S2E44 – Robert Persichitte – How to avoid investing in scams

Key Timecodes

• (01:07) – Robert Persichitte’s background story 
• (03:12) – The traps and scams at penny stocks or cryptocurrency  market
• (07:16) – What does an investor need to look for in the market?
• (12:03) – Know where it is safe to dig.
• (17:40) – The safety and future of those coins
• (24:12) – The ethics and thoughts about the unregulated business model
• (29:10) – The trap of the “gurus” at that market
• (31:00) –  Thoughts on Tesla and similar companies’ moves
• (35:40) – The importance of management and a win-win model
• (37:39) – How Innovation and added value can change the world
• (41:07) – The worst business or investment advice he ever received
• (41:49) – The best business or investment advice he ever received
• (43:06) – Get in touch with Robert Persichitte.

Transcription

[00:00:03.390] – Intro

Payback Time is a podcast about building businesses wealth and financial freedom. We try to uncover the challenges our guests faced, the mistakes they made, and the steps they took to achieve their goals. The overall objective is to provide you with a roadmap that leads to your own success. Sean Tepper is your host. Are you ready? It’s payback time.

[00:00:32.810] – Sean

The next multibagger hot new penny stock or cryptocurrency on track to go higher than bitcoin. We’ve all heard people speculate on the trends, but what should you really look for to determine if something may truly be a good investment or complete waste of time? My next guest is an expert on the subject of scams. He has a financial audit history, which he’s applied to his current profession as a certified financial planner and certified public accountant. In today’s episode, we talk about red flags to look for in crypto and stocks. Please welcome Robert Persecuted. Robert, welcome to the show.

[00:01:09.430] – Robert

Hey, great to be here. Thanks so much for having me.

[00:01:11.950] – Sean

Thanks for joining us. So why don’t you kick us off and tell us about your background?

[00:01:16.090] – Robert

Absolutely. So I’ve been interested in money and finance for a very, very long time. I started trading stocks when I was in high school, and one of my favorite instances there was I had a teacher teaching us about the Great Depression, people trading on margin, and said, but we fixed this and you can’t trade on margin anymore. To which I said, that’s not correct. That is an untrue statement. And she didn’t believe me. And I went on to her computer and executed a margin trade and said, look, I’m 15. I can do a margin trade here, and it’s still possible you could still do it. And since then, I’ve been really focused, really obsessed with the downside of things and when things go wrong and right. When I went into college, I asked my professors, how do you cook the books? What does that mean? How do you do it? And they put me into some really great accounting classes that I really enjoyed. And I continued on with the negative side of things being a pessimist, looking at other types of problems, looking at things like fraud, abuse, where does the money go? How do people lose money in the stock market?

[00:02:33.400] – Robert

How do they lose money when they’re going through? And so that’s really led me to where I am now. I’m the founder of a company called the Lagafi Financial. We help people keep their money. We do a lot of financial planning that focuses around helping people recover and avoid scams, mistakes and taxes. So that’s where I am. The whole mission is help people not get ripped off. Because it’s so interesting to look in that direction. It’s so interesting to have that human element of money, to me, at least, I’ve always been fascinated with it.

[00:03:12.710] – Sean

Yes, thank you for that context. And I think this is a great episode to really dive into. It’s not the most popular topic, but it’s a topic that we do need to address on the show, which is avoiding scams because there’s a lot of scams. There’s a lot of shiny objects. Like in our world with ticker. There’s a lot of stocks people can get involved with that are penny stocks or really weak businesses that are never really going to take off. They’re going to be stuck where they’re at. We wouldn’t really call them scams, but debatable, they’re not wise investments at the end of the day. But I would really love to dive into your perspective and experience with scams and how we can educate the audience and what they should look for and also avoid.

[00:03:54.860] – Robert

Well, it’s becoming easier to get involved in a scam and it’s becoming easier to get roped into a scam. And this comes from a big hole in regulation. And really there’s two different holes. One in particular that I want to talk about, but I’m going to go over both of them. 1st. First of all, you have a group of investors that are exempt from SEC regulations. They’re called accredited investors and it’s based on your income or assets, among other things. Right. But you alone can qualify based on income or assets. Those numbers weren’t fixed to inflation. So we’re seeing more and more people now start to qualify. It’s a million dollars in investable assets or $300,000 in income for a married couple. Still a pretty big number. But more and more people are crossing that threshold, making it worthwhile for people to do these unregulated investments, solicit these unregulated investments. I think where it’s really, really come out is with cryptocurrencies digital assets in general. And the SEC got some questions. They said, hey, why aren’t you guys regulating this? There’s a lot of people investing a lot of money. And the SEC said, well, hold on, it’s not a security and they’re not investing.

