Expert: Professor Scott Galloway – The formula for building wealth

Bryce: [00:00:31] Welcome to another episode of Equity Mates, a podcast where we explore what's possible in the world of investing. If you've just joined us for the first time, a huge welcome. We have a massive episode coming up. My name is Bryce, and today we have the pleasure of speaking to none other than Scott Galloway. To chat through it as always, I'm joined by my equity buddy Ren. How are you going?

Alec: [00:00:51] Oh, I'm very good. Bryce. You start every episode with welcome to another episode of Equity Mates. But this is nothing. This is not another episode of Equity Mates. This is being your, this is the reason you started equity mates. So you could speak to Prof. G. 

Bryce: [00:01:06] Prof. G. Yes. 

Alec: [00:01:07] I was reflecting on it on the way in this morning. Early start for us for I am about to get here because the bus wasn't even running yet. Yeah. You were a big fan of Tim Ferriss back in the day. We weren't able to get him on the podcast. Yeah, but recently I think Prof. G has the top spot. Yes. In your podcast rotation. Yes. And we have been able to get him. So yeah. Sorry.

Bryce: [00:01:28] Yeah. So for those of you who don't know, Scott. Scott, is a clinical professor of marketing at the New York University Stern School of Business. He's a public speaker. He's written a number of books, hosts, a couple of, I guess, the world's largest business podcast in pivot and Prof. G. And has started many, many businesses. So, we're going to unpack all of that with Scott. He has just, released his latest book called The Algebra of Wealth: A Simple Formula for Financial Security, which pulls together all his learnings from the very first business that he started through, to now having made hundreds of millions of dollars and, looking back on on his time and what is important to him and how he thinks we should go about building wealth. 

Alec: [00:02:14] We cover a lot in this interview. Everything from Australian property to the crisis in masculinity. Why he quit drinking, how everyone should be investing today. Like, it's a pretty wide ranging interview, so I think there's nothing more we need to say. Let's get to our conversation with Professor Scott Galloway. 

Bryce: [00:02:35] Well Scott Galloway, welcome to Equity Mates. 

Scott: [00:02:37] Thanks very much, Bryce. Good to be here with you. 

Bryce: [00:02:39] So Scott, I want to start with your early life before we dig into The Algebra of Wealth. He started nine companies. Made a fair bit of cash along the way. What was one of the biggest failures, though, throughout that process that's helped shape your thinking about building businesses? 

Scott: [00:02:59] Through most of them were personal affairs. So I think this was as much as a failure as it was a recognition that I had been, I don't know, should have been more mature or more just fun when I had my first kid. It was about the time the Great Financial Recession came along. And I was kind of all in on things, and I had gone all in on my business that I'd done while I had gone public. But I was that guy who borrowed money against Tesla stock to lever up and buy more stock in my company. Because, you know, I'm awesome in this country, clearly going to the moon. And then when the great financial recession came along, it got hit very hard. And, by that time, my first kid had kind of a poor judgement to come march again on my girlfriend. And I remember being in the delivery room and I was so faint, tenacious, and they thought it was because I was, you know, upset about or, you know, squeamish and I wasn't that at all was having a kid, which is terrifying for me because I felt like from day one, I'd sort of was already failing this kid because I didn't have the economic security that I'd hoped or thought I was going to have, and it just had a different meaning once I had a kid just like wow, I'm failing this kid, and I just got here. So that was very kind of pivotal. It was very jolting. Very upsetting. But having, you know, made all this money and had I been just a little bit smarter, I would have just been in a much more kind of, you know, secure, comfortable position than I was in. I felt like a failure. 

Alec: [00:04:34] So Scott, when you, when you started those businesses and you looked across I guess the successful ones. One thing we read was the only factor I could identify across successful ones was that I started them in recessions. Can you talk a little bit about, I guess, the luck of, of timing when it comes to, to business success? 

