30 Years of Money Knowledge in 18 Minutes

You can follow all the right money rules and still feel like you're never getting ahead. You can save more and invest early and work hard and still that scoreboard never moves. I went from being a janitor to building two billion dollar companies and managing billions of dollars in Goldman Sachs. And what I learned is that money doesn't follow rules, it actually follows laws. So here are the seven laws that will help you understand how money actually works. So here's the system to make more money. It has three parts. The three parts are momentum, structure, and asymmetry. So what does this mean? The job of momentum is to figure out how you can actually compound money more. The job of structure is to figure out who controls the money and what outcomes you get. And the job of asymmetry is to maximize the upside and minimize the downside. Starting with law number one, money loves speed, but wealth loves time. When I first got into real estate, I had access to several real estate agents who handed me off-market deals and I became a flipper, meaning I would get the deal, I would rehab the property, and I would sell it. I would flip the asset. And this entire five years, I got the deal, I put money in, and I flipped it. I got more deals from our agents, I put money in, and I flipped it. At that same time, in that same five-year period, my friend did something different. He started off with one single-family property. A couple of years later, he bought a fourplex, meaning four units. He waited for a couple more years, he recapped money from it, and he bought a 20-unit complex. He didn't do any flipping. He went from one property to four units to then 20 units. At the end of those five years, I had flipped 100 homes and made some cash, but he owned 20 units. His net worth was five times that of mine because I was working on speed and he was working on time. So if money loves speed and wealth loves time, well, what is speed and what is time? Speed is when you see an opportunity and you act on the opportunity. It is the shortest distance between seeing and acting on an opportunity. The faster we can shorten this distance, the faster money moves. Well, what does wealth love time mean? Wealth love time means you make a good decision and you hold on to it for a long period of time. But the crazy part is, for the first period, that actually looks like an okay decision. You don't even know if something's happening. As the time passes by, you see the value of that decision. Oftentimes, what most people do is they confuse fast action with fast results. Fast action is not equal to fast results. You want to get the speed right and you want to get the time right. Warren Buffett at Berkshire Hathaway completely flipped this idea of holding onto something for a long period of time. He bought high quality companies and he held them forever. From 1965 to 2024, Berkshire compounded at almost 20% annually. They beat the S&P 500 by double. Their total return hit 5 million percent. So remember, speed is about the shortest distance between seeing an opportunity and taking action. Time is about making a good decision and allowing the time for it to compound. There's one important reason for this, because the best partner that you have in wealth creation is time. Once you understand that wealth is built by time, the next question is, who actually benefits from that time? Because in the money game, the person who gives the money controls the outcome. Which brings us to law number two. He who gives the money has the power. I've sold five companies in the last 20 years and the buyers of all my companies made 10 to 100x more than I did, because buyers and builders have an unfair advantage. If we analyze the Forbes 400 list, there seem to be three types of people who make it on the list. The first are people that have made it on earned income, meaning with their salary. The second are people that have actually sold a business to get on the list. And third, the people who are buyers and builders who continuously buy and build companies and opportunities. Well, let's look at the people who have made it on the list because of earned income. Well, spoiler alert, there are zero people that made it on the Forbes 400 list on earned income or on their salary alone. But what about people who sold their business? There are a few, like Mark Lohr sold Jet.com to Walmart and he made it on the list. Dan Gilbert sold Quicken Loans and made it on the list. But the folks that buy and build are the vast majority. Take Elon Musk or Jeff Bezos or Warren Buffett or Mark Zuckerberg or Don Bren at the Irvine Company. All of those who buy and build constantly make it on the list. In fact, Dan Gilbert, who sold Quicken Loans, he actually bought it back and then he built it to take it public again. So he was an example who got on the list for selling the business, but then made it even more powerful by buying and building overall. Because he who actually gives the money has the power. Facebook bought Instagram for a billion dollars and it's worth over 45 billion dollars today. Google bought YouTube for 1.6 billion dollars and it's the core part of Google's business and the second most valuable search engine. Take Elon. Elon bought Twitter for 44 billion dollars. It is about buying and building. This is even more prevalent in the sports franchise realm. Henry Samueli, the owner of Broadcom, gave 70 million dollars to the Anaheim Ducks in 2005 and today the Anaheim Ducks franchise is worth over 1.6 billion dollars. Mark Cuban gave 285 million dollars to the Dallas Mavericks in 2000 and eventually sold 73 percent of it for 3.5 billion in 2023. Even if you take something as simple as the real estate market, if there are no buyers, there is no market. And the main reason for this is because buyers unlock value. And however you slice it in economics, buyers wield the power because they give the money and they control the terms. Let me break down what we do at Acquisition.com. We are a business that builds businesses. We have a flywheel of building more companies. We use our brand to attract more businesses. That business drives the advisory business. It drives our education business. It drives our ventures business. It drives our private equity business. It drives our real estate business. We have no plans of selling Acquisition.com. Our goal is to buy and build for years to come. And you know whenever someone says buy and build, you must be thinking, man I don't have all the cash to go buy companies or buy real estate or invest in private equity. What do I do? This does not mean you need to have all the cash. It just means you need to