Many entrepreneurs believe asset management will be a lot like running a business. However, this doesn’t always prove to be the case, and many business owners experience real shocks as they transition into being passive or semi-passive investors. My guest, Robert Brooker, is someone who navigated this transition beautifully.
Robert built a successful business, removed himself, and set off on a new course as a lifestyle investor, and today we’re exploring how he did it! We discuss the unique perspective on investing he inherited from his family and how he’s passing it on to his kids, how to analyze and assess many different factors as you consider investments, and what truly constitutes a life well-lived.
- Why people often think selling their businesses will make their lives easier – and why putting their cash to work often proves to be extremely difficult.
- What makes entrepreneurship so risky – and why Robert attributes his success to hitting a bunch of singles, not home runs.
- Tools you can use to better understand contracts, licensing agreements, and other important components of deals if you’ve never had formal legal training.
- What wealth and freedom really mean to Robert.
- How you can learn from struggle, failure, and missed opportunities.
Tweetables“I think wealth is sort of a fertilizer; it's an ingredient to freedom.” – Robert Brooker Click To Tweet
- Robert Brooker on LinkedIn
- Contracts in a Nutshell
- TIGER 21
- Abundance: The Future Is Better Than You Think
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Connect with Justin Donald
Justin Donald: Hey, Robert. It's great to have you with us here today. I'm so pleased to have you on the podcast. I know we've been talking about it for a little bit and you and I, we've had some really fun conversations about investing and about asset protection and about smart experts. Who do you go to for advice and who do you have to help vet deals? I've really enjoyed our friendship. I'd love for you to share with our listeners what you're working on right now that you're excited about. What's new? What's exciting? What's going on in your world?
Robert Brooker: Okay. So, of course, we're all in the middle of the pandemic here which has caused things to slow down and it's been hard, I think, for everybody, and certainly catastrophic for a lot of people. So, that does cast a pall over things but we're doing our best. Nowadays, I'm spending most of my time on asset management. I own a software company, which is really being run by a phenomenally talented person and team of people and I think probably the more I get involved with that, the more damage I do, the more negative value I create so I try to minimize my involvement in that. It's interesting. I think this happens with a lot of, I mean, I've been investing for a long time but it's not easy to do, in my opinion, in my experience. I think a lot of, I don't know if I speak for others but I know I speak for some people who have been in the business for a long time, they feel like they know it well but they can create value, that they can make things happen. Then after a certain number of decades, let's say, where a lot of people might switch their focus to managing their assets have the assumption that, "Oh, well, it's just going to be like running a business and it's going to be not easy,” but it’s not just going to happen, the far worse you're going to go and so forth.
I think it's harder the kinds of returns that one gets as an entrepreneur and in running an operating company, owning an operating company that one has experienced doing. It's very hard to switch to being sort of a passive or semi-passive investor. Their turns go down. Not saying it's a bad thing but the returns go down. This happens actually a lot with I've seen this a lot with people who have a business for a long time. They sell their business thinking, “Gee, my life's going to be great. I'll have all this cash,” and they actually find that they're working just as hard making that cash work for them than they did before they sold the business so it sort of defeated the purpose of selling their business. So, anyway, it's just a general observation.
Justin Donald: I love it and really, it's a really cool thing. I mean, I want to say great job to you. You've been able to build a business and remove yourself. So, first of all, most entrepreneurs never even get to the point that their business takes off and succeeds. Secondly, you are able to do that and you're able to build a team, which when someone is able to get their business to work, they're often not good at building and managing a team or even knowing how to do that or knowing when to do that. Then from there, it's even a smaller sliver that can actually remove themselves completely from the operation and have it function at a high-level without them. So, really, it's kudos to you and great job. But I think you nailed it on the head that there is a huge difference between entrepreneurs and investors. We just talked about this the other day too that the skill set to be a great entrepreneur is completely different than the skill set to be a great investor. And so, that's why you have so many investors that probably aren't going to succeed as an entrepreneur and so many entrepreneurs that aren't going to succeed as an investor and to bridge that gap, it's tough. It takes time.
Robert Brooker: It takes time. It's really hard or you accept a little return, which is fine for some people.
