How to Buy Distressed Assets, How to Network with Codie Sanchez | My First Million Ep. #176

Codie Sanchez 0:00 Most people should not be out there trying to build the next Facebook, and I think it's kinda fucked up that a lot of people try to tell people that's what they should do. Most people want Maslow's hierarchy of needs, right? You want your family taken care of, you want food on the table, you wanna be able to do the shit you wanna do on the weekends, and that's it. And so I like the portfolio actually better of a portfolio of small bets. I think of buying businesses a lot like I think about buying stocks.

Sam Parr 0:25 Yeah. I feel like I could rule the world. I know I could be what I want to. Uh. I put my all in it like no days off. On the road less traveled, never looking back.

Shaan Puri 0:36 Sam, you showed up.

Codie Sanchez 0:37 [laughs]

Shaan Puri 0:37 I thought, uh, I thought you were too hungover from last night's pod that went till 2:00 in the morning, uh, to, to show up today.

Sam Parr 0:45 Dude, it went later for me. I mean, I didn't go to bed till 4:00. What time did you... What time, what time was it over for you?

Shaan Puri 0:50 Well, it ended, but my brain didn't turn off, so, like, I don't even know if I slept last night. I straight... So we, so Codie, we had, um, Balaji on the pod yesterday.

Codie Sanchez 1:00 Ooh.

Shaan Puri 1:01 And, uh, I don't know if you know him.

Codie Sanchez 1:02 Yeah.

Shaan Puri 1:02 He's kind of a, he, he's real smart, smart dude, and he definitely, um, you know, has, like, a ton of different ideas and thoughts, and he's, like, super, super smart on a math perspective, science, uh, you know, technically for computer science. Um, and so he was, you know, rattling off a bunch of int- interesting things. But when he left, and I'm going to sleep, and it's just, you know, uh, you know, I'm sit there, I'm in bed, my dog's in the bed, and, like, my mind is, like, making up, it was straight up, I was just making up, like, scientific theories in its head. Like, you know that state where you're dreaming, but you're, you're, like, lucid dreaming or whatever? You're, like, kinda like half asleep? And so I was half asleep, but my mind was like, "Oh, but then the vector has to go to the scalar, and then it has to, you know, the order of magnitude." And, and I was like, then I'd wake up and be like, "What the fuck am I ta- like, what the fuck is going through my head? This is not even... This is gibberish. This is scientific gibberish." And that straight up happened, like, the whole night. So, uh-

Codie Sanchez 1:50 Well-

Shaan Puri 1:51 ... not a great, not a great night for me

Codie Sanchez 1:51 ... be prepared to be underwhelmed in comparison to him today, I think [laughs] is the moral of the story.

Shaan Puri 1:56 [laughs]

Sam Parr 2:00 Well, he, uh, he's just, like, like, we've had a f- I think we've had one other person on the podcast, like, I guess Michael Saylor could be this, but I, I for sure think that, uh, Rahul from Superhuman-

Codie Sanchez 2:13 Mm-hmm

Sam Parr 2:13 ... was like this. But there's, like, these, a handful of people who we've talked to, and you know how people say, like, "Oh, that person's a genius"? They're not, they don't really mean it, but if we define genius as just, like, a certain IQ, I would bet a lot of money that, that he was the highest IQ person that I've ever had a conversation with.

Shaan Puri 2:29 Yeah.

Sam Parr 2:29 And it was very obvious. And he actually was quite... He tried really hard to hide it, in that he tried to act nice and friendly.

Shaan Puri 2:37 Yeah.

Sam Parr 2:37 And there was times where he was like, "Sorry."

Codie Sanchez 2:39 [laughs]

Sam Parr 2:39 "You guys probably don't understand that. Let me try to re-explain."

Shaan Puri 2:41 Yeah.

Sam Parr 2:41 And that was ki- that was actually pretty cool, but he just, his, he's just smarter than me.

Shaan Puri 2:47 Yeah.

Sam Parr 2:47 Like, his, his, his oven just burns hotter, and I-

Codie Sanchez 2:50 [laughs]

Sam Parr 2:50 ... and there's nothing I can do to try to understand that. Like, I remember one time, I, I didn't wanna embarrass Shaan, but, like, Balaji was telling something, and he used so- he used math metaphor.

Shaan Puri 3:00 Yeah.

Sam Parr 3:00 He's like, "The vector," and he's like, this, this-

Shaan Puri 3:01 He's like, he's like, "What I try to find is the dot product between me and this," and I was like, "Dot product. I remember that, like, in ei- eighth grade." Like, I heard this phrase 15 years ago, didn't understand it then, never, ever thought about it again, and then he's referencing it for, like, the way he thinks about something. He's like, "You know, so I try to find the dot product." And I was like, "Fuck, I don't know what that means." [laughs]

Sam Parr 3:19 But then, but, but he went, like, he went from math, so he was at, talking about math to talk about an idea, and then he moved to, like, uh, this one element-

Shaan Puri 3:26 Battle-

Sam Parr 3:26 ... like, some type of chemistry tip

Shaan Puri 3:27 ... battle of the bulge [laughs]

Sam Parr 3:28 And then he went to the battle of the bulge, and he goes to Shaan, he goes, "Shaan, you know, like-

Codie Sanchez 3:32 [laughs]

Sam Parr 3:32 ... you know, like, at the Battle of the Bulge, right?" Um, and Shaan was like, "Yeah." And he's-

Shaan Puri 3:36 Yeah

Sam Parr 3:36 ... Shaan goes, I don't think he knew what the Battle of the Bulge was. But-

Shaan Puri 3:38 World War F- World War IV, right?

Sam Parr 3:40 And he's like-

Shaan Puri 3:41 Yeah. [laughs]

Sam Parr 3:41 [laughs] Yeah. Anyway, it was an interesting podcast, but this, this isn't about him.

Codie Sanchez 3:46 Well-

Sam Parr 3:46 This is about you

Codie Sanchez 3:46 ... that's what Wikipedia is for

Sam Parr 3:47 ... but it was a good podcast.

Codie Sanchez 3:49 Sometimes I'm kinda glad-

Shaan Puri 3:50 Yeah, exactly, yeah

Codie Sanchez 3:50 ... I'm not like that, honestly. Could you imagine how, like, you felt like that last night, Shaan. Could you imagine being in his head every day, or at, like, a dinner with normal people? He probably wants to kill himself.

Shaan Puri 4:00 Yeah. We were, we even asked him about that stuff. Uh, we were like, you know, we asked a whole bunch of questions that were like, I hope not even, like, condescending, but were kinda like, "Were you always like this?"

Codie Sanchez 4:09 Sure.

Shaan Puri 4:09 And, like, "What does, what did your family thi- like, were you, like, an oddball to them, or are they, like, was this, like, totally normal? 'Cause I've never met somebody like you, so I wanna know, like, what's your life like? What do you do for fun? Like, uh, you know, how does this all work?" And so we asked him a bunch of goofy questions like that. Actually, unfortunately, the best, the very best part was at the end after the recording ended, and we just kinda, after a three-and-a-half hour podcast-

Codie Sanchez 4:31 Oh, crap

Shaan Puri 4:31 ... we then shot the shit for, like, 30 minutes, and it was great, and his guard was totally down, and, uh, that was awesome. And then Sam started helping him with his newsletter tips, and he was, like, taking notes. And he was like, "Oh, this is, this is great. This is awesome stuff." And, like, that was ironically the best and simplest part of the podcast, and then we had, like, three and a half hours of, like, good stuff, but in a, the, I mean, the way you said it, hi- his oven burns hotter than ours. Uh, and so, you know, I didn't feel like we were able to really add too much to the conversation or really, like, steer it, because I was, like, riding a bronco that I didn't know how to ride, basically. It was too smart for me.

Sam Parr 5:03 Yeah.

Codie Sanchez 5:04 I love that. Can't wait to hear it.

Sam Parr 5:05 It was good.

Shaan Puri 5:06 Anyways, so, uh, with that out of the way, welcome to our guest. Uh, Codie's, Codie's here, so, uh, Codie, how do you, uh, how, I guess, like, how do you explain yourself, uh, when you kinda introduce yourself? 'Cause you have a newsletter that's pretty cool, con- you know, uh, uh, this Con- Contrarian Cashflow Newsletter. You have an investment, uh, fund and business there. You have built and own businesses, I think majority share in some businesses. So, like, what do you, how do you describe this jack of all trades? So, "Hi, I'm Codie. Here's what I do." What do you say?

