Podcast: Todd Tresidder — The Leverage Equation — Maximize Your Money & Time

Todd TresidderEpisode 26 of the NewRetirement podcast is an interview with Todd Tresidder who is an author, former hedge fund manager and founder of FinancialMentor through which he provides tools, courses and coaching. We discuss his new book The Leverage Equation and ideas about how to lever up your time, money, technology, network and experience.

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Full Transcript of Steve Chen’s Interview with Todd Tresidder

Steve: Welcome to NewRetirement Podcast. Today we’re going to be talking with Todd Tresidder who is an author, former hedge fund manager and founder of financialmentor.com, through which he provides tools, courses and coaching.

Steve: Todd lives in Reno, Nevada, and we’re hoping to meet up in Tahoe this winter to get some ski runs in. I met Todd a couple of years ago, I was at my first FinCon and we had a pretty long conversation about his hedge fund background and evolution as a financial coach, educator, and online solution provider.

Steve: With that, Todd, welcome to our show. It’s great to have you join us.

Todd: Thanks Steve. Thanks for having me.

Steve: Yeah, I appreciate your time. Before we get started I always kind of like to hear people’s story in their own words and I’d love to hear kind of how you arrived at … in ending up living in Reno, Nevada, and kind of running your online business. What led you to this place?

Todd: Yeah. Well, I actually grew up down in your area. When I was growing up we used to vacation up at Tahoe and I always loved Tahoe. Once I was in the hedge fund business and I was kind of working remotely, I could live anywhere and I was paying ridiculous taxes, I moved to the Nevada side of the lake and I never left.

Todd: Once we had kids then it was like, well, Tahoe is really great for lifestyle as adults but it wasn’t a very good place to raise kids. I decided to move down to Reno and we’ve always loved it ever since, so we’ve stayed down in Reno. It’s combination of taxes, quality of life, just wanting a recreational lifestyle, being … still staying fairly close to family and stuff.

Steve: Sure, that makes sense. Is Reno growing pretty rapidly right now? Because I definitely hear about more people living there.

Todd: Reno’s a boom town right now, it’s crazy. Yeah, we just got an old house down in the middle of town and restored it, and just tried to simplify life a little bit. Yeah, the outskirts of town are just expanding crazy and it’s just so good to be away from there because it’s starting to get traffic problems and things we’ve never had in Reno before.

Steve: California problems. What’s driving that growth? Is it people that can just work remotely, tech workers, or is it all different kinds of things?

Todd: I’m not an expert on it. I don’t know. I know Tesla relocating its gigafactory here was a big deal and then that brought in a massive tech hub center out, it’s just a little outside of Reno. There’s a lot of stuff going on in terms of growth and it’s just a great place to live. A lot of people have an impression of Reno like divorce capital of the world, or they think Las Vegas, and it’s none of the above.

Todd: Reno has really transformed and it’s an art town. There’s a lot of culture here, there’s a lot of great outdoor recreation here. It’s a great lifestyle.

Steve: Yeah. I love going to Tahoe, and I meet people from Reno when I’m up there. I definitely feel like more and more … and you’re seeing this on Twitter as well that, many people can choose where they live and they’re living some of these higher cost areas and they’re going to the mountain states and just kind of designing their own life in a much more intentional way. Do you see people like that [crosstalk 00:03:24]?

Todd: Yeah. Before we had kids, my wife and I did a lot of travel. We would always come back home and be like, “Wow, what a great place to return to after traveling around the world.” It’s just like it … I don’t want to talk it up because we don’t want too many people here, but it’s a great … You know you’re in a place that fits you well when you’re happy to come home to it after traveling in really nice places around the world.

Steve: Nice. Well, it’s awesome that you’ve kind of ended up in a place that really satisfies you. Can you share a little bit more about kind of how you got to financial independence? Because you definitely have a unique background.

Todd: Yeah. I came out of college and I had kind of … I don’t know if you call it an epiphany or what, but I was watching guys graduate ahead of me and because I was in a fraternity in college and I pledged really young and so I was watching these guys that were four years ahead of me graduate, and they’d come back to the fraternity and they’d roll in in their Porsche and their fancy clothes because they’d get good jobs out of college, and they’d roll in and like … I guess we were supposed to be impressed but I always looked at it and thought, “Well, that’s kind of strange. These guys are stuck in cubical nation all day long. They’re stuck in their jobs. They’re having a lot less fun than we were having while we were in college.” They were first to admit it. It was also you could have fancy clothes and a nice Porsche.

Todd: I just thought, “As long as I’m going to have to work,” because I wasn’t born with a silver spoon in my mouth, I thought, “As long as I’m going to have to work, I may as well organize it and design it to result in financial freedom, so I can get back to having fun.” Because I really didn’t find just work or owning up to the man or responding to man, fun.

Todd: I started from the beginning with the full intent of financial freedom, and I designed my life around it. I got a lot of job offers for corporate jobs in investment management and finance sales. I got a ton of sales offers, and I turned them all down and went into … my first job out of college was Hewlett-Packard in … back then, it was in search of excellence and it was one of the top corporations you could work for, and I lasted six months in corporate America.

Todd: I got fired to be totally candid, I got fired and that was after doing amazing results. They had one of these dual manager systems where, the one manager, I was the best guy that ever walked through the door, and the other manager, I was the worst person that ever walked through the door. Steve, you know me from the ChooseFI. You saw the response to my ChooseFI episode on the podcast there. I seem to have polarizing influence on people. But my fate was determined by the manager that despised me, and so I got fired even though I did really excellent job performance.

Todd: That was the beginning of me building the hedge fund. I was fascinated by investing. That’s what I really wanted to do. I didn’t want to be in corporate America. I ended up hooking up with a guy that was developing a hedge fund and he was stunned that there was this kid that was developing these mathematical models and stuff on his own. We teamed up, and it wasn’t long before the realization was because he was a gray haired old guy and knew how to sell. We started out with me trying to sell to small corporations, the CEO and CFO, to try to get their retirement plans to invest with us.

Todd: I was just a zitty-faced kid and this was like early 1980s, and people just thought I knew nothing. Pretty soon we figured out that I actually knew the finance side better than he did and could manage the assets better and he could, even though I was young, and he was way better at selling. We completely flip-flopped roles and that’s when the business took off.

Todd: I built my wealth in the hedge fund business, developed a large salary. But because I was a young kid, pretty much out of college, I never really raised my lifestyle. I saved the bulk of my assets and invested them according to the investment methodologies I’d developed until we sold the fund. That was how I built my wealth.

Steve: Yeah, that’s awesome. They say, “To build wealth, you have to concentrate and take risk. And then to maintain it, you diversify to try to manage your risk.” [crosstalk 00:07:38] –

Todd: Yeah. I don’t really follow that. I think that everything’s governed by mathematical expectancy and risk management, and so I don’t do anything unless there’s a potential for a large gain and I don’t do anything unless I can manage the risk tightly. I’ve never really followed that traditional dictum. That’s more from traditional asset allocation beliefs around where you get the age formula for allocation and you use dilution for risk management, and things like that. I don’t do any of that.

Steve: Interesting. Well, it’s pretty cool background. When you got started … today there’s this whole huge body of work about how to achieve financial independence, the whole FIRE movement and everything else, but it sounds like you learned this on your own, I guess doing your own research right in college?

Todd: Yeah. I was doing FIRE before FIRE existed. It’s weird I’m usually kind of 10 to 20 years ahead of where the trend is, and I’m not trying to say that in an ego way, it’s just kind of how my life has worked out. Because it’s not really advantageous by the way, you’re much better off being more in sync with the trend. But like I did hedge funds back when there were private placement partnerships. There was no such term as hedge fund back then.

Todd: We were just private placement partnerships. We were using the legal structure of the failed oil and gas stuff from the 70s, and using it that way to form. That’s how we took control and possession of the assets in order to manage them as a pool. Then over time it morphed into this idea of hedge funds where they were skill-based investment strategies, which is what we’re doing.