[00:05:15.150] – Robert

The SEC saying they’re not investing because you are not getting paid out of future income. You’re not getting paid based on a business. You’re getting paid based on somebody else buying this asset. You’re relying on somebody else buying this asset. Now, people who have looked at fraud, who have looked at schemes might have some flags raising in their head right now of when you have something sold as an investment, but it’s paid from future investors, not paid from profits, it’s paid from future investors. That’s Ponzi scheme, right? There’s no income to generate those future revenues. Now, talking to a lot of people who are very passionate about crypto, you can make some counterarguments there. So for example, Ethereum can process smart contracts. Someone buys Ethereum and uses that to process a smart contract. Well, is that Ethereum doing work and earning you money? Kind of, in a way. It’s some minors doing work and getting you that money back. But the SEC decided this doesn’t resemble a traditional security. So we can’t regulate it like a traditional security. We have to do what we were allowed to do, what Congress told us to do. We can’t just pick new things to regulate.

[00:06:33.730] – Robert

And so as a result, you’re seeing a lot of unscrupulous activity generated around this. Now, I’m not saying every single crypto is a scam. That’s not what I’m saying. What I’m saying is nobody is looking at this. Nobody is checking to make sure that what the people selling this to you are saying is true. They’re not verifying that what the sellers do is followed up on and that they are following the rules that every other investment company has to follow. They are just kind of doing their own things and maybe occasionally they’re going to get sued, but it’s not a security, so it doesn’t have the protections that a security would have.

[00:07:16.360] – Sean

Right. So what can an investor look for? And what I want to focus on specifically is maybe the type of platform they were to buy and sell crypto on. That’s one thing, I’d love to hear your feedback there. And the other thing would be what type of coins to look for and what type of coins to avoid any red flags.

[00:07:34.350] – Robert

So the biggest red flag I’ll start there, biggest red flag. And the question that you should ask before making any investment is, how am I going to get my money back? How am I going to get repaid? Am I going to get repaid because somebody else is going to buy this from me? A lot of the crypto sales pitch says you’re going to get paid. This is going to be worth money because you’re going to be able to walk down the street and buy a pizza with this. Right? I want you to think through that before giving them any money of, all right, I’m knocking into Pizza Hut what steps the Pizza Hut have to take to accept my crypto as payment. Are these people working with them to make those steps into a reality? So are they building the infrastructure? Is it worth it for Pizza Hut to start taking this thing that I paid for years ago? How are they getting paid? What’s their incentive? And I think a common thread that I see in these scams is that there’s a missing middle step. They sell you the beginning, you get in on the ground floor and they sell you the end.

[00:08:40.630] – Robert

This replaces currency. Right? There’s a lot in the middle that needs to happen before we get to that vision of this is the new US. Dollar. And you really have to ask yourself, what do those steps look like? Who’s making those decisions? And are the people selling you this crypto in on that decision making process? Right.

[00:09:01.870] – Sean

Right.

[00:09:02.200] – Robert

That’s the common thread for the scams. The other side of it, we talked about it a little bit. I think Ethereum is probably the best example right now? Do I think it can justify its valuation? That’s really a hard question to answer. I think probably not. But think about in terms of smart contract processing. That’s a thing that it can do well. How much does it cost to process a smart contract? How much does it cost now with the current systems to process contracts? What’s the difference between it and is it worth it? Is it worth it for these businesses with billions of dollars to give it to you? Why would they want to give it to you? They don’t want to. You have to have a really good reason for them to have to give you currency or goods or something other than your digital assets there. Don’t just rely on somebody buying it in the future. Just because the chart looks good doesn’t mean that it’s going to continue to be good. Looking at the platform side of things, the second side of that question, really, I think it comes back to skepticism in a lot of these auditor skills of how are they getting their pricing data?

