The 3 Most Important Rules of Investing
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all right today’s book of the day a few lessons for investors in management and managers by Warren Buffett or I should say it’s not by warm but it’s a compilation of his writings so people ask me one of the most common questions I’m compiled like the 30 most common questions I get one is what is the best book on money finances business you know what’s that one place I can go to and just have a fountain of knowledge everything you need to know about money this is the one right here by Peter beveling and I just got done I did it for those of you who are in some of the the premium stuff I do the VIP coaching the inner circle the mini NBA business program arm I went through this for about a couple hours and if you’re not in that highly recommended cost depending on the course but the basic VIP one cost less than a cup the average person spends on coffee per month to double down on your own brain invest in your own brain but I want to share a few things I don’t have a you know that call I did I was on a live call interactive you might have been on it if you’re in the premium program for like 3 hours talking with people but let me just share a few thoughts if you get my book of the day emails I shared a few of these too so the first rule of making money all right creating true wealth is coming at it from an investor standpoint look at the 440 or 450 self-made billionaires in the world the largest category of them is not real estate it’s not gold it’s not oil it’s not sports it’s not media it’s not the food industry or hotels or fashion what makes the most billionaires without a doubt about 77 is investors it’s double the nearest category other category more than tech it’s not Mark Zuckerberg ah that are dominating the Forbes list it’s still investors so the first rule if you’re writing it down or keeping mental notes is no matter what you do come at it from the standpoint of investor so once you understand that then the second point is what is the criteria that will make you into a great investor well in this book and these are just quotes and compilations of Warren Buffett who by the way you know was the richest man in the world worth anywhere between forty to sixty billion dollars that’s forty to sixty thousand million dollars owns Berkshire Hathaway which owns you know you owns 10% of coca-cola he owns Gillette he owns Dairy Queen or a large shareholder in Dairy Queen NetJets Geico is a big one so multiple diversified portfolio uh holding so he says here’s the first thing you have to understand as an investor anything even if you’re not going to try to be a billionaire young you have to understand the difference between price and value and even if you’re advanced and listening to this even if your investment bank or a hedge fund owner go back to the fundamentals of Michael Jordan and Phil Jack’s and his coach worked every single practice on bounce passes every practice even though Michael Jordan was the greatest basketball player in the world he still went back to the fundamentals every single day that he practice if that’s true you and I can always no matter our level of financial knowledge revisit the fundamentals with somebody like Warren Buffett remember Warren Buffett was mentored by the great Benjamin Graham who wrote books on security analysis and a lot of fundamental understandings we have in stock markets so what is the districting pricing value well a lot of us are confused when you see something that is a high price or a low price we necessarily impute some value to it let me read uh what Buffett says he says the value of anything stock a bond or business is determined by the cash inflows and outflows discounted at an appropriate interest rate rate that can be expected to occur during the remaining life of the asset so let me step back from this price value first and and go here remember the value of anything is the lifetime expected income you know in 2008 tremendous amount of people maybe you or somebody you knew lost a lot of money in real estate whether they had their home foreclosed on them or they invested in roasted I have a friend who sold a tech company for 1520 million dollars he was still in his 20s he took that money in early 2000 invested in all these real estate crazy projects in the desert and next thing you know he was back to getting a job lost almost all his money so you may know somebody like that now some people were fortunate enough to not have a calamity during 2008 and why it’s those real estate investors who understood that the value of a piece of property it’s not the price I was just in London the other day and they have condos that are worth 100 million dollars condos in London I believe that’s some kind of an inflationary bubble why well what’s the or at least it’s not investment I would want to make I call it crazy money crazy money goes after that maybe you are a oil baron or you know you strike oil in Saudi Arabian so you have billions of dollars so you don’t care if you buy a condo for 100 million bucks but for you and I that are not operating on that you know trillionaire quote-unquote level you’d have to go well what is the true value value remember not price of 100 million dollar condo or maybe you’re looking at your at your own house how much should you pay maybe you’re in the market for real estate maybe you’re going to buy a stock maybe you’re thinking of buying a business or invest in you don’t be always confused by the price what you want is things that the price is lower than the value how do you know what the value is price is easy to find out you go to the store things have price tags on them but that doesn’t mean the values there and you as an investor should be chasing value value value in fact guys like Warren Buffett are called