Codie Sanchez 5:37 Well, I think if I'm on an airplane sitting next to somebody, I usually tell them I'm a salesperson so I don't have to talk too much. Uh, but in-

Shaan Puri 5:43 [laughs]

Codie Sanchez 5:43 ... in a conversation where I was trying to impress somebody, you know, I'd, I'd probably say I'm an investor. I am a private equity investor. I run a fund that's about a couple of hundred million bucks focused on cannabis. Before that, I did emerging markets, couple billion dollars raised there. And, uh, and now I write about all the things I wish I knew when I was first figuring out anything to do with this green language of money. Um, and I do that at Contrarian Thinking, and I meld the two. But I think these days that's not that weird. There's a ton of VCs, not so many PE investors out there probably, that write about investing and share their ideas, and I kinda think that's probably the future and where it's going, going forward.

Sam Parr 6:21 You, you... I didn't know that. I knew that you had the newsletter, but so you have a- you run a, a $200 million fund

Codie Sanchez 6:27 Well, not by myself. There's five partners, but yeah. We have a $200 million cannabis private equity fund. We invest in companies that do, like, 10 to $50 million in revenue, largely. It's called Entourage Effect Capital. And, uh, we've invested in 67 companies thus far. Some cool ones, um, you know, that you all would know. I think there's been six unicorns in there thus far, so you know, um, you guys would maybe know GTI, Green Thumb Industries, Acreage, Canopy Growth, uh, Curaleaf. I don't know. If you're big weed connoisseurs, you'd know them. And then, uh, and then we have a smaller fund that's about 20 million bucks that's for micro PE. So that's just me and a couple other partners' money where we buy small businesses, and that's... If, if weed's sort of fancy and, not fancy, I guess, trendy-

Sam Parr 7:15 Oh

Codie Sanchez 7:15 ... uh, then the other one are super boring and things that, you know, your, your father did when you were growing up and you didn't tell people about.

Shaan Puri 7:25 And that's like, uh, give us examples. We're talking laundromats. We're talking, um, what, what are we talking about? Plumbing businesses. What are you looking at?

Codie Sanchez 7:32 Yeah, the, actually the first one was a plumbing deal. We started it because my Uncle Eb, uh, he had a $5 million business, let me make sure I get the numbers right, that was doing about 2 to $3 million in profit, and he was old, you know, 70s-ish, and he was a sharecropper. He grew up in a sharecropping family. Um, didn't know anything about the business world, and when he came to, uh, retire, he didn't know anything about M&A. So instead of selling the company, he basically just wound it down. And, uh, and, you know, he took a company that had 2 to $3 million in profit and just, just, you know, let everybody go and, and sort of wound down the business, and I thought that was a real waste. And so-

Shaan Puri 8:08 [laughs]

Codie Sanchez 8:09 ... um, we realized, wait a second, there's actually, like, a business model here. It's called PE. I've been doing it for 12 years at Goldman and Vanguard and State Street and all these different firms. Why don't, why don't they apply this to these micro-sized businesses, anything below three mil? And, uh, instead of us making a bunch of money for other people, we can make money for ourselves. So we ended up taking an offshoot of Eb Homes Plumbing. You can look it up. It's in Phoenix. And we bought a- another plumbing company, rolled it in, sold that one. That was a little tiny company. And, uh, and then I've done it for a bunch of others. And now we own laundromats. We own a podcast production company. Uh, we own some lawn care businesses. We own a professional services business that's in the cleaning space. So a slew of tiny, sort of boring businesses. And most of the time, uh, I don't operate any of them. There's somebody else that's an operator in them, or we place somebody in the business.

Shaan Puri 8:59 Uh, we love this model, me and Sam both. Uh, and a s- couple of our best friends started a kinda micro PE firm. We invested in it and I think have been... I don't know, Sam, I don't know how f- how closely you track them, but we've been, I've been learning a ton as they l- look at all these different deals, and it just seems like there's this huge generational shift of people who are aging out of their business and need to hand it off. The kids don't wanna take it over necessarily or, or aren't able to or whatever. And so basically the boomers handing over businesses. There's just, like, all these businesses that are beautiful, 5, $15 million a year, profitable, super steady book of business, um, and you can, you can buy these out at-

Sam Parr 9:34 But like a-

Shaan Puri 9:34 ... re- super reasonable multiples.

Sam Parr 9:37 Yeah. It's like a 65, 70-year-old mom and dad whose kids went to a good school, and they're like, "Uh, I'd rather work at Facebook than run the-

Shaan Puri 9:46 Yeah

Sam Parr 9:46 ... plumbing company, please. Um, I don't wanna do that." Uh, so and they're like, "All right."

Shaan Puri 9:51 [laughs]

Sam Parr 9:51 "What do we do now?"

Codie Sanchez 9:52 100%.

Sam Parr 9:53 Uh, and that's what these guys are buying. It's, it's going great. Uh, like, I get their updates. They're making a lot of money.

Shaan Puri 9:58 And so can you-

Sam Parr 9:59 Good for them

Codie Sanchez 9:59 Yeah. [laughs]

Sam Parr 9:59 Good for me too, right? I guess.

Shaan Puri 10:00 Jo, can you, can you, can you draw a quick line? So, like, let's do a quick, uh, hop through the resume ca- so people... 'Cause I think where you're at now is super interesting. Anytime I meet somebody who's in a really interesting spot now, I'm like, "How the hell did you get there?" Uh, so you said something like Goldman, but, like, without going into the details of, like, oh, I did this, and here's how it went, just sort of like, "I went to school thinking I'd do this. First job was here. Second job was here. Third job was here. Now I'm here." Like, g- can you give us that for sure?

Codie Sanchez 10:24 Yeah, the short and sweet. Uh, so I went to school totally unrelated to anything financial. I'm not really a, a finance nerd at the core. Um, I started off in human, uh, [tsks] trafficking and drug smuggling as a journalist, not doing it, uh, but along the US-Mexico border.

Shaan Puri 10:39 [laughs]

Codie Sanchez 10:40 So, um, so I was covering things like, uh, you know, old people being left behind at the border and, um, you know, went with a couple coyotes and actually saw what the process was like. And anyway, super young at the time. I thought I was gonna change the world, realized, like, ah, you know, Britney Spears shaves her head, and nobody cares about these stories, so maybe there's a different way. And so anyway, uh, so moved from, uh, journalism to had my little quarter-life crisis and decided that maybe I wanted to understand finance 'cause my last name's Sanchez. All these people's last name was Sanchez, Suarez, whatever the case may be, and I was in a very different position than they were. So I was like, "What's the difference? Why are they there and I'm here?" And I think the only int- difference is green. It's not actually even that I'm American. And so went to, from there I got recruited to go to Vanguard, accelerated development program, saw a bunch of parts of finance, didn't understand any of it, but journalists, we ask a lot of questions, so was pretty decent at that. So asked a lot of questions. Got from Vanguard, they're all about passive investing, right? So create an index. That was at the very beginning, ETFs. Uh, and create an index and replicate and replicate and replicate, and I thought that was cool but not that sexy or fun. So I went to Goldman, and I wanted to understand active. How do we do IPOs? What do these alternatives look like? Is there more margin? Then went from Goldman to State Street, ran a international investment business for State Street at the time, and then, uh, left, did a JV with a company called First Trust, and built out their international portion. So I grew the business to a couple billion in Latin America, and, uh, and basically we sold products to big pension, sovereign wealth funds, et cetera. And then after that business, uh, I was ready to exit, myriad of reasons, and looking for the next emerging markets. Uh, and I start- invested in cannabis a few years back but real quiet. Wasn't sure my mom would approve. And, uh, and then went full in as a partner into EEC.

Sam Parr 12:36 What's your, um, uh- Um, what's your heritage? You said that you're... Are you, uh, you were talking about the fourth, are you Mexican?

Codie Sanchez 12:41 Yeah, so my fam- my father's half... So I'm half Spanish, half Mexican.

Sam Parr 12:45 Are you Catholic?

Codie Sanchez 12:46 Yes.

Sam Parr 12:48 Me too. So a, a Mexican Catholic mother probably wasn't a fan of, uh-

Codie Sanchez 12:53 Oh, yeah

Sam Parr 12:53 ... what you were doing.

Codie Sanchez 12:53 She was thrilled. Baby's, baby's a weed financier. She was really excited about it.

Sam Parr 12:57 [laughs]

Codie Sanchez 12:58 Um, just making daddy proud. But, um, you know, I think once we kinda understood, I mean, here's my pitch on cannabis, but once we kinda understood the, you know, psychoactive portion of it and the benefits for those who are overusing opioids, like, I got her around to it, but certainly up front she was not thrilled about that. But that's when you know, right? When people think you're a little crazy for doing something, there's usually at least some opportunity left. Otherwise, all the smart people would've moved first, and I'm not smarter than anybody else, I'm just better at maybe finding some early emerging markets people won't go into yet.

Shaan Puri 13:29 And I thought you would be a great guest for two reasons. A, I went on your thing and you were so prepared. Uh, I, I'm not anywhere near as prepared for this as you were for me, unfortunately.

