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--:-- Steven Bartlett: When I grew up, everyone said to me that to generate wealth, get a job, get money, then get a mortgage. That's one of the worst pieces of advice you can give somebody. And your future self is going to be poorer because of it. But that's what everyone's doing, because we're not taught this stuff. So what do you think the biggest money mistake the average person makes is?
--:-- Jaspreet Singh: Being a saver.
--:-- Steven Bartlett: So just having your money sat in a bank account?
--:-- Jaspreet Singh: Yeah. It's a guaranteed loss. You're becoming poorer every single day.
--:-- Steven Bartlett: But there are plenty of ways to retire early and be financially independent. And that's including a secret hack that makes people fortunate. So let's talk about making more money. This is the ultimate money-making masterclass, as we are joined by three financial gurus with very different opinions and methods to build future wealth. So I want to talk about pensions, credit cards, renting, bad money habits, debt, passive income, spending money to look rich. But first, what is it that rich people know that the average person doesn't know?
--:-- Jaspreet Singh: Rich people are more disciplined and they're doing the little things that compound into huge results, like investing. But for example, the average American spends more money on Netflix than they do on their investments. And if I invest $1,000 a month for 30 years in something like the S&P 500, I will have about $1.9 million.
--:-- Raoul Pal: Or there's no asset in all human history that's ever generated as much wealth in the shortest period of time than Bitcoin.
--:-- Jaspreet Singh: There's one problem. Bitcoin is high risk. And if any of those risks happen—
--:-- Raoul Pal: Let me finish. Do you want to have hope that you have the Bitcoin or would you rather have more security?
--:-- Jaspreet Singh: You can reduce risk. It's our job to educate. So if someone has $1,000, what would you suggest they did?
--:-- Humphrey Yang: I have a different take on this. If you're trying to make more money...
--:-- Steven Bartlett: What about bad money habits? Because when you look at the stats, money is the number one source of stress for Americans, topping work, family and health.
--:-- Humphrey Yang: There's a three-step framework. So I want to get into that. Number one.
--:-- Steven Bartlett: Just give me 30 seconds of your time. Two things I wanted to say. The first thing is a huge thank you for listening and tuning into the show week after week. It means the world to all of us. And this really is a dream that we absolutely never had and couldn't have imagined getting to this place. But secondly, it's a dream where we feel like we're only just getting started. And if you enjoy what we do here, please join the 24 people that listen to this podcast regularly and follow us on this app. Here's a promise I'm going to make to you. I'm going to do everything in my power to make this show as good as I can now and into the future. We're going to deliver the guests that you want me to speak to and we're going to continue to keep doing all of the things you love about this show. Thank you.
--:-- [Discussion continues]
--:-- Steven Bartlett: I think the first place to start is people want to know how they can make more money. Because if you don't feel like you have money, saving and investing in these kinds of things appear to be pointless. I also understand that that's not necessarily true. I think you can start investing and saving with very small amounts of money. But for those people that are asking that question, if they're listening to this now and going, "How does one make money? I've got this job, I'm working a nine to five, it's paying me 30,000 pounds a year or $40,000 a year, whatever it might be," is the right question to be asking, "How do I make more money?" And if so, how do I do that?
--:-- Humphrey Yang: I always think it's a combination of making more money and also saving more money. But let's talk about the making more money piece. I think that everyone is unique in their own way. You've probably spent more hours doing some sort of hobby that I have no idea about. You play paddle, for example, I've never played paddle in my life. So let's say you were Steven from age 20, and you're a really good paddle player. You can start to monetize this type of skill which you have that I don't. Perhaps you know more than me. I could take lessons from you. Even if you're not the pro paddle player that you are, I might still be willing to pay you 20, 25 pounds an hour for a lesson, just because you're naturally better than I am. So I would encourage people to lean into what makes them unique, and where they've spent a lot of their time. I think everyone has something that they're good at inherently. Figuring out what skills you have internally and how you can monetize those.
--:-- Steven Bartlett: What do you think, Raoul?
--:-- Raoul Pal: I think one of the hidden things to do is you really are a function of who you're surrounded by. Invest in your network. And I don't mean that in a cold-hearted, "I want to network with these people" way, but just surround yourself by people who are also trying to push themselves, to push their income, push their opportunity set, and it makes it so much easier. If you're the only one doing it and you're around a group of friends, you're the odd one out and you're castigated for it. Find other people who want to do the same thing and you kind of help each other in that journey. So at an early stage, that's just one of the key things: find people who also want the same journey as you. That really helps. Then it's still about the best leverage of your skill set and being honest with what your skill set is. Just because you're a doctor doesn't mean you should be a doctor, just because you've graduated, because you can do other things. And it's figuring that out. That's not an easy bit, but you figure it out over time by trying stuff. We've all done multiple jobs. And we know what we're terrible at and what we've been good at. And you over-index on the things you're better at. And that works. So if you're early, it's the time to make bets on yourself and your network. And that gives you the foundational tools to then earn more income and then invest more.
--:-- Steven Bartlett: Was there a seemingly pointless job you did that ended up, in hindsight, making you the most money? And what I mean by that is I think about my experience doing telesales between the age of 16 and 19. That's probably the most important thing I ever did. Not only do I spend a lot of time talking now, but sales is a transferable skill across raising investment, persuading employees to come and join you. And I think there's nothing I did that was more important than telesales.
--:-- Raoul Pal: The single best skill you can acquire in life is to learn how to sell. To be comfortable around people and to be able to get a message across is the single most powerful tool you can have in life. Everything you do, finding a partner in life, doing anything you do, is basically sales. And it's all people.
--:-- Humphrey Yang: So if I'm this 24-year-old and a 25-year-old and I'm ambitious, I want something big, you've got to find more income. You've got to have more income to do it. If I'm a 25-year-old and I just want to be okay, I don't mind my job, I just want to invest, you've got to find the right investments. You've got to have a system for your money. And then you've got to create a plan. Anytime you get paid, you know how much money you're going to save, you know how much money you're going to invest, and then you spend what's left. Because the difference between the person that becomes wealthy and everybody else is wealthy people save and invest their money first. Everybody else, especially in America, I spend all my money. I wonder where all my money went. And then if there's anything left, I'll try to save and maybe invest and hopefully I'll get rich.
--:-- Raoul Pal: For me, it's all around based around what is your vision of your future self? How do you see yourself living? Because that is what we do. It's one of the sources of unhappiness is if your current state is not moving on the path of where your future self wants to be, how you imagine yourself.
--:-- Steven Bartlett: So practically and tactically, how do they do that? How do they create this financial vision board? Do they need to know certain... Should they get clear on if they want to be on a private jet or EasyJet?
--:-- Raoul Pal: Oh, man. I think if you have to ask yourself, "Do I want to fly on Spirit Airlines or do I want to fly on a private jet?" I think you already know that question. But is it important to be explicitly clear with yourself? Because actually, if I think of most of my life, I wasn't entirely clear. And so you either end up chasing more and more and more. Generally, it's not a materialistic outcome. It's generally an emotional outcome. And that's why it's hard to pinpoint exactly what it is. But you need to position yourself in that future self and say, "What does it feel like? Do I feel secure? Do I feel this? Do I feel that?" So it's an emotional thing and not a material thing.
--:-- Steven Bartlett: Is that central to a lot of this? You talked about emotional elements. Is being okay with what other people think of you?
--:-- Raoul Pal: Yeah, that's the other thing: social pressure. So you may have the vision of yourself and you just say, "I want the three-bed house with a little strip of lawn and the barbecue." And that's great. And around you, people are like, "You should try harder." So they're questioning your own sense of happiness. And society does that at scale. And then even the whole media complex is about how unhappy and how miserable you are and should be. It doesn't make it an easy place.
--:-- Steven Bartlett: We're talking about emotional and psychological barriers here. How do we get over people not just being scared of what other people think, but so many people are scared of their own money? When you look at the stats around avoidance, 82% of Americans admit they avoid thinking about their own finances, and one in four Americans have avoided medical care because they're afraid of the bill and thinking about how much it might cost. For Gen Z, 67% of Gen Z and 58% of millennials say they avoid checking their own bank account because it's too stressful, which is compared to only 30% of boomers. And in terms of mental health, money is the number one source of stress for Americans, topping work, family, and health. 36% of people with debt experience clinical anxiety and 23% depression. So people avoid their own money.
--:-- Humphrey Yang: A lot of people avoid it because the financial world is full of jargon. You need to go to a professional for advice. That's what people think. It's intimidating. You don't feel like you've got enough money. You're going to let them down, yourself down, your family down. So there's this whole thing around it. It's the confidence that you can learn. Because a lot of people say, "No, no, unless you're from an investment bank or you're an RIA or something, you can't do this." But just a little bit of confidence to say, "Yeah, you can do this." A simple tip that I think people can do is just figure out how much they spend on a monthly basis. Track your expenses for 30 days, 60 days, or 90 days, and you're going to learn so much more about just your personal habits of what you do. Because sometimes I'll forget that I DoorDashed something for $30 or I'll forget that $15 or $20 Uber charge. I'll just file it away because I'm swiping my credit card. I'm not aware of it. It's like if you're going to the gym and you're not aware of your weight, where's your starting point? So I like to give people a starting point because then they can have that small step to start working towards their finances in that sort of way.
--:-- Steven Bartlett: 65% of Americans have no idea what they spent in the last month, according to the U.S. Bank, and 60% underestimate their monthly spending by a significant margin.
--:-- Jaspreet Singh: Right, and that's exactly what I found. I tracked my expenses for a month in 2014. I thought I was spending $1,500 a month. Guess what? I was spending $2,800. And I wasn't making that much. And I was like, "How am I off by an order of magnitude of 60%, 70%?" And I find that even all my friends I issue this challenge to, most of them don't make it to the three months. But I think as long as you have an approximation of what you're spending, that can help. Because that means then you're going to have a little bit of a difference of what you make and what you spend, and then you can save that money. And I think that's one of the bad money habits of Americans: they don't save.
--:-- Humphrey Yang: It's a really good point, which is a practical step to just heighten one's awareness. Because you need to have informational awareness of where you're at to even understand what you need to do to get to where you want to go.
--:-- Jaspreet Singh: Yeah, I think you need to start with the mindset. You have to build the basics. You've got to get rid of the credit card debt. You've got to save a little bit of money. You've got to have some breathing room, because investing is all about taking the extra money that you have and throwing it somewhere to grow that money. And this is where there's a three-step framework that I'll talk about because there's a lot of ways to invest. At the very simplest is I can be completely hands-off. I can work with a financial advisor. I can give them my money and they can do everything for me. If you don't have a lot of money, you're not going to get a very good advisor, but there's a con and a cost to a financial advisor, which is the amount of money you have to pay because they're going to charge a fee. So if I invest my money a month with a financial advisor, I get a good financial advisor who beats the market. They get 11% a year, but I have to pay 1% a year. After 30 years, I'm going to have $1.8 million after paying $600,000 to my advisor. Stage number two is I can be a completely passive investor. It's a little bit more involved than an advisor, but I can just put my money into the stock market, something like the S&P 500, which is a group of the 500 largest companies in the stock market. It's kind of like investing your money into the United States economy. This has historically averaged 10% a year, which means if I invest $1,000 a month for 30 years, I will have about $1.9 million. A little bit more work than completely hands-off, but still pretty passive. Then we have the people that want to be more involved, what we call an active investor. And an active investor is somebody who now wants to invest their money themselves. And I don't mean trading. I mean actually investing their money. And now I'm going to be doing the research to find which investments I want to own. Maybe it's real estate that I want to own. Maybe I want to invest in individual companies. So it's more risk for more potential return. A small edge can give you outsized return. Because if now I don't get a 10% return, I can get a 13% return. We're not talking about 200 or 50% returns. A 13% annual return means that $1,000 a month over 30 years is now going to grow to $3.5 million. So about $1.6 million more than before, just with a slight edge. And you've got to figure out how involved you want to be.
--:-- Steven Bartlett: On this point of being an active investor and picking stocks yourself versus being a passive one, the data shows that passive investors who invest in the S&P 500, like you said, consistently outperform most stock pickers. Over a 20-year period, more than 90% of actively managed investors, so talking about funds there, underperformed the S&P 500 after fees. So should people be actively investing or should they just put the money in an S&P 500 and be patient?
--:-- Jaspreet Singh: I say most people should not be active investors. In fact, I say 98% of America should not be active investors. Just be a passive investor, because if you don't want to put in the work, if you're not willing to put in the time and the effort to research, you're probably going to lose. And many people do.
--:-- Steven Bartlett: So why do people want to be active investors if the probability is stacked against them?
--:-- Jaspreet Singh: Well, if you get a little bit better returns, if you're willing to put in the work, you can get better returns. And it is possible. We do see people that are doing it consistently.
--:-- Humphrey Yang: Is there an element of fun and entertainment? Absolutely. People like sports betting. That's the problem. Because the fun is I like researching versus, "Oh, I want to see my money go up tomorrow." If I buy a house tomorrow morning, am I going to go into Zillow in the afternoon and check what my house price is? Am I checking in the evening? "What's my house price?" No, because you know that this is something I want to own for the long term. Well, when I go into the stock market, because it's so liquid, I buy a stock in the morning. I'm checking it 15 minutes later. I'm checking at lunch. I'm checking it in the bathroom, checking in the evening. And I'm getting anxiety because if it's going up or down, I'm very emotional. And that emotional control as an investor is just as important as the research that you're putting in.
--:-- Raoul Pal: See, I fundamentally differ on all of this stuff. People are so screwed. They are coming out of university with massive debts. We looked at the stat earlier off camera when we were talking about the fact that the percentage of 30-year-olds who have a mortgage and are married has gone from 52% in 1950 to 12%. Nobody can afford anything. So if you look at the average millennial in the US and a Gen Z, they generally have a 401k if they've got a job. They have some sort of savings. But they're taking massive amounts of risk. A lot of us would look at them and say, "This is ridiculous. Why are they taking risk for anyone that doesn't?" Because there is no way of closing the gap between buying, getting the deposit on the house, getting into a house, realizing that future vision of themselves, however reasonable that is.
