Scott’s Investment Portfolio — a Breakdown | Prof G Markets
Summary
TLDRIn this engaging discussion, the speaker shares insights into their personal investment strategy, highlighting a significant allocation to real estate and private investments. They emphasize the importance of diversification and long-term holding, while also acknowledging the role of privilege and access in their investment success. The conversation touches on the unpredictability of the market, the value of liquidity, and the impact of the tax code on wealth management. The speaker candidly discusses their wins and losses, offering a realistic perspective on the risks and rewards of investing.
Takeaways
- 🏠 Real estate constitutes a significant portion of the investor's portfolio, around 40%, due to its tax advantages and potential for long-term holding.
- 💼 The investor has a diverse asset allocation with 40% in private investments and only 15-20% in publicly traded stocks, reflecting a belief in the potential of private markets and a more hands-on investment approach.
- 📈 A focus on demographic trends and supply-demand imbalances in the housing market informs the investor's real estate strategy, leading to investment in rental units and a belief in their long-term value.
- 🌐 The investor's real estate holdings are concentrated in areas he terms '0.1% neighborhoods', based on the belief that income inequality will continue to drive up property values in these areas.
- 💡 Private investments are disproportionately high due to the investor's access and relationships in the tech and business world, allowing for unique opportunities that others do not have.
- 💸 The investor has a hands-on approach to managing his investments, spending significant time on understanding and advising the companies he invests in, rather than delegating this task to others.
- 📉 The investor acknowledges the emotional toll of daily market fluctuations and prefers investments that do not require constant monitoring, such as real estate and private equity.
- 🔄 The investor's strategy involves regular liquidity events, where he cashes out of certain investments and redeploys the capital into other opportunities, maintaining a balance of risk and reward.
- 🚫 The investor has experienced significant losses, including a $15 million loss from shorting the market and marking down private company investments, underscoring the risks of an active investment strategy.
- 🎯 Going forward, the investor is looking to diversify into the credit markets and take advantage of the anticipated boom in the IPO market, while also focusing on philanthropy and tax advantages.
- 🌟 Despite his success, the investor attributes much of it to luck and timing, emphasizing the unpredictable nature of investments and the importance of diversification to manage risk.
Q & A
What was the total revenue earned by the Caribbean island of Anguilla from web domain registrations last year?
-The total revenue earned by Anguilla from web domain registrations last year was $32 million.
What does the interviewee's current asset allocation consist of?
-The interviewee's current asset allocation is approximately 40% in real estate, 40% in private investments, and 15-20% in publicly traded stocks.
How has the interviewee's asset allocation changed over the years?
-When the interviewee was younger, they had more money in real estate due to leverage from buying a home. As they accumulated more wealth, they increased their exposure to public stocks. Over time, they reduced their public market exposure and increased their allocation to private market investments and real estate.
Why does the interviewee own a significant amount of real estate?
-The interviewee owns a lot of real estate because they view it as a tax-advantaged asset class that can be held indefinitely without leveraging it too much. They also believe that real estate, especially rental units, can be a good asset to pass on to children and that there is a long-term demand-supply imbalance due to a shortage of homes being built.
What is the interviewee's strategy with their real estate holdings?
-The interviewee follows a 0.1% strategy with their real estate holdings, focusing on owning properties in areas that are expected to increase in value faster than inflation due to income inequality and the concentration of wealth among the ultra-rich. They own homes in London, New York, Palm Beach, and Aspen, aiming to have places where their children will want to visit and where they can enjoy beautiful locations.
How does the interviewee manage liquidity in their investment portfolio?
-The interviewee manages liquidity by borrowing against their stocks, selling assets during liquidity events, and maintaining a line of credit. They also generate income from their day jobs, such as writing books, podcasts, and speaking engagements, to ensure they live within their means and have dry powder for investment opportunities.
What was the interviewee's biggest loss in the past 12 months?
-The interviewee's biggest loss was $15 million from shorting the market as a hedge against their exposure to tech stocks and individual stocks. They also experienced losses from marking down the value of some private companies.
How does the interviewee approach investing in private companies?
-The interviewee invests in private companies based on their access and relationships, often being invited to invest alongside tier one private equity and VC firms at negative fees. They also focus on diversification and invest in a wide range of sectors, from aircraft leasing to software companies and supply chain benchmarking.
What is the interviewee's view on public market investments?
-The interviewee has reduced their exposure to public market investments, believing that it is a rigged market and that nobody can reliably pick stocks. They typically invest in stocks when they have access to IPOs due to their connections or when they can get allocation through their involvement with the company.
How does the interviewee's investment strategy align with their advice to others?
-While the interviewee advises others on diversification, low-cost ETFs, and letting time take over, their own portfolio is heavily weighted towards private investments and real estate due to their unique access and ability to take more risk. They acknowledge that their strategy may not be suitable for everyone and that they have the luxury to take more risk due to their financial security.