understand the strategy. The massive wealth is created by buying and building. So just understanding the strategy and being so obsessed with buying and building will create massive momentum for you. And when you are the one giving the money, you'll notice something immediately. The biggest players aren't just using more effort, they're using better tools. And the most misunderstood tool of them all is leverage. Next up is law number three. Leverage multiplies everything. Let me give you four examples of how leverage plays a massive role in our daily lives. Let's say you bought a house for all cash for a million dollars and in three years that home went up 10% to 1.1 million. Well you got a 10% return on your million dollars. Yay, good job. But instead if you actually got a loan and that loan was for eight hundred thousand dollars and you put two hundred thousand dollars down it was the same exact house and it grew by 10%. Now compared to the two hundred thousand dollars that you put down, you got a 50% increase in your return. And that was only possible because of leverage. Because leverage multiplies everything. Leverage actually introduced an entire industry for us. Private equity is where investors can invest in companies that you and I know about. The laundromat, the restaurant, or the roofing company and actually unlock value in the company for them. So what these investors do is that they bring cash to buying this business but own just like you were buying a house. And then they get the bank to finance the rest of the debt as leverage. And because of that, the company gets to grow and also the founders and the owners get to take some money off the table. This entire trillion dollar industry would not even exist without the existence of leverage because leverage multiplies everything. This also happens in the commercial real estate world. So if you think about buying a 20 unit multifamily apartment building, there's multiple things that happen there. The first is you only probably have to bring a third in equity or cash to close the deal. The rest can be used in bank financing, which is leverage. And there's two amazing things that happen with it. Number one, because this is a commercial property and it's a business, the leverage is based entirely on the value of the collateral, which is the building. And you don't even have to do a personal guarantee to it. But the most important part of all of this is you get so many tax advantages for doing this big a deal. So this leverage not only unlocks several personal advantages, but it also gives you tax advantages, which is why it is such an active strategy for many investors. But I will tell you the one strategy that many people use that don't realize the leverage behind it. Let me show you how billionaires save money on taxes by using leverage. Take Elon Musk, for example. Elon recently bought Twitter. And instead of just selling all his equity holdings in Tesla or any other company and buying Twitter, he borrowed against his Tesla stock. And when you borrow against your Tesla stock, your Tesla stock became the collateral. So the bank tell them, sure, go ahead and borrow against the Tesla stock, because if you default, we'll just take your stock. And he was then able to take billions of dollars of his Tesla stock and then go and buy Twitter. He was able to do two things. He was able to leverage his existing position in Tesla without kicking off any taxes for himself and then use that to buy an asset that was significantly bigger over time. What you're seeing is examples in our daily lives of how leverage multiplies everything. A lot of people talk about how debt and leverage are bad, but there is a wrong way to do it and a right way to do it. I want to give you four ways to think about how you can use leverage to multiply everything. Number one, you have to know that leverage is the number one economic growth engine, because if leverage stopped in the world, everything would stop in the world. Number two, you have to educate yourself on what kind of risk is available to you. Number three, leverage is a game of collateral. When you get a mortgage, your house is the collateral. When you borrow against a stock, your stock is the collateral. When you're investing in a building, the building is a collateral. And that makes the leverage much more manageable. And number four, since we know that taxes are the number one drug on wealth creation, leverage does not provide any income. And since there is no income, there are no taxes as well. So it gives you a massive tax advantage. But leverage by itself doesn't make you wealthy. It just magnifies what you've already built, which is why we have to understand the difference between cash flow and equity. Law number four, cash flow keeps you alive and equity makes you free. Cash flow helps fund your current lifestyle. It pays your bills, it pays your house, it pays your car and it pays your vacations. It is the money that you need today. But equity is the wealth that you create tomorrow. So you may say, well, Sharan, what is the best way to own equity? Well, the best way to own equity is to own your business. But that may not be a strategy for every one of us. There has to be a second best way. And the second best way is to own a piece of someone else's business. Now, what does that mean? There's a lot of companies in the world right now that are publicly traded. You're talking Amazon, Tesla, Google. They're all companies you can buy shares in. So the job there becomes how can you use your cash flow to buy a piece of someone else's company? Because at the end of the day, you either have to own your own business and the equity in your business, or you have to own a piece of someone else's business. Either way, we need the equity to make you free. Let me tell you how McDonald's makes all its money. Most people only think that McDonald's sells burgers and fries, but there's a lot more to it. Their burgers and fry business makes a lot of cash. But the real wealth comes from a different part of their business, which is the royalties that account for $1.6 billion of McDonald's franchises all around the world. And even more is their real estate, which accounts for nearly $45 billion. While the cash flow makes you rich, the equity makes you wealthy. Here's where most high earners still get stuck. They chase the stability and they call it wealth. But real wealth shows up when you understand that risk and reward don't scale evenly. Law number five is that risk and reward are non-linear. Most companies that are backed by venture capital actually never make it. So let's say you take a venture capital firm and it's making five investments. It