The #1 Investing Habit That Made Me a Billionaire | David Adelman

20:16David Adelman:I sat in a room in Austin with 100 owners running this exact system, And in one weekend, that room found another$7 million in revenue, which is wild. So we're launching this book with a free live virtual event. We're doing massive giveaways while we're there, a million dollars in cash and prizes. Register at ownerbook.com. This one's going to be wild. It is for you if you want more profits and less pain in your career, in your business, and in your life. What do you think is the difference between leading or building a$1 million,$10 million, $100 million, billion company? How does it change? Getting to the first million dollars is really hard, right?

20:53Because that determines if your business is going to win or lose, right? And so to me, that first million and 10 million are much harder than the hundred million to a billion. People won't believe that, but I'm telling you it is way harder, right? Because you're trying to validate a business, you're trying to get people to believe in something that maybe it's a product that doesn't exist or isn't widely known. And so you're creating a new thought on how this gets sold and all of that. Once you've gotten adoption, it's a different sales cycle and it's a different leader, right? Startup is one thing, you know, growth is another.

21:27And then like that exponential growth, all different leaders, right? Because some of them need to be really good managers to put the infrastructure in to make sure that, you know, the wheels don't fall off, that you're meeting your sales targets or if you're manufacturing, whatever that is.

21:39David Adelman:Yeah. How many people do you think you've hired in your career? Directly? Hundreds. Yeah. And how many people do you think you employ across the companies that you own? Over time, tens of thousands. So at any given point, something's going horribly wrong, like even right now. Always. Yeah, sure. Yeah, of course. And I won't know about it till whenever. Or hopefully they'll try and fix it before it solves a problem. I mean, I think if you involve people in a business, you will have a problem, right? HR issues are like paramount in every company, whatever they are, right? People aren't showing up to work.

22:17People are like, you know, people are being rude to each other, like whatever it is, like you got to get those issues right. And generally a good manager handles those, right? You know, customer issues. Okay. So you're in the apartment business. Okay. Like shit happens, like pipes break. It's no one's fault, right? Well, did we respond quickly? Did we do things. The thing that drives me nuts is if I'm walking by one of our offices and I see someone saying, well, they're not going to renew their lease. And I'll pull them like, how come? Well, we had these issues and then I'm like, did you tell us about it?

22:49They're like, no. I'm like, well, you didn't give us a chance to try and fix it. And so I always want to know why in any business, why people stop doing business with us. If it's not renewing the lease, if it's not completing a sales function, a season ticket holder that didn't renew their tickets, what is it? Yeah.

23:04David Adelman:Do you almost not even care as much about the good news as the bad news as a leader? Yeah, it's a problem though, right? Because like, you know, you feel bad because like the team wants to come celebrate all this great stuff and you're like, yeah, well, what about these two things over here? And it's like this, it's like this. And like, the problem is I also tend to do that at home with my family. It's not good, right? Like you, so, but I do think you get better that way. Like when I tour our properties, I still, I don't do it as often as I'd like. I go in and I tour the fire escapes in the back of the house.

23:37Because that's where you know where the pride is. Your grounds can look great, but are the prides in the back of the house? And I can tell a really good property manager and maintenance supervisor by how clean the other areas are. How organized is the maintenance shop, which no consumer or customer is going to see, but I'm going to see it. And they're going to know, well, these guys are so organized that the maintenance team could come in and do whatever they need. So like for me, that's also, I told you I have like ADD, I also have OCD. And so like all those little things out of place drive me nuts.

24:08David Adelman:It's so good. You know, it's interesting because we own a lot of these home service franchise companies. And so painting companies, roofing companies, window cleaning. I love that. The anti-AI play. Yeah, exactly. Well, people thought I was really lame and boring five years ago and now they think it's a lot more I love boring businesses. Oh, there we go. That's why we'll be buddies. But one of the funny things is I could tell the good operators by the status of their cleaning vans. Yeah. And so you open up the doors. And if it's a mess, I know that guy's not going to be on time. They're not going to hit their quota.

24:38David Adelman:And they're definitely never going to be in management. And then the ones where it's super organized, it's not always a total indicator, but it makes a big difference. Correct. Interesting. And you call this back of the house. So for somebody listening, it's basically always like you're looking under the rug. Anywhere in business, it's like where's the part that people are not going to usually look at? Correct. Because if that's clean, you know, the rest of it is probably clean. Interesting. In your world, you're having to hire all these different people. You're having to, I mean, how many hundreds of millions of dollars do you think you've allocated over your career or invested?

25:09Oh, between real estate, the other companies, our asset management firm, we have an asset management business future standard that manages$95 billion. So we're allocating billions of dollars at a time in different cases. But, you know, in the real estate business, you know, hundreds and hundreds of millions of dollars in capital improvements, construction, renovation, you know, in the last seven years, we've done a billion dollars in new construction alone. So, I mean, you know, in Philadelphia, I'm going to build a$2 billion arena. Okay. So that's, you know, so like, it's a big number. I think every business, like I'm building this new arena right in Philadelphia, and I want to change the live entertainment experience, period.

