My Worst Investment Ever Podcast

Dan Ferris is the editor of Extreme Value, a monthly investment advisory service that focuses on great businesses traded at steep discounts. Dan joined Stansberry Research in 2000 and became the editor of Extreme Value in 2002. Since then, he’s earned a loyal following and an impressive track record. Dan counts more than 20 major financial firms and well-known fund managers as subscribers. Dan has appeared on Money with Melissa Francis, The Willis Report on Fox Business News as well as The Street with Paul Bagnell on Business News Network. He has also been featured in Bearings, the Value Investing Letter and numerous financial radio programs around the country. Dan also hosts Stansbury Investor Hour, a weekly podcast with a mission to help its listeners become better investors.   “People can learn futures trading but it’s really hard and takes a long time. Learn it from somebody who’s already done it well for a while.” Dan Ferris   Worst investment ever Dan didn’t have a career in finance in mind when he enrolled in college. He studied music and was a classical guitar performance major. He, however, had his eye on investment, which led him on a journey to his worst investment ever. He had a deep desire to learn everything he could about different ways to invest and be a good investor and then communicate that to other people. He eventually got the opportunity to teach people about investing and risk management and he’s been doing that ever since. Naïve zeal to hit it big Dan was once waiting tables before he became the investment guru that he is today. During this period money was a struggle for him. This fueled his desire to become an investor even more. He continued to read stuff about investing and finance. He gained a bit of knowledge in investing and was naïve enough to believe that he was ready to become an investor. He kept his eyes open for investment opportunities that he could afford. Falling for the futures trading trap One day Dan received junk mail in his email inbox containing a program to trade commodity futures, an activity that had becoming pretty famous. The trading program made all these big sexy promises about all the money he could make and he was amazed at just how easy it looked. And just like that, he was sold on the idea! He had saved a total of $5,000. He opened a futures trading account and deposited $2,000. He traded in platinum and gold futures. With $2800 of the balance, he bought a brand new handmade classical guitar, which he still has to date. Unfortunately, the guitar was the only investment that worked. Interest rates went down and his $2,000 became $268 in about six months. That’s right. He watched $1,700 evaporate before his very eyes at a time he barely had any money. Knowledge is power especially when investing Dan was a green young man who barely knew anything about stock markets. He knew nothing about Treasury-EuroDollar (TED) spreads and treasury bills. He did not even have any futures-trading basics. The only investment knowledge he had in this kind of thing was from hearing somebody say that they go up when interest rates are moving in a particular way. The investment program seemed good and easy and backed by his desire to be an investor, he never thought about taking the time to learn about futures trading before putting in his money. This cost him big time.   Lessons learned It’s difficult to make money in stocks It is very difficult to make money in stocks. But forex trading is even more complex and should be approached very carefully. If you want to try it out make sure you undergo some (a lot of) forex trading training first. Learn the art of saving money Mastering the skill of saving money is like lifting weights or exercising a muscle that becomes very useful to you long after you’re finished exercising. The skill of saving money will always be useful even in the latest stages of your career as an investor. The art of saving money teaches you the discipline of not spending money blindly and instead, keeping it so that you can put it into good use in the future.   Andrew’s takeaways Reduce your risks Investing is complex enough, but if you go into stock markets, forex trading, T-bills and other instruments, it gets even more complex. The key to succeeding as an investor is to keep it simple. Always go for opportunities that reduce your risks.   Actionable advice Don’t be in a hurry as an investor. You will constantly be sold to by brokers telling you to get into one investment opportunity or another. You don’t always have to. Take your time before you invest and make a good decision because ultimately, you are putting your capital at risk.   No. 1 goal for next the 12 months Dan and his chief research officer Mike Barrett plan to pay more attention to underpriced stocks in the next 12 months. The stock market is currently witnessing one of the biggest shifts since 2009. The cheapest stocks in the market have finally started to perform, while the most expensive stocks are underperforming. Dan plans to take full advantage of this.   Parting words “Read chapter 20 of The Intelligent Investor by Benjamin Graham. I still read it every month. Do it. Just do it.” Dan Ferris   You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points You can also check out Andrew’s online programs Valuation Master Class Women Building Wealth The Build Your Wealth Membership Group Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Connect with Dan Ferris LinkedIn Twitter Website Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Benjamin Graham (1949) The Intelligent Investor: The Definitive Book on Value Investing  

Some would say, Rick Nicholson, owner of several franchise businesses is a serial entrepreneur because of the seven restaurants he has owned over the past 13 years. He would say he’s just a guy trying to do the stuff he loves to do while trying to make enough money to survive. He hates the term “serial entrepreneur”. He has a strange combination of skills that include a solid understanding of account and marketing, which helps him identify potential business opportunities. He owns three restaurants, a consulting business and is a partner with Wizard of Ads in Austin, Texas. In his spare time, he coaches his son’s AAA baseball team, sits on multiple boards and wonders where the world will take him next.   “Just because you say something doesn’t mean it’s going to happen. You need a legal document for everything.” Rick Nicholson     Worst investment ever Rick started as an executive in a franchise business. He continuously got excited about hanging out with franchisees and decided that it was time for him to get into the business. He tried teaching entrepreneurs but he still had the itch to be an entrepreneur. An entrepreneur is born He quit teaching and decided to explore available franchise opportunities. He decided to open a franchise restaurant and in no time he was able to finance half a million dollars for his first restaurant. About two or three years later he bought his second franchise in the same group. With two franchise businesses to run, his wife joined him and they ran the two restaurants turning them into the fastest growing franchise operations in the network. The businesses were growing at 43% annually, where the average was about 3%. Scratching the itch to have his franchise businesses While being part of the franchise group was working well for him, the entrepreneur in him wasn’t satisfied. He wanted his own business and create franchise opportunities from it. He always had this dream of owning a coffee shop that he could franchise. With the experience he had earned running the two franchise restaurants, he decided to live his dream. But he was bound by a franchise agreement that contained a non-compete clause. A man’s word is not always his bond Not wanting to violate the non-compete clause, he called the VP of operations and told him about his plan to start a coffee shop. He talked to him about the franchise agreement and whether he’d be violating it by opening the coffee shop. The VP told him not to worry about it and gave him his word that it wouldn’t be a problem. As fate would have it, just when he was ready to open his doors to his first customers, the VP was fired. At this point, he’d already invested $50,000 into the coffee shop. When the new VP came in, Rick called him just to make sure that he was still in the clear to run his coffee shop alongside the restaurants. The new VP sent him a few questions via email to which Rick provided the answers. The VP assured him that there would be no problem, so he went ahead and realized his dream. Word of mouth – no chance against written contracts Six months later, he got a lawyer’s letter in the mail saying that he had violated his franchise agreement. Now you see, Rick is a rural guy from a town where if a man says something that’s taken as a bond and there’s no need to get legal documents drawn up. So he was in total shock when he realized that the VP had gone back on his word. He thought it was probably just a misunderstanding. However, the VP was categorical that Rick had violated the agreement as he didn’t get the board’s approval, a requirement of which Rick was unaware. He certainly should have had legal documents drawn up after the discussion with the two vice presidents. His dream comes to a bitter end Rick’s lawyer was ready to put up a fight against the franchise group but the entrepreneur figured that it would be a waste of energy. So he decided not to fight them. Instead, he negotiated for some time before he could close the coffee shop. The coffee shop wasn’t the only dream that had to come to an end. Rick felt betrayed and disrespected by the franchise group and he just couldn’t continue doing business with them. He simply couldn’t trust people who couldn’t keep their word. At this point, he was so exhausted and he just wasn’t feeling a creative outlet working in this franchise environment. He decided to sell his two franchises. The decision to sell both franchise businesses cost him about $250,000. It was a painful loss and definitely his worst investment.   