value investors now there’s different schools of thought on an investment my advice to you if you want to stick with the fundamentals if if you don’t want to play the lottery ticket approach try becoming a value investor so you’re searching for things where the price is lower the value so when you buy a piece of real estate a house you go well how much could I rent this place out for if you could rent it out for a thousand bucks a month okay that’s $12,000 a year and let’s see going to hold that for 30 years you have a 30-year mortgage what’s the expected value of cash that you’re going to receive over 30 years remember hopefully you can raise your rents over time if you can do the math on that now there’s a formula on how to do that can’t get out on time to get into that right now if you are in the VIP stuff and business stuff we go more into actually how to calculate that so you know how much to pay but for now on this you know podcast YouTube TV show whatever I want to just get you know kind of a quick point into your head this will change everything you will begin to see that the whole world is chasing price price oh this that had that and they’re forgetting that true wealth is created when you are able to pick up things where the price is much lower than the value you know it’s a practical example of price being lower than value this book right here there’s a hardback book just randomly it’s a third I paid $30 for this I bought this one new it’s the story of Conrad Hilton what’s the value that’s the price is $30 for that on Amazon or I think I bought some Barnes & Noble do I get $30 worth of value yeah the first chapter of this book I have things that were put into my head that will be in there for the rest of my life as long as I don’t you know get hit in the head get amnesia or Alzheimer that’s there forever that value is creating thousands of dollars of value tens of thousands maybe even hundreds or millions of dollars of value $30 price value far and beyond these book of the days you’re spending time right now there’s a price for you watching this up I hope the value is tenfold this book social how much did this put cost $26 this will make you understand the newest cutting ESRI search and science on what makes you click with other people how to win friends and influence people now so books are something with tenfold value over price what are things though let’s talk about that it’s reverse well but it talks about this later in this book the definition of something he calls it a lousy oh he calls it the gruesome the gruesome so the worst kind of investment the grotesque kind of investment is one that requires a lot of capital at a low return business so it’s a business that the price is high and the return is low now he’s talking specifically about investment capital building factories and so on but let’s take this back to everyday life that you and I have as not you know necessarily the richest person in the world the price in this sense if the price is high and the value is low what is an example of that well what about some luxury stuff what about a Louis Vuitton purse or actually I don’t know if that’s I don’t know my purses but say a purse what’s the value there versus the price probably the price let’s say it’s a thousand dollar handbag does it deliver a thousand dollars or the stuff in your life how about the average person eats four times a week fast food you think the price is low right because you’re like oh I’m eating it Donald Socko bail whatever and it’s only costing me ten bucks to eat there five bucks to beat there but the value is negative it’s actually killing you and making you fat and making you pre-diabetic and all these things so there you have the gruesome price above value you must flee and run away from anything that prices about value you hear it straight from the words of Warren Buffett my mentor one of my mentors Allen nation said ty’ never invest in things that rust rot and depreciate what are those common things big flat-screen TV you put the prices there a bone but is the value there well it’s depreciating meanings some cars are like that I you know even I like cars sometimes I’ve had fancy cars Ferraris Lamborghinis whatever but I don’t buy them new because you can get a huge let somebody else carry the depreciation on it so I’m not saying you never buy luxury things I’m not saying that but I’m saying from now on this day forward continually ask yourself what’s the price what’s the value is that and I look for my personal preference and Warren Buffett talks about this later he calls us you must look for businesses that have a or investments that have a margin of error meaning your guess about what the value to price is you may be wrong so make sure the value is way higher that’s called the margin of error I like it our margin of safety I like a 10 fold so if this book I’m going to spend $26 I want to make sure it’s delivering to me two hundred and sixty dollars of return over the lifetime of me knowing this book and I’m very certain that this book has returned to me a hundred a thousand fold so what some great investments out there you know just there was a an investment deal that I was reading about where a kid bought found that hot meal the domain name you know the email hotmail hotmail com had expired somebody at Microsoft literally forgot that hop to renew the domain every year this kid bought it on GoDaddy or Namecheap or whatever registrar for eight dollars as an expired one so his investment price was eight dollars what do you think the value of that was well when Microsoft founder court order that forced the kid to give back since it was trademark and so on and in intellectual property but I think they had to pay something don’t quote me but I was a million dollars so what’s the price to value ratio Oh over time well they