Sam Parr 13:39 [laughs]

Shaan Puri 13:39 But I knew enough, which was like, oh, she's great at talking, and, uh, which is, like, half the battle. And then the other half is like, oh, wait, she's, like, wicked smart with a bunch of industries that I think people don't know a ton about. So micro PE, I know there's a lot of people interested, but for most people it's a little bit daunting. They don't understand, how do I identify the businesses? How do you value them? How do you buy them? What do you do after you buy them? That sort of thing. And then same thing with cannabis. Uh, people kinda know it's a big market, but don't spend, you know, if you're not spending every day in that world, you don't know how it's going, how, what's, what's been growing. And so you sent us-

Codie Sanchez 14:12 Exactly

Shaan Puri 14:12 ... a bunch of things. So you sent us ideas on the micro PE side, you sent us ideas on the cannabis side, and then you sent us some controversial thoughts. Sam, where do you wanna start, uh, of those three?

Sam Parr 14:24 Uh, the ideas, particularly the, the, she posted something in trends about mailbox, mailboxes which are... So, like, you just have, like, five or eight different things that I think are interesting. They're not, like, huge home runs, but they're small business entrepreneur, like, stu- shit that, like, an immigrant who came from nothing, like, would start, and then eventually did it for 30 years and they would have, like, a fucking empire.

Shaan Puri 14:48 So let, let, let's rapid-

Sam Parr 14:48 That's what I, that's what I wanna hear

Shaan Puri 14:49 ... let's rapid fire them, and here's how we'll do it. Uh, you sent us this bullet point list. I'm just gonna say the phrase, and you be like, "Okay, so here's what I'm thinking." And then if we just wanna switch, if I'm like, "Oh, okay, that's great," uh, I'm just gonna throw another one at you, and then you go from there. I think you'll be able to volley these pretty well.

Codie Sanchez 15:03 Love it.

Shaan Puri 15:03 All right, so let's do that one. M- Mailbox money. What are you, what are you thinking about here?

Codie Sanchez 15:06 So this is pack and ship centers. So basically, think FedEx, UPS, except get rid of the franchise fees, 'cause that's 25% of your, your profit off the top, and instead you just put, you know, Sam and Shaan's shipping center on the front of it. And what this is, that I didn't realize, my friend Lisa did it. I'm always curious for my people who make money in ways that are repeatable, since I'm not smart enough like Balaji or whatever his name is to create the next Tesla. Instead, I just want a bunch of stuff that cash flows now. Um, and so with this, you know how everybody's obsessed with storage units? Like, everybody builds these storage centers, and that's-

Shaan Puri 15:42 Yeah, self-storage

Codie Sanchez 15:42 ... been, like, the sexy thing.

Shaan Puri 15:43 Yeah.

Codie Sanchez 15:43 Right. And, and that's really just a riff on everybody was obsessed with multifamily and apartment beforehand. They're, like, going smaller and smaller and smaller, but still trying to get-

Shaan Puri 15:53 Yeah

Codie Sanchez 15:53 ... as much profit as possible. Well, that's what pack and ships are. So essentially the money is not in the taping of boxes and the stuffing of, stuffing to make sure stuff doesn't break. It's actually in the little mailboxes in the front.

Shaan Puri 16:07 Uh, oh, I was gonna ask you, what do you think of this, uh, P- PO box rental? So I, first I like the trend, which is you're buying a box of real estate, and you want, like, kind of these low operation, you know, rental units. So okay, self-storage, but now you shrink, shrink the self-storage unit. Instead of being, you know, 100 square foot little room, you're shrinking it down into a one square foot box that you're renting out for 20 bucks. And what you were saying, so let's just do the math real quick on this. You're saying 200 boxes in a location, roughly? Is that right?

Codie Sanchez 16:36 200 would be what you don't want. That's UPS, FedEx. Go 1,000.

Shaan Puri 16:40 Okay. Okay, okay, gotcha. Okay. That, now the ma- math works. So 1,000 boxes, average $15 a month of renting out the PO boxes. And how do you get customers to, like, h- what does she do to get c- what does your friend Lisa do to get customers? How does she acquire these PO box tenants?

Codie Sanchez 16:55 Well, I, the, the smartest way, what I talked to her into doing, she built the first one. That took a year and a half to become profitable, because she had to do what you were just talking about. It's not really that complex of a business. It's ads, so PPC. It's dropping actual hard mailings in the surrounding neighborhood. It's things like she does, like, a book setup-

Shaan Puri 17:13 Yep

Codie Sanchez 17:13 ... out front. Little, um, pop-ups for the neighborhood where you can, like, you know, free packing if you ship this day, all that kind of stuff. Those squiggly arm things, you know, that you put outside of a new unit. All that stuff. And then-

Shaan Puri 17:27 [laughs]

Codie Sanchez 17:27 ... uh [laughs] , she, uh-

Shaan Puri 17:28 Right

Codie Sanchez 17:28 ... but, but the second store I told her to buy. And so what she did is went out and bought an, already an existing store that had customers, and then just upsold them. And that's a much easier way to do it. And so you buy the store for about 2 to 3X profit. Her second store she got for about 1.5X, retiring, uh, owner, and then she was able to take that business and sort of double the revenue for that one.

Shaan Puri 17:52 Uh, I like this idea. I actually might steal this idea because, um, I just rented out a big warehouse for my wife's, uh, uh, business, and one thing we could do is just put a bunch of these mailboxes [laughs] in, uh, into that space, and, uh, and, and just actually offer this as a sort of a, a simple way to take advantage of a small footprint of real estate.

Codie Sanchez 18:12 Yeah, I think you have to decide what, what type of human you are. Like, if you are the type of human that has a capa- ca- capability to build up a really big business, and that's what you in fact want, to be a CEO of a hustle or to be a CEO of an even bigger company, then I think the ROI on that is potentially more interesting long-term. You're not gonna get the same type of multiples with these tiny businesses. But here's the thing. Most people are not like the three of us, and I don't even know if we'd all be in the same category. We're all different in the way we've built things. Most people should not be out there trying to build the next Facebook, and I think it's kinda fucked up that a lot of people try to tell people that's what they should do. Most people want Maslow's hierarchy of needs, right? You want your family taken care of. You want food on the table. You wanna be able to do the shit you wanna do on the weekends, and that's it. And so I like the portfolio actually better of a portfolio of small bets. I think of buying businesses a lot like I think about buying stocks. So how can I get a little portfolio of them with somebody running or operating them so then my risk is diversified? And, um, you're right, it takes more time, but if what you're really going for is I wanna make, you know, 200,000, 300,000, 500,000, a million bucks a year, and that that is my goal, not to change the world, there's so many better ways to do it than do a startup in my opinion.

Shaan Puri 19:29 Yeah, I'm 100% with you on that. Uh, I think the build versus, build verse buy is so slanted towards build because building sounds sexy, building sounds, like, virtuous. It's what the media talks about. And, um, and it's really unfortunate 'cause I know a lot of people that would've been really happy with 250K a year of profits, um, and low maintenance, low headache. And, um, and unfortunately they get sucked into either one of two paths. It's like, "I guess I'll do the startup thing 'cause I wanna be entrepreneur. I wanna be kinda my own boss. Uh, so then I gotta, like, do this from scratch, find product market fit. Like, damn, that's hard." And the other path is like, "Oh, that's, that sounds really hard. I'm just gonna stick at this job and, um, and you know, I'll be an employee for the next, you know, 25 years and never really get that freedom 'cause I'm sort of on their schedule. I'm basically renting my time out to this company." And so the b- the buy path versus build or join, I think buy gets criminally underrated right now, but I think it's changing. Like, we have Andrew Wilkinson on the podcast a lot, and one of the reasons he's so popular is that when he says what he does, there's a hell of a lot of people out there who are like, "Shit, I wanna do that. That sounds fun."

Codie Sanchez 20:35 Totally.

Shaan Puri 20:35 [laughs] Uh, "That sounds like a easier path than the one I'm on right now." And so I think it's quite appealing.

Codie Sanchez 20:40 Yeah.

Shaan Puri 20:41 Sam, you wanna jump to one of these other ones that sounds interesting to you? We got... I see a bunch that I know you'd like. Tiny homes, buying distressed assets for d- zero dollars, laundromats. Which one you wanna do? Oh, no. We gotta tell you, Sam, the audio's gone again. [laughs] Okay. [laughs] All right. [laughs]

Codie Sanchez 21:03 [laughs]

Shaan Puri 21:04 Sam has, uh, peaced out. The technical difficulties have overcome him, and he cannot continue on. He is, th- he is out of the game. Uh, okay, I'll do one. Uh, so I wanna talk about dis- buying distressed assets for zero dollars. Is this something you've done, or why did you bring this up on the list?