Lessons learned Get those papers signed Rick learned the hard way that just because someone says something it doesn’t mean it’s going to happen. When drafting franchise agreements always make sure that the agreements are executed with legal documents. Legal documents leave no room for ambiguity or misinterpretation. Go ahead and spend that $1,000 and get some legal advice because it might just save you from losing a whole lot more.   Andrew’s takeaways Know when to walk away Not every problem has to be escalated into a big problem. Sometimes it’s better to walk away from a fight because it’s just not worth the time and energy, especially if it’s going to cost you a lot more. There’s always room for negotiation Agreements are not set in stone. Just because it’s in writing, doesn’t mean that it can’t be changed. Always try to negotiate. It doesn’t hurt to ask for what you want. Not everything has to go into a confrontation A confrontation is not always the best solution in the business environment. Try to talk about it and if this does not work out then walk away.   Actionable advice Make sure that anything that is of consequence is contained in a legal document and everyone has a clear and mutual understanding of what is written there. It may not always protect you, but it’s at least one barrier to prevent further mishaps.   No. 1 goal for next the 12 months Rick has three successful brick-and-mortar businesses and a couple of consulting businesses. Next, he wants to try online businesses to allow him to travel more and probably live a digital nomad life enjoying different cultures.   Parting words “Before you spend any money, get some legal advice and draft up a piece of paper.” Rick Nicholson       You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points You can also check out Andrew’s online programs Valuation Master Class Women Building Wealth The Build Your Wealth Membership Group Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Connect with Rick Nicholson LinkedIn Website Facebook Email: ricknicholson@wizardofads.com Connect with Andrew Stotz Astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Malcolm Gladwell (2019) Talking to Strangers: What We Should Know about the People We Don’t Know                

Victoria Lynn Weston boasts more than 20 years of experience as an intuitive business consultant working with professionals and business owners to provide insight to help them make better decisions. This business intuition coach is also an entrepreneur who loves voice technology. She’s the founder of Studio Carlton, which produces and develops custom Alexa Skills for professionals and companies. Victoria is also a producer of PBS-featured documentaries such as America’s Victoria, Remembering Victoria Woodhull and the America’s Victoria Alexa Skill. As an intuitive business consultant, Victoria offers a broad spectrum of insights to help individuals achieve their professional goals. She also encourages people to trust their own intuition. Fun Fact: She used to be known as a corporate psychic. She founded AYRIAL to feature vetted lifestyle consultants such as Feng Shui experts, licensed therapists, intuitive consultants, etc. Individuals can find a consultant on AYRIAL.com or VOICE search via the AYRIAL “Positive Living” Alexa Skill.   “Intuitive insight can be invaluable when used as an adjunct to your facts and logic.” Victoria Lynn Weston   Worst investment ever Psychic business coach gets a vision Having worked as an intuitive psychic business coach for more than 20 years, Victoria is indeed a master of helping professionals and business owners make better decisions. It is no surprise that now and then, she will have business visions and ideas that she pursues. One of those visions was to produce the world’s greatest psychic reality show. She thought that this idea was going to work, and that it would be magical. Part of it, she admits, was intuition, and another part was a bit of wishful thinking. She decides to trust her intuition She went ahead and took time off her other businesses and concentrated on writing a proposal for the TV show idea. She put blood, sweat, and tears into the proposal, and it was indeed good. She had the visuals and photos in her proposal. She also had this spectacular test that could be done to convince any skeptic that intuition psychology works. She spent so much time analyzing and putting things together. In short, she had thought of everything to make the show a success and had all those details in her proposal. Meeting the bigwigs in the TV industry With her experience and connections, she was able to connect with TV big shots, including ABC producers, MTV producers, the Game Show Network, and others. She held pretty good meetings with the who’s who in TV production and pitched her reality TV show idea. Her sweat, blood, and tears go down the drain Victoria had spent so much time putting together a solid proposal and had managed to pitch her idea to top TV producers. She was sure that one of these producers would endorse her pitch and her show would be on TV soon. Her show did appear on TV but not in a way she would have imagined. A friend called her out of the blue one day and congratulated her on her show that was running on Lifetime TV. She was taken aback as she had not gotten into any agreement with anyone regarding her show. The friend informed her that Lifetime TV was promoting a show using words so similar to her proposal that when she heard the promo in the supermarket, she thought it was her show. Upon further research, she found out that Lifetime TV had come up with a show dubbed America’s Top Psychic. Somebody had stolen her idea. What she came to realize what that while she was pitching, she had given out more information than she should have. The show producers had everything they needed to create a similar show without her. She had given them all her ideas on a silver platter. Nine good months of burning the midnight oil researching and coming up with the perfect proposal all went down the drain. While for most people, the worst investment involves losing tons of money, Victoria’s loss was about time. Even though she had also lost a bit of money spent on the proposal, the pain came more from losing that commodity that can never be earned again – time. To her, the most valuable thing we have is not money; it is time because you can’t take back yesterday. She had invested a lot of time and energy creatively, and now she had nothing to show for it.   Lessons learned Curb your enthusiasm Victoria learned one huge risk management lesson from the whole experience; you never show your whole hand. Don’t get too eager and excited about your idea that you share everything about it with the people you’re pitching to. Give them just enough to know what your idea is all about, but not enough that they can run your idea without you. Unfortunately, Victoria’s proposal was so detailed with all the exercises on what to do that it made it easy for anyone to copy it. Protect your material Never trust anyone with your idea, especially in the TV industry. Protect your ideas because TV people are always looking for ideas that they can implement without necessarily hiring you. Let your passion guide you No matter how big your loss is or how many hurdles you face, keep going because at the end of the day, it is all about to where that experience propels and compels you. Through your loss, you learn some good stuff, and you learn some bad stuff too. Don’t walk away feeling cynical or scornful because that prevents you from really living.   Andrew’s takeaways Always hold something back Never bring your full force to bear. Always hold something back so that when you start to make some progress, you’ve got more ammo to penetrate and get through. Drip out a few goodies along the way so that you people don’t get the core idea right off the bat and to also keep them excited and interested in you.   Actionable advice Whenever you’re making a proposal, always make sure you go into a pitch meeting with a lawyer and have them guide you on how much info to reveal. When you’re doing pitches in the creative arts, and you’re writing proposals or screenplays, you have to have a really good agent and manager. Victoria’s advice to people in the creative arts is also to consider using Alexa Skills and do their business independently. You can do interactive content or a web series. Produce something small scale and get a bunch of publicity around it using Alexa Skills, and then the big wigs will come to you.   No. 1 goal for the next 12 months Victoria’s number one goal is to create more interactive Alexa Skills. She’s already working on something unique and different. Something that tests your intuition and clairvoyance, psychic abilities, and inner cards. She’s creating this for Amazon Echo Dot. Her goal is to win an award for her creation.   Parting words “Always go for the passion and trust your intuition.” Victoria lynn Weston     What are Alexa skills? How can you benefit from them? Alexa is the voice technology for Alexa Echo dot and other Amazon Echo devices. It’s much like Siri for iPad. You can ask the Amazon Echo Dot simple things like what’s the weather; you can play games and so on. You can also enable third-party Alexa Skills on your device. And third-party means independent producers and developers like Victoria, who has her own Alexa Skills – America’s Victoria. As a creative, you can create your own Alexa Skill and use it to promote your work and build an audience. So for instance, if you have a podcast, your audience can get your tips or listen to your podcast while sitting in the car via an Alexa Echo device. Then you can send them a text message with a weblink. That weblink could be a summary of your show or any other content that you want to share via a custom landing page.     You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points You can also check out Andrew’s online programs Valuation Master Class Women Building Wealth The Build Your Wealth Membership Group Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Connect with Victoria Lynn Weston LinkedIn Twitter Website Facebook Pinterest Email: victoria@victorialynnweston.com Connect with Andrew Stotz Astotz.com LinkedIn Facebook  Instagram Twitter YouTube My Worst Investment Ever Podcast    

