Transcript of Interview with Garrett Gunderson
Dan: Welcome to another episode of Shoulders of Titans. This is Dan Lok and today I am so excited to have the privilege of introducing you to yet another Titan. He is a successful entrepreneur, financial advocate and is rated as a Best Selling Author by the New York Times; he makes personal finance simple, actionable and enjoyable for entrepreneurs. Garrett Gunderson, welcome to the show!
Garrett: Hey, good to be on the show, Dan!
Dan: Garrett, tell us a little bit about your background and how you got into what you do today.
Garrett: Well, I got to where I am now because I started a business detailing cars when I was 15 years old. I was successful enough to win $5,000 as Young Entrepreneur of the Year. Before that, I’d even been mowing lawns for my neighbours and relatives as a way of making money. I wanted to invest the money I received for being titled Young Entrepreneur of the Year, but I couldn’t because my Mum had to be my custodian.Therefore, it was only when I was 18 years old that I began to figure out where I should invest the money.
I interviewed lots of people, but the more questions I asked, the more confused I got. Ironically, this led me to get into the financial services industry. I worked in the industry for a couple of years, but when the market went down in 2000, I didn’t like they way people were giving traditional answers to difficult questions. I would hear advisors telling customers “you’re in it for the long haul” or “the markets on sale, buy more!”
I thought it was all crap, so I started asking more questions and upon my first year out of college I decided that every month for the next 2 years and 2 months, I would fly to the best events with the best speakers to properly find out more about the market. It really turned my life upside down; it was very different to what I’d been taught at that point. It led to some tough conversations whereby I’d have to tell clients I hadn’t been doing the right things for them. They either had to find a new advisor or let me enlighten them on some of the things that I’d learnt.
Because of this, I’ve always been looking for different ways to do things, ways that are more effective, efficient, productive and guaranteed. I focus more on the individual as the greatest asset, instead of treating the the stock or the bond as the greatest asset. I’ve always had an affinity with business owners because that’s how I started out, so I want to do right by them.
Dan: Wow, Garrett, you won’t believe this but my first business was actually a lawn mowing business when I was in high school! But you’re lucky because I actually didn’t make any money from that; I did it for 6 months and gave up.
Garrett: Haha, these teenage businesses we ran were no fun; detailing cars was not fun. Scrubbing tar off a vehicle sucks, man. I was even detailing repossessed vehicles for the credit union and some of them were in such horrible condition they would take me 12 hours to complete. I would be so exhausted by the end of the day. This is why I’m now glad I get paid more for my brain; it creates a much better lifestyle.
Dan: I’m curious about when you made that $5,000. Most kids would blow the money on something like beer. Where did you get the idea to invest it and where did your financial discipline come from?
Garrett: I don’t know if it was as much disciple as it was the fact that I grew up in a small, coal mining town. I lived in East Carbon, Utah, with around 1,000 people. During high school I then lived in Price, Utah, which had around 12,000 people. I just wanted to be successful and for me, at that point, the definition of success was very limited. It meant having $1 million, so the $5,000 was just the first step. At that time of my life I didn’t have a huge ambition to make a big impact on the world, it was simply a matter of ‘how do I get rich?’ I had $5,000 which I wanted to invest so I could get out of the small town and hit the thriving metropolis of Salt Lake City. It felt like a big city, which seems laughable now, but back in the day it was a huge leap for me and Salt Lake City was the dream.
Dan: From there, you went on a surge of talking to some of the best financial minds. What are some of the things you’ve learnt from them?
Garrett: I remember flying to New York City; I’d never been there before and I rented a car to interviewed product designers for 2 straight days. I chose the people who managed the money, instead of interviewing people who sell the products. It was incredibly eye opening. Everything I was originally taught got turned upside down. My understanding of returns was changed; averages vs actual returns were not even close to the same thing. I started to see the real impact of small fees and how time value ties into recovery. I would take a memo to these kind of interviews and jot down the names of experts they recommended on different topics so I could speak to them next.