Todd: Like FIRE, there was no such thing as FIRE. We can really kind of attribute the FIRE movement to … I would say Pete would probably be kind of the root of that. But obviously I did it way before Pete ever existed or thought about it because I’m 57 now and I “Retired at 35,” but I didn’t really do FIRE exactly in the way it’s taught now. That’s become one of the kind of interesting differences between my message and what is in the kind of what I’ll call, echo chamber of all the FIRE blogs.

Todd: There’s kind of become this standard message in FIRE which is fine, it’s not wrong. It’s just very limiting and it doesn’t have to be that way. There is a lot of variation in how you can approach FIRE and people kind of … sometimes people get upset when I share these messages and I try to point out that there’s a nuance to understanding this stuff because the FIRE movement … again, I think we can attribute this to Pete.

Todd: Pete is a brilliant writer and he’s dead on accurate, brilliant analytical mind, and what he’s done is he intentionally and consciously created a culture or a cult movement around what he created. But what that’s done is that it’s spread a lot of intolerance in the community, I think. I think the community is kind of going through a maturing on that. At least in the last year I’m starting to see it. The bear market tends to help with that.

Todd: Anyway, I’ve never quite seen the FIRE quite that way and it’s not that what’s commonly taught is invalid, it’s just, again, a very limited version of the truth. There’s a much more nuanced in dynamic and full body of work that can come into the FIRE movement over time, and that’s what I’m trying to push.

Steve: Sure. I definitely want to dive into kind of your point of view in what’s different about it. But before we do that, a couple things. One is, Pete is Pete Adeney of Mr. Money Mustache. That’s what we’re talking about. Could you describe kind of your kind of day in the life and what your life looks like, since you’ve accomplished financial independence and you kind of designed your life? I’d love … I think it’s always good to kind of make it personal and then we’ll go from there to kind of your methodologies and thoughts about how other people can get to a similar place.

Steve: Then after that, we’ll dive into your book, which is the main point of this podcast. But –

Todd: Yeah, that’s fine. That’s fine. Day in the life varies widely with what I’m focused on. During school year I work a lot because my daughter is still in school. My other daughter’s in college now, my younger daughter’s still in school. Life has kind of build around that schedule. When school’s in session, I’m pretty much here. I’m very focused on my work. I tend to be hyperfocused if you will. When I’m working, I’m working, and when I’m not, I’m not.

Todd: I do very little work when I’m not in the office. I try to pretty much avoid it. When I travel I probably travel about three months out of the year, some months it’s four, some months it’s two, two and a half. Rarely is it under two. I don’t think it’s ever under two actually because scheduled events I go to, pretty much makes up two month’s worth.

Todd: When I’m out and about traveling, I do almost no work and I have no project, and then when I’m in the office I’ve got my time organized around projects, and once I get into a project I’m kind of hyperfocused. I just dig into it and go.

Steve: Nice. Today, what drives you? I know you don’t really need to work for income but you’ve built a business that generates income. I know you do some coaching and you’re an author, and you’re focused on the educational side of this. What drives the income of the business today? Or is it all?

Todd: [crosstalk 00:13:16] the business or my personal income?

Steve: I guess both.

Todd: Okay. Well, my personal income would be dominated by my investment portfolio, and then the business would come second, and then the business income is dominated by course revenue, and then books, and coaching or about a toss-up now. I stopped accepting coaching clients years ago. I’ve still got five legacy coaching clients. Then once in a while I’ll do coaching for core students where they want some personal attention, so if they’re a paid course student, I will allow them very limited access. But basically I no longer do coaching. It’s just for people that are grandfathered in through other mechanisms. That’s pretty limited.

Todd: The book income is pretty much balanced against that and the courses. It’s pretty much a product based business now. But that’s different from what it used to be. Before it was almost all service revenue. As I was developing it, the service revenues would drove the revenue equation but it never really paid the bills.

Steve: I know that’s part of your method is that sometimes you use service revenue to bridge to a more product based business that’s scalable.

Todd: Yeah. You have to understand the function of each thing in your plan. For me, for this business, the goal all along was for me to give back the knowledge that I spent my lifetime developing, and figuring out how to do that. It’s one thing … you see gurus all the time where they come out and they … they did it one way, so they teach everybody how to do it their way and then surprisingly it doesn’t work.

Todd: I didn’t want to fall into that trap. What I do is, pretty much everything I teach I do first and then what I do is I figure out how to generalize it through the coaching process so it works consistently for people. And now I’m finally in the stage of productizing it. The role of coaching was always, revenue producing, market research, how to generalize the lessons I applied in my life years or decades earlier, and then how do I apply it with other people? Then by working with people closely in coaching, you’re not insulated. Like as a book author, you’re insulated. I could write stuff and people go, “Oh, that’s great.” Then they go off and they do nothing with it or they do it wrong.

Todd: But with coaching you’re very close to the client because you’re talking with them every week, and they’re reporting back on the results and it’s interactive and so you can’t hide. Your stuff either works or it’s wrong. It’s a really great method for working out how to teach this stuff properly so it produces consistent results.

Steve: That makes sense. Kind of a clinical approach. We are going through some of the same thing where we have a lot of content, and we have this product around financial planning, and then we rolled out an RAA so that we can deliver a collaborative advice to people around their plans that they build. The more we interact with consumers, the more we learn from them in how much we have to improve with what we’re doing. But it is a really fast way to kind of close the loop and learn really quickly with our users.

Todd: Yeah. Yeah. People will let you know if your stuff sucks.

Steve: Yeah, that’s for sure. That’s awesome. Going forward as you’re focused on kind of sharing the knowledge that you’ve built up, how do you see this –

Todd: Yeah. That’s the whole function of the business. That’s what got me going in the first place was, I’ve always been fascinated with wealth building, freedom is a really strong value of mine and that’s what drove me. And then I made all the mistakes everybody else does, like I projected my value of personal freedom onto financial freedom and once you attain financial freedom then you realize that it was never about finances in the first place, and on and on and on. I did all that stuff. And so I have kind of a different viewpoint, or at least that’s what my clients tell me, and the readers of my books and courses and stuff.

Todd: I wanted to give that back. What happened was, I was “Financial independent,” or retired or however you want to say it, I was still really fascinated with this stuff, still reading books on it. Then what happened was one time my wife just kind of took me to task and said, “Why don’t you do something with all this knowledge you developed?” But I was really afraid of being a public figure, and all the criticism that comes with being a public figure and I didn’t really want it in my life.

Todd: This is kind of interesting side, I know this usually doesn’t come out in interviews. But I started Financial Mentor with the premise that if it ever took public heat that I would just shut it down. You already know it does take public heat now from certain quadrants and I haven’t shut it down. It’s because I’ve kind of got committed to it and I love it but it took a while to get to that point. But originally it was all started with fear and I gave myself permission to just shut it off.

Steve: Yeah. I think that if anytime you venture out in the public arena, you have to be ready for the good and the bad, and the criticisms are going to come. They say it’s, you want to get that reaction. Either you want people to love it or hate it. If people don’t care, that’s when you have a real problem.

Todd: Yeah. The ultimate insult is animosity.

Steve: Right. People call it ambivalence. That they don’t care about it maybe.

Todd: Yeah.

Steve: Okay. This was super helpful to hear [crosstalk 00:18:41] –

Todd: That’s right. When I said that quote wrong, you got it right. Thank you for correcting that. That the ultimate insult is ambivalence. Thank you.

Steve: No problem. I would love to get your take kind of on your approach to investing and retirement planning and just achieving financial independence because it is different than what a lot of folks … kind of either in the FIRE movement or traditional planning take. Can you kind of spell it out for us?