Codie Sanchez 21:19 Yeah. So this one is one I've done. Um, and actually there's an example of it. I'll give you the actual example. So I have a friend Brittany, who owns a bunch of gyms, and... Not a bunch. She owns two. And they're like the, you know, like the gyms that, um, a lot of women go to where they have, you know, set classes and, you know, they all get in and work together?

Shaan Puri 21:37 Yeah.

Codie Sanchez 21:37 It's kinda like women's CrossFit, but not with big weights.

Shaan Puri 21:40 Yeah.

Codie Sanchez 21:40 Anyway, so she owns a couple of those.

Shaan Puri 21:42 Like shapes without the franchise basically.

Codie Sanchez 21:44 Exactly. Exactly. So, um, she was telling me that a bunch of her friends, their businesses, Pilates studios, barre, whatever, were going out of business, right, during the pandemic. And, um, what was fascinating to me is she was like, "So I'm buying some equipment. You know, I feel bad for them. I'm helping them out." I'm like, "No, no, no, no, no. The way we gotta do this is think about those businesses. They're going under, and they're worth now zero to the market, but they have value. So, you know, they're not getting anything out of the client roster that they have, all the goodwill that they've built up." So what we decided to do was reach out to some of these gym owners and basically say, "Hey, you know, I'm really sorry. I know you're going through this terrible time. What if we could help annuitize you a little bit, where you could get some revenue off of the, the business that you're about to close for zero, and instead we can do a rev share? And so I own a business right now. We'll transition over your clients from your business to mine very carefully, very thoughtfully, but give them a new home. And then for every client that we bring over from you, I'll pay you out on it for a year, or I'll pay you out on it for six-"

Shaan Puri 22:50 Right

Codie Sanchez 22:50 ..."months at X amount and 24 months at Y amount, however we wanna structure it. But this way you actually make money while you're closing. Your clients have a new house, and we have new clients, and we can serve them, and we're friends, and you like me anyway." And so this business-

Shaan Puri 23:04 Right

Codie Sanchez 23:04 ... uh, what, to me what's fascinating is nobody's doing this that I know of. Like, I, if I owned any business, I would be out there right now for every business closing on Yelp. 60% of the businesses on Yelp that close temporarily close per- permanently. So I would be out there right now going after every one of their client lists, even if they were unrelated, and doing discounts and coupon codes, giving a rev share to the owner, who probably could use it, and taking their client base. And that's how I would buy distressed assets. I wouldn't spend a dime.

Shaan Puri 23:30 I love that. I think that's great. Uh, if it's basically you're picking up the assets and none of the liabilities.

Codie Sanchez 23:34 Exactly.

Shaan Puri 23:34 So you're, you're not buying the business and then having the rent and then, you know, having to bring that business back up. You're basically saying, "What is the, what is remaining as an asset to this business?" Um, and it's the customer rol- Rolodex, and I think that's a, that's a great one that costs zero out of pocket from day one. It's just profit share, uh, you know, if, if a customer does come on over to you. So I think that's a great one. Uh, let's talk about, um, modular homes or tiny homes. I think you have a couple of ideas on this. So, uh, you have one, correct?

Codie Sanchez 24:01 I do. Yeah, we bought a modular home, which I didn't even know. Do you know there's a difference between manufactured and a modular home? There's all this weird terminology.

Shaan Puri 24:09 No, like I actually, this is what I was gonna ask you is, like, w- I thought a manufactured home is a modular home. No. They're two different things?

Codie Sanchez 24:15 Yeah, exactly. Yeah, the f- I guess... So a manufactured home basically means it's what we think about, like, stereotypically, right? It's a, it's a trailer home basically. All the difference is-

Shaan Puri 24:24 Yep

Codie Sanchez 24:24 ... is that there's no foundation set. So you could pick that bad boy up, and you can move it, right? That's manufactured.

Shaan Puri 24:29 Right.

Codie Sanchez 24:29 Modular is that it's built in pieces, which is modular, what that means, but it has a foundation. So at the end of the day, there's really no difference between a, what is called a stick-built home, a house that probably you're living in, that I live in right now-

Shaan Puri 24:44 Yep

Codie Sanchez 24:44 ... and this modular home. But the crazy part is, is, well, one, we've all seen these cool modular homes all over the place popping up, but I was surprised. I'm like, "They don't really make sense, not at scale." They're not that much cheaper, and they're not that much faster when you just drop one on your property. And I did a bunch of research, asked a bunch of people. They're kinda sexy, but they're not that much cheaper. But when they are cheaper is when you do them at scale, and I was, I was surprised that there weren't any developments that did this. And so I started scouring the country, found a few, one in Park City, and bought there. And the numbers were amazing, and I bought it, so I know they're real. We bought our house for $900,000 in Park City, and, um, on an acre, 3,000 square feet. The average price, average or median, is, like, uh, $2.5 million in Park City. So the cost that they were able to save was so amazing, and they didn't pass it on to the user fully. I think they weren't sure if we all were gonna actually buy into this. But the houses are super sick.

Shaan Puri 25:53 Right.

Codie Sanchez 25:53 Um, and I think that's a model. If I was a developer, I'd be using those all day long, and, and I'd probably buy a modular housing company and then use it. Don't you think?

Shaan Puri 26:05 Right. Yeah, and so when you look at that home today, can you tell basically this is anything but a normal home? Like, i- is it aesthetically different, uh, once... If you didn't know coming in what it was?

Codie Sanchez 26:15 No. So I'll drop you the link right now. I'm not gonna say where it is-

Shaan Puri 26:19 Yeah

Codie Sanchez 26:19 ... just in case anybody wants to come yell at me about something stupid I say online. Um, but, uh, I'll drop you the link, and you can see the difference. But no, it's super sweet looking. So it's, it's kinda the open concept, big windows, whatever the case may be, and, uh, and you can't tell the difference. The only difference really is that the turnaround time, so we bought this in December of last year or January, February, I don't know, and it'll be done by July. And so it hadn't been built at all.

Shaan Puri 26:49 And you, are you gonna add to it? Like, are, are you-

Codie Sanchez 26:51 Uh

Shaan Puri 26:51 ... gonna add more modules to it?

Codie Sanchez 26:54 So I'm gonna add a back office, like, module, and then what we did is we got, like, five or six of our friends to buy in the same community, and they're cool looking. And so I think I'm gonna do some event or something and utilize the four or five of them, and then you could have it as a tax write-off because it'll essentially be like a little business.

Shaan Puri 27:14 Okay. This house is sick. And so the company that's doing the development, they're, the company that's doing the development here, they are not the actual, uh, manufacturer. So there's three layers, right? There's the manufacturing le- level, then there's gonna be, uh, probably some delivery layer, and then there's the developer who's doing a development, marketing that, and then there's, like, kind of the individual home buyer, uh, beyond that. So have you looked at the manufacturers of this?

Codie Sanchez 27:36 Yeah, so that's where this one's interesting. The m- the builder and the manufacturer are actually in this deal together. So they-

Shaan Puri 27:44 Hmm

Codie Sanchez 27:44 ... do own the modular company, and at least a portion of it, and then the builder is one that's built this in a couple other places. They also have another location that I think is cool and also could work at scale, which is modular tiny hotel rooms essentially, and I believe that's in Jackson Hole-

Shaan Puri 28:00 Right

Codie Sanchez 28:00 ... Wyoming. Um, and the economics are just so fascinating because, you know, our modular home will be built in less than six months. It's about a third of the cost. The square footage, uh, if you break out by square footage, it's about a third of the cost. And then the part that's interesting is in these locations where there, the weather's terrible, you know, and you can't break ground very often, they, um, they build it all in a warehouse. So it's fine. They lay the foundations all in one period-

Shaan Puri 28:27 Right

Codie Sanchez 28:28 ... of time, and then boom, boom, boom, boom, boom, do all, throw all the houses up as opposed to everybody else in Park City has to wait, like, you know, two years or something like that. So we'll see, but so far so good.

Shaan Puri 28:37 Okay. This is pretty sick. I like this one. Um, I'm gonna jump to more 'cause I wanna see, uh, what these other ones are all about. So talk to me a little bit about, let's do a couple of the controversial thoughts. Um, I'm gonna rip through them pretty quickly, and, uh, and so let's, let's do the first one. Number one, angel investing is largely dumb.

Codie Sanchez 28:54 Uh, yeah.

Shaan Puri 28:55 Go.

Codie Sanchez 28:55 [laughs] Is that painful because we both are angel investors too, and you have a rolling fund? [laughs]

Shaan Puri 29:00 No, I actually, I, I actually say this, I say this often, and people are like, "You have a rolling fund." And I'm like, "Yeah, uh, I don't..." Of, of all my investment types that I do, this is, I would say, the worst one. But I think it's still good and fun, and I do it anyways, but I have, like, two or three better ones that I do besides this.