[00:10:17.220] – Robert

If they say it’s worth $100, can I go buy it for $100 somewhere? And does it match? Does it have a difference? Are they telling me something? Are they trying to tell me something that’s not true? Are they projecting something in the future? If they’re projecting something, how are they supporting it? It’s really looking for verifiable information, paying close attention to what can we prove versus what’s a guess or what is optimistic about the future.

[00:10:47.880] – Sean

Are you referring to, like, if you’re going to go to a platform and buy a crypto, are you buying it for the actual price? Is that what you’re saying there?

[00:10:57.750] – Robert

Yeah. And cryptos are a lot harder to determine that actual price with a stock, a publicly traded stock, I should say, on an active market, we can look at that market and see exactly what the last traded price was with a crypto. There might be a private transaction that we have no idea about. There might be ten different markets. You should be looking to see that your transaction is on the blockchain. You should be able to verify that you really got what they say that you got at a bare minimum. But also, how is it tracking it? How is it tracking trading volume? How is it tracking with the last traded prices? Because it’s not like a stock. It’s not straightforward. There’s a lot more wiggle room involved in there. And to your point yeah. If you are paying more than what they’re saying, huge red flag. If you’re selling and you’re getting less than what they’re saying, huge red flag. That means there’s some problem. They’re not meeting the actual market price and what they’re advertising, and that is a huge, huge problem.

[00:12:03.220] – Sean

How does an investor dig into that? How do they know?

[00:12:07.230] – Robert

Well, I’m a firm believer. You shouldn’t invest in things that you don’t understand. And you should, at a minimum, be able to look again. If you’ve done your due diligence and you believe that you are not just buying a space on the blockchain, you are buying a token that can be used to provide a service or do something in the future, you do that due diligence first, and then you need to look back and be able to validate or verify that in some way. And you need to be able to do that independently. It shouldn’t be the person that you’re paying telling you, yeah, for sure, I put it on the blockchain. You can trust me. You should be able to independently verify it. That’s one of the benefits of the blockchain. And there’s software that can do this for you. You should be able to transfer it. Just be very careful with what information you give out. Don’t be giving out private keys. Be careful what information you’re giving out in trying to get that validated and verified.

[00:13:07.620] – Sean

Sure. You mentioned software. Is there a certain platform or website people can go to to learn more?

[00:13:13.090] – Robert

Off the top of my head for just verifying the blockchain, MetaMask has some tools available. That’s the one that I’ve used in the past. I don’t have much digital assets just because I look at it and say, hey, most of the time we can’t justify this valuation, we can’t justify what they’re charging for this. It’s still something to keep an eye on because maybe some day in the future they’re valuable. But in terms of valuation, I have kind of a fun activity to go through here. And this is really to appeal to the people who are true believers who think that blockchain technology is the future now. I personally agree. I do think blockchain technology is going to play a huge role in the future. But we don’t know what that role is going to be. We don’t know what it’s going to look like. And anyone guaranteeing you that something is or isn’t going to happen should be met with a lot of skepticism. So let’s go through a thought experiment. We’re going to go back in time to 1983, early eighty s, and we have the benefit of forward knowledge. We know that spreadsheet software is everywhere.

[00:14:26.190] – Robert

Everybody’s using spreadsheet software. It’s very, very common. Businesses pay millions of dollars for licenses for it. It’s great. So you now have an option, and I’m going to turn around and ask it to you. What do you think the option you would follow is? I’m going to give you three. Option number one, you can invest in the industry leader. They hold about 80% of the market share for spreadsheet software. Number two, you can invest in a somewhat well established business who has brand new spreadsheet software. It’s just entering the market. They’re just trying to break into it. Option number three, you can pay an account in $100 to write your name down into a spreadsheet. So which option would you choose?

[00:15:11.500] – Sean

Well, from my perspective being an investor, option one or a checks all the boxes right there because it’s a reputable company with a wide moat. You know, we’re all big on the four M. So being one of those Ms that checks that box by a long shot, high probability we’re going to make more money.

[00:15:30.340] – Robert

And I tricked you, Sean, I’m sorry I did. Option number one, you invested in Lotus. They were the provider at the time. Microsoft introduced Excel in 1983. Microsoft was option number two. Again, they were a well established company at the time. They had other products, but they were brand new to interesting the spreadsheet software and they took over everything. They won, they have a huge percent of market share now. We couldn’t have reasonably predicted what would happen with spreadsheets in 20 years.

