How much of a role does luck play in a career? When we study the uber-successful, do they leave clues or are they a product of an impossible combination of fortunate events?
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Is It Better To Be Lucky Or Good?
Ian, you lucky son of a bitch.
The title of this episode is, Is It Better to Be Lucky, Good or Smart? I can say with certainty that in our show, we are neither smart, good, or lucky. We have none of the three going for us but hopefully, we have a few other examples from other areas of our life where we found at least one of those attributes.
I will do the Ian role here and will intro this thing. There’s a book that I read years ago. I was in my twenties. It was by a guy by the name of Bo Peabody. Bo Peabody, at 27 years old, was an internet millionaire. Now they say it’s like an internet millionaire. He was like an internet half a billionaire. He timed something so perfectly. He had an internet startup that he ultimately sold in the early ‘90s, and then he got a bunch of stock from a company by the name of Lycos. Lycos, as Ian and I like to say, went tits up but not before the stock ran about 10X and Bo Peabody took the earnings. All became in-stock options.
He sold all of it in days, if not weeks, before the meltdown of the tech bubble in the late ‘90s. It was right around 2000 when the tech bubble called pop. It’s in the early 2000s. This guy got insanely lucky but got asked this question over the years and essentially wrote a business book about it. The question is, “Are you lucky or are you smart?” He answered the question in a unique way.
He goes, “I was smart enough to realize I was getting lucky and got out.” What Ian and I are going to talk about in this episode are a bunch of different things like when we go to Vegas, and someone gets drunk. They are up $800 and ultimately end up closing the night down $500. They should have walked away from the table because they were getting unlucky.
I feel attacked by that story, frankly.
At a wander, a two in front of it, and that’s you. To that end, that’s the fun part about Vegas but you got to know when to pull your chips off the table. There are two ways to attack this. There are the Steve Jobs of the world who blow up but then there are people like Ian and me that are more normal, had some good fortune, had some luck but also we are smart enough to realize it. That’s the takeaway with this. As we are recording this, we are entering a recession, the market is changing, and the questions you need to ask yourself are humble questions, “Did I deserve to be here or did I get a lot of incredibly favorable things helping me get to this point?” That’s what we are going to debate.
Frank, you are in multiple mastermind circles. You do coaching for real estate firms that are growing. How many people have not made money in the last 5-6 years?
You are much more experienced than the average bear that comes as a new person to a mastermind. When you see that, knowing you have been through multiple market cycles now, how realistic is an industry where everyone is making money?
That’s got to scare you when there’s no one saying, “I’m struggling.” They are all finding ways to make money.
A couple of quick stories that I will tell in succession here that are relevant. I’ve documented this. I own hundreds of houses, around 300. I’m selling 51 of them. The reason I’m selling them is that I would rather have a little bit of cash and reposition myself with cash. Now I’m not necessarily right or wrong but that’s my position because it’s the right move for me.
In this industry now, it’s a good time that the smart money is selling and the less smart money is buying. I don’t know if it’s the right time to do that, so this is how I look at the world. I will give you a couple of statistics. I’m in the process of selling some units, and someone asked me the question, like, “Why are you doing this?” I didn’t want to say because we are at the top but I think we are at atop. We are certainly at the top comparative to where I bought everything. There’s another side to it. There’s a bunch of people who don’t understand the fundamentals of a deal. There’s a very simple term when you do a real estate deal. It’s called a tape. What’s a tape, Ian?
I don’t know what you are talking about.
Don’t you know what a real estate tape is? Ian doesn’t do this. I do. A real estate tape is basically a spreadsheet but it has everything on. It has the property, address, age, the amount of money it makes, and the whole thing. It’s called tape. It’s basically the book report about each property. If you’ve ever traded a basket of assets, you’ve heard the term tape.
Someone was like, “I don’t know what to do with this deal.” I’m like, “Send me the tape.” He goes, “I’m sorry to sound ignorant. I don’t know what a tape is.” He thinks he’s going to buy 255 houses. If you don’t understand some of the fundamentals of where the market is and something like a tape, which is a very simple term, now is not the time to wait in.
The time to wait in was 2009 and 2014, when we had a lot of runways. Now, there’s less margin for error. When you asked me the question, “What do I think?” A lot of people have a false sense of what a market is, and there’s something else. Several ago, the market was still where the cycle started. People who have been in this business for 10 to 15 years are half-cycle people. They are not full cycle. That’s why I wanted to talk about this now because it has been a great long run. We’ve had a great run but most people think, “This is normal.”In real estate, a lot of people have a false sense of what a market really is. Click To Tweet
The other thing that is relevant is COVID. Everybody in real estate thought we were going to get crushed by COVID. The stock market got crushed by COVID. If you remember, you and I were talking about unemployment and the stock market. The stock market dropped like thousand points in a day like Black Monday type of stuff. It happened multiple times in 45 days.
Somewhere around April, a month later, was the bottom, and it bounced. It was up 25% within twelve months. That is not normal. There’s a false front. People have this thought, “This is what the world looks like.” I don’t necessarily think that’s what it looks like based on a historical perspective. That’s why I thought now was a great time to talk about this.
Even your story about the tape, I haven’t heard that term. I don’t buy residential units. I’m not in that space but I am in it with you, though. I will let you worry about that. I could do it myself but I prefer to invest with someone who’s more experienced than I am in that area of the world. I’m a little more experienced in the industrial property world. In this market, I would never think about getting into residential real estate by myself.
I would only want to be with someone who understands how to buy at a good price because that’s not my thing. I’m in it tangentially but with a good partner. Better to be lucky or smart. I would not prefer to try to get lucky now after a fifteen-year amazing run in the housing market. I don’t want to think I’m so good that I could get lucky. I prefer to be smart and only invest if you are going to do it.
I don’t know if Ian and I told this story here but we’ve told it before. It’s a funny story for us. We bought 75 houses, and 70 days later, COVID happened. Ian was like, “Frankie, when your son is old enough to play baseball,” Ian and his son will move down and buy a house. We are going to teach my son how to play baseball. My joke to Ian was, “Ian, you don’t need to buy a house. You are going to own 75 of them.”
We still own all these shit houses.
Old pain Cava but the reason this is relevant is this. We were smart with the deal. We looked at that deal. We analyzed it. We did everything right, and then a pandemic happened, and we didn’t know it was going to happen. We were smart during the pandemic. We did what we needed to do but the market bounced way faster. Ian and I looked at it, and we are like, “We might be able to squeeze a 5% to a 10% extra return out of this thing or we could get out of it with huge upside, big win.”
Ian and I are not humble guys, and we looked at it from a humble standpoint of like, “This is a month of return. Everyone has got their money back.” That’s how you can breed luck and smarts together. From the outside world, it looks like luck but there’s a combination of both of those two things. The manifesto is whether working for a national company or a solo startup. What you should heed is that the business should be successful. Make sure you work with the fundamentals that are innovative, morally compelling, and philosophical positive. At the same time, be honest about, “Where am I? Should I be lucky? Should I be smart?”
The Detroit Lions last won a playoff game in 1991.