Codie Sanchez 29:16 Yeah. So I think, you know, one of my, uh, good friend's name is Justin Donald, and we're both pretty obsessed with deal structuring. One of the big- biggest things I have a problem with with angel investing is it's, it's too fun. It's like gambling, right? Like, you get-

Shaan Puri 29:30 Right

Codie Sanchez 29:30 ... excited about the founders, and guess what? Founders are charismatic. That's how they raise millions of dollars, and so you end up getting sold, and it's not their fault. And then, you know, there's fraud, and, you know, I wrote this whole piece about this one guy that we lost to $2 million with because he just was super egotistical. He had, like, big images of himself on the wall, like, all this stuff later that I got added to my due diligence questionnaire of, like, how many images of yourself do you have in your office?

Shaan Puri 29:56 [laughs]

Codie Sanchez 29:56 But, um, but, but the, uh, the thing with angel investing is, you know this, you need, like, 20, 30, 40 deals for every one to four that are gonna go through. And so I think that the other thing that we do a disservice is telling people to invest in angel early on. Once you've made a few million dollars, and I mean that literally, then I think go into angel investing, or if you're on a path where you're making really good money and you've made at least half a million, a million bucks, then I think you can start angel investing. But until then, you know, let other people lose money and learn from it. You said it. Like, you were like, "Take a, take a, you know, DocuSign image of every deal you wanna do, write down how you do it, timestamp it so people can see, and then decide later on how good you are at it without burning through a few tens of thousands of dollars."

Shaan Puri 30:44 Yeah, exactly. Uh, okay, so I have a bunch more thoughts there, but I, I largely agree with you, and I would say, like, it's one of those, here's my red flag, is in order to talk, in order to justify angel investing, you have to give a blend of reasons. It's like, well, it's really fun. Uh, I like learning about the, you know, the future and the mar- And these are all true things, by the way. So it is fun. You do learn a shit ton, so it's like an education. Um, you can make great money if it, you know, pans out a- as you- Assemble your basket. You know, you should over a s- you know, you should, you know, be netting, you know, a 20% plus IRR. Uh, it just takes a long time. It's illiquid. Um, and it's, like, not too much work, um, because you're largely investing in your network that you've already built for 10 years. Like, that's kind of the p- the thing. And so there's, like, this blended reason, and anytime you have a blended reason, it just really means that there's not one-

Codie Sanchez 31:34 Yeah

Shaan Puri 31:34 ... really great reason to do something. Um, and so those are always, like, you know, suboptimal choices I find for myself at least whenever I have to come up with a blend. And so, and I n- and because I tell everybody this around me, whenever they hear me justifying something with a blended reason, they're like, "Oh, interesting. So that's a pretty big blend."

Codie Sanchez 31:51 [laughs]

Shaan Puri 31:51 And I'm like, "Oh yeah, we should just not do it. Never mind. Take it all back," um, because I'm giving you this huge list, and instead of just saying, "We should do this because of X," right? Like, we should invest in this business because it's growing like, like a weed, and, um, if it wins, it's gonna be this big. That I can get behind. Um, and some angel investors do fall into that.

Codie Sanchez 32:10 Yeah.

Shaan Puri 32:10 But the act of angel investing as, like, a, a job or a hobby is, um, is like, it's more like when you describe playing basketball with your friends. Like, "Oh, it's great. I get to hang out with my friends. I get a good run in. I get exercise. You know, I'm, I, I, you know, it's, I get outdoors." It's like you're giving this blend of reason, uh, for doing the, the, the, the really fun thing you just really wanna do, and you're justifying it, but the reality is you just wanna do it and your brain comes up with reasons afterwards-

Codie Sanchez 32:37 I think that's exactly right

Shaan Puri 32:38 ... uh, for the most part.

Codie Sanchez 32:38 Yeah. The only caveat I have to that is if you can go later stage deals, which now you can do with like a lot of the late-stage, uh, angelist-

Shaan Puri 32:45 Yeah

Codie Sanchez 32:45 ... syndicates, or if you can structure debt. Like, if you can figure out a way where you start earning interest day one on a startup that actually has, you know, it's a little bit later stage and so it has some revenues, or you could, you know, get into a debt deal that's on some of its, you know, factoring of the invoices it, it has. Like, there's, you know, people always think of equity-

Shaan Puri 33:05 Yep

Codie Sanchez 33:05 ... with startups, but lots of startups prefer debt. So do debt with, like, a equity warrant kicker on it, and you can actually make money from day one and then have some equity upside, and that I think is interesting. But, you know-

Shaan Puri 33:17 Right

Codie Sanchez 33:17 ... just throw the Y Combinator term sheet out the window, 'cause that, it's not gonna be on that.

Shaan Puri 33:24 Right. Um, and all that being said, I'm still gonna angel invest, uh, 'cause it's, 'cause it is fun. Um, a- and it's, you know, it's a hobby that makes money. So okay, so let's do another one. Public market, public market investing, also kinda dumb. Talk to me there.

Codie Sanchez 33:38 Well, this one I like to talk about a lot with big investors, because if you look at the Forbes 100 list, there is not one person on there who made their money from just investing in the stock market. And then this is where people are like, "Codie, Warren Buffett, Carl, Carl Icahn." And it's like, I remember I was at Goldman in 2009 when... Do you remember Buffett did the deal to invest a bunch of money in Goldman to stabilize it? Yeah.

Shaan Puri 34:01 Yeah.

Codie Sanchez 34:01 So, um, I was there then, and it was not a public market deal. Warren didn't go out to the street and buy a bunch of stock. He had a ton of warrants and options on top of it. It was a total backroom deal, and that's the only reason that he did it, because he basically had this huge asymmetric risk, right? Where he had a bunch more upside than he had-

Shaan Puri 34:20 Right

Codie Sanchez 34:20 ... downside. And that's the same thing with Icahn, who tries to affect the outcome. So my point with people, especially these days with, like, GameStop and all the madness in stock investing, is like, y- if you don't have an unfair advantage, if you can't, like, write down why specifically you're gonna win instead of somebody else, you should be really careful speculating on stocks. Because the big boys-

Shaan Puri 34:41 Right

Codie Sanchez 34:41 ... don't really do it.

Shaan Puri 34:42 Uh, yeah. I have a cousin who runs a hedge fund, and, uh, when he told me kinda like all the different things that they have at their disposal, I was like, oh, okay, I'm, I'm coming into a gun fight with, like, a fingernail.

Codie Sanchez 34:53 [laughs] Yeah.

Shaan Puri 34:54 Uh, that's kind of like h- how, how, uh, lopsided it is. And I, so, you know, I, so, so that being said, again, I think this is important to say skin in the game here. Do you own any public equities? And, uh, so despite this, do you just do, like, Vanguard? Do you just say, "Oh, here's 10 companies I believe in. I'm gonna do that," or what do you do?

Codie Sanchez 35:12 Yeah, I don't hold any individual stocks for speculation purposes. I invest in indices. And I'm not saying this is right or I'm some guru. I'm just saying I don't think I'm smart enough to beat the market, and so I don't play-

Shaan Puri 35:24 Right

Codie Sanchez 35:24 ... games where I don't like the rules. I'd, I'd rather write my own rules-

Shaan Puri 35:27 Right

Codie Sanchez 35:27 ... if at all possible. So I go, you know, equity indices, Vanguard, you know, whatever the case may be. I like Vanguard the best. Um, and then I go, uh, mutual funds on alternatives, private equity, REITs, where you can actually have an unfair advantage. Um, but I don't speculate on any individual stock. Now, I don't, I mean, would I own Apple, Amazon, Facebook, whatever? Would I make a play on Twitter if I thought that might be fun? Yeah, maybe. Um, but I think there's so many easier ways to make money with private market investing and buying businesses as opposed to having to deal with the irrationality of the crowds, right? I mean, do fundamentals-

Shaan Puri 36:04 Mm-hmm

Codie Sanchez 36:04 ... really matter in today's world, or is it whoever has the best IR and doesn't have some crazy thing the CEO said or done?

Shaan Puri 36:14 Right. Uh, yeah, exactly. Uh, have you ever heard this term a Keynesian beauty contest?

Codie Sanchez 36:19 No. [laughs] What is that?

Shaan Puri 36:23 So, uh, named after I think the economist, uh, Keynes.

Codie Sanchez 36:26 Yeah.