[00:16:08.760] – Sean

Right.

[00:16:09.420] – Robert

You had a lot of time to reevaluate that investment at Lotus and Lotus continued to make money for some time. So in the short term, that may have been the right answer. Simply buying something like Bitcoin, right, that doesn’t do transaction processing, that doesn’t have some of the benefits of the other cryptocurrencies is like option number three. Sure, your name is recorded in the blockchain. That doesn’t mean you own the blockchain, that doesn’t mean you can sell the blockchain. This is the fallacy that a lot of these unscrupulous salespeople throw out there of look, it’s the future. You’re participating in the future. The future is really hard to predict with these brand new technologies. And even if it does be completely ubiquitous, every company in the world has to get some blockchain. There’s no reason to believe that right now bitcoin is going to be the one. There’s a lot of competition out there and especially these startups. Why would that be the one? Why would that be the one technology that everybody picks? We have to ask as investors, some type of reasoning for that.

[00:17:20.590] – Sean

No, that’s a really good point and I enjoyed that little exercise there with the mystery company Lotus.

[00:17:27.030] – Robert

Behind the scenes, everybody falls for Lotus. It’s okay.

[00:17:30.540] – Sean

I thought it was Microsoft all day for some reason. I thought.

[00:17:35.890] – Robert

They were well established, they were new to that space.

[00:17:38.940] – Sean

Yes, interesting with ticker and we’ll get more into this with our education as crypto is added to the platform. But similar to other large corporations out there that manage people’s money, they mentioned try to allocate 5% or less of your net worth into crypto and we’re in the same boat. We say, hey, you can definitely play in this world, but be really careful because you don’t know how to read where it’s going to go because there’s no income statement, there’s no cash flow statement and balance sheet like you have with a business. And I like your point there. It’s not producing ongoing transactions or how we look at it would be. It’s not an entity producing ongoing revenue. We like investing in businesses that have multiple streams of revenue, healthy revenue streams.

[00:18:30.870] – Robert

Right.

[00:18:31.110] – Sean

That’s a better business model. Whereas a coin, a digital coin, it does not have that. It’s just based on volume and popularity. And it’s very hard to determine what’s going to be that coin of the future. If the world moves towards, let’s say, a single currency, which it is moving in that direction, the question is, what currency will it be? And that’s so hard to determine, really.

[00:18:55.020] – Robert

It really is. And I mean, if you look at how transactions happen now, large business transactions, that is, USD, the US. Dollar is kind of how a lot of contracts are being written right now. Do people like that? I don’t know. You’d really have to go investigate in the market. What they want, though, is stability and predictability. And right now, none of the major players out there are providing that to them. So I don’t see a light switch moment where all of a sudden something happens. And to your point, it’s highly speculative, and that means we’re making a guess about the future, and we’re making a guess about what’s going to happen. So we should be compensated for that risk, but we also shouldn’t bet the farm on it because we don’t know what’s going to happen. And if there is going to be one coin to rule them all in the future, you better be right. If you’re wrong, you’re not gonna get it. There’s hundreds of them out there.

[00:20:00.850] – Sean

Yeah, I was going to say, isn’t there like a thousand coins? Maybe I’m a little over the mark there, but there’s a lot of coins.

[00:20:06.930] – Robert

Well, and I think that goes back to the scams of there are thousands and thousands of coins and more getting added every single day. And I think there’s just kind of that line of when someone going to fall for this, and I only need a few investors to fall for this and give me their money, and then I can run and shut everything down. And how convincing is that? And so I think there’s a much smaller number where people think this is being run like a business. This is making those connections that is going to be necessary. They’re doing building the infrastructure to make it work, to make it be the future. But that’s just because they’re doing the work is no guarantee that that’s what’s going to happen, that they are going to be the new platform. So I think there’s a good chance that the next thing that even if we say, yeah, that replaces USD US. Dollars in 20 years, maybe it hasn’t even been invented yet, maybe that is something that’s backed by a government. Maybe there’s something else, some secret sauce that businesses want to get it. And it brings me to kind of an interesting point about Tesla and how Elon brought up here.