Todd: Yeah. I’m not a low cost passive index investor and that has nothing to do with saying it’s wrong, it’s totally mathematically valid. I’m always careful to qualify. Even though I don’t do it, that doesn’t make other people wrong, it’s just not my choice. What I say is that it’s valid, it mathematically works over time if you’re willing to tolerate the risk reward that’s inherent in the strategy. I’m just not willing to tolerate that and it’s not the most efficient path to the goal. That’s why I choose not to do it. Again, it doesn’t make it wrong.

Todd: I’ve never been that way. I’ve always designed everything around expectancy, mathematics. Expectancy equation and the future value equation is what determines the growth of your wealth, and that’s just invaluable math. That’s the way it works. The expectancy equation is … I could go into the complexity of it but it’s actually just probability times pay off, it’s the simple way of understanding it, probability times pay off.

Todd: What happens is because the future’s unknowable, the probability equation’s extremely difficult to work with. You can know historical probabilities but ultimately all outcomes are just probabilistic. And so what happens is you have to really focus on the pay off, half of the equation. That’s the part you can control. That connects to the book we’re going to talk about some point here which is, leverage is how you tilt the probability side, I mean the pay off side, favorably for the wins as you pursue big value wins, which is what I talked about earlier, and then risk management is how you control the loss side of the equation.

Todd: As it turns out, if you’re really good at managing the pay off half of the equation, then you don’t have to win very many times. In other words, the probabilities don’t have to be in your favor. You can actually produce profitable results and lose more often than win. The key point here is that probability is the manageable part … I’m sorry, pay off is the manageable part. That’s what I focus on is pay off management.

Todd: The first thought out of my mind is always risk management, and that’s kind of what I’ve become known for. I noticed that as a hallmark in working with coaching clients, is coaching clients would always come to me and they were always focused on winning investment, they were always focused on how to win. I would always be looking at, “Well, how much can I lose?” The first thought out of my mind was, “How do I manage the risk?” I would try to … I always say you don’t even know an investment until you understand how you can lose money with at every way that you can lose money with it, no matter how unlikely.

Todd: Because the one idea that you don’t manage, the one risk you don’t manage, is always the one that will bite you in the rear. It always starts with risk management first, you got to control that risk to very low levels.

Steve: Yeah, I was reading your book and it definitely resonated with me. A couple of analogies for me spring to mind. One is, I interviewed Annie Duke on this podcasts on her book, Thinking in Bets, and the way she thinks about poker it’s all about managing risk. It’s all about the risk reward. What are the odds of winning a particular hand? How much is in the pot? How much is it worth for her to pay to get additional information to try and win that pot? And so much of poker is minimizing those losses and then on your way to try and take down huge wins. That’s really what wins the tournament of poker.

Todd: Yeah. Poker players understand expectancy but entrepreneurs do too. Entrepreneurism … I teach wealth building differently than is traditionally taught. Because most people when they talk about retirement plan or wealth building, it’s all focused on the paper assets that an advisor can sell you.

Todd: I point out there’s really three asset classes. There’s business, real estate … direct ownership of real estate, direct ownership of business, and paper assets as well. They’re all valid and they’re all useful and they all have different characteristics, and you’ve got to match the characteristics to your plans and your needs. One of the interesting characteristics of business entrepreneurship is you could lose 99 times out of 100 and still get all the riches you ever need. It’s just has to do with how you run it, how you manage that risk.

Todd: I’ve gotten to the point on … like this business I’m building now, where even when I come up short and I fail, it’s still a winner. It still makes money. It just … there’s ways of managing risk where you can get it right even in a small way so that your losses … I’m sorry, your failures are actually small wins. And then as long as you’re constantly playing for the big win, eventually it turns into something valuable.

Steve: Yeah. I know that was the second analogy. It’s … we use something internally called, kind of the lean startup method. It’s really about kind of setting … as we run our business, we’re making essentially a bunch of small bets all the time, and we’re trying to learn [crosstalk 00:23:50] –

Todd: Absolutely.

Steve: We come up with a hypothesis, “Hey, do I think that running a podcast will effectively help us grow our business? Well, what’s the MVP, minimum viable product, that we can build to try this out and then see what happens?” You kind of come up with your whole range of experiments, all the things that you could do, try to stack rank them in terms of … using heuristics, best practices of like, “Hey, what do I think could work or maybe isn’t going to work?” And then decide which one is to invest in, run the experiment, measure it, and then assume many will fail or most will fail, and then the ones that win. If the work winning big enough, keep doing that.

Todd: Yeah. Agreed 100% nothing to add to it. The only other thing I was … share about, because you were asking about what are some of the differences in how I do stuff versus how it’s commonly taught. Another one is this thing called art and science. There’s always a scientific answer but it’s rare. It’s often a good grounding but it’s often not the full answer, and that brings in this concept of nuance.

Todd: I’ll use the 4% rule as an example. I like to say that anybody who claims they’re going to live off the 4% rule has never lived on it through a prolonged bear market. There’s a human emotional side to every answer no matter how accurate the mathematics are. You’ve got to understand what the mathematics are because that’s the foundation or the base, but then you also have to work with the human emotional side because ultimately we’re not computers, and ultimately all business is relationship and it’s driven by humans.

Todd: There’s art and science to all of this and there’s nuance to all of this. Often people that are very polarized or very fundamentalist in their approach, if that’s a correct term, are often expressing their lack of understanding of the nuance of what actually exists in practicality.

Steve: Right. Yeah, I think it’s pretty interesting to look at the FIRE movement and the whole approach around passive. I’m a passive investor in general, but when you look under the covers about what’s actually happening in the economy, there’s a bunch of people that are active or they’re not. Entrepreneurs like myself and yourself we’re actively making bets and actively investing.

Steve: There’s this whole translation that happens between kind of what’s driving the core economy and then how that gets translated to the investors that fund it and fund those experiments and how they go about funding it. I think the reason that these two opposing forces can exist is that really for many people, they don’t think about this as much as people like you and I do, and so passive is fine.

Steve: But if you do think about it a lot, then the approach you’re laying out and really kind of diving into the assets that you own and how you’re going to manage your investments, can make a lot more sense and really pay off for people. But there’s more risk in management involved.

Todd: Well, I’m not going to see this as more risk, I think there’s less risk actually. But I’m agreeing with you and that’s where I go into, you have to match the assets to your strategy and plan. For example in wealth planning, I’ve had a client who makes half a million a year in his legal practice, and I had another client who’s making half a million a year in is anesthesiology practice, and both of them felt that they needed more income to meet their goals. And I pointed out, “No, that’s not true. You have plenty of income. You’re already in penalty tax brackets, et cetera, et cetera, that you’re missing the other aspects of the wealth plan.”

Todd: One of the strategies that usually came out for both these types of people is low cost passive index asset allocation because the highest value activity they can do is their income production to their business. They don’t need to become expert investors, it doesn’t fit their wealth plan. But there are other aspects that do fit their wealth planning and will fit their life. Again, I’m trying to point out the nuance of this stuff.

Todd: People will run around and they’ll just polarize like … they’ll become … one of the things I teach is I teach the idea of asset agnosticism, become asset agnostic. Like if you look at my own career I epitomize it where I was completely paper asset focused when I was in the hedge fund business, but not really because I ran the hedge fund which meant that I was building wealth in the business asset class as well.

Todd: When I sold the hedge fund and I got rid of the business asset class, I still had paper assets, but then I substituted some of those paper assets and took an entrepreneurial approach to real estate and I started acquiring apartment buildings. Notice how … and that’s because the opportunity was so great. This was 1998. I was buying apartment buildings in the Midwest for like in the teens per door. Placement costs was about 60,000 per door, and I was paying in the teens.