--:-- Steven Bartlett: Why?
--:-- Raoul Pal: It's so far away because the cost of assets has gone up so much versus the incomes don't go up.
--:-- Steven Bartlett: You mean the cost of buying like a house, for example?
--:-- Raoul Pal: Yes. Or even however much percentage share of the stock market the average salary does. You're getting less for your money. So your future self is automatically going to be poorer because of it, because you could buy less of a house, etc.
--:-- Steven Bartlett: Explain that to me like I'm an idiot, like I'm 10 years old. And maybe in the context of this mug here, in terms of why is that worth less now, based on what you said?
--:-- Raoul Pal: The way of explaining it is money is the medium of exchange, the thing that you buy something with. If we all have a lot of money, we all got a stack of cash on this table and you want to sell that mug, we can pay anything for that mug because we've got a stack of cash. So that mug suddenly is worth not the $10 it's supposed to be worth, it's suddenly we're paying $150 for the mug. Why? Because that money has no value to us because we've got excess money. So when you create excess money in the system, it's this debasement of currency. It's an optical illusion that the value of assets are actually going up. They're not. It's the value of your money going down. And this is this pain point because your earnings only grow with economic growth generally, plus your progression of your career or whatever it may be. But those things, the scarce assets, are going up optically by the amounts they're lowering the thing. So what you find is salaries go up at about 2% or 3% a year, and the cost of the S&P is about 12%, 13% up every year, and a house price is about the same, gold is about the same. And that's because they're printing more and more money.
--:-- Steven Bartlett: Correct. Okay, that makes perfect sense to me. So I'm imagining you will have a big stack of paper in front of you which you're using to take some notes on. And if I was saying I'm going to sell you guys this mug for some of the paper you have there, but then my team said you guys can have unlimited paper, this mug loses value because you can all just offer a gazillion sheets of paper for this mug.
--:-- Raoul Pal: Well, it doesn't lose value. It optically will give you a gazillion for it as opposed to three sheets of paper because we've got so much paper. It matters not.
--:-- Steven Bartlett: So I'll be thinking, "Wow, this mug is worth a gazillion sheets of paper," but actually each sheet of paper is now worth nothing.
--:-- Raoul Pal: Correct.
--:-- Steven Bartlett: Okay, great. And this is the problem that people are finding. They put money in a 401k, you compound it at 10%. And for my generation, yeah, that was how the world worked. And it was great. And it worked. And now it doesn't work. So they need assets that go up 50% a year, 100% a year, which is ridiculous.
--:-- Raoul Pal: But luckily, we've been gifted a few. And so that's helped.
--:-- Steven Bartlett: Go on, say it.
--:-- Raoul Pal: Well, it's crypto. Simplistically, it just outperforms all other assets, even with the excess volatility. So Bitcoin, for example, since 2012, it's produced about 145% a year returns. So that's 10x the stock market. And that's including three 70% drawdowns in the middle of it.
--:-- Steven Bartlett: A drawdown being a drop.
--:-- Raoul Pal: Yeah. Well, you feel like you're an idiot, you're losing money, it's all going to go, you've made the biggest mistake in your life, and it recovers and it keeps going because it's a technological network adoption model that's happening. So it's just sucking in more and more people. So there's now 650 million crypto brokerage accounts in the world, which is more than all the stock market brokerage accounts added together in the world. And we're seeing it all around the world because everybody can buy a share of something. So as opposed to being able to buy, nobody can buy a Fifth Avenue apartment here, everybody can buy a fractionized share of Bitcoin, which is in theory a $100,000 asset. But we can all put in $10, $5, $1,000, $10 billion.
--:-- Steven Bartlett: Let me challenge it then. So Bitcoin isn't based on anything, though. Okay, I'm being a fudder here. That's my job. Bitcoin isn't based on anything. It is a database in the sky that isn't backed by gold, or it doesn't produce any sort of valuable asset as its byproduct. So why, how can we have faith in Bitcoin? It's essentially, in its essence—before someone clips me, this is, I'm playing devil's advocate, because I know they're just going to clip this part out—it is essentially, many would say, a Ponzi scheme, which is it only goes up if other people take part in it. And if everybody decides that it's not worth anything, then it's going to go to zero.
--:-- Raoul Pal: So all money is social consensus. Everything. Gold has no real value.
--:-- Steven Bartlett: I can build a table with gold, though. I can rest some things on it, and it's good. It doesn't rust.
--:-- Raoul Pal: If you're building a table of gold, then the value is going to be much less if everybody's building gold tables.
--:-- Steven Bartlett: Trump has.
--:-- Raoul Pal: I do. That's true. And so really it's just social consensus. What do we as humans ascribe value to?
--:-- Jaspreet Singh: But the problem with the 145%, like you mentioned, Bitcoin has fallen by 70 plus percent on multiple occasions. Let's go back to the S&P 500. A lot of people invest in the SPY, the S&P 500, and still lose money. Why? Because when we go through any downturn, people panic and they sell. And if we look at the crashes from recent history, 2020 stocks fell by 30%, Bitcoin fell by 50%. 2022, stocks fell by 20%, the S&P fell by about 20%, Bitcoin fell by 60%. So in those times, people who are in the S&P are freaking out, selling.
--:-- Raoul Pal: Yeah, but here's the thing. This is the risk reward that people don't understand. If you've got a time horizon, let's say the average drawdown in the S&P during a bear market is 25%. You're getting compensated 15% a year returns for that, at best. In Bitcoin, the average drawdown over the same period will be about 70%. But you're getting 150% return.
--:-- Steven Bartlett: If you're on the winning side, though.
--:-- Raoul Pal: If I buy it and I can sell it for a higher price.
--:-- Steven Bartlett: Just hold it.
--:-- Raoul Pal: That's the key. All of these are in a nice trend channel. They go up. So anybody can buy something and hold it long enough. It'll go up.
--:-- Steven Bartlett: Well, what about—let's look at housing. We can say the same thing about housing. 2008, housing crashed. Just hold it.
--:-- Raoul Pal: I have too much debt. I'm underwater. My bank's taking it from me.
--:-- Steven Bartlett: People are buying Bitcoin with debt.
--:-- Raoul Pal: Yeah, I mean, I would not recommend that. But housing's different because you can endlessly create more housing, and we have a demographic problem in housing that makes it more complicated. Demographic problem is, A, everyone's leaving the cities now. B, the generational gap. Maybe we can afford the boomer houses. We don't have enough cheap housing for young people. People are relocating, moving around. So we've got a very interesting mismatch in real estate now that makes it more complicated than it used to be.
--:-- Jaspreet Singh: Absolutely. And I do want to say, I think the part that we fundamentally differ is not that there's value in crypto. I own crypto. But the difference between you and I is you are all in crypto. For me, it's a speculative piece of my portfolio. So I invest in my own business. I have real estate, stocks, my speculative assets, and then a little bit of gold. Imagine how difficult it is to replicate what you've achieved in your amazing career for the average person listening to this. Versus buying one thing in your Coinbase account, your Robinhood account, and doing nothing. There's no cost. It's not like buying a house. It's like servicing all the stuff. There's no debt involved. There's nothing.
--:-- Raoul Pal: In theory, but theory isn't reality. How many people end up losing money when things go down? How many people panic, especially with Bitcoin? Because if we look at the early adopters of Bitcoin, who are those people? These are the people that—well, a lot of the average person is, "I want to get rich. I want to get rich quick. I want to make money fast." Versus the average person who's buying the S&P 500, this is somebody who is, "I want to invest and build wealth for the long term." It's a very different mindset. The average investor of this is 32 years old. And we said, "No, you need to invest for the long run." They're never going to have a house. So their whole vision of their future selves is utterly destroyed. So it becomes a logical thing to actually take more risk. It's logical for them because they've got nothing to lose.
--:-- Steven Bartlett: So Bitcoin, you're saying, is 145% a year.
--:-- Raoul Pal: Yeah, and in recent years, as the trend rate of adoption grows, it's probably down to about 100% a year. Let's call it that for easy maths. But now let's think about this just from a practical long-term perspective. Warren Buffett is arguably the best investor in the history of time. He has averaged about 19% a year over the course of his decades, making him a multi, multi, multi billionaire. And so when we compare a 20% return from one of the top investors in the world versus, "Hey, Bitcoin is going to give you 100% a year," there's some sense that something could be wrong.
--:-- Jaspreet Singh: Nothing. So even if I'm wrong by 50%, you still outperform Buffett.
--:-- Raoul Pal: To put it in perspective, Bitcoin, since 2010, has done, I think it's about 90 million percent returns. There's no asset in all human history that's ever generated as much wealth in the shortest period of time. And because it's not a random thing, it's actually a technology, and it's a network model of technology. As more people use the network, and we see with Bitcoin, governments buying it, and asset management firms buying it and everybody else, you have this network adoption model. And so what it creates is the same chart as Google or Amazon, all of these. It just goes up in a log trend over time with some volatility. So you've got a secular bull market, which means that over time prices go up for measurable, understandable reasons. And it happens to be the highest performing asset of all time.
--:-- Jaspreet Singh: There's one problem. And it's volatile.
--:-- Raoul Pal: The psychological thing you're dead right about. It's very hard when it falls 70%. I've gone through three of those. They're hard. The problem is just like with real estate, everyone has said real estate only goes up. Well, how do you make money on that real estate? You make money when you sell, or you lose money if you sell. Ultimately, this comes down to that. You make or lose money only if you sell.
--:-- Steven Bartlett: Well, what about everything along the way? And what if I need to sell during that 70% crash? Because what happens during those crashes?
--:-- Steven Bartlett: A lot of times people lose jobs. A lot of times people lose their income. A lot of times people need that money during that time. And so now I'm desperate or I'm panicking. There's two things happening. And now maybe it's the end and I go in and now I lose money thinking that I'm going to make all this money. I think I can appreciate your love for cryptocurrency and your 100% concentration in cryptocurrency. And I'm not saying that's suitable for everybody, right?
--:-- Steven Bartlett: I've got my bottom of Maslow's hierarchy of needs taken care of. I've got a house, I don't have debt. You know, it's easy for me. I've got multiple sources of income that I can take that back. I'm not saying that for everybody, but I can also understand why a 25-year-old can do that too because they've got nothing to lose. But do you think that if a 25-year-old puts their entire salary and savings into Bitcoin and they lose it, let's say they run through a 70% drawdown, are they just putting themselves in a bigger hole for their future as well? Maybe before there was a glimmer of a chance that they'd buy a house, and now they can't.
--:-- Raoul Pal: The most important part of financial markets is the least understood: it's time. It's not just price, it's time. So if you're 25 years old and you get wiped out, we've all done it. We've all kind of screwed up and had to move home to our parents. You can do that several times when you're young and it's okay. You just don't want to do it at age 50. You really, really don't. You become more risk-averse, generally speaking. So it just depends where you are and how much time you've got to take that risk.
--:-- Jaspreet Singh: But now if I'm investing my money in Bitcoin, or really anything, a lot of the value is what some people refer to as equity. I bought it for—like I started buying Bitcoin when it was $3,000. That equity is invisible money, which in my view is theory. It's not actual money in my bank account. It's sitting there waiting for me to sell, hoping that when I go to sell, it's going to be a profit. Versus cashflow. If I buy a dividend paying stock...
--:-- Steven Bartlett: What's a dividend paying stock?
--:-- Jaspreet Singh: Some companies have big profits. For example, McDonald's has billions of dollars of profits. There's three things that they can do with that cash. They can save that money for an emergency. They can take some of that money and reinvest it and open more stores and create better burgers. Or the third thing that they can do, which some companies do, not all, is they can just give this money away to their investors, the shareholders. It's called a dividend. So it's a cash payment for doing nothing except owning that investment. So if I buy something, whether it's an ETF, stock, or whatever, that's paying a dividend, or a rental property that's putting money in my bank account every single month or year, that's money I can use to buy food, go on a vacation, do something.
--:-- Raoul Pal: Let me tell you. You're getting paid 4%. Listen, so I started buying Bitcoin at $3,000 a coin. I went through multiple crashes. I remember when $20,000 of Bitcoin was the "oh my God, we did it." And once they hit around 70,000, I looked at this and I said, wow, I have my real estate, my stocks, my speculative, which is crypto and startups, and the 2% gold, which is now looking extremely inflated. I need to lower this. That way I can have some more income. So what did I do? I sold some Bitcoin, I bought rental properties. That rental property is now putting money in my bank account every single month. The Bitcoin, it's a big number on paper, but it doesn't actually mean anything unless I do something with it.
--:-- Steven Bartlett: Could you have staked it, which means you can stake the cryptocurrency and make a monthly yield from it? Get a loan against it.
--:-- Jaspreet Singh: Now that's adding risk. Well, what happens if I take an 80% loan, 70% loan, let's say 50% loan, whatever. It's very volatile. So let's take a 50% loan and Bitcoin falls by 70%, which it has. Now I'm underwater. Now what? Now the bank comes knocking on the door, margin call, you're forced to sell, and it's a foreclosure on my Bitcoin.
--:-- Raoul Pal: My point being, I don't disagree. And really speaking, people should have the ability to have cash flow or cash for if things go wrong, right? That's really a super important thing to be able to have a long-term view, to be comfortable with drawdowns, to be able to invest in startups or to invest in crypto or technology and all of this stuff. That makes sense.
--:-- Jaspreet Singh: But I just don't think a dividend of 4% makes any difference to anybody.
--:-- Raoul Pal: Well it does if you do it consistently, month after month, year after year.
--:-- Jaspreet Singh: But you need huge capital to start with to be worthwhile.
--:-- Jaspreet Singh: If you start investing for a dividend income, I call it a decade of sacrifice. And this is why it's so hard. But if you're 33 years old now, you're sacrificing until you're 43. You're going to become 43 at some point. And imagine if you're 43 and now you have the income to pay for that car, to pay for the house, you don't have to worry about it.
--:-- Steven Bartlett: Well, do you want to have hope that you have the Bitcoin, or would you rather have more security?