Justin Donald: Yeah. The other thing is I see this a lot because as you know, I coach a lot of very successful high net worth individuals and I teach them how to create cash flow from instead of spending through their principal to create cash flow so that they don't ever dip into their principal. But the number one thing I see is entrepreneurs that try to invest, they lose a whole ton of money and they're in a much worse situation because they didn't master the skill set of investing. So, to me, it's admirable when you have someone like you that is a strong entrepreneur that can build a business but then you've also bridged that gap. You are like the smallest percentage. You're less than half a percent. You're probably 0.01% of people that can actually do both successfully. I'd love to know what your secret is and why you feel you've had success in both.
Robert Brooker: Well, the biggest secret is luck in that at least as an entrepreneur. I mean, being an entrepreneur is incredibly risky. I've never hit any big home runs but I've hit some kind of singles one after the other. That's uncommon. It's mostly like it. I could tell you stories that support the notion that it's luck, largely luck, and I think it's very hard. A lot of entrepreneurs have incredible talent and if you get wiped out one time, if you go 10 or 20 years, then you get wiped out, you have to start over again, that's really tough. It's really hard to build assets that way. But that's what happens a lot of time because I had a company, for example, that I sold not knowing that the financial crisis is going to happen but it happened to sell in October of 2007. If it didn't sell, if that buyer happened to not come around and it was a year later or no buyer came around at all, that business probably would have gone out of business and I would have been wiped out because I guaranteed debt to part of the company and so forth. So, that's just one example. I think one thing that I feel did help me and can help others is that if, and this is a reason for investing in education early in life because I had the experience of losing money.
For me, at the time when I was 21 years old, it was a lot of money and so having had the experience of losing, being overconfident, which a lot of people are both in entrepreneurship and in investing but then once you've been humbled a few times, and it's better, I think, to be humbled early in life when maybe the dollar amounts are smaller, the stakes are smaller than to have, it's almost worse to have a string of successes early in life and then your disaster happens. You get overconfident then your disaster happens with a larger amount of money when the stakes are higher. That's almost worse than suffering defeat and loss early on.
Justin Donald: Yeah. I couldn't agree with you more on that and I also had a similar situation where my first investment ended up losing me money and so I feel like I sobered up real quick on the investment, just the framework of what I need to do and then I'm doing it wrong, and I need to get a little more education there. So, I think that's so cool. Your backstory is really interesting. I had the privilege of kind of learning about your father and your grandfather, and kind of the family tree that you came from. I was wondering if you'd be willing to share some of that because I wonder if part of that lineage has helped shape who you are, and maybe even has lit a fire under you to do some great things with your life.
Robert Brooker: Well, it certainly has had some influence. My father, my grandfather, both worked for large corporations and they had good careers, and they contributed a lot to the companies they work for. I think generally they had pretty good lives. They worked really hard and at certain points in their lives, they sort of came to the realization that investing is important as a way to generate lifestyle and better to start early just because of compounding and other reasons. And so, it was interesting. I remember when I was 16, my grandfather said he proposed to me this game where this is before the internet, where I would invest $10,000 of fake money in the stock market and I had to send him a letter and it had to be postmarked on Thursday, and he would check the postmark and I would say what stocks I would buy with the imaginary $10,000 and which ones I would sell. The deal was that I would do it for a year and if I lost money, nothing would happen but if I gain money, he would write me a check for whatever the gain is. I mean, that really is I would say, it's not investing. It's really more of a game. For me, I was never into sports, either playing them or in professional sports as a spectator.
And so, maybe this was my substitute for my lack of interest in professional sports. This was really a fun game and it so happened that I started doing it in August of 1982, which was to start with this enormous bull market. So, my portfolio was up just by sheer luck, actually, 60%. And so, that was very motivating for me. Part of what I feel that, as a kid, or really anybody, you're not going to really develop much of a skill for anything in one year but if you can develop an enthusiasm for it, at least for me, it kept me going to the point where I actually developed some skill because it takes multiple years. However, the results from investing in one year, it's really whether you do well or not is total luck or 99% luck or 90% luck. So, I don't know if really that game is such a - with my daughter, I'm doing something a little different for that reason. So, I happened to be lucky. I developed enthusiasm and then that led to, I was fortunate. When I went to college, my parents had tuition money for me and they basically, rather than just paying the term bills, they actually gave me the money and said, "Okay. You're responsible for paying your own tuition. If you can earn money through investing on this money, then that'll help getting – maybe there were three years’ worth of college. I needed four years or something like that.