What is the interviewee's outlook on the IPO market for the year ahead?
-The interviewee expects the IPO market to boom in the next six months and is actively seeking ways to invest in great companies that are about to go public. They aim to leverage their communication skills and access to high-level corporate contacts to secure investment opportunities.
Outlines
📈 Diverse Investments and Real Estate Strategy
The speaker discusses their personal investment strategy, highlighting a significant allocation to real estate and private investments. They explain the tax advantages of real estate and their belief in a supply-demand imbalance due to insufficient home construction. The speaker also mentions their focus on owning properties in .1% neighborhoods as a hedge against income inequality and their reduced exposure to public markets.
💡 Privilege in Private Investments
The speaker acknowledges the privilege and access they have in the private investment space, which allows them to invest alongside top-tier firms with negative fees. They express a lack of confidence in the stock market's predictability and a preference for less frequent valuations of their assets, which leads to less emotional stress. Despite their unconventional portfolio, they maintain that they are diversified and follow a long-term investment approach.
📉 Learning from Losses and Market Irrationality
The speaker reflects on their biggest losses in the past year, including a significant sum from shorting the market and writing naked calls against high-flyer stocks. They discuss the importance of not overestimating one's investment abilities and the painful lesson learned from the market's prolonged irrationality. They also mention markdowns on private company investments that have not met expectations.
💰 Managing Liquidity and Leveraging Assets
The speaker shares their approach to managing liquidity, which includes borrowing against stocks and having regular liquidity events from investments. They discuss the importance of tracking spending and investment values to avoid surprises. The speaker also talks about their successful investments, such as claims against a bankrupt company, and their strategy for staying liquid and leveraging their assets.
🚀 Success Stories and Diversification
The speaker recounts their successful investments, including a substantial return from a company acquisition and their strategy of diversifying across various sectors. They emphasize the importance of diversification and investing in good people and opportunities. The speaker also discusses their approach to giving away a portion of their investments, combining philanthropy with tax advantages.
🔄 Active Portfolio Management and Future Strategy
The speaker talks about their hands-on approach to managing their investments, their involvement in several company boards, and their plans for the year ahead. They express an interest in gaining exposure to the credit markets and investing in companies that are about to go public. The speaker also reflects on their strengths as a communicator and their ability to attract talented people, which has contributed to their investment success.
🌟 Acknowledging Luck and Unfair Advantage
The speaker humbly attributes their investment success to factors beyond their control, such as being born with certain advantages and experiencing the bull market during their prime income-earning years. They emphasize that their wealth is a result of luck and societal advantages rather than solely their investment skills. The speaker concludes by reiterating the importance of diversification and leveraging one's strengths in investments.
Mindmap
Keywords
💡Asset Allocation
💡Real Estate
💡Private Investments
💡Tax Advantage
💡Income Inequality
💡Market Volatility
💡Diversification
💡IPO
💡Leverage
💡Philanthropy
💡Risk Management
Highlights
The Caribbean island of Anguilla earned $32 million from web domain registrations last year.
The guest, Ed, has an asset allocation with 40% in real estate, 40% in private investments, and only 15-20% in publicly traded stocks.
Ed believes real estate is a tax advantage asset class and can be held indefinitely without leveraging too much.
There is a supply-demand imbalance for homes, with 1.5 million fewer homes being built annually than needed.
Ed's real estate strategy involves owning properties in .1% neighborhoods in cities like London, New York, Palm Beach, and Aspen.
Ed's private investments are disproportionately high due to his access from working in tech, consulting, and academia.
Ed invests alongside tier one private equity and VC firms at negative fees, a privilege not available to most.
Ed has reduced his public market exposure, finding it emotionally trying to constantly check stock scores.
Ed's biggest loss was $15 million from shorting the market and writing covered calls against tech stocks that skyrocketed.
Ed has marked down several private companies substantially in value, including a Twitter competitor and a text messaging app for healthcare.
Ed manages liquidity by borrowing against stocks and having regular liquidity events from investments.
Ed's biggest win was a $2.5 million investment in a bankrupt consumer company that returned $75 million.
Ed plans to diversify his portfolio with exposure to the credit markets and invest in companies about to go public.
Ed attributes his investment success to diversification, great communication skills, and attracting talented people.
Ed emphasizes the importance of not spending more than one makes and living within one's means.
Ed admits that he doesn't believe he is a good investor, but rather has had access and luck on his side.
Ed's strategy moving forward is to continue diversifying his investments and focusing on long-term holds.