Is that true?
This is true. One of the greatest days of my life would be the Dallas Cowboys beating the dog out of them. We had this incredibly young, talented team led by maybe the best running back of all time, Barry Sanders, who was maybe in his 2nd or 3rd year with the league but we had a good defense. We had a good offense.
We came one game away from making it to the Super Bowl. We got beat by the Redskins. Largely, that game was because we threw a bunch of interceptions. We had no passing game. They knew what to do. We were largely considered to be an up-and-coming team that was one quarterback away from winning a Super Bowl. The next year didn’t make the playoffs. Fell apart.
Quarterback play got even worse, and Detroit was desperate for the next thing. We went out and went after a guy by the name of Scott Mitchell, very hard. Frank is a Miami Dolphins fan. Scott Mitchell was a quarterback for the Dolphins. Tell everyone, Frank, why Scott Mitchell was it quarterback on the free agency market that year.
Dan Marino dropped back the pass in Cleveland brown stadium and blew out his Achilles. Scott Mitchell came in off the bench complete and total unheard of. He literally played in the World League of American Football, the Waffle, just a terrible league. He comes in, and he’s a world beater. The Dolphins are incredible, and we’ve got this guy.
It looks like they are apparent to Marino but Marino was still young enough where there’s a debate like, “Should we keep Mitchell? Should we keep Marino? What should we do with this guy?” What ultimately happened is that the Dolphins made the right decision. They kept Marino and shipped our buddy, Scott Mitchell, off to Ian’s hapless Lions. Ian will fill in the rest of the story.
Again, why was there such a debate? How many games did people have to evaluate Mitchell, and how good was he in those games?
He was incredibly good. In 1993, the year Marino got hurt. He played in thirteen games. Marino got hurt at the beginning of the season. He had a 58% completion percentage. He threw twelve touchdowns, and the Dolphins made the playoffs. He was freaking good.
A few of them are in heroic fashion. He has some fourth-quarter comebacks where people are like, “Who is this kid?” Everyone wrote Dolphins when Marino got hurt.
Ultimately, what ended up happening, and Ian is going to talk about this. The Miami Dolphins, at that point in time, were incredibly talented. They had the most winning head coach in the history of NFL Football. They had a great offense line, an incredible defense, and incredible wide receivers. They had this good team. He stepped into this situation where he was, Ian and I talked about earlier, born on third base. It wasn’t him. It was the situation around him. He was better because of his situation than he was.
He leaves that, and I could argue he went to an even better situation at first. He went to Detroit. Detroit had Herman Moore, who was a first-team, all-pro wide receiver. Incredible receiver. They had Johnnie Morton. They had Brett Perriman. They had three amazing receivers, a decent line, and the greatest running back of all time. Scott Mitchell got the biggest contract in NFL history because of his thirteen games with the Miami Dolphins. In his second year with us, he broke a record for most passing yards in a year. He was the first quarterback ever to have two receivers catch 4,400.
He had put through 4,400 yards in 1995.
He blew up through for 50 some touchdowns. It was amazing. We were an unstoppable offense that year. Now Scott Mitchell had been in two scenarios, where he had Duper Clayton, the amazing offense goes to Detroit, where they were weapons everywhere. He is the example of a guy who was born on third base and thought he hit a triple. What happened was he went from being hungry until he had this big contract, and Scott Mitchell got fat.
He quit working in the off-season. People said he wasn’t showing up to workouts. He put on 40 or 50 pounds. He could barely move and completely fell apart. That is a guy who should have looked at it and said, “I’m the luckiest guy in the world. I had to play thirteen games. I was in the World League, and I got the biggest contract in the league. Now I get to play with all of this talent,” but he didn’t. He thought it was all him. He thought, “I’m amazing. I’m great. I don’t need to work for it.” He quit working, and his whole career fell apart. He was unceremoniously shooed out of Detroit.
One of the things that’s crazy about this story is literally, there’s a guy named Lomas Brown, who also is in the Hall of Fame and a Florida Gator, by the way. He was a good offensive tackle. He said on ESPN, “He purposely missed a block that resulted in an injury to Scott Mitchell because of Mitchell’s lack of commitment and poor play.”
They hated him. They knew if he would work hard and put the tackle in, they could have been a Super Bowl team. They have Lomas Brown, and Kevin Glover was the center. Those are two Hall of Fame offensive linemen and all that talent I told you about. They were pissed at this guy because he wouldn’t put the time in. He’s a good example. Some people, if they get a contract like that, they get the Imposter syndrome or panic and like, “What if people find out and it makes him work harder?” Mitchell thought it was him.
He thought, “I’m the one driving all this.” You were surrounded by a lot of talent. You should have realized that you cashed the bank because you were in the right place at the right time. You found a desperate team that needed a quarterback that would pay you that much but he didn’t. The opposite happened, and his career fell apart. That’s a little bit of looking at Scott Mitchell and saying, “What did Scott Mitchell do so well to have such great years?” It’s a little bit of survivorship bias because there are a lot of people that have been much better than Scott Mitchell, who landed on terrible teams with no talent around them.
They were labeled bus, and survivorship bias comes from a story in World War II, Frank. Researchers from the Center for Naval Analysis went through and conducted a study on the damage done to return to aircraft after missions. Their goal was to make the aircraft more formidable, defensive, and stronger. Their recommendation after studying where all the bullet holes were on all of these planes was to add armor to the areas that were damaged the most.
In that, if you were to go look at an airplane. You would see there were bullet holes riddled all along the wings and the back fins everywhere. Their recommendation is that we are going to fortify the hell out of these airplanes. What happened is that nothing improved. None of the losses went down, and airplanes were still going down at the same rate.
A guy by the name of Abraham Wald came in, and he suggested differently. Wald was a mathematician and a statistician. What he argued was, “Your study is flawed because you are only studying the aircraft that survived the missions.” If they survived with bullet holes there, that meant that they were still able to land. Those are obviously not places that are taking down the planes.
His argument was, “You should go and fortify your airplanes in the areas where there were not bullet holes because if there were bullet holes there, those are probably the ones that went down in the ocean.” If you looked at the plane, the areas where there were not bullet holes, where the cockpit, where human beings ride the planes were there, where the engines were, where the turret was. In some of those areas, they said, “Let’s fortify that because the only thing is surviving or the ones that didn’t get hit there. Forget the stats of what made it here with bullet holes in it.” You are looking at that. The survivorship bias, what that says, is going and studying Jeff Bezos and famous CEOs, which is what we do.
We study Zuckerberg and Bill Gates. We say, “You should drop out of college and become wildly successful or if you start a business out of your garage, you are going to kill it.” What that’s not looking at are the thousands of people that dropped out of college and tried to start a business out of the garage, and it never worked. Sometimes learning what to do by asking someone who’s had success, they don’t know how to explain it. The truth is, they don’t want to tell you they got lucky in so many ways. They had many near-death experiences where the wind had to blow a certain way or they would’ve never made it.
