Phil Town: Yes, I am. Let’s go.
John Lee Dumas: Phil is the number one New York Times bestselling author who is revolutionizing long-term investing for the little guy. He is a hedge fund manager and a licensed financial advisor, and he’s saying quit listening to Wall Street and take control of your money now before it’s too late. Phil, take a minute, fill in some gaps from that intro and give us a little glimpse into your personal life.
Phil Town: Oh man, I live out on a horse farm south of Atlanta, we’ve got 22 horses on the farm, my wife Melissa and I run our company together. We kind of got thrown into this years ago but I’ll tell you what, my background is, I don’t have your Wall Street background. I came from the US Army into being a white water river guide in the Grand Canyon, and I was down in the canyon for about ten years. So I spent about 14 years living in a sleeping bag after I left my third attempt at college. And it was kind of on one of those white water river trips I met a guy who mentored me into becoming an investor and it kind of all went from there.
John Lee Dumas: Well Phil, you are speaking to a fellow officer here. I am a captain. I spent eight years in the Army. What was your rank?
Phil Town: Yeah, I was a first lieutenant.
John Lee Dumas: Wow, good stuff man.
Phil Town: I started off as a private in Fort Louis, Washington, and I was just gung ho man. I just liked it. I liked crawling in the mud and I liked standing at attention in the rain and everybody thought I was crazy, and the captain that was running that infantry basic training said, “Hey man, we’re going to put you forward if you wanted to think about going to OCS,” and I said, “I’m not very interested but maybe,” and at AIT this guy got me fired up and I ended up going to OCS.
John Lee Dumas: Wow, good story. I can remember my days back at Fort Louis and standing in the rain as well. But we won’t bore Fire Nation Phil, but thank you for your service. Much appreciated.
Phil Town: Thank you for yours man. That’s great.
John Lee Dumas: So Phil, Fire Nation is built up of entrepreneurs, small business owners, and one thing that we’re all focused on is creating viable businesses, and as you know and I know, viable businesses mean you’re actually generating revenue. So how do you generate revenue today?
Phil Town: Well right now our little business is about a $10 million a year business, and it’s come up from that in just three years, and we started with nothing. We generate revenue three different ways. The company teaches people how to invest, essentially how to invest like Warren Buffet does it, and we generate revenue there from our training courses, and we also generate revenue from investing people’s money, managing their money, and we generate revenue by investing our own funds, so those are the three source of revenue we have.
John Lee Dumas: So Fire Nation, this is the entrepreneur that Phil has grown into. We all have our journeys, we all get experiences along the way, we all have that mentor in the night that speaks to us, and I just love how this has kind of come to fruition because, Phil, this interview is about your journey in life, specifically your journey as an entrepreneur. Now you’ve had your ups, you’ve had your downs, but what I want to talk about next is what you consider your worst entrepreneurial moment to date. So Phil, take a deep breath, take us down to that ground level and tell us that moment in time that you consider your worst entrepreneurial moment.
Phil Town: Well it was either my worst entrepreneurial moment or my best entrepreneurial moment, I’m not –
John Lee Dumas: I’ll be the judge of that, Phil, how’s that?
Phil Town: Okay here it is. I wrote a New York Times bestselling book about how to invest, and it brought me on to a very large stage. I was doing these circuits with Bill Clinton and Rudy Giuliani and Colin Powell and Goldie Hawn and all these athletes and everybody would arrive at, let’s say, Phoenix, Arizona on Wednesday night and on Thursday morning the speakers would start speaking in the Phoenix arena to 15,000 people and they’d have you in the lineup, like I would usually be on at about 10:45 a.m. in the morning, and I would often follow Rudy Giuliani or Colin Powell, and I would speak for an hour about investing and then I would go home. But what would happen afterwards is that they would get all these people who were excited about learning to invest and TD Ameritrade would fulfill the workshops for them, and I just did my investing and talked to people how you do it. But the company that was running all this, a company called Get Motivated, went bankrupt in the midst of their tours, and what happened was that all of these people that I had been speaking to on stage had paid a lot of money to have someone teach them to invest.