Kirk Chisholm is a known risk taker when it comes to investing and alternative investments. Being a person of full will and perseverance to know the ups and downs of the market, he has learned a lot through experience – good and bad. Currently, he is a principal and wealth manager at Innovative Advisory Group, an independent registered investment advisor (RIA) in Lexington, Massachusetts, in the United States.  Since 1999, he has used his influence to promote change in different aspects of the wealth management industry, manage risks and provide options for investors. Kirk has been acknowledged by different investment sectors for his passion for learning and imparting them to others. His ideas are frequently sought out by the media. In fact, Kirk made it to Investopedia’s top 100 - at number 7 - as the most influential financial advisor. Moreover, Investment News recognized him as one of the top 10 social media all-stars in the financial services industry. He also is the host of The Money Tree investing podcasts, which aim to teach listeners how to have their money work for them.   “The best investors will acknowledge that [truth] and they’ll tell you: ‘I’m wrong a lot. I’m just quick to make a change when I’m wrong’.” Kirk Chisholm   Worst investment ever Analyst perspective and promising reports Kirk can has had numerous bad investments, but just like any of us, one will always stand out. Considering its pertinence to the present global economic situation, he shares his story of investing internationally, in a Chinese coal company. Ten years ago, a friend of Kirk’s, who happens to be a financial analyst, visited a coal company in China. His friend and his team saw directly how operations were carried out. They talked to people, did extensive research, and finally drew the conclusion that this investment had a potential for growth once it was regulated and operated by more astute parties. Having read the reports and in the belief that it is always best to have a reliable team of analysts, Kirk was attracted to investing in the company. For him, researching is one of those tasks that must include a lot of due diligence and should be done by more than one person so it can produce thorough and accurate information. Analyst reports on China investment hide painful truth While every box was checked and all operations had been carefully looked into, a short-seller’s report came out of the blue. At first, Kirk did not take this as a serious warning to reconsider his decision about the investment. Based on his experience, short-sellers are not always reliable. He was also looking for a yield potential of 36% on selling. However, at a certain point, the company halted trading and he tried to limit his losses but to no avail. He found out that the reports presented to him were dishonest. The company had failed to disclose that the company’s shares were used as collateral in order to secure a loan from a private equity firm. Technically, the shares on the US exchange were worthless, and a great deal of money was lost. Poor research and cultural differences This was the point of no return. Kirk had already invested and his money was nowhere to be found. He could have chosen to report the matter to the authorities and file a lawsuit, but the company was on the other side of the Pacific, which made that option extremely difficult and cost prohibitive. Moreover, he believes that cultural differences played a major part in his failure. A property right is treated with as much respect in China as it is fundamental in the US (and most of the developed world).   Lessons learned Risks are inevitable As an investor, Kirk is aware that no matter how prepared a person is in a new venture, risks are always there. Likewise, with investing internationally, the risks are greater and mostly beyond research. Risk management is essential in order to plan for, avoid and guard against loss. He has learned to acknowledge these risks and turn them into a beneficial lesson. In some cases, he encourages people to use other options and explore them before sealing a deal. Alternative investments are good, but the risks involved should be considered in advance. Home-country bias must be considered well Investing internationally made Kirk realize that everyone places more importance in areas they are familiar with – their home turf.  The cultural differences between investors and companies should be assessed first since what is significant for you may not be as precious to members of another culture. Statistics show that investors are much more likely to pour their money into businesses in their own country. So, for you to manage your risk, look for investment opportunities in your country first before exploring other lands. Invest in what you know Kirk quotes Former Fidelity fund manager Peter Lynch, who wrote phenomenal books in the 1980’s and 1990s, such as Learn to Earn, reiterating the lesson of staying within your comfort zone (your home country) and investing in industries in which you have extensive knowledge.   Andrew’s takeaways The risks that really matter are the ones we can’t see The more dangerous risks are those that are not visible at first glance. Corporate governance is a great example. In such instances, the scorecard may shift on how good or bad a company is, but not everyone can notice it. Financial analysts don’t reveal everything at events or company visits, which makes it hard to predict the true situation of a company.   Actionable advice Take a look at the contrarian view Kirk does not deny the fact that we are not 100% right all the time. He admits that even the smartest people make mistakes; but the best ones look at how they’re wrong and how to improve on it always make a difference. Assess, assess and reassess Kirk emphasizes the critical need for constant reassessment, no matter where you are in the investment process. Logical decisions should be based on facts and not on emotions. Furthermore, once a deal becomes potentially damaging, one has to look for closure and not to be emotionally tied into it.   No. 1 goal for the next 12 months To become a better leader, mentor and coach to his followers. He is very passionate about imparting his own lessons to others.   Parting words Kirk says there is no growth without struggle. He believes that people learn not only from their wins, but more from their losses, or the losers that they meet along the way. He added that Andrew’s podcast is something that is in line his passion because provides options for listeners to gain knowledge from real-life situations. Also, as a parting gift, he offers here a free report about his top-75 alternative investments. “There is no growth without struggle.” Kirk Chisholm     You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points You can also check out Andrew’s online programs Valuation Master Class Women Building Wealth The Build Your Wealth Membership Group Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points  Connect with Kirk Chisholm LinkedIn Twitter Website Blog Connect with Andrew Stotz Astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Peter Lynch (1996) - Learn to Earn: A Beginner’s Guide to the Basics of Investing and Business  

Raoul Pal is a former hedge fund manager who retired at 36 and is co-founder of Real Vision, a financial media company offering in-depth video interviews and research publications from the world’s best investors. He has run a successful global macro hedge fund, co-managed Goldman Sachs’ hedge fund sales business in equities and equity derivatives in Europe, and helped design the BBC TV program Million Dollar Traders, training participants in investment and risk management strategy. Raoul retired from managing client money and now lives in the Cayman Islands, from where he manages Real Vision and writes The Global Macro Investor, a highly regarded original research service for hedge funds, family offices, sovereign wealth funds, and other elite investors.   “Have a framework, use your framework. But do test your framework because it does change. Your framework will keep you on the straight and narrow.” - Raoul Pal   Worst investment ever On top of the global macro hedge fund game Raoul started The Global Macro Investor in 2005. He was managing his own money as well as advising many of the world’s top hedge funds, family offices, sovereign wealth funds, etc. He had a pretty good first year out of the gate. His business did phenomenally even in the second year. He was at the top of his game. Around 2007, having understood how the market works, he switched from a long emerging market position to a short emerging market position, a decision that scaled his business to success. By 2008, he had made a huge reputation for himself because his business was thriving and he’d lived and breathed the Asian financial crisis. Where macro is concerned, Raoul had made it. Surviving the global financial crisis The global financial crisis hit the global markets in 2007 and 2008. Most hedge funds barely made it out alive but Raoul was one of the hedge-fund investors who survived the crisis during these years. How did he do it? Raoul has a framework through which he follows and analyzes global economies. It is the framework that allowed him to nail the whole situation going into the crisis. Most economists build a linear model of GDP, which Raoul believes is ridiculous. He’s more of an applied market economist. Raoul’s framework involves observing markets in conjunction with economies and looking for opportunities between the two. The framework worked for him because when you look at the yearly rate of change of oil, gold, copper, the stock market or emerging markets, they’re all the same, they’ll go up and down with the US business cycle. So he’d use something like the Institute for Supply Management (ISM) supply management survey, a poll of purchasing managers in the US, to give him an idea of whether they are more or less confident in the economy. This helped him sail through the storm. Overconfident, he ignores his faithful framework Come 2009, things were different. No one was sure whether they were through the worst of it or not. At this point, unlike the other times, Raoul ignored his framework, which was suggesting that the business cycle had probably bottomed out. Not certainly, but probably. In his view, some hurdles could worsen the cycle. He believed that it was going to go lower. While his framework was telling him that the business cycle would not bring him any return, he believed that there would be probabilistic outcomes and that risk would return to the markets and he’d make some recovery. This never happened. After a series of four years of the best returns he’d ever had, 2009 became by far the worst year he’d ever had investing, and in advising. The market never recovered that year and so his investment didn’t bring him any of the returns he had calculated. Eurozone crisis comes knocking Raoul was able to recover from the worst investment of his life, but psychologically it took a few years to regain his faith. The 2012 Eurozone crisis made it even harder for Raoul to recover from his loss. During that crisis, he was living in Spain. Things were so bad he was having to buy food and store it. The markets were shaky and there was no guarantee that the banking system would last. Greece had imploded, and the Cyprus banking system had shut down entirely. So it was an extraordinary time. It was hard to escape the psychological trauma of the loss he had incurred in 2009. Thankfully, he was able to return to his hedge fund management glory in 2013, 2014, and 2015.   