Transcripts
this week's number $32 million that's
how much revenue the Caribbean island of
anguila earned last year from a web
domain registrations true story yet last
night I was at a urinal in a bathroom at
a famous restaurant the guy next to me
said oh you're circumcised and I said
nope that's just the wear and
[Music]
tear I like that I like that get it Ed
get it I get it okay welcome to prop G
markets Ed what are we discussing today
we're doing something a little different
today Scott we're going to take a look
at your own personal Investments over
the past year we'll talk about what went
well what went poorly and perhaps what
surprised you and at the end we'll
discuss your investment strategy for the
year ahead sound good sounds good so
let's start with a pretty general
question between stocks bonds real
estate private Investments what does
your overall asset allocation look like
right now my asset allocation is about
40% real estate which is um a lot and
then about 40% private Investments and
only about 15 or 20% publicly traded
stocks has that balance changed
significantly from previous years or is
that pretty standard for you when I was
younger obviously I a lot of money in
real estate cuz I kind of levered up to
buy a home um and then as I got more
money it was more public stocks and I
have reduced my public markets exposure
increased my private Market exposure and
increased my real estate so the reason
why I own so much real
estate is uh one I really think it's a
tax advantage asset class and it's the
kind of asset you can if you don't lever
it up too much you can hold forever and
then might make a good asset to give to
your kids but essentially I have two
types I have kind of consumption real
estate and then rental units and the
rental units are great because you can
depreciate them 2 or 3% of year real
estate's most a tax advantage asset
class in the world so even though these
rental units that I have have gone up in
value every year every year I can
depreciate them I think it's 3% a year
there's no other asset that as it's
going up in value you can take a write-
off against it despite the fact it's
increasing in value then I look at
demographics and we are building one and
a half million fewer homes than we need
every year which just says to me that
there was going to be a demand Supply
imbalance for a long long time so I just
love rental units and I think it makes
sense where I have the bulk of my real
estate holdings is in what I call a 0.1%
strategy that I've adopted over the last
five years and that is I used to own one
home now I own four my belief again
based on economic Trends is that what's
happened in the US is happening around
the world and that is massive income
inequality and that is the 1% continues
to Garner more and more they weaponize
government they keep their taxes low
they have invested they invest in
monopolies they get they massively
weaponize the tax code and uh there
seems to be in my opinion just
unbelievable explosion and the ultra
Rich so in the US for example the last
10 years the number of billionaires has
gone from 500 people to 2500 and so what
I've done is I've bought for homes in
what I call .1% neighborhoods so I have
homes in London New York Palm Beach and
in Aspen and there's some consumption in
there in the sense that as I get older
uh my priorities are the following I
want homes where my kids when they leave
for college will come visit me and so I
want to have homes where they think oh
you know we'll go see we'll go see Dad
and two as I get older I primarily just
want to you know like as I always say I
want to be in beautiful places just wait
for the ass cancer and so there's some
consumption here and generally speaking
I think that I think that as income in
equality continues to get out of
control that these areas are going to
increase in value faster than inflation
and then privates is disproportionately
high because I have access I know a lot
of after working in Tech and business
for 30 odd years in Consulting where you
speak to a lot of CEOs and in Academia
where what I do I meet with a lot of
CEOs and a lot of venture capital firms
based on starting companies I have a lot
of access that other people don't have
and if it's a story of privilege trust
your instincts but I get invited to
invest in companies alongside of kind of
tier one private equity and VC firms at
sort of negative fees they will let me
invest if I put in say a million bucks
they'll give me you know 1.2 or
sometimes up to two million in equity to
go on the board or be an adviser so I
get to invest most people have to invest
uh
with fees I get to invest with negative
fees and so I disproportionately
allocate money to privates I have less
money in the stock market because I've
come to the conclusion that nobody can
pick stocks the only time I invest
typically in a stock is when I have
access to the IPO because I either have
advised the CEO or uh the Investment
Bank running the book for whatever
reason I can get allocation it's a Rigg
Market most of the pop for the first
couple years is usually on the first
trade so unless I can get allocation in
the IPO I don't do it
again if that sounds like privilege and
access it is I worked hard to get it but
it's still a rigged Market but I don't
invest that much in public market stocks
anymore because I find it a bit
emotionally trying I you know today I
checked my stocks probably six times and
I hate having a scorecard every day one
of the reasons I've never purchased
crypto is I know my personality the fact
that it trades 24 by7 would just be bad
for me so one of the things I like about
owning real estate and owning privates
which is 80% of my assets is that you
don't have to mark your book every every
day and I find that is emotionally
comforting or just less kind of
emotional stress if you will yeah I
think the thing that jumps out to me is
this unusually low public markets
exposure and you're sort of over
indexing on private Investments and real
estate your advice to listeners is
generally speaking
diversification lowcost ETFs let time
