Episode 178: Prioritizing Profit, Escaping The Deal-to-Deal Cycle with Alex Chizhik & Shimon Lazarov
May 4, 2023
We’ve got double the value for today’s episode with two great guests—Alex Chizhik and Shimon Lazarov, the hosts of The Dollar Auction podcast! They discuss anywhere from Bitcoin, government regulations, investing, economics, finance, and more.
Alex is an experienced executive with nearly two decades worth of experience in managing organizations and is passionate about technology and cryptocurrency. Shimon is a growth leader with an extensive strategy background in digital strategy, market research, and business development.
These two strategic minds join us today to discuss various topics surrounding money mindset and intentionality, and how it can greatly affect your business growth. Tune in!
[00:48] Introducing Alex Chizhik & Shimon Lazarov
[03:48] Blitzscaling: Why People Don’t Prioritize Profit
[15:49] Why People Live Deal-to-Deal
[23:16] Thoughts on Fractional Businesses
[25:29] On Real Estate and Cryptocurrency
[33:55] Connect with Alex & Shimon
[15:37] “It doesn’t matter if you’re making a million a year or hundreds of millions a year. You need to know where you are on the financial side.”
[17:05] “If you don’t put some [money] aside, then you can literally have 10 years pass by and for nothing to show for it. And I actually have friends who worked on Wall Street and friends who worked in Silicon Valley making over half a million dollars per year. They didn’t save too much. ”
[31:50] “All these investments, including cash, is a tool for something…So be intentional about what you’re investing in.”
Connect with Alex & Shimon
Alex’s Twitter: https://twitter.com/mrebitda
Shimon’s Twitter: https://twitter.com/ShimonLazarov
The Dollar Auction Podcast: https://podcasts.apple.com/gb/podcast/dollar-auction-show/id1492748168
Tired of living deal to deal?
If you are a real estate investor or business owner who is tired of living deal to deal, and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David
You don’t put some aside, then you can literally have 10 years pass by and for nothing to chauffeur it. And I actually have, believe it or not friends who worked on Wall Street and friends who worked in Silicon Valley making over half a million dollars per year, they didn’t save too much.
If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the profit first for re e i podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.
Hey everyone, it’s David Richter again here on the Profit First r i podcast. Have a pair of guys here that I think you are going to enjoy warning from. They’re actually strategists and they are not just your typical strategist, like they’ve strategized with some huge companies and I believe in Profit First and what it teaches on the strategy of just making sure you’re a profitable business. I think they’re gonna even take it to the next level on this podcast. So no, no pressure here for both of them, but oh yeah. Have Alex and Simone here. I’m really excited to make sure that they give you as much value as possible. Thank you guys for being on the Profit first, r e i podcast.
Thanks for having us.
Why don’t you give a brief background, maybe like a minute or less on each of you, just like what you’ve done, what you’ve accomplished, like where you are now. Can you do it in like a minute or two? And I’ll start with Alex, why don’t you give your background first?
Sure. Yeah. Happy to be here. So my, my background is my whole career I spent scaling and building up businesses with the Boston Consulting Group from Management consulting style. And then Microsoft. I used to work at Microsoft Strategy, ran the strategy teams there work on ai, autonomous driving health crypto Bitcoin over there. Then over the last six years, for the last four years, I actually spent running a business. I was the chief revenue officer, chief operating officer of a research company. That was that one ended up going public. And so when it went public, I went back into crypto, which is my love. And been focusing on Bitcoin and crypto for the last two years ever since. And super happy to be here.
Awesome. Alex. Now Shaone, how about you? Your background?
Yeah, so I also come from a strategy background, but after the Boston Consulting Group, I moved to Silicon Valley. And I did a lot of growth work for different companies at different levels of of scaling. And I’m excited to chat about Profit First because now there’s a big a big thing in Silicon Valley where the idea of let, let’s just blitz scale. There was a very famous book called Blitz Scaling which basically means I don’t care about profits. Top line is all that matters. It’s starting to fall apart, especially in these market conditions. Yeah, so excited to talk about that. But I’m also you know, a technologist and love crypto and yeah currently working at the second largest crypto exchange.