Lessons learned Put odds in your favor Nothing is a certainty so always put odds in your favor and not against you. Raoul admits that he should have seen something negative in the market and taken on less risk than he did. Luck doesn’t always strike twice The very thing that has given you the best returns of your life is the very thing that can bite you. Raoul had gone against the crowd several times in 2007 and 2008, and this had made an extraordinary return for him. So understandably, after winning consistently, he became overconfident. He went into that phase thinking, “No, I’m right, I can override this”, even when his framework was telling him that the odds were against him. Yep. This time luck wasn’t on his side.   Andrew’s takeaways Confidence can lead to overconfidence Confidence is something that builds over time as we invest or as we do anything. And unfortunately, confidence sometimes leads to overconfidence. This is one of the most classic behavioral biases that you always have to be careful about. If you’re overconfident, the market will teach you a lesson. Frameworks don’t always work Frameworks work during certain times, and sometimes they don’t. You don’t have to abandon your framework but always question it. Don’t let emotions get in the way It is so easy to get caught up in the emotion of success, the emotion of failure, and the emotion of trying as an investor to take a bet. It’s your job to find something that the rest of the market doesn’t see and take a strong view on it. But sometimes we let our emotions get in the way and we forget to look at things objectively.   Actionable advice Have a framework and use it. Different people have different frameworks that work for them. Stick to your framework, do test it, have faith in it, and understand how it’s going to work.   No. 1 goal for next the 12 months Raoul’s life is currently tied up in Real Vision, and this incredible journey of creating the Netflix of finance. His main goal is to create the world’s best financial video content that’s all about storytelling and engagement. He wants to make finance interesting and unique.   Parting words “You only learn from making mistakes, you can hear me make mistakes, but you’ll only really understand it when you make your own mistakes. So you can make mistakes as long as the size of the trade is right.” Raoul Pal Raoul is encouraging hedge fund investors to take calculated risks and not to be afraid to make mistakes. You’re going to lose money, but you’re going to learn from it.   You can check out Andrew’s books here How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points You can also check out Andrew’s online programs Valuation Master Class Women Building Wealth The Build Your Wealth Membership Group Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Connect with Raoul Pal LinkedIn Twitter Website Facebook Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Raoul Pal (2014) The End Game     Upcoming on Real Vision is a two-week series of Gold vs Bullion, from 14 October Raoul will be interviewing: Jim Grant Dan Morehead John Hathaway Tom Kaplan Rick Rule During the two weeks Real Vision will be exploring the role of bitcoin and gold as alternative asset classes in a world of ailing monetary regimes and a seemingly unstoppable push toward negative interest rates. In this new world, how can investors preserve their wealth? Does gold remain on top as the ultimate safe haven asset or is bitcoin the new “digital gold”? Raoul will be covering these and plenty of other questions that investors tell us they want the answers to... Special offer For Worst Investment Ever followers, Raoul is also offering a three-month Real Vision subscription for only $1 (limited time only). Here is a link to the landing page  

David Barnett is a three-time best-selling author, consultant and business coach who has been working with small-business owners for more than 20 years. For the past 10 years, he has been helping people buy and sell businesses. David works directly with clients and produces online education products to teach aspects of small business purchase and sale transactions and local investing.   “(As one progresses in doing business) The deals keep getting bigger and we need these little ones to teach us not to make mistakes when we get into the big ones.” David Barnett     Support our sponsor   Today’s episode is sponsored by the Women Building Wealth membership group, the complete proven step-by-step course to guide women from novice to competent investor. To learn more, visit: WomenBuildingWealth.net.         Worst investment ever Background on value-added taxes in Canada David was approached by an entrepreneur he knew quite well who had run several businesses. The latter was building a new business. In Canada, they have a value-added tax called the HST. When a business buys goods it pays HST, when its sells goods or services, it collects the HST, and then business then sends the difference to the government. So when building a business, the founders have to lay out all kinds of money. All of the contractors and suppliers are charging new tax, but the founder has yet to make a sale. So a business pays paying out money in taxes, and it is not returning. Usually when a new businesses is founded it gets a check from the government because when it files a tax return, it has overpaid sales taxes versus what it has collected, and David had been through this many times. Deal done to pay partner’s advance and win off the government rebate In the first filing for a business, the business should get a check back from the government. After that, if it is doing well, it sends money to the government. David’s partner started to run short of cash in building the business because there were unexpected events and he had extra expenses. He offered to sell David and his investor group his HST return at a discount. So the idea was that the group would give the partner an advance and then, within three months, this money would come back to the group because the return would come in and the group would be paid. So the group proceeded. Once business was operating there was more to learn about tax liability David then started to learn more about how the government processes HST. It turned out that when the figure is high enough, the government do not blindly issue checks, it looks at the company more closely. So a few months went by and the government wanted the partner to submit some of those bigger invoices. So he did and when it found out the nature of his business, that there was a lot of cash involved, it required him to do anti-money laundering training, so the partner would become aware of current rules and laws. By this time, it was month five, and because there was so much cash in the business, he had to go through the training. So the group has gone from the business being built and all the money was going out to active operations. But the government withheld the money due to the business because it wanted him to send in more information. It wouldn’t release the funds because he had to do the money laundering training. Business had failed to send in payroll tax, which killed the investment’s chances Sadly, the business’ sales failed to come in as fast as was forecast, and another problem was that the partner had failed to send in source deductions – There were no income tax deducted from employee paychecks. By the time month six had come along, and the tax office was ready to return the HST, it didn’t, because it did some final checks and found that the business actually owed the tax office money. David loses faces with his investor group over loss of $25,000 David had not been entirely comfortable about doing the deal. So he had invited two friends to join him in the investor group. Now he had to face them and give them the news about all these problems that had been dragging on, and of course about the loss of the $25,000 they have put in. He admits he felt quite stupid in front of his friends and for the fact he got involved in the first place. He had failed to make himself fully cognizant of all the potential hazards that could have come about by doing this kind of thing. He was embarrassed and felt bad about inviting friends along with the deal. After two years though, they were all able to write off the loss as it had become an allowable business investment loss. So they were able to offset some other gains with it. But he feels embarrassed also that he had been a person who had written a book on how to successfully invest in small local businesses. It was a hard story to tell and one had not been ready to tell until on this occasion.   “There always has to be a clear path to a Plan B … some kind of security or collateral against something (your investment or deal) … even if it’s a guarantee from some person or entity or other business that you think would eventually have the ability to pay.” David Barnett   Some lessons Plan A: Make the most attractive thing possible, which is the repayment of your money If it doesn’t work for whatever reason (and because we’re dealing with humans, anything can happen, illness, marriage breakdowns, all those kinds of things)… have a Plan B. Plan B: Some other way to be made whole if something goes wrong with Plan A And follow your own counsel. In one of David’s books he tells how people can do local investing deals by learning how banks do them, which is, banks have a Plan B, they get collateral, they get security, they ensure that if something doesn’t work out, there’s a Plan B to follow. And that was one of the key critical things that David admits failing to have set up. Avoid hubris (excessive pride or self-confidence) and arrogance     Andrew’s takeaways Be very careful doing any business related to cash flows linked to government Government has extreme power and can literally do whatever it wants. It can cancel a deal, it can refuse to pay, it can demand more payments or fees. Dealing with anything linked to governments is messy, both in the West and in Asia. Make sure that you actually have rights to the value you are trying to claim or receive If you don’t have rights over the benefit you’re seeking, then you know, it’s very hard to win.     Actionable advice There always has to be a clear path to a Plan B That can be some kind of security or collateral against the deal you are doing, even if it’s a guarantee from some person or entity or other business that you think would eventually have the ability to pay.   No. 1 goal for next the 12 months David is focusing most on his everyday work with people who want to buy and sell small businesses. He has an online group-coaching program where there are people from all around the world (Asia, Australia, New Zealand, Canada and in the US). He works with them to help them prospect, find, locate, make offers, make deals, do the due diligence, on buying small- and medium-sized businesses. The group’s been going for about a year and a half and it continues to grow. It’s very exciting for David because you can spend a lot of time looking online for information about buying a business but every one of the deals is privately, so it’s very rare that you’re ever going to get somebody to tell you the exact details of what happened when they bought or sold a business because it’s all confidential.   “If you want to avoid all risks … you know, just stay home and don’t do anything and don’t go anywhere.” David Barnett   Parting words David says, If you want to avoid all risks just stay home and don’t do anything and don’t go anywhere. But he doesn’t think that’s what life is all about. He admits losing money in the deal, but he now sees it as a piece of the $25,000 that’s going to help save him from losing the piece of the $100,000 because as one progresses in doing business, the deals keep getting bigger and we need these little ones to teach us not to make mistakes when we get into the big ones.       You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points Learn with Andrew Valuation Master Class - Take this course to advance your career and become a better investor Connect with David Barnett LinkedIn Email Website Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned David Barnett (2016) How to Sell my Own Business: A guide to selling your own business privately and not pay a broker’s commission David Barnett (2014) Invest Local: A Guide to Superior Investment Returns in Your Own Community  

Andrew and Chance would like to dedicate this podcast to peace “I stand for life against death; I stand for peace against war.” Pablo Picasso   Picasso’s Dove became a symbol for the Peace movement after it was used to illustrate the poster of the World Peace Congress in Paris in April 1949, part of the series of conferences held at the end of the Second World War (also in Wroclaw, Sheffied and Rome). At the 1950 World Peace Congress in Sheffield, Picasso made a brief speech recounting how his father had taught him to paint doves, which he concluded with the quote above. Photo: Tate Gallery, London, 2004   Guest profile  Chance Glenn is an innovator and entrepreneur who has been engaged in creative pursuits for the better part of his life. He holds a bachelor of science and a master of science degrees, and a PhD, all in electrical engineering, and has patents and publications in a host of focus areas. He is the president and founder of Morningbird Media Corporation, where he and his colleagues have developed and prepared for launch the Electronic Alchemy eForge, a 3D printer capable of producing functional electronic devices. His team has utilized support from NASA to take this from product from concept to commercialization. In addition to his technical pursuits, he is a tenured full professor, provost and vice-president of academic affairs at the University of Houston-Victoria (Texas), a practicing visual artist, and a Grammy-nominated singer/songwriter.     “I got involved with bitcoin ... early. And I’m talking about when it was a couple of hundred dollars.” Chance Glenn     Support our sponsor   Today’s episode is sponsored by the Women Building Wealth membership group, the complete proven step-by-step course to guide women from novice to competent investor. To learn more, visit: WomenBuildingWealth.net.       Worst investment ever Bitcoin foray holds investor’s attention on a daily basis Chance got involved with Bitcoin early, when it was valued at around US$100 a coin. It was one of his first investments when he bought his first batch of around five or six coins and he watched as they continued to grow. As he followed the progress of this new currency he felt he never knew where it was going to peak. He was too inexperienced to know how to tell when a downturn was about to hit, and he shared that if tracking something closely like this in the manner of a day trader, when it falls even a little, he felt panicky. Slight downturn is spooks so Chance retreats So he pulled all his money out when Bitcoin was at about $900 per coin. He had made about 10x the money he had invested at that point. After that, he would watch it rise to $14,000 per coin in the next nearly four years and he notes that now it is hovering around the $10,000 mark. The next time however he looked again it was well over $3,000, so he felt he had missed the boat and he probably could have made 100,000 if he had cashed out at the right time. Not so much a bad investment as a bad decision Aside from the loss, he pointed out that it was not the investment that was bad, but more like the decision was bad. The lesson he therefore takes away from the experience is to have the courage in future to sticking with something. Of course he raises the question of how long and how to you tell how long you must stick with something and then when do you jump out. Something good usually comes from failure He said however, “Here’s the good news!” What he did make he actually took and used as a seed investment for what became his current project, Electronic Alchemy and its eForge 3D printing device. So this mistake truly led to what he is starting to build now with his company, which is creating something genuinely revolutionary. He was able to use that money and do some of the preliminary work. But, he again revisits the pain, and says if he had stuck with it, he could have walked away with US$100,000 from Bitcoin investment.     “It wasn’t so much that the investment was bad. It was the decision that was bad. Chance Glenn     Lessons learned Having the courage to stick with an investment is important No risk, no gain. Chance learned how important is to be willing to take the risk and not just play it so safe. He thinks now that he was playing too safe and that this was a strategy issue. He was not risking too much, he had put in an amount that he could get away with losing, he hadn’t put his family in danger and there were no other such issues. But he says that if he had stayed with it, and was courageous enough, and had used some profit-taking strategy, he could have done a lot better. He was however the victim of panic when he saw it was correcting.     Andrew’s takeaways Have a plan So you know, if you have a plan it may have but not sure. Could it could have allowed you to say Nope, I’m sticking with this I’m not selling because I believe that Bitcoin is the future of da ba ba. And therefore, I’m going to stick with that plan. So one. And what we find oftentimes in the world of finance is very few people actually write out their plan. Just because it’s cheap, you don’t have to buy it. Andrew’s mother used to say that as they passed by a store and he saw something on sale and told his mother about it. The corollary to that is … Nobody went bust by selling too early So the idea behind that is, investors cannot always make the right calls. But it’s better to sell too early than to sell too late. Don’t buy high and sell low So many bad investment decisions are rooted in the fact that people have bought high and sold low. In Chance’s case, he actually sold high, perhaps he sold a little too early, but at least he sold high compared to his initial investment and didn’t make that common mistake.     Actionable advice Apply mathematics Chance says if he could have developed some analysis and modelling to look at the curve of Bitcoin to see whether it was going up or down, he should have done that instead of just looking at the numbers from minute to minute. Don’t be a prisoner of the moment Be someone who looks at the bigger picture, because the ups and downs of the moment can cause you to make the wrong decision. If you look at things with a broader perspective, have a plan and are willing and courageous enough to stick to it, you will do a lot better.     No. 1 goal for next the 12 months To launch the Electronic Alchemy eForge. To see what’s happening there, visit Electronicalchemy.com and sign in for news about our progress and how you might be involved. He calls on everyone to imagine having a device that can even 3D print a phone that works. He’s talking about being able to print the different layers of the phone from the bottom up, and the cool thing is, it doesn’t of course have to look like a phone. So that is he says where designers can create something special. Chance says his company at its core is about fostering and enabling such creativity through a community of people sharing ideas and printing them into realities.     Parting words Be courageous and be creative.     You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points Learn with Andrew Valuation Master Class - Take this course to advance your career and become a better investor Connect with Chance Glenn LinkedIn Twitter Website Electronic Alchemy Email Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Chance Glenn (2006) Jesus is Faithful MP3 album and CD  