Speaking of near-death experiences. In 2014, Scott Mitchell reached 366 pounds. He was a test on season sixteen of the Biggest Loser but was eliminated once again in week fifteen.
He leaned up, though. He leaned up a little on that show. He was 326 when he was playing for us. The question, Frankie, that we are trying to answer is, are great companies lucky or are they good?
There’s a combination of those things. I’m getting into the notes here and looking at a couple of different things. It breaks into three factors. There’s lucky, smart but there’s more to it. There are smarts, guts, and luck. If you look at smarts. Smarts are the type of thing where people with PhDs or people with Master’s degrees are the people who are the smartest. MBAs especially but they are not necessarily the ones who become the CEO rock stars that everybody celebrates.
It’s usually the ones who drop out earlier because what happens with smarts is with smarts is a part of the equation. If you are just smart, it doesn’t give you all of it. You’ve heard of street smart. You’ve heard of toughness. You’ve heard nasty. There are those types of things. If you look at most people on the Forbes 500 or 400 list, whatever the number is. It’s Forbes 400 like the billionaire’s list, the richest people in America, 65% of those people started with nothing or were broke.
They had tenacity and hunger, and there was something to them that pushed them. Clearly, they were smart enough but there was something else past the smarts. It’s not people who graduate with an MBA from Harvard or Stanford are the ones who ascend up financially. There are other things to it, so smarts are where it starts.Smarts is where it starts but if you want to be highly successful, you need tenacity and hunger. Click To Tweet
Frankie, talk about the exercise that the professor at MIT does when it comes to luck.
When it comes to luck, this is fascinating. This professor at MIT has a room full of students, and the professor’s name is Rebecca Henderson of the Sloan School at MIT. She has everybody stand up and gives them all a quarter. The room size is roughly 70 people. She then asked each one of them to toss a coin, and if the coin came up tails, they were asked to sit down. If it comes up head heads, they are asked to remain standing. She has been doing this study for years.
Since there are about 70 kids in the class, after 6, sometimes 7, maybe even 8 rounds, there’s usually only one student left at that point because it’s mathematics. What she does is add a great deal of theatrics to the whole process. She celebrates this person. She was like, “How did you do it? Was it because you woke up on the right side of the bed? Was the type of serial anyway? Is that incredible wrinkled T-shirt that you are wearing?” There’s the theatrics to the whole thing. The student stands there, dumbfounded, almost drooling and is like, “I don’t know. I got lucky.” What she’s trying to drive at is that there is a factor of luck that happens in this entire process.
A great friend of mine, David, who I’ve worked with for many years. He got on a TV show, the precursor to Shark Tank. We got to get him on here to tell the whole story because it’s a beautiful, fantastic story. Anyway, David had an idea, and it was for a new bike rack. He stood in line for hours in New York City, waiting for his chance to go in and pitch his idea for a TV show called American Inventor.
Over 500 people were in this line. Other, very smart people like David. A bunch of people he knew from Harvard but people with their own inventions, their own ideas, and they all pitched. David and his friend were the only ones picked that day, 1 out of 500. He can’t tell you why he was chosen out of the 500 but it’s the only TV show he ever applied for. He is one for one. He’s batting a thousand. He got on there and did that. He gets up in front of students, and it was a big-time game changer for their company because they got funds by making it to the finals of that show.
They got a ton of exposure. They got a lot of hits on their website. It helped them when it came time to get acquired by Whirlpool. He goes through and tells that story when he teaches an entrepreneur class at Georgia Tech. When he is done with it, he says, “Nothing I told you will help you in any way in starting a company because it is a one-in-a-million chance, and it is not repeatable, and I got lucky for that to happen.”
I say all of that because the title of this episode is Better to Be Lucky or Smart. David is one of the smartest people I’ve ever worked with. Probably the smartest person I’ve ever worked with. Incredibly intelligent and outrageously good grades, he needed to get a little bit lucky on that to the point where it’s funny now with Keep.
We are going through the application process with Shark Tank, and Dave was like, “Here’s the way it’s going to work. We are going to get on there. We are going to do this.” It’s like, “I know you are batting a thousand but because you got to hit in your first ever Major League Baseball bat doesn’t mean you won’t go for the next 50. It’s still pretty hard to do what you did.”Just because you got a hit in your first ever major league baseball that doesn't mean you won't go 0 for the next 50. Click To Tweet
I was way too young to understand this time but I’ve told this story before. I had a buddy that I grew up with. His name was Nate Denton, and his dad played in the NBA. His dad coached us, and we were like, “We are going to kill it. We got Nate and his dad.” We were fucking terrible. We might have come in last place. We were in last place because his dad was like, “We are going to ride the hot hand.”
We are fourteen. We don’t have a hot hand. We are terrible. We need to pass four times and drive to the hoops. We would be better off watching Hoosiers than listening to this guy that was a former NBA player because he can’t scale it. It’s the reason why people like Brett Favre or Michael Jordan aren’t great coaches because they have a skillset that nobody else possesses. Michael Jordan launched from the foul line, other people can’t. Brett Farve can throw 60 yards off his back foot.
The only other person I’ve ever seen do that, somehow luckily, is the other guy that replaces him with the Packers, Aaron Rodgers. They have things that are not teachable. If things aren’t teachable, they aren’t scalable, and you need to realize that. Most people who are in that spot don’t realize there’s something incredibly favorable, and then you have to pull it apart. Let’s go back to Scott Mitchell for a second. Not the 366-pound Scott Mitchell. The quarterback is playing Scott Mitchell.
When I was a kid, I would look at Scott Mitchell and think, “That’s the guy I want to bet my future on.” I remember when he got traded from the Dolphins or however he left either as a free agent or traded but he left. I was very disappointed because I was a young kid, a fan, and emotional. As a grown-up, when I look at it with some objectiveness, what I see is, “Of course, you let that guy go. That’s the right decision. He’s a flash in the pan. He got lucky. He was overpriced. You can have Dan Marino, who’s had a twelve-year career at this point. Although, coming off an injury is better than this person.”
That organization, you could say, the Dolphins were lucky. They weren’t lucky. They drafted them, developed them, and then they let them go because they were smart. They were smart and made the right decision. They took what they thought. They probably knew the work ethic that Ian talked about, where he didn’t have that going into Detroit. Those are smart decisions. There’s a lot that goes in behind the scenes that people often miss but luck does play a huge part in it but you have to balance it out with something intelligent.
If you are starting something new and taking some risks, that’s part of life. I want to stay on that for a second. The Dolphins had a quarterback who was hurt but they had ten years of looking at Dan Marino. Some might say they are probably the greatest thrower in the history of the league. They had a lot of objective data. They also knew that there was a lot left in a typical quarterback when they were 30 or 31 years old. The safe bet, the track record bet, was to stick with Dan and not go with the hot hand or not chase the butterfly. I will stick with David.
I have been investing in David for a long time for the many years I’ve worked with him. Investing in David in the claw when his first company was risky. He had no track record you. What do you know about starting a company? It was a little less risky, though, after he sold that business to Whirlpool when he started code guard but still risky. He hadn’t done anything that big yet. Now, for me, his third company, Keep, wasn’t much of a risk at all because, you know what? Maybe you got lucky on one. Did you get lucky on two when I’ve watched you for years, methodically, systematically build companies that grew and got to a million in sales?