Awesome. So we’ll definitely talk about that. But as you can see, if you’re listening to this, these guys have worked at some pretty extensive companies and have a pretty extensive backgrounds here and from Silicon Valley all the way, you know, to Boston Consulting Group. Like these are some high tech and high, I would say hight intelligence individuals. But then, I mean, Simone even said like right now too, he also knows that <laugh>, it’s not all just about blitzing scale, which I thought that was great cuz I’ve heard of that book as well too, and like that why do you think, I’ll, I’ll take an answer from either one of you. Why do you think people get into the, you know, just scale at all cost mode? Like where did that come from? Like, where does that originate? Is that just business in general that’s been happening for thousands of years? Or like what do you think there, where that root cause comes from?
Well, I mean I think the the main culprit is that after 2008 you know, when the interest rates were very, very low so businesses basically could borrow money for free and or okay, close to free. And when you can do that, it actually makes sense to just like, grab as much of the market as you can. Yeah. And then figure out how to make a profit. Because once you’re big enough, it’s really hard to compete with you. And you’ll see that many of the companies that use this technique like Uber, like LinkedIn, it’s a winner take all mentality. Like if everybody’s on LinkedIn, everybody else wants to go to LinkedIn because all the info is there, but that breaks when interest rates are high because then the idea is like, okay, but you know, the cost of just servicing this scaling might not be might not be sustainable.
And also on the venture capital front, you know, VCO was probably a very lucrative asset class because when you could borrow at 0% and, and deploy it into startups, but if you have to pay 5%, or if you can get 5% as a limited partner, then it’s like, do I need all this risk? You know, because like with, with venture most companies fail and you’re trying to find one or two that will make up for all the other ones that fail. So, so yeah, that’s a new, I I think we haven’t been in these conditions for a very long time. So let
Me ask this, how does that translate to the main street? You know, like the mom and pop shops that maybe because a lot of the people listening now are real estate investors, they’re not going into venture capital, they’re not doing that stuff. But do you think that mindset permeates just business in general, even including, you know, like the mom and pop real estate investors or the people that want to scale real estate business, maybe doing five deals a month, want to go to 20 deals, you know, and selling, you know, these flip houses or wholesale or whatever. Do you think that is just comes down from those other types of things? Or do you just think that’s just a part of what everyone goes through in the business world?
I mean, I can, I can try to take this one. I think market structure is important and I’ll bring it down to Main Street in a second. I’ll, I’ll just say two things she won, talked about winner take all, if you’re in a winner, take all market on a oligopoly or a couple players. And specifically if you’re in a market of network effects, yeah, Uber, Lyft, Google, you want to go out and blitz, get scale, and then you raise prices later. Okay. That’s, most people aren’t there, right? Yeah. Most people like mom and pop shops, real estate, there are very few global or national real estate companies. And even those compete against those brokerage houses compete against each other. So, you know, for someone going out in the flipping houses or investing in real estate, you want to make sure that your cash management, your day-to-day cash management is, is actually very astute or on point, if you will.
You’re not thinking about just growing at all costs and pumping money into marketing. You wanna make sure that every deal brings in some sort of investment that you can either reinvest right, or pay yourself. You know, Robert Kawasaki talks about a lot about the mentality of paying yourself first and thinking about yourself and having a, you know, like a, you are a state, an important stakeholder in, in the business. Many people that are doing startups think about paying themselves last. That’s a tricky, so that’s a tricky path to go on. You definitely want to take care of yourself. You don’t wanna overpay yourself. You know, you have a business, you’re paying yourself $500,000 a year and you only make $500,000. Well, you’re gonna be in business for that one year and that’s gonna be done, right? Yeah. So so you have to be kind of smart about what you can sustain, what your burn rate is.
But for the regular investor, you should be thinking very, very carefully and astutely about where you spend your money. And I, and I’ll say kind of one last thing and, and this is what I think clicked for me over the last two years, you know, before I was in this mentality of go work, whatever work is get salary or get some sort of profit from network, you know, put some away for a rainy day you know, and then use the rest to do whatever to spend on going out to spend shopping, to reinvest in, in the business. And I think this mentality of put some away for a rainy day into a savings fund is actually the wrong mentality. And I think the right mentality is I have this access profit that I have, I’m going to think of like a capital allocator or an end size of one.