Todd: A few years later I sold those buildings for 40, 45,000 a door, which was what my objective was when I bought them. I’m looking at opportunity, I’m looking at low risk opportunities that have high potential pay offs and I’m asset agnostic. I’m not married to real estate, I haven’t owned real estate since I sold everything in 2006. I started selling 2005, I had everything sold by then 2006, and then the top was in 2007.

Steve: Good timing.

Todd: Well –

Steve: Or a way to see it. You see the market, you see what’s going on, and you’re like, “Okay, time to get out.”

Todd: There’s some principles in there. If people are willing to pay me twice what I think it’s worth, and the tenants who don’t even qualify to rent a $600 apartment from me, are qualifying for $300,000 loans for houses down the street, that tells you something’s familiar wrong with the market. The timing was partially luck. It was also personal reasons why I wanted to sell. I had my strategy wrong, so I just wanted to clear out the inventory.

Todd: But the point I’m making is that I’m asset agnostic. Ever since then … I sold the apartment buildings and ever since then I’ve maintained liquidity. I never got back into real estate because I wasn’t comfortable to commit to financial leverage with all the games in the government, with all the debt problems, and all the other issues. I wasn’t willing to take the risk of financial leverage. I don’t need to. I didn’t want to. It was a risk management.

Todd: I went back to bring in the business asset class. One of the things I teach is, you generally want two assets in your wealth plan. You want to work with two asset classes. Some people can have three. It does tend to dilute your focus and it can take away from your freedom. I generally have had two paper assets, it has always been my rock because of my background in developing strategies for that, and then I’ve alternated between business and real estate.

Todd: Anyway, I look at it as opportunistic focus where the opportunity is, when I see opportunities that I can’t let go of and they kind of haunt me, then I’ll go ahead and dive into them. But it has to be extremely low risk, high potential pay off, and then I’ll dedicate some energy to it.

Steve: Right. Well, I think it’s great that you do focus on kind of the human emotional side of this and the behavioral side. We’ve talked to a lot of other guests about that and how it’s such a big component of managing risk and building wealth and preserving it. Do you think –

Todd: Well, yeah. Your decisions are product of your thinking.

Steve: Totally.

Todd: Right?

Steve: Yup.

Todd: Your outcome will be determined by your decision, so you can just trace it back and go, “Oh, so it’s all about my thinking.” If your thinking’s off … I’ve lost millions for stupid thinking. If your thinking is off, you will screw up. I’ve done it many of time. People will say to me … and I know you’ve said this to me that, I’m usually clear, you know?

Steve: Yup.

Todd: Like I just have these really clear boundaries on things and it has to do with that whole process that I’ve developed as an investor where I have to have absolutely clear thinking because, man, if it’s not, it’ll cost you money. You’ll just screw stuff up, and I still screw it up. I’m human, right?

Steve: Right.

Todd: There’s that human emotional component. I’m not spock here. I make mistakes, but I really strive for clear thinking and clarity in my path.

Steve: How do you kind of validate that your thinking is clear? Is it something that you just do yourself or do you talk to other people about this?

Todd: No, I just do it myself. It’s years of development where … you see like, this is another thing that’s kind of a weirdism is like you know me well enough to know I’m highly analytical mind, and usually analytical minds as a backdrop don’t have this woo-woo side that I got through coaching all the years. Coaching gave me kind of the woo-woo side really connecting with people and understanding that and communication.

Todd: An analytical mind also usually has analysis paralysis, and my investing taught me about clear decision making where you can’t over-analyze, it’s a myth. Because if you over-analyze what’ll happen is you’ll just collect evidence that supports your position. Everybody does that. I’m watching the downturn in the market, I’m watching how people discuss it, and it’s totally typical. They’ll all gather evidence supporting the position they’ve taken, and the position they’ve got –

Steve: Yeah. Confirmation bias [crosstalk 00:33:29] –

Todd: Yeah. Confirmation bias. What you have to do is you just have to become really clear in advance on all your decisions and your frameworks and how you’re going to put stuff together. People who’ve taken my course, they’ll see that everything’s structured in frameworks and there’s all rules around everything. All that’s been developed over the years because I started it with my own life and then I coach clients through it. I have to build this in a way that it can be communicated and applied.

Todd: Over time if you work with this stuff long enough, you just get clear.

Steve: Yeah. That’s cool to hear. Do you think that your methods apply to anybody? Or is there kind of like a threshold for you to have to have a certain amount of money or a certain amount of knowledge to be effective with the tools you provide, the education you provide?

Todd: No, it’s universally applicable. This is not a pitch for the course at all. But I’ve got people in the wealth planning course that are fresh out of college. I’ve even got a couple kids that are in college, and I’ve got 70 year old multi-millionaires in there. They’re all getting value, and usually the response from the people that are older is, “I wish I had this knowledge 20 years earlier, I would have done that much better.”

Todd: The principles are universally applicable regardless of the country you’re in or your financial wellbeing at the current time because it’s just these are truths. This is the way this stuff works. Again, I know that sounds egotistical but I’ve worked with hundreds of people on this stuff. It’s just the way it works.

Steve: Yeah. What you’re saying resonates because in my own life, the things that have led to wealth are real estate, that’s partially because I live in California, and I did buy during the last downturn, during 2009, we bought our house. But like you, I was looking around and I remember … in 2005, I was actually in escrow on a house here in Marin.

Steve: I looked around, I had the exact same feeling you did, which is I was like, “Anybody who’s breathing can borrow several hundred thousand dollars. But I’ve worked my whole life to save money. I’ve got great credit. I’ve always had good income, but I’m competing with all these people.” It was both that analytic, the kind of looking around, but also in my gut I was like, “This doesn’t feel right. It feels like something’s wrong.” I remember I was in escrow and I was like, “I need to get out of this.” And I worked with an agent and luckily we got out. Because we were in, hundreds of … This is going to be a one and half million dollar house.

Steve: We waited, we rented for three more years and then when everything was going to hell and you couldn’t buy a house, we found a house that nobody else wanted and we’re like, “Let’s buy that house.” Luckily we got it and it was next to impossible to get a mortgage at that point because I was like you, a small business owner, so I don’t have W-2. And you go in and you’re like, “Okay, I need to borrow over a million dollars.” [crosstalk 00:36:35] –

Todd: Because the liar loans, they were just basically not lending to anybody who didn’t perfectly qualify.

Steve: Yeah. I had to basically beg and I was like, “Okay, look I’m good for it. Here’s the balance sheet of the business, blah, blah, blah, blah, blah. You’re going to get paid,” and luckily we got it and got the house but that was game-changing. Then running my own business, like you I feel like, “Okay, I have a level of control over this thing,” and there’s a huge amount of leverage in this business just like yours.

Steve: You’re right. If we do a few things right, it can have a huge outcome and if we manage the downside, it can still be a single but it could also be home run.

Todd: Yeah.

Steve: Yeah. The last thing is, it’s equities but like you … you’re right, it’s interesting being an entrepreneur. I’m a little bit more of the barbell guy, which I know I shouldn’t be because I’m in the space, but I try to match –

Todd: What do you mean the barbell guy? I don’t know what you mean by that.

Steve: With my own assets I tend to have more cash, a lot more cash than I should even though I don’t necessarily need it but I use it to manage risk. Like in a worst case scenario, I have a plan C that involves my own savings.

Todd: I look on cash, I look on all liquid assets as cash equivalent. In other words, if I can click a mouse and it can go to cash in a few seconds, then as far as I’m concerned that’s cash. If I dilute my portfolio by carrying a cash position then what I’ve done is effectively lowered the expectancy of the portfolio. And so I would never carry a large cash position because everything to be diluted to cash in a moment’s notice, that’s paper assets. What do you think about that?

Steve: I don’t disagree with you. I think that I’m aware that my own behavioral issues have limited me somewhat, and definitely limited my returns. This is something I was actually curious to talk to you about it’s, I feel like one of the reasons we’ve created this RAA and created humans as part of our process for planning is that I think for money, for most people, behavior change involves other humans. And that doesn’t have to be just financing, it can be just, “Hey, you need to do pushups.”