probably bought it back within a week or a month so $8.00 returning 1 million dollars that’s the Holy Grail that’s low price low capital investment high return over the lifetime when you’re buying your real estate be patient when you’re investing in yourself college university maybe you want to go back and get an advanced degree a PhD or an BA all assets and by the way just to be clear all assets need to be valued this way Warren Buffett says so valued all financial assets become economic equals it applies to outlays for a farm if you’re buying oil if you’re buying bonds Sox lottery tickets manufacturing plant it’s still about pricing value and he goes on to say and neither the advent of the steam engine the harnessing of electricity nor the creation of the automobile will change this formula one iota nor will the internet just insert the correct numbers and you can rank the attractiveness of all possible uses of your money throughout the universe it’s that simple that’s not the only thing you must know but that is the basis a wealth creation of investment strategy you must remember that everything is the same do not be chasing o ty is gold a good investment o is an iPhone app the next big thing oh you know should I invest in flipping houses oh oh people are chasing things without realizing that the asset class whether it’s real estate gold a business stock it that’s irrelevant it’s the price versus the value so that means you could become very wealthy or very poor in the gold coin business you could become very wealthy or very poor in the oil business I was out the other day in Hollywood I got went to a private screening of the movie whiplash which is going to be nominated for a lot of Academy Awards those little private screening screening with the production company that did that did that I was talking to one of the investors there who’s invested all recent a lot of Ryan Gosling’s movies that have been out driving this and he’s and he basically brought point he sounded just like warm of it he said you know make money in the movie business you want to be famous you don’t make money in the movie biz you want to be the next Steven Spielberg you know the next Scorsese George Lucas he said it depends on how much you pay to make the movie that’s the price so he said if you make a movie that you know is only going to generate 30 million dollars over the lifetime that’s the value 30 million dollars if you make that movie and pay the directors and I was asking him his always expensive to make movie just I was kind of joking he’s like he just bust out into laughing he’s like movies always go over budget so he said the secret for me as an investor movies is to hold the price that I pay the amount of money we spent on sets and locations and cameras and that we give to Ryan Gosling and all of these a list actors I got to keep that below the value and he said ty’ as long as you keep the price that you pay for that movie below the expected value remembering that you need a margin of safety don’t cut it too close don’t be like well I’ll spend $29 million dollars on a movie that I think will bring me 30 million that’s too close because your your estimations will always be off somewhat so he wants to pay five million dollars for a movie that he expects to bring in 30 million that way if it goes a little over-budget cost him seven million or the movie comes in and engrosses in the box-office and DVD sales and Netflix a little bit less than 30 million only 20 he had a lot large margin of error and of safety okay that’s beginning to get in some more advanced if there’s a tremendous amount of advanced stuff go to my site Tai Lopez calm I wrote two articles on this recently that you can check out Tai Lopez calm look there in the articles this book is absolute gold I want to reiterate that I just went through this step by step for the people in the mini MBA business course you know people ask me should you go to call it should you not go to college that’s irrelevant uh because it’s the price you pay versus the value you get at university there are university degrees that you can get where the price is much lower than this huge amount of value and money that that degree will make you but make no mistake there are college degrees especially if you’re unfocused and don’t know what you’re doing that will cost you this much money and over your lifetime only make you that much and they are poor investments and one of the reasons I came up with this business MBA program is that I wanted to create something not built by professors even though I love professors and they have tremendous knowledge but I want to have an alternative to uh and it’s a mini MBA it’s it’s obviously not a regular college degree it’s not accredited you’re not going to get a certificate if you need a certificate uh you have other issues if you ask me you know I dropped out of college I’m an entrepreneur not that there’s anything wrong with degrees but remember at the end of the day degrees or pieces of paper value in your brain is what you must create best investment you can ever make in yourself is doubling down go to seminars you know I pay thousand bucks for seminars and get I went to one titans of copywriting in Connecticut in September value it was not a cheap seminar I think I paid three or four grand or maybe even five grand three to five grand and put the value even one little nugget I heard the guy gut rancor he’s doing about two billion dollars I think in in sales in his company and I heard him talk and got to meet him as CMO bumped into each other there’s more than three to five grand value the price that ice money I spent expected value over the lifetime of my brain knock on wood hopefully I stay healthy ah should be ten to a hundred to a thousand fold that’s how you must begin thinking knowing this today and this is just