I’m gonna allocate that capital. I may allocate it into savings, I may and allocate it into buying more close to myself. But when I’m thinking intentionally savings shouldn’t be an afterthought. Yeah. I wanna be intentional about what I’m putting into savings and how I’m investing it. Because even different, like Shemot talked about, right? 5% the, the cost of capital went up. So maybe savings into a bank account is the wrong savings. Maybe my savings should be investing in a government treasury bill for a year that’s gonna gimme 5% versus a half a percent in the bank, right? So it’s just being more intentional about investing in saving the money rather than just, I’m gonna save, you know, 10% and then for a rainy day the, your rainy day fund should be a part of your investment portfolio.
Yeah. I think you hit the nail on the head cuz a lot of people just don’t have that intentionality. A lot of people just kind, the money comes in, the money goes out. Oh, where is, where did it all go? And I don’t know, I, so let me ask this cuz you’ve worked with some, some the larger companies, do they have a lot of controls in place like that to make sure, like every dollar’s accounted for or like <laugh>, I, I know what goes behind the scenes and a lot of the main street entrepreneurs and real estate investors and a lot of ’em are all just like money in, money out. What the heck’s going on? I don’t know. How is it at the bigger firms? Is it like that? Or do they have a lot more in place? Do they have like the No, this is right in line because then you hear about some people that go out of business, it’s like, I would’ve thought they would’ve had a billion controls at place to keep them from running out of cash or going out of business and like doing those things. So sometimes I know it’s probably viability of like the actual service or product, but I, I just want your perspective cuz we hear a lot of the times about the mom and pop type, you know, side of things. But I’m wondering if you guys have any perspective into kinda the other side, the Silicon Valley side.
So I work with, I did Microsoft that worked in consulted many of the, the major players, Google, among them, Facebook, apple. Actually, look, I think the, the question is a very good question. The quick answer I’ll give you a quick and, and a medium answer. Cause the medium answer I think is juicy. That’s, that’s where all the, all the, all the power comes in. The quick answer is, yeah, everyone has controls. I mean, the more professional you are and, and assuming that when I say professional, I don’t mean it to be condescending. I mean, just mean the bigger companies, you know, higher professionals do all these things. So the more, the bigger you are, the more money you can spend on lawyers and accountants and business development people, consultants that are useless, consultants like myself that, that basically come in and, and are able to structure the company for you.
You have a lot of controls, cash. So cash is king. And especially the, when you’re starting a business, right? When I, when I went to run the, the company I ran for four years, my partner and I, when we took the keys to the business, when the first question I asked them, I said, I said, who has the power to write checks? If we have the power to write checks, we control the business. If someone else like the, the o other owners have the power to write checks, we don’t. So as an owner, you want to be able to have the power ultimately to write checks and then work backwards, set up the right controls, purchases over certain amounts, need to get some sort of approval purchases under a small amount your employees can do and so on and so forth. Yeah.
here here’s the midterm answer, right? The midterm answer is margin and being a margin call. Mm-Hmm. <affirmative>. And I wanna explain for your listeners what that means because a lot of people in real estate are on margin. You take out debt and using debt as an asset, right? You take out, you take out debt in order to invest in your project. Debt can be good for two reasons. One, you’re borrowing someone else’s money and you can make more money on your own. So if I put 20% down on a project and I take out 80%, and the, and you know, the, the, the property goes from a hundred thousand, I put 20,000, 80,000 I take from the bank, the property goes from hundred thousand to one 20, I doubled my money more without, with without thinking about interest payments, right? So I’m borrowing someone else’s, I’m creating leverage.
On the flip side, if it goes down to 80, right? I lose everything. All my equity’s gone because I still owe 80 to the bank. So what professionals do is that they built all these models accounting for various scenarios of when they can be margin called out of the market essentially. So can there be a scenario where all the bad things happen? You know, in a, an amount pop you lose, let’s say a source of income, a couple properties fall through, you go into a flip and it’s running months behind. And also then you can’t sell it. And then zoning laws come in and, you know, whatever the, the the big upgrade you were gonna do is no longer there, right? Or no longer can be done. Now you’re getting all of these negative things hitting at the same time. Can your portfolio, can your burn rate and burn rate is the cash out that you need to operate your business, including to yourself?