I was on a real search and it truly opened up my mind because before that, I only really thought of finance as scrimping, saving, sacrificing and budgeting. It used to be a matter of setting money aside for 30 years and hoping the compound interest will work. I thought it was all about the stock market, but that mindset turned out to be limiting and even destructive for some people. I started to see a new way: the way wealthy people thought. It was like I entered a whole new world, simply because I had been born into a world of scarcity, where money was bad. If you had too much of it, you were made to feel you had done something bad or you were greedy touching such filthy, dirty, money. Even though these things weren’t said outright, it was definitely a battle I, myself, fought internally. Was it true? If I become a millionaire does it really make me a bad person? I was grappling with integrity and morality, discovering who I was.
At this point I realised education wasn’t enough, I had to have self-awareness too. I realised I was my own asset and I had to start investing heavily in myself. Ever since then, I’ve been going to everything from mastermind classes to workshops in order to understand my mind and explore what’s possible. There’s definitely a fine balance between being in a state of curiosity and getting into a state of envy or jealousy. As you learn from people and as you see what people accomplish, it’s really easy to feel like ‘oh, there’s so much more I’ve got to do to be happy’.
However, happiness is something that can be considered both an easy and complicated equation. Many people say ‘money can’t bring happiness’, but this can often be used as an excuse not to have money. I would say it’s ok if you want to make money to bring you closer to happiness, especially if you’re making it through a way which brings meaningful value to the world. The best way to make value is to really search within ourselves and see where we have a level of competence and confidence that doesn’t exist within other people. If we find it, it allows us to touch other people’s lives, to serve them and to solve problems and to somehow facilitate the growth of other people’s wealth.
Dan: Yes, I’m very big on having the right mindset. Throughout my own journey I’ve also had some inner conflicts; fighting and wrestling with the inner demons in order to overcome them.
So, moving on slightly, when you do approach some of the best financial experts in the world, how do you go about it and how do you get them to agree to an interview?
Garrett: I approach them in the same way I approached anything earlier in life; I continue to operate outside my comfort zone. For example, when I was a teenager I applied for the Governor’s Honors Academy. If you’re accepted onto the programme, they require that you go out there and raise funds for your 2 weeks, rather than your parents writing a cheque. I went and did it, and it was uncomfortable. I went knocking on doors and talking to city council members. It taught me that the world is a much friendlier place than I thought it was.
I realized that with a little bit of ambition and a little bit of value to give, I had an advantage over many others. People thought I was too young to be 22 years old working in financial services, but I started at the age of 19 and I didn’t let my young age prevent me from doing so. In fact, I used it to my advantage and built confidence by speaking to people who were willing to listen to me because I was young, such as the sponsor of my baseball team. Although he didn’t end up being a client, he took a meeting to hear about what I was upto and I learnt lessons from that because it pushed me further out of my comfort zone.
I now know that if I don’t approach someone, there’s 100% chance it’s not going to work out. And if I do approach them, the odds are actually exponentially better than I ever could have imagined. I look at it like a bank account. Bank accounts don’t do very well if you make no deposits and just withdraw money; the cheques are going to bounce. So, instead of meeting people and giving them my agenda and trying to ask them for a bunch of stuff, I ask enough questions to figure out what I can do to contribute to them and their life. A lot of the time I can’t directly help them, but I can indirectly help them; it might mean giving them a connection or a contact or just having a conversation which gives value to both of us. And whenever I feel uncomfortable I remind myself: this is where opportunity lies. Plus, what’s the worst that could happen?
Dan: Wouldn’t you agree that most successful people are actually very generous, especially with their time?
Garrett: Yes! When I went to Governor’s Honours Academy, we met senators and inventors who gave their time to talk to the group. Whenever I meet someone wealthy, I never worry about wanting their money, I just want to learn from them, contribute to them and build a relationship. I also love meeting people who haven’t quite made it yet. I recently spoke at a University and had 25 students asking ‘how do you do it?’ and one of them said ‘I would love for you to mentor me. What would that take?’ I replied ‘how about equity in your business when you start?’ He said ‘I don’t know if I’m willing to do that, but I do have a background in writing’ and that worked well because I was doing a lot of writing that he could edit.
It was rewarding for me to give something to someone who was so ambitious. He was very appreciative and I enjoyed it! So if he calls me, I’ll call him back and if he emails me, I’ll email him back. I really do feel that wealthy people want to give back, contribute and pay it forward because someone probably did that for them back in their day.