Shaan Puri 36:26 And ba- basically the, the idea is that this is how the stock market works. So a Keynesian beauty contest is where you don't just, uh, so in a normal beauty contest you sort of just would assess, uh, let's say the contestant that's, that's on the stage, but in this case, uh, the way the stock market works is it's not you assessing the true beauty of the thing, it's you guessing what other people will value it at, who are also guessing what other people will value it at. And so it sort of is this like extr- you get these, like, really warped things happen because everybody is not betting on the thing. They're betting on what the other people will do about the thing, and everybody knows that everybody's betting on what the other people will, will value the thing at. And so you get these, like, really crazy, um, sort of out of whack things that, that aren't, you know, value investing, uh, at its core. Um-

Codie Sanchez 37:12 No, I totally-

Shaan Puri 37:13 Okay, let's do-

Codie Sanchez 37:13 ... totally agree

Shaan Puri 37:15 Let's do a couple more. So, uh, buying real estate at auction, so a way to buy real estate at a discount. Talk to me about this one. I've never done this.

Codie Sanchez 37:22 Yeah, [laughs] this one's fascinating. So for instance, let's use Texas. Well, Sam's in Texas, right? But, um, I like Texas because they do this thing where they actually sell real estate at auction on the courthouse steps of each municipality or city previous to it going on Zillow or Redfin or whatever the case may be. Like, we've all seen those-

Shaan Puri 37:43 And are these-

Codie Sanchez 37:43 Mm-hmm

Shaan Puri 37:44 ... foreclosed f- or is it foreclosed properties that you, that you get there, or what, what type of properties are you getting?

Codie Sanchez 37:48 Yes. So foreclosed is really when it's listed on Zillow and Redfin, and so that's sort of like this post-auction step.

Shaan Puri 37:59 Right.

Codie Sanchez 37:59 That's when most of us see foreclosed properties, right? So you're like, "Oh, no, I know how to buy foreclosed. I can go on Redfin. If it says foreclosed, I can buy it." Well, prior to that, you have auctions, which actually are the bank auctions of bankrupt properties or foreclosed properties.

Shaan Puri 38:14 Mm-hmm.

Codie Sanchez 38:14 But you get it before the street does. And then you can even front-run that one step further, which is there's a list of properties that are going to go into bankruptcy or foreclosure, and the list in Texas, you can look it up right now, it's called Roddy's List, R-O-D-D-Y-S. And on Roddy's List, you buy this list. It's cheap, like a couple hundred bucks, and you can get the list of all the properties that are about to go foreclosed. And then you can door knock. You can go knock on the door because even though it sounds predatory-

Shaan Puri 38:40 Right

Codie Sanchez 38:40 ... it's actually not, because if you go knock on the door and tell this person, "Hey, I'll give you $200,000 for the house that you are in foreclosure because you owe 50," that actually gets them out of bank foreclosure and gives them the extra money that the bank, uh, was going to write off for them. So this is buying on the auction steps.

Shaan Puri 39:02 Right.

Codie Sanchez 39:02 And I did it with a friend of mine, Aaron Amuchastegui, who's a stud at it, and, uh, [laughs] and it's wild. Millions of dollars of transactions in cashier's checks happen same day on the courthouse steps.

Shaan Puri 39:13 Why can't somebody bring that online? So why has nobody built basically the tech platform that says, "Great-

Codie Sanchez 39:19 Mm

Shaan Puri 39:19 ... we go to all the court steps, and then we, you know, sort of flash list these things, and you can sit at your la-" I can... You know, Shaan, he's, he likes this idea. He loves getting an edge, but he's kinda lazy, and so he doesn't wanna go do all this stuff. Um, why doesn't somebody bring that online?

Codie Sanchez 39:34 That'd be-

Shaan Puri 39:34 Like Roddy's List, I guess, is an example of that, bringing that part online. Um, what about after that?

Codie Sanchez 39:39 Well, I think you could. There's a couple things that you need to do in real life. Like, you have to validate that the house exists, right? And the, the couple keys to the actual auction game are that there's some part that is just you gotta walk the walk. So you could go and buy a house at foreclosure and look at it on Google Maps, but Google Maps isn't updated same day, so that house actually might have burned down last week or a month ago. And I know [laughs] somebody that that's happened to. Or the house, if you look at it on Google Maps, you may not be able to tell that the inside of the house or, you know, the back end of the house is totally blown out. So you've gotta kinda go walk the properties a little bit is one part of it.

Shaan Puri 40:19 Right.

Codie Sanchez 40:20 And then the other part is it's about debt and who owns the debt. And like one thing I've realized about wealth over time is, um, debt is just about everything. You should always look for, even before you do a startup investment, is there any debt on the company? Am I in a first lien? Does that, you know, do I have first access to money if this company gets it in some way? And it's the same with a house. So a lot of these times they'll have a lien on the property that's like, this is weird. Th- uh, this is actually would be an interesting business for you guys to look at. Like, one of the biggest predators on, uh, low-income home, uh, owners is, you know those faucets, like the little water purification faucets that you have in, like, your house?

Shaan Puri 41:00 Yep.

Codie Sanchez 41:01 So, um, oftentimes-

Shaan Puri 41:03 Yep

Codie Sanchez 41:03 ... those are put in houses by people that come door to door and try to sell them to people, and, and they use it by doing a lien or applying debt to that person's mortgage. And so you could literally have a lien before you for, like, $1,500 that hasn't been paid, so it's now worth, like, $25,000 because the interest is 10 or 12%, and you don't even realize it.

Shaan Puri 41:25 [laughs]

Codie Sanchez 41:25 So you do have to... [laughs] Yeah.

Shaan Puri 41:27 Wow.

Codie Sanchez 41:27 So you do have to go actually figure out who owns the debt on the house, and you do that, again, through a list like Roddy's List that will tell you who owns the title to the house. But none of these are big problems. If somebody can list houses on Zillow, like Zillow now buys sight unseen, you could just have APIs in from Roddy's List, from the local county, uh, location. You could probably have updated Google Maps locations, and all three of those things triangulate to go online, I would imagine.

Shaan Puri 41:54 I like it. Um, and, uh, Roddy's List is only Texas, or that's for only California?

Codie Sanchez 41:58 It's only Texas, but there's tons of them. So usually you have to go to the county registrar, uh, and they'll list how often they do re- uh, how often do they do auctions. So in Texas, it's every Tuesday. In California, it depends by city and county. But one of the interesting things is, like, the biggest buyers of homes in California, for instance, uh, in, in this downturn, in my opinion, is going to be the government because they've essentially made it where if this is not your primary residence, you cannot buy these foreclosed hou- homes at auction, which is a crazy change. But in 2008-

Shaan Puri 42:35 Mm

Codie Sanchez 42:35 ... that's what happened. All the PE firms went to all of these little municipalities and scooped up all these houses and got them at pennies on the dollar. Um, the only thing that is true about this is you need cash. You gotta pay cash. So these are... You know, you're coming in with $100,000-

Shaan Puri 42:49 Right

Codie Sanchez 42:49 ... in cashier's checks to buy this house and, and auction, and buy it at auction.

Shaan Puri 42:53 Right. [laughs]

Codie Sanchez 42:55 Yeah. Wild.

Shaan Puri 42:55 Uh, amazing.

Codie Sanchez 42:55 And no paddles.

Shaan Puri 42:56 I gotta just attend one of these to, to see how it feels.

Codie Sanchez 42:58 Yeah. Yeah. [laughs]

Shaan Puri 43:00 [laughs]

Shaan Puri 43:01 Um, okay, we'll st- we'll end on these last two. Um, you wrote, uh, "How to collect cool people." I don't know what collect means in this case, but is that a typo or did you really mean how to collect cool people?

Codie Sanchez 43:11 I did mean that. Well, actually, I wish Sam was here 'cause he would laugh at this one. But, um, so one of the things that I, I think is important for investors or VCs or anybody, um, I guess really who wants to be in the startup game, is, like how do you make a connection with a human like you, right? So, you know, we get to know each other on Twitter, I kinda retweet you a few times, but before the social media game was there, um, w- uh, how I actually met Sam originally, I liked one of his articles that he wrote in The Hustle years ago, and, um, and I just did some research on Sam and was like, "You know, I just think he's gonna, he's gonna do some stuff. I don't know what." The Hustle was small at the time.

Shaan Puri 43:48 Right.

Codie Sanchez 43:49 Uh, but I, I think I wanna know him and I want him in my Rolodex in some way so I could bother him about things. And, um, and so I found out what his favorite candy was, which is Butterfingers. I don't know if it still is now. And so I shipped him this ludicrous sized box of Butterfingers, right? Just like a shit ton of Butterfingers.

Shaan Puri 44:05 [laughs]

Codie Sanchez 44:06 To the point where, like, he didn't have a lot of choices except to, like, call me back and say, like, you know, "What? Thanks?" Um, and you know Sam really well. I mean, he's not always like-

Shaan Puri 44:16 Thanks, and what the fuck?

Codie Sanchez 44:16 Yeah, exactly. Exactly.