Now with this third one, I’m watching him apply all of that again. A track record takes some of the luck out of the equation. Doing it once, you could have gotten lucky. You got on a TV show that helped you grow it but you still had a lot of work to do. Did you get lucky three times? You can take some of that risk out. I will go back to, “I like to invest in you.” It’s not lucky when we do good on a real estate deal because you’ve done these hundreds of times. It’s not lucky. Now it’s beyond that. It is you are experienced and skilled, and you know what the hell you are talking about.
One of the things I tell anybody who’s asking me for interview advice is this. Talk about stories and tell me success stories. Success stories are important in an interview because you are being asked the question. Telling a story is memorable. The interviewer can latch into it and ask more questions and follow up with it. There’s a particular arc that works well with success stories. It’s this. It’s I started as an enthusiastic beginner.
I realized I wasn’t proficient at the job. I took an honest approach, looked at the job, and said, “Where am I weak? Where am I, strong? How do I build on my strengths but how do I level off some of my weaknesses? How did I go about getting stronger in the areas where I was weak? How did I become proficient where I was weak? How did I package it all together and do it?” Ian, why is that a winning formula in an interview?
It’s because that’s something you have to do over and over again when you are working at the company.
That’s a track record. It’s the same thing you said about David.
Past history is a good indicator of future performance.
Not only is it that. It’s like, “How do you get something to go public?” I stood in line. I had so happened to be 5 foot 7. They picked me. I went on TV.
I stood out.
I got on TV. I sold it, and that’s how it worked. That’s Michael Jordan jumping from the foul line. Nobody can do that. Nobody can relate to that but if you tell a story about, “This is how it went,” and you walk piece by piece through it. If you are in your 30s and interviewing for an executive position, you can talk about doing this in your teens, when you learn something in high school or dove into a sport. You can talk about it with a part-time job and then in college with a major. You can talk about it with maybe 1, 2 or 3 positions you’ve had in your career. You start to build those things, then what you realize as an interviewer like, “This person has a recipe for this.”
What you realize is that the person who Ian and I are often called lucky, you get lucky because you take note of these things and scale off. Ian is smart. He invests in people like me and David who are good at one specific thing but I’m smart because I don’t invest in a bunch of other stuff. I do this and only this because I know it isn’t luck. I know it comes down to a routine. It comes down to the rote repetition of the same thing over and over again because that’s the best way for me not to get surprised or to look dumb. It’s because I had experience in a certain field.
You don’t chase the hot hand. You don’t run out and chase, “Where else can I put my money? Where else can I?” You stick with what you know and who you know, and that’s why you are consistently earning money on your capital.
I’m going to give you another incredible example that I know you love. It goes right back the Watergate. Our good friend, Bob Woodward, so happened to be in the White House, sitting next to a guy who so happened to eventually become number two at the FBI. That was the guy named Deep Throat. He is the guy who gave him the information that helped lead to the breaking of the Watergate story. If it ended there, I so happened to be f hanging around rooms in DC and hope I bump into somebody. That’s not what happened. He built on it.
He built the reputation as being someone who protected the source to the point where he got subpoenaed and almost went to jail but he protected the source. Luck turned into a systematic thing, and he was the guy that everybody came to when they didn’t want to reveal the source. That’s how he became an insider for five decades because he got lucky once, treated it right, nurtured the relationship, built it, and scaled it.
That’s the same thing that you see with what we are talking about with us or with Moller or with these other people who have had meteor rises as they tend to figure out how to hack it. Going all the way back to the beginning of the episode with Bo Peabody. He got lucky and smart in the ‘90s. He’s at five other huge companies that he’s built and sold or built and scaled because he’s smart enough to understand these things. He’s got the intellect. The ability and the emotional intelligence to make sure he can ride it out. It’s one of the reasons that I was excited to talk about this episode because there are a lot of things that I can go into.
Let’s go back to David and the American inventor. Think about if he had done everything the same. Five hundred people stood in line for hours, sweating, waiting to get in, and nailed his pitch the same way. When all of the casting directors came together, they started by saying, “Eliminate all of the men. We already have three men, and we need a female because this is a talent show. We need some diversity.” David could have been the best that day. He could have done everything right but they were looking for someone else because it’s TV. That could have easily happened. He could have had misfortune hit him in the same way.
It also comes down to the old Wayne Gretzky, “You miss all the shots you don’t take.” He took the shot. He went, stood in line, and took the shot. There have been hundreds of shots David’s taken and not going anywhere with. I can tell you about all the different people that he chases on a regular basis to try to get in on our company. He’s tried to get the iPhone inventor to come in and get us. When we were designing the device, he went to one of the premier heads of design in the world and tried to convince him to come to us.
You guys had a meeting with Shaq.
Shots that missed the net. Maybe they will work out in the future but you only hear about the ones that survive. If one of those would’ve hit, we would be talking about it now about how brilliant. Lots of those things we will never talk about because we are taking those shots all the time, and some don’t work. Frankie, if you want to create your own luck, what are some things you should do?
There are a lot of things you can do. When we were talking about building this agenda, the first thing we both do is research. You research the problem. You look at what is happening and how do you get as much information as you can. To me, the next thing you got to do is you got to work. You got to put in the work and get the skill.
I never want to know deep down. I’ve had Imposter syndrome in my life. There are moments where I still have Imposter syndrome but by and large, when it comes to single-family residential real estate in Richmond, Virginia, I don’t have Imposter syndrome. I’m super confident because I know it. I’ve seen it. I’ve done it. I can get to, “That’s bullshit or that’s a good idea,” very fast because I’ve seen it, and I know it, and I do it. There’s more to it but let’s go through it. Let’s talk about the steps that we’ve put out of how you can create your own luck.
You are going to need some luck to win, no matter what. Luck is a factor of risk like how lucky you get. If you win the Powerball, that’s seriously lucky because that’s a 1-and-30 million chance.
It’s even higher than that.
That is crazy lucky. For me, I like to take shots that I have a better chance of winning. You take gambling. I’m not a guy that goes and sits at a roulette wheel and puts $100 down on one number. That’s a 1 and 36 chance. I don’t like those odds. I want to play blackjack, where if I play right, I have a 48% chance of winning any given hand. I like to play games where my risk is such that people wouldn’t say, “It was that damn lucky.”
If I hit, it makes a little more sense because my skills are a better fit for that opportunity. You got to start by researching the opportunity. If you are starting a company, the first thing you do before you ask for any investor’s money, while you are still bootstrapping, before you raise capital or hire an employee, you have to ask, “How big is the market? Is it growing? Is it shrinking? What are the current solutions? Are they broken? Do people like the solutions? Are there holes in the solutions? How in demand is the product?”