take over but when I look at this
portfolio just from the bird's eye
perspective you just laid out it doesn't
totally reflect that is there a reason
why you're not following your say
standard advice right now so some things
I'm following some things I'm not so a
couple things one this is not it's like
don't do this at home kids and here's
the reality if I
lost 90% of my
wealth I'd still be fine I'd be bummed
out I probably couldn't maintain this
lifestyle but I'd still have enough
money to live really well and my kids
would be fine I just I can take more
risk than most people in addition I have
access that other people don't have I
mean that's the reality and I'm trying
to lean in you know when I do that I
lean into my access I'm very
self-conscious saying it but that's the
reality I am following diversification I
have everything from a investment in a
company that buys old aircraft engines
fixes them up and then leases them out
to cargo planes to real estate to
investments in software companies to
investments in supply chain benchmarking
companies I have to claims against a
bankrupt FDX I do have
decent diversification I'm not
Diversified geographically most of my
companies are in the US I have a little
bit of exposure to Europe but I do have
pretty good
diversification and I do let time take
over in the sense that I usually don't
invest in anything I'm not a Trader I
usually don't invest in anything that I
don't plan to hold for several years and
a lot of the stuff I buy I mean for
example the real estate I don't plan to
ever sell it none of it I I mean until
my kids needed or wanted or you know or
or what have you so the other thing I
don't do I don't try to time the market
I'm I realize that it's very difficult
to do I find a good company or a good
opportunity I lean into it and I plan on
holding it for a long time so let's go
through your wins and losses and we'll
we'll start with the losses what have
been your biggest failures in investing
in the past 12 months well I don't think
it is failures my my biggest loss is
because if you do what I do and you
invest I mean I think I have 30 or 40
different Investments if you if you
looked at every investment over I don't
know a million dollars in value I have
at least 30 or 40 of them and and that
goes to diversification I don't like to
have any more
[Music]
than you know I have one asset that's
probably almost 15 or 20% of my net
worth one of my home
but that's it nothing else is more than
kind of 5% and most is two or three the
biggest loss I lost uh$ 15 million
shorting the market last year I do it as
a means of hedging I had a lot of
exposure to tech stocks I had a lot of
exposure to individual stocks I got in
the IPO so I would short some High
Flyers by selling calls against them and
some of them just skyrocketed and I got
just hammered now the year before i'
made money the year before that I'd made
a lot of money so I started believing
that I was good at it and that's a
lesson to not trust your emotions I was
lucky I wasn't good and I started
believing I was good at it so I got more
aggressive with it which really hurt me
and also I write covered calls in all my
stock positions so if I own Airbnb at
100 bucks I'll write a week long I'll
write calls on the number of shares I
have so if I have 10,000 shares at 100
bucks I write calls on 10,000 say
expiring at 105 and I'd get a buck
premium that week and I'd make 10,000
bucks and it's all great as long as the
stock does go above 105 now technically
you're hedged because you just give up
the gains above 105 because the stocks
gone up but what happened to me a lot
last year is these stocks would
Skyrocket and if I wanted to hold on to
the stock I had to go buy the calls back
and it cost me a lot of money and then I
wrote calls nakedly against some
companies I thought were really high
flyers and just made no
sense and I learned the hard way the
market can stay irrational longer than
you can stay liquid and these some of
these companies a couple of them went up
30% in 3 days and I'd have to write it
you know write a check for two or three
million bucks anyways I've still made
money on this strategy over the last
three years but I lost $15 million on
that I've a lot of a couple of my
private companies I've marked down
substantially in value I was an investor
in post news I am an investor fantastic
Co fantastic idea uh competitor to
Twitter competitors to Twitter haven't
gotten any traction other than threads
so I made a substantial investment there
I marked that down I'm still
hopeful I made an investment in a text a
text messaging app focusing on the
healthcare industry everything made
sense smart people Health Care handhelds
I love it pushing out Health Care to
lower income people through corporations
you know Sam's or Walmart signs up and
for eight bucks a month per employee you
can contact a dermatologist or a doctor
and give them your symptoms over the
phone text message and they use AI to
connect with the right person great
business hasn't grown as fast as we'd
all hoped I invested at a really high
valuation um a vocational training
company here in Europe I have marked
down um really good company but I think
the valuation I invested at it was
extraordinarily rich and the company's
doing well but uh the markets
rationalized in the private market so
I've marked that down by two or three
million bucks um so of my losses last
year I mean they all add up to probably
about 25 million bucks when you say
you're marking these Investments down
are you
coming up with your own valuations when
you mark them down or you getting
reports from the team and learning based
on other investors valuations how are
you how does marking them down work for
you at a personal level so I find
generally speaking if you don't keep
track of how much money you're spending
and how much you're making and the value
of Investments you're due for an
unwelcome
surprise and so as a regular practice at
least once a year if not more I sit down
with the guys at Goldman and I go
through every investment actually I
probably do it twice a year and try and