Shaan Puri 44:18 [laughs]

Codie Sanchez 44:18 And so anyway, so and then I did that with another good friend of both of ours, Noah Kagan, except it was something about tacos at the time 'cause that's his little shtick, and I sent him a s- a shirt. And so the whole point here, I guess, was kinda like, people these days will say, I'm sure they say it to you, "Well, but Shaan, you have this huge network. Of course you could raise a fund this way." Or, you know, "Sam, of course you could do this. You have this giant Rolodex of emails." You know, I didn't have any of that at the time. I was in finance. We couldn't even have social media. And I think those are all excuses, and instead you should just get kind of obsessed with the people that you think are interesting, find ways to connect with them, and you can even do it in an old school manner, which might work more today than ever because DMs and social media are inundated.

Shaan Puri 45:01 And, uh, what's your s- uh, what's your next move? So if the Butterfingers and the tacos are the pickup line, and that's great, 'cause I... And, and this happens to me, and I, I always feel like, well, you did break through the door. Like, I, I see you and I hear you, and I kinda check you out and I'm like, "Okay, cool." Um, but honestly, like most of the time when that happens, I don't like become buddies with them, and I think that's what they want is like-

Codie Sanchez 45:24 Mm

Shaan Puri 45:24 ... I sent you that shirt. Like, I sent you that thing 'cause you s- you said you like this and that, so I sent it to you. I'm like, yes, I did appreciate it, but like, I didn't necessarily go start like a bromance with you after that. So, uh, what is, what do you do, let's say, with your follow-through or how, what did you do in those cases to like turn that little like, you know, funny just sort of like, "Hey, love what you do. I'm a fan. Uh, here's a bunch of Butterfingers." Uh, what'd you do to turn that into more of like a peer relationship after that? Or what, what would you do?

Codie Sanchez 45:51 Yeah. Well, I think a couple things. One, you gotta be doing cool stuff to hang around cool people. Rule number one, right?

Shaan Puri 45:56 Right.

Codie Sanchez 45:57 So like-

Shaan Puri 45:57 The prerequisite.

Codie Sanchez 45:58 Yeah. [laughs]

Shaan Puri 45:58 Exactly.

Codie Sanchez 45:59 Yeah. So like, you know, I don't care if I was backing up a dumpster truck. Actually, that would be cool. I would probably be doing cool things if I did that for, for Shaan. But, um-

Shaan Puri 46:07 [laughs]

Codie Sanchez 46:08 ... but, you know, you have to actually be out there creating the thing to be around creators. So I think that's rule number one, and it's to have the lowest expectations humanly possible, right? Like, I don't want anything from Shaan. I didn't want anything from Noah. I just wanted them in my circle-

Shaan Puri 46:24 Right

Codie Sanchez 46:24 ... and then to ping them sporadically with random stuff. So I think I got Noah, like one of the, his investments that he did, I pinged him, uh, on it. Like, he actually had a question about something else. I, he put it on Twitter or something and I sort of responded and said, "Oh, I knew that person." So it was trying to serve them a bunch of different times, and then after doing that continuously, which is very similar to what I do with founders when I wanna invest in them, they'll eventually be like, "Codie just, she kinda solves-

Shaan Puri 46:50 Right

Codie Sanchez 46:50 ... problems for me," or, "She does interesting things and makes my life easier in some way."

Shaan Puri 46:55 Yeah.

Codie Sanchez 46:55 And doing it without being too, you don't wanna be a creep, you know? I think, I do think when I first, uh, engaged with Noah, and I can say this now 'cause we're buds, but I think he was like, "Is she hitting on me?" Like, "What's happening here," you know? "Does she like me?"

Shaan Puri 47:07 Right. [laughs]

Codie Sanchez 47:07 And I was like, "No, dude, I'm married. I'm sorry." Um, so you know. But also just having no shame.

Shaan Puri 47:12 [laughs]

Codie Sanchez 47:13 Like, I don't have an ego. I'm not trying to prove anything to anybody.

Shaan Puri 47:15 Right.

Codie Sanchez 47:15 Uh, and I think that's important. What, what do you think? What would work for you? Would that work for you?

Shaan Puri 47:20 Uh, y- yeah, that, that, uh, that's... So, so the thing you said that, that works for me is, first and foremost, the ultimate networking hack is be interesting. Okay, that sounds easy. What do I... That sounds like, okay, I can't do anything with that. Well, no, you actually can, which what is interesting to other people is somebody who either knows stuff in an area that other people wanna know that, that thing, so if you're an expert of a certain area, cannabis, DeFi, just be knee-deep in it. And, uh, you don't have to be like a power player. Just the knowledge is actually quite useful, um, the knowledge network. Or be doing interesting things. So if I see you out there actually making shit happen in your field, and it doesn't have to be a big s- you know, so you don't have to be doing SpaceX, like, but you gotta be doing something. So what, what doesn't work is the opposite. Uh, you reach out, you ask me for something, you ask me for my val- most valuable thing, time, um, without offering me any th- reason why I should give you that time. And maybe I will anyways 'cause I'm just in the mood, but like, you didn't help yourself by like sa- making it easy for me. Um, and lastly, you're basically saying, "Hey, I'm kinda doing nothing, and I think if you talk to me, then I'll start to like do something or I'll know what to do."

Codie Sanchez 48:28 Yeah.

Shaan Puri 48:28 And, um, and that's not fun. Like r- you know, so what, what do I like? I like people who are doing interesting things, and then, um, they reach out or I reach out, either way, doesn't matter. And in doing so, they are, like you said, a non-needy person, so they're happy to give, they're happy to chat, um, and they have low expectations. Uh, one of the weirdest things is when people start with like, "Hey, big fan of what you do. I know you get a ton of messages, but, uh, just wanted to put this on your radar." Uh, cool. Great first message. Second message comes in like 19 hours later. I guess you just don't even care. Um, you know, [laughs] what was the point of, of this anyways? You know, like, um, I really thought you were a good guy, but now I know the truth. It's like, whoa, whoa, whoa, what's going on? [laughs] Like you sort of pull a 180 and now you're really n- needy and desperate for some kind of response, and now you expect things of me that I never, ever offered to you. Um, so, so I would say like, you know, just do the opposite of those bad things. So be interesting. Uh, don't expect anything in return. Uh, just give, and give little bits. Don't even give too much, because giving too much, it actually creates an obligation also. So just keep it really simple. Share interesting things with the person, share life updates if you're doing cool stuff, um, and be useful. Hey, if, if they're trying a project, give them some feedback, help them out, reach, sh-share, you know, spread the word, tell a friend, whatever, and, uh, let them know that you're kind of, you know, in their corner. That's all that it takes really to like break through with most people. And then from there, um, you know, it's either gonna work or it's not, and, you know, that, that's fine. Uh, not everybody's meant to be friends with everybody, and that's okay.

Codie Sanchez 49:59 Yeah. And don't ask to be, uh, mentored by anybody. That's my biggest pet peeve. I'm like, "I can barely mentor myself. You don't want me mentoring you. What are you talking about?"

Shaan Puri 50:08 Right.

Codie Sanchez 50:08 Not to mention-

Shaan Puri 50:09 Right

Codie Sanchez 50:09 ... if I've got an obligation, it's like, wait, have you looked up the definition? That means that I am supposed to lead you, like on your path of purpose. We don't even know each other, man.

Shaan Puri 50:17 Right.

Codie Sanchez 50:18 So yeah-

Shaan Puri 50:18 [laughs]

Codie Sanchez 50:18 ... I totally agree.

Shaan Puri 50:21 Uh, yeah, and somebody said this and I thought it was totally spot on. Um, they said, you know, the easiest way, if you really do want a mentor, uh, first, first things first, acknowledge that seeking a mentor is a advanced form of procrastination. Um, you think that you need a mentor before you do the thing, and in reality, your mentor and all other people who succeed don't use mentors as a prerequisite. Yeah, they find people along the way that help, but that's 'cause they're just in furious motion, and people turn and look who's splashing in this pool, and, uh, sometimes they go and they lend a hand, um, and, you know, when you need it. But, uh, they didn't sit around and say, "Well, if I get that mentor, then I'm gonna do the things." So that's the first thing. It's a pr- it's an advanced form of procrastination. And secondly, the way you actually do form a mentorship bond is you ask somebody for a specific, uh, situational piece of advice. So not just, "What should I do?" But like, "Hey, I'm debating between these two options. How would you think about this?" Or, "Here's how I'm thinking about it. Would you poke holes in that?" And then, then you follow up, which is where 95% of people fa- fall off the cliff. They get advice and then they don't follow up with, "Hey, I listened to what you did," or, "I did a variation of what you did, and here's what happened." Uh, people actually love hearing that update. It's their d- they are gathering data points of like what works, what doesn't, and it just feels good that like you closed the loop, you get some closure on that, that conversation. And then you just say, "And now here's the next thing, like that's, that's going on." And you know, some people will drop off 'cause they don't wanna deal with you, and some people will give again. And then you do that a third time. You say, "Hey, here's what happened. Um, and now this unexpected thing is going on, uh, and here's how I'm dealing with that." And by the third one, you guys will know. Either this works, um, we have good rapport, we see the world in similar ways that complement each other. They kinda like my spunk, and I like their experience, and like it meshes, and we should do this. Um, or you'll know by then that, you know, this is not the right fit. And so how do you, that's how you organically ease into having a mentor rather than trying to put a label with a stranger and asking them to commit to something that they, you know, don't really necessarily wanna do with you.