Scott: [00:04:56] Yeah. So much of it is out of your control. I think 49% is your talent. About 51% of things outside of your control. So when I got out of business school in 92, it was a recession. And I started a company, and then in that company, profit was successful. And then I started L2 in 2009, in the midst of kind of the height of the recession. And it was successful when you started having a recession. Office space is cheap, people are cheap. It's easy to kind of start a company on nickels. There's a lot of people looking good, people who you can get to come to work with you. And then as the market recovers, you imprint the correct DNA on the thing for sure. If it has any success in a recession, you know that it works because you can't wallpaper over a mediocre idea with cheap capital or a, you know, a bull economy. And then if you have something that works and you assemble a good core team when the economy starts to come back, it's like you have huge sales up and you're ready just to, you know, cater sales. What people don't realise is that we haven't had that economy, though. If you're not, if you're not under the age, you're not over the age of 40, you've never really been able to start a company in a recession or find I got New York real estate for like 35 bucks a foot. I could hire my first first person I hired at, L2. I hired at 20 bucks an hour. I ended up with 10% of the company, and we sold the company for 460 million. So she did. She did just fine. But, you know, I had a very talented, hard working person at 20 bucks an hour initially. So I found that the DNA of low costs and having to have a a good concept from day one because of the recession and then being positioned well with the concept of kind of having a running start when the winds came, you know, came behind you, that I think where you start in the economic side. And then the flip side of that, when I started companies in boom times, it was always easy to raise capital. It was easy to wallpaper over the fact this is not a great idea. Everything was expensive, mediocre people were expensive, mediocre technology was expensive, and those companies usually did not do well. But I found the recessions are actually really good times to start businesses. 

Bryce: [00:07:01] All right, we will keep night watch out for the next recession. Yeah. So before, just to close out, I guess the entrepreneurship side, if you look back on that period, Scott, would you do anything wildly different if you had the chance? 

Scott: [00:07:16] I don't know, entrepreneurship is hard. We have a tendency to romanticise entrepreneurship and diminish working for corporations. A big company is usually a great platform for building wealth slowly. Getting good experience, meaning good people. What would I do differently? You know, I probably would have, what about a diversified earlier? You know, start took some money off the table and probably would have been a little kinder. I was just so hardworking and so focussed on my stuff. I didn't really slow down and think about others a lot. But you know, I, you know, the several businesses I've started that failed. I'd probably like to have those back. You know, that was a lot of brain damage for not a lot of upside. Known people say you learn from your failures. Oh, God. Oh, God. So, yeah, I have a lot of, you know, I have a lot of regrets, but nothing. Yeah, nothing. No real scar tissue, nothing traumatising. Yeah. 

Bryce: [00:08:20] Well, that's probably a good spot to move to the book. You've just released The Algebra of Wealth: A Simple Formula for Financial Security. And I've been listening to you for a number of years and sort of, you know, I've heard of a number of elements of this book sort of come together. And it was a great read. So, The Algebra of Wealth is focus plus stoicism, times time, times diversification. So we'll unpack that, over the next little while. But Scott, everyone has a different idea on what wealth is. So can we start by understanding what wealth is to you? 

Scott: [00:08:57] Well, the definition of rich or my definition is passive income that's greater than your burn. So I have a close friend who runs a large division at a bulge rack and investment bank and makes between 3 and 7 million a year, depending on the year, in between a 52% tax rate in New York. A master of the universe lifestyle. Ex-wife, alimony, home in the Hamptons. I think he spends most or all of it well, and he stays up late. I can tell you. The stairs of the ceiling, wondering what happens to the king of the music stops. My father, who is 93, turning 94 in August between his Social security and his Royal Navy pension, makes $58,000 a year, and he spends 48, so he makes 58,000 and passive income. He doesn't have to work and he spends 48. My father throws around nickels like a manhole cover. He's rich. So passive income that's greater than your burn is rich. So being rich is not only a function of how much you make, it's how much you can put away such that you can have passive income, and then how much you spend. And once your passive income is greater than what you spend, you know, welcome home. You're rich. So what people usually fail to realise is they focus on how much they earn. It's not about how much you've saved, how much passive income that creates over how much you're spending. So if you want to get rich faster, you spend less, you consume less, you save more, and you get to that number faster. But anyways, passive income that's greater than your burn is how I would describe, you know how well, so rich. 

Alec: [00:10:25] So, we're going to repeat the formula a few times throughout this conversation. So focus plus stoicism times time times diversification. I guess if you can take us into how you thought about building that, that formula, was there anything that got close to making it in and then was left on the cutting room floor and they all equally weighted? Or is there one part that you think is the most important part that gets you sort of 80% of the way there? 

Scott: [00:10:55] Well, it's hard to build wealth without making money, right? So you got to start with focus. You got to we're in a specialist economy. You got to figure out something you could be good at and ideally great at. In an industry that has 90 plus percent unemployment rate, what do I mean by that? You can be a great actor and be poor. In the Sag-Aftra union, which is the union for actors, has 180,000 people, and 87% of them don't qualify for health insurance because they make less than $23,000 a year. So the key is to find something you're good at and could potentially be great at in an industry where the employment is 90 plus percent and that's 98% industries. The problem is young people mistake kind of passion for hobbies. And that is they think, oh, I'm supposed to follow my passion according to everybody. So they go, oh, I want to be a DJ or I love music, or I love sports, or I want to be in fashion. You know, these industries have a 90 plus percent unemployment rate. So the first is to find a focus and something you could develop mastery and developing mastery of something and the economic accoutrements, the camaraderie and the relevance of that mastery will make you passionate about whatever that thing is. Then obviously diversification. Don't do what I do. Don't go all in on one thing. As soon as you have some money. Diversify across different companies, different asset classes, different markets. That way, if anything goes to zero, you have Kevlar and you can take a bullet to the chest. You can have an investment or a stock go to zero, but it doesn't kill you because you have other things. And I didn't learn this until later in life. Now I don't have more than 3 or 5% of my net worth in any one thing, and I try to rebalance constantly. Time for the species. Is it because for 98% of our time on this planet, we have to live past the age of 35? Young people just have a very difficult time grasping the fact that, you know, I embrace you look 17 so I'm gonna guess your 30.