mark the investment and an easy way to
mark it is if a company raises money in
the market follow on round at a you know
100 million and you own 1% of it then
you know your Stock's worth a million at
least if it's a legitimate Mark not just
insiders I try to be conservative on the
mark such that I don't get too crazy
with my spending and overestimate my net
worth and I always try and value it
probably maybe 10 or 20% realistically
than what I could get in the open market
and some these things are difficult to
mark because they're so a liquid but you
I try and go through everything and have
an honest sober assessment of what I
think it is worth at that
moment we'll be right
back we're back with profy markets just
a question on liquidity I think what's
also surprising about your portfolio is
just how insanely IL liquid the
portfolio is I mean you only have 15 20%
in public stocks how do you manage
liquidity like how did you manage
liquidity when you needed the cash to
say buy a house in Aspen this year what
do you do about liquidity well one you
can borrow against if you have say 30
million in stock you can borrow 20
million against it so I take I do what a
lot of wealthy people do and that is I
borrow money against my stocks I don't
do it to double down in the stock market
but I'll do it to invest in another
asset that's Diversified and you can
borrow very low rates and also I'll sell
stuff and I have liquidity events on a
regular basis you know I was investor in
a subscription based search engine
called Neva I wanted to invest in
companies where I thought provided a
solution to some of the systemic
problems of big Tac I hate the ad model
of Google I think it's led to really
terrible places and I met this guy
shadar ramas Swani who I just thought
was so incredibly bright he was a lead
engineer in Google and he was starting a
subscription based search engine I put
three million bucks in the company never
got traction but snowflake came in and I
think basically did an aqua hire because
they're like this team is so incredible
we'll pay all your investors back and
now of course trar is the CEO of
snowflake and I'm I'm actually thinking
about investing in Snowflake because I
just think so much of this guy so I got
my three million bucks back which is
like the best Venture investment in the
world because I got a lottery ticket and
when it didn't hit I got my dollar back
so I actually see that as a kind of a
win I have so many Investments That
typically two or three a year will have
a liquidity investment and then I deploy
that Capital also no matter what wealth
I have I always want to make money and
between books podcasting speaking you
know the reality is I make a lot of
money so I try to still live within my
means I try to still live I try to make
as much as I spend and occasionally if I
don't have cash I have an investment
opportunity now and I've had I've ramped
up I've got I've got a line against one
of my homes so I try to always make sure
I try to always line up kind of dry
powder in case an opportunity comes
along but I do try to keep track of how
much leverage I have because Leverage is
kind of the smart person's way to get
poor fast and that is if the market has
a real Hiccup and you get caught with a
lot of Leverage if I have X worth of net
worth I try not to lever up more than
0.1 or
0.2x recognizing that you might have
enough money to pay it back but it's not
liquid and the problem is when you need
liquidity it's when no one wants to
provide it there's been sometimes I've
build in a little bit stretch but for
the most part like on all my homes I
have almost no
mortgages so if I really need money I
can borrow against them or you know
borrow against the stocks speaking of
liquidity events let's focus on your
wins what were your liquidity events
this year what went right where did you
cash in earlier in the year we purchased
a bunch of claims against a bankrupt
FTX I bought a bunch of those at 23
cents on the dollar
and just sold some at 95 cents so that
was like and it's better to be lucky
than good I had no idea that Bitcoin was
going to sky rocket so but in the matter
of less than a year that investment more
than
quadrupled my public stocks have done
really well this year Airbnb is up I
don't know 40 or 60% this year I'm a
holder on Amazon and apple they've had
really good years but my big win was
about 7 years
ago I invested
$2.5 million in a bankrupt consumer
company and the distress credit
investors a friend of mine he called
he's like I'm investing in this smoking
sensation company called enjoy and this
was seven eight years ago and the idea
was smoking is going away and two of my
friends use Androids to help to quit
smoking and I'm like oh I've heard of
this company I know it so he said do
this go on the board so I invested two
and a half million bucks and this compy
I went into because I thought it was
going to make a lot of money but I
thought it was going to get a twofer my
mom died of a smoking related illness
and I thought smoking sensation is great
and the UK the health Ministry at the
equipment of the FDA here sends you a
vape if you're smoking because they're
like this is just it's not good for you
but it's not nearly as bad as
combustibles anyways that company we
kind of went through the valley of death
if you will and a really strong CEO
really smart investor a guy named Jason
mudrick who I've been friends with for
about 20 years anyways long story short
alra bought it and that invest M paid
about 75 million off a $25 million
investment I gave a third of it away but
as you can imagine that's still a huge
liquidity event so that was my biggest
that was by far my biggest hit my
biggest hit ever other than maybe when I
sold L2 and just if you have any
questions about how the rich have
weaponized the tax code I was also able
to take advantage of 122 and because I'd
held the stock for longer
than 5 years and the company had net
asset value of less than a certain
amount the first 25 million were
taxfree so if if if you don't believe
that the tax code has been weaponized by
rich people it absolutely has but I try