Codie Sanchez 52:23 Yeah, you nailed it. I also think, and this is like probably not very PC, but I think it all becomes easier once you've achieved like a little bit of financial freedom. Like, I think the less you're focused on making money every day and like, uh, y- you know, being in that sort of employee lane and you can do interesting things with your money, that opens up a ton of opportunities. So I'm, I'm pretty big on like, it's hard to be ideologically free, it's hard to be time free. It's hard to really have any freedom if you don't have financial freedom. And like, that all means something different to us. Like you and I might think that that means e- X big dollar amount, whereas some people might be like, "No, it's just enough to cover, you know, the money that I need to pay today." But that's like one thing I wish more people could think about is like, how do you, how do you really get financial freedom so that you can do all the stuff you wanna do? Um, and then, you know, how do you get critical thinking freedom, where you can actually learn to ask the right questions?

Shaan Puri 53:18 Here's the bit of insight I've had, uh, the realization I've had recently, because I worked for like a decade being like, "Financial freedom is what I want." Uh, and even more so, I was like, "Okay, I wanna buy a house so that, you know, I wanna, I wanna have enough where I can get my mom a place 'cause she'll have a better life if, you know, if we could do that", and blah, blah, blah. And, um, so I all thought fi- financial freedom, that's the, that's kind of like, that's my goal right now. I think a lot of people are like that. And, um, and now, uh, that I kind of achieved a lot of those goals, I was like, okay, uh, definitely my goals just got big, kind of bigger and, uh, you know, it's not like I... And, and it's true, I definitely do like carry myself a little bit differently and choose projects and people differently because I'm not like, I'm not in, I, I don't need you for the money, but, um, you know, so I don't need to do this for the money. I could do many things, and money should probably come along with all of them, and I don't, I don't need near term money necessarily.

Codie Sanchez 54:12 Yep.

Shaan Puri 54:12 Um, so, so there definitely has been some benefits, but here's the realization. I used to think about financial freedom like, if I get X dollars, then for me and my lifestyle, that's, I'm financially free. And then, um, for another person, they might have a different dollar amount, which I think is kind of what you're saying. And I thought that, you know, as recently as like a month ago. And then I met, um, a bunch of people who, uh, have a way smaller dollar amount, uh, but what they have actually also is way fewer demands and desires about what they want out of their life, um, [laughs] uh, you know, in a good way. Like they're happy as is, so they don't feel like, "Well, I need X, then I'm gonna be like happier."

Codie Sanchez 54:49 Yeah.

Shaan Puri 54:49 Like, "Well, I'm super happy right now." And like, great, if I have more money, like f- I'll have other things, but I'm not gonna have more happiness. And so, um, and so what I realized was that financial freedom is actually just, it's, it's an internal question. It is not about a dollar amount. Uh, financial freedom is when you stop Deciding what to do based on money. Uh, that's when you have achieved financial freedom. And for some people it takes getting a large amount of money so that they can do that stop. For other people, it's wanting less shit, and then they can stop because they have less demands for money. Their, their, their total number's lower. And for other people it's, uh, more like, you know, sort of Buddhist or monk-like where they just sort of realize that it's actually, uh, an, an internal attachment that they have to let go of and then they are now free. Uh, the freedom is, is, uh, freedom from your own desire to have more money, and therefore you choose things based on money. Uh, rather than the kinda mathematical definition, which is, well, y- like, like there is also like a sorta technical definition, which is you have enough money where even if you earn zero income, your investments will pay your lifestyle, uh, y- and you won't be sort of dip- you know, you're not dipping into savings. Your savings are in- are increasing at a rate faster than your life burn. And there is that technical definition, but I realize, I know many people who pass that technical definition and still aren't financially free, and it's because internally they have not actually freed themselves from what they need, uh, uh, from this idea of like, well, I gotta do, like pl- putting money first as the choice, uh, a- as the choice of what to do, uh, whether it's people who penny pinch or it's people who choose projects based on a financial return as the like kinda core criteria.

Codie Sanchez 56:27 Yeah.

Shaan Puri 56:27 Anyways, that's the sort of-

Codie Sanchez 56:28 I like that framework

Shaan Puri 56:29 ... soapbox, uh, thing that I have.

Codie Sanchez 56:29 No, I think it makes a lot of sense. I think, you know, above a certain level. Like I get a little obsessed just with everything that's going on economically in the world with people who, again, like aren't maybe where you and I are. Like I, I almost think financial freedom might have something to do with your skill stack. Like even if you lost-

Shaan Puri 56:46 Hmm

Codie Sanchez 56:46 ... all of your money today, or if I lost all of my money today, as long as I've put as much in the relationship deposit as I think I have of other humans that are doing interesting things in the world, you and I are never gonna be homeless. Like pending catastrophic issue, right? Because you can go to some of your friends-

Shaan Puri 57:02 Right

Codie Sanchez 57:02 ... and be like, "Hey, I'm actually pretty good at copywriting. Don't you see? Look at my Twitter account. Hey, I'm actually pretty good at building-

Shaan Puri 57:08 Right

Codie Sanchez 57:08 ... these businesses. I've sold a couple of them." So once you like get that skill stack, you're like, "I'm fairly confident. Worst case scenario, I can go call up somebody and work for 'em." Um, so I think there's some mixture of the dollar amount in your bank, what you need to pay, not having a ton of debt, and then are you competent enough as a human where somebody will always need your services? And, and, you know, and I think that paired with like-

Shaan Puri 57:31 Right

Codie Sanchez 57:31 ... can you reason and think for yourself is a pretty powerful combo.

Shaan Puri 57:34 Yeah. Tot- uh, totally agree. I, I think that's great. So give us, uh, we should wrap up. Give us where, where can people subscribe to the newsletter? 'Cause it's actually really damn good. Um, and I don't say that, like ... I, actually I'll, I'll say it. I would probably say that anyways if somebody came on as a guest. I'm like, "Oh, you have a great newsletter." But I'll just kind of shout out that I actually believe it here. I'm not just being polite. Uh, but you actually do a really great job. And you're like us. You don't shy away from the topic of money. Um, you actually lean into it and you say, "Hey, you know, like a lot of people are interested in making money, and a lot of people don't know what's under the hood of these different business models or businesses. And so like let's lift the hood together and let's look at this, how this engine works and how it, what's good about it, what's bad about it, and how you might wa- make it work." We do that as a podcast. You do that on your newsletter. And we're very like simpatico as far as that, that goes. And so where can people find you and where can people find the newsletter so they go subscribe?

Codie Sanchez 58:29 Thanks for the shout. Yeah, contrarianthinking.co is the newsletter. Uh, and then it's Codie Sanchez, Codie_San- Sanchez on Twitter. I think those are probably the two places I'm most rocking and rolling. Um, and Twitter, man, I've really found that fascinating in the last six months. I think we've finally figured out how it works, so apparently I'm a little bit-

Shaan Puri 58:47 [laughs]

Codie Sanchez 58:48 ... more a boomer than a millennial in some ways. [laughs]

Shaan Puri 58:51 Yeah, there you go. Uh, cool. And we'll link it in the description, so if you didn't remember those just scroll down and click the links in the description to, uh, to find that of the podcast. Okay. Codie, this has been amazing. Thank you so much. Uh, I would like to have you back on at some point. Maybe we'll break down a couple of the businesses that you've either acquired or been looking at recently, and, uh, I think that'll be a lot of fun. But thank you for coming.

Codie Sanchez 59:11 I'm in. Thanks for all the questions. It's always fun brainstorming with ya.

Sam Parr 59:13 [singing] Uh-huh. Yeah. I feel like I can rule the world. I know I can be what I want to. Uh. I put my all in it like no days off. On a road less traveled, never looking back. Oh, yeah. Uh. Feeling like gold. I don't wanna hide it. Uh-uh. Ain't nobody telling me no. Catching feels wherever I go. Uh-huh. Yeah, yeah, yeah. Feel like I can rule the world. Like I can rule the world. Yeah, yeah, yeah. Like I'm on top of the world.