The product could be you. If you are seeking employment, if you are trying to go work somewhere, if you are in college and trying to figure out the best degree, “Should I go into Computer Science or Philosophy? Which one is in more demand now, a computer programmer or someone who can spout the stoic thought process?” It’s most definitively the former. You are going to be more in demand with that skill that you are looking to build yourself. Could you become a millionaire if you had a Philosophy degree? You could. It would be crazy lucky. Whereas becoming a millionaire with a computer science background, not that lucky but it makes sense.
It’s like that guy I told you about, this friend with people I know that’s a White Africanist. He was getting employment and is lucky.
It’s going to take insane luck for that guy to make any money and be successful in life because he chose a poor market.
I’m going to dive into two things. Talk about two of Ian’s favorite things. First is the Outback Steakhouse. I went to the Outback Steakhouse to get a job as a sixteen-year-old because I had a finite amount of time to work. I did a little bit of research and found that people that work in the restaurant business make the most money per hour. That’s why I work there. I worked there as a bus boy. We went driving around looking at jobs, and all these different places were all hourly. When I talked to the people at the restaurant, they were like, “You can make $10 or $15 an hour.”
I’m like, “I want that job because it pays more.” It’s the reason I kept that job when I went to college. I didn’t do odd jobs or other BS. I took a job that could pay me 40 or 50 hours worth of work in 20 to 30 hours because that’s the amount of time that I had to invest, which taught me. This is how I value my time. When it was time for me to graduate from college, I had an internship. I had an opportunity to go and have all types of different jobs. Working an Outback, it was a great company, well run. Nowadays, the Outback is laughed about but back then, it was a big deal.
There are a few things that Outback did that I thought were great. They offered an ESOP program for people that worked there, Employee Stock Ownership Plan. I got stock when I graduated from college that I sold. That I ultimately put into buying my first house, small but big. When I went and looked at other companies that weren’t publicly traded, I remember thinking, “I’m not going to get the same opportunity I had at Outback.”
There was one privately-owned company that had no type of stock. There was another company that’s based in Baltimore that gave out Phantom stock. What the hell, good or either of these two things? I learned by simply working in a place, slinging, blooming, and onions that weren’t where I wanted to go, and then it goes to a different degree. I read a book because I was doing research. I’m a constant seeker of information. Ian and I are both this way.
I read a book about how to buy stocks. One of the ways to buy stocks is to find a company that you love. If you love that company, invest your money in it. I did that once I got there but when I went to NVR to interview, I was like, “This is the perfect spot for me.” They value people with my skillset but mostly hire people that don’t have my skillset, so I’m immediately going to stand out. If I do a great job there, they are going to give me an opportunity to do something I do well inherently, which is sell.
I did the counterintuitive thing. I didn’t go where all my friends went into commercial construction. I went to someplace that was better for me. I didn’t know they had the best-in-breed business model. I didn’t know the stock was going to go from $33 a share to $450 a share. Nickel literally looked at me and went, “If that was anything other than dumb luck, you should quit and move the Wall Street.”
I didn’t know any of those things were going to happen but in my first job, holding myself to a standard gave me exposure that got me to get used again when I picked the place to be employed, and the stock went up 15X was luck. I had very little to do with it but I was also smart enough to know that I should go to this company because there’s a chance of it where these other companies didn’t have that. That’s how you can put things in your favor and set the deck up so you can win.
I’m going to take a different side on this because we both went and worked for the same extraordinary company. I would say a lot of yours was luck because both of us were dumbasses out of college. We were happy.
You would say it’s luck because it happened to me.
I went and worked at GE. That was an easy decision. They were the biggest company in the world. When you go to college, you are proud of it. You, going to NVR, made sense. You are at a construction major. They are good company. They were doing well. You could see it they are public. I would say mine was the second company. Both of us went and joined there. I feel like, in one way, I was lucky to go to GE because I was surrounded by a ton of smart people. I used all of that for the rest of my career.
I was unlucky because when I started, I joined a company whose stock literally peaked on the day I started with the company. It was going down ever after that. Becoming an executive in a company with a declining stock means you are going to make shit for money for the rest of your life. I felt that was unlucky for me. You and I wouldn’t have known when we started. One stock was going to go up 10X, and who would’ve guessed GE was going to fall 50% over six years where it was in ‘98, ‘99 when I started, when it was the peak of the mountain. I felt that was a little unlucky. What I would say is that mine was the second. I was a little more down the path than you.
You were discretionary in your work decision because it was your second choice.
I gave up so much to leave GE. I was well thought of in the company. I was doing well. When NVR stock, for me, it was a little different. I joined when it was $400 and went to $4,000. I got a 10X out of it too. What I would say is that I was more mature than you. I was a little farther along and leaving family, friends, a great company, Chicago, and everything in the Midwest to move to DC, where I knew nothing, knew no one, and here I am with an Engineering degree and all this pedigree. I’m a mortgage regional like this lame job.
It’s because of that, of how much I had to give up. You were moving out of mom and dad’s house. You had a job at Outback. For me, I was leaving so much that I read every freaking quarterly press release they had for four years. I could see all of the stats of how much better they were performing than every home builder out there. It looked like they were in a different industry. I felt I was taking a very calculated guess that this stock was going to continue to rise and GEs were going to keep going down.
Once again, my boss, Ian Matthews, shows his world-class empathy because he’s the one that sacrificed, and I did not. We both got to the same conclusion at different places in our life. We both chose the same place for very similar reasons. There was a sacrifice that went in. I was made fun of by professors. They thought I was a fucking idiot and called me an idiot to my face for going to work in residential. They were like, “You are going to build those dog crap houses.”
My only point on our two NVR decisions, my stakes were super high. You were a college kid getting your first job. It was important but you could have gone and jumped into the commercial if it would have been a shit show right away.
Sure, but the point is I didn’t, Ian, and it created an insane amount of luck because I picked the right things. What we are trying to talk about now is lucky or smart. We both ended up being insanely lucky. I had sold most of my stock. I went from $400 to $4,000, and I was gone. The fact that I went from $33 to $850 a share while I was there is a mediocre jump. I realized like, “I’ve got a bunch of these things.” What drove me to leave is what also drove you to get there and ultimately leave yourself.
It’s very similar because we realize we made a good choice. We worked our asses off. We got a lot of good stuff. This is a great way to start the closed episode. We both got to a place where being here any longer doesn’t help me a ton. When I had shares of stock from $33 to $850, I took that money. I started buying real estate with it. When your stocks went from $400 to $4,000, you also had a young kid, and you were like, “What the hell else do I need to do?” We both took chips off the table to do different things because we made smart decisions that exponentially changed over time because of compounding interests.
For me, the luck with NVR was a very good friend of mine who worked with me at GE and knew my work left and went to NVR. He went and got a Master’s degree. He went and got a recruiter. He did all the work, got there, and then he could justify like, “No, it’s legit. This place is good.” I had an inside. That was lucky for me, that McCauley went there and could tell me it’s going well and as good as you think.
My luck happened this way. We were at a competition in January of 1998. All kids were going to work commercial construction and our professor literally said, “I got to go say hi to this guy that I used to know from college.” That guy was Bob Paul. Bob Paul did no one in a conference room, and they brought us upstairs. There are lucky happenstances but there’s also Ian. You could have gone to Atlanta and continued your career but made a choice.