And TD was, they said, “Hey, we’re out. We’re gone,” and these people had paid money into this company that had produced all these things, they didn’t pay TD Ameritrade, and we stepped up and said, “Okay, we’ve got,” I’ve kind of got my personal credibility and reputation on the line because I’m the guy that said, “Hey, go do this. It’s great stuff.” So we stepped in in 2012 and we started fulfilling 1,000 people who had paid something like, I think it was almost $1 million, so we just found ourselves in business all of a sudden, John, and we had to come up with workshops, we had to come up with a whole curriculum, we had to hire teachers who would teach it, I taught a lot of it myself, and so that was a shock. We literally put about $1 million of our own money into this just to not have my reputation get drug through the mud, and the outcome was a complete change in our lives.
We suddenly discovered that we’re really good at teaching this stuff, we think we’re really a lot better than the guys who were teaching it before, and we have evolved what we were teaching over the last three years, and now when we do this, it’s the most fun thing I ever do. It’s such a blast, and that brought us into the entrepreneurial world. I came from the investing world and here I am, an entrepreneur. I can’t spell it but I are one.
John Lee Dumas: That’s why I have eofire.com not entrepreneuronfire.com, because nobody can spell entrepreneur. But Phil, there’s a lot of things I want to talk about here. Number one, and it’s a Warren Buffet quote. “It takes a lifetime to grow a reputation, and a minute to lose it all.” And that’s exactly what you realized. You realized that you had spent time building your reputation, and it could be dashed with this one situation, and you weren’t willing to let that happen. The next thing is so critical. This is what I call the baby effect, and bear with me here Fire Nation, I think you know where I’m going with this, but Phil, so many of my past guests have had their backs against the wall, and so many times it came when they had their first child and they said, “Oh my god, I actually now have to care for this being. I have to feed and clothe this child in this world,” and so guess what? Those outbound phone calls stop getting as difficult, all that hard work they had to do stopped feeling so hard because they had to do it to actually make it happen, their back was against the wall, and there you were, Phil, you birthed a business without even knowing it. You’re like, “Oh my god, there’s a business right now that I have, and I need to step up and grab hold of this by the horns. My back is against the wall. I have no other option but to succeed, so I will succeed.”
And Fire Nation, that’s why whenever anybody says how terrible of a situation they’re at right now, I say, “Hey, guess what, your back is against the wall. Now go get it. Make it happen.” So Phil, that’s my biggest takeaway from your worst moment.
Phil Town: What’d you call that, baby what?
John Lee Dumas: The baby effect.
Phil Town: Hey man, I’m writing that down. We got born by the baby effect.
John Lee Dumas: You birthed a business, baby. And Phil, that was my biggest takeaway. What do you want to make sure Fire Nation gets? In just one sentence, just sum it up for us.
Phil Town: I think there’s something in nature that will drive you into a certain area, and it’s what I would call dharma, and it’s like you know it when you get there, and you may not have the slightest idea that that’s what you should be doing, and so what I would take away from this is that life can astonish you, and you shouldn’t be afraid, you should be open to that moment where it’s the path less travelled, you know? And that makes all the difference when you step out on that road in the way your whole life comes out.
John Lee Dumas: Dharma, well Phil, I’m writing that down, so thank you my man. Now let’s do a little bit of a shift. We just talked about the worst entrepreneurial moment you’ve experienced to date, which obviously birthed an amazing business and worked out for the best, but now I want to talk about a different story, and this one is going to be an aha moment, an epiphany, a light bulb moment that you’ve had at some point in your journey, and Phil, you've had a ton of these, brother, but what I want you to do is to know Fire Nation. We are entrepreneurs. What’s an aha moment that you’ve had that you think is going to resonate with our audience? And take it down to the ground level and tell us the moment, tell us that story.