Steve: Some people have the wherewithal to say, “Okay, I’m going to do 50 pushups every day,” and then they make it happen but most people don’t. Most people who have to go to classes, pay money, feel guilty about paying money, have someone yell at them, and that’s when they’re doing pushups. I think for many people finances is a similar thing where having, maybe it’s definitely not a one-on-one financial advisor, but being involved with other people that are thinking the same way either in communities or with a coach or whatever, that will help them make behavior change in their own life.

Todd: It’s possible. I went to coaching route because I wanted to disconnect the investment product sales from the service side. I disconnected it by doing pure coaching and I was … again, this is an example of being way too early. I was the first financial coach on the internet.

Todd: When I started Financial Mentor, back then there was no Google, it was AltaVista and some of these other search engines, you could search the term and there was literally nine returns for the term financial coach. Now there’s millions. And all eight of them except for me, were financial advisors that were repackaging themselves as financial coaches so that they didn’t look like a financial advisor.

Todd: I kind of operate from a little different premise in that the behavior change you’re looking for is completely disconnected from the investment product, and to connect them causes some conflicts of interest. I agree with you that it requires humans at some level. This would probably be a question like, “Where does coaching apply versus courses and all that?” Because what I’m trying to do is productize the knowledge and make it actionable, but there are limits to where the interaction can be more efficient.

Steve: Yeah. Well, it’s definitely you’re seeing evolving models. I talked to Jonathan Mendoza from ChooseFI recently, last week actually, I just look at what’s happening with that community and how it’s blowing up, and it’s this combination of … they’re sharing knowledge, they’re doing the podcast, they have this really rapidly growing Facebook community where people ask great questions and support each other and they also do local meetups which I think is really interesting.

Steve: It’s pretty interesting watching some of these models emerge and how they spread. It’s how do you get people to adopt and learn quickly? And communities is a huge part of that.

Todd: Agreed.

Steve: Are you on your side investing to kind of facilitate the communities in what you’re doing?

Todd: My focus right now is to productize my knowledge in the form of three courses in 10 books. I’m most the way through my seventh book now, which will be Risk Management. That’ll probably come out late next year at the earliest. Then there’ll be three courses which is … the first one’s done, which is Expectancy Wealth Planning, and then there’ll be Expectancy Investing and Expectancy Living.

Todd: I’m changing out the Seven Steps to Seven Figures Process into three courses. That came out of my experience from, and learning from developing the first course which was Expectancy Wealth Planning. Originally that was step three of Seven Steps to Seven Figures. My focus right now … and I tend to work in projects like I was saying earlier, and these projects can span over a period of years which is again something that’s kind of unusual. Like my first path on Financial Mentor was I was just trying to see if I could even fill a coaching practice.

Todd: I started doing content marketing and doing coaching and just even seeing it was going to be a little boutique coaching practice built on internet marketing. I’ve long since surpassed that I could have filled out a bunch of coaching practices. Then I started moving to a pure content marketing platform and how to monetize that, and that’s when I had to shut down the coaching because it just got too big.

Todd: I’ve been now moving towards the conversion strategy on the products and the books as a way that’s congruent with information business, without any conflicts of interest, it’s just to have the products and books. Once I’m done with that, that’ll take me a few more years. And then once I’m done with that, then I’ll go back to building out the platform and then the final stage will be to remove me from the equation and make it so it has a life beyond me, which was the intention all along.

Todd: That’s why it’s called Financial Mentor not toddtresidder.com. It’s, financialmentor.com because it’s supposed to be much bigger than me. Just right now I’m the one leading it until it takes on a life of its own.

Steve: Yeah. Well, I’ll say that you are definitely disciplined because the first time I talked to you, you were saying the exact same thing about how you’re focused on education and delivering courses, and it’s good. I think your thinking is clear and the way it hangs together it’s clear and I think consumers more and more, they want to know that their interests are aligned with your interest. That’s a big thing that we talk about with our businesses is that we want to be … for our users, to be able to explain to them this is how we get paid, this is how you win, this is how we win.

Steve: There’s no, “Hey, I’m doing a bunch of services. You really don’t understand how the money’s flowing inside our business.” Because I think the way the world’s going is, traditionally financial services has been all about accumulating assets generally and then the provider is getting paid indirectly on managing those assets, and the consumer’s not really being that aware of how they’re getting paid –

Todd: Yeah.

Steve: And thinking about it, but that’s going to change.

Todd: To me, it’s all about transparency. I never make it secret that mine’s a business, and it was always intended to be a business. Because when it’s a business and it has profits, it can afford to support people, pay people to build a bigger and be a better service. It was always designed as a business up front, it was never designed to be a charity event or just some cute blog. That’s what I’m trying to build. I think as long as it’s transparent … I know I took a lot of heat in the FIRE community because, “Oh, Todd just wants to sell his courses,” and, “Oh, he’s just a pitch man for his courses.”

Todd: Yeah, I want to sell courses but that’s not the point. What I’m really trying to do is communicate something, and I think as long as somebody gives more value than they take it every point in equation and they’re transparent what the model is, then that’s perfectly ethical and fine. There’s nothing wrong with being in business inherently, and yet there’s people in that community that think there’s something wrong with that.

Steve: Yeah. I agree with you. I think that business as a vehicle is a great way or the best way we’ve found so far to deliver and scale value to lots of people, right?

Todd: Absolutely.

Steve: [crosstalk 00:45:58] the government necessarily. Yeah, I like the government for certain things but do I think that government is going to be better at delivering a particular thing than businesses generally? No. Certain things for mass insurance like social security and defense, yeah, the government … it makes more sense I think for the government to some of those things but for many things, business’s better and you have to provide incentives to people for them to want to work hard and feel like there’s upside, and that’s how you create alignment and drive growth.

Todd: Yeah, and you have to give value. As long as you give great value and you take care of people, then that’s a good thing. It’s funny that I even feel the need to defend it, but again the FIRE community got so aggressive towards the fact that, “Oh, there’s a business and he sells courses.” And I was like, “Well, that’s just kind of bizarre.” Again, it’s one of those nuances where it’s like, “There’s nothing wrong with that. That’s … as long as it’s overt and it’s told and it’s up front, then there’s nothing wrong with that.”

Todd: What’s wrong is when people hide it. You’re familiar … as a financial advisor you know that there’s a lot of incentives and fees that are hidden behind the curtain, and so as long as somebody is clear on that and they disclose everything and there’s nothing hidden then there’s nothing wrong with sales incentives and there’s nothing wrong with an advisor being paid for the products they sell but it has to be all disclosed and it has to be absolutely transparent, otherwise there’s a conflict of interest.

Steve: Yep. Totally. One quick disclaimer. Yes, I am a financial advisor but what my capacity for the work that I do for NewRetirement, Inc. which is separate than the NewRetirement Advisors, which is an LLC, this is kind of just general information and educational content it’s not meant to be advice.

Steve: I always say that because now that we do have an advisory function, we have to be super clear about disclaimers and all that stuff.

Todd: Oh, and I have to do the same thing. That’s why my business is an education business, I operate and meet the education exemption in laws.

Steve: Yup. Makes sense. Well look, I’d like to move on to your book which I read –

Todd: Do you really want to talk about that, Steve? Let’s just keep rambling.

Steve: Let’s get to your book. It’s actually … this is super helpful leading up to the book because I do remember, just as an aside for our audience, when I first met Todd back at FinCon two years ago, we ended up in a … I think it was one of those rooms and we talked for like an hour, hour to two hours, kind of just about your approach and your background.

Steve: I found it fascinating just like I think this conversation is fascinating, I just learned about how you think about it, things which is definitely different than many people I talk to, but I appreciate it. I appreciate the clarity. But back to your book.