--:-- Jaspreet Singh: Again, Bitcoin, in my perspective, high risk, high potential return. And I'm not saying don't buy it. I'm saying allocate it in your portfolio in a way where you understand you are arguably one of the top crypto experts in the world. I'm not. Also, I'm not the stock expert in the world. I'm also not the real estate expert in the world. What I do is I'm probably going to be wrong. If my stocks crash, I have my real estate. If real estate crashes, I got my stocks. Crypto crashes, well, that's part of my speculative portfolio. I really don't care. And if everything crashes, I got some gold. So for me, I have to diversify against myself because I know stocks crash. I know crypto crashes. I know real estate crashes.
--:-- Raoul Pal: But if you're not starting with a lot of money, your strategy is the strategy of a rich person. "Oh, I've got houses and I've got dividends and I've got some gold and I've got a bit of this." That's the strategy of being rich. But I didn't start with all those. I started with one.
--:-- Steven Bartlett: Where did you make most of your money?
--:-- Raoul Pal: Being an entrepreneur.
--:-- Steven Bartlett: What were you doing?
--:-- Raoul Pal: Taking obscene risk. I did. That was me. An entrepreneur is taking obscene risk. But if I'm making $50,000 a year, the first step, let's assume now I'm putting $5,000 aside, $7,000 aside a year. I can take high risk, high potential return, or I can be conservative or a hybrid. And not everybody should be taking all the risk because Bitcoin has risks. And again, I'm telling you that somebody who owns it, the government could come in and change policies on Bitcoin. Quantum could change Bitcoin. People could stop caring about Bitcoin. And if any of those things happen and all my money is in this very speculative asset, I'm the one carrying all the risk.
--:-- Steven Bartlett: So if someone has disposable income to invest, what would you suggest they did, Humphrey?
--:-- Humphrey Yang: My take has changed over the years. I used to say you could invest $1,000, but as Raoul probably mentioned, 10% on $1,000 is not that much, right? So if you invest $1,000 in the S&P 500, you get 10%. Next year, you'll have $1,100. That $100 is not going to change your life dramatically. So if I had $1,000, I'm investing in myself. So trying to improve my skills to make more money at some point.
--:-- Steven Bartlett: How exactly would you do that?
--:-- Humphrey Yang: When I was still coming up, I was trying to take a lot of courses online. So I'd try to figure out different types of skills that I could use in the marketplace. So I took an AdWords course back in the day for like $150 that taught me how to do Google AdWords. And I would try to consult for businesses out there to try to make more of an hourly income on the side.
--:-- Steven Bartlett: And Google AdWords, for anyone that doesn't know, is Google's advertising platform.
--:-- Humphrey Yang: Yeah, and now there's TikTok ads and Facebook ads. But anywhere where I could be more of value to another business, I knew that, economically speaking, that I could command more in the marketplace. So something like that would be great. So right now, clearly, that is AI.
--:-- Steven Bartlett: Because what you saw there is like a knowledge arbitrage with a new technology where most people didn't understand AdWords, and you could be the young guy bridging the gap for people's ignorance. So most businesses now would be dramatically more efficient and effective if they understood even the basics of AI.
--:-- Humphrey Yang: Yeah.
--:-- Steven Bartlett: So a kid could take a course in AI. And do you know what's crazy? If you read the top 10 books on AI, you'd be in the top 1% in the world in terms of knowledge.
--:-- Humphrey Yang: Yeah.
--:-- Steven Bartlett: I mean, if you just read the instruction manual of how ChatGPT or Plot works, you could probably be in the top 1% of prompt engineers, right? And that could be a value to a business or service, right? That's probably where my career came from, was we were the kids, 18, 19, 20 years old, that knew social media because we'd messed around with it. So we sold it to companies.
--:-- Humphrey Yang: Right.
--:-- Steven Bartlett: And that started my first business. And then there was soon hundreds of us. And there's a lot of these apps right now coming out from 18, 19, 20-year-olds. Have you seen that one profile of that guy who created CalAI? CalAI is this app where you take a photo of your food and then it sends it to AI and it tells you how many calories are in it. Well, the guy's making 50 million bucks a year, or whatever it is.
--:-- Humphrey Yang: Yeah, I saw that this morning, funnily enough. $4 million a month he's making from a—
--:-- Steven Bartlett: Like Chad, basically it's an AI wrapper, obviously. I think he has some secret sauce that he puts into it, but a lot of the kids these days are using AI to try to leverage that and turn them into businesses.
--:-- Humphrey Yang: I do want to say though, with what Jaspreet said, I think you can still make a decent income. You can start to slowly save and invest your way to some sort of semblance of retirement. I think you can still be able to retire and be financially independent without having to, let's say, bet your life savings on crypto. I know that I personally bought Bitcoin at $100, but I've sold it many times. I bought and resold it so many times because when it's up 10x, you're like, "Oh, if you would give me a 10x return when I first bought it," I'm like, "Yeah, I'm taking that any day of the week, right?" And so I think that's why it's so hard. It's like Bitcoin does produce 145% return since 2012. But in 2012, no one knew how to buy it. I bought it on some random sketchy website. I got this string of characters for my wallet, and I tried to buy a coffee at a cafe in Palo Alto. And I didn't know that Bitcoin transactions took 30 minutes to go through. So I sent Bitcoin twice for a $5 coffee. Now, keep in mind, this is 0.1 Bitcoins, right? This is 10K worth of Bitcoin. It's an expensive coffee. I sent it twice, and they didn't get it. And guess what? I still had to pay for the coffee with my debit card.
--:-- Steven Bartlett: So where did your Bitcoin go? You spent what, 20K on coffee?
--:-- Humphrey Yang: I spent 20K on coffee.
--:-- Steven Bartlett: Yeah, that could be the title of this video. So this is what you do. Spend 20K on coffee.
--:-- Humphrey Yang: Yeah. I literally sent it to Coupa Cafe in Palo Alto if anyone wants to go there.
--:-- Raoul Pal: I think the average person, psychologically speaking, it's really hard when it goes down 80%. And if Jaspreet says you need money, at that moment, you're going to sell it. But your point about the primarily important thing is income.
--:-- Steven Bartlett: Yes.
--:-- Raoul Pal: I mean, we talked about last time I was on the podcast, it's like, how do you just leverage the same skills in different ways so you can earn more money from it? The story I was told when I left university was, speaking to a friend of my dad's, he was like, "Well, what are you going to do?" And my father was in marketing, and I liked marketing. But it was like late 80s Wall Street thing was going on. And I'm like, "Well, I'm thinking about either going to work for somebody like Mars, do marketing, great company, or go and work in the city in London." And the guy looked at me and said, "It's really simple, Raoul. It's the same job. You're a salesman in both. One you get free Mars bars and the other you get free money." And he realized, "Oh, there's actually arbitrage in what you can do with the same skill set."
--:-- Steven Bartlett: Well, I would say there is a point. So I agree. If it was me with $1,000, I'm going to go out and invest in my income, read some books, get whatever I got to do, go start something because that's enough. But if we look at time, $1,000 compounded is decent. If you go back to 1971. How do I pay for my college loan and my house deposit? And I want to get married and have kids. You're telling me I can't do that for another 20 years. If I took a thousand dollars in 1971, I invested that into the S&P 500 and I did nothing else. I keep doing whatever I'm doing, my job. And I only invest a thousand dollars. I never invested another penny again. Today, that would be worth, if I reinvested my dividends, about $330,000. And I never invested another penny after the first $1,000 investment. Why? Because the S&P 500 has grown by a little bit over 10% a year from 1971 to now. Now, imagine if I invested $1,000 a year, $1,000 a month.
--:-- Jaspreet Singh: Now, I can't say that about Bitcoin because Bitcoin didn't exist 50 years ago. I can't say that about Bitcoin because Bitcoin didn't exist 25 years ago.
--:-- Raoul Pal: How about Amazon? What about Amazon? That started trading in 2000, or even better, Facebook, 2012. How do I know? Do we not invest in it because it wasn't around? It hasn't been around as long as gold? Facebook has been around less than Bitcoin has, shorter time.
--:-- Jaspreet Singh: Amazon creates a profit. It has a tangible value that you can see and feel because I can go onto Amazon and order myself a brand new guacamole set. It'll be there in two hours. They didn't make a single profit until what, 2018? But that wasn't because they weren't producing value. It's because they were growing so aggressively.
--:-- Steven Bartlett: So you think if you had a thousand dollars, you should invest it in the S&P 500?
--:-- Jaspreet Singh: Well, I'm not saying you should. I think personal finance is personal. I think if it was me, if I have a thousand dollars extra and I'm just trying to figure things out, I'm going to go buy some books. I'm going to buy a class. I'm going to do something about how do I increase my income, going back to what you said. But if I'm saying I just want to work my job, I don't want to go out and do all that, I would do half into the S&P 500 and I would go half into individual companies. So more risk than the S&P 500, not as much risk as Bitcoin. And the reason why I would do this is because this is something I enjoy. I like that research side of things. And I understand this is something that I could see returns with, like you talked about Amazon, like you talked about Microsoft and whoever. There's potential.
--:-- Steven Bartlett: And what about you, Humphrey? $10,000, does your strategy change?
--:-- Humphrey Yang: My strategy is probably more conservative or traditional. It's probably 90% index funds, so tracking the S&P 500, and then 10% speculative. And my whole goal for that 25-year-old would probably be to get to $100,000 as quickly as possible, because at that point, I think they have more options and flexibility, and they're able to kind of use that capital to maybe take more risk.
--:-- Raoul Pal: That's still 10 years with the S&P, well, eight years of the S&P. About 7.84 years, yeah.
--:-- Humphrey Yang: But that also assumes that they're only doing the $10,000 a year. Maybe they can save and invest a little bit more. That'd be nice. But I think for a lot of people in America, if they can get a guaranteed $100,000 in 7.84 years, I think a lot of people might opt for that.
--:-- Raoul Pal: So I agree, but I'd remove the S&P.
--:-- Steven Bartlett: You'd do all crypto?
--:-- Raoul Pal: No, I'd just do NASDAQ.
--:-- Steven Bartlett: Oh, yeah, you'd do NASDAQ.
--:-- Raoul Pal: So NASDAQ compounds at 18% a year.
--:-- Steven Bartlett: What is NASDAQ?
--:-- Raoul Pal: The NASDAQ is the NASDAQ 100, which is the top technology stocks in the United States. We live in a world that tomorrow will be more digital than today, guaranteed. And so therefore these stocks tend to generate the most performance. And we've talked about many of these names that are all in the NASDAQ. So a little arbitrage is if you want to shorten your 7.8 years to five and a half years, six years, buy the NASDAQ 100. It's an ETF, yeah, zero cost, easy. And then I would say 70% that, 30% crypto, and you don't have to care about anything. You're fine. Now if you have a different risk tolerance, you can tweak those dials. Or if you are more risk-averse, then you up your cash dial or some other more stable flow, whether it's gold. Although gold is still driven by debasement of currency. They're all the same thing. They're all driven by the same macro factors. So, yeah, similar kind of idea. And the NASDAQ is great.
--:-- Jaspreet Singh: I'd just say one thing. But just like with Bitcoin, the difficult part with the 18% is you've got to be willing to go through the downturns. And I want to make sure that that's clear because, I mean, the big drop, 2000, the NASDAQ fell by 78% from its peak. During that time, the S&P 500 fell by 40%. So it's a bigger drop. Not to mention the NASDAQ didn't get to its level until 2015. 15 years later of no money.
--:-- Raoul Pal: It has still compounded more returns than the S&P.
--:-- Jaspreet Singh: Absolutely. If you held on for 15 years of loss, it got to be in the risk returns versus the gains. But how many people can hold on for 15 years and say, "You're one, no big deal. You're two, okay. You're three, you're five, it's going to go up. You're 10, it's going to go up." And by the way, year 10 was also another crash because...
--:-- Raoul Pal: All you have to do is dollar cost average.
--:-- Steven Bartlett: What's that?
--:-- Raoul Pal: Dollar cost averaging is if you're young and you've got a bit of excess cash now, you've sold your income a little bit, as opposed to just chucking everything in, or you do, you put your large sum in, you've saved up your 10 grand, but now you've got maybe $500 a month of free capital you want to put into your savings. So when you have these drawdowns, you're actually keep buying. And what happens is it lowers your average cost over time. And you get to new all-time highs in your portfolio much before the market does. So for example, in the last crypto down cycle in '22, all I did was add as much as I could to my crypto. So I was at new all-time highs in my portfolio well before the market was because I'd lowered my average entry. That compounds your profits over time incredibly.
--:-- Steven Bartlett: And is there something psychological there where if you commit to the habit of just putting $500 in regardless of what happens, you remove emotion?
--:-- Raoul Pal: You remove a bit of emotion from it. And emotion is the thing that people struggle with. If you're investing in things that are more volatile, you firstly understand that you will see larger drawdowns when markets go down. Usually they're all correlated. They all go down at the same time, all up at the same time. So you're going to do that. But if you tell yourself, "That's an advantage for me because I can buy more," that's a secret hack that makes people fortunes.
--:-- Jaspreet Singh: Compounding. This is Warren Buffett's thing. I 100% agree with that. He buys more companies in a bear market than in a bull market.
--:-- Raoul Pal: I agree.
--:-- Jaspreet Singh: Yeah, I 100% agree with that part. I call it POOP: Panic leads to Overselling, leads to Opportunity, leads to Profit. So I am on board with that. But that requires a specific level of financial sophistication.
--:-- Raoul Pal: Even your Coinbase app can just dollar cost average.
--:-- Jaspreet Singh: But how many people can dollar cost average down 70% for 15 years waiting to see that return?
--:-- Raoul Pal: It wasn't 70% for 15 years. It was 70% in one year and then rallied ever since. Every single year after year after year it went up.
--:-- Jaspreet Singh: And to see that down. Well, no, after the 2008 crash, the NASDAQ also again crashed more than the S&P 500. And then step back and look at the returns of the NASDAQ first.
--:-- Raoul Pal: I agree. Over the long term, it's a great investment.
--:-- Jaspreet Singh: But volatility is hard for the average person who doesn't have the emotional IQ and the financial sophistication to understand.
--:-- Raoul Pal: That's our job to educate them.