Bryce: [00:12:46] I used to have. I normally have a beard, Scott. 

Scott: [00:12:49] What is your moisturiser? Okay, so I don't know. I'm going to say, are you 30? How old are you?

Bryce: [00:12:53] Yeah, yeah, I'm 32. 

Scott: [00:12:55] Okay. Okay. So you're probably going to be here another 70 years. That's realistically the actuarial table. Seven years. That's an enormous advantage. You always want to lean into advancing your advantage and your advantage. You're going to be here for seven years. So if you managed to save 500 or 1000 bucks a month, by the time you're my age, which will go much faster than you think, just in case this podcast doesn't make you millions, or you don't buy the house in Bondi Beach that goes up 100 fold, or you get into the right crypto or whatever it is, you're going to be financially secure and it takes a little bit of discipline. It takes a lot of maturity, the savings muscle, the discipline. But time is just incredible. The market's gone up 11% per year the S&P since 2008. That sounds boring for a young person, but that means every 21 years you're getting a tax, you know, on your investment. So, time diversification live on your means. Stoicism, recognise that people aren't as impressed with your stuff as you are. Don't try and impress others. Try and be happy yourself and have some peace of mind knowing you're gonna have some financial security. And then, so that's kind of the equation. And then you asked me if there's anything that didn't make it. It's all sort of wrapped in the following. And that is there's a bit of a myth that wealthy people are bad people, that they light their cigars with hundred dollar bills and they've crawled other over other people to get they're generally speaking, people who are successful are high character people because in order to get wealthy, you really have to establish allies along the way. I mean, if you're just if you're Kanye, you're a genius, okay? You can be an arsehole. Most people are not Kanye. And if you want to be put in a room of opportunities, even when you're not in that room, and the way you get there is by being a high character person that people want to help. Even when you're not around, you want to be the person that people talk, you know, speak well of behind their backs. And I think that if you really looked at the, you know, kind of the millionaire next door, he or she is usually someone who is a high character person, good spouse, good father, good mother, good friend, goes out of their way to help people. Is a high, high integrity person. I think that, you know, wealth is sort of a full person project. And I found in the research that most, most wealthy people who collect allies along the way are actually very good people. So I don't, I, you know, people like to think it makes them feel better, though. Rich, most people must not be very nice people. That's not that's just not true. 

Bryce: [00:15:27] Scott, I want to just unpack the focus piece there a little bit more, which was around following passions rather than, sorry, following, what you, I guess good at rather than your passions. Because when we go through school and through university, obviously we're just told to follow our passions and, as you said, end up in industries that have 90% unemployment. You're a professor. What advice would you give to people going into university, then to to think about degrees and further education to help them with that decision. Because I'm one of them. I went into uni and did classical music and ended up realising that I was really good at it, but that wasn't going to give me a career. Pivoted to business and now obviously running my own business. But that is a story I can relate to. But it wasn't something I figured out until post uni.