So, if you make it beyond that, you'll have extra spending money. So, I thought that was pretty cool so that gave me an extra four years during college of investing. So, investing started with a game, and then it became a way to pay college tuition. Then after that, it became a social experience because I joined an investment club, and only then did it become sort of a lifestyle type thing. So, I think it progressed in different forms.
Justin Donald: I just think it's so cool how your family equipped you so that instead of having money be this thing that's like super divisive that you have this scarcity mindset around like, “Oh, no, what if I lose it all?” and you grip it so tight, your whole like framework around it is this is cool, this is fun, this is a game. This is an opportunity for me to make more, and I just think that that's tremendous. What a great education, what a great experience we can pass on to our children and to our friends’ children and people just in our circle of influence. I know you're doing really cool stuff like this with your family, with your daughter. In fact, I think it'd be really neat to even share now like you have done a great job with your investing and you've created a wonderful life for yourself. You don't have to work for a job. You own some businesses, you've got income coming in from other investments, and so you've really built what I would call the lifestyle investor type of life and with intentionality. And so, you can pour into your daughter and your wife and your other family and friends. I'd love to hear your thoughts on that and just lifestyle investing in general.
Robert Brooker: Well, I will say, for example, what I think is why I decided to do with my daughter that I think is a good way for any parent and I think it's affordable for anybody. And that is the notion that as you probably know, you can't put money in an IRA unless it's earned income. In other words, from the salary or wage. So, I think any parent can say, and what you can start working at 14 years old, is that legal age? I don't know if it's by state or how it is. But let's say kid typically gets a summer job or whatever at 14, 15, 16 and to say, "Look, for every dollar that you earn up to X amount, of course, kid wants to spend the money, right? I mean, that's the lack of education and I understand that. There's nothing wrong with that but for the parent to say, “Look, I'll match dollar-for-dollar into your retirement account, whatever you earn,” and if the maximum priority is $7,000 but depending on one's means, a parent could say the first $1,000 or $500 or it could be any amount. Just to give you an example, if you compound out, if you take someone at say 15 and you compound that 10% a year tax-free that $7,000 by itself without any additional contribution becomes almost a million dollars, or let's say $800,000.
That's pretty amazing and that's a pretty big gift to give that probably will affect that child's lifestyle in retirement. So, that's just a thought there that I think is applicable to anybody. Also, unlike the game that I did, the one-year game, it really sets up more of a long-term perspective, and then ideally, having a retirement account where you have some autonomy to choose different investments, and then that becomes a separate conversation about what to invest in.
Justin Donald: By the way, I do want to say I love that. I think that is fantastic, Robert, and you are encouraging and embracing and supporting such great skills of being a long-term thinker, not being in the moment, short-term, filling your wants, needs, and desires today but allocating something towards that but giving incentive for the long-term plan and long-term focus. I just commend you. That's amazing.
Robert Brooker: You know, I'll also make another cut. I don't know if I shared with you. So, I mentioned to you I was in an investment club and then actually, I started a software company that was focused on investing and investing software. During this whole time, I was a member of this organization. It's a nonprofit organization called BetterInvesting. Are you familiar with it at all?
Justin Donald: No, I'm not.
Robert Brooker: I believe it's the largest. It’s a nonprofit, by the way, so I have nothing to gain out of saying good things about it. It's a nonprofit organization and I happen to serve on the board now but originally, I mean, they are focused on I think their dues cost it's kind of like a mastermind in a way or it's about collaborative investing and the dues are like or it depends. Some subs are for free or it can be $100 a year. And there are chapters all over the country. You can meet with people in person. You can be in an investment club and sort of invest with 5 or 10 other people and there's a huge amount of investing education. The reason I bring it up, I find what the organization does is inspiring, and what they really tried to do, I mean, the members are from all walks of life, some are high net worth but I would say the majority are people who are regular savers, and they may not have large incomes but there's nothing more inspiring than go to one of the conferences. I'll typically try to sit at lunchtime, sitting at a table with strangers I've never met before. Inevitably, I’ll ask, "So what brings you here?” and almost every time someone says, "Look,” if they’re an older person, “I was a plumber or I was a teacher and I saved through this organization from a discipline of saving and investing. My retirement is so much better than I ever would imagine it would be.”