[00:21:27.370] – Robert

We’re going to use bitcoin. Oh, no, we’re going to use dogecoin. And now forget it. Forget the whole thing. Right? And we look in the financial statements, and what do we see? They bought those cryptocurrencies before, drove up the price by saying it’s going to be the future currency of Tesla, and then sold them, and then said, no, we’re not going to use it. Right. And you might be thinking, well, isn’t that illegal? Isn’t that a pump and dump scheme? Isn’t that exactly what they’re doing? And if it was a security, you’d be right.

[00:21:59.380] – Sean

Yes.

[00:21:59.800] – Robert

It’s not a security. Those laws do not apply. Those protections do not apply. They’re allowed to do that. And we only know how much Tesla made as a company. We don’t know because they had to file it in their public filings. Right? We know they made at least $100 million. We don’t know how much Elon personally made. And it comes back to, once you remove these protections, you have to be really smart about who you’re trusting and where you’re putting that money. And am I saying that the protections are perfect? No. You can still get ripped off with the SEC protections in place. I mean, look at what’s happening with theranos right. They went through that whole process.

[00:22:42.610] – Sean

Right?

[00:22:43.260] – Robert

Is it harder to rip somebody off when you have a regulator looking over your shoulder? Yes, it’s going to be harder to do it, and there’s going to be more hurdles to ripping somebody off.

[00:22:55.510] – Sean

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[00:24:02.670] – Sean

Visit Ticker.com. That’s tykr.com again. Ticker.com. I love your little discussion here on Tesla because we could talk all day about different businesses. And that’s actually the way I wanted to go. Is talk about stocks and businesses people should be worried about and not to point fingers at a specific stock. But type of behavior and the things people do. Like cooking the books and trying to you know. That’s a great example of that pump and dump play with crypto. It’s like that was a 100 million dollar fundraising activity, essentially. If you were to summarize that, how do we get a quick $100 million injected into the business? Oh, here’s an idea. We should buy a bunch of doji coin, drive up the price, because all the retail investors going to follow and then sell out unregulated, totally legit. Was it ethical questionable? Right?

[00:25:02.960] – Robert

Well, again, big fan of looking at risks, looking at the potential problems. And a really interesting thing happened very recently, and I just brought him up. Theranos Elizabeth Holmes compared herself to Elon Musk in the trial, and she said, I had a very ambitious goal. I had an ambitious goal, and I thought that we could do it. I thought it was possible. And it’s very common for a business to pitch something to investors, say, I have this business idea before the business is brought to fruition. Right? Now, what was illegal about her involvement? There wasn’t any support for this. There was no science behind this. There was no reason for her to believe that she was going to be successful in producing these promises. Right? There’s a fine line, and some people have you could look to Elon Musk with Tesla, and he said, we’re going to have full self driving cars by 2016. A Tesla will be able to drive from New York to California without a driver. That’s something that he tweeted. It is 2022. We are nowhere near that being able to happen. They’re nowhere near that being able to happen. And where’s the line?

[00:26:29.440] – Robert

Does he have the intention of delivering on that and it’s harder than he thought. I don’t know. I think that is a really interesting point to bring up. And Warren Buffett famously said that he doesn’t invest in anything that he doesn’t understand. And about once every five years, you get people coming in and calling him a dinosaur, saying, you just don’t get it. Internet is the future. the.com bubble can’t happen. You just don’t get it. Blockchain is the future. You can’t have a collapse in cryptocurrency. And he sits and does this. Very boring investments based off of value. And we’re just looking at, can we build up the business? Do they need the capital to do something? Is the thing they want to do achievable and doable? And how does that happen? Where are the assumptions that they’re making? What are the risks involved with them trying to scale the business this way and really focusing on that middle part that I talked about before. Step one, I get your money. Step three, I’m a really big, successful business. How did we get from one to three? What was that middle part? How realistic is it?

[00:27:44.890] – Robert

And I think electric car companies in general have been giving these huge, big promises, we’re going to change the world. You have Tesla. I’m going to have more market share than Volkswagen. Like, wow, maybe. What are the steps to get there? What’s going to happen to get there? And am I saying that they can’t do it? No, I’m not saying that. I don’t know. I don’t know if they can do it or not. But that’s the type of analysis and investment that the analysis that needs to go into an investment of do I think the future is there tends to be very easy for more boring companies like a railroad or insurance. It tends to be a lot more straightforward of, yeah, we get this return on our advertising budget. We need this much money to do this much advertising, and then we’ll have this much profit. Right. Boring not going to change the world. Nobody’s claiming to do that. Same with the railroad company. Right. If you invest this much money, we can make rail shipments $0.10 cheaper by having more efficient trains in there, and we can use that ten cents to pay back the investment.