Phil Town: I mean, our big aha moment in this business is how we decided to actually conduct our marketing that made this all work. And first off, we were sort of driven into this situation where we had to do all of this stuff for free, and what we started to find out, and what the aha moment was, was that people are skeptical about our kind of a business. We are teaching people to invest, and there’s all kinds of reasons to be skeptical, not the least of which is what you can see on TV every night at 2:00 a.m. in the morning on how to invest. And what we found is that if we could show people we were credible, if we could show people that we did what we say we did, if we could show people that we could teach and most importantly that they can learn and that they had a great experience, and that they didn’t have anything to lose at all by having that experience, then they might really get into what we’re doing. They might really get into what we call this rule one revolution. So John, what we did was, we said we’re going to give way our best stuff.
We’re going to provide scholarships for people who are willing to write us 400 words and tell us why they want to be here, why I should teach them for free, why I as a hedge fund manager should take time out of my day and sit down with a small group of people and teach them how Warren Buffet invests and how I learned to invest. And it blew up. I couldn’t even believe it. People, we would have people come here and they would just absorb the stuff for three days, and not once during those three days did we talk about what we were going to sell, what else we had available, nothing. We made the rule of the three days that you cannot ask us about anything else we have and we are not going to talk to you about it, and we’re going to send you home with an incredible education and no marketing whatsoever, and we did that. And people walked out of there just saying, “The shoe never dropped,” the one where you go to the free webinar or the free workshop and then they hammer you. We never dropped that shoe. We do three days of intense investment education and we send people home fulfilled that they got what they wanted and absolutely our credibility is built.
That aha thing, that thing that said, “Put out a lot of effort and money and time and energy for people and it will work.” That was our aha moment right there.
John Lee Dumas: It is so valuable to build up that know, like, and trust with your audience. It is so hard to build the right way but if you do, then when it comes time for them to make that investment, to step up to that premium level, who else are they going to go to? I’m a big proponent of podcasting and webinars, Phil, it’s how I build my business, and when I created two free courses on how to do these two things, free podcast course and free webinar course, people are like, “You’re giving away the farm. You’re giving it all away,” and I said, “No, I’m building an amazing audience that’s going to know, like, and trust me for just giving, giving, giving.” So Fire Nation, what can you give for free with no strings attached? All you are doing is just giving awesomeness, giving value, and expecting nothing in return but knowing that there is going to be return on that time with that free content across the board. So Phil, that’s my big takeaway. One sentence, what do you want to make sure Fire Nation gets from your story?
Phil Town: Feel that you need to be doing something, and start pursuing it. Start looking into what nature is putting in front of you. I may not even be your passion. You might even be terrified of doing it, but if it’s right there in front of you and it keeps pushing you into it, you’re being drug into it, man, go check it out, because that might be your gold mine.
John Lee Dumas: Phil, what’s our biggest weakness as an entrepreneur?
Phil Town: My day to day working with people, I’m not very gentle about things. I really am not a great manager. That skillset –
John Lee Dumas: It’s the Army in us, Phil. We can’t help it.
Phil Town: Oh man, I’m telling you, you know, I am a pretty introverted guy and I do my best stuff right here in my office working and investing and focusing and reading and creating, but I’m really weak as a manager.
John Lee Dumas: What is your biggest strength?
Phil Town: Well my biggest strength is I married Melissa, and she does it all. This woman is so good at everything she does, I mean, she is my absolute strength in our relationship, in our business, in my life, in every way, she’s incredible superstar. And in our business, she’s our COO. She runs the company, she takes care of all the details and makes it all happen, and she’s phenomenal at it. Beyond that, I’m a very good researcher. I do know my stuff. I’m good at what I do, and I’m really good at creating a vision for the people who are here in the company and for the people who are joining us as clients. I can get a vision out there that people can see and respond to. So that sort of visionary entrepreneur side of things is more where I’m stronger, and thank god I have someone like my wife to handle the rest of it.
John Lee Dumas: What is the one thing, Phil, that you are most fired up about today?