--:-- Jaspreet Singh: Yes. Our job is to help people in this journey and not get them to make decisions that compromise their future. We have to help them.
--:-- Raoul Pal: I agree. And risk-adjusted returns and time horizon are two of the single most important things.
--:-- Steven Bartlett: And so what I hear, I mean, through history, contrarians have made the most money. And also, I think the other thing that I've really pulled out from what you both were just saying there is you need to set up a system that removes emotion and requires you to not make decisions. Because it's in making decisions that your amygdala, the emotional center of your brain, is going to make a bad one. And I think that self-awareness emerges from what you were both saying, which is, "Okay, my brain is going to panic. It's going to POOP or whatever you were talking about there. And I need a system which is panic-proof." So, you know that the best performing brokerage accounts in the United States are dead people.
--:-- Raoul Pal: That's true.
--:-- Steven Bartlett: It's a known fact because they don't do anything. So they have these accounts that haven't been closed and they're inactive. They outperform all the active people. You are 100% in crypto in terms of your investment portfolio.
--:-- Steven Bartlett: So you must be sat here thinking that, actually, when I asked that $10,000 question, what should someone do with $10,000, you must be thinking that the right answer is to put it into crypto.
--:-- Raoul Pal: The right answer for me is that, to his point. Look, I actually would say, but, you know, this is an audience of people and people misinterpret things. Yes, the answer is we've been given the gift of the greatest performing asset the world has ever been given. That's not just Bitcoin, it's the crypto complex. If you're very careful in investing in, like, top projects, you can even have a broader diversified portfolio of that. Like you've had Ethereum, Bitcoin, Solana, SUI, all of these things. Great. They will definitely outperform for a period of time. And that's based on macroeconomic factors, which is the debasement of currency, which we've talked about. That means all of these assets go up by a certain amount and some outperform it. The only two assets that outperform the debasement of currency is the NASDAQ and crypto. This has been a persistent trend that is observable and measurable. So this is not a speculative asset. What it is, is a Metcalfe's adoption model. Bitcoin is the adoption of, let's say, a money or collateral layer, like gold, digital gold, we'll call it, while the rest of crypto is the new rails for the internet. So it's a technological investment. It is growing at twice the speed of the internet in terms of adoption, and has been since the first 5 million IP addresses for the internet and the first 5 million wallets. Twice the speed of the internet makes it the fastest adoption of any technology the world has ever seen, aside from AI now, which is now outpacing it.
--:-- Steven Bartlett: If we sit here in 20 years' time and you were wrong, what happened, do you think?
--:-- Raoul Pal: Well, firstly, in terms of investments, you have to always, once you have a high conviction bet, your entire job is to question yourself, not to keep reaffirming yourself. Sure, you end up reaffirming by questioning and then you figure it out. For it not to have been true, what would have happened? The AI would have had a new system of money that it created. There has to be a competitor to this because we're now in the game of nations. Nations are acquiring this, the Middle East nations, nations in Asia, the US wants to acquire it. So we've got South American nations. So it's now the game of nations, geopolitics. This is a real thing.
--:-- Steven Bartlett: But what changes in 20 years' time?
--:-- Raoul Pal: Well, in 20 years' time we're in a very different world. The economic engine is driven by robots and infinite intelligence. We don't know how the economic machine works. We don't even know the value of money when we go into that world. So I've talked about this before: the economic singularity. Past 2030, the economic model breaks down. So the economy generally grows by a measure of population growth, how many people are in the economy, or coming into the economy or being born, productivity, how much output they create, and then debt growth is the other lever. What happened here is the population of the entire Western world plus Japan plus China has been aging. So the rate of change of population growth is shrinking. They tried immigration, but that became politically unacceptable, so that stopped. So you've got this slowing economy. GDP growth has been slowing over time. Productivity, old people make fewer things. So it makes less economic output. So we've got this mess, and then we've got this debt, and we stopped that whole engine in 2008, and we need to service this debt. So that's the system we're in, and this is why we're printing money to service this debt, because we're not generating enough output in the economy. But after 2030, this population part changes. We've got infinite artificial humans.
--:-- Steven Bartlett: You're talking about AI agents and robotics?
--:-- Raoul Pal: Yeah, infinite. So what does that do for the multiplier of that formula? Population growth plus productivity growth plus debt growth. It breaks because you're going to have 20% GDP growth because you've had a huge rise in the number of AI agents creating economic activity in robots.
--:-- Steven Bartlett: And so what does that mean for me as an average person?
--:-- Raoul Pal: For me, it's like the economic system starts changing. We get to this world of abundance. We don't know what has value. What we as humans do is change and retool to become more human, because AI and robots can't be humans. So we have to figure all of this stuff out. Investing, we were talking about this earlier, is like, well, does the AGI, is that going to be a better investor than any of us?
--:-- Steven Bartlett: Yes.
--:-- Raoul Pal: Artificial general intelligence. Yeah, that's the next stage where it's smarter than any human that's ever existed. And we're very close to that. So in which case, well, how do markets work?
--:-- Raoul Pal: …and when businesses are agents selling stuff to other agents, where do we play a role? So all I'm saying is my job, my whole life, has been to look into the future, sort of 10 years out, and try and probabilistically understand paths. I get to like 2030 and it's like a dark curtain.
--:-- Steven Bartlett: To flip that for a second, how could AI actually positively influence your hypothesis?
--:-- Raoul Pal: I'm very positive about AI. I think humanity will come out of this just fine. I think economic growth that explodes is we can work a way of accreting it to humans or society or whatever we want to do with it. So I am not a doomer.
--:-- Steven Bartlett: Specifically on Bitcoin value and price, how could AI make it even more important?
--:-- Raoul Pal: Well, in the end, an AI requires two inputs. It's Maslow's hierarchy of needs, basically two things: compute and energy. And it needs to be paid. You can't build billions of agents running around doing things without paying for them. Agents will use agents. One agent will get another 10 agents to do all these tasks. They're all going to have to be paid. And the way of doing that is using crypto rails. Stable coins. Whether it's stable coins, whatever it is, that whole crypto rail, all of this new infrastructure for the internet, the blockchain, that's where it works.
--:-- Steven Bartlett: Often the difference between a company succeeding or failing isn't down to its product or strategy. It's down to the people on the inside. After all, the definition of the word company is group of people. And some of the best companies in the world have been largely built by A players, because I'll let you in on a little secret. When you hire an A player, they go on to hire more A players, and it perpetuates. The challenge is finding those first few A players. I found the majority of mine on LinkedIn, who are a sponsor of this show. LinkedIn provides talent I could not find anywhere else. Talent with the necessary skills and culture fit that I'm looking for. Whenever I've paid to promote a role on LinkedIn, I've been able to hire faster, and of course, better. The data supports this too. You'll actually get three times more qualified applicants than if you posted the same role for free. So if you're trying to build something truly great, you can get started by posting a job for free by visiting linkedin.com slash DOAC. That's linkedin.com slash DOAC, and you can post your role for free there. Terms and conditions, of course, apply.
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--:-- Steven Bartlett: I wanted to ask you a question. The reason I went and got my phone is because I had someone contact me that I knew from my childhood. Used to be one of my best friends, frankly. Not spoken to them in 10 years. Sent me a text message, and the text message they sent me is… I wanted to get your opinion on this because I said… I ended up saying to him, "Listen, I'm not the guy to ask about this. I think you've misunderstood who I am." He said, "Hi mate, I hope you're well. I got myself in a bit of trouble with some debt. About 40,000 pounds. So more than a bit of trouble. After some advice and direction in terms of maybe passive income, slash an avenue to try and work my way out of it. Is there some material I should be reading, watching that you might know of?" And I asked him, I said, "What kind of debt is it?" And he said, "Personal loans and credit cards, mate." And I said, "Like how urgent are those debts? Is it causing any immediate issues?" And he said, "Well, they're not super urgent, but as a result of the high monthly outgoings, I'm a month behind my mortgage payment this month. So it is, but it's not. Because I don't want to keep being in that position moving forward. It's costing me circa $1,000, £800 a month in repayments at the moment. And I can't get a consolidation loan. It's a perfect storm starting because I've just started a new job. And my partner is on maternity leave. And I have this debt mountain. It's starting to affect my family if I can't pay the mortgage, you know? So I've got to change moving forward and figure out what to do. And you're the man to ask for advice." I was like, "Fuck me." And then he messaged me again within an hour and said, "Hey, sorry, man, if you're busy, just wanted to nudge this." Then messaged again an hour later because I was on a flight and said, "Hey, I really need some help and direction, man. I'm quickly running out of places to turn."
--:-- Humphrey Yang: He's kind of in a hard spot because £40,000 in debt with the interest payments of, let's say your interest rate is 15 to 20%, that starts to spiral out of control a little bit. If he was under £10,000 in debt, it's a little bit more manageable. But at £40,000, the interest starts to compound quite quickly. So, you know, you said he had a mortgage. He might even have to consider moving, selling the home to at least get the interest payments under control or reduce that amount of debt. It's kind of one of those situations where you just need to reduce every single expense possible and start really pouring all your money into the highest interest rate debt that he owns. So, you know, you can rank your interest rates of all your debts from highest to lowest and start at the very top, right? If it has 22% interest rate, you want to get rid of that first because that's what's killing them. At those levels of debt, it's really tough. I think a lot of people consider bankruptcy at that point just to kind of clear that amount of debt. Depending on what his income is, I've known, let's say, a waitress or a server that had $50,000 in credit card debt and just unable to get over it because the interest payments were as much as their salary. So in those cases, unless you can get a personal loan from, let's say, a family member and kind of clear that debt, you're in a really tough spot. Reduce your expenses as much as possible. Put any extra money you have towards that debt at the highest interest rate possible. And then consider selling some assets if he has assets.
--:-- Steven Bartlett: Bankruptcy. When should someone consider bankruptcy and what's the tradeoff?
--:-- Humphrey Yang: The tradeoff is seven years. I believe your credit is shot in America. I think if you pull up a chart, someone sent me a tweet the other day of bankruptcy lawyer searches in America on Google. And it's been kind of going up and to the right, which is not a great thing. Bankruptcy, there's different types of bankruptcy that you can file for. But I do know that it usually clears some, if not all, your debt. And you basically have to start over. But as a result, you lose a lot of your privileges. Like for example, no credit score.
--:-- Steven Bartlett: I read some stat, and you might know if this is true, but I read a stat that said something to the effect that people avoid going into bankruptcy because of the stigma associated with it. But when they looked at the financial performance over 10 years of people that did go into bankruptcy, those that did typically were better off than those that tried to avoid it for the next 10 years.
--:-- Jaspreet Singh: Yeah. I don't know. That could be anecdotal. It's tough because if you have debt and you make a year, it's different. Bankruptcy in some ways is a good thing because it forces you to do crisis control. Your expenditure, what you're doing, everything becomes hyper-focused.
--:-- Steven Bartlett: You led in the beginning with about how people should look at their expenditure, right?
--:-- Jaspreet Singh: Yeah. When you're $40,000 in debt, you've not been doing that.
--:-- Steven Bartlett: Correct.
--:-- Jaspreet Singh: And bankruptcy actually forces you to actually discipline that for an extended period of time where it becomes a habit. So Steven, that's why they outperform in the end, because you've created the habit that you talked about right in the beginning of this discussion.
--:-- Steven Bartlett: Yeah, so I just found the stat here. It said, "This is one of the uncomfortable truths in finance. And the answer is often yes, those who file for bankruptcy end up in a better place long term than those who try for prolonged periods of time to avoid it. And the research shows that people who file for bankruptcy typically get their debt wiped out and cleaned. And removing unpayable debt, bankruptcy can bring immediate mental relief, removing the crushing stress of unpayable debts. People who avoid it often live in chronic financial stress which spills into health, relationships, and work. So in short, those who face bankruptcy head-on often recover faster and end up in a stronger position than those who keep limping along trying to avoid it." And I think somebody was listening who may be in a similar or the same situation, ultimately wants to know how do I get relief? Bankruptcy is one option, but at the end of the day, there has to be change and that change is difficult. And that's the part that I think a lot of people have a hard time talking about or comprehending. There is relief, but it comes with severe, extreme, and quick sacrifice. What do I mean? Number one, you got to cut back your expenses as fast as possible in that situation. You have to sell as much stuff as possible. I mean, bankruptcy obviously works, but you also lose your house. You also lose other things along with it. There's a lot of emotional toll with it. You have a family, you have a kid. I mean, it's also a big reason people end up getting a divorce. So it can also impact your life in many different ways. So you have to make extreme sacrifices. And I mean, get rid of the Netflix subscription, not because it's just costing you $15 a month, but because the average American is spending more than two hours a day watching Netflix. And if you're in that type of situation and you're spending two hours sitting there watching whatever the heck is on Netflix, how do you sleep at night? You shouldn't be sleeping eight hours a night. You better be getting up, go and try to get some more money. I don't care if it's Uber. I don't care if you're working at McDonald's. Find some extra money and learn how you can earn some more money. And I mean it sounds harsh, but the reality is if you want extreme change, it's not going to happen without extreme change.
--:-- Humphrey Yang: So could he sell his house, do you think, assuming he's making the 50K, which I think is probably accurate, having a vague understanding of his job and where he lives, et cetera, sell his house and then move and rent an apartment? Would that free up capital? I mean, that would alleviate his current problem immediately.
--:-- Steven Bartlett: Sure. He says here, "After some advice, direction in terms of maybe passive income." This word passive income, I know, it's stressing me out. Why does it drive you nuts?
--:-- Jaspreet Singh: It is a… There's like a passive income industrialization complex that is… I mean, it is literally every millennial's dream is "I'm going to get passive income" and it doesn't exist.
--:-- Steven Bartlett: We talked about property. Property is the least passive income you can imagine. It is awful. Every time I've tried to rent out property, there are so many costs. Everything goes wrong. It's just endless. You're paying fees. And people think there's a magic passive income. Everything comes with effort. There is no such thing as returns without effort. Even robbery comes with effort. There's no way of making money without effort or risking something. And so when you're 40 grand in debt, how on earth do you think passive income is going to rescue you? But he's seen that on TikTok and on Instagram. "Oh, we're millennials in our 30s, and we're now living in Lisbon, and we've got passive income from our house." It's like, it's bullshit. It's a social media dream that doesn't really exist. And that's never going to save him from £40,000 debt.