Scott: [00:16:19] Yeah, but you did exactly what you're supposed to do. Your 20s are about workshopping. It is fairly unlikely. I thought when I was 17, I was going to be a paediatrician, and then I failed chemistry my sophomore year in college, and I okay, I guess I'm not gonna be a doctor. And I thought, well, I'm going to be an investment banker. And I was got a job at the Premier investment Bank at the time, Morgan Stanley, and I was awful at it. And but, you know, you workshopped your career and you found something that you're good at and could potentially be great at. And that's what your 20s are for, is trying to find something that you could build. And you can't hate it. And I'm not saying it's something, you know, my attitude is if you find something you're good at and you've been great at it in an industry that pays decently, okay. I was passionate about sports. I realised very early I was going to be an athlete, but now that I've got, I went into this boring industry. Consulting and analytics made a really good living. And now I go to the World Cup and I would say, yeah, I'd rather be Roger Federer than me, but maybe Nadal, but I get to go to Wimbledon because I get to by my window Wimbledon and I get to have a really good time there. I'd rather be Federer or Nadal, but I'd rather be like the number five six player, much less the number 300 player. So why not be? Why not have as good or as better a life than the fifth best player in every sport in the world? By having economic security and being able to take your kids to these amazing events. You know, I'm super passionate about taking care of my kids. I just think that's so much fucking fun to take care of your kids, to be able to show up and take care of my father. At 93, that's really enjoyable. You know, think about that when you're young, you think about, I want to be a, you know, I want to be in fashion or I want to start a restaurant or all these industries that it's just like banging your head against a wall. And if I don't want to crush anyone's dreams, but just if you want to go into what I call one of the passion or romance industries, unless you have bright, flashing green lights that you're in the top 1% right away, just recognise it's going to be an, you know, a lifetime of a lot of frustration. You want to be an editor at Vogue? Fine. You're not going to make a lot of money. You know you want to be, you want to be a music producer or producer. Movies. Great. It's great. You. You can be great. And you're not going to make nearly as much money as someone who's great in any other industry. So I just think you have a sober conversation with yourself around where are you going to get the greatest return on your efforts and or human capital? That's your advantage when you're young. And so you have a lot of you have more time than money. But what I wanted to I was wanted to get to the point where I had more money than time so that I could start creating time with money, which you can do. Money is just a transfer of time and work from one entity to another. And now I have a lot of balance in my life. I can do really wonderful things. So unfortunately in, you know, in Australia and Canada and the and every capitalist nation, these nations become more like themselves every year. And that is they become loving, generous places. If you have money. And there were precious violent places if you don't. And it's not, this isn't a book about what should be. This is a book about what is and how to navigate the is of our economy. So, you know, what I suggest to people is. You can have it all, but you just can't have it all at once. And there's a certain amount of trade offs and a certain amount of maturity and willingness to save as a young man, when there's offers, compelling offers thrown at you every minute on your phone about why you should upgrade from economy to economy class or business class, or why you should go to Coachella this weekend. Or add that flower list chocolate cake to your order right now for just another $11. I mean, every day there's just thousands of great opportunities to spend everything you have and more. So it really takes discipline and maturity just to, you know, develop a bit of a savings muscle. It takes real kind of stoicism, comfort with yourself and discipline and ideally a partner who has a kind of the same sort of as signed up for the same spending as you that has a similar approach to spending. Similar approach to saving similar goals. Sober conversation around the economic weight class you're going to be in. Understanding about who's responsible for keeping going that way. Can I make weight class? What are the trade offs? You know, you can have a really nice, live, know a good life. I'm not a ton of money. If you're willing to move to the suburbs of Perth. I'm making a lot of Australian, right?

Bryce: [00:20:43] I am loving it.

Alec: [00:20:44] I appreciate it. Yeah. 

Scott: [00:20:46] But, you know, you and your partner expect to be in Sydney on the harbour. Okay, you better make a shit ton of money. And now that comes to the sacrifice, it means you're both going to do nothing but work for 20 or 30 years. And it might be worth it, but you just have to have that conversation with your partner. And because the majority, the fastest way to snatch financial insecurity from the jaws of financial security is divorce. And I speak from experience here. I lost 60% of my net worth overnight because you split all your assets, and then you have two households to support. I am just one, you become a force seller of assets, usually at a terrible time. So you lose 60% of your net worth. And unless you're Jeff Bezos, losing 60% just takes a huge toll on you economically and also professional divorce. Show me a small or medium sized business that's doing well. And then all of a sudden it isn't. It's usually that the partners are divorcing from each other or not getting along. So if you want to be wealthy, you need to bring a certain amount of generosity and forgiveness to your personal and your professional relationships. Because personal and professional divorce are the most you know, a lot of hedge funds say we're in the business of not losing money the way you personally are in the business of not losing money is by maintaining relationships and being, you know, a good, forgiving, generous person. Because at some point, you know, there's going to be problems in any partnership. And unless you're willing to forgive, unless you're willing to be generous, you're just not going to have, you know, your relationships are going to struggle at some point. 

Alec: [00:22:14] I'd love to drill down on that more, Scott, because I think the numbers now are pretty startling. It's something like 50% of marriages end in divorce. And you know you've written that the most important economic decision is your partner, which I'm sure is jarring for some people to think about, their, you know, their love life in economic terms. But, you know, as you've explained it, it makes so much sense. But how do people actually, you know, put that into practice? And I guess, what are the, aside from, you know, the generosity that you were talking about before and probably having a number of hard conversations early in the relationship.

Bryce: [00:22:52] Ask for a bank account.

Alec: [00:22:52] Yeah, yeah. How do we actually, I guess, you know, make sure we're aligned values wise and, you know, goals wise and the rest. 