Dan: Wealthy people probably also see a version of themselves in young people, which is why they get so much joy and satisfaction from helping them.
So, going back to when you were speaking to people who create, promote and consume financial products, did you learn anything shocking about the world of stocks and finance?
Garrett: The most shocking thing I came across was the book called ‘Money Master the Game’ by Tony Robbins. He interviews billionaires and I found the content which came out of the interviews ironic and even comical. He asks Charles Schwab ‘what should people do to get wealthy?’ and Schwab says ‘put money in a discount brokerage account’. However, Schwab didn’t get rich from putting money in a discount brokerage account, he created the discount brokerage account. He also asks Jack Bogle the same question, who similarly replies saying people should ‘put their money in index funds.’ But Bogle didn’t get rich putting his money in index funds, he created them.
So there is a huge disconnect between what the book says you will learn and what value the content actually provides. Robbins even goes on to talk about the risks of being a business owner, but to me that seemed silly because 90% of people that are worth a lot of money ($5million – $500million) own their own business. So I guess what shocked me was that a lot of the time, people get seduced into risky investments they know nothing about, because of salesmanship and commissions. Investments then end up haunting people instead of helping them. It’s a big problem with financial planning; people take good money and put it in bad places.
When it comes to investment, way too many people also make the error of focusing on accumulation, whereas my focus is on cash flow and great recurring revenues that cover your expenses as a solid financial foundation. A lot of people skip the initial stage of building that foundation, which is why we see so many bankruptcies and so much financial stress.
Dan: That’s awesome, so let’s dive into it. What advice would you give to entrepreneurs who are making good money, but are interested in investing it?
Garrett: I would ask them four questions. Firstly, do they have at least 6 months liquidity set aside on a personal front? They may not be ready to deploy their money which is going to get locked away. Secondly, have they invested in the 3 P’s of their business by making sure they have the right people, processes and procedures? Thirdly, have they focused before they diversified? In other words, have they created a strong enough stream to branch out from? Fourthly, when they go to invest, have they asked about things they can invest in which compliment their existing knowledge base and business? We have to make investments which are aligned with our abilities. People can’t be told what to invest in, because it depends on who you are and what you’re good at.
Dan: I love it, I can’t believe how much we share the same values. I also believe in fully funding your business and maximising its value so that it becomes something you can control and understand.
Now, is there an amount of money any business should be making through profit before they invest their money?
Garrett: First and foremost, when a business owner takes money out of the business to fund themselves personally, they should take at least 15% off the top. Make that 15% an automated save, so that 6 months of personal expenses can be covered in case of emergency. Don’t think of investment as automation; think of saving as automation instead. Investment is more like a Cheater or a Leopard pouncing at an opportunity when the time is right, but only after waiting silently and patiently for a while.
Malcolm Gladwell wrote an article for The New Yorker years ago, where he talks a lot about Ted Turner, who invested exactly in this way. Ted bought businesses to complement his existing businesses and he sat on cash like crazy until the right opportunity came along. He then used cash as a negotiating mechanism, whereas many other people had lost all their cash due to irrelevant investments which were locked into a retirement plan. Bad investments are a psychological and philosophical problem because people are taught to be mindless with their money. For years, people have thought compound interest is going to save them, but in reality the only miracle that’s going to save them is delayed gratification and the ability to automatically save.
Dan: As entrepreneurs we have to think ‘why are we being taught this way?’ ‘Why is there so much misleading information which has trained the general public to put away their money and not touch it for 30 or 40 years?’ We must think about what the agenda truly is and what lies behind it so that we can make smarter decisions on our own, wouldn’t you agree?
Garrett: Yes, so let’s unveil the agenda right now. If you’re a bank, what do you want from people? Cash. How often? As often as possible. How long do you want to hold onto it? As long as possible. How much do you want to give people back when they want to withdraw? As little as possible. What do banks do with the money? They invest the money. There’s the agenda, right there.
Banks also do absolutely everything they can to focus on cash flow by gaining the monthly income from the customer. They may even take bi-weekly payments because that’s even better for the bank. They’re getting money more frequently which is exactly what they want. They don’t say ‘yeah we’ll give you this loan and 30 years from now you’ll pay us back’, they’re getting it along the way. Think more like that and you’ll be better off.