--:-- Jaspreet Singh: Passive income can exist. The perception of what it is, is the problem. "I am struggling with money. I have no money. I got bills to pay. I need passive income." That's not how it works. That's not how it works. The way it works is you take extra money, right? "I have, I'm going to work and I'm saving and investing some money. I take the extra money that I want to put into my investments and I can put it into an asset, an investment that can pay me for owning it without actually working, without going to work to own it."
--:-- Steven Bartlett: Now, let me ask you about your real estate because I got to keep coming back to you, man. Did you manage your real estate yourself? Or did you have a management company?
--:-- Jaspreet Singh: I've done both. I've had a management agent and I've managed myself.
--:-- Steven Bartlett: Managing yourself is probably an absolute nightmare. That's horrific. And managing it with a manager is also probably a nightmare, just in a different way.
--:-- Jaspreet Singh: It is reduced. And then you take the trade-off between whether you're going to do short-term lets or longer-term rentals. And there's the volatility in the short-term lets that you don't know what your yield is going to be. Long-term, different as well. Then you've got the tenants and how bad the tenants have been and the damage that they've done.
--:-- Steven Bartlett: By the end of it, you walk away and think, really, it just wasn't worth the effort.
--:-- Jaspreet Singh: Well, I would disagree with you on that part.
--:-- Steven Bartlett: Yeah, I mean, obviously people can do really well out of property.
--:-- Jaspreet Singh: The work in real estate investment is learning the process. When I first started investing in real estate, it was a complete nightmare. And it was not passive, anything close to passive. It was a nightmare. What you don't know when you start is that there's a good property manager. There's also a bad property manager. How do I find good property managers? By going through a lot of bad property managers and learning that process. And that is a painful process, a very time-consuming process. But when you do have the right team, it can be extremely passive. So I invest in real estate.
--:-- Steven Bartlett: What kind of properties are we talking about?
--:-- Jaspreet Singh: Single-family houses and multi-family apartments.
--:-- Steven Bartlett: And do you have lots of them?
--:-- Jaspreet Singh: Not lots, but I have a decent amount.
--:-- Steven Bartlett: And how much of your portfolio is in buying properties and then renting them out to families?
--:-- Jaspreet Singh: 50%.
--:-- Steven Bartlett: And what are your returns been like year over year for the last decade?
--:-- Jaspreet Singh: So the way I look at returns, when I look to acquire property, is I want 7% cash on cash on the money that I put in. So when I look at return, I don't care about equity. We talked about this a lot. If I buy a house for, let's just call it $100,000 and it goes up to $200,000, I don't care. My goal when I acquire real estate is not to sell it and flip it for a profit. My goal is to grow the cash flow that I'm generating month after month after month from rental payments.
--:-- Steven Bartlett: It's really difficult though, because if I, as someone that hasn't done a lot of property rentals and stuff like that, the chance that I'm going to fuck up is so high. And I'm one of those people that probably screwed up more than I could count. It just cost me a lot of sleep, cost me a lot of stress.
--:-- Jaspreet Singh: So you have to kind of be an expert. You don't have to be an expert, but you got to be willing to give in the beginning. For the first number of years, it was extremely painful. But today, when I go and acquire a property, I will look for the property, just like I do research on a stock or whatever I want to do. I do the work to research a property. In today's economy, it's much harder, not impossible, to find those returns. Acquire the property, hand over the keys to the property manager, give them the goals. And now I oversee the manager because I have a team now that is…
--:-- Steven Bartlett: It's a business.
--:-- Jaspreet Singh: It's a business. It's like starting a startup.
--:-- Steven Bartlett: But it's not like starting a startup. Why? Because starting a startup, when I work in my company, I am working in my company and I work a lot of hours. So I'm meeting with my employees. I'm leading the meetings. I'm coming up with ideas. I'm leading the vision. With this, I acquire, I hand over the keys. I've already set the framework and now you are doing the execution.
--:-- Jaspreet Singh: That's a mature business.
--:-- Steven Bartlett: With my company, there's hundreds of people in the UK right now. But you're not the one that's starting that startup. I was the founder. And now what have you done? You've acquired more employees to get there. Which is what you did with your property management. It's much harder to do that with a startup though. How big does a startup have to be in order to be able to displace you as a CEO, to pay for the staff, to make the money, and then to hire a new CEO and to lead it the way?
--:-- Jaspreet Singh: Depends. My friend Ash, who was just with me last week in LA, has four people in his startup. He's out in LA right now, in my house in LA with my girlfriend and my other best friend who's still there. And I watched… he's in the hot tub right now. I know that because every day at the same time, he goes in the hot tub. And then they go for this hike and my girlfriend sends me photos. What he's done is he set up a team of four people. They do personal branding on LinkedIn for people, and they're running it back for him in the UK. He's up in the mountain with my girlfriend right now.
--:-- Steven Bartlett: That's beautiful. But how many startups don't get there? No, but I'm saying, when you described it to me, I was like, oh, it's just a business.
--:-- Jaspreet Singh: It is a business. A steep learning curve to develop expertise. And then you put systems in place to make it sustainable. But the systems are kind of pre-established, where you need to rent it out, you need a good manager, it's going to find a good tenant, they got to pay the bills. And it's not like a startup where I have to innovate and create an idea. I don't have to go out and build the blueprint. I am going out. I'm acquiring an asset that people already need. It's already existing. And then I'm going to put it to use by having somebody live there or use it. And then there's a team just maintaining it.
--:-- Steven Bartlett: So what do you think then in terms of passive income? And is it real? But specifically, let's do this point of housing. Do you advise people to buy rental properties and then generate rental fees from them as a source of income?
--:-- Jaspreet Singh: Well, you just heard how much it would take. So I generally don't advise people to get into that business just because of the steep learning curve. And not everyone is built for that. And not everyone has capital for that. So if you were just trying to get started and actually make some money, I just think the stock market is the most liquid and easiest place to get started.
--:-- Humphrey Yang: I personally rent and I plan on renting and just instead investing the difference of what my mortgage payment might be in my rent. I think on the coast, like San Francisco, New York, I think Miami, that might actually be the more reasonable thing to do. I was reading a New York Times article that just came out yesterday, and it said more millionaires than ever are renting in the United States, and that it's tripled between 2019 and 2023. So in just a couple of years, millionaires are choosing to rent more than ever before.
--:-- Steven Bartlett: What's going on?
--:-- Humphrey Yang: My guess would be a lot of the millionaires are probably living on the coast because they invest a lot or they have higher paying jobs. And maybe it's slightly unaffordable for them to buy a house in, say, San Francisco, Seattle, New York, Los Angeles. In the New York Times article, it says they're choosing flexibility and liquidity over ownership. And they don't want to be bothered with the inconveniences of home ownership, which includes paying real estate tax and insurance, especially in markets like Florida and California, where we're seeing a lot of natural catastrophes.
--:-- Raoul Pal: Yeah, so the US is a peculiar market because there's this high real estate tax in owning real estate. So all the time your returns are being reduced by that you pay. So whether it's like 1.5% or 2%, whatever the number is, there's that. And then there's the other real estate taxes that come on top of it. Interest rates have been high. They've been high for a while now. So a lot of people have just been priced out of the market just in interest payments. But now because mortgage payments are here, the difference is actually with the rental, a lot of rental people aren't trying to cover a mortgage cost because they own the property outright. So you get cheaper rates. So it's to do with price. The US economy has not been super strong yet at Main Street level. Wall Street's had a great period of time, but Main Street hasn't. So people don't have excess earnings yet. So I think it's a function of that, but it's probably a larger trend as well.
--:-- Jaspreet Singh: I think also it's understanding what the opportunities are. I mean, there's a lot of flexibility with renting. I mean, I finally bought a house in 2025. I've been renting before this.
--:-- Steven Bartlett: So you bought your first property to live in with your family this year?
--:-- Jaspreet Singh: Yes, to live in. It was 2025.
--:-- Steven Bartlett: Why didn't you do it sooner?
--:-- Jaspreet Singh: Well, because when I was renting, I could take the capital and buy other rental properties, buy other investments. So it made more sense for me to put that money to work somewhere else.
--:-- Steven Bartlett: So is buying a property as a means to generate wealth a terrible idea? As a means to generate… to buy for yourself to live in or to… Well, but you know, when I grew up, everyone said to me that you get money, get a job, then you get a mortgage. And so like that's what you did. That's one of the worst pieces of advice you can give somebody. That's what everyone's doing. That's still what the vast majority of people are doing. And I know that because I look at my friends that don't have the same financial advice that I have from my brother and my financial advisors and my accountants. The first thing they do when they get a bit of money is they go and get a mortgage. And that's because that's what their parents did and that's what everyone's always done. Is that a good idea, Raoul?
--:-- Raoul Pal: Yes and no. No, I think these days with how the economy is set up, don't forget when I was 24, 25, I was working in an investment bank. I wasn't the highest paid guy there. I was a 25-year-old. And to buy my first flat in London was three and a half times my income. That equivalent flat and the equivalent income is 12 times. So rent makes much more sense now and you might as well invest in all the stuff that you think will drive returns. But a house, a primary house is not an investment, never will be. Because once you buy it, you don't sell it. You don't realise the equity. Maybe your kids do, if you've got kids. So it's not an investment, but it can be an investment in your future.
--:-- Steven Bartlett: But there's like some optical illusion going on here. Because when I think about renting, I go, well, that money, I never see it again. But with buying a house, I'm paying into it. So it's like me depositing the money in a piggy bank. So logically, of course, renting is wasting money. It goes to someone else and I never see it again. But that's not exactly true.
--:-- Jaspreet Singh: If you go out today, I buy a half a million dollar house. I put 20% down. So I put $100,000 down. I finance $400,000. I get a 6.5% mortgage. 30 years, my mortgage payment is $2,500 a month. Now, what am I doing? I'm not renting. I'm not giving money to my landlord. I'm building equity in my property. But banks also understand the same game. They front load your mortgage. What does that mean? When I pay it, not $1,250 is going to principal to build equity in my house and $1,250 for interest. The principal being buying your house back for yourself. It's not half and half. It's almost all interest. In fact, if you go out and buy the half a million dollar house today at a six and a half percent mortgage, 20% down, for the first 20 years of that mortgage, more than half of that payment is going to go directly to your banker's pocket with interest. It's not until year 21 that half of your $2,500 payment is going to go towards equity in your house. So it's all interest, zero equity, and then slowly it moves like this. It takes 20 years to get there. And then what happens along the way for a lot of people? For not everybody, for a lot of people, along the way, interest rates go down, I need some extra money. So what do I do? I refinance. As soon as I refinance, that amortization starts all over again. And so now I'm paying all this interest again and my real equity that I'm building is not there. This is why I say it's not bad to buy a house. I think it's great if you buy a house, but don't treat your house like you said, don't treat your house like an investment, treat it like an expense. Buy it because you can afford it, because you want it, because you're ready, but not because you're going to build wealth.
--:-- Humphrey Yang: I agree with what they're saying. I think that a home is an asset that you can't sell very easily. So that's also a good thing. Like if you have $100,000 to put into stocks or $100,000 to put on a down payment and you know you were just such an emotional person that the moment that the stock market goes down 2% you're selling, probably better to buy a house, right? You can't really sell your house in the tap of two swipes. But in terms of an investment, it's usually much more than an investment to people. They buy them for psychological reasons or emotional reasons or the sense of security. So I would just say, like, if you're interested in buying a house and you can afford it, then that's great.
--:-- Jaspreet Singh: And let's actually go with the best case scenario. So, like, I think you were mentioning this. I buy a house for, let's call it half a million dollars. It goes up in value to a million dollars. Oh my God, I'm rich, right? Well, it's invisible, but yeah, I could take the cash out, refinance, but now I have to pay all that. But here's the problem. You now own a million-dollar house. What does that mean? You have to pay property taxes on a million-dollar house. So you got to pay a lot more property taxes. You have to pay insurance on a million-dollar house. And so now if you pass this house down to your kids, great, they've got a million-dollar house. But if they can't afford the property taxes or the insurance on a million-dollar house, now they have to sell it. Insurance is one of these really hidden costs that you don't realize, particularly if you're in a hurricane area like Texas or Oklahoma or something. Suddenly your house insurance costs are prohibitive on top of the taxes you pay. People don't think about that.
--:-- Steven Bartlett: So Jaspreet, you're saying buy Bitcoin, right? Go all in. You're one coin away from everything. Zero cost. They've just clipped that. Clipped that. That's gone viral. But no one at this table would adopt buying a house as a wealth creation strategy.
--:-- Steven Bartlett: You would all do many things before then.
--:-- Jaspreet Singh: Yeah, correct.
--:-- Steven Bartlett: Would that be almost at the bottom of the list of things?
--:-- Raoul Pal: It's part of its age cohort, who we're talking about. If you're kind of like 38 years old, you've got a kid, you've kind of cleared up some of your student debt payments, you're okay, that security thing is fine, but it's not an investment. Anybody younger, just no. If you're just talking pure dollar investment returns, I probably would rank it lower on the list for sure.
--:-- Steven Bartlett: Is there any such thing as good debt? Because I remember at the start you said clear up your debts. Is there a good debt?
--:-- Humphrey Yang: People make a lot of money on debt, but people lose a lot of money on debt. I just try to stay away from debt altogether.
--:-- Jaspreet Singh: Yeah. I mean, I think that, yeah, there is such a thing as like good debt if it's working for you and you're able to leverage that money to make more money. But a lot of people, you know, with leverage comes a lot of risk. And I know a lot of people got wiped out because they took on quote unquote good debt, right?
--:-- Jaspreet Singh: What's leverage? Leverage is, so for example, in Jaspreet's example, you put 20% down on a house and you take 80% the rest of it as a mortgage. That's technically leveraging your money because you're taking the $100,000 that you have and now you're affording an asset that's worth $500,000. If your home goes from $500,000 to a million dollars, you have a $500,000 gain, but you only put in $100,000. So technically your profit or your return percentage is much higher. It was leveraged by that debt that you carried.