Scott: [00:23:04] Well, it's hard, but that's not the hardest part. Like sitting down and having an open and honest conversation with a potential mate around that stuff. I remember I was head with my girlfriends whenever I was getting serious. This is how much money I have. This is how much money I spend. This is how much money I'm hoping to have. This is where I want to live. This is my plan. Okay. Your turn. And just, I think it made us feel closer. You know, if it's the right partner, then the hard part is finding a great partner that's high character and, you know, wants to be successful and takes a team approach and you're on the same page. And that's just it's not only important for building wealth, but it makes the journey and the destination so much more rewarding. One of the nice things about my relationship, we met when neither of us had money, and now we do, and we built it together. In addition, with the exception of our kids, it's the thing we're most proud of that we built together. It's just very bonding and rewarding that we built this together and we both sacrificed and we both worked hard and it paid off for us. And the way you find a high character person is through rejection, and that is if you want to score above or punch above your weight class professionally and personally, it's rejection or specifically the willingness to endure rejection. Only 1 in 7 businesses succeeds. So I started nine. I've kind of. I'm. Two, three and four. I've had four businesses get some of their most of their money back. I've had three businesses crash into a wall and, you know, a fireball of disaster. And I've had two wins. But all you need is one and two. That's a lot. I've also endured a lot of rejection from women, and it's been upsetting. Humiliating at the time. But the reason I'm with someone who's of such great character and is more interesting and definitely much hotter than me, is I wasn't scared to keep trying. And I think it's I think you need to figure out a practice such that every morning, whether it's working out, looking, you know, hanging out with people that lift you up, meditation, whatever it is. So it's how you can look in the mirror and kind of honestly say to yourself over and over and agree or convince yourself that you are the answer to a firm's problems. You bring a unique talent to the economy and you can make money. And two, that you can absolutely, you know, find what I'll call real, real, joy. Or you can, you know, find someone who you're gonna have a great relationship with. I think that, you know, you need to believe that stuff. You need to say it over and over, and that you're worthy of someone's love and someone that you can make someone really happy, and that you should approach strangers and express romantic interest because you can make their life really wonderful. And the story I always tell, you know, I met the mother of my children at the pool at the Raleigh Hotel, and I walked up to her in the heat of the midday sun without the benefit of alcohol, and introduced myself, and I could have so easily laughed. I remember I walked in, I saw her and I thought, I'm going to, I promised myself I was going to speak to this woman before I left the pool. And it was a pool, the Raleigh Hotel, and I literally was walking out. I'm like, oh God, I would just be so much. It's embarrassing and hard to walk up to a strange person. She was with another woman and a guy like, I don't know what was going on. All right, so I'm walking out of my house, I promised myself. So I went back and I just said, where are you guys from? Anyways, you know, long story short, two years later, our first son's middle name is Raleigh. And I'm like, if you want to score above your weight class, the only thing I can guarantee you is that you have to put yourself in a position of uncomfortable risk. Starting a podcast is embarrassing and hard if it doesn't work. Starting a business is hard. Asking people to invest in you, asking people to be your client, calling people trying to get meaning. You know it's embarrassing and it's hard, and you're risking public failure and then trying to find a mate who brings a lot of character and someone you're really attracted to and an interesting person. The only thing I know about that is, is rejection, that you're going to have to workshop it. You're going to have to, you know, you're really gonna have to put yourself out there. And one of the things I think a lot about young men, I don't think a lot of young men are developing the skills to endure rejection and put them in it selves in a position of success. They're not getting out. They're not taking chances. They think they can live a reasonable facsimile of life in their basement with algorithms and screens. So anyways, people will say, what's the key to your success? I get asked that a lot and I get rejected. I ran for sophomore, junior and senior class president in high school. I lost all three times and based on my track record, I decided to run for student Body president, where I went on to wait for it lose I five and nine. I applied to nine schools, so I got rejected from Indiana. You know, good school, but I never lose my sense of enthusiasm. I love what Churchill said. The key to success is your ability to move through failure without losing your sense of enthusiasm, the ability to mourn and move on. I've been shot in the face, professionally and personally. So I took some time to mourn, you know, twist the legs off my Barbie dolls, kick the dog, whatever it is. And then I got back up and I started, you know, trying to start new businesses, trying to meet new people. So, resilience, the willingness to get back up and get back on the horse, so to speak. 