[00:28:59.740] – Robert

Right. Very, very clear start to finish plan without a lot of hand waving in the middle.

[00:29:08.590] – Sean

I love that analogy. Now, you touched on a really good point there about theranos I loved the book Bad Blood, the documentary on HBO, the Inventor. I think I watched. There was a quick docu series on Hulu on her. And then there’s the We Work story with Andrew Newman, right. And the list goes on. And I’ve always been really skeptical on, you know, the gurus out there and the entrepreneurs, you could call them, that have these big ideas, and they’re very good at selling, as we saw with Elizabeth, very good at getting money.

[00:29:46.510] – Robert

Right.

[00:29:47.200] – Sean

And I’ve always been a big skeptic, and the older I get, I just become more skeptical. I hear these stories, but I really love the point made. I think this is a good takeaway for investors, is connect the dots between where they’re at right now and where they plan on being in five years. Are they explaining that story in layman’s terms, like breaking it down? We’re going to get there because we’re going to do this, this, and this. And if they can’t tell that story clearly, that’s the moment when I’m like, that’s a pass for me to move on to another company.

[00:30:15.870] – Robert

Oh, absolutely. And that mythos, this magical person that can make everything to come together and turn to gold is constant through some of the greatest fraud scandals in time. And we can look at Enron. There’s a reason they were the smartest guys in the room. That’s what everybody called them. And they had this gravitas like, how dare you ask them a question. They’re so much smarter than you. How dare you ask them you should just understand it because they are so smart. They’re operating. On a whole, another level that you couldn’t possibly understand. And it’s a cover. It’s a cover for a massive scam.

[00:30:59.400] – Sean

Yes. Right on. To circle back to Tesla, there’s a lot of people out there that they love Tesla and they love Elon. A lot of people do. And I respect what Elon has done with EVs, and I think SpaceX is interesting, but I’ve never agreed 100% with everything he’s really preaching. For example, right now, I don’t think it’s a wise move to make everybody come back to the office. We live in this world where zoom and teams, Microsoft teams, have been amazing tools to allow you to live wherever you want and work remote. And why would you reverse that? So I don’t think that was a good play. But there’s other things too. But I heard something I think this was I could be wrong if I heard it on Motley Fool, a big fan of the podcast, but they said if Elon were to get sick, heaven forbid that ever happens to be a major CEO, but you get sick, what would happen to that share price? What other names are in the company that can take that CEO spot? Well, I tell you what. I know a lot of people in the stock market, like a lot of these leaders, and I haven’t studied that C suite.

[00:32:05.430] – Sean

I don’t know who, like from the COO or CFO or whatever is going to step into that position with a big name and a big vision. I don’t see good things happening to that share price. If something would happen to you and.

[00:32:18.370] – Robert

You can look at the polar opposite of that being Disney. Every successive CEO has very publicly talked about what a good so starting back from Eisner, talking about what a good mentor he had, how he learned the business and passing that down. And every single CEO all the way through till now has been talking about who built them up, how they got there and how they understood it. And to your same point, you can remember seeing articles about Bob JPick for a long time before he actually ran the company.

[00:33:00.480] – Sean

Right? I was just doing some research on Starbucks, and I know Howard Schultz is stepping down new CEO. What is his name? Laxman. I’m going to slaughter’s last name here. Laxman narratun looks like. But there’s a succession plan taking place right now where it’s this soft handoff over a duration of time to make sure they’re heavily involved in operations and getting to know different store locations, like keystore, location for the business. And when you can do something like that, I think it’s a little easier for the public to kind of embrace this new CEO, this new face of the company, instead of the event happening like this happened to this CEO, something legal, maybe it’s a health situation like I mentioned, and then you’re immediately with somebody else. That’s jarring that can cause an issue. And I, you know, Tesla again, they’ve done some cool things, but I think the share price, there’s a lot of that share price right now propped up on the name Elon Musk, and that’s a little risky.