25:48Because you think about people are spending a lot of money on tickets and a night out, babysitters, all of that. You need to give them a great pregame, game time, and postgame experience. And so what I'm talking about as we're designing this with the architects and with the people who are going to run the food services, think of yourself in the hospitality business. And no one does that, right? So again, that's me putting a twist on a age old offering to say, can we do something that just feels different?

26:14David Adelman:Yeah. So in order to have the capital really be efficient and come back to you and bring friends like, you know, you've talked about it. You've got to invest in the right people because those are the people that are going to do the outcomes. How can you tell somebody is going to be an A player or if somebody is not going to be an A player? How do you tell the difference between the two? a couple ways one you know the number one quality to me is i would rather have somebody that's an eight in intelligence and a ten in work that work ethic than a ten in intelligence and an eight in work work ethic so for me like hard work like you know i am like look i went to ohio state at a time in college where like i just needed a pulse to get in there right so like i like i know I was a low SAT, low GPA guy in high school.

26:57But I knew that in business, no one was going to work harder than me. There are a lot of people smarter than me. And most of the people who work for me or work with me are smarter than me.

27:06David Adelman:Why do you think that most people are not as successful as you? Do you think they don't take enough risk? I think not everyone is meant or programmed or willing to take the risk, which is okay. I say to a lot of people, you can be an entrepreneur in somebody else's business. Yeah. Right. And so some people are meant to be that number two or number three guy or gal to run a business and not be the forward facing and not taking the risk capital. And those people make the business successful. So like, I think there's this weird stigma out there that everyone has to have, you know, like I digress from your question for a second, but everyone has to either have a startup where their own venture capital fund.

27:46you know, like I would tell your listeners, the world doesn't need another fucking venture capital fund. Okay. Like enough. Okay. But like, let's get people who are willing to work hard in business and learn from other business. And then maybe you want to go out and do your own thing.

27:59David Adelman:Yeah. I think you're right. It's also pretty miserable running the place, you know, because when payroll isn't there, I mean, how many years in the beginning you invested in your first deal, I believe when you were 13, right? I mean, how many years did you not pay yourself in order to just invest in deals instead? My mentor taught me a really great thing that I think about all the time. He's like, every dollar you spend on yourself is a dollar you have less to invest. And that is in my mind even today. And it doesn't mean I haven't bought some really nice things and extravagant things, but I think about that.

28:30I'm like, oh, if I didn't buy a plane, I could buy that building. If I didn't do this, you could do that. And so capital is like really important. I think it's, you know, you always hope it, you know, and my uncle used to say, he would be like, Hey, you know, you just hope after all this money comes in and you pay everyone that there's something left for yourself. Right. But in the beginning, capital allocation is really important, but it comes back to that risk. I was willing to take risk. I'm willing to fail. Um, I'm willing to fail every day. Like I, a lot of our startups fail, like that's okay.

29:01You know, but I'm also willing to like try and build new businesses.

29:05David Adelman:Yeah. Yeah. It's super, super interesting. I think a lot about what holds back people from taking whatever their appropriate level of risk is. But you're totally right. I mean, Sheryl Sandberg, incredibly successful, very rich, never ran a company. You know? And I think she's probably, I read the average entrepreneur makes$46 ,000 to$65 ,000 a year. Like, that's not really winning as much as being one of your executives at any of the nine companies. But they're playing for the equity. Right. Yeah. Yeah. You must get pitched daily for people to invest in your stuff. We do. And you got people to give you money early on.

29:39David Adelman:Yeah. You know, somebody listening today is like, I want somebody to invest in me. I want capital. How do I get it? What are the things that you look for that maybe people would be surprised by? You know, one, what problem are you trying to solve? Like, if 10 people are doing what you're doing, like, why are you going to do it better? Like, just tell me, what's the mode around your business? Like, can the next guy start up your thing and do it for the same cost or less? Like, what's the differentiator? Problem you're trying to solve, track record as an entrepreneur, and how big could this opportunity be?

30:15The problem is a lot of times people are creating these startups and they're playing small ball. And like, if we're going to put risk capital to work, like, we want to know that there's the potential for a big outcome.

30:25David Adelman:Yeah. What do you usually bet on? The jockey or the horse? like the guy running the thing or the opportunity? So the way I, here's part of what we go through when we're, my family office, when we're looking at investing. If the deal fails, would we do a second deal with that person? Great question. And I have a handful of people that we've backed a second time or a third time. Because if it didn't, if it failed because like the timing wasn't right or like as long as they weren't like crux or bad guys, nefarious, bad attitude, whatever it is. Like not all of these things win, but it's not always their fault.

31:02They're in poor timing.