Phil Town: I’ll tell you, man, our industry, the whole financial industry, is in a paradigm shift right now. I mean it’s one that we’re on the cusp of it, of a paradigm that was established in the 1950s after World War II that basically says that rewards is related to risk, that the market is efficient, and the value of things is the price that you pay for them, and that’s created something called modern portfolio theory, and it’s the way everyone’s portfolio is managed. So when you hear things like “rebalancing your portfolio” “diversification,” those things all come out of the concepts of modern portfolio theory, and that paradigm has been breached now by really good researchers who have just proven the math underneath it all of the stuff that’s come out of Princeton and University of Chicago, it’s all been disproven by a bunch of guys at Yale, and people are starting to realize that Warren Buffet is right. After all these years, the best investor in the world is right that the market is not efficient, it’s inefficient, that there are massive differences between price and value in the market, that diversification is for ignorant investors, that if you are interested in making a lot of money in the market there’s a very clear and efficient way to do it, particularly as a small investor.
And this paradigm, John, is so imbedded, the opposite of that is so imbedded in the financial advisory services industry that financial advisors, when they take their test, have to pass a test that agrees with all of this modern portfolio theory and which, if you took it and applied it to Warren Buffet would say that he’s like a monkey flipping coins, he’s just lucky, and that paradigm is changing now, and I’m really excited that we’re on the front edge cusp of changing it and being involved in teaching people what they can really do with their money and the kind of returns you can really get with your money with a paradigm that says that low risk, high return investing is absolutely possible.
John Lee Dumas: Well Fire Nation, you can tell that Phil has some more value bombs awaiting us in the lightning round, but first let’s take a minute to thank our sponsors. Phil, are you prepared for the lightning round?
Phil Town: All right, I’m ready John. Go to it.
John Lee Dumas: What was holding you back from becoming an entrepreneur?
Phil Town: I didn’t like the idea of being a business man, and my family had a bad attitude about people that were rich, so those things were things that I had to get over. I remember the guy that first took me under his wing, put me up in the front seat of a Rolls Royce and we drove around La Hoya, California, and I was mortified. I thought, “Dang, anybody that knows me, sees me in this car, they’re going to think I’ve joined the evil side of the world,” so I really just didn’t want to be a business person. I didn’t think those were the kind of people I wanted to be like.
John Lee Dumas: What is the best advice you’ve ever received?
Phil Town: First, I got this from Dr. Jonas Salk, he was one of the first people that I had a company that I put money into, and he said that if you step out in a way toward your dreams where you burn your ships, you just burn the ships, that that process of promising yourself you’re going forward is going to make all the difference to you, and things will come out of nowhere to support that dream that you’ve put together, but it depends on burning the ships. Dr. Salk did that in his career to develop the Salk polio vaccine, and he told me everyone told him, “This can’t be done,” and then he proceeded to prove that it could be done in a laboratory, and then everyone told him that it’s trivial and it won’t make any difference, and then he saved millions of people around the world with the Salk vaccine for polio, and those same people, he said, came back to him later and said, “I knew it all the time, Jonas, I knew it all the time.” So that thing carries you where you step out, when you burn the ships, you’re not going to turn back no matter what, against everyone in your life that’s saying you can’t do it, and magic will happen from that.
The second one comes from a guy named Maharishi Mahesh Yogi who was an Indian guru that died not too long ago, and basically what he said is don’t forget to water the root. And what that means really is that while you’re busy out there with the burnt ships and charging forward in this life that you’re creating for yourself, you have to pull back a bit and remember that you’ve got to nourish your life, nourish the people that are in your life, don’t let yourself become so unbalanced that you just burn out and flame out, and that’s really easy to do as an entrepreneur.
John Lee Dumas: What’s a personal habit that contributes to your success?
Phil Town: I really like to get away from it, and so I have a bunch of horses out here that Melissa and I ride, and I ride three or four of them every day and I play a little polo, we do a little inventing. What it does is it’s the equivalent of, say, going surfing or going snowboarding or riding your bike or something where you just get the wind blowing through your ears and air your head out a little bit. And what I find is that especially riding horses, it’s just a thrill every time I do it, even if it’s just walking them out through the woods, I come back loaded with endorphins, fired up again, reconnected to nature, and it just provides that balance for me that makes my life go strong.
John Lee Dumas: Share an internet resource, like Evernote, with Fire Nation.