Bryce: [00:28:29] All right. Scott, well, before we move on to the investing part of the formula, let's take a quick break and we'll be right back. Welcome back to Equity Mates. We're talking to Professor Scott Galloway about his most recent book, The Algebra of Wealth: A simple Formula for Financial Security. I want to turn to the diversification and investing part of the formula. And in the book you talk about a number of different asset classes. And I know personally as well you invest across a variety of asset classes, some of which aren't readily accessible to the retail investor. So what's the optimal portfolio set up following? If you were to follow The Algebra of Wealth formula.

Scott: [00:29:11] Low cost index funds. I mean, everybody has an advantage. Everyone has an advantage. My advantage is after working for 30 years in the corporate world, I'm establishing a lot of relationships in the technology community and in the corporate world. I can call a CEO almost any CEO, and they probably, you know, may or may not have heard of me, but oftentimes they have asked for lunch and then say, oh, you're going public. Here's the three things I would try and communicate in your roadshow. Or those are the two things I think your company should be focussed on. And that's what I've done for a living. And sometimes they'll meet with me. Most times they won't, but sometimes they will. And then they'll usually ask me what they can do for me and I'll say I want. And they won the IPO, that is a privileged position. I'm learning and to my advantage. Bryce, you have an advantage. And we talked about it earlier. You have time. You don't need to be a hero. You don't need to find the needle in the haystack. You can buy the whole haystack. And by showing a little bit of discipline and putting some money away, I mean, there's this great stat. I carry an iPhone. My assistant always buys me the brand new iPhone. Right. And because I'm a narcissist and I like to communicate to the world that their kids are more likely to survive if they mate with me because I have an iPhone. When you have an Android phone, you're kind of communicating to the world that life really hasn't panned out the way you'd hoped. And if someone did the analysis, if I had taken all the money I'd spend on every iPhone, it's like 26 grand or something since the first iPhone came out. And instead I bought a free phone. You can get free phones now with a phone contract, and I invested that money in Apple. I'd have $2.5 million. So just some small decisions. You know, I spend $7 a day on coffee. I'm going to make my own coffee. I'm going to round up using an acorns investing app and round up to the nearest dollar such that I can save two or 3 or 500 bucks a month at your age, which is your advantage. You have a lot of time, you know, you can get there, like, are you? Yeah. And then people say, well, I'm in my 40s. Is it too late for me? I just kind of screwed up. I'm like, well, are you single? Do you have kids? Are you tied in place now? Okay, that's your advantage. Figure out a way to make some money. Would you work remotely? Yeah, I work remotely. I'm in customer service, right? I do temporary staffing whatever is okay. That's an advantage. Move to Costa Rica. Get to a point where you can make five grand a month and you're going, you can live a really good life in, you know, parts of Italy, Costa Rica, parts of Greece. You know, they're just some wonderful things, there's some wonderful things everyone has or everyone should be able to find an advantage that you can lean into. But generally speaking, the surest way to build wealth is slowly. And that's with low cost index funds. Now, almost nobody I know goes all in on index funds like fine, have some fun. You know, buy the next cryptocurrency or a stock that you think is going to skyrocket. You will learn that you have no idea what's going on, just like the rest of us, but have some fun. You'll learn about the markets. Scratch that itch. Who knows, maybe you got lucky and you know, fine, but try and ring fence it to no more than a third of your assets. Try and put I just think Warren Buffett says this in every really every big brand I know and low cost in, says low cost index funds. And because the number one question I get to email is, is it too late to invest in Nvidia. I don't know. All right. Okay. So what do I do. Well, if you buy SPY, if you buy the S&P index fund, $0.33 on the dollar invested in the Magnificent Seven because they represent 30%, 33% of the weighted adjusted value of the market. So if they double which they could, you participate. But if they're overvalued and the other 493 stocks finally get their day in the sun, you're gonna have $0.67 on those. And so it's it's really just a function of what I'd call, maturity and recognising that you should be totally focussed on your day job and your gig, having some discipline, some savings muscle such that you can deploy an army of capital that in your sleep will go conquer and kill on behalf of you and your family and send the spoils home. And the sooner you start building that army, the bigger it gets, and the more vicious and confident it gets. And you know, I didn't. I was an idiot. I was always spending everything I had, and I always assumed that my company was just going to be huge because I was talented, I worked hard, I made a lot of money. So I'm like, oh, you know, why would I deny myself of anything? My company is going public. I'm going to be worth, you know, on paper was worth a lot of money before the implosion, and then all of a sudden I was worth zero less than zero. So this is about okay. Always have that plan B and that plan B should be economically secure by the time of my age. You're my age and you can get there. It's leaning to your advantage. And for a lot of people, their advantage is time.