Steve: The Leverage Equation. One quick thing. One of the things … I think one of the chapters it’s talking about using leverage to leverage leverage. Could you explain what you mean by that?

Todd: Yeah. There’s a lot of things I want to accomplish with this book, so we’ll just start with the leverage, leverage, leverage thing. Think of it like Russian nesting dolls. Like those dolls where you open up a doll and it’s exact same doll inside of there, but it’s just smaller, and you do that like five, six times, those are Russian nesting dolls. Anyway, that’s how leverage kind of works.

Todd: When you’re starting to leverage it’s a complicated … it’s not complicated, but it’s a subject that people think they understand but they don’t. They think they … most people think of leverage through … most people think financial leverage, and they compartmentalize it that way. A few people add time leverage. Beyond that, people don’t really have much of an understanding of leverage, they understand how to actively apply it.

Todd: It’s funny because people are intuitively applying it in their lives every day, but it’s not conscious and it’s not overt. The intention of the book is to teach people how to overtly do it and build it as part of their wealth plan, design it right into their wealth plan. Then that what that does is segue you into what I teach as the advanced planning framework. It’s a whole another subject. But anyway, leverage, leverage, leverage is the idea that when you’re starting to leverage … I teach six types of leverage but the way it works in practice is they’re all interconnected.

Todd: What I try to teach people to do, because it can be intimidating at first that there’s so much to learn and there’s all this stuff, no, not really. What you do is, you start at whatever’s accessible to you. Whatever excites you the most and relates to the biggest obstacle that’s holding you back, focus your leverage intention there. Start at that point, and don’t worry about the rest. You don’t have to master all six forms. What you’ll find is that you naturally end up moving from one type of leverage to another to another because they’re all connected.

Todd: The idea is just to get started and just to develop whichever leverage form is most compelling to you, and that’s going to be based on your need, and that’s going to be based on your skills and your abilities. As an example … and I wrote this in the book, I’m really good at systems leverage, it’s just how I think. It’s how I developed the hedge fund portfolios and hedge fund trading systems, and it’s how I’m developing this business. I am a systems guy at the core. On a one to 10 scale, I’d give myself a nine.

Todd: Whereas network leverage, you’ve met me, I’m not very good at network leverage. I’m probably almost anti-network leverage when you get right down to it. I’d probably give myself a two or three. I can function at it and I can do it, but it’s not my skill, it’s not my natural bent and that’s okay. Lean towards your strengths and then also try to mitigate your weaknesses, and over time you’ll get better and better at it but just get a starting point and build it.

Todd: That’s where leverage leverage comes in is that you don’t have to master all of them, one will lead to the next, lead to the next, and you can apply one to get to the next. Does that make sense?

Steve: It does make sense. It was actually good to read this in your book, the different kinds of financial leverage like getting a mortgage. Many people take advantage of this when they buy houses and then there’s time leverage. Leveraging other people’s time when you’re hiring employees. That makes sense. Technology and systems try to automate things, try to leverage the cloud or try to build processes for doing things in a repeatable, scalable way. That’s a huge part of any business that’s going to grow quickly.

Steve: Communications and marketing. Like this where you tap in our audience. We’re obviously interested in you as a person, and a known person as well. Networking relationship kind of similar thing, and experience and knowledge which is for many people where they mostly reside, right?

Todd: Yup.

Steve: Yeah.

Todd: Absolutely. That’s the six types of leverage in a nutshell.

Steve: Yeah, it’s good to see that. When you are … can you kind of describe the –

Todd: Let me just throw one thing on top of that. Each of the type of leverages … because that didn’t sound horribly compelling, because it was descriptive, it’s not really sharing the benefit. Each of the six types of leverage, what you’re doing is you’re expanding your resources beyond what you naturally have by accessing them through leverage strategies.

Todd: What that does is, that frees you from the limitations you face that allows you to break beyond the obstacles that are holding you back. If you look at every obstacle that holds you back from the success you desire, that’s reducing your path to success, what you’ll find is that the answer is always leverage.

Todd: There’s always a leveraged answer to break through that obstacle because almost by definition, that thing that is an obstacle is a resource or skill that you lack. And whenever you lack somebody else has, and you need to use leverage to get to it.

Steve: Yeah. Well, I think the FIRE community would embrace this book because that’s what everyone’s trying to do, they’re trying to become … make work optional by compiling enough assets so that they can leverage those assets to live off of them.

Steve: Are you finding a good reception with the FIRE community for this?

Todd: I have no idea. The book’s just out. It will be whatever it is. I just share the knowledge and basically I’m a little gun-shy with the FIRE community just because of that ChooseFI interview, and the polarizing response, half the people said it was the best interview they ever had, and half the people called me scumbag and charlatan and every name in the book.

Todd: It will be whatever it is with the FIRE community. As I said, I think the FIRE community is developing and it’s going through a learning process. I have the book out there so when they’re ready for it, it will be there. But some people I think will really resonate with it and I think some people are going to get pissed off by it.

Steve: Well, it’s right back to it’s … it’s part of your life. Your first managers, one loved you, one really didn’t like you. Some communities really like you or part of the community really likes you, and part of them dislikes you, but that’s the way it is. You’re out there doing your thing, and I think being clear about it, so that’s fine.

Todd: Let me put it this way. I didn’t write the book to entertain myself, I wrote the book because I think it’s a tremendously important topic that can benefit a lot of people. It’s just some people are ready for the message, and some aren’t. Some people it goes back to the asset agnostic idea and opportunistic focus ideas we’ve shared in this interview, when you start embracing these ideas and you realize that there’s a limited structure that you’re working within and you want to expand beyond that structure, then you’ll look at knowledge like this and you’ll go, “Oh, I see how this is put together. Okay, I see where I can …”

Todd: Let’s say the markets are in a prolonged flat period … Here’s another side note. Bear markets are not the nemesis of the FIRE community. Like an 87 crash is not a problem. Because it goes down and then it comes back. Short-term bear markets are not the problem. The problem is what I call, prolonged flat spots, that include bear markets always but they have a different characteristic. They go down, they stay down, they extend sideways over a period of time, and there’s a period of nonperformance, and when you’re living off your assets, that’s death.

Todd: That may be overly dramatic but again anybody who’s lived through it … and I’ve lived through it, it’s very trying, it’s very difficult, and it changes your perspective permanently. This book is trying to open a door to the advanced planning framework and it’s trying to show that there’s other concepts and other ideas that you can rally around that you aren’t stuck with being Johnny One Note, that there are ways to manage risk and seek opportunity that don’t have you stuck with just a single plan.

Steve: Well, I think one thing we’ll see and we do see in the FIRE community is people, whatever method they take to get to financial independence, if it’s, “Hey, cut my expenses a ton. Get to 25 times my living expenses,” have that all invested passively and really efficiently, and feel that, “Okay, I can live on the 4%.” Even if they get there, they then do something else with their time. That’s part of this is like controlling your time.

Steve: Many of them build other things. Look at Mr. Money Mustache. He’s like, “Okay, I’m independent and I’m going to write about it. Oh, now this thing creates $400,000 a year of income.” I see other people spinning out achieving FI and then … like J.D. Roth, he was our first interview. He was independent but then he found other ways to be engaged. He bought back, get rich slowly, and he’s been expanding that ever since.

Todd: Yeah. There’s a myth when you’re working really hard which is that retirement … first of all let’s clear up what retirement is. Retirement is just a euphemism for old age financial independence, and the real goal is financial independence at any age and that’s what we’re all here to teach.

Todd: There’s a myth kind of this millionaire myth like, I’m going to sock away a chunk of change, whatever that number is, your 25 times spending, whatever the number is, and then you can sit around with an umbrella drink on a tropical beach in a hammock or something. Fulfillment is something very different. The real goal is a fulfilling life, and a fulfilling life has many different characteristics to it. It’s not just about living what I call the pro-leisure circuit.