[00:34:05.110] – Robert

Well, I think it goes back to what we were talking about before too. Maybe if the plan is more transparent, we have more confidence in that. But you have a new factory going up. Are you selling power plants now? What’s the main drive, what’s the main purpose and what are the next steps? And I think that’s another step that would go a lot farther. Am I saying that they can’t get there? No, I’m not saying that. I’m just saying that they haven’t shared it with me. And I’m also humble enough to know in all actuality Elon Musk, I would be willing to bet a lot of money that Elon Musk is smarter than I am. I’d be willing to bet a lot of money on that.

[00:34:50.670] – Sean

Agreed.

[00:34:51.480] – Robert

That doesn’t necessarily mean I should just hand him my money. Does he have my best interests at heart? What’s he doing? Why is he going through this? What game is he playing and what’s happening? I’m not saying that I have no evidence that he is committing a scam or anything like that. It’s just that same mindset of asking what’s the next steps here? What’s going to happen and how am I going to keep my money? And if you got burned with bitcoin or dogecoin during that time, I think it’s easier to get on. If you were really early and you made money off of it, you might be in the same bucket of saying, well, look, he made me all this money. Well, again, that’s not a guarantee that you should give him a blank check right now.

[00:35:40.930] – Sean

It’s a good point. And this is, I think, one of the key takeaways here when looking at businesses is really pay attention to what the CEO is saying and what is their vision for the company and they’re breaking it down, how to get there. I’ll give a nice example. Starbucks was one, another one was I was just doing research on Halloween golf Company and almost 50% of the revenue is now from Top Golf. It’s that franchise location where you can go with your family, rent a bay for an hour and just hit golf balls. Different games they have, but it’s incredible because they make money off of the actual rental. You can do memberships, but there’s food and drink. It’s a very easy business to understand and they pretty much laid out. We want to grow by X amount of stores over the next five years and that’s how we’re going to get to this new market cap. It was very simple to understand, like, oh, I get it. OK, so you got to build this facility here and this one there and this one right. It’s super simple. And it’s like, okay, I can buy that.

[00:36:42.410] – Robert

Yeah. And it’s a win win, right? That they’re getting the capital to open the stores and they’re getting the extra profits, their overall profits are rising. But you are getting money as an investor, assuming it all works out, and they are getting money from their new locations, those new stores, and you can have a winwin. It’s not a zero sum game. You have to outwit or outsmart the board. On top of all, you’re working together. They need something that you have. And yeah, that is much clearer analysis than saying give me all of your money and one of us will be rich.

[00:37:22.780] – Sean

Yes. It goes back to Silicon Valley. The show and HBO made fun of this is all the CEO saying and we’re going to change the world. That line was always in. Sure you are. As soon as you hear that, it’s like, okay, red flag moments, I’m sure you’re going to change the world. How about just focus on solving one little problem and then we can work our way up to changing the world. How about that?

[00:37:45.360] – Robert

Well, I think one of the biggest changes to the world that happens every day is someone makes an innovation that makes a very common product marginally cheaper. Yes, it’s a little bit cheaper. That’s the change. That happens constantly. This pen used to cost fifty cents to produce and now it’s only two cent. That’s the change in the world.

[00:38:09.400] – Sean

Right.

[00:38:10.320] – Robert

That is more common. But it’s not as fun.

[00:38:13.840] – Sean

No, it’s not as simple.

[00:38:14.770] – Robert

You’re not going to brag to your friends like, hey, I made a pen a little bit cheaper. It’s not going to happen that way.

[00:38:21.000] – Sean

But in truth, that’s how you make it a more efficient process, a more efficient way to manufacture or somebody to do something a little easier for the consumer. And that’s not glamorous, but that’s what makes money.

[00:38:34.390] – Robert

And back to a common thread with these scams. They’re selling an idea, they’re selling a dream. And they are commonly ignoring the risks. They’re ignoring the steps, they’re ignoring the what if somebody’s going to give you a bunch of money is the end of it? Or think about this millionaire. They use a lot of emotional arguments. Think about how rich this person was who got in the ground floor at a really big company. That can be you if you give me your money. And I think our instincts, that greed, that the feelings, the emotions just are looking at steps one and three and forgetting about how, how is it going to happen and asking those questions.