A lot of times, to me, it just means saving $100 a month, let's say. Not talking about necessarily large amounts of money. So, I think that demonstration investing is really accessible to anybody. Sure, it takes some initiative and it takes some effort but I find that incredibly inspiring.
Justin Donald: I love that, and I love that you're so giving of your time and your resources to charity. I mean, there are many things that you've done. Sometimes for people when they have earned a good amount of income, it's not as much of a sacrifice to give capital, to give money because you have access to that, whereas time, that's the real sacrifice because it's finite. And so, it's neat seeing that you're willing to do both. In fact, we were just talking the other day in one of our investment club meetings and you were saying, “Hey, I love the idea of being able to donate to let's say people that need help in the startup space,” and maybe even these are individuals that aren't even from here or whatever the case is like I would love a charity that focuses on helping these entrepreneurs get funded and get off the ground and I just love that. I'd love to hear more of your thoughts and maybe even some of the listeners that listen in might know of something because you reached out and got no response. You're willing to give and donate, right? People aren't even responding back.
Robert Brooker: Well, yeah. I don't know maybe spam filters and so forth. Maybe I should make some phone calls but the thought is and I'm really, this is initial stages, but I touched on a little bit previously that in I think a typical entrepreneur’s life there's a lot of volatility and their points of vulnerability. If you can sometimes just squeeze through and survive in the tough periods, you can go on and continue to grow and compound. I think I happen to personally have like immigrants to the United States who have that fervor and energy and hard work and desire to do well, though this is not limited to evergreen. It could be anybody, any entrepreneur who wants to make a better life for herself or himself, and reaches the point where everything's about to collapse, and maybe relatively not a huge amount of money. We'll just help them kind of get over the hump. So, that's just the general idea. What I haven't figured out is how to find such opportunities in a structured way. That I don't know but maybe that's something you’d like to talk more about.
Justin Donald: Yeah. For sure. Well, I had just shared with you an investment that I do in a VC fund, where it focuses on immigrant entrepreneurs. And so, this fund only invests in immigrants that have started a company and they like the thesis of that company. And so, I love that. I love the impact that that has, number one, on entrepreneurship but, number two, helping people that aren't from our country get a good start in our country at least from a professional standpoint. I think that's so cool. Let's transition here because you've done a lot of investing and I'm curious, one of the things I admire about you, Robert, I think you're one of the most analytical people I know, one of the most detail-oriented people I know. You catch things in contracts that attorneys often don't catch. So, I've been very impressed on a bunch of the deals that we've done together, just your due diligence, and what you personally put into it, even before getting to the attorneys. We both run our stuff any deal by our attorneys. That's just good practice just to get other eyes on it, get other perspectives on it. But how did you get so analytical? Like, where did that strength come from because you're phenomenal at it?
Robert Brooker: Oh, that's nice of you to say that. Contracts is just something that I just enjoy for I don't know what reason. I was really inspired. There's this book that I highly recommend to any investor or any entrepreneur who's not a lawyer, hasn't had formal legal training. It's called Contracts in a Nutshell. It's used in law school curriculums mostly. It's funny because there's a lot of drama in contracts too because the contracts get disputed and they go to court and just talk about all these stories about how, I don't know, some disaster happens. It's, in my opinion, kind of fun reading but I think there is a, gosh, I wish there was something in the K-12 education system about contracts. You see it like, I mean, every person, these what do you call these? Consents or these sort of license agreements that you get in an app or the terms and conditions and these are always documents that are 30 pages long, and consumers are expected to read them and understand them and sign them. I think a lot of people have reservations about this. Is it really realistic to expect the average person to read all these and understand what they're…? Most people, I think, 99% of people, including myself most of the time, just say yes, accept it if it’s Apple or Microsoft.