a preview kinda you know these book of the days or free things that I do when I have time unfortunate I don’t always have enough time if you notice having put one out but if you come into some of the premium program that’s where I I put more my most of my attention people that meet me halfway and really commit to doing something you can go on a mini MBA program for one month or you can stay it goes up to 18 months in continual learning on financial freedom how to get four levels most people are in scarcity you want to get financial independence minimum 70 to 120 thousand above that as prosperity 120 to a million and above a million a year you’ll become someone who can create wealth and impact money is not everything but on the flip side it also is not to be discounted as something that’s not important it’s more important than people at think so pick up this book a few lessons for investors and managers I have it on my top list you can go to Tai Lopez comm slash books also check out the 67 steps that’s the basis of everything I do 67 videos that will change our habits and you can join the free book club if you’re not already on it now one quite a few questions for you that I want you to answer by answering these videos with intention okay with intention you will get more out of what you just heard and you’ll begin to become a value investor you will begin to grow when everybody around you is always struggling ah you will be M to move up the chain okay now the first question is I want to start asking us what videos would you like me to do next right I have so many options I have thousands of books i order 10 to 20 new books a day I read a new book every day and so what would be a subject if you just leave that below and that gives me ideas can’t always get to them but if I see a trend a lot of people asking something I will record then the next videos on that number 2 where’s an example where you’ve been confused where you have paid more for price than the value received and how are you going to avoid that in the future that’s of absolute importance all right lastly here there should be if you’re watching this as a video look right below here there should be a button that you can click on what take you you can learn about the 7 steps mini MBA and joining the free book of the day club or joining the premium stuff coming to the premium stuff telling you I don’t do this for money but I like people to meet me halfway as Joel Salatin used to say I don’t mind carrying a man but I don’t want him to drag his feet with this knowledge that we’re doing in these um twice a month VIP I’d like to invite you to that it’s like I said I’m not doing it for the money I see the value we had you know five six seven hundred people on these live calls I’m answering everybody’s questions we’re going through these and also you are making the intention the habit-forming of saying yeah I’m going to put my neck out there and change my financial status I don’t care how wealthy you are or want to be the fundamentals in this book you know I didn’t get into this but I’ll leave you with this what is the definition of a really great business but if it says those businesses that have high returns on capital and that require little incremental investment to grow you want a business I talked about this you know the virality effect how to create a business is like a boulder pushing up a hill you push it up the hill but once it goes to the top it rolls on its own you must stay away from businesses that require ongoing continual heavy uses of more cash investment capital so the really great business he says high returns a sustainable competitive advantage and obstacles that make it tough for new companies to enter as I talked about if you’re in the 67 steps the oil Arian destiny you must find your area competitive advantage didn’t get totally into that but once you understand price and value the next thing is like the Oracle of Delphi you must know yourself know that area of competitive advantage even if you already work for a company or start your own company you got to tweak it towards more your advantage what’s an advantage I have in business well if this is a business what you’re seeing now this book of the day stuff will have advantage that I read very fast and not many people want like books as much as I do so there are some people but I have a protective moat around this business there will be people who try to compete with me in business and that’s okay but it will be the mass of people will not try to compete so whatever your idea is don’t just think how great is this next idea don’t think oh I think of what is that moat around your castle your ideas the castle and you must create one of those I don’t have time to talk on that but we can talk about that sometime come into the VIP there should be a link here again book of the day get reading double down on your brain this book you know these books are ten or twenty dollars if you get them used sometimes there are five dollars in imagine the value pouring into your brain imagine that values 100 fold I buy books for four dollars and they you know instantly give me ten thousand dollars worth of value look at the return it’s insane so don’t be penny wise in dollar foolish okay so thanks so much and check me out on Twitter at Tai Lopez Instagram Tai Lopez one YouTube Tai Lopez official oh yeah if you want these regularly please subscribe if you’re here watching on YouTube on the button below that way you you get the stuff first before everyone else sees okay thanks so much talk to you soon
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Today’s book of the day is “A Few Lessons for Investors and Managers From Warren Buffett” by Peter Bevelin. Check out Tai’s advanced in depth lesson of this in the 67 Steps + Tai’s Exclusive Twice A Month Call System here.