to make myself feel better I give it
much of it away what did you do with
that with all that cash did you
immediately invest it yeah I deployed it
in different it's amazing uh how fast
you can spend money I deployed it across
a bunch of different investments in
private companies I paid off all the
debt on all my homes cuz I mortgages
mortgages exploded and I was dumb I I
bought I have fiveyear mortgages and now
looking back you know we all wish we'd
got 10 or 30e mortgages but I thought oh
interest rates are never going up so I
had kind of five-year mortgages they all
sort of seemed to come due last year and
I just paid them off because the cost to
refinance them what's going to or the
cost to take out a new mortgage is going
to be about
7% and I thought I'll just pay them off
cuz the 7% guaranteed return feels
pretty good so I paid off almost all the
mortgages on on my homes and properties
made some new private Investments but it
went it went pretty fast when we spoke
earlier you also mentioned this company
flight lease Capital that you invested
in which is like an aircraft Leasing
Company yeah that's a it's a great
company a friend of mine as Shad aimi a
super bright private Equity guy I found
this great group of guys in Florida and
they're total Gearheads and they go out
and they have just a look and a lock on
this strange Market where they buy used
aircraft engines from usually from
companies or Airlines all over the world
going out of business they buy the
engine essentially a plane if a plane is
worth 10 million 9 million is in the
engines they buy the engine they
refurbish it they're fantastic engineers
and then they lease it to usually a
cargo company and I'm an investor in
there and it's just been a great every
year it's been it's done really well so
that that one's returned like irss of
like I think almost close to 30% but the
reason I did that one I didn't get
Negative fees I actually pay fees on
that one is I love the idea of
diversifying I thought Air Cargo is
probably you know I want to I'm much
more inclined to make investments in
things that aren't Tech right now
because I'm so levered to Tech because
that's where I get opportunity that the
thing I loved about this company was it
wasn't really Tech it was like a lot of
these engines are leased out to
companies you know transporting you know
materials between Mexico and you know
taxes to what wherever their their cargo
planes are flying but that I love that
investment do you have any income
generating Investments I mean other than
Ed
Elson well that counts yeah we make good
money here you know we make you know
millions of dollars doing books podcasts
speaking gigs so you know I try not to
spend more than I'm actually making in
terms of current income and then let the
asset base grow so I don't have kind of
cash my real estate my rental units
generate income but I usually reinvest
that back in other stuff but I don't I'm
not at the age yet where I need cash
flow for my investments I still manage
to live within my means from my current
income from my my day jobs if you will
and you have no interest in debt sounds
like I know you were considering private
credit at one point but we haven't
discussed bondes yeah I actually bought
my first Bond I put I bought a $10
million bond in ganette
because I know the guys at Apollo and I
like them and they they were investors
and they carved out a piece for me but I
sold that I think about two years ago
and I haven't been back in the credit
markets I would like whatever liquidity
events I get in the remainder of the
year in 2025 I would like to put into
the credit markets because interest
rates have come up and I think it would
be good diversification for me to have
some exposure to the credit markets but
probably some sort of tax deferred or
tax advantage VI vehicle that's a low
fee in the credit markets but you're
right to point that out that I have a a
dir it's a hole in my portfolio I should
have you know they say 6040 I'm I'm not
I'm whatever 40 4020 and none of it is
is in the credit markets I don't think
so the other thing that I find
interesting which I didn't totally
appreciate is that you basically manage
everything yourself and actively I know
you have a guy at Goldman but you're
making of the investment decisions it
sounds like it doesn't seem like
Goldman's actually doing that much my
question to you is what does Goldman
actually do for you well they do
execution when I do when I write covered
calls on stuff they help me figure out
asset allocation the real thought
Partners they're really good fiduciaries
they have all these funds I've invested
in several opportunity zones which is
also real estate through them but I'll
call them and say do VC approached me
and said I should invest in this and
they're going to give me additional
options or
rsus and meanwhile they have all their
own products which they get fees from
and they'll say oh no you should do that
they really are good fiduciaries they
put theel they put themselves in my
shoes they also handle my taxes which is
getting increasingly complicated they
will sit down with me and say what
investments are you planning to make
over the 3 6 12 months what is your burn
and they'll say this is where we need
liquidity and they'll manage all that
for me I'm going to try and Outsource
more of it uh like this credit vehicle
I'm just going to put money in there and
let it go away or just not think about
it because I spending too much time on
it I'm a bit of a I've talked myself
into thinking it's worth it and I it's
like do as I say not as I do or whatever
it is but I do have these opportunities
my investments are usually pretty
handson so if I get an opportunity to
invest in something especially if
they're going to give me additional
options I'm expected to work on that
company I'm expected to get involved so
I like to stay very involved in this
stuff and really understand where
everything is and having said that my
advice to people is to take all of the
time you're spending on your
Investments and give it to other people
low fees and then focus on your work to