They're not going to ask me to do something that like it would be in the newspapers if it was something really egregious, right? But I think that contracts are such an important part of business and frankly, of life and to be able to and even investing, it's interesting, and I know you've encountered this too. There are a lot of people who have been investors for a long time or someone may have a fund and are looking for investors, and they raise millions and millions of dollars. It seems that the investors don't really read the paperwork. If it’s 100 pages, it takes time and sometimes it's super sloppy, surprisingly. You would think that if you're the 100th investor sign on, everything's all good but oftentimes, it's not good. It's concerning. It’s disappointing. So, I happen to like doing that but for understandable reasons. It's not enjoyable for a lot of people, for most people.
Justin Donald: Yeah. That's so spot on. I mean, I find errors all the time and this is not a strength of mine. I'm not as detail-oriented as you. It takes me a lot more energy because I would never say I enjoy contracts. I can do them because I have to do them or moreover, what I prefer to do is just send them to my attorney and he does them and alerts me on things. Any investor really needs to learn how to at least read a PPM, a private placement memorandum, and so that kind of outlines, it's like the SEC guidelines for investors who are accredited because the SEC basically has less rules or regulations because they assume that you're more sophisticated. And so, it's kind of laid out in a nice little booklet or pamphlet or document but there's a lot of nuance to it between that and the subscription agreements. And so, I do think it's very important that you go through it, and at least get the foundational elements of where things are located, what you should look for, where the terms are listed. Do the terms match up to what they said they are? A lot of the times groups don't talk about fees and so all the fees are listed in there. Any fee that would ever exist, you'll find it. And so, these are the things that I know you and I, we've dug through these together and found all kinds of stuff, inconsistencies, and so I think that's important.
Robert Brooker: Yeah. I think that was super powerful in that context and this is what you do with lifestyle investing, and you've been very generous with your time and bringing people together in collaborating on investing but when multiple people come together to work on a deal together, each person has a different skill set of perspective. That's really powerful. I would even say it's even more important that, okay, some people when you send it to the lawyer, have a lawyer review in the percentage of the investment is not a lot of money but when you're starting out investing, paying a lawyer a couple of thousand dollars or whatever it is to review a document, that's where prohibited for when you're starting out. And so, all the more reason I think to develop the skill earlier.
Justin Donald: Yeah. There's no doubt. One of the things I write about in my book, in The Lifestyle Investor is that I want to get an education from anyone that I bring on, anyone that's an expert, anyone that's an advisor, anyone that is legal counsel or tax counsel, my goal is to learn. I don't want them to just do my work for me. I want them to explain why they're doing it. So, that way, I'm more educated for the next time around. And so, I know I'm infinitely better at looking at contracts and negotiating contracts simply because I've had my attorneys teach me over the years what's actually going on in them. They're not just sending me documents that say, “Hey, here are the write-up. Sign this.” I coach them and say, “Tell me why we're doing this. Give me the breakdown. So, I see you edited it. Why did you redline it? What's that affording me or what don't you like about that? Or what should I be looking at before I even bring it to you?” And so, that's just so important. I love that you're doing that.
Robert Brooker: That's a really good point that professional attorneys, if you reframe it as their educators, as well as service providers, then I think that's awesome. I think that’s absolutely a great way to look at it.
Justin Donald: Yeah. And it helps me justify the price, right? At first, it was really tough to pay thousands of dollars for legal advice but later when I really started looking at it, it was like, “Wow, not only did they help me not lose money in this situation because if I didn't have a good contract, I would have lost money,” but they helped me structure deals better. They help me be able to use better mechanics and come up with better ideas for structures in the future. So, there's just so much, right? I can see that the investment isn't for the work being done. It's for my education and all my future deals and that has made it a much more pleasant expense for me to pay. So, you and I, Robert, we met at our investment club in TIGER 21 and that has just been so fun. There are so many reasons why I love it. I'm curious why you joined and even what your thoughts are on it.