31:04David Adelman:Yeah, it's a really good point. I think about that a lot today. There's so many people pitching like AI for small business stuff or SaaS companies left and right, but there's no moat. Right. And the jockey isn't that impressive. You're just like, oh, there's this huge opportunity that it's easy to build SaaS now. I'm like, that seems like an anti-sell. Yeah, I agree. What would you absolutely not invest in today? Like what comes across your desk? you're like, oh my God, I don't ever want to see another one of these again. God, there's so many. I know restaurants are on your list. We don't get as many restaurants anymore, but, and I'm in some restaurants.

31:38David Adelman:Do you think I'm wrong on restaurants? You know, it depends on the operator. So I have a couple of investments. I'm partnered with a guy in Philadelphia, Michael Shulson. And I learned very quickly that his operating margins are 20%, which is some of the highest in the business. And so I'm like, this guy knows how to run a business. And I bet it's a restaurant group, isn't it? Not an individual restaurant. He has multiple restaurants. Yeah. And, but, but he was a great chef. Very, it's interesting. A couple of things in business. Chefs generally make poor business people. Doctors are very poor business people.

32:10Right. And a lot of time lawyers don't translate into being operators. Like that's just a, something I've noticed. This guy made the transition from chef to CEO. So he has, understands food costs, things like that. But all in all, I rarely do restaurants. I think what I also don't like, software companies are too hard to understand today with AI. I have no idea if you're solving for something that couldn't be solved now by just putting into chat GBT, right? And we're not going to spend the time to differentiate that. So software is a very tough putt right now, I think. I think that anything in the, you're going to have lots of bets in AI, hard to know which ones are going to win.

32:50So sometimes we're kind of like, all right, we're going to spread it out a little bit and get educated along the way. You know, I think for me, it's easier to know. And the problem also is we're getting all these funds that are coming and looking for stuff. And I'm just like, stop with the funds. Like, what's your differentiator? You know, you ran a company for 10 minutes and now you're going to go launch a fund. So like we say no a lot to those.

33:15David Adelman:Yeah, it's really good. What about the opposite of that. Like when I look at how you made your first big pile of money, to me, it's like, okay, you had sort of this ugly, super, you know, non-popular asset class, highly fragmented, you know, not a ton of major players in the space and an ability for both operational proficiency that just wasn't there at all, plus leverage. Like really neither of those things existed. Do you see a space today that you're like, God, I wish I could find amazing jockeys or like why isn't somebody doing it in this world? So the thing I talk about often, and it seems like you've dabbled in it, I think these service businesses are the future.

33:56Because if, you know, like, so I tell everyone, I'm like, go work at a person who has an HVAC company that only has three trucks. Yeah. And they're still doing work orders by pen and paper or maybe some shitty computer system. Like AI is not going to replace the heater in my house. We're short 2 million electricians in the country, 2 million. Okay. Electricians are making almost 200 ,000 a year right now. And so I look at all these kinds of like hands-on skills, all these service businesses, and I'm like, this is where people need to go to. Now that also changes education. Maybe you're going right from high school to a vote tech school to learn these trades.

34:35But if you could go in as an entrepreneur into someone's old line business and make that business better and you work out some deal, none of those businesses have succession plans, right? You have the entrepreneur who's pushing 70 as kids aren't in the business, the heating and plumbing or whatever business. And they're all ripe for succession right now.

34:55David Adelman:Yeah, I totally agree. That's why we buy them. It's also kind of fun because, to your point, I love competing in industries where you don't have to be that smart. You know, I don't profess to have a crazy IQ like some of these guys. But guess what? I've never had a plumber that had me on a recurring plan that I thought was really useful and a text message follow-up system that was right, that asked for a review, that looked sharp when they showed up at my house, that I could remember the name of the place and the van and branding was good. It's never happened to me. And all these, you know, it's the same thing kind of the way I look at student housing.

35:30You know, we were having people's kids. You're letting somebody in your home. You are trusting them in your house with your family, like show up and look respectable. Be considerate. Like, right. A lot of times you feel like they're doing you a favor by coming out and fixing something in your house. Right. Like create attitude changes the outcome here.

35:49David Adelman:That's really good. You know, I have to imagine this has happened to you. but one of the lines from one of my very first investors, he told me, he was like, all right, if you're going to do this thing of business, because I was in finance back in the day. So it was like finance, you're doing this financial arbitrage thing. You're not actually really creating something. You know, you could have some deals go sideways, but it's not going to feel that personal to you because it's not your baby, right? You're just trying to buy low, sell high, you know, if we want to like hyper simplify it. He goes, but if you get in business, you're going to be lied to, you're going to be stolen from, you're going to be cheated and you're probably going to be sued.

36:21David Adelman:And it's not just going to be one time. It's going to be many times on that. So I'm curious, like in business, does that always happen? Are you going to be lied to, stolen from, cheated? And how can you tell who is going to do that to you or not? You know, hopefully you get the benefit over time to choose who your partners are, right? And choose who you do business with so you can thin the herd out on those issues. But like we get frivolous lawsuits every day from our properties and from our businesses every day. We literally just got a lawsuit about our website not being compliant for something.