Dan: It’s great how you emphasise it’s more about the investor, rather than the investment. I can relate to that. I don’t have stocks, but it doesn’t mean you shouldn’t have stocks and I do invest in real estate, but it doesn’t mean you should invest in real estate.
Now, let’s talk about control for a second. Why is control so important in investment and how can you get more of it?
Garrett: You can get more control through cash flow, contracts and investing in things you know. To be out of control, you put your money into a qualified retirement plan because the government owns it and you are just a beneficiary. They make the rules and they can change the rules along the way. Not knowing your exit strategy means you have less control, whilst having one gives you more.
Dan: One classic mistake made by entrepreneurs is being too busy. They are very good at making money but sometimes, they don’t have the time or the mental bandwidth to develop a new set of investment skills. What advice would you give to these people?
Garrett: Focus on simplicity rather than getting caught up on complexity. But you’re right, businesses are leaking at least 10% of their income to overpayment of taxes; it’s one of the biggest problems in the business owner space. For this reason it’s worth investing in a good accountant or some basic knowledge around tax strategy. Also, the loans many businesses have from when they started out have high interest rates, but if you have a good credit score, good collateral and good cash flow recordings, you can be paying over 80% on your interest. They can keep more of it rather than let it go to waste.
There will be a lot of hidden fees and commission fees within their investments, as well as improper insurance structures. It can feel overwhelming having to learn about so much, so it takes courage to face our finances. But I think 80% of what we’re afraid of we don’t even need to deal with; we just need to deal with the fundamentals.
Dan: I agree and I think it’s also about asking ourselves ‘why are we in business in the first place?’ It’s not just for the sake of being in business, most people want financial freedom, they want to be wealthy and they want to have a nice retirement.
So, moving on, you wrote a book called ‘What Would the Rockefellers Do?’ Tell us what inspired you to write that book.
Garrett: Whilst I was flying around the world, learning lots about the financial market, I had an epiphany about sharing the knowledge I was picking up. My friend, Michael Isom, accompanied me on most trips as we aggressively pursued our education together. We started to think about the most important lessons people could learn from the super wealthy, who have implemented such practices themselves. We wondered what it would take for someone who started from scratch, to build a legacy. We weren’t simply talking about the monetary legacy, but also the philosophy and mindset that goes hand in hand with such success. In terms of how we would get this out there, we decided a book would be the best way to do it.
Dan: What can you share with us about the habits of wealthy people?
Garrett: One notable thing is that they seem to have a ‘statement of purpose’. This means having trust in your own worth, not the normal legalese that bores everyone to death and means nothing, but the real signposts they might want to leave for future generations. It involves integrating your core values and philosophies into your planning. The Rockafellas also created a strategy whereby they financed things for their family, rather than relying on the financial institutions, which meant they could earn interest rather than pay interest. So in the book, we cover how you can mimic that type of structure. We also talk about enjoying life along the way and how to engage in the right conversations.
Some people who read the book were planning on leaving their kids with nothing financially, but after reading the book they felt they had a duty to give their kids money and it would be a privilege to do so. But they would need to really invest in their kids along the way so they grow into the right people to be able to handle that money in the right way when it comes to them. There’s a quote early on in the book from ‘Atlas Shrugged’ which sums this idea up, it says:
“Only the man who does not need it, is fit to inherit wealth; the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money?”
That’s what we’re talking about: real human beings. How do you make sure financial structures support and join people, rather than destroying and dividing them?
Dan: That makes a lot of sense and it’s a very profound quote. I can understand people might not want to leave money for their kids in case it spoils them, but it’s not about the fact you give them money, it’s about the way you raise the kids with the right values and philosophies so they use the money in the right way.
I love how you always tie things back to the psychological aspect of finances. Why do you think people have this negative association with money? They don’t know how to handle it and they don’t want to handle it. Why is that?
Garrett: I think a lot of it is about our tribe, who we spend our time with. Sometimes you have to let go of certain relationships, but for some people that is too painful to think about so they would rather stay put and not look at the money. They might have heard something from a family member about money which made them feel that what they’re doing is bad or wrong, or it simply feels intimidating because no one’s ever taught them how to handle it. There’s no rule book so they say things like ‘I’m not good with money’ or ‘I don’t know what to do’, so they just get on the treadmill and run faster.