Yeah. Can your burn rate sustain that kind of black swan event, that margin call? So the name of the game in investing is not to be margin called, right? Not to have your portfolio fall enough that your debt is being called in to be repaid. And that’s actually that a again, and that’s thinking very intentionally about debt and very intentionally about scenarios. So if you’re looking to go into any project or house, you wanna think about, okay, if it goes well, the happy path is X, great, amazing. We all want the happy path, the okay path, the bad path, and then the bad path times two, and then the bad path times three or times four, right? You wanna create certain scenarios for you to say, Hey, if I’m gonna take out this debt and l hell breaks loose, right? And I get hit here, here, here, here, here. I can withstand it. And it’s very hard to do many professional shops like you said, they’re going bankrupt, haven’t done this and don’t do this very well. Because sometimes, you know, like a 2008 comes Lehman Brothers, right? Like bear Stearns, one under Lehman Brothers, one under Merrill Lynch, one under, I mean, these are century old investment banks on Wall Street that got this wrong. So it’s okay to get this wrong, but you have to think about it.
Yeah. Then that’s really good cuz that’s where I, we keep coming back to that word intentional, you know, like you’re being intentional with what, with everything that you’re doing. And, and I think it’s interesting that you’re saying this because a lot of people I know in the small, you know, the real estate world and in like the small mom pop, you know, they are not at Microsoft and they’re not at that level. The ones that usually can weather those bad storms are the people that have thought about the bad storms before those bad storms hit <laugh>. You know? So they were intentional even upfront being like, okay, what if a black WAN event came, you know, and completely wiped us out. So that was really good. I think that’s if you’re listening to this episode of the Pro First Aria podcast, these guys know what they’re talking about.
And they also have seen this on different levels as well too. So it doesn’t matter if you’re making a million a year or hundreds of millions a year, you need to know what you, where you are on the financial side. You need to be very intentional with the dollars that are going through your pocket. So I guess then I, can you speak either one of you, can you speak to why I, to the main street side, why someone would live, you know, paycheck to paycheck or deal to deal in the real estate space? Or like how do people get into their own rat race and like, how do they get like to the, they’re just not making enough even to like, they don’t know their burn rate or they don’t know what they don’t know. So can you speak to like, why, where does that mindset come into play?
Yeah, I mean I can speak to that. It’s, it’s you know, I’m experiencing it right now, which is like, you know, we were living a really good life, let’s say 10 years ago. Yeah. Like, I’m thinking of my life. I, I’m with my wife for 10 years, we’re having a lot of fun now. We’re making so much more money and we’re still living a good life, but we’re not saving, like now we’re not saving too much. And it’s this creep of, of it’s it’s expenses on, on the personal side, but on a business side, people want growth at all costs, right? So it’s like, what’s the next project? What’s the next thing? And so it’s really, really easy to just like keep investing the money or, or, or just risking it on different projects because like you’re looking at what will happen in the long term, but like, yeah, if you don’t put some aside, then you can literally have 10 years pass by and for nothing to chauffeur it.
And I actually have, believe it or not friends who worked on Wall Street and friends who worked in Silicon Valley making over half a million dollars per year, they didn’t save too much because, and, and it, it’s interesting I think that this idea of intentionality, it, it sounds very simple, but it’s actually not because it’s really hard to, you know, tell your wife, okay, we’re not gonna take this vacation. And she’s like, okay, but not, not my wife or not people that I know, but like, I can imagine a scenario where people are like, but, but we have the money. You know, why not do it? Like, we only live once? Or like, you, you have a deal that you can invest in that you’re not a hundred percent certain of, and you’re like, okay, I have the money, let’s do it.