36:59I didn't even know what that means. Okay. But if there's something we need to do, we should do it. But we're being sued over it. There was no harm, no damage, no foul. That someone's going to try and just grab some money. To me, that's un-American. It's just bullshit.

37:14David Adelman:Yeah. Yeah. Yeah. And so you just, at some point you just go, this is normal and this is the game of business and just deal with it. Yeah. And you have to have, you know, back to our point about the social media and the comments, just have to have thick skin. Like the bigger you are, you become a target period. Have you ever had somebody go after you and say you weren't doing enough and you weren't successful that was more successful than you? Or does that hate or whatever always really come from below? I've never had that happen. And I think it does come from below and it really stems from jealousy, right?

37:47David Adelman:Yeah. Yeah. I think so too. And I think it's a lot of energy too, to hate somebody so much. You don't want to build, you want to tear down. Right. It's really sad. Actually, it's like, God, what could you do if you actually wanted to build something instead? I'd love to see that because you're spending a lot of time on me. Spend some time on you. Let's see what happens. What is the best investment you've ever made? Like, is there one you're like, God, we just were so clever on this and we saw something nobody else did? There's a couple. I mean, one was our company Future Standard. It's been 18 years since we started that.

38:18And we were trying to solve a problem, which was how do you bring alternative investments to the masses instead of just being, you know, wealthy people being able to, you know, you can invest in hedge funds or whatever. But, you know, you're you said your mom was a school teacher, right? But she couldn't because she could only get stocks and bonds, right? Because she was not accredited or wealthy. Right. So we were trying to solve that problem. And so I'm proud of the business we built. And today, you know, we're running ninety five billion dollars. And that started from an idea I had about how we could do that in a democratized way to, you know, make it accessible to others.

38:49David Adelman:Interesting. So the best investments you've typically made are the businesses that you build yourself. Yeah. Now, listen, we've had the answer is yes, but I'll also say we've certainly had some venture capital bets where we wrote a great idea, great operator, you know, checked our boxes of different problems they were solving. and going from there, we just had a great exit on a, I'm in the alcohol business, so I know a little bit about it. We invested in a great company called Beatbox. And Beatbox thesis was we were going to be kind of the party drink and they did it in a box, like a Tetra Pak, instead of like a bottle or a can.

39:26And the founders, they built it. We were then in there early. We tried to add value during COVID. They needed capital. So we gave them kind of a working capital line, which I've done to a bunch of our portfolio companies. And they crushed it and they sold to Anheuser-Busch and we made like a 30X on our money. Sucks. It's a terrible deal. Right. Terrible deal. And I couldn't be happier for the founders, right? Like they're going to make a fortune. They busted their ass. Like it was great for everybody. So we, you know, every now and then you get a couple of like monster hits in some deals that you've done.

39:58Some are because you were, you know, like I consider us being part of the answer there because they needed working capital during a time where they couldn't get bank financing. So we stepped in with a couple million dollars of financing and it worked for them and it worked for us.

40:12David Adelman:Yeah. So interesting. I always like to do the opposite side of this because I think sometimes people hear wins. It's like in the casino. Your buddies only tell you about when they won. They don't tell you about the five losses before it drives me nuts. We do. There's like those guys on the streets that go around and say, what's the most amount of money you've made? And I've refused to do it because I'm like, ask me how much I've lost. I know. It's a lot, you know? So I'm going to ask you that question. Like, what's the most money you've ever lost on a deal?

40:46We've had deals go to zero where we've lost millions. I mean, so like, you know, I've had several venture bets that, you know, we've gone into and they've, you know, they've gone to zero where I've lost, you know, several million dollars. Um, now one of them was cause the person was a bad person is ultimately in jail. Um, and we learned a lesson, right? And so, but then that's my point, like good people, bad people, you know, all of that is something important. No one likes to lose. Like I'm very competitive. I know you are, but like, if I know that like some of these bets are going to lose, if none of my venture bets lost, it means I'm not trying hard enough.

41:24Okay. Now, if I ever lost money in real estate, which is supposed to be a slow and steady busy, I would be nauseous. Like that would, I wouldn't be able to handle that. That would be tough for me because that's not what that business is supposed to do. Yeah.

41:36David Adelman:That's a, that's a really good point because I think I think about it the same far, but are like quote unquote boring businesses, the cash flowing businesses. I mean, that failure rate should be below 10%. For sure. It should be really, really low. The only thing you should be subject to is maybe a regulatory change, right? Yeah. That's beyond your control and you need some new licensing to why I'm making this up to wash windows, right? And like, you're not able to get that. Yeah. And I think people don't realize it's really hard to figure out risk when you haven't done this before. So I know a lot of people be like, well, buying a business is really risky.