There’s a lot of fear around money as people put a lot of meaning into it. However people view money, whether it’s power, prestige or sexiness, if they don’t feel worthy, they will reject it, ignore it and deal with it in a negative manner. They never address what’s going on subconsciously because it’s running in the background. Great work ethic with a bad philosophy, still equals bankruptcy.
Dan: They might even find a way to lose it without knowing why.
What advice would you give to young people still in college, trying to find their passion and career?
Garrett: Don’t invest in the stock market. Lots of people will say invest early and invest often, but it’s not the right time. As a college student or young professional they should be investing in people, ideas, their skillset, ways to earn a living and ways to monetize their skills. Invest in education outside of school that teaches you how to make money or go through personal self development. They are the real opportunities at that age.
If you don’t correct the issues of knowing how to get paid what you’re worth or change what you’re earning, then I don’t care how hard you work or how much you scrimp and save because none of it will matter; you’ll find a way to destroy it. This is why you have to spend time expanding your mind, expanding your vision and investing time with great thinkers and with people who are great at what you want to be great at. Learn from them; don’t learn from the people who suck at money. There are people who might have lots of nice things, but they could be one incident away from bankruptcy.
Dan: Now, Garrett I have to ask this question. Your messages probably ruff a lot of feathers in the traditional financial world, have you made any enemies along the way because of this?
Garrett: I would expect so, but many see me as a respected contrarian. I thought I would face more battles, but the only reason people fight me on anything is if their living depends on something I’m addressing. It has been fun because it’s liberating for people to realise they don’t need to pay attention to every financial institution in the world, they just have the select a few that make sense for them. It’s ok for them to be investing in theirself and their business and to be sitting on cash, because professional investors sit on cash until the right opportunity comes.
Dan: What’s a good return on investment from your perspective?
Garrett: Well I believe in the ‘hurdle rate.’ In the corporate world, the hurdle rate is the minimum return before people put money into research or other companies. If it doesn’t hit the minimum return then it’s not worth the time. In personal finance, I call that ‘cost of money’. If you have a 17.9% interest rate on your American Express card and you choose to go on a trip instead of paying it off, then the money you spend isn’t costing you what you think, it’s costing you the additional 17.9% you didn’t repay. For some people the highest cost of money is what they have on loan, whereas for other people, it’s their highest net sustainable rate of return that they could earn. That means the cost of money is different for each person. If you establish your cost of money it helps you determine what to invest in. Maybe it’s to pay something off, maybe it’s to invest or maybe it’s to keep things where they’re at for the time being.
Dan: That makes a lot of sense. Now, tell us, Garrett, what do you read on a regular basis?
Garrett: I have a few people in my team who send me articles as they know what I’ll be interested in. That keeps me pretty busy. There’s not a lot of finance books that I read; I’ve read a lot in the past but now I can kind of predict where a lot of those books are going. I do read some stuff from economic thought leaders, but not really on a consistent basis because it complicates a simple universe. I’m not trying to be a trader by knowing what’s going to happen on the stock market tomorrow; my business is my stock.
The books I would therefore prefer to read would be ones like ‘Scaling Up’ by Verne Harnish, ‘Stealing Fire’ by Jamie Wheal and Steven Kotler or ‘Head Strong’ by David Asprey. I love reading books which are going to increase my ability to be productive and think straight, more so than financial books.
Dan: Great stuff! Do you have any final thoughts or any information on where listeners can find your work?
My main site is www.wealthfactory.com and you will find my book at www.freewwrd.com or you can text 801 396 7211 and put ‘WWRD’ in the subject line. Definitely get a copy of the book, I think you’ll really enjoy it! I built it so you can look at which chapter applies mostly to you and head straight over to the most relevant bits. I’m happy to buy you a copy, so long as you’re willing to read at least one page!
Dan: Garrett, thank you so much for inspiring us today with your amazing stories and your incredible insight. I had high expectations going into this interview but you exceeded them by far and we explored lots of your advice from many different perspectives. Thank you once again for the fascinating conversation, I appreciate it!
Garrett: Thanks so much.