Robert Brooker: Well, I mean, everyone has different styles of learning and processing things. So, I'm not saying this is for everybody but the way that I learned best is by collaborating with other people who have the same interests as yours or you have similar objectives. So, for example, as I mentioned decades ago, I joined an investment club as a way to learn about investing, and was also social and fun. When I was operating a business, I was an entrepreneur, I was a member of the organization called Entrepreneur’s Organization. Actually, I'm still a member and that's really kind of like TIGER 21 but it's about operating businesses. It's entrepreneurs who get together every month and talk about the issues that are affecting them, and how to solve them, and people collaborate with each other. I wouldn't even say that sort of called mastermind group or peer group, let's say, is more to me is more valuable even than an MBA because I feel like for the MBA, I learned a lot of stuff that was about being a CEO or something that wouldn't be relevant for 20 years or whatever. But with the peer groups, you are learning stuff and the world is, of course, changing quickly too.
You’re learning stuff that's relevant to you and to others right at that moment, and people who are kind of in the same shoes. So, TIGER 21 is great because it's like the peer group for entrepreneurs but it's a peer group for investors. I think something that's important to me, personally, also is sort of nurturing my friendships and my relationships with people because that's a fulfilling part of life and TIGER 21 is a nice way to combine that. It helps that we're collaborating with each other, looking at investments but also the camaraderie that comes with that, that sort of kills two birds I feel, and I think it's a great organization.
Justin Donald: Well, I love that. I was going to mention this at the beginning because you just recently moved here to Austin. You were living in New York. You are part of our chapter, though, which is really cool. So, you come in for our meetings, even though you had to catch a plane flight to get here and now you're officially here, which is a testament to, A, the city, B, the group. I think that that's so great. Obviously, there must be some great value if that is the draw and you could be doing it in New York but I think there are other draws here moving to Austin based on just kind of what's going on in the world too so we're glad to have you.
Robert Brooker: Thank you. Oh, it's an honor for me.
Justin Donald: That's cool. I was thinking about this and one of the things I'm always thinking about is with highly driven, highly successful people, it's like what makes them tick? And then from their standpoint of like the world, and what does that mean and what's their purpose? And what is their mindset? I'm always just so curious, what makes people tick and the viewpoint that they look at the world from? I'm curious for you. What is lifestyle investing to you? Why is it important for you to have cash flow that covers your expenses?
Robert Brooker: Well, that's a great question. Figuring out what one wants in life, I think, is not easy for a lot of people. Some people know just instinctively what they want out of life, what their lifetime goals are. I admire that. Other people and myself included, it takes time. It took time for me and is still taking time for me to figure out what that is. But I appreciate very much the relationships in my life, my family, and friends, and like to have the time and freedom to nurture that. That really is for me kind of a primary thing. And I like ways to collaborate and ways to help people and you've been so generous and good at that, Justin, that I feel that I have a lot to learn from you on that regard, as well. That's pretty much what I don't have particular items on my bucket list or anything other than just the - and I'm still figuring out what constitutes a life well-lived. It's interesting. I always find, oftentimes, biographies are very interesting to read, to hear how other people thought and how they navigated themselves through life, and what their regrets were and what ended up being important at the end of the day.
What's interesting, though, is that most biographies are biographies of famous people who are and their lives are not that relevant to my life. I'm more of an ordinary person and I'm looking right now for accounts of ordinary people who figured out how to lead extraordinary lives for them as they defined it because I think that could be interesting.
Justin Donald: Yeah. It is interesting. I love biographies and I love nonfiction because I just love to know what makes people tick, and what they're thinking, and decisions that they make in stress and in situations that are more relaxed. I mean, that to me is like my favorite genre of book. And so, I think it's great because I can learn vicariously through someone else who has very successful habits or a very successful mindset, what they did and emulate that. So, I think that's cool. One of the things I want to ask you, I love asking this to people, and every answer is so different but to you, what does wealth and freedom mean?