42:08David Adelman:And you're like, for sure, business is risky. But the SBA loan default rate is less than 13 % on average. Average is about 8%. That's actually an incredible risk return. Because those people are working in their business every day hands on. They can't afford to fail. Yeah, that's true. And they could never really even get a real loan. So it makes a lot of sense. So what did you learn? Like for somebody who wants to go out and do a deal, what did you learn from the failures of losing millions? Like what would you never do again? People, right? I really, you know, I didn't, in the case of the one where the person went to jail, they were very good at being warm and affectionate type of like, you know, very gregarious and all of that.

42:47And we just missed some things in our diligence. Yeah. Yeah. And but, you know, others, you know, I think that we learned, oh, you know what, we made a bet in an industry that was to had an ability to be replicated too easily. That was a mess. Right. So like always trying to understand what went right. You know, one, we lost. There was a regulatory change. Just put that business out of business. Can't predict that.

43:08David Adelman:No. It's really hard also to determine fraud up front in a lot of these businesses, even if you do forensic accounting. Have you learned any ways to figure out if somebody is going to defraud you or steal from you? It's really hard to, especially if you're a minority investor in another company, right? And it's all minority investors and you don't have reporting rights. So we try to determine based on the size of the investment how involved we want to be, right? Because that's the key. Like if it's a business we're active in and then one of your employees is doing something wrong, you need to know that.

43:42If you are a passive investor in a business that goes bad and all that, you wouldn't have been able to do anything anyway.

43:49David Adelman:No. Yeah, it's interesting. We were talking about this in the beginning. Like, how do you decide if a business is worth your time and attention or not? Because sometimes, yeah, maybe you could make another billion dollars, which sounds amazing, but it's going to take every single moment with your family, tons of your personal guarantees and capital. Like, what is your, do you have some sort of framework for saying like, this is worth it, this is not? Yeah, especially now because I have too many businesses, right? Too many things I'm doing in time as a commodity. I continue to try and get better at saying no.

44:22But I love the puzzle of business. And so for me, my next frontier that I'm really getting involved in is longevity, okay? Peptides, stem cells, all of that. I think that is the wave of the future. Like, I think that is going to change the scope of people's lives. And so, like, I'm intellectually interested in about in it. I'm learning about it and all of that. So then now I'm actively, like, putting capital in to try and really, you know, follow the lead there.

44:49David Adelman:So if it's if it's going to take up a bunch of your time, you better be interested in it. Yeah. And what I also say is I'm sure you get asked in some of the companies you invest in that aren't your main business. Will you be an advisor? Will you do this? And like at some point, the juice needs to be worth the squeeze. Right. Right. And so like, I'm only going to allocate personal time versus our team's time. If the outcome is really worth it for us, you know, unless, you know, the caveat to that is sometimes I've just taken a liking to a founder really like them. And I'm like, I'm going to help this young person and really do it that way.

45:21David Adelman:Yeah. Yeah. It's interesting. I'm sure you get this a lot. Sometimes I get that. Will you be my mentor? And I think, uh, that is a big role. Like, I'm like, I don't know. You shouldn't listen. You should question everything I'm Yeah, it's very hard. And I get a ton like you inquiries, you know, I'm looking for a mentor. Would you be my mentor? You know, all this stuff. And we just have to say no, like, I can't give you what you would need. Yeah. What's the way that they could sneak in? Like for me, I'll share first, like I always say, here's, you know what? I don't have time to do that right now.

45:49David Adelman:Read this book. This is a good first start. 99 % of them, 100 % of them don't read the book. It's pretty wild. And then I might say like, okay, here's like one answer to a question. And like they might sneak in if they ask me one really smart question and then go execute on it because nobody executes on anything ever. like what are you like you know what i want to bet on this young person because i think a lot of young people listening are like ah you guys have made it why won't you help it's like no no we will the problem is it's real hard to figure out who actually will take action well and the effort right like so for example and it might be somebody in your own company that wants to be mentored and this is why i like this whole work from home bullshit kills me because you can't meet somebody in your business if you're on his behind a screen, right?

46:35Like whether it's at a, your own business or I remember like, like you talked about Sam's L. Okay. I used to go to these real estate conferences and just wait in line with the hopes that I could just say hello to him and introduce myself. Right. And you need to show up. Right. And so like people need to show up and reach out and try to make that effort. And so for me, like my assistant, who's kind of like the gatekeeper, and I have a chief of staff, they'll be like, hey, this kid, you need to talk to this kid. They're like, you know, handwritten notes, like following up, like real grit. And so like sometimes if you trust your team around you to like kind of be the funnel a little bit, that helps as well.