I could have gone back to South Florida, which is where everybody was, the comfortable choice for me but I moved out of state because I’m like, “This is an opportunity.” There’s opportunity there that you can see and seize. It’s the whole reason I wanted to do this episode. Where we are in the economic cycle is, if you have a chance, we are on a hot hand. We have been at the pool all day drinking.
We’ve had a hot hand at Vegas. You are up. There’s no doubt in my mind that you are up. Now is an awesome time to pull some of those chips off the table. Whatever you’ve got on the table, maybe you pull back 20%, 40% or 60%, and you stick it in your pocket, and you were like, “I’m going to play with this.” It’s a good time to take some of the winnings.
Before we get to the second two takeaways, we have three big takeaways in this. I’m researching the opportunity. This is important. I knew what I didn’t like about GE when I left. I want to keep staying on that discussion, and it wasn’t the culture that was going away. I saw the company shrinking and the reason it was shrinking, Frankie, was the customer base was moving to China. The customer base was moving to Mexico. The people where we made our money were leaving the country. I was looking at it like, “There’s not going to be many customers to call on anymore. I don’t want to live in Russia or China where steel mills are moving to power plants.”
I saw that it was getting commoditized. There wasn’t a technology effort anymore. I saw that it was getting offshore, competitors were coming in, making products cheaper, selling them there. When I looked at residential real estate and a big company that was growing publicly traded, you couldn’t outsource it. You couldn’t make these houses in China. Bring them over on a boat. The way that was happening to me, where I was getting underbid by these things.
The customers all lived in America. They were residentials, a local market, and whoever controlled the ground, controlled the business. There wasn’t the same risk that I saw killing GE that I saw it wasn’t working. For my research, I saw a big growing market that would be growing for 50 years, and it couldn’t be offshore. It still was going to take locals and people. Many years later, that’s still the exact same story that’s happening. Would you be surprised if, in ten years, NVR stock was up another 10X? Would you be totally shocked?
I would be less surprised in that than a GEs was up 10X.
I still own a ton of shares of NVR. I will not be surprised if, in ten years, my shares are up 10X. The reason is that they have a process. They have great leadership at the top and have a model that is so different from their competitors that they will do well in any scenario. Now, if I get a 10X, I will be much less lucky than when I first joined NVR and didn’t have experience.
Now I know all the people that are running that company all the way down to the people on the front lines and know how well it works. It will not be lucky if I catch a 10X in the next 10 or 15 years because I have so much more data. They have a better track record with me on the inside. I would say research the shit out of the opportunity, and you will take luck out of the process.
We are all on research. We have some time. I want to spend something on this. This is important. Your scenario is going to be different from our scenario. Ian and I are basically telling you the same story. Ian thinks it’s a different story because he was four years older than me. The one thing that is different that is worth talking about is this. When Ian talks about research, I don’t think I’m as good at research as him. He does it differently than me. He knows how to research companies and buy stocks. He’s better at it than me.
I ended up with a good decision my way. I did it in ways that suit who I am as a person and made sense to me. My research was different from Ian’s research. Ian read a bunch of reports. I met a bunch of people. I worked at three other companies. I saw similarities. I had read some books and put those things together. How you do your research can be defended if it works for you. This is a critical distinction. Ian is looking at it from a slightly different perspective than me because he’s a different guy. He thinks of it differently.You can end up with a good decision by doing it your way. Research in way that suit who you are as a person. Click To Tweet
What the takeaway is that, if my kids were to read this episode, my sister or someone I wanted to see get a promotion or find the right opportunity is that research it your way and figure out what your special skills are and how that research benefit you long-term? This is the Scott Mitchell-Dan Marino discussion again. Ian was with a company that had a lot of runway, a hundred plus years, big company.
The difference is that the future was Dan Marino. It was stick with a ride that horse that got me here. Ian was the opposite. Technology has changed. The data has changed. My research tells me this. We got to make a move. There’s a lot of decision-making that goes into this stuff that is critical for you to think through and process your way.
That’s all fair. I’m not saying my decision was better. I’m saying it was at a different stage of our career. You looked at it a little differently because of what I had to lose at that point. I had a lot to lose, so I was more panicked about probably the decision than I was when I made a decision to go to GE, which is, “Big company, good company, I’m in.” I can honestly say I didn’t research GE enough. I knew they were the biggest company in the world, and I was excited, “This is what I want.” That was it. More of a gut decision, NVR was very analytic. Very much more calculated than mine.
It was a discretionary employment decision because you already had a good job. As an example, I had a head hunter call me in 2004, and I could have left NVR. I remember going and interviewing somebody else. I was like, “This person is not nearly as organized. They are not as good. They are not as strong.” I said no to leaving for the exact same reasons you said yes because I was in the inner sentiment at that point and looked at his strategy versus the NVR strategy. I’m like, “We are going to continue to kick your ass, so I’m not going there.” That’s the point. It doesn’t matter what my story or Ian’s story is. Your story, listen to it. Understand it, know your story and make good decisions at those critical junctions.
Frankie, I’m going to go to number three on our list, and then we will finish with number two. Number three is you got to ask yourself how in demand are you. How in demand is your product? How in demand will this investment be? Whatever decision you are making, if you are trying to eliminate luck and use smarts, you have to think hard about demand. I’m going to stick to the NVR thing for one more thing. The other little difference that I had with Frank is that I went into a different business unit and Frank at NVR.
Frank was going into a highly competitive, very deep bench business of Ryan Holmes, the home building side, which talent everywhere and lots of good people. They had been hiring well forever. They interviewed me in a business that was upside down. It was broken. They didn’t have talent. They had no bench. They had no depth. The CEO was frustrated with all the managers in the company. They wanted to throw it all out.
For me, I saw this wide-open blue ocean. I got a wide-open lane. There are no defenders in the paint. I got to hit a layup. I saw, “They don’t have anyone like me here.” My talent and skills here are very much in demand in that business unit. That made it a little easier for me because I saw a clear path to going and making a lot of money.
This is where I will say 100% I agree with you. You were discretionary about your business choice, and you picked something smart but you did the exact same thing I did. I stood out because of my major. You stood out because of your GE training. The thing you did smarter than me is you negotiated for some serious options upfront because you deserved it at that point, and I didn’t when I was coming out of college.
You went to a different business segment. You were smart enough because you looked at GE say, “Where is all the talent? I will go where the talent isn’t and rise up.” Now we both made similar decisions but yours ultimately led to a much more lucrative backend because of how you placed yourself.
I want to share another thing. “How in demand are you, your product, and your investment?” This question, you got to ask yourself. I leave NVR in 2017. In 2018, I was trying to figure out what to do. We’ve talked about it. I went and bought a collision center. That was exciting. It took a lot of time but then I had nothing else to do. I got an opportunity to do some consulting, and it turns out it’s a much bigger consulting job than I initially expected. The more scope we added, the more time and I called Frankie.