It’s, it’s the bias to action, especially I feel in American culture, there’s like a lot of bias towards action. Like, if you’re not doing stuff, something’s wrong with you. And I think psychologically that’s actually very very damaging because also, first of all, investing, you can read any investing book and it’s, it all boils down to doing a lot of basically doing the same thing over time and letting the compound interest grow for you. That’s easier said than done, right? Because you know, that means saying no to lots of things. So that’s one thing. And then the other thing I wanted to mention what Alex said before, I think it’s a very, very critical point that not many people think about, which is like, how do you protect yourself from many events that are connected to each other even though they don’t seem connected?
So for example, with real estate, you can say, okay, I have a salary. I’m gonna take some of, of my salary and, you know, buy a property, rent it out, and use some of my salary to pay the mortgage. It all sounds really good, but guess what, under a situation where let’s say there’s an economic downturn, you’re likely, I mean, not your likely, but there’s a likelihood of losing your job and also not being able to find tenants for your property. So those two things, they’re connected even though they’re, they’re separate. And so I know many people, especially in real estate that in 2008 will see how now it what, what happens now with the interest rates. I personally don’t think that they’ll be able to sustain them at very high levels. But like, you know, people who bought a property got a 3% mortgage you know, in 2021, and now the, the mortgage is like 7%.
What happens if you have to move? Like you know, you can’t just sell one house and buy another. So people are, okay, I’m gonna rent out my house and then use the rent money to pay for the other, but what if rents go down? So a lot of these things you just think are, are the risks connected to each other or are the risks not connected to each other? For example, having a disease and, and losing your job because you can’t work is not a function of depression or some kind of economic, you know condition. So those two things are not connected, but like having a job and having rental income, those two things are very connected. And in businesses what I’ve seen, it’s not so much about the controls. Like again, at, at those levels where you raise venture capital and everything, you have very tight controls.
Like you have lawyers, accountants, everything is accounted for, but guess what? You don’t have controls over your decision making. You know, as a CEO you have to make decisions. Nobody can tell you is it a good decision or bad decision. So like, it’s really, really important to think of all the scenarios and, and how to protect oneself against against bad scenarios. And, and the last thing I’ll say is that there will be pressure when times are good. Alex and I experienced this, when times are good, there is pressure to go up the risk curve. So to do more risky things. Yeah, because you see all of your friends or co colleagues or you know, people, you know, they’re making all this money. And so you almost feel something’s wrong with me if I don’t do the same. But then when the downturn comes, we know some really, really smart people that lost everything with ftx. And you know, FTX is a crypto exchange that collapsed, right? People put all their money there, it went under, who knows if they’ll get it back. Some of the smartest people I know went through this. So like those are the controls we should be thinking of more than just the dollars going in and out.
Man, there was a lot there, there was a lot of good stuff. You started off with the expense creep on the personal side, which I don’t think we touch on enough where it’s just like, okay, where, and you even gave that great scenario, which I’m sure no one’s ever gone through. Like, we have the money, why don’t we just buy the thing? You know, like, we could do this. That was, that was great. And then scale creep too, you mentioned like in the business side, it’s the scale side, it’s like scaling at all costs, which that was great. <Laugh> bias forward to action in America. Like, we just can’t sit still. We can’t sit still. We’re addicted to everything. We just want, we’re addicted to the hustle, the grind you know, the next thing. I thought that was a great point because then we always want to be doing things, but like you said, real investing is picking the boring stuff and having it go and ride out for a long time and using compound interest and actually seeing, you know, the magic of being able to do.
I thought that was great. Saying no to lots of things. You said that as well too. It’s not what you say yes to, it’s what you say no to. I thought that was so good where you just threw that in there. That was just a little line, but it was like, that was gold. You know, like, what are you saying no to now that’s protecting you from that next Black Swan event or like something like that. That was then you said the decision making process, especially as a main street entrepreneur, they don’t have a lot of people, you know, to say, is this a good decision? Like, they’re not going to their team of lawyers, accountants, data analysts, you know, like all this stuff say, is this a good business decision? Which I thought that was really good because then to be, to be fair here, I run a fractional C f O business.