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47:38David Adelman:Yeah. Yeah, the work from home thing is fascinating because we'll get ridiculed online. I say the same thing. I think it's a tragedy, actually, unless you've made it. If you've made it, work from home, maybe. You want to work from the beach? God bless you. It's not for me because I actually need the energy. I'd much rather sit here with you than us do this by Zoom, right? No, no, no. That's where dreams go to die. Yeah, it's terrible. And so for me, I'm like, be around people, create energy. A junior person is not going to suggest an idea in your company. If you walk by the hall and I'll walk in someone's office, like, what are you working on?

48:12And like, well, we have this crazy idea. They're not going to call my assistant, make an appointment to do a phone call with me to tell me that idea. And what if that's like the next billion dollar idea? like so like don't be afraid to show up so my advice to all your followers is like show up in person make that effort get in front of people i think people like appreciate it yeah and i'd be curious your take like how hard is it to find really competent people who want to get after it it's really hard you know and especially like and i hate like feeling so old like this generation. I'm like, I feel like a grandfather, like drives me nuts.

48:50But like, it's true. There's just this like, like, yes, you should have a work life balance. Okay. Like, I think that's important. Enjoy your life. And you know, you're developing and all that, but like, you know, you got to pay your dues to like get the fucking work. And so like, to me, like if I see somebody who's like grinding and doing it, it makes me want to put more in.

49:09David Adelman:Yeah. Yeah. It's so wild. I think like, I remember when I first started at Goldman, everybody that was smarter than me, I was a public school kid. I went to Arizona State, you know, and I was not I called it Harvard of the West for partying. Like that was not we were not this. This was not Harvard. And so the only thing I could figure out how to do was be in there earlier than everybody else and stay later than everybody else. That's literally all I had. But damn, if that wasn't enough. And, you know, of course, one of the MDs sort of, you know, saw me there and then we got a relationship going and I got an opportunity because of that.

49:40David Adelman:And I wasn't even in that much earlier or that much later, which is crazy. It was like 10 % more work almost. And I think that still exists today. Like if you had, like of, I don't know, of your employers, those are the people you've seen overall in your career. How many people do you think are like giving the extra 10 % or 20 %? Is it so competitive that, you know, anybody could try and they won't be able to do it? Or is this still pretty rare? I think it's still rare. What about your kids? You have how many kids now? Two kids, two daughters. And they have a lot of resources, obviously. I think America in general, we have more resources than we've ever had.

50:21David Adelman:Is it hard to keep your kids grounded with everything? Or how do you keep them grounded? Yeah. I'm going to come back to having an awesome partner, my wife Haley, the number one. Is she tough? No, she's just kind, right? And she's really, you know, she guards her kids like a mama bear. Yeah. But we were fortunate that my kids, as I have two daughters, 22 and 24, my 24-year-old's a middle school art teacher. My 22-year-old just graduated and just started working. And they just have great values. I think it starts, it doesn't matter how much money you have, because people who don't have a lot of money can still have spoiled, entitled kids.

50:58Yeah. Okay? True. And so I think it's about making sure your kids aren't entitled. Like, teach your kids to be nice people. Teach them to contribute. Right? And then teach them the value of a dollar. And how do you do that, though? Well, because like what I'll say to my kids when they were younger, like, well, you know, we live in a big house or whatever. Like, well, we're rich. I'm like, you're not rich. Mom and I, we're rich. OK, like you haven't done shit. OK. And like and so I would say that I think I'm a little too harsh, but I'm like, I'm like, you've got to earn it. Right. Like, I'm doing you no favors.

51:31Like, now, listen, you graduate. You want to start a business like pitch me on your plan. I will line up to be your first investor if it's a good idea.

51:39David Adelman:Yeah. How do you teach them money? Like, is there like, did you make them have allowances? I'm going to give you a great story. So my younger one from the time she was a kid, her name's Sage. She loved apples. Okay. It still does. And I would cut up the apple into four pieces and I would only give her three. And I would eat one in front of her. And she'd say, why are you eating one? I'm like, that's called taxes. Okay. And I literally would do this her whole career. Okay. I mean, her whole childhood. And she's like, does everyone have to pay taxes? I'm like, yep. Get used to it. Okay. And then like my proudest moment, she's like 10 years old while walking.

52:22She's like, can you explain what a mortgage is to me? I like, I thought I was dying. Right. Like, so very inquisitive and all of that. And my older one. And so like when we invest in a venture company, first thing I do is I send it to my girls. I'm like, what do you guys think about this? Like they know cool way more than me. They know stuff like way better. And so like they've been really valuable on like, I'll tell you, like there's a company called Coconut Colt. Okay. It's this new yogurt type of blend that they're making and they pitched us on it. And I sent it to my girls and my daughter was in college at the time.

52:58She literally opened up her refrigerator and said, dad, I have this here.

53:00David Adelman:Is it glass? It's a glass jar. I think I eat it. It's so overpriced, but delicious. Delicious, right? Okay. They're crushing it. They are. I knew it because they're getting me. And their margins have to be huge. Maybe you probably can't say it. You know, I don't know. I can't speak to their margins because it's a fresh product that's made, right? Yeah. But I was like, all right, my kids know this. All their friends are eating it. I'm like, I'm good, right? So we made the investment. It wasn't a huge amount of money, but that was a good demo for me to prove that this thing was real. And so I really do try to understand that.