Robert Brooker: I think wealth, and we have to define wealth, right? But I think wealth is sort of a fertilizer or it's an ingredient to freedom but the reason I go back to definition of wealth, one can have a lot of freedom. There are places and lifestyles one can have that don't cost very much. And one can have a lot of freedom I feel without, I mean, our average income of wealth in the United States is higher than a lot of countries so we have some privilege in this country. So, I think, on the other hand, one can end up with a very high financial overhead and requires a lot more to have the freedom not to, not necessarily not to work but to, although it's a possibility for some if that's important to for someone but also to have more freedom over how one works and maybe it's not a 9 to 5 or 9 to 9 job but maybe it's something where one's working productively four hours a day and does other things or other types of work, or maybe multiple types of work and to have a college that's fulfilling, and fits that individual need and to have that freedom which is it's not always necessary to have. I mean, one can have a lot of choice and not have money to finance it but you have to be more creative and clever about it. If there's some money coming in you can kind of count on, certainly makes your choices wider in terms of what you can do.
Justin Donald: Yeah. There's no doubt. I say this a lot but money solves money problems. You have a financial problem, well, you have money, it's going to solve that problem. It's not going to solve all your problems but it will certainly take care of your financial problems.
Robert Brooker: Yeah. I’ll also add, not to take a negative tone but it creates problems, too, that are not created with wealth. I mean, you have maybe it's a little bit cliche but the trust fund kids who they, whereas a normal working person doesn't have that extra glass of wine because they have to get up at 7 AM to go to work and if someone doesn't have to work, they are much more vulnerable to lots of vices and unhealthy lifestyles that can be much worse than if they didn't have money at all.
Justin Donald: Yeah. I think it's a magnifier. I think money magnifies the character you have, the qualities that you have, and really the person that you are. And so, for better or for worse, that is kind of what I see it do.
Robert Brooker: Yeah.
Justin Donald: It's interesting. So, I'm also curious, you've been investing for a while now. You've been an entrepreneur, you have been an investor, you're still an investor, you're still an entrepreneur but I'm confident that your investment philosophy or thesis has changed over time. Can you share what maybe that change looks like what it once was? What it is now? What's different?
Robert Brooker: Well, a lot of it is stage of life and foolishness of youth. So, earlier in my career, I took some really big risks where I could have been completely wiped out like lost everything financially. As I mentioned earlier, I haven't hit any big home runs but I did get lucky that I averted disaster. Actually, there were some disasters but they weren't financially catastrophic. And so, that's fortunate. So, basically, a lot of the change has to do with now. I think this is fairly common and also that my focus now is more around not losing money. And my returns, my upside’s lower today than it was 20 years ago or 30 years ago but I think my downside’s also less too. So, I think that's very common, a more diversified. I spend a lot more time on risk and trying to assess risk, and that's really hard to assess risk. I mean, I think it's just very, very hard to figure out. Some often there's a risk that you don't know about that you find out later or any other - sometimes you know about the risk and you just got unlucky on an unknown risk. So, I would say that's one thing, more diversification, and more conservatism. That's a stage of life. And then there's a whole other dimension, and that is the world changing.
The world we live in today is different from the world that we live in 20 years ago. I'll just give you one example of that. I had a brief conversation about this the other day. There's this book and I read it eight years ago when it came out but I still think about it a lot. It’s called Abundance by Peter Diamandis and Steve Kotler. Basically, it talks about how acceleration of technology or technology accelerates exponentially. So, probably most people are familiar with Moore's law where computing capacity doubles every 18 months. Their thesis is and they're not alone in this is that that acceleration happens in almost all areas of technology and the implications are, I mean, it's a little bit like you know that fable of the chessboard and the grains of wheat and how, supposedly, I don't know if it's true or not but the inventor of chess said to the king, “Will you give me one grain of rice on the first square and then double it for every square for the whole chessboard?” The king is like, "Oh, no problem. That can't be that much money. What a small amount of rice,” and it ended up being because of the compounding. And so, it's like the first half of that chessboard, it doesn't seem like a lot of rice but at the second half of the chessboard, it really gets to be a lot. The book argues the same thing with technology and its impact on society that it will…
And the thing that is interesting for me is that if that's true, then it'll overshadow. We spent a lot of time in investment circles or I think people do, talking about who's going to be elected president, what's monetary policy, what's fiscal policy, what's going to happen with trade with China, all these things, and what's going on in the bond market, the stock market? If this acceleration of technology and productivity through technology could actually trump or overshadow all these other factors so they're really not significant in comparison, and we might be seeing of others. I’m struggling to find direct evidence of it but people are this notion that inflation has been so low in the developed world for the last 10 years and economists can't explain it or there’s a struggle to explain it despite all this stimulus and all this extra cash being thrown to the economy. So, I think that's potentially very interesting. So, that would suggest for an investing standpoint, maybe more waiting towards early-stage or towards technology, although some of that the worst little bit out of the gate on that because these big technology companies have done so phenomenally well, the stocks have done so phenomenally well over the last 10 years but that may continue or maybe even accelerate. So, there's that side as well in terms of what's going on in the world and what are the trends or things that are going to happen that I'm oblivious to that and are going to surprise me.