So like we’re trying to bring a little bit of that, you know, like to the market. So like what is your, I, it’s my show here. I’ll, I guess I’ll ask the question. What are your thoughts on those types of roles? Because a lot of people can’t afford a full-time c f O on main, you know, they’re a mainstream entrepreneur, they can’t afford a full-time COO a lot of times too. And number two, like they can’t afford the, the C-suite executive team. What are your thoughts on the type of fractional type businesses or those four mainstream entrepreneurs?
It’s terrible though. Actually. I, I’ve been pushing for this a lot. I, I think fractional, fractional cfo, O c you know, accountants they work really, really well. Caveat, yeah, okay. The caveat is, I think it’s okay if you own your own business to be a hard ass and to expect and push people, typically when people are factionalized, they you know, they do it for the hours and they build by hours just so the output, you know, isn’t there. So I would just find someone that’s good, be okay, firing people and, you know, and, and getting someone else be graceful, right? They, nobody wants to be treated like shit. And sometimes people mistake being tough in terms of business tough with just being an asset or a jerk. You don’t wanna be a jerk to people. You don’t wanna treat them like like garbage.
But you do wanna ask for a lot and you want to hold them accountable. So here’s what I need. Timelines get shifted. I, I’m very bad. This is probably my Achilles heel. I’m very bad with shifting timelines and real estate, you know, I haven’t developed a lot, but a feeling if I developed a developer and they kept on pushing timelines on me, we would have, we would have, you know, the the Eastern European will come out <laugh> on that developer about getting, pushing timelines. But look, it happens, right? I, my my whole point is it’s a great way of bringing in professionalism into your business without having to pay salaries. However, please, please, please be mindful, intentional with, you know, giving those people enough work to do to keep them busy and hold them to aggressive timelines. It’s okay to hold, to be aggressive. I think it’s just not okay to be a jerk.
Yeah. Well that’s good. I think the, the, the moral of this episode is intentionality. If you keep hearing people come up, like with the people with your money, with the processes, with whatever you’re investing in, like you even mentioned, you know, ftx, it’s like a lot of smart people, you know, went down. It’s like, well how intentional were they with those dollars versus just being like, okay, someone else is doing it. I really trust them. Let me, you know, just park money there. Exactly. I think I think there’s lots of lessons all around. We’ve only got a few more minutes here. I do want you to, I don’t know, can you give us like, in just a few minutes your thoughts between crypto versus real estate? Cuz I know this is probably something you eat up and like want to just, you know, spread that message. But I, I, I know there’s a lot of investors too that have gone down the crypto roads. Some still love it even though the ups and downs have been, you know, pretty high and pretty low. But I’d love to, you know, but they’re still investing in both. So I would love to know your perspective on real estate and crypto.
Yeah, I mean, I can take, do first stab and Alex, I’m sure we’ll have other thoughts. So basically I, I’m, I’m, I’m starting to like real estate for two main reasons. One, I, and when I say starting to, like, I never had anything against it. I just, like my previous mentality was like, I just rent and invest all my money in the stock market, just like you know, s and p 500 in Nasdaq. And that worked really well. Cause I’ve been doing it since 2012. So again, the, the compounding, but two things that are, are great about real estate. One is that you can see you, you get kind of free money from the government. Like a lot of the loans are subsidized one way or another. And so it’s like really hard to get leverage where you don’t get a margin call.
Like, you know, as, as long as you make your monthly payment for the mortgage even if, if the price of real estate goes down, even if your equity’s worth negative you don’t lose the house. And that’s not the same case with stocks. You know, you can, I can borrow against my stock portfolio, but then I get margin called immediately. They, they don’t even ask you. So that’s one thing that I love. And then the other thing that I’ve been starting, I just bought my first house I’m like 40 years old, bought my first house. What I love is that I think people can, so investing, a lot of it is about asymmetrical knowledge. So it’s like you should know something that other people don’t know. Yeah. And then you capitalize on that, right? I’m seeing that like real estate in a sense is a, is a call option on the economic growth of an area, basically. And so what’s the call
You want? A, a call option is basically you, you can get outsized returns. So if, let’s say the, the area grows, the GDP of the area grows by like 5% your real estate portfolio can grow by like 50% if, you know, with all the leverage and all, and all of those things. So I think someone can assess an area in, in the prospects of an area really well. And, and that could give you an advantage. I’ll give you an an example. San Francisco. I, I lived in San Francisco for 10 years. It’s not, I, I wouldn’t invest there. Now because like the, the, the politics of the place is just like, it’s really mismanaged and, and people are just like escaping. You can see the zip code data of the, the U S P S just published, like people who moved and it’s like everybody’s leaving California for like Miami and for like other places that are better run.