Todd: The pro-leisure circuit is valuable and it’s fun and it’s worth enjoying as bringing pleasure to life, but it’s only meaningful in the … it’s only valuable or enjoyed in the context of meaningful work. The evidence of that … you don’t have to take my word for it, just look at any retiree. Right after the six month honeymoon, they go through a period of languish and they wonder what they stand for, and they lose their identity, and they go through all the things that people who achieve financial independence go through.

Todd: I’ve coached a lot of people through this and it’s a consistent pattern. This is not some big mystery or anything like that. I went through it, J.D went through it, Pete went through it, everybody goes through the same thing then you come out the back end and you seek what is meaning in your life, and people do have different answers to that.

Steve: Yeah. Do you have any suggestions for people that are on the path to financial independence in terms of how to think about meaning and how to discover that in their own lives?

Todd: The only tip I’ll give is think about the next stage of life before you get there. What you don’t want to do as a chief financial independent’s tell your boss to go stick it somewhere and then suddenly you face this void or this blank slate. You want to think about what you want to do for the next stage of life before you hit there. The really smart strategy person will actually start setting up that next stage of life in advance so they can get through a lot of the learning curve and prove out a lot of the models before they actually have the time to fully dedicate to it.

Steve: Yeah, it makes sense. I think this is where community will be a bigger part of this. You’re going to find more people kind of discovering other folks that are achieving, “Oh, this is happening right?” Achieving FI earlier and then thinking about how they’re going to spend their time once [crosstalk 01:00:07] –

Todd: As I said, there’s a maturation process going on. You have to learn this through experiencing it, and that’s more and more people are going FI and they’re going through this process and they’re seeing it for themselves.

Steve: Right. Can you give a couple examples of how you’ve applied leverage in your own life as you’ve built your business and what’s worked best for you and maybe what hasn’t worked?

Todd: Yeah. Well, pretty much everything I’ve done is an example of it. You could take like when I came out of college, I went straight to the hedge fund industry before they even called hedge funds. That was both knowledge leverage, leveraging the business to develop my knowledge, leveraging the client’s money to develop a scalable income source. There’s a reason I didn’t become a financial advisor, a traditional financial advisor. I went straight to the next level which was hedge fund.

Todd: Then when I went into real estate, after I sold the hedge fund I went into real estate. I didn’t do single family homes which is what almost everybody does. My first purchase was a 62 unit apartment building, and then my second purchase was 102 unit apartment building. Those were both leverage plays because what I realized was I can own an apartment building for less risk than a single family home because back then you could get conduit loans and they were non-recourse.

Todd: The non-recourse loan meant that I didn’t have the rest of my assets exposed, only the down payment I put on the place and whatever money I put into it while I owned it. It was less risk and more upside. Again, an example, and that was using mortgage leverage in a very specific way or financial leverage in a very specific way. Then when I got uncomfortable with financial leverage which is what I started doing in 2005, I was kind of similar to what you’re doing. I was looking around going, “This ain’t right.”

Todd: Because I had been through bubbles and I’d studied the stock market and the history of stock market and how bubbles look, I could kind of see it was a bubble. I knew that the risk reward was tilted. I didn’t know where the final end would be. I ended up … I got scared two years too early, but it took me two years to unwind because commercial real estate’s slow. It took me two years to unwind everything, all my real estate positions, everything except for my personal home, I sold. That was just the nature of the beast. I was too early again as usual. Then it tanked.

Todd: Nobody could call the timing on that stuff. That was just kind of half luck and half pull it together. But anyway, that’s an example of leveraging. Now you could look at this business. This business is just layers upon layers of leverage. I’m leveraging my knowledge into products. I leverage the needs of other clients into developing the knowledge for those products. I’m leveraging technology as delivery systems for the products. Just every aspect of the business is an example of leverage.

Todd: The only thing I can’t leverage, and this has been the stumbling block to the business is I can’t leverage the writing and product development time. I can shorten it by hiring people to help me, which is what I’ve done, but ultimately I have to get it all out of my head and into product form. And so that’s an example where I’m the cog and the clog. I’ve never figured out how to leverage the writing, and I’ve tried. I’ve hired professional writers, always failure. It has never worked. For some reason I haven’t been able to make that part work despite trying to leverage it out. I’ve never succeeded.

Steve: [crosstalk 01:03:40] one comment there. One person I see who cranks this stuff out is Michael Kitces. I asked him about it once and … because I see him … regardless of what you think about the quality, I think his work is really good. But –

Todd: I think he’s doing great work.

Steve: But he knocks out so much stuff and I said, “How do you do this?” And he’s like, “Well, I dictate stuff. I’m doing periscope kind of a live recording, and then projecting that stuff,” but it’s amazing what he puts out. It’s probably worth it for you to do a phone call to him [crosstalk 01:04:08] –

Todd: Michael and I know each other.

Steve: Yeah.

Todd: Michael and I know each other. We talk regularly … not regularly, but we talk whenever we see each other and hang out. I totally like Michael and respect him. I know he’s putting out amazing work and really building an authority website for the work he’s doing. So very powerful what he’s doing.

Steve: Yeah, that’s been awesome. You talked about, you had this concept of productive time. Can you just describe that really quick since it sounds like you think about that a lot when you’re using your own time, which is a scarce resource?

Todd: Yeah. There’s four steps you go through in time leverage and the first one is productive time. There’s been research done on this, various studies, I’m not going to be able to name off the top of my head. But they’ll study CEOs and stuff and maybe they have a half hour of productive time in a day. The rest of the day is phone calls and meetings and managing people and just getting stuff done, and just keeping the balls afloat, juggling all the balls in the air and keeping everything afloat. And maybe there’s a half hour or 45 minutes productive time. It depends on the research study.

Todd: That was consistent with my experience with email and everything else. The first point is to rescue productive time because the thing that people don’t realize is that when you add an hour of productive time, in all likelihood you’re doubling or tripling your total quantity of productive time. It’s not just one more hour, it’s literally double, tripling your results. I’ve got to a point where I’m rescuing like four or five hours in a day, which really accelerates things forward.

Todd: I try to … as an example, you wanted to schedule this podcast, you only had afternoon appointments to work with, didn’t you? Yeah. Because I don’t allow appointments in the morning because that’s my writing time. That’s all productive focus time, and I don’t do email anymore in the mornings and I’m getting much, much better at it and I’m addicted to my email. But I’m really, really trying to just rescue that productive time. That’s the first step in time leverage is you want to get as much productive time out of your days. You can and you eliminate all distractions from productive time.

Todd: Then the second step is where you start leveraging tasks. Tasks add some leverage but it’s not the most effective way to leverage. Tasks are things that don’t repeat, so projects, things like that, you can leverage them to people. Then you go to the next layer of leverage which is systems or processes that repeat in your business. You start leveraging those out. That’s really valuable. That really starts adding time leverage in a big way. Then the final step is automation, where you place human time with automation time machines.

Todd: There’s four stages you go through in time leverage and it all begins with rescuing productive time.

Steve: That’s awesome. I appreciate hearing that directly from you. It’s something I think a lot about. I actually hired a coach for myself to try and get more productive and look at the tasks instead of spending my time on trying be smarter about it. We talked about blocking time and time boxing stuff, just how do you maintain that focus and try to be as productive as you can?

Todd: Yeah. This goes into the nuance thing again, art versus science. Because people will give you all these ways to rescue time. But time is really strange because time has a way of filling the void, has a way of filling all the available space. And so again, this is that nuance. There’s this scientific strategy to rescue it but it’s way more subtle, way more nuanced than it’s generally taught.

Todd: One of the … I’ll throw one more thing. One of the fun things about coaching … because you’re talking about hiring a coach. One of the fun things about coaching is you end up learning the stuff yourself through the coaching process. I think the coach gets as much out of the coaching process as the client does. This is one of these areas where I got a lot from working with people where I would teach them about how to structure their time and all these different things as I started applying it and seeing what worked and what didn’t, testing it on my own life.