[00:39:20.860] – Sean

Right, well, this is a great transition point and thank you for giving us some context and what to really look for with scams out there. I think this is a huge value to retail investors out there. But what I’d like to do next is transition to the rapid fire round. This is the part of the episode where we get to find out who Robert really is. So if you can try to answer each question in 15 seconds or less.

[00:39:43.530] – Robert

Are you ready and do yes.

[00:39:45.430] – Sean

All right. What is your favorite podcast?

[00:39:47.890] – Robert

That’s going to be the indicator from Planet Money.

[00:39:51.390] – Sean

I’ve never heard of it.

[00:39:53.290] – Robert

It’s a little option to planet money from NPR.

[00:39:56.490] – Sean

Got it. NPR. Related good to know. All right, what is a recent book you read and would recommend?

[00:40:03.640] – Robert

I alluded to the title earlier, the Smartest Guys in the Room, one of the most intriguing financial fraud stories of all time. People say accounting is boring, but in that book, which really happened, you have drugs and prostitutes and strippers and all kinds of crazy stuff that really happened. That really happened.

[00:40:23.290] – Sean

I’m going to put it to the top of my list because I love stories, because I eluded to my interest in this type of it’s all over like Showtime or HBO or Hulu, these CEOs and they’re misguided dreams, you could say, on scamming people. So this book, I know I’m going to love it. So thank you for that. Next question here. What is your favorite movie?

[00:40:46.990] – Robert

Favorite movie? It’s got to be the Big short. They explain things very, very well and talk about the human implications of moving markets, what happens to people, to individuals when markets make big changes or mistakes.

[00:41:05.820] – Sean

It’s a classic. Love that movie as well. What is the worst business or investing advice you ever received?

[00:41:15.040] – Robert

The worst advice I ever received is, back in college, I had a friend, I thought he was smarter than me. He got better grades in the finance classes. And I told him, hey, take a look at my portfolio. Tell me the things to do. And I executed those trades without asking, why did you do this? And I unloaded a very speculative stock that was about to pay off. And so I missed that profit. And it came from not asking questions.

[00:41:44.060] – Sean

Which you do a lot of today for good.

[00:41:46.270] – Robert

I learned my lesson.

[00:41:48.640] – Sean

Right. All right, let’s flip that equation. What is the best business or investment advice you ever received?

[00:41:55.390] – Robert

Take the money and run. When you have something that is unexpectedly good, take it and reevaluate it and ask yourself the question, would I buy this stock again today? Would I buy it at the price that it is currently? And there’s been a lot, especially on the speculative side of things where I make some money and then have to go back and reevaluate it and do all my analysis from scratch. And it saved it saved me from getting greedy and hanging on too long.

[00:42:29.680] – Sean

Right. Interesting. And last question here is a time machine question. If you could go back in time to give your younger self advice, what age would you visit? What would you say?

[00:42:39.570] – Robert

I think I would probably go back to my early college years and convince myself that changing the world is a lot harder than you think it is and that it’s still possible. But the reason it doesn’t happen all the time is because it takes a lot of work and it takes a lot of effort. And just make sure that whatever you do is worth that effort.

[00:43:05.590] – Sean

That’s good. All right, where can the audience reach you?

[00:43:09.720] – Robert

So the best way you can get to me? Through the Delagify financial homepage. That’s delagify.com. You can sign up for our newsletter, get tips about financial mistakes and how those trends are emerging.

[00:43:25.450] – Sean

Nice. All right, Robert. Well, thank you so much for your time. This was really insightful. Greatly appreciate it.

[00:43:31.590] – Robert

Thank you very much. Happy to be here.

[00:43:33.100] – Sean

All right, we’ll see you. Hey, I just want to say thanks for checking out this podcast. I know your time is valuable and there’s a lot of other podcasts out there you could be listening to. So thanks for taking the time to listen to my guest story. If you did enjoy this podcast episode, could you head over to itunes and leave a five star review? That would be much appreciated. Thank you. And last but not least on this podcast, some episodes we do talk about stocks. And please keep in mind, this podcast is for entertainment purposes only. So if you did hear any buy or sell recommendations, please don’t make those decisions based solely on what you hear. Alright, thanks a lot. See ya.