--:-- Steven Bartlett: Well, I don't think most people know that they can leverage their crypto.
--:-- Raoul Pal: That's right. You can borrow against it.
--:-- Steven Bartlett: So anyone can?
--:-- Raoul Pal: You don't need to go to a bank. No, you can do it instantaneously in what's known as decentralized finance. There are a whole bunch of companies that do this where you can borrow against your assets. You can even do it against digital art. I'm a huge digital art collector. Much like the art market, you can actually go and borrow against the value of the art, maybe 40, 50% against the value.
--:-- Steven Bartlett: Explain this to me super simply, as if for someone that's never even bought a Bitcoin before and is thinking about potentially buying one, but they would also like some way to have a little bit of cash.
--:-- Raoul Pal: Look, I don't like it.
--:-- Steven Bartlett: Okay.
--:-- Raoul Pal: I understand why. But the issue is, you've got an asset that does this. It's volatile. It's very volatile. And you're borrowing a certain amount against it. And you don't know whether it falls below that value and you get liquidated. Then you've lost all of your Bitcoin. The whole game is, if you're in a secular bull market, don't lose control of your tokens. Own your Bitcoin all the way through and you have a risk of screwing that up for the extra 5% income or 10% income. In Ethereum, very different world because you're staking. So you're getting naturally rewarded in the network.
--:-- Steven Bartlett: What does that mean, staking?
--:-- Raoul Pal: What it means is in Bitcoin, you actually get miners basically rewarded for solving the algorithm, the computation. In Ethereum and Solana and SUI and the other big blockchains, you basically get rewarded for securing the network. So you stake your tokens to secure the network because the more people then have this network connectivity between them and you get paid for that. So in Ethereum right now, it's probably 4% yield.
--:-- Steven Bartlett: Okay, so just I'll try and summarize this like a 10 year old. There's no risk in that, you're not getting leverage in that. So if I choose to buy Ethereum, which is a form of cryptocurrency, I can take my $100,000 of Ethereum and on my phone in a couple of clicks, I can move it. I can press a button and move it so that it is staked. And when it's staked, I am basically using my Ethereum to secure the network, to make the whole thing more secure so it can run properly. And in return, they'll give me 4% of it as a payment every month.
--:-- Raoul Pal: Well, not 4% a month, but...
--:-- Steven Bartlett: The monthly payments are 4% annualised.
--:-- Steven Bartlett: So you can get interest on your crypto.
--:-- Raoul Pal: Yes. And then if you're a little more sophisticated, a little bit racier, there are then yield enhancements. And we talked about high yield bank accounts there. There are high yield versions in crypto and you can get up to 20, 30, but now you're taking risks.
--:-- Steven Bartlett: And I can also loan against my Ethereum. So I actually did this at one point. I don't do it anymore, but I had 1,000 Ethereum and I put it. I took a $1,000 or 1,000 Ethereum?
--:-- Raoul Pal: 1,000 Ethereum, yeah.
--:-- Steven Bartlett: Oh my gosh.
--:-- Raoul Pal: Yeah, I know. I actually switched it into Bitcoin a little while ago, so a couple of months back, but probably bad timing.
--:-- Steven Bartlett: This is why Melanie was...
--:-- Raoul Pal: That was terrible timing. You should have called me first.
--:-- Steven Bartlett: I know. But yeah, people are emotional. I had a loan against it so I borrowed a couple of million dollars at one point to buy some other crypto assets against my Ethereum. And it was surprising to me that I didn't have to call anybody. I didn't have to ring a bank. I could just click a couple of simple buttons on my phone. And this 1,000 Ethereum I had, I managed to get a couple of million dollars paid straight away in cash straight to me. But I chose not to do that because the markets are super volatile. But it is incredibly efficient, effective way. For people, if you were to, let's say you had $100,000 of Bitcoin, one Bitcoin, to borrow $20,000 against it.
--:-- Steven Bartlett: That's not very risky. Or $5,000 against it.
--:-- Raoul Pal: Or $5,000, whatever it is, it's not very risky. Or if you're in a different currency where you can stake it, very little risk, very, very little risk. It's like lending to the US government, i.e. lending to the government of Ethereum, the Ethereum network. That's a pretty decent way of enhancing. It's hard to do that with stocks. It's hard to get a loan against your stocks, isn't it?
--:-- Humphrey Yang: Yeah. I mean, when I was younger and I bought Facebook stock when I finally got some money, I couldn't see a simple way of taking a loan against my Facebook stock.
--:-- Steven Bartlett: It wasn't until later when I had a private investment bank in Europe that my private investment bank were like, do you want 50% of your blue chip stocks as a loan? Yeah, it's probably usually reserved for people with more assets. But I do want to push back a little bit on the staking yield. I do understand it's 4% virtually risk-free, but there are always going to be risks with the price of Ethereum, right? So you're getting paid in Ethereum.
--:-- Raoul Pal: This is a key thing, right? Your risk is the currency you're staking. So if Ethereum goes down 50%, then your fiat value of your stake could go down, versus if you're getting a 4% high-yield savings account, it's backed by the FDIC, it's virtually risk-free.
--:-- Humphrey Yang: And there is another risk as well. Ethereum is actually annual staking.
--:-- Steven Bartlett: Oh, I see.
--:-- Humphrey Yang: And most of it is being done via a few businesses like Lido, which are turning into short-term staking. And so there's a duration mismatch that has some elements of risk in.
--:-- Steven Bartlett: What about... Sorry, go ahead.
--:-- Humphrey Yang: It's okay.
--:-- Steven Bartlett: I was going to say, when do you get paid? With the Ethereum staking, you get paid every month, or do you get paid on the year?
--:-- Raoul Pal: I was getting paid monthly.
--:-- Steven Bartlett: Monthly, okay. What about pensions? Retirement. So in the UK, we call it a pension. I think you guys call it a 401k. But across the world, it's pretty much the same, across the Western world anyway. If I'm 25 or 30 or whatever, should I be paying into my pension as a way to generate, to make myself wealthy someday? Is that a smart idea?
--:-- Jaspreet Singh: I don't have a 401k. I don't have an IRA. But the reason why people like these accounts and why they can work for some people is because they are tax-deferred accounts, meaning I can put my money in whether I pay taxes now or later. The money will then sit there, grow, and I don't pay taxes until I pull my money out. But there's a couple problems. Problem number one is I have very little control of where my money can be invested. Maybe this will change. The Trump administration has passed a new executive order on 401ks to change what you could potentially invest in 401ks. But that hasn't happened yet. You have very limited options. They're primarily just mutual funds, and many of them have a fee. I think NerdWallet said 92% of Americans don't know what the 401k fees are. So if you don't know what a 401k fee is, this is your notice to go check what the expense ratio is and you should know that. So you have very limited options. You're going to have to pay a fee, which means somebody on Wall Street is going to be paid forever until you retire. Number two, I can't touch this money until I'm 60 years old, 59 and a half. If I do, I have to pay a 10% penalty. And number three, the whole discussion is you're doing this for tax benefits. But kind of like we talked about earlier, there's a lot of tax benefits that you can get outside of a 401k, which is why for me, I don't like it, but I'm not everybody. For some people, it can be a great place because your employer might say, we're going to give you a 3% match. So if you invest, let's just say $3,000 into your 401k and they match it 100%, they might also just throw $3,000 into your 401k, but you have the same risks and concerns along the way.
--:-- Steven Bartlett: I don't think most people even know what a pension is, to be honest. I think we pay into it, but we don't really know what's working. And I saw this really interesting debate take place on X the other day, where someone was, a guy was saying in the UK, I've paid into my pension my whole life. So I deserve it. And it will be there when I'm ready. And then everyone underneath it was telling him that, by the way, it's not like some piggy bank that you get to break open. The money you paid into a pension was used to pay for the people that needed a pension when you were working.
--:-- Jaspreet Singh: So you're talking about social security in the United States. Because as an employee in the United States, you have to pay into social security. So 6.2% of your income. So you have a lot of taxes. You're going to have to pay income taxes on what you make. And then you have social security tax. So on your income, you're going to pay 6.2% of that separately from your income tax, but 6.2% into the social security fund. And then your employer is also going to pay 6.2% into this fund. This money in theory is supposed to grow and compound. That way, when you retire, you have this retirement fund that's going to pay you every single year. You don't get to choose. I mean, you can choose when you pull it out, but you don't get to do anything with it. The government's going to be in charge. This is what is running out of money in the United States today. Why? Because people that are in their 20s, 30s, and 40s that are paying into it today, it's not paying for their retirement. It's paying for the people who are retiring today to pay for their social security benefits. And that's what people don't understand. They think they're paying into a piggy bank that they get to crack open and that will pay for them as long as they live for the rest of their life.
--:-- Steven Bartlett: I was looking at the biggest misconceptions around pensions and the first one was that my pension is guaranteed money for the entirety of my life once I retire.
--:-- Jaspreet Singh: Well, there is some truth to that. The part in the United States, at least, that you are guaranteed, what the wording is, that you're going to get the social security until you pass away. But the part that they never tell you, and there's no asterisk about this either, is how much that value of the check will be. So here's what's going on. People are paying into the social security fund thinking that they're going to be able to fund their retirement. Every financial advisor historically has said that retirement is a three-legged stool. You have your 401k, your personal retirement, you have your own personal savings and then you have social security. Well, you pay into social security by force because you don't get to opt out of it unless you are an investor. You don't have to pay your social security income or social security taxes on your investment income, but you pay into this until you hit retirement age and then you get to pull this money out. Well, the government is running out of social security money, but people misconstrue that because they say, "Oh, that means the government's no longer going to pay social security." That's not true. They'll still pay it, but they'll just print their way to pay it, which is what you've been talking about. So great, they're giving you a bigger check. The problem with that bigger check is that that bigger check can't buy you as much stuff. So yeah, based off what the United States government says, assuming that they don't default, you're going to get the social security check. It's just not going to be able to buy you as much as you thought before.
--:-- Steven Bartlett: The other big misconceptions are that people think their employer is putting enough in to cover their full retirement. They think it's the same as a savings account. They think they can access it whenever they like. The government will cover them when it runs out. And I don't need to think about it until I'm older. And lastly, my pension pot is tax-free.
--:-- Raoul Pal: So the big shift that happened around 20 years ago was a shift from what's known as defined benefit to defined contribution. So defined benefit used to work for Ford or American Airlines or whatever company you retired. You got 60% of your final year salary forever. Oh, that was bankrupting all of these pension plans because people were living longer and all the other stuff. And so they kind of changed it to defined contribution. Basically you get out what you put in, plus the investment returns. But there's fees. Maybe you didn't give it to a good manager. Maybe you didn't know when they said, "Well, do you want to put it in bonds or equities?" You're like, "Bonds," and it didn't grow as much or whatever it was. And in the end, you're just not sure. The average 401k in the United States for a baby boomer, I believe, is about $100,000.
--:-- Steven Bartlett: What age? A baby boomer, like 65?
--:-- Raoul Pal: Yeah. I think it's right now around $200,000.
--:-- Steven Bartlett: $200,000? It's not enough to retire. That's 10 years of $20,000 a year, right? So there's so little money in the US pension system, particularly, that there is no hope for these people. And this whole video on this called the retirement crisis became a huge kind of viral success years ago, just explaining there is no way out of this for the pensioners, the boomers. All the millennials and everyone's going to have to change within this to figure this stuff out. I think you said it earlier today. You were talking about a Ponzi scheme here. You have one, but nobody wants to say that. But everyone is paying in to keep funding this thing. But the only way it's running is because people are paying into it. The problem is there's not enough money coming in because, remember, we talked about the beginning, the demographics. There's less and less young people because we're having less babies, but there's tons of these retired people. And this keeps going in perpetuity because we're having babies, so that's workers in 20 years time. The babies now are workers in 20 years time. We can forward project this. It doesn't stop. So how the hell are we going to pay for this massive amount of baby boomers, which is, in the United States, 78 million of them, the largest cohort in history at the time? We can't pay for them. And this is where the proposals are to tax your Bitcoin, the value of your Bitcoin, or tax the value of your assets, or tax your investment income. But the UK's got the same. This whole wealth, everybody's got the same problem, everybody.
--:-- Steven Bartlett: What do you think, Humphrey, in terms of the retirement crisis?
--:-- Humphrey Yang: I think that, so I have a different take on retirement altogether. I think 401ks are good for the average person because it's a forced savings mechanism. A lot of people wouldn't contribute to a retirement account unless the employer offered it, right? And so the whole match thing is a great thing for behavioral finance. It's like, okay, if I do this, I get some free money from my employer, and at least I'm saving some money instead of nothing.
--:-- Steven Bartlett: You are working for that money. It's not really free.
--:-- Humphrey Yang: A 401k for anyone that doesn't understand is you agree to invest in an investment pot alongside your employer. It is more like an individual retirement account that is awarded to you because you work for an employer. You have the option to invest within a 401k and that 401k is typically tax deferred, which means that you pay taxes on it later in life.
--:-- Steven Bartlett: And what's the difference between that and social security?
--:-- Humphrey Yang: Social security is a government program where you are required to pay into it every paycheck that goes into this big pot. And then when you do retire, the government will send you a Social Security check every month. But I still think that there are plenty of ways to retire and retire with some sort of freedom. Retire early. Have you heard of Coast Fire before?
--:-- Steven Bartlett: No.
--:-- Humphrey Yang: Coast Fire is another newer thing that's kind of on Reddit, but it's a variation of financial independence, retire early. And it's essentially you get your nest egg to a point where you don't have to invest any dollar into it after that. But because you get it to, let's say, a certain number and that number is usually pretty reasonable, the investment returns, if you're invested in the S&P 500, will get you to a full retirement by the time you're able to retire at 65. So it doesn't mean you retire early completely, but it means that if you get to your Coast Fire number, which is what it's called, maybe you have more freedom of choice in what you're working on. So like maybe you don't have to work for the employer that you absolutely hate. You can maybe go do something that's a little bit more suited to your lifestyle. You're still working, but you're not working to save for retirement anymore because you hit that Coast Fire number. So for example, at the age of 35, I think the Coast Fire number is like $150,000. If you can hit $150K by 35, if you have 30 years of investment returns at 8%, you'll have $1.5 million by the time you retire, which is a little bit more palatable for people that are having a hard time wrapping their heads around, "Am I ever going to retire?" They're not going to retire in that they're not going to be kicking up their feet on the sand beaches of Aruba, but you're still going to be doing something. And I personally think if I was retired, I'd be so bored out of my mind doing nothing, right? So I'd like to work on something. The idea is you just don't have to work for maybe the job you hate or something like that.