Steve: Yup. That’s what’s been happening with me in podcasting is that I get to meet all these interesting people that are super knowledgeable and I got to read up … I ended up doing a ton of three or four hours of prep usually for one hour recording or something like that. Or more, it can be like five, six hours sometimes because … especially if you’re reading a book and taking notes and everything else, but it’s a great learning opportunity.

Todd: Yeah.

Steve: All right. Well look, anything before we move on from the book. Any last bit you want to share? Like what people should take away from it? What you want them to take away?

Todd: I wanted the knowledge out there because it’s not well understood. People think they understand leverage but what they think is financial leverage. Leverage is the gateway to connecting to the advanced planning framework because the advanced planning … all wealth is built as I said earlier on mathematical expectancy and future value equation. It’s probability times pay off.

Todd: Once you understand that, you realize you need to work with the pay off equation as I pointed out earlier, then you’re dealing with pursuing leverage growth and scale opportunities to create big wins and then you’re managing risk very tightly to guard your losses. Once you understand that, then you realize the necessity of this book. And the message in the book is all about how you scale up those big wins and the tools you use and the principles you’re playing by in order to start applying one portion of the advanced planning framework, which is what’s in this book.

Todd: I wanted to get it out there and … the comments are always illustrated. You’ll see … Can I Retire Yet? Chris Mamula, did a nice review of the book the other day and one of the comments was that, “Oh yeah. Other people have written about leverage before. This guy wrote here about using debt and this guy over here wrote about using debt,” and it’s like, “No, that’s not leverage.” Do you understand that’s one of three forms of financial leverage I teach in the book. Debt financing is one and it’s the most dangerous. Then people have that in their head and they think they understand it and they don’t.

Todd: There’s a whole concept here. Like I illustrated earlier about how you use leverage to break through the barriers that are holding you back, the obstacles that are limiting your success, I haven’t seen that taught anywhere else and that came out of my coaching with clients where I kept seeing that pattern over and over again. I realized that it was just a fundamental truth.

Steve: Yeah. Have you any huge wins for your clients? When you’re coaching them, do you see a material change in their outcomes?

Todd: Yeah, absolutely. I’ll give you a story. I had a client come to me and he was employed in a job, had a side hustle business, and worked with him around rearranging his finances. He was financially independent and eventually the business got bought out and he became mega financially independent, and he had rearranged his income for stock options just for that buyout.

Todd: I had another client, she came to me, she was just 1099 employee when she started, back then my rates were a lot lower. She’s been with me a really long time. She worked through. Now she has her own business. She wanted a long-term relationship, she’s now married. There’s another sideline. What you find is when you start mastering certain skills for financial independence, what you realize is the principles are universally applicable. They apply to all aspects of your life what I call, big goals. Which are process oriented goals.

Todd: Any process oriented goal requires the same approach to succeed with. Financial independence happens to be one of those. But it could be relationships, it could be your health, spirituality, all of these are process oriented goals and they all use the same technology or the same principles. You just apply them in slightly nuanced ways. That’s another example. She’s … I’m not going to say, “We’re on our way to financial independence,” because she took a pretty big setback in her business. She’s working at it though and she’s got a plan to come back now, but she is married and she’s had a lot of other successes all built on the coaching.

Steve: Yeah. I’ve definitely seen it in my life where I learnt the lessons from coaching for the business side. I also apply inside our family and I try to apply some of those same lessons and keep them in mind because there’s your family life and what happens there has a huge impact on everything else that’s going on.

Todd: Yeah. I used to get coaching clients who’d say … they would talk to me about the butterfly. What’s known as the butterfly effect. They’d say, “You realize what impact you’re having. I’ve been working with my child and it’s like I can hear Todd talking through me when I’m working with my child and we’re doing better now and my wife and I do this and it’s like … do you understand?” And I was like, “Yeah, that’s the way it works.”

Todd: The way I teach it is that all these are stages on which we act out our stuff, but you’re the protagonist, you’re the one that has that stuff inside of you in your decisions, in your behaviors, and they’re going to be consistent across stages, whether it’s business investing, relationship, health, it’s all you’re bringing the same patterns because they’re just different stages on what you’re acting out your patterns.

Steve: Totally. All right. Well, Todd, this was great. It’s great to hear kind of your take and your approach to investing and retirement planning and hear about your book, The Leverage Equation. As we wrap up here, anything, any key influencers or communities or podcasts that you love out there?

Todd: Not really. I did this in the ChooseFI Podcast and I took heat for it there also. People said that was unbelievable. Is I’m not taking in a lot of information right now, it’s very selective and it’s based on whatever I need. I’ll give you an example. Like right now I’m starting to develop my plan for YouTube, start building out the YouTube channel which I’ve totally ignored in the business. I’m starting to study people that are YouTube successes and people who teach courses on YouTube success and things like that.

Todd: I’m taking in that information right now, but that’s highly selective based on a specific need I have, and that’s kind of the way I do stuff now. In earlier years, I was just a massive book reader and I loved reading and I still love reading. I think books are the single best value in education and it’s one of the reasons I’m an author is books have done so much for me. In the past I’ve taken in tons of information but as I shared before, I’m in a long-term process now of converting my knowledge into information products making it actionable.

Todd: One of the things is you can’t put out while you’re taking in, it’s you can do one or the other. I’m really limiting my input and really focusing on putting out. Again, it’s like what we were talking about earlier is to rescue that productive time to focus on that which I’m trying to achieve.

Steve: Nice. What happened? Where do you think you’ll be project forward five or 10 years and hopefully you’re done with this process, you’ve got your knowledge laid out in a consumable form. What’s next?

Todd: It’s going to take me I think twice as long and cost twice as much. You know that rule, it takes you twice as long and cost … I think that’s conservative. If you say five, 10 years, I’ll probably be doing pretty much what I’m doing now which is, if I’m done with the products then I’ll be building the platform then. Because once I finish with the products, I’m going to multiply the platform. If I’m done with the products then I’ll be multiplying the platform. If not, then I’ll still be building out the products.

Todd: The products haven’t changed for many, many years. It went from seven courses to three, but it’s three courses and it’s always been roughly 10 books give or take two. Then from there then I’ll multiply out that. I’ll still be working Financial Mentor, and I’ll still be probably vacationing three, four months a year.

Steve: Sounds good. Sounds pretty good, well balanced life, doing what you want.

Todd: It works for me. I’ve done both extremes. I’ve done the pro-leisure circuit where I did nothing but fun, and I have been a workaholic. This is where I found my balance point but it doesn’t make it right for other people.

Steve: Yeah, I think it makes sense. I think that’s what it’s going to be for a lot of folks, meaningful work that they enjoy but on their own schedule and where they want to live.

Todd: Yeah.

Steve: I’m going to wrap this up. Any questions for me before I close it out?

Todd: No, just thank you for having me on the show. I appreciate you having me on, and sharing me with your audience and I hope the interview went well.

Steve: No, it has. On that note thanks Todd for being on our show. Thanks Davorin Robison for being our sound engineer. Anyone listening, thanks for listening. Hopefully you’ve found this useful. Our goal in NewRetirement is to help anyone plan and manage their retirement so that they can make the most of their money on time. And if you’ve made it this far, I encourage you to check out Todd’s site, Financial Mentor, and his new book, The Leverage Equation. And check out our site and planning tool at newretirement.com.

Steve: You can also find us on Twitter at NewRetirement, or we have a private Facebook group as well if you’re interested in that. And then the last note is both for Todd and I, if you like this podcast and the work that he’s doing, feel free to leave a review out there on our sites or iTunes or wherever you can find us.

Steve: Okay. That’s it. Thanks again and have a great day.

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