Phil Town: Well I love Evernote so you really put a high bar, I use it all the time, but I’ll share one that’s in my world that I think is phenomenal. It’s a free website called seekingalpha.com where about 3,000 analysts who are sort of young, trying to build a reputation by being really good at analyzing companies, they’re on there for free and it’s just an incredible resource for people that want to understand things about buying into businesses and stock.
John Lee Dumas: So Phil, you have a bunch of great books. Rule Number One, Payback Time, but if you could recommend one book for our listeners to join those on the bookshelf, what would it be and why?
Phil Town: Yeah, that one is a no-brainer in my world, Ben Graham wrote a book in 1949 called The Intelligent Investor. It’s still in print, Warren Buffet says it’s the number one book he’s ever read on investing, and it’s not a very long book. By the way, Ben Graham is the guy that taught Warren Buffet how to invest and was a professor at Columbia, and it is just an incredible compilation of what we call rule one strategies for investors that everybody can do. So that’s what I’d recommend you read.
John Lee Dumas: Well Fire Nation, I know you love audio so I teamed up with Audible and if you haven’t already you can get an amazing audiobook for free at eofirebook.com. And Phil, Rule Number One, Payback Time, are they on Audible?
Phil Town: I read one of them, somebody else read the other one.
John Lee Dumas: Cool. Now Phil, this is the last question of the lightning round, but it’s a doozy. Imagine you woke up tomorrow morning in a brand new world, identical to Earth but you knew no one. You still have all the experience and knowledge you currently have, your food and shelter is taken care of, but all you have is a laptop and $500.00. What would you do in the next seven days?
Phil Town: I’ll tell you what I’d do John, but I’ve got to tell you what my old partner actually did. He actually did this. He rolled in, he was painting, now this guy became a venture capital partner with me, but when he was younger he was painting in the Oregon desert, ran out of money, and hitchhiked his way to Portland, Oregon. He had absolutely no money, not a single penny, and what he did is he went to a welding shop, because he had trained as a welder, and he borrowed some helium, he went behind a Payless store, got balloons that had been thrown in the dumpster, went behind a Safeway, got chicken feathers, and he made a headdress out of the chicken feathers, he wrote little notes and stuffed them into these balloons, blew the balloons up and put them on strings, and hung them from the helium tank, and sold those suckers as fortunes at Reed College, and made $200.00 in the first three hours, which I thought was stunning.
I thought that was so brilliant. Okay, but here’s what I’d do. I’ve got $500.00 and a laptop and everything is the way it is, then I would do kind of what I did. I would recognize that there are hundreds of mispriced companies out in the stock market because the paradigm that the market uses to price these companies is wrong, and I would do vertical spreads in the options trading world. In three months, you can do that with $500.00, I would have a track record in three months, I would then knock on a couple of doors with my track record, I would get friends, family, and fools, in this case I wouldn’t have friends and family so I would get fools, I would get some people to put some money in this fund, you have $100,000.00 within the first few months, and within the first year I’d have $1 million under management. Within three years I’d have $18 million to $20 million under management, and within five years I’d have $3 million cash in the bank.
John Lee Dumas: Wow, Fire Nation, you heard it here first. And Phil, I want to end today on Fire with a parting piece of guidance. The best way that we can connect with you, and then we’ll say goodbye.
Phil Town: All right, the best way to connect with me is just to go straight to our website, ruleoneinvesting.com, and plug in. We’d love to meet you.
John Lee Dumas: And what’s a parting piece of guidance?
Phil Town: Money is easy, it just is all about the education. Just keep cranking on the education. Obviously you guys are listening to this kind of a podcast, absolutely this is the way to do it. Keep listening to John, he knows what he’s talking about and he’ll get you there.
John Lee Dumas: Fire Nation, you’re the average of the five people you spend the most time with, and you’ve been hanging out with PT and JLD today, so keep up the heat, and head over to eofire.com. Just type Phil in the search bar, his show notes page will pop up with everything we’ve talked about today. Of course, go directly to ruleoneinvesting.com, pick up his books, Rule Number One, Payback Time, and Phil, I want to thank you for sharing your journey with Fire Nation today. For that brother we salute you, and we’ll catch you the flip side.
Phil Town: Thanks John, love it man.