make more money but I've talked myself
into believing that a lot of my
investments it makes sense for me to be
active in I probably should move to more
passive as I get older I probably spend
easy a third of my week
on money managing
Investments you know figuring out where
I can invest what opportunities I have
to invest advising the companies of my
investments stuff like that I spend a
lot of time I'm on several Boards of
companies I invest in so I do spend a
lot of time on it and I think as I get
older I'm going to start moving more
into passives I guess I'm surprised that
you you're still doing it yourself is
there a reason why you haven't made that
switch yet because of my business which
is I'm in the business of advising CEOs
and Advising investors I get I Get Crazy
access and if I really like a company
and I'm not above this if I really like
a company I'll call the CEO and say hi
I'm Scott Galloway I love your company
these are the I want to invest and these
are in my view let's set up lunch and
then I'll sit down at lunch and say I
think these are the three things I would
be thinking about if I were you and most
of the time I don't get a call
back when I get a call back most of the
time I don't get a launch but
occasionally I get a call back and lunch
and occasionally I get a call back at
lunch and they think okay let's this guy
would be a good person to have on the
cap table most even wealthy people don't
have that kind of access and that's the
reason that I'm so heavy in privates is
I you know I'm I'm I'm not above calling
someone that I think is doing a great
job or a company I really like in saying
you know I want in on this I think it's
I think there's a real opportunity here
this is what I would do to improve the
company this is why I like you guys and
you know this is why I want to invest I
mean it comes right down to this it
returns are a function of how kind of
hard you're willing to work in your
access and I right now at some point my
contacts will start to dry up I won't
have the profile I have now and I won't
just have this type of
access we'll be right
[Music]
back
we're back with propy markets has
anything happened this year that was
particularly unusual is there anything
that's surprised you anything that
caught you off guard perhaps maybe a
liquidity event or an unexpected loss
what's been strange this year
everything's been kind of strange like
everything is such a random walk at one
point I marked enjoy down to almost zero
you know every year I mark my
investments at one point I made I made a
$25 million invest I think at one point
I marked it down to half a million
dollars something like because you you
got the financials and they just went up
to scratch or no it was just um it was
just such an ugly space and we were
trying to get FDA approval where the the
key to this company was basically
regulatory play we got it the FDA it
cost us I think a hundred to $150
million to do all of the studies and
tests to show that this is a company and
a product that's not only that's not
only safe or reduces the harm on a net
basis of getting people off of
combustibles and nicotine but also the
youth studies to show that we were
unlike other players in the space that
youth weren't buying our
product to get FDA approval for a
company like that cost I think it cost
$10 or $150
million so that was a massive investment
and then when all hell broke loose a few
years ago it felt like none of these
things were ever going to get FDA
approval they were just all going to be
removed from all shelves
and it was very hard to raise money but
you know we got through that the FDA
decided that this is that smoking cation
or electronic nicknine Delivery Systems
are a net good and provided FDA approval
to like a handful of companies and we
were one of them and then once we had
that FDA
approval uh we were able to sell the
company for I think 2.8 billion or
anyway some crazy number it paid off
huge and then other
companies you know I'm an investor in
public.com great guys online trading
they don't do payment for order flow and
I'm like I like these guys they're not
praying on young men's gambling
addiction they don't they're trying to
be they're trying to promote responsible
investing so I invested there overnight
I marked that from 1 million to 10
million and then Robin Hood has crashed
and so now that that company I would
mark down substantially so and then
investing in a Twitter competitor from
the guy who ran who
Ed ways this guy's probably the best
product guy in the world literally in
the world he he took on Google Maps and
beat them he's amazing he's such a
talented guy you just meet him and
within three seconds you're like I'd
back this guy to do anything all of
those companies are down and what it all
comes down to is the following nobody
knows nobody knows I wrote enjoy almost
down to a zero I thought I was under the
next best best thing with text messaging
and Healthcare a subscription based
search engine run by the head of Google
engineering one of the brightest people
I've ever and here's the thing nobody
knows I mean you always want to look for
Concepts that you think work and most
importantly you want to find good people
because good people have a tendency to
to to at worst get you your money back
but no one has any idea and that's why I
never invest now other than a couple
homes I've never I don't invest more
than 3% of my net worth in anything if
you looked at my portfolio now and said
something's going to go to zero in the
next 3 months and something's going to
go up 20x I'd have almost no idea I I
would literally be throwing darts in my
portfolio I don't know so I spread it
around and a bunch of different stuff I
try to find good people and good
opportunities and more importantly
things where I get better economics if I
can invest in better economics than a
than a tier 1 VC firm over time if I do
enough of those I should I should be
fine but my my random walk through the
world of Investments is that nobody
knows so you want to diversify you want
to lean into your strengths and you