Alec: [00:33:52] Now, Scott, I'm glad in the formula that it was diversification rather than investing because Australia is probably one of the least diversified investing markets in the sense that every man and his dog seems to just go all in on property. It's our national obsession. I'm not you know, you've been mentioning some different parts of Australia, so maybe you're familiar with our market, but if you're not, it has just gone up into the right for the past sort of 20 or 30 years. There's been a number of government policies and incentives that have driven a lot of that. But it's just it's stupid over here. How do you think about property for those that perhaps have only eyes for property as their sort of investment focus? What do you have to say to them? 

Scott: [00:34:43] So the reality is I'm not as I'm not as familiar with the tax advantages of real estate in Australia versus the US. Real estate is a fantastic way to build wealth over time and pass on intergenerational off in the US because it's tax advantaged. You can write off your mortgage interest rate, you can roll it into another property within six months. If it's a commercial property without paying taxes, you can lever up 4 or 5 to 1. But also I would say from a consumption standpoint, if you're in a position at some point to buy a house, it has psychic benefits because it feels like nesting and it feels like you're committing to something and you can fix it up. So what I would suggest is, you know, don't lever up to buy a lot of real estate in a market where traditionally the yield on that real estate, what you can rent it out for is, is remarkably low. And my sense is you're in that period right now in Australia where just real estate relative to rent is so expensive that in some cases you just might be better off renting, you know, kind of do the maths and then decide, well, maybe we'd be better off renting and putting our money into other assets. Because real estate, anything that anytime someone tells you something always goes up, that usually means it's about to fall 30%. And, you know, real estate can way down in the United States in 2008 through 2011, you know, in some neighbourhoods it came down 50 or 60%. And if you were levered up, you just you're all your all your equity got wiped out. So I think it's situational. And you know, how much money do you have. Where are you in your life? Where are you planning to buy? But if it is, I'm going to have to spend 50% of my pre-tax income on a mortgage and really lever up, and I'm buying at what feels like kind of a historical high in terms of the yield. You know, you may want to think about speaking to some people who are smart and say, should I maybe rent and take some money and put it in another asset until maybe the market rationalises or I have enough money that I, you know, I can think of a house as consumption as opposed to an investment. But long term, there have been few ways that you can build kind of intergenerational wealth better than real estate. Because it usually over the medium in the long term, go up. And unfortunately, the modern economy as the rich with weaponized housing codes. And I don't know if this is true in Australia, but in the US, the moment the incumbents own a home, they get very concerned with traffic and show up to the local review board and make it almost impossible to build new housing, which creates artificial scarcity, which drives up the value of the current homes and makes increases the wealth of the incumbents. And some of these government policies which make it hard, which create, you know, we need one and a half more million housing units a year to satisfy household formation than we actually create. We have artificial scarcity in our elite colleges. It's great. Once you have a degree, it's great once you have a house. But all that does is make it harder for new entrants and benefits incumbents. And I think that in a lot of modern economies, their housing market gets weaponized. Australia, I mean, you have like one person for every 7 million miles. I mean, you guys have had like it's ridiculous that housing would be that expensive there. And the government has probably figured out a way to limit scarcity because people who are the incumbents, who own homes, who have tenant, who have a tendency to have a disproportionate voice in government, really like artificial scarcity. And we have become that in spades in the United States. So it's a situational decision. I don't know the answer because I'm not familiar with the Australian real estate market. 

Bryce: [00:38:26] Well, Scott, that's a nice wrap for the convo around The Algebra of Wealth. The book is now available. Just to sort of close that out, the formula is focus, which is all about, you know, finding talent over passion, plus stoicism, which is about character and, you know, community and relationships, times time and diversification. As I said, book is out now will include a link in the show notes, but I want to just wrap with a couple of miscellaneous questions through listening to you and the podcast over a number of years. You often speak about the lack of role models for young men, and you've said that Taylor Swift is the ultimate female role model. So I guess a two part question is why do you think Taylor is the ultimate female? But b who is the male equivalent for, I guess, young males? 