I’m like, “Frank, here’s what this company wants me to do as a small growing company. This is what the CEO is asking of me. It’s going to take me six months of almost working around the clock to do what he’s asking. Here’s what I’m thinking about pricing it at but I feel awkward doing it because I don’t know that I need to do this. I don’t know that I was thinking of building a business but I feel obnoxious as price. I’ve hinted around at it, and he would take it, this CEO.”
Frank was listening to me and was like, “Why not add a quarter million to it?” I thought he was messing, and I started laughing. He goes, “No, really? If you are not sure if you want to do it, make it so high that you can’t say no to it.” It was awesome advice. I literally went and changed my spreadsheet and added $250,000 to this price, which was already high. I went through and pitched it, and he said yes. That is not normal.
Again, David talking to a bunch of kids, be like, “Here’s how you get into consulting. Go pitch this much amount and tell him this is what you are going to do.” What I realized pretty quickly was after starting to work with the CEO, this was a market of one. I connected with the CEO. I had a background that would help this CEO. I could charge what I thought was an obnoxious amount of money because I could also deliver an obnoxious amount of value because this company had a lot of revenue. It was growing fast. It was not organized or structured the way it should be so that I could add a lot of value. I realized pretty quickly that this is a niche deal that I got going here, making this money.
It would be a lot better if I could take all of this and turn it into a program that I could sell for a much lower price. I would have a much deeper market. Now with my management program, I can sell it for a lot less and add a lot more value but with a lot less of my time, which is a better trade-off. I had to figure out, “Is that repeatable? Could I do that every year and get a deal like that?” The answer is no.
Why don’t you tell your second story? The one we were talking about without using the names from earlier, and we will get into a route. That’s a better story than I have.
There’s an executive at a company. I have been with the company for many years, and through a number of unique circumstances, people leaving, people quitting, and not having a deep enough bench. This individual had risen up the ranks into a senior executive role. If you were to ask about anyone in the company, they would say that this person was way over their head. Probably three levels too high in the organization from where they were but because they had found themselves in this position, they had stock options in a very good company.
They were paid, in my opinion, at least 4X more than they should be paid. This person’s head grew. It was a little bit of the Scott Mitchell. I would come back to Scott Mitchell on this. They didn’t realize they were performing and making that money because they were surrounded by exceptional talent. A little bit of the opposite of what I saw when I started at NVR. This person was surrounded by talent everywhere, and they overplayed their hand. They made some demands that the company wasn’t interested in to the point where they went and got themselves fired.
Now this individual is out looking for work and not finding anything close to what that opportunity was paying because they were a little bit of the Peter principle. They had overplayed their hand. They had gotten lucky to be making that money and hadn’t stopped to think who would pay me this based on my skillset and my talents. The answer is no one.
There was one that would’ve paid you, and you should have kept your mouth shut and kept making that money because you were a little lucky you got into it. Now they are in a bad position because they are out looking to try to find something to replace that. The truth is the only thing they are going to find to replace it is probably the job they did three positions ago at best, which again 4X difference in pay.
I remember being an irrelatively young executive. I was in a room with a bunch of people that were a lot older. They were all from fucking Pittsburgh. I remember thinking to myself like, “Is everyone at this company from Pittsburgh? Why are they all between 50 and 65?” What I realized was this. The people that were diverse, the people that had different skillsets, the people who were the real shining stars had all quit and done their own thing. They all built their own companies. They had all done stuff but these people were rich. They were in great jobs. They were basically yes-men. They all wore the same outfits. They all wore the collared shirt with the sweater over them as the CEO.
The V-neck sweater over the button-down.
They all looked the same. What I remember thinking at that point is that these guys have realized they are in the right spot for them. They can’t get paid this elsewhere, so they never left, and that’s what happens. When I go to conferences now and bump into people, all they can see is the way of the world of the company that they work for. I had the dynamic thoughts and skills to go elsewhere, and I did it. I’m going to get into my clothes this way.
That’s such a good point, Frankie. You can see the people in an organization, the yes-men and yes-women of an organization. You can see when someone when they know they’ve hit their Peter principal.
We don’t seem to say the names but we both came to the same conclusion.
“I’m getting away with theft here. I can’t believe they are paying me this amount.”
The person you are talking about didn’t see it and got cut. What these other people did was they shut their mouths and did what the CEO did. They dressed like the CEO and did all the same shit, bought the same car, and did the same things because they wanted to fly onto the radar. They wanted to be likable and agreeable because they went home and told their wives, “Holy shit, I’m getting lucky.”
Those people are miserable to work for because they will not shake the tree. You bring them ideas, you bring them thoughts, and you don’t have stocks.
They are so petrified that they are going to lose their job if they don’t do anything.
Everything they do is to minimize any possible failure that would draw attention or worst to work for.
That’s it. I’m going to summarize our last bullet point this way. When should you take your chips off the table? I’m going to tell a story. I’ve used this multiple times. Alastair MacDonald, we’ve done an episode with him. If you haven’t read it, go back and read it. It’s an awesome episode.
Check it out. Very popular episode.
He’s smart. I talked to him once a week for about two hours. He told me this, “I don’t think you understand what makes you special. You have an incredible amount of success, and you are constantly asking yourself, why do you have the success, and what should you change? That’s not something that’s American. I have a lot of high-end clients. You are the only one that does it consistently.” This is where lucky and smart come in. Lucky as shit, I had my mother. My mom is a freaking incredible human being and taught me that piece of humility to believe, ask, and always seek understanding. I’ve taken it into my adult life.
The reason I’m selling some units is that it’s a good number, and it makes sense. It’s sensible to pull some chips off the table. In the book, what he talks about is B students work for A students. I was an A student with a C plus mentality. I’m not smart enough but I worked hard to get to better grades, and that was it with my life. What I did was I picked something that it was good at, that I enjoyed, that is controllable.You can be an A student with a C plus mentality. You don't need to be the smartest kid, but you have to work hard to get better grades. Click To Tweet
I’ve got a big company, a big basket of stuff but it was in a lane that made sense to me. I always ask myself, “What could hurt me? What do I need to take off the table? How do I need to evolve? Where am I not seeing danger?” Those are things that came from how I was raised, and because of it, I feel like I continue to get lucky because I’m as smart as I know how to be with making it so I can’t get hurt. That’s why we are a good place to work for. It’s why we make the moves that we do. We don’t do crazy things. We do things that we are good at that are calculated risks because we constantly come from that perspective.
My opinion is when you should take chips off the table, this is simple. It’s when you have something better or more interesting to do with those chips, and that could be money, time, how you spend your time or a different investment. I get calls all the time about the collision center and will say, “I could sell. I know prices are high now.” I don’t know what I would do with the money.
You and I have had that conversation.
I don’t want money sitting in a checking account. I don’t know if I want to buy more stock now. I don’t know if I want to buy crypto. I don’t think I could find a better real estate property than this. I love this real estate. I’m always like, “I will maintain it.” I had a good friend who started his own business years ago. He had worked for a big insurance company. He does health insurance benefits. He started his own business.