Johnny FD (Fighter-Divemaster) grew up in San Francisco, in the US state of California, and quit his job at corporate giant Honeywell in 2007 to move to Thailand, travel the world and work as a professional scuba diver. While in the Kingdom, he started training and fighting professionally in Thai kickboxing. He has since written two books: 12 Weeks in Thailand: The Good Life on the Cheap and Life Changes Quick (both on Amazon), started multiple six-figure online businesses and since been has been interviewed and featured in Forbes, Business Insider, Fast Company, Entrepreneur, and the BBC.   “The reason why it’s such a bad idea to leave money in cash is you’re guaranteed to be losing at least 2% due to inflation. So even if your money is technically safe in a checking account or savings account, and you’re not gaining interest, you’re not losing money, you are losing, you know, whatever the rate is, which is usually around 2%.” Johnny FD     Support our sponsor   Today’s episode is sponsored by the Women Building Wealth membership group, the complete proven step-by-step course to guide women from novice to competent investor. To learn more, visit: WomenBuildingWealth.net.       Worst investment ever Johnny outlined a trio of mistakes Buying crypto and losing He named his most annoying investment ever was buying cryptocurrency and Bitcoin, and described the pain of seeing it crash. He still holds some Ripple because he simply hates selling it at a loss. He blames the Fear of Missing Out (FoMo) phenomenon for some of his exposure and relates the tale of buying in to Bitcoin when it was valued at US$18,000, just because of the FoMo effect amid the hype even against his gut feeling that it was not a good investment. Peer-to-peer lending ties up money Johnny also described getting into peer-to-peer lending via the Lending Club and finding out that it just tied his money up for five years. In that time, he just witnessed all the money he had disappear as loans defaulted one after another. He felt trapped and could not only not retrieve his money, but people were just flaking out on paying the funds back. He bemoaned the essentially and completely unsecured nature of the investment. Cash is not king in this context His number one of the trio though would be one big mistake he made that has recently been in the front of his mind – keeping money in cash or not investing it for the past few years. He did this based on the widespread idea that the market was due to go down “any day now” and that the world was due for another big crash. But, for the past two or three years, this crash is yet to happen, and he has lost the opportunity of all the potential gains he could have made on decent investments. He identified why it is a bad idea to leave money in cash is because you are guaranteed to be losing at least 2% due to inflation. “So even if your money is technically safe, in a checking account or savings account, and you’re not gaining interest, you’re not losing money, you are losing whatever the inflation rate is, which is usually around 2%.” Johnny FD Storing savings in cash means further losses The second part of loss in keeping money in cash is the forfeiture of potential gains, Johnny said. Even if the stock market fails to grow over a year, in the years he just kept cash, he was still missing out on dividends. They might have been another 1% or 2%. So right there, he explained, he was losing 2% on the inflation, 1% or 2% on the dividends that would have been paid out, which would have been either re-invested into your account, or cashed out on. Then there are the potential losses. On average, the stock market goes up by 7-8% a year, he pointed out. And he sat out on that, but also, in the past few years, the markets have gone up even more than that. So keeping a significant amount of money in cash was losing money, “almost like a bucket with a slow drip”. He said that it was almost to a point that he was holding on to a liability because the cash was not really an asset any more.     Some lessons On crypto Don’t fall for the FoMo Just don’t feel like you’re missing out on any wild gains because you’re not jumping in to something that looks really attractive. Slow and steady wins the race Instead, his strategy now is slow and steady wins the race. If he can grow his portfolio by 7% a year for the rest of his life, he will be very happy with that. On peer-to-peer lending For such investments, Johnny is still a fun, but he has learned. He still has quite a chunk of money in this class, but now he only gets involved if the loans are secured by real estate. If the people he lends to (invests in) don’t pay of the loans, he repossesses their house, sells it and get his money back. Alternatives are there if we look for them and learn There are always alternatives. Would-be investors just have to listen to podcasts, ask people, do the research to figure out how much return you’re going to get. Why give people money in an unsecured loan when you can give it as a secured loan backed by property. The only market timing that is proven to work is time in the market No one – no matter how smart they are or how much they think they can predict the future – can predict the market. So it is better just to be in the market.       Andrew’s takeaways On peer-to-peer lending Get collateral Make sure you are collateralizing anyone you lend to. Time in the market Allowing money to compound is critical People love to show the chart of the exponential rise in money in later years that comes after allowing your money to enjoy the fruits of compound interest. The sad news about such charts is that the compounding effect doesn’t really happen until 30 years later. Most people never start early enough to get to the 30 mark or stay in long enough to get the real impact of the compounding. Red light/green light Andrew has created an investment thinking tool thing called Red Light Green Light, which is just a very simple method based on the tools he has learned of how to look at a stock – his FVMR approach (fundamentals, valuation, momentum, risk) He says: Let’s take these four items, mix them together, and see what they can tell us. The only think he really wants to know is if the market is crazy high, he calls this Red Light, which means the market is too hot. And if it is flashing green, it is crazy low. It’s not a trading rule, it’s just an indication. If you’re someone who really gets stressed out about it, if you see it flash red, take the $800 (say you invest $1,000 a month) that you would normally put into equity and put it all into bonds. When you see it flash crazy green, maybe take the 200 that you would put in to bonds that particular month and put it into equity. This is a kind of a rules-based system that allows someone to control their emotions. And the fact of the matter is, it will only flash red or green, 10% of the time.   “Regardless, don’t worry about where the stock market is, as long as you’re contributing over the long term.” Andrew Stotz   Actionable advice “My only shopping is buying assets and no longer liabilities.”   No. 1 goal for next the 12 months His goal now is to stay on track – to keep doing what he’s doing – with everything. He says everybody should strive to work out in the beginning what their game plan is, then educate themselves to figure out what makes us happy, not just investing goals. He includes fitness and health, regularly growing income and keeping expenses low.   Parting words Learn from mistakes, don’t make your own and kick some butt.     You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points Learn with Andrew Valuation Master Class - Take this course to advance your career and become a better investor Connect with Johnny FD Website 1 Website 2 Invest Like a Boss summit 2019 The Nomad Summit 2019 The Nomad Summit 2020 Email Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Johnny FD (2013) 12 Weeks in Thailand: The Good Life on the Cheap Johnny FD (2014) Life Changes Quick: Replace your 9-5 income, travel the world, get in shape, and even fall in love  

Andrew Sherman is a partner in the corporate department of Seyfarth Shaw LLP, and serves as the corporate office chair for the Washington DC team. He focuses his practice on issues affecting business growth for companies at all stages, including developing strategies for licensing and leveraging intellectual property and technology assets, intellectual asset management and harvesting, and international corporate transactional and franchising matters. He has served as a legal and strategic advisor to dozens of Fortune 500 companies and hundreds of emerging growth companies. He has represented US and inter-national clients from early stage, rapidly growing start-ups, to closely held franchisors and middle-market companies, to multibillion-dollar international conglomerates. He also counsels on issues such as franchising, licensing, joint ventures, strategic alliances, capital formation, distribution channels, technology development, and mergers and acquisitions. Andrew has written nearly 30 books on the legal and strategic aspects of business growth, franchising, capital formation, and the leveraging of intellectual property, most of which can be found via his author page at Amazon. He also has published many articles on similar topics and is a frequent keynote speaker at business conferences, seminars, and webinars. He has appeared as a guest commentator on CNN, NPR, and CBS News Radio, among others, and has been interviewed on legal topics by The Wall Street Journal, USA Today, Forbes, US News & World Report, and other publications. Andrew serves as an adjunct professor in the MBA programs at the University of Maryland and Georgetown University law school and is a multiple recipient of the University of Maryland at College Park’s Allen J. Krowe Award for Teaching Excellence.   “Things happen when people sell their business, closely held companies, entrepreneurial companies – they run around and make a series of business decisions. Some of those decisions are actually diminutive of value or dilute of a value and accretive of value. But because you have chosen to surround yourself only with people that are like the Emperor’s village, and no one’s telling you, ‘Hey! This is a bad decision’ or ‘Hey! This decision could really affect the enterprise value if you were to go sell you are the Emperor’.” Andrew Sherman     Support our sponsor   Today’s episode is sponsored by the Women Building Wealth membership group, the complete proven step-by-step course to guide women from novice to competent investor. To learn more, visit: WomenBuildingWealth.net.     Worst investment ever This episode features a slightly different format  As Andrew Sherman has so much experience in the space of businesses, selling businesses and intellectual property and other types of property rights, our host thought it would be a great opportunity for his guest to go through some of the mistakes people have made in this arena that he has seen over the years. Enjoy! ‘Don’t call my baby ugly!’ or ‘DCMBU’ Andrew Sherman compares being in the park and seeing a mother with a baby in stroller and the social necessity of always having to say “Oh my God, what a beautiful baby”, with being the owner of a business and trying to sell it. Perhaps your “baby” is not attractive. Which doesn’t mean it may not be attractive in future or in the buyer’s arms but the first big mistake (1) a seller can make is to be overly defensive about their business. For many sellers, the business is their child, and they can have put more time into building that business than they have in raising their own family. Be ready for Spanish-inquisition-type scrutiny So if people are going to be selling their business, failing to be ready for the exposure and criticism that comes with putting their business up for sale is a huge mistake. He urges sellers to remember that due diligence in the post-Madoff, post-World Com era means that the depth and breadth of questioning the seller about all aspects the business for sale is extremely extensive. Andrew says it slows down transactions and makes them more expensive. Have checklists and humility about your ‘baby’s’ value Such scrutiny though can have a considerable psychological impact on sellers and the response can be defensiveness when people are questioning every business decision that they have made on every customer, channel, relationship, intellectual property action. He says: Be ready for this process. Have a data room, checklists and the right advisors, but also try to attain a mental state that admits not every buyer will think you have the most beautiful business in the world. “In fact, most buyers and buyers counsel and their advisors are trained and are paid to find the flaws in your business.” Andrew Sherman ENC syndrome Andrew spoke here about an issue similar to DMCBU, but one that is slightly different it speaks to leadership, governance and culture. ENC stands for The Emperor’s New Clothes, from the Hans Christian Andersen children’s story of the same name. He likens the Emperor’s tailors (who make the invisible suit) to consultants. The scariest part of the story is that no one in the village points out that the Emperor is not wearing anything until a child tugs on their father’s jacket coat and says loudly: “Daddy, why is the Emperor walking around with no clothes”. Business sellers need team members to be honest Things happen and people sell their business, closely held companies entrepreneurial companies, they run around and make a series of business decisions. Some of those decisions are actually diminish or dilute the company’s value, and do not create or add value. But some business owners because you have chosen to surround yourselves with yes men and no one’s telling them that a decision is bad and could affect their enterprise’s value, this is a big problem. Some owners only want to be told good news and good things about their business and how well everybody’s doing. This tendency will haunt a seller, because buyers, they’re lawyers, their accountants, their investment bankers, and their consultants are like the child, and they will state loudly something is a problem, Advisory boards can be a great form of due diligence Not only that, this it will go on to affect enterprise value and the price and the terms paid. One thing a lot of companies do not do is set up advisory boards to help prepare a seller, and play the part of the tugging on your jacket. When do you want to know you have a problem? When you’re in the middle of a sale process, which could be very embarrassing and derail the transaction? Or six months before the sale process, when you still have time to fix it? Andrew himself uses a process he calls mock due diligence. Like a dry run in which he plays the part of a nitpicking buyer, fault-finding wherever possible. If a seller is negligent, they can throw away a lifetime of effort If an entrepreneur who starts with nothing spends a lifetime builds their company and sells on day for US$100 million, that’s enough money for many generations to live on if it’s properly invested and protected. Andrew gets very sad when he sees people work their entire lives to build a business and then get a very disappointing result because of things that could have been avoided. So due diligence is very, very important.   “If during the mock due diligence process I can help find pockets of improvement and I can identify problems that I know a buyer’s counsel will identify, then we’re turning it from the worst investment ever into the best investment ever.” Andrew Sherman Build your business with the eyes of the buyer (EOTB) in mind Come in every day and say, “Is this business for sale? Could it be for sale? Why would somebody actually want to buy my business?” Numbers follow, they don’t lead In the context of mergers and acquisitions (M&A), Andrew says numbers don’t just happen, numbers happen as the result of attitudes, and the culture of leadership, of governance, of goal setting and of motivating people. Here Andrew talks about one of his recent books, The Crisis of Disengagement, which documents how high employee disengagement has become, in not only United States, but around the world. If someone was going to buy a company and they found the company’s level of disengagement among its workforce was at the norm, which right now is 51% if we’re talking about the US workforce, they would run away. Another 20% on top of the 51% is ranked “highly disengaged”. So that means seven out of 10 workers describe themselves as either disengaged or highly disengaged. A business owner can’t get much financial performance out of a workforce that is that disengaged to such degrees.   “Imagine how much more productivity, profitability, creativity, innovation, collaboration, teamwork you would get, if you could figure out a way to improve that national engagement average.” Andrew Sherman   Engagement is becoming a key due diligence question. Business buyers and sellers must be ready for it or they will be blindsided and it will sneak up on them like a bad pair of underpants. Disengagement defined It means that the worker or manager is not up at three in the morning tossing and turning about ways to innovate and improve her business’ products or services. If you are, it’s because you’re online looking for a new job. Andrew said the most disengaged workers never even leave their jobs, but merely stay in their cubicle and take paychecks from the owner while updating their Facebook accounts all day. They’re not doing any work. But they don’t want to leave because they fear they’ll be even more disengaged across the street. About 4% of the workforce are highly engaged. Twenty-five percent describe themselves as simply engaged. That’s where your delta is as a business owner, can you bring some of the 25% up to the 4% of high performers, without having them fall into the larger bucket of the 51%. One of the things that leaders of entrepreneurial and closely held companies need to do is really pay attention. At some point, there’s going to be onsite due diligence. And buyers are going to want to look at your culture and interact with your people. If what they see is people just shuffling their feet or taking 90-minute coffee breaks and other such things, they’re not just going to walk away, they’re going to run away. So pay attention to your disengagement levels. Pay attention to your company’s culture. If you really want the numbers to lead. Make sure that your culture, governance and leadership is in place. Negotiate until you’re done negotiating, then let go Negotiate all the way to the end, but once you have closed the deal, have no regrets. You can beat yourself up over an extra dollar you might have won, but it’s not worth it. If you’re that smart, start another company. And by the time you’ve hit 50 years old, you will have built a significant treasure chest. But… “This is really the important part, you’ve (also) empowered a lot of other people a lot more entrepreneurs today are not just interested in building wealth for themselves, but they want to build wealth for the people around them. And you know, that’s, that’s been a really refreshing evolution of this next generation of entrepreneurs coming up. Andrew Sherman   Andrew’s takeaways Getting ready to sell a business is not ALL about the numbers Andrews Sherman spoke a lot but not so much about numbers. When people go into thinking about selling their business, it’s usually all about the numbers. But Andrew was talking about emotional preparedness, a very important lesson. KPIs are no savior for management Followers of western style management often think that if they just measure everything about a person, they can get the most out of them. That is nonsense. If you took all the people out there who have created amazing things, and we tell them to measure every single thing they do, we destroy pride of workmanship in people. So I challenge listeners to think about that. To the buyer: “You gonna have to do better than that” The seller, just like the buyer, have every right to do our due diligence, work and into why the buyer is buying. The seller has every right to go to the buyer and asking to speak to peple in the company to understand more about it and what it is doing, and that way, with that small amount of work, you can figure out what they see in the company, and through that even if you don’t find out what they see in the company you are selling, you’ll have a better understanding of where they’re coming from.   