Scott: [00:39:19] Well, Taylor Taylor's incredibly talented, incredibly hard working, pays her people really well. Seems like a nice woman. Makes a ton of money, is in a healthy relationship. I, you know, I just think she's, I just think we could do a lot worse than 15 year old girls. Looking up to the woman who doesn't have a lot of surgery or have a lot of profit. I mean, you know, if you're a dad of a teenage girl, you're probably not that upset about her modelling Taylor Swift. So I don't think we could do much better. By the way, I can't stand her music. Her music makes me want to put a gun in my mouth. Like for a young man, the ultimate role model is a man willing to spend time in his life and the call to action, I don't know if it's as bad in Australia, but the young men are really struggling. In the U.S. they're four times as likely to kill themselves or three times as likely to be addicted. They're 12 times like to be incarcerated. More single women own homes in the United States now than single men. It's going to be three women college grads or every two men in the next five years. Men are, No one's fallen further faster than young men, in America. And the single point of failure for when a man really comes are a boy, comes off the rails, is when he loses a male role model through divorce. A lot of there's aren't that many men in schools. There's more per capita, fighter pilots, female fighter pilots and male kindergarten teachers in the United States. So there's a whole Khadra or cohort of men who, up until the age of 25, have no contact with men. So the role model, the ultimate role model for a boy is a man. It doesn't have to be a baller. He doesn't have to be an iconic figure. He has to be a man that's trying to live a virtuous life and shows real irrational passion for that boy. And the call to action I put out to men. I think a lot about masculinity. I'm writing a book on it. Masculinity is taking care of yourself. Be strong. Be smart. Have a plan, be economically self-sufficient. Then take care of your family. Then take care of extended family. Then maybe start contributing to the community. But I think the ultimate expression of masculinity is that you have the resources and the strength so that you can show an irrational passion for the well-being for a child that isn't yours. And boys need men, and you don't have to look very far to find a boy that is fatherless or just doesn't have a lot of male role models. I used to my mom was a single mother. There was a guy across the hallway who just came over and banged on the door, introduced himself to my mom, and then the next weekend came over and said, does your son like to go horseback riding? She said, no. And he's like, does he want to learn? And this strange guy who lived in our apartment building took me horseback riding every weekend for a year. And by the way, people hear that and they go, oh, wait, he must be a molester. No he wasn't. He was a decent man. And unfortunately, the Catholic Church and Michael Jackson have fucked it up for all of us, have made people suspicious of a lot of men who have kind of fraternal and paternal love to give. And there's a lot of boys who need it. And we look at them like, oh, there's something wrong or nefarious there. So what I would say to men is that a real expression of masculinity is to get involved in the life of a boy that isn't yours, because what ends up in single parent homes, girls have the same outcomes. Same college attendance, same income, boys and single parent homes, and there was a male role model who became substantially more likely to be incarcerated, addicted, self-harm. So men need to step in. You know, if we want better men, then we've got to be better men. We've got to start getting involved in young men and boys' lives.

Bryce: [00:42:56] So just to close that one and that I'm also interested in is around you've you've been very public about your, professionally induced Ket experience. You've written about it in your email and, and on the podcast. You've spoken to it at length. I'm just really interested to know that, through that process, you said that it completely squashed any desire for alcohol. Is that still the case? 

Scott: [00:43:18] Oh, no. It's come back. It'd be a better story if I never drank again. Yeah, that's kind of titled back. But not as much. Yeah, it was really weird. I think every year I pick a technology of the year in 2022, as the technology for 23 was going to be AI, and that wasn't that provocative. But in 2023, I had the technology for 24 that was going to be GLP one drug. And GLP one drugs just basically turn off some signal in your brain saying you don't need this. It's like scaffolding on your instincts. And not only does it reduce your desire for food, it reduces your desire for alcohol. Or, you know, people on GLP one drugs are biting their nails, lest they think it might even serve as a therapy for social media addiction. It strikes me there's probably something in the ketamine therapy that's similar to GLP one, where it just told my brain, and for a couple weeks I didn't like the smell of alcohol, and now I'm drinking again. But I'm not drinking as much, and that's a good thing. I'm trying to use it as an excuse not to drink as much, because the reality was I was drinking too much. You know that when you do those physicals and they ask you how many drinks a week you have and you have to actually go through and do the maths, and you realise you're drinking a bottle of maker's Mark every seven days. Or at least I was, you know, you get to a point like Bryce, your liver can handle that at some point. Well, okay. But for me, now, when I drink that much, I. And the next day I feel like I've had chemotherapy. It just really hits me hard. So I'm trying to take advantage of that and just drink a lot less. And by the way, I'm not I still I love I love edibles, I love THC, but I'm trying to really substantially reduce the alcohol intake because if you listen to, you know, Huberman or Peter out here, you know, all these kind of health gurus, they've sort of like declared war on alcohol. And unfortunately, I think they're probably right that the technology is pretty, pretty primitive. So, I'm not, I'm back to drinking, but I'm drinking substantially less. I'm probably drinking 50 or 60% less than I was, I was kind of pre ketamine. All right. 

Alec: [00:45:17] Well Scott, that does bring us to the end of our time. We want to say a massive thank you for joining us. You've given us a lot to think about around wealth, around the rest of our lives. The crisis of young men and I guess drinking as well. So, plenty to think about, but we've loved it and would love to get you back on again. But, until then, a big thank you. 

Bryce: [00:45:38] Yeah. Thank you. 

Scott: [00:45:38] So much. Thank you, guys, and congrats on your success.