He went on his own with a partner, and they’ve done incredibly well. He grinded his way to the top, literally making cold calls. He was in his mid-40s when he started it. He is cold calling people day in and day out and found some great clients. They’ve grown a lot, and it’s very profitable. He called me and said, “I have been getting some offers 8 to 12 times, EBI, my earnings, and these are good offers.”
He’s like, “You made a decision to take your chips off the table and leave years ago. You left a lot of money on the table. Now, I took a lot of money but left even more on the table.” He is like, “How did you make that decision?” I said, “Your situation was different. You own this company. You have autonomy. You are your own boss. You work when you want to. You can work as many hours as you want or as little as you want. You have freedom. I had none of those things. I was running from a situation where I was slowly losing my life. I was miserable. I was working twelve-hour days. I had no autonomy. I wasn’t getting along with my manager.”
“I was bored as hell and didn’t like my job, so for me, it was an easy decision because I could cash out, take that cash, and didn’t mind leaving some money on the table but I also had something better I could trade it for, which is freedom and autonomy to go start some things, do some things. I was chasing what you have today, which is your own business autonomy to do things you want. The fun of going and closing a deal when you started the business is 100X closing a deal for someone else’s company. You are so proud every time you close a deal.”
I got a deal, Frankie. I didn’t even tell you about it. I got a nice little deal for my management program. It feels good like when you start something, and you do it. I told him, “I was trading to try to get what you have. Forget the money. I wanted what you have. If you sell it now, what are you going to do with your time? What are you trading it for? Will you be any happier? You put a big chunk of change in your checking account. It doesn’t change. After a day, you are like, now what? What do you do with it? You can move it back and forth from accounts unless you are going to change your style of life. You better have something better that you can go do with it before you take chips off that table.”
Going back to the theme of the book, the person took chips off the table because you realized it was time to do it. He got a bunch of stock and took the chips off the table because he saw that it made sense to do so. Ian took chips off the table for himself because he thought there was a better thing for him to do, spend time with the build and do. It was serving him. I walked away from options that weren’t as lucrative but we did these things because there was something else burning inside of us. It comes down to this thing with, “Are you growing or are you protecting?” There are both sides to it.
Frank, stay at it for a second because it’s worth it. Your decision to leave NVR was way gutsier than my decision because of how much I could take off. I didn’t need to work right away. You were leaving in a scary housing market, a good solid paying job, and you weren’t 100% certain how you were going to make money right away.
When you say, when you take chips off the table, what to you was better or more interesting that you could take your chips off? It is not like you left, and you were broke. You had plenty of money. You didn’t need to work that year but you needed to go find something to do. What was more interesting or better for you that would take your chips off the table then?
Are you asking, ultimately, what went into that decision?
You traded one opportunity for another, and the other opportunity had to have been better than the one you had. What got you to take your chips off?
I will tell the stories. I ultimately quit in 2009. Around 2006, I thought about quitting. I was pretty miserable but what I did was I made a couple of moves. I got promoted to a new job, and I negotiated a relocation package that was pretty sizeable. I had to work there for two more years to do it. I lived in an 8,000-square-foot house when the market was hot and sold it.
I moved into a shitty 3,000-square-foot house that was terrible but I did all of that on purpose because I knew I wanted to leave. I made a very slow exit out. Ian left a lot of stock on the table but he walked away with a huge up sign. What it was to me was this. I levered up, took a chance, and bet on me. The reason I bet on me is that I did the work. I wasn’t Scott Mitchell. I put in the work. I did a great job at Outback. I did a great job in six different roles at Ryan Holmes.Take a chance on yourself. Start betting on yourself if you know you can do the work. Click To Tweet
I knew if I was one of the guys in a sweater, sucking the dick of the CEO, I was going to be fucking miserable. I saw what that life looked like. I said, “That is not for me, and I’m taking a chance.” I knew I was employable. I knew I could reinvent myself and put on a suit but what I didn’t want was to do that. Ian goes, “What don’t you want?” I was like, “To put on a suit.” He thought I was nuts, and that meant going and interviewing because I wanted to take a chance.
I remember I was talking to Uncle Paul, and he was like, “I hear you are going to get in the real estate.” He goes, “Frankie, get ready to be cash for 30 years,” because to him, that’s what real estate was. I wanted to do it a slightly different way because I had the skillset. I was in the crucible. I worked it and knew if I looked at what my life looks like 30 years from now and didn’t take this chance, I’m going to be fucking miserable. That’s why I ultimately decide to leave. It was hard. I second-guessed a ton. I asked myself, “Why the hell did I do this? This was stupid.” It took a long time to get to the other side of it.
It took me many years. Ian and I have landed in very similar spots. The path was very different from our exit points but it was something for me that I thought required to lever up and take the chance. I did it in 2009 when the market was at its lowest. When I’m saying, “Taking chips off the table,” the market was at its hottest. We are not as hot-hot as it was. It’s close. It’s a different place, and my life is different.
I’m married with two kids. My one kid is freaking fun now. I can see not wanting to miss afternoons with him at 4:00 in the afternoon. When I call Ian at 4:00, he doesn’t answer because he’s at the batting cage with his son. I can see that coming. I did this stuff for those years that gave me a chance to get there, and now I can make that choice. Like when Ian moved from GE at discretionary choice, I have that. That’s a tirade but that’s how I feel.
Let’s wrap this up a little bit. We’ve both said this in many different ways with all of these stories. It’s going to take some luck if you are going to be highly successful. You make a little bit of your own luck by working hard and putting yourself in the right position. The big takeaway here, though, is that you can minimize that luck through preparation, research, and finding high-yield opportunities where your skillset can make a big difference. If you are smart about where you put your hard work, and you try to match a growing market with your skills. Luck is not going to play as big a role as you would think it is in a lot of success.
There are two quotes that I put in the notes that I will use quickly in this. One of which is, “Work is often missed or opportunities often missed because it’s dressed in overalls and it looks like work.” That’s Thomas Edison. The second one is, “Compounded interest is the eighth wonder of the world.” Warren Buffett. The reason I brought both of those up is that if you do put in the work and invest in yourself, you put yourself in the right place, the compounded interest can be your life and your career.
Those things in Ian’s and mine’s case led us to pretty awesome spots. That’s the thing that people often overlook. They missed the opportunity. They don’t think of where I could be in 5 to 20 years. When you get there, celebrate it. Pull some of that off the table and do it as you want. The last thing I will close with is this. This is a five-dump book. You can literally read this book in 40 minutes. If you decide to get it, it’s a fun book to read, good stories, fly through it, and it’s 60 pages.
Hell of an outline, Frank. Frank did the preparation for this. I’m very proud of him. I’m very excited that he wrote an outline in one that is an absolute banger. Great job. If you liked this episode, if you like our show, it would mean a ton to us if you gave us a five-star review with a few nice comments wherever you listen to a podcast. If you are still reading, you must like us because you read for over an hour to talk about luck and smart. Please give us that review. It means a lot to us. Frankie, it has been a pleasure.
Ian, you lucky son of a bitch.
No doubt. I will take it.