Actionable advice 1. Build the right advisory team He’s not saying that just because he’s a mergers and acquisitions lawyer and that’s how he makes his living. He’s that because many times people – particularly sellers of entrepreneurial, closely-held or family-owned business sellers – get all the wrong advisors. They instruct a guy that did their estate plan or handled a piece of commercial litigation for them. They put the fate of their entire business and future generations’ wealth in the hands of an inexperienced person. Andrew says hopefully a seller will sell their business once. A lot of quantitative and qualitative wealth will come from this transaction, so a good team of transactional advisors should include: Lawyers accountants Valuation experts Good consultants These should be People who that really know what they’re doing, particularly if it’s going to be a cross-border transaction, which adds complications, both cultural and legal with which to the deal.   Walk a mile in the buyer’s shoes, ask what buyer really buying? The biggest mistake a company seller can make is to fail to understand what you’re selling. A seller may have a couple of patents that some patent lawyer a couple years ago said were not valuable to which the seller has never paid much attention. But perhaps because the seller never paid them much attention, they may be very important to the buyer. Andrew suggests thinking of the buyer as building this enterprise and that maybe the seller is the missing piece that will drive value. So the buyer comes along and offers US$10 million and the seller thinks: “Oh my God, so much money, I can live so comfortably with that.” “The truth is, to the buyer, you’re worth 100 or 200 million. Now, that doesn’t mean they’re ever going to tell you that. It doesn’t mean they’re ever going to pay that. But if you can figure out why is this company interested in me? What is it that they’re really truly buying?” Even if they won’t disclose it to you, which they rarely do, you can take the time to understand it.” Andrew Sherman 

Todd Tresidder is the author of seven personal finance books with an eighth coming out shortly. He created a course on strategic wealth planning and is the founder of FinancialMentor.com, a popular personal finance site. He is a self-made millionaire and was financially independent at age 35, which was more than two decades ago. Since then he’s been coaching clients on how to do the same giving him an unusual depth of experience. Todd has maintained his wealth by remaining an active investor and utilizing statistical and mathematical risk-management systems for investing. Through FinancialMentor.com he teaches advanced investing and advanced retirement planning principles. Take the next step beyond conventional financial advice and discover what works, what doesn’t, and why, based on years of proven experience.   “So he had all kinds of great stories about how this company was going to the moon and he didn’t understand the setback but this company was going to fly and I was a stupid kid and I bought it hook line and sinker and I put even more money into it. So I made this stupid mistake of averaging down on a loss you know chasing good money after bad and eventually went to zero, and I lost everything.” Todd Tresidder     Support our sponsor   Today’s episode is sponsored by the Women Building Wealth membership group, the complete proven step-by-step course to guide women from novice to competent investor. To learn more, visit: WomenBuildingWealth.net.       Worst investment ever Graduate joins HP, friend in credit department offers hot stock tip Todd made his first and worst investment when he fresh out of college. Holding a fine résumé for a new graduate, he had been the business manager for campus businesses. It was the mid-1990s and he had read the book In Search of Excellence, by Tom Peters. He went straight from college to work for HP, one of the top companies employers at the time, and had a friend in the credit department. One day during a lunch-time chat, his friend told him about a new company they were working with that was buying HP mainframes, and they were listed in the pink sheets on the Nasdaq. Todd’s friend had put his money in the company’s stock after doing financial analysis on the company and all this. ‘Inside scoop’ meant he put in all funds he had saved for his MBA course So Todd felt this was a “cool insider scoop” on this “amazing emerging company”. The company had an algorithm that was dominating how mail was going to be sent. Todd said “it sounds so absurd now, but it sounded cool at the time”. He had been busily saving for tuition fees to study for an MBA after paying his own way through school, and was still trying to pay off his college costs. He was also saving some money but chose instead to stick his savings into the pink sheet stock. Initially, it went up. But he neither knew anything about how new stock issues work or about how this business worked. So he also had no idea that it was standard protocol for new issues to promote them in an over-the-top way to get people excited about the stock, that it was “going to the moon”, in order to create demand. Todd was in early enough to see an initial rise in the stock, and he kept pumping more money into it. The more he had, the more he would invest, thinking this investment was going to pay for his further study. Stock price turned and broker talked him out of selling He then watched his investment fall to zero Then suddenly it turned and started going down. Magically, the stockbroker called Todd (as though he could read Todd’s mind) and “had all kinds of great stories about how this company was going to the moon. And that he didn’t understand this setback, but this company was going to fly and I was a stupid kid”. Todd bought the broker’s story and put more money in. He made “this stupid mistake” of averaging down on a loss, chasing good money after bad and eventually it went to zero, leaving him with nothing of his original investment. That was Todd’s first and worst investment ever. So for his very first investment I lost everything. But it did set him on a course to learn everything about how to stop it happening again.   “It was only in hindsight, as I started to learn (about finance and investing), that I realized the depth and the level of all the different mistakes I was making.” Todd Tresidder     Lessons learned Don’t buy on hot stock tips Don’t risk money you can’t afford to lose Don’t buy a story If you think about it, you are actually buying a business, so if you are going to buy based on any sort of fundamentals, it better be business fundamentals. You must must must have a risk management plan in place This must include an exit strategy Don’t play a game that you don’t fully understand. Todd was in the new-issue market, which is a very specialized game. There are rules by which that game is played by and he admits violating them all “with pure stupidity”, because he did not know the game. Don’t confuse brains with a bull market Which is he says is what many people are doing right now. Don’t ever buy based on news Don’t send good money after bad by averaging down Don’t let a win turn into a loss       Andrew’s takeaways Collated from the My Worst Investment Ever series, the six main categories of mistakes made by Andrew’s interviewees, starting from the most common, are: Failed to do their own research Failed to properly assess and manage risk Were driven by emotion or flawed thinking Misplaced trust Failed to monitor their investment Invested in a start-up company Andrew says Todd’s case features Mistake No.2 “Failed to properly assess and manage risk” When we get excited about the returns and the opportunity, we often ignore the risks Part of managing risk it to assess the risk of that particular company but the other part of it is managing all the other risks, and that is about the position, size, how much money you put into it, and things like that. Have some kind of exit strategy for every single investment you have The hardest thing for an analyst and for any investor is the decision of what to do when the stock goes down. When we talk about emotion in investing, the emotion involved when our stock is starting to fail is intense. Nobel Prize research highlights that the pain of loss is two-and-a-half times the excitement you feel when you’re winning. When that emotion is involved, that really is the time to have a risk management system in place. It could be a stop loss, or something else. You must learn the game before you play That’s a critical lesson.   “(Risk management) It’s the first consideration in investing. I always think in terms of what can I lose and only secondarily do I consider what can I win? My focus is entirely on controlling losses.” Todd Tresidder   Actionable advice Focus on risk management, first and foremost. The reason for that is you can make all the other mistakes, but if you have a risk management strategy, you can still win in the long term.   “If you don’t have risk management any one mistake can bury you.” Todd Tresidder     No. 1 goal for next the 12 months Todd is finishing off his wealth planning course at FinancialMentor.com and he has one final module to create to complete that project. Then is will be time to build all the sales funnels and all the systems to support the site.   Parting words “It’s really not painful to talk about your losers.” Todd said, no one is born a smart investor. As a matter of fact, we are hardwired in our DNA that opposes what we should be doing as a smart investor. That’s one of the reasons he uses quantitative disciplines to overcome the natural human emotions. Recalling mistakes and how they are made is just part of learning how to invest.       You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr. Deming’s 14 Points Learn with Andrew Valuation Master Class - Take this course to advance your career and become a better investor Connect with Todd Tresidder LinkedIn Twitter Website Full bio Course Books Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned Thomas (Tom) Peters and Robert Waterman (1982) In Search of Excellence: Lessons from America’s Best-Run Companies