So I think you can just like, have some thoughts of the economic prospects of an area and just capitalize on them by real estate investing. Now, the one thing that crypto is better at is one, the, the upside is bigger. The volatility is bigger, so the downside is bigger, but like on average it has been performing better than any other asset class. And the second thing is, you don’t have maintenance costs. You don’t have like all these like costs of, it’s, it’s super liquid. It’s one of the most liquid markets. And so I think it’s not either or. It’s about like how much you allocate to each to each category. And it’s funny like I’m, both of us are Jewish in the tmu, which is the Jewish derivative of the Bible. 2000 years ago, they gave investment advice, which says like, one third of your money should be in land. One third of your money should be in your business, and one third of your money should be in gold, which is like basically liquid money. And when you think about it, you can translate it to, to today. Mm-Hmm. <affirmative>, the business is stocks, land is like real estate and gold is basically we think it’s Bitcoin, but I mean, it can be treasuries, it can be bitcoin. Interesting. 2000 year old financial advice. <Laugh>. Yeah.
Yeah. No kidding. Awesome. Alex, do you have anything to add on that part? That, yeah, no, I, I
Echo everything as you once said. I think we can go a little bit, you know, deeper. Probably we can de dedicate a whole episode here. But, you know, look, I, one, another big aspect for real estate is, look, somebody just wanna live in a nice place and it’s your home, right? There’s an intangible value to just living in your home right now. When you think about real estate from an investment perspective, you should just think about what, like, like she remember a third or third, a third or different risk returns of your portfolio. Intentionality, right? You can have part invest in savings and invest in holding cash. When I hold a $5 bail on my wallet, that’s an investment in cash in that $5 bill, because alternatively, I could buy a stock with it, right? But cash stays more or less steady or loses, you know, call it 6% a year right now with the current inflation, stocks can go up and down, more volatility, more return Bitcoin, much more volatility, much more return.
But if I’m going in and starting my own business, right, and I’m, and I need to take out loans for hardware, I need to take out loans for, you know, buying a house and I need to pay the painters and such and such a, maybe Bitcoin in this case isn’t right for me because if it’s, if it’s going up, it’s beautiful when it goes down, I have to wait two years for it’s recover again. So it, it’s just all, again, I wanna bring it back to the whole portfolio theory. You know, I’ve also, I I don’t own a house. I, I’ve always rented because I’ve always invested that money. Yeah. it’s just my personal my personal choice. Although I also see the value of real estate. Like said, I can buy a house when interest rates become normalized again and then borrow against my equity in the house.
And I don’t have to, like, nobody’s gonna kick me out of the house versus stocks. If I borrow against stocks, I get margin called in a second. God, holy moly, if I borrow against Bitcoin, I’m gonna get margin called, you know, it can dip like 20% in in the minute, come back up 20%, but in the 20%, you know, minute, you know 1 0 7 I Bitcoin is worth 20,000, right? One 10 it’s worth 20,000. But in between I just wiped out all my money cuz it dipped really quickly. Yeah. So it’s just, you know, every, all these investments including cash is a tool for something that’s a be intentional about what you’re investing in. Real estate is a tool for X, it’s less returns, easier to borrow against equities, higher returns, harder to borrow against Bitcoin, highest returns hardest to borrow against and so on and so forth, right? And then you can construct a portfolio that does what you need it to do.