puts $100,000 each into each of the five investments. That is the maximum amount of money it can lose, $500,000. But let's say the first investment goes to zero. The second investment goes to zero. The third investment just breaks even. The fourth investment goes 10X, and the fifth investment goes 100X. Just by these two investments, they recapture all the profits this is necessary for the portfolio from a $500,000 investment. So they invest $500,000 and they make 100X that amount. This is called portfolio theory, where you have asymmetric risk reward, where the risk and reward are not linear. They are not betting $500,000 to gain $500,000. They're betting $500,000 to get 10 to 100X more. It's easy to think that risk and reward are linear, meaning you put $100 in and you may only get $100 worth of return. But we want to be in a game where you can put $100 in and you can get $10,000 worth of return. Our job is to maximize the upside, which is the reward, and to cap the risk, which is the downside. That's exactly what they do in venture capital. That's exactly what you do with leverage. That's exactly what you do when you buy a home with a loan. So if you hear asymmetric upside and go all in, that's how people blow up. The goal isn't to win one big time. The goal is to never lose the game. That brings us to law number six. Don't bet the empire for a pot of gold. My friend bet his entire life savings on one deal and lost everything. He and his wife had systematically saved a little over $700,000 in life savings. And then they got introduced to an oil and natural gas deal. Every part of the deal was extremely attractive. It had tax advantages. It had great return profile. And his friend was actually promoting the deal. It was almost a no-brainer. He took his entire life savings, almost $700,000, and he invested it in this deal. As you can imagine, the deal did not go well. And two years later, the entire investment collapsed. Over 15 years of savings instantly vanished. There's a lesson here to be learned. It's not about evaluating the investment or evaluating the friend that brought it to them or evaluating what they should have done or not done differently. It's about sizing the bet. You don't risk the empire for a pot of gold. You don't risk 15 plus years of savings all on one deal. And that is the sizing investment that we should learn today. So if this was your entire empire, our job is to size our investments correctly. We need to size our bets. And sizing bets is a very important part of investing. The best lesson I learned about sizing bets was to manage risk, because the entire idea of doing this is to manage risk. I learned this idea of managing risk from Ray Dalio, and I want to break it down for you. He talked about risk and return, because every investment has some risk, and every investment has a return. Let's say you have an investment that has a risk of 150, which is a random number, and it gave you a 15% return. Or you had an investment that gave you a risk of 100 and a 12% return. Now, what Ray Dalio says is, our job is to keep this return the same, but reduce the risk. What if you could then get to a risk of 80, but still get a 12% return? Or get to a risk of 70, but still get to a 12% return? Or get to a risk of 60, and maybe get to 11.5% of return? This becomes the best investment. Our job is to figure out how we can reduce the risk and keep the return exactly the same. The number one mistake that people make is that they try to increase the return without paying any attention to the risk. The best of the best, the greatest of the greats figure out how to reduce the risk while keeping the return exactly the same. There are two big learnings here. Number one, protect the machine that produces the opportunities, which is your empire. And number two, swing for the upside when your downside is capped. And once you size the bets to survive, the next protection is really simple. You diversify only where you don't know. Law number seven, diversification is a hedge against ignorance. Wall Street tells you to spread your money across everything, but every wealthy person I know does the exact opposite. Here's why. Because when you don't understand something or you don't control something, then you're just hoping that it works out. Here's a formula for investing in companies, and it has two vectors. Number one, risk, and the second is control. When you understand risk and you have control, it tells you whether you can concentrate or diversify. So in this case, when you understand risk and you have control, you get to put all your eggs in one basket because you know everything about the business, which is your business. But what if you understand the risk, but you don't have control? It's Apple or Google or some other company. That means it's okay, but you still invest in the business because you understand the risk. If you don't understand the risk, but you have control, you have ownership control, then it just means you're missing a key operator. So all you need to do is get a key operator in the business. But last but not least, if you neither understand the risk nor you have control, that's the time where you actually spread your bets out. That's the time where you completely diversify. This is why most entrepreneurs and investors have their entire net worth in their business. Take Bill Gates or Elon Musk, and if you remove their equity from Microsoft and Tesla, they dramatically drop in the Forbes 400 list. That's why operators like Elon Musk or Jeff Bezos or Mark Zuckerberg understand that risk so deeply in their business that they don't diversify from it. They own all their stock and all their equity because they have the insider information, they have the insider plans, then they have the future control and influence of the risk to build and grow their business. Now, knowing these laws isn't enough. You have to know how to use them as a system to make you money. Here are the five questions to ask before investing in anything. Number one, can this compound? Meaning, is this a good long-term investment? Number two, who has control? Is it you or someone else? Number three, what happens if it Do you get some or all of your money back? Number four, is the upside meaningful and larger than the downside? And number five, do you understand the risks? Meaning, can you clearly explain how the business works and what could go wrong? Now that you understand the laws that decide whether money compounds or disappears, the next step is knowing how to apply them in real decisions. Watch this next video and I'll show you the exact decision system that tells you what to do even when the answer is not obvious.