--:-- Steven Bartlett: So if I hit the $150,000 in savings and I put it into the S&P 500 and get the...
--:-- Humphrey Yang: 8% return.
--:-- Steven Bartlett: 8% return. By the age of 65, I'll have 1 point something million.
--:-- Humphrey Yang: $1.509 million, yeah.
--:-- Steven Bartlett: What's that worth then?
--:-- Humphrey Yang: That's true. That is another part of the equation is with inflation, what is it going to be worth?
--:-- Steven Bartlett: And is this what you're trying to do? Because I remember an hour ago, you said, "I'm just trying to retire earlier," words to that effect.
--:-- Humphrey Yang: Yeah, I mean, I'd like to be Coast Fire. And Coast Fire is, however you would like to define it. But I already think I'm pretty close, or if not, I've already reached it, which is like, I get to work on the things that I love. And I think that my retirement nest egg will eventually grow to a point where by the time I hit 60, 65, I'll be able to coast.
--:-- Steven Bartlett: Did you create a number? Do the math on what you'd need to get to?
--:-- Humphrey Yang: Yes.
--:-- Steven Bartlett: Okay.
--:-- Humphrey Yang: Yeah, so you can project out your expenses of what you think your expenses are going to be on an annual basis and then kind of work backwards to that number.
--:-- Steven Bartlett: Okay. Yeah. A lot of math involved, but you kind of have to do it. Do you want to use ChatGPT or something?
--:-- Humphrey Yang: Yeah, just do it.
--:-- Steven Bartlett: Retirement crisis. Hmm, that's concerning. That's concerning. So your approach is to do the Coast Fire thing.
--:-- Humphrey Yang: My approach is let's stay disciplined, consistent with our savings and investing, and actually get to a place where retirement might be possible.
--:-- Raoul Pal: I love that idea. And that's the same as when I started with the manifesting your destiny. You say, well, I need this goal. How do I do it? We do this and grow it via investments, right? It's brilliant to do that. And then you can take more risk. If you isolate that and say, well, any capital I build now, I can do whatever I want. That was the same idea that I had with the home. It's like I've de-risked my life. Now I can take risk, and that's a really nice thing to do. And I love the way that you do it by saying, well, my future self wants this. For me to do that, I need to do this now, and then it should take care of that. Now it's always riskier than you imagine, but yeah.
--:-- Steven Bartlett: And then you have extra dollars to do whatever you want with, right?
--:-- Raoul Pal: That's right.
--:-- Steven Bartlett: I also love that you've been disciplined on what you like and what you know.
--:-- Humphrey Yang: Yeah, I appreciate that.
--:-- Steven Bartlett: Because you said, I think, 90% are in index funds and ETFs. That's what I would recommend for people.
--:-- Humphrey Yang: Oh, sorry. For me personally, I like 50, 60 index funds. But still, that's pretty high and not having that shiny object syndrome or whatever you want to call it.
--:-- Steven Bartlett: I mean, that's not... You're accusing me of having shiny object syndrome.
--:-- Humphrey Yang: I was just trying to engage everybody here.
--:-- Steven Bartlett: Yeah, yeah. But whatever it might be, to be disciplined. I think that's such a valuable trait. And you talked about the scarcity mindset. I think that's also a disciplined mindset that you have. So I would reframe that. I think you've done an excellent job. I think personal finance is personal.
--:-- [Ad Break - Boncharge]
--:-- Steven Bartlett: On that point of discipline, Humphrey, I have seen a couple of videos from you where you talk about the things that you stopped spending money on. And there is a narrative that says, in order to get rich or to save, to get to where you want to go with your financial goals, you should not have the Starbucks coffee. You should not do these things. What did you stop spending money on and what is your framework there?
--:-- Humphrey Yang: So I looked at my expenses from 2014 and onward and just kind of saw the differences in how my spending habits have changed. The first thing I stopped spending money on are Airbnbs. So Airbnbs used to be a great value. They used to be a unique experience, but these days they're all kind of commercialized. And I feel like with the cleaning fees and all these fees, you end up paying more for less convenience than a hotel. So that's number one. I stopped buying food in bulk. I know that sounds kind of random, but I'm a single guy. Sometimes I get two gallons of milk and I can't finish it, right? So I'm pouring milk down the drain or I'm buying 48 eggs at a time from Costco. And I'm just like, dude, I mean, I like the gym, but I can't eat 48 eggs in like two weeks or whatever that time is, right? So that's another. And then another thing I did was I started to switch my car insurance because I moved into San Francisco, the city. I'm driving less. So I used to drive 15,000 miles a year. I drive 3,000 miles a year now. And just by calling my car insurance, I was able to save like $40 a month just because my driving requirements are much lower.
--:-- Steven Bartlett: Explain that.
--:-- Humphrey Yang: Yeah. So car insurance rates are dependent on how much you drive. And if you drive less and you move to a city, then your rates should come down. But I think some people are a little bit too loyal to their providers. They're not willing to compare rates because it's painful. You don't really want to do it. It takes time. But I think doing that, spending an hour calling your insurance provider, looking at different insurance providers, not just for cars, but for homes too, you can save a lot of money because insurance is kind of commoditized. So it's like you're going to get coverage from many different providers. You might as well put them in a bidding war for your business.
--:-- Steven Bartlett: I used to work selling car insurance. So, you know, I used to, it was one of my telesales jobs.
--:-- Humphrey Yang: I've done that as well.
--:-- Steven Bartlett: Yeah, and there was, interestingly, I don't think people know this, but as I sat there in the car insurance call centre, there's this bar on the screen that I can move in either direction to basically give you a discount based on how the sale is going. So if I really think I'm going to lose your sale, all I do is slide the bar to the left and it brings your upfront payment down and your monthly payment down. But if I thought the sale was easy, I could bring the bar up in terms of the price they quote you and give you breakdown insurance and all these other upsells. And so I don't think people realize how negotiable all of their insurances are, even their phone insurance and all these other things. And sometimes you don't figure out until you say you're going to quit and then suddenly they give you some great offer where they're going to give you 50 off.
--:-- Humphrey Yang: Yeah, yeah.
--:-- Steven Bartlett: And the other way of approaching it is I never really sold for costs. I sold for income. Okay, and that is saying that your lifestyle, as long as you're not being ridiculous, right? It's like, do I really want to not go to a restaurant or get that Uber Eats or whatever? I understand, yeah. Because that's penalizing yourself. And that's not a nice thing to do always, right?
--:-- Steven Bartlett: It takes a lot of discipline, and discipline is hard. But if you've got an equal and opposite amount of discipline in solving for income, you actually move your lifestyle further ahead. So, you know, the rise of, I mean, I do three, four jobs. You do three, four. We all do lots of different things now. You do as well. We all got different income streams. You're almost better off to spend your energy thinking about how do I increase my income stream than your cost basis. At a certain point, we agree, like Stephen's friend who sent him the message, he needs to desperately rescue his cost base. But generally, if you're looking at a life plan, you'll get to your coast fire or whatever it's called quicker by solving for income than you will for cost.
--:-- Humphrey Yang: I just think lower hanging fruit is solving for expenses, which is like everyone can cut back a little bit, but everyone can't just say, I'm going to make 2x more tomorrow. That's a harder problem.
--:-- Steven Bartlett: Well, you just trade off your time because you can. If you're in a lower earning job, you can drive an Uber for extra money or you can do a bar job.
--:-- Humphrey Yang: Oh, I see what you're saying. Yeah. It's like multiple revenue streams is now the way the world works because the cost of living has become so expensive that everyone's having to do multiple jobs. But with technology we can actually do it much easier.
--:-- Steven Bartlett: Tomfrey's point as well, though, you can get a 30% pay rise today just by maybe bringing a packed lunch or walking somewhere. And it's probably harder to get a 30% pay rise today.
--:-- Humphrey Yang: I'm not sure about today. I think it depends on which stage of life you're in. Because now if you just stick with a lunch, on that lunch example, packing lunch costs time. And depending on how much your time is worth, that one hour of time could be $20. It could be $2,000. And I think that's that key difference. And I think there's definitely times and places you got to cut. I fully agree with you on that. But I think at a certain stage, look, I'm still cheap with my money in multiple places. But when it comes to time, our office is in downtown Detroit and my commute is 45 minutes. I don't drive. What I do is I get driven there. The reason why I do that is because I can sit in the back seat and work. One of the things that we publish is daily financial news. So sometimes something will be happening with our market briefs where, oh, this is important. And if I'm driving, I don't want to be texting and driving. So instead I pay for an Uber. I go that 45 minutes there, it's 45 minutes back and it's money out of my account every single day, but I get back an hour and a half of my time, which is worth way more than whatever I'm paying in driver fees. So I think it depends on where you are in the stage of life, because I wouldn't do that if this was way before.
--:-- Steven Bartlett: What is the biggest, this is an open question to everybody, what do you think the biggest money mistake the average person makes is?
--:-- Raoul Pal: They spend all their money.
--:-- Humphrey Yang: The two S's. You're spending all of your money, and if you get past that, then you're saving all of your money.
--:-- Steven Bartlett: Both of them are mistakes?
--:-- Humphrey Yang: Both of them are mistakes. So just having your money sat in a bank account doing nothing, you're becoming poorer every single day. I don't think most people know this. I've got a friend who's steadily compounded his bank balance over time. I remember asking him, I said, how much money do you now have in your bank account? He's taking a really slow approach over time, he runs a business as a freelance. He goes, I think probably about a million dollars. I was like, it's just sat in your bank account? He was like, yeah. And because he's scared, he doesn't know what to do with it, so he thinks putting it in the bank account is the safest possible thing to do.
--:-- Raoul Pal: Well, it's a guaranteed loss.
--:-- Steven Bartlett: Why?
--:-- Raoul Pal: If your bank account, the average bank account in the United States today, not the high-yield accounts, but the average account is paying 0.1%, 0.5%, something super low. If we just say inflation is 3%, meaning the cost you have to spend out of the bank account to buy something is going up by 3%, and that's the reported number. It's not the real inflation that many people feel. Well, that means there's a net loss of 2.5% on that. So if I have a million dollars there, that's lost buying power.
--:-- Steven Bartlett: Raoul, do you think companies, because a lot of my audience are companies, whether they're one person companies or big companies, do you think they should be putting their money that they have sat in their account into Bitcoin? In essence, if you're Microsoft, they have huge cash piles. What does Microsoft buy with their cash? They buy some investment stuff but it's generally cash based, and then they may buy another company, or they may buy real estate data centers, or they may buy their own shares back. All of those three things that they buy are driven by the debasement of currency and they get more expensive every year, and they're holding a cash return of three and a half percent, so it's stupid what they're doing. Because actually, all your shareholder cash is not buying the equivalent of the actual things that drive the value of the company. So what about small companies? What if there's people listening now that have companies where they've got a million, 2 million in the bank, they probably don't need it all for cash flow reasons. And so I do think that investing versus saving is misunderstood, to go back to your original question. I think investing is much more important. I made the mistake of being a saver when I was young because the fear meant I was super risk averse. And I was an investment banker. I was investing, but I didn't. So I made money from being in that industry. So I'm like, I'm just going to hoard cash. I did worse for doing that. And then once we saw the banking system fell, I'm like, I'm not doing this anymore. I'm going to take control of my own finances. So the same is true of a business that they're generating cash. They shouldn't be sitting on a massively large amount of cash, but some liquid investments, I think, massively help because you're going to make your cash grow for you and your shareholders. And that's important. But don't let go of your liquidity because when you really need it and you don't have cash, that's the worst thing in the world, particularly when you've saved the money.
--:-- Steven Bartlett: So in your business bank account, for Real Vision, do you put some of the money into crypto?
--:-- Raoul Pal: It depends. A lot of it gets reinvested for growth within the company. So you're making the decision, how's your capital going to grow? Is it going to grow your share price by reinvesting in the business? Or is it better to use the savings pool and buy other investments and diversify away? That really depends on your business where it is in the growth cycle. But if you like a cash regular non-style business, then you're going to be generating cash. You might have taken some dividends out and bought a house and done all that thing. There's no reason not to do some relatively conservative investment strategy.
--:-- Steven Bartlett: Humphrey, you worked with lots of rich people advising them. What is it that rich people know that the average person doesn't know as it relates to money? Because there are money games that you discover when you get to see behind the curtain. What is it that they're doing with their money that the average person isn't aware of or isn't able to do with their money?
--:-- Humphrey Yang: Rich people are typically more disciplined. They're typically checking their bank account every day. They're doing little things that compound into huge results at the end of 10 or 20 years. And they're thinking in decades, not just what am I going to do this week. They're choosing investment choices for themselves in 10 years, 20 years from now, instead of choosing sports betting on the football match for 1,000 pounds that night. Because they know that their 1,000 pounds working for them today will be worth 10,000, 20,000 in 10 or 20 years.
--:-- Steven Bartlett: So it's more just like a long-term mindset versus a short-term mindset.
--:-- Humphrey Yang: Delaying gratification, yes.
--:-- Steven Bartlett: What were you writing down there?