Justin Donald: I love it. I love your perspective and how deeply you think about things. It's fun hearing you share your thought process. That's really cool. I would love to find out just one of your biggest failures that you had in your life and what you learned from that failure.
Robert Brooker: Yeah. So, when I was 25, one of my best friends and I, this was in the early 90s so the Berlin Wall had come down and Eastern Europe was in the state of change and a friend and I decided that we wanted to go to Eastern Europe and start a bagel business, essentially a bagel shop. That's a great example about one's youth. One has a lot of passion, enthusiasm for things but sometimes not a lot of rational or a little bit less in terms of rational thought and thinking things through, but that's okay. That passion can offset a lot of shortfalls in other areas. But anyway, went out there, opened one bagel shop, had a wealthy person showed up at our shop one time and helped us fund. So, we lost so much money with the first shop that we needed to open 14 other shops in order to get profitable. It was just one. I could go on and on but it’s one disaster after another. Clearly, I didn't have the skill set to do that. I was overconfident. I was in a strange country with a strange culture and with lots of other things going on. So, that ended up being, I mean, it survived financially and it was sold at a loss for most investors. Essentially, it was financially a disaster.
But in terms of your question, what I learned? Well, I learned that things are much harder than, you know, it humbled me and made me less, I mean, confidence can be a good thing but it brought my confidence in check and it made me think more and more and I guess it applies to investing, okay, more of a mindset of, okay, what could go wrong? I feel like early in life for a lot of entrepreneurs, they're just thinking about what can go right and that's great because it's that optimism that fuels success and a lot of entrepreneurial endeavors but the investor has to be more of I think investors have to be more oriented about what can go wrong, and having things have gone wrong in the past helps one to do that, as you pointed out earlier.
Justin Donald: I love it. It's great because there are so many learning opportunities from the struggles and from the failures that really helped define who we are today. I feel like when you do fail early in life, you learn some hard lessons but early on. So, the money that you lose is not the great amounts that you could lose later as you're building your wealth. And so, I just think it's great. I love hearing that story. I didn't even know that about you. That's just such a cool way to start a business, not even in your own country, somewhere else where there's a language barrier, I'm assuming, and just so many other cultural norms that are different than the norms here. That's cool. Well, do you have any last thoughts? We're kind of coming to a close. Is there anything else you want to share with our listeners here today?
Robert Brooker: No. I think it's just what you're doing with lifestyle investing is incredible and I've been privileged to be, you invited me to some of the sessions you've had where you've brought together all sorts of people who have, I mean, they have at least one thing in common and that they're all eager to learn and to collaborate with each other. And so, I think it's just incredible what you're doing. You've been incredibly generous and I think bringing, you know, and it seems like there are some people who are more experienced, some people have less experience. It's just you seem to be open to all types and I really admire that in you.
Justin Donald: Well, thank you. I appreciate the kind words, Robert, and I appreciate you having the time to spend with us here on the show. Where can our listeners reach out to you or connect with you online if they had any follow-up?
Robert Brooker: I'm on LinkedIn. I'm not on Twitter but I'm on LinkedIn, Robert Brooker, so that might be the best place.
Justin Donald: Awesome. Well, thanks again for joining us here and I just want to encourage our listeners to take some form of action today. Take one step more towards the person you want to be and crafting the life that you desire. Move in the direction of becoming a better version of yourself and keep moving forward one step at a time. So, thank you all, and have a great one.
Robert Brooker: Take care. Thanks, Justin.
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