53:29And my older daughter is very challenging. She'll be like, well, I looked up that company. Their social media is horrible. And I'm like, so does that? She's like, maybe it's a good product, but you better make sure because their social media sucks.

53:39David Adelman:I love that. Right? And so I'm trying to get my girls engaged to think about how you invest and what you do. So is that the key to having kids that understand money and business is you just bring them along? I think you talk about it. Yeah. Okay. I think you share it with them. You talked about allowance. So my wife had this thing. And when they were little, we had this checklist for them. And they were little like to earn your allowance. OK, here's your checklist. Look good. Feel good. It meant like brush your hair, brush your teeth and look good each day. Right. Make your bed. OK. Things like that.

54:12And we had this list. Then we were like, OK, how much of your allowance has to go in the savings? How much is for charity? Right. And so we would like have those discussions on that. And so like it was a small thing and it was, you know, a very small amount of money. But we wanted them to think about it. All these things are earned and you have to work towards it.

54:28David Adelman:Now, it's so good. I mean, when I was growing up, I'm Latina and I didn't come from very much money. And you didn't talk about money. You didn't talk about it. We pretended it didn't exist. You didn't ask for things. I had no idea what a credit card was until I was well in college. You know, so I didn't have credit. And I thought that to talk about it was kind of gross. I was like, oh, that's not a good thing for us to talk about. We don't talk about that. And in retrospect, what you realize is rich people talk about it all the time because it's just a tool. Yes. And so, you know, I think that's really nice to hear for people who maybe didn't grow up with it.

55:01Yeah.

55:02David Adelman:Because if you don't talk about it, how can you ever get more of it? So that triggers something to me that I think is number one thing we didn't talk about, asking questions. So one of the things that drives me nuts about people is, let's just say I was just pontificating about something and you didn't understand something I said, and then you didn't ask me about it. and so because i'll say like so like i'm proud of the fact that if we're talking about something and i'm gonna say well can you explain that to me most people are embarrassed to say i don't understand or i don't know huge mistake like i respect when i'm talking to our interns or whatever it is that can you explain to me i'm like thank you because none of you understood that and you were brave enough to ask right yeah and sometimes i'll say things in a group and i'll stop and say Like, did you all understand what I said?

55:48Like, why didn't you ask? And so whether it's learning about money to ask or learning about business or learning about anything, people need to not be shy and not into this group think and not afraid to ask questions for fear of looking dumb or anything else. So many people are self-conscious.

56:04David Adelman:Yeah, it's a great point. I also think it's so important with AI today. Like, I have one of my employees the other day. We're doing a big book launch on September 18th. We want to sell a million copies. That's kind of a ridiculous goal. People don't buy books to the same degree. It's sort of hard. Anyway, and one of my employees came to me and was like, well, this other person, I won't say who, not a big name, not a well-known book. She sold 100 million copies. And I said, hold on. Just think about how many copies that would have to be. Is it J.K. Rowling or Jesus? Right, yeah. Because unless it's one of the two, that doesn't make sense.

56:40David Adelman:She's like, no, I got the result from AI. You can see it here. I'm like, but you got to ask the next question, which is like, is this reasonable? Right. And so for whatever reason I do, I remember when I was younger, oh, like, yeah, I totally get that because it is scary to look stupid. Right. But that's where you lose all your money. I think it's brave. Yeah. Interesting. Yeah. It's a good point because you probably say often explain that to me like a six year old. I don't understand what you're talking about. More and more now because I like especially when it comes to AI and certain song, I'm like, I don't understand what you're saying.

57:07David Adelman:Yeah. And because you don't think that has any bearing on your intelligence. You're saying, I don't understand this one thing, which is no reflection on me. How do you learn if you don't ask questions? Like, I want to learn every day. I want to learn about business. Yeah, interesting. You've talked a lot about your wife. Yeah. And I wasn't thinking about asking about this, but I work with my husband. He's brilliant and amazing. And I think you said in the beginning, you really can't be successful if you don't have a successful partner. How do you find a partner that is going to back you? you know i i think i was pretty open and transparent with my wife when i met her that like i love work and i love business and you know this is a very important part of what i do and so like i i felt like i she might disagree but i was like i laid out the disclaimer right like that this is really important to me and i love this i can love you too okay but like this is my energy right and it does it feeds me like and i think i'm a better husband and a better dad and a better a friend to people when I'm like inaction.

58:08And it's also because my mind won't settle down. So like, I just need that energy.