--:-- Raoul Pal: I was writing down how the system is rigged in the favor of rich people. It's extraordinary because it's the Charlie Munger quote of, show me the incentive and I'll show you the outcome. What people get, once you get, it's not the 100,000, but it's like the people who've got 10 million in their bank account, they get loans that are called non-recourse loans. It's an extraordinary thing because unlike your friend, they don't have to pay it back. So a non-recourse loan means you're not legally liable for the loan in the end. There will be some provisions and how to do it, but why are they doing this? Why are they getting these favorable terms? Why are they getting the private placements in stocks before they go public? Why are they getting all the best offers? Because they pay fees to the investment banks, and the investment banks desperately want these people because they have a lot of financial activity, and so they incentivize them. None of us get a look at all of that. It's the same thing that I talked about with the hedge fund industry in the beginning. They were incentivized by a phase to get information that was better than everybody else. And I think part of that is the ability that all we're trying to say to people is you don't have to play the same game. You don't have to pay anybody's fees. You buy a Bitcoin, stick it in your Coinbase thing or wherever. It costs you nothing to run, and you're outperforming a venture capital investor. There's simple things like buying an index fund. You're not paying the Wall Street complex thousands of dollars for active management. There's ways of hacking this. And it's not that expensive to do.
--:-- Steven Bartlett: Just before we move to Jaspreet, one of the things that I think you both alluded to a little bit, and you said earlier on, was about how relationships make money. Because what I was watching when I sat in that apartment with this billionaire is his friends and his contacts who had done business with him in the past were getting the allocation, the prime allocation of being able to invest just before this company went public, which means that the next day it would multiply. But those were relationships. So if there is a strategy to build wealth, it goes back to what Raoul said at the start: being around people and having good relationships is actually, I think, really unappreciated. I've got a friend, I can name my friend, called Harry Stubbings. He runs a podcast called 20VC. On that podcast, he sits with extremely rich people. Harry's podcast isn't as big as Joe Rogan's. But because Harry has had two-hour conversations with the richest people on planet Earth and continues to do so, he's built one of the biggest investment funds in Europe, especially as a guy in his 20s. I think he's raised, if I'm not mistaken, 750 million just from the relationships. And he said to me, the biggest value leverage I've built in the last five, 10 years isn't the views. People have more views than him. It's he knows everyone rich. And I think we underestimate that when we think about wealth creation, because if you can do what Raoul said and get around rich people, help them in some way, build those relationships, it pays dividends forever.
--:-- Raoul Pal: There's a great guy called Divesh Makan who runs an investment firm in San Francisco called Iconic. He was a young investment banker at Goldman, around the same time when I started there as well. He was hired into the internet banking team in 2000. He turned up to the office, but a month later, the entire thing was gone. Everybody was fired. And he was too young, he was too junior to bother firing. They fired all the senior bankers. And he thought, well, what do I do? I think he had no bosses left. So he just basically went to Silicon Valley and hung out in coffee shops and made friends. The people he happened to make friends with were Mark Zuckerberg, Reed Hastings, Reid Hoffman, all these people. He then became their wealth advisor at Goldman, moved all to Morgan Stanley, and then built his own firm, Iconic. And Iconic is massive. It runs all the wealth for the Silicon Valley people from this network of meeting these random dudes building businesses when nobody else wanted to speak to them because they'd gone through the big bust. He made his entire life on that network.
--:-- Steven Bartlett: Genius.
--:-- Humphrey Yang: Probably at that cafe where I spent all my Bitcoin.
--:-- Steven Bartlett: The one with the gold door. You were there at the same time sending your phone on Bitcoin. It's interesting because when we talk about systems and all these things for money, nobody ever talks about a system for managing your relationships. The way that most of us manage our relationships is we get someone's number and we hope that we'll cross paths again. I'm thinking about, obviously I do this podcast, so I meet so many great people. I should have a much better system for understanding those relationships, how I can be of service to those people, understanding their birthdays and all these other kinds of things. Not only would that be good for my mental health and more friends, but in business terms, there's going to be opportunities, whether it's six years from now, where I need your advice. And the key to networks is it's what you put into the network, not what you take out. So the people who have the best networks I've ever seen are always the people who say, how can I help you? Hey, I've got something for you. You should meet so-and-so. The connectors. It's never, hey listen, what can you do for me? That karma flows back. Always give as much into the network as possible and the network gives back. I think that's what in the case of Harry, he's also done. Funnily enough, about a month ago I said, oh, I've got this idea to do this thing, and Harry turned around to me 30 seconds within WhatsApp and said, oh, I know insert name of this person who's the very top in investing in Europe. I'll put you in a WhatsApp group with him. Put me in a WhatsApp group with this guy, sent a voice note, said Steve's the best ever, then he said about the guy he put me in the WhatsApp group, this guy is also the best at what he does ever. Putting you two together, good luck. And immediately I thought, fucking hell, Harry, what a great guy. And then the guy he'd introduced me to goes, isn't Harry such a great guy? And so I messaged Harry, I'm like, listen, if there's anything I can do for you. But that's the karma. Honestly, I really believe in networks. I think it's the most important thing. Your community, your network is everything. And the absolute answer is, you have to keep putting into the network. Because if you try and extract from the network, it collapses. Because then you're just that guy who's making the phone call after 10 years saying, hey, Stephen, can I get some money from you? Because I've run out of cash.
--:-- Steven Bartlett: The last thing I wanted to talk about is the UK and the US and geographies generally and how much that plays a role. Because right now there's lots of political, social conversations about the UK. People are a little bit doomer about the UK. Some people are optimistic about the US, some aren't. How much do you think about geographies when you're thinking about your wealth creation, your finance strategy? Does it play a role?
--:-- Humphrey Yang: So I was fortunate enough to live in London for a little bit over a month or so. And I did a number of podcasts out there. The interesting thing about these podcasts is when I was talking to them, what they told me is that the majority of their listener base is in the United States. The majority of their money comes from the United States. The majority of their sponsors come from the United States. It's not from the UK. And I thought that was very interesting because it's a huge market. But what they were saying is people who are really looking to grow in the United Kingdom, a lot of them at least, just from what I heard, would prefer to earn from the United States because the dollar figures are much higher. Now, I don't have a lot of global experience outside of that, but I do think that the United States is more friendly for people that are interested in wealth growth, wealth accumulation. Maybe not the best, there's tax-free countries out there, but in terms of for somebody who is more entrepreneurial in that sense, I think you have a lot of opportunities here that you don't have other places.
--:-- Steven Bartlett: What do you think, Raoul?
--:-- Raoul Pal: I'm a huge believer in geographic location for a number of different reasons. So I've lived in the UK, India, Spain, in the Cayman Islands. I spent most of my working career on this side of the pond in the US. Spain is lifestyle arbitrage. The cost of living is probably half that of the UK and a third of what it is in the US or the Cayman Islands. 300 days of sunshine, incredible people, culture, climate, cost is very cheap, rent is cheap, to buy is cheap, everything. Perfect lifestyle arbitrage. Problem is network. You're not surrounded by people who are ambitious doing different stuff. In a globalized world now where we can work online, it's actually doable. So we're seeing a lot of Americans moving down to Latin America. That's the arbitrage here, or Colombia as well. So into South America, Latin America, it's cheap, high quality of life, relatively safe. And if you're in a business where you can work online, you can get to your end goal, your coast fire thing, super fast by doing that. If you want, to your point, if you want intellectual capital, there is only one place in the world that has it in such high density, it's the US. Capital and intellectual capital. Asia has it. India has it. It's all around, but they're all missing different forms of it. So it's using that for your end goals.
--:-- Steven Bartlett: What about the UK?
--:-- Raoul Pal: I can't do it because the UK's attitude now has become we just can't have nice things. They don't want to. If I speak to my friends, they don't want to invest. They just want to have the bigger house and the next car on lease. People are institutionally unhappy in the UK right now. And there has been for a while. And so we don't have a culture of entrepreneurialism left. It's been stamped out. Europe too. So it's not just the UK. Everywhere in Europe, the same thing has happened. People just don't believe they can have nice things anymore.
--:-- Steven Bartlett: When you think about the narrative that you understand of the UK, like what is the message? So if it was like a marketing slogan, the UK, you're an investor, you're an entrepreneur. What's in your head when you think of the UK? What comes out? Is it in reality? Or how would you sell the UK to others?
--:-- Raoul Pal: No, I'm saying, what do you think the narrative of the UK is right now as an investor and entrepreneur?
--:-- Steven Bartlett: I think it just feels like a backwater.
--:-- Raoul Pal: Backwater?
--:-- Steven Bartlett: Yeah, it's an economic backwater.
--:-- Raoul Pal: So don't forget, in the late 90s and 2000s, it was the entire centre of the world's financial industry. It was the centre of the world's advertising industry. It was some of the, you know, all the creative industries. It was all based in London. We lost all of it.
--:-- Steven Bartlett: Why?
--:-- Raoul Pal: Regulation.
--:-- Steven Bartlett: So you think the government has misstepped?
--:-- Raoul Pal: Yeah, the government misstepped and the US took the banking system back because how they treated capital requirements in the UK and Europe was different than the US. And they managed to get Wall Street back to Wall Street. It all moved. I was working for Goldman Sachs. London was their biggest office. Same for JP Morgan, Morgan Stanley, everybody. And we just stopped it. And now we're seeing it again. We've got new industries rising. We've got AI, crypto. AI came out of Cambridge. I think it was the Google DeepMind. I think it was Cambridge University for most of that stuff. And we dropped the ball. We dropped the ball in the finance industry. We dropped the ball in AI. We get this massive talent density coming out of Oxford and Cambridge, Imperial College and all these others, and we don't use it. They all move to the US. We had the crypto industry of which we were part of that. We dropped that ball too. We dropped the whole ball on everything. And Europe is actively shutting the door on every opportunity by saying we don't want to do this. Don't forget they're a nation of old people now, most of Europe. So they'd rather just not have any change. But if we go back to that economic formula for GDP growth, population growth is the key driver. You need a growing population over time, but it just needs to be done in the right way. So they're blaming that, but the whole economic machine is because nobody's had kids. The demographic problem is the structure of everything. And the problem is, nobody's had kids, so you don't have economic growth. So then you try and bring in new workers to create growth. You don't want that, so they get thrown out. Meanwhile, the economy slows down. People get pulled back. They don't want to take risk anymore. The whole system is now having to pay for the National Health Service to pay for these old people. There's not enough kids to support all of that. The governments are getting more in debt. Bond yields are going up. Everyone's like, what's going on? It's all been a function of demographics from day one.
--:-- Steven Bartlett: Closing arguments, Humphrey. Closing position. What's the most important thing people should be thinking about? Is there anything that I didn't ask you that I should have asked you?
--:-- Humphrey Yang: Yeah, I think that my personal philosophy is just that personal finance just comes down to your income minus your expenses. So know those two intimately. Know how to drive both of those two. And then just really watch what you spend your money on. Like the average car payment in America is $745 a month. Stay away from that if you can. Try to be reasonable. Everything is about being consistent and reasonable. And I think those small decisions compound to a much brighter future.
--:-- Raoul Pal: Well, for me, first thing is educate yourself. You don't know. We talked about what do your finances look like? What does your bank account look like? What are you trying to achieve? So educate yourself. Learn about investing. Invest above all things. Investing above saving is the only way you're going to get there because if not, your money goes down. And then just do it. Make a trade. Make an investment. Fail. Learn. Do it again and do it again and keep learning, educating. And then surround yourself by a good network. Whether it's even on Twitter, on social media, find a network of people that you can learn from, add to the network, and those things, you'll get ahead. You can't fail. If you educate yourself, just get started, and then learn, keep doing it then, and just grow a great network.
--:-- Steven Bartlett: And buy Bitcoin?
--:-- Raoul Pal: Obviously.
--:-- Steven Bartlett: What coins do you own in crypto? So this is going to get more contentious now.
--:-- Humphrey Yang: So I actually own just one Bitcoin for posterity's sake.
--:-- Steven Bartlett: Oh, fuck. Okay.
--:-- Humphrey Yang: So I own...
--:-- Steven Bartlett: I'll delete the episode then.
--:-- Humphrey Yang: I own mainly Sui, which is the crypto network that came out of Facebook. But I'm also on the foundation as well. But I actually put most of my liquid net worth into that. And then I own a lot of digital art on Ethereum. Because that's a long-term store of value for me.
--:-- Steven Bartlett: NFTs.
--:-- Humphrey Yang: Yeah, NFTs. And so I've moved around a lot between Bitcoin, Ethereum, Solana, and Sui. I don't trade, so these are long-term holds. I might change once every two years, change my allocation. But it's generally all the big tokens.
--:-- Steven Bartlett: And Jaspreet, closing statements.
--:-- Jaspreet Singh: Well, first off, thank you Raoul, Humphrey, and the theme of putting this together. And to add on to everything that you guys said, for me, I think there's a lot of, for lack of a better word, crap on the internet of people romanticizing and fantasizing how easy it is for passive income or for insane levels of wealth, where it becomes sometimes hard to see how you could actually do that. And what I'd like to say is, look, nothing comes easy, but change can always be made regardless of where you are, what your background is, where you come from, but it's going to take work. And I think the best thing to help your outcome to get to where you want to go is hard work, sacrifice, put in what I call a decade of sacrifice. That way you can have what most people dream of. And the only reason why you're able to get there is because you're willing to do what the majority of people are not willing to do.
--:-- Steven Bartlett: And in a word, AI, positive about it or pessimistic?
--:-- Jaspreet Singh: Positive.
--:-- Humphrey Yang: Best tool we've ever been given.
--:-- Raoul Pal: Optimistic, yeah.
--:-- Steven Bartlett: Okay, good. Refreshing, very refreshing. Thank you all so much for giving me your time today. I'm going to link the top three things that you tell me we should direct the audience to below, so I'll ask you after this conversation to give me three things where people can find you. The first is going to be your channels, your channels on YouTube. You're all very large YouTubers and have incredible channels, channels that I followed for many, many years. Is there anything else that you guys would like me to link that you think is going to be pertinent to the audience?
--:-- Jaspreet Singh: Well, we have a free newsletter for investors that we publish every single day called Market Briefs. I think that would be a great one. I'll link that one as well.
--:-- Steven Bartlett: Anything else?
--:-- Raoul Pal: Real Vision is a simple place. It's a simple home for everybody to find what they need.
--:-- Steven Bartlett: The website, realvision.com?
--:-- Raoul Pal: Realvision.com.
--:-- Steven Bartlett: Okay. And Humphrey?
--:-- Humphrey Yang: And I'm building a website right now that's basically my guide, but it's my guide on different...