don't want especially when you get money
the key to being rich is to stay rich
and so I'm not looking to get rich I'm
looking to not get poor and you the way
you manage that is through
diversification now I can take a lot of
risk but I take risks in different
things that are somewhat sequestered
from each other but yeah every year it's
like I can't believe this company isn't
doing well I'm just shocked and then who
would have thought that claims against a
bankrupt FTX go up go from 23 cents to
95 cents and about 6 months who would
have thought that
so the key is the key is to make a bunch
of bets you don't know what numers going
to come up so you want a lot of chips on
the table and the way you do that if you
don't have access like I have access is
through index funds let's switch to the
year ahead are there any Investments
that you're looking at right now and how
is your overall strategy for 2024
shaping up so I'm I want some exposure
as you referenced before to the credit
markets also I think the thepo market is
going to Boom in the next six months so
I'm trying to find a way into great
companies that are about to go public
and that is try and find companies that
I think are great companies see where I
could add value and quite frankly call
the CEO and say I want to invest in your
company and I think that the IPO Market
in the back half of this year is going
to be really really strong and I think
we've seen that and we've talked about
it on this show with AA and
Reddit and and one of those companies
the COO reached out to me said can I do
an hour line call with you I said sure
and he asked me for advice they gave me
advice said anything I can do it for you
and I like yeah I want allocation in the
IPO and by the way I asked for x and he
only gave me 3x but it was still more
than most people got so I'm going to try
and do that a bunch um whether it
happens or not you know I don't know but
I'm aggressive like your your success in
life financially and personally is your
willingness to get out of spoon and eat
and what I mean by that is endure
rejection I don't I don't just wait for
people to call me and say oh you're
awesome when you're going on board I'll
call people and say I love your company
I'd like to invest you know that's how I
kind of try to have outsize returns but
be clear I get it wrong all the time
what I try to do is be so diverse or
diverse enough that it doesn't keep me
awake at night I assume I'm going to
lose everything and ask myself if I lost
everything would I not be able to sleep
if if that's true I don't make that size
of investment I reduce the size and also
I try to go for the long term and just
to manage my own mental health I've been
in privates a lot because I don't like
to have a scorecard every
day and like I said I'm just trying to
be really Diversified and yeah and now
I'm I'm trying to take a certain
percentage of every investment and give
it away because it's like force
philanthropy which is fun and also has
tax advantage
my takeaway here
is you have throughout your entire life
actively managed your portfolio I don't
know what your net worth is but you said
on this podcast that it's nine
figures I think it's safe to say that
you are a very good investor I just want
to end this by reflecting on what you
think you're actually good at um and
what you think your strengths are and
whether you believe personally that you
are a good investor too uh I'm not a
good investor Ed I'm a really good
communicator I have the ability to take
ideas and communicate them through
storytelling which has given me access
to the highest levels of corporate
America the CEOs of the biggest
companies in the world and the most
esteemed investors are willing to sit
down and let me tell them a story about
what I think they or their company
should be doing and as a result they've
given me access that any idiot
could make money on if they Diversified
and just weren't stupid and I was smart
enough to diversify uh such that no one
mistake of which I made a lot of it
might have hurt but I had Kevlar so I
didn't get the injury wasn't the injury
wasn't fatal and and also being a great
communicator isn't enough what what my
superpower has been my core competence
has been communicating but my my
superpower has been attracting and
retaining really talented people because
that scales what you're good at and
every company I talk about every piece
of access I've had it's because of a
firm or consulting firm or something
where I was working with great people
and we had credibility so I got you know
we established a good relationship with
these companies or these investment
firms you know at profit we were doing
brand strategy engagement for Kleiner
Perkins so I got to co-invest with
Kleiner Perkins by the way lost
everything investing with Kleiner
Perkins but the point is I got
access and so I am I a great investor I
don't think so I think I think if you
said manage a hedge fund I'm not sure
I'd be any good and also add let's be
honest I've just been really
lucky you know to come into my Prime
income earning years when the market was
about to have an unprecedented Bull Run
I mean to think about it I hit I kind of
hit 40 just as the market was starting
to scream so I'm finally making really
good money I have enough Capital to
deploy into the market and the market
just goes bat crazy up that's got
nothing to do with me so a smartest
decision I've ever made was being born
in California a white heterosexual male
in the 60s I had unfair
advantage and coming into my Prime
income earning years during the greatest
bull market in the greatest country in
the world so yeah my talented hands down
I you know I might be the best Merchant
in teron if I'd been more working there
making 30,000 bucks a year but I might
be the best hotel operator in Cape Town
making 80,000 bucks a year my
exceptional
wealth is a function of things that
aren't my fault thank you for watching
this version of propy markets check out
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Wednesday and we'll be back with a fresh
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