Awesome. I really like that. That’s some good advi. I like the whole theme of this is just be intentional with everything that you do. Like we keep hitting on that and then it keeps coming up in every conversation here. And that’s where I think a lot of people, they just got a hold of this message from this podcast. I think they’d be a whole lot happier a year from now if they would just be intentional with their money, with the people in their life with the business that they’re running. So that’s, this is good stuff. So here we go. Here’s a recap. So we talked about, you know, paying yourself first, making sure you ride that line of like making sure you’re taking enough out but not enough to like tank the business and making sure that you’re actually growing it intentionally. And then I loved what you said about this was Alex, I believe you said, you know, like as the companies got bigger, they were able to hire more professionals to be able to control more and be able to have more access to that.
And that’s where it’s like, can you borrow from that as a smaller main street investor who’s out there, you know, buying the houses and that’s where maybe a fractional CFO, F o could come into play. Make sure you hold them accountable, just like Alex was saying then there was a lot of good stuff like what you said, Shae from express creep on the personal side, scale creep, you know, <laugh> bias towards action no matter what the cost as a, as an American, you know, that’s where I think that definitely permeates our mindset. Say no to a lot of things. This was just really good. Be very intentional if you’re going to invest. I even like what he said there about in the tel mood about the the third, third, third. Like, can you be intentional there? That’s like a form of profit first. Honestly, he was even telling you, you know, like, of making sure your money’s going to certain aspects and maybe setting up specific bank accounts and for your specific investments, maybe even on your personal, you know, the personal side to make sure, okay, money came in, I’m gonna set it aside here and then I’m gonna invest it.
So just being intentional with every dollar in your business. This has been awesome. So guys, well, how do they get ahold of you? What are you doing? I know you have a podcast that you have, but if they wanted to provide value back to you with all the value you provided here, how do they, you know, get in touch or listen to you or whatever that you wanna, you wanna send them to?
I I can start. So we, we do, David, you gotta come to our podcast, we gotta do an exchange. How about this? After this you come onto ours and we’ll do a, we’ll do a podcast show.
Sounds good. We’re
Doing it live. Yeah. Okay. We heard it here first. Live, live in the air. We we’re agreeing, we’re agreeing to this. So we, we have a podcast called the Dollar Auction Podcast. It was previously called Hardcore Finance. We did a lot of focus on finance investing, expanding a little bit. And actually we, we can tell you on our podcast why the dollar auction has a very interesting game theory solution. It’s, it’s a very interesting game theory game. But if you guys wanna hear more, please take a look on Spotify apple Dollar auction or maybe if it still hasn’t changed, the hardcore finance, same thing. And then we’re most active on Twitter. We, we share a lot of knowledge on Twitter. And speaking of Profit First, so my moniker is Mr. Mr ebida, which means earnings before interest, taxes, depreciation, and modernization, which is a, a financial term for profit. So there we go. It’s a perfect moniker for here. So Mr. Ebida, E B T D A on Twitter and Shon.
Yeah, so am Shimon Lazarov on Twitter. Probably David can put the handle in the show notes for sure. And the way you can help me is just like, listen to our content and ideas and let us know if they resonate. Because like, what, what we’re trying to do is take things from very academic, you know, heady to, to something that can appeal to the wider audience because frankly we think there’s not enough depth in the kind of mainstream financial, like when you listen to the news or something, it’s, it’s, it’s fine, but it’s not like deep enough. So we’re trying to bring a little bit more depth, but this balance about like not going too deep versus not being too on the surface would love to hear what you guys think.
Awesome. That’s good stuff. So we’ll make sure to put that in the show notes to follow them and follow their podcast. Listen to them. These are great guys right here. They provide a ton of value here. And if you are listening to this as a real estate investor and you’re like, oh shoot, you know, like I’m, the expense creep is there, the scale creep, like what the heck? I, you know, I’m just go, go, go. Where’s the money all the time’s. Head over to simple cfo.com. We can see if we could take help you on that road. Just click the schedule a call if we can or if we can at least pin you to someone who might be a really good fit for you. Cuz I don’t want you to stay there. There’s no reason to. As a real estate investor, thank you so much for listening guys, thank you so much for the knowledge you shared here. Alex Shaone, this was absolutely incredible. Thank you for being on the Profit First. R a I show. Thank
You David. It was a pleasure.
This episode of The Prophet first for r e i podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery firstname.lastname@example.org right now. We’ll see you next time on the Profit First for r e I podcast with David Richter.