58:13David Adelman:And so the key is kind of one, you got to be honest and say, this is what it's going to be. Yes. And then what response are you looking back from your partner? How do you know if they're just paying you lip service and going like, yeah, yeah, sure. Buy me the Bentley, but be on vacation. Yeah. I mean, I think one, um, she had her own great values, the way she was raised. Two, she was a really hard worker. She was a teacher, then became a college professor and then got her PhD. And then, you know, now she does documentaries and writes children's books. So she has her own business. But I think, you know, for that was, and I'm not an expert here.

58:47Okay. I've been married 20, she got this right, 26 years. We'll edit it out if it's on. Yeah, I'm right. Okay. And I'm still like a student of this, right? Like where, you know, my wife will be like, hey, like, you know, the pendulum is a little too far, like this, that, like, and we'll talk about it.

59:04David Adelman:Yeah. Yeah. I know. I always chuckle every time I give some piece of advice about relationships on the podcast, I'll immediately fight with my husband. I'm like, I got to not do that anymore because I can't pretend like we actually know what we're talking about. But I think it's really important because I don't know what happened, but at some point we stopped thinking it was reasonable to do business with family or to bring family into business. and I can see why. It's really hard to set expectations. Things could go very sideways. But Lord, I mean, how many hours a week do you think you worked in the beginning and even now?

59:36Oh, 70, 80, 90, 100.

59:38David Adelman:So like, what if you couldn't talk to your significant other about any of that? Wouldn't that be hard? It is. That'd be really hard. And so my wife has done a good job being interested. Not all partners are interested, right? And so I find that my friends are in business, not all their partners are interested. Mine is. I'm trying to get my kids interested as well. But to your point about family and business, so I have a hard and fast rule that if you're a family, you can't work with me unless you work someplace else for three to four years. You got to pick up those habits somewhere else, be trained by other people.

1:00:11And that's kind of the way I've thought about it for my kids, my nieces and nephews, you name it.

1:00:16David Adelman:Yeah, because probably a lot of them just want to come and work for one of your mini companies. I mean, the 76ers would be pretty sexy to like step right into. Interesting. And so you go, no, you have to, is it just three to four years somewhere else? Or do you have to have it? And again, like that's directly for me. If it's like a portfolio company that I'm not running and all that, and they're getting their, cutting their chops there, that's great. Like I'm okay with that. And if there's great management there and great mentors there, I'm fine. But like, you know, if it's certainly for me in the real estate office and some of the other, the family office, you have to work someplace else first.

1:00:46David Adelman:I think that's smart. I remember I got to chat really briefly with Charles Koch and he was the same way about his kids. And I remember Junior was telling me about one time he had to, his father made him go to one of the ranches that they owned. And he had to do some things with a cow and a glove that really I don't think anybody would ever want to do. And I thought that's probably the right way to bring somebody into the mix. I think you need the appreciation. So literally, in the real estate business, when it snowed, I showed up there and was shoveling the walkways along with the maintenance crews.

1:01:23David Adelman:Interesting. Right? And I think you have to have that appreciation of hard work. I've painted apartments. I've done all of these things. I can't tell you I'm a master painter, but I think if you don't have an appreciation for the work your people are doing, it's hard to relate to them. So I think that's really important. This is kind of a weird question, but one of the reasons I really liked your background is you are an operator and have like, you know, when I looked at your businesses, I was like, yes, there's financial arbitrage here and leverage and all of that. But man, you know, campus housing that I that's 24 seven service, which is like you want to do that's worse than any of my businesses.

1:02:00David Adelman:You know, you don't, I guess some of the plumbing companies you call in the middle of the night, but my painters aren't having to go fix something at two in the morning. Right. So that's really intense. But I was curious, like, it feels like a lot of real estate is so competitive and could be even gnarly because maybe the margins are tight and it's just so much financial leverage. Why is so much of the real estate industry seem to be so competitive, whereas a lot of these other industries are more collaborative? You know, I don't view really competitive. You might be competitive with someone else in a market, your apartment complex against theirs.

1:02:32But, you know, in our industry, in the student industry, I would say a bunch of the owners, like our chief operating officers, all get together twice a year and they share best practices. We've tried to bring people together to do that. So I I think like, you know, you can be like friendly competitors too and, you know, want what's best. It's like, you know, I'm friends with a lot of lawyers. They compete, but they're all kind of collaborative and friendly and, you know, do that. So I think it depends on the personality.

1:02:55David Adelman:Yeah. So do you think you always have to compete to win or annihilate somebody else? Or can you collaborate with your competitors? I don't believe that I, I don't try to win at the expense of somebody losing. Okay. I kind of pride myself on that. And so, but there are people that do. And it's winner take all and all of that. Not my thing. And maybe I would make more money if I did that. But I also want to set a good example for the people I work with and my kids and all of that. And so for me, it's exciting to win the right way, share the wins with your team. But don't get me wrong, I'm really competitive.

1:03:33I still want to win. I just think it's how you play the game. Yeah.

1:03:36David Adelman:Well, that's what I heard about you from a few people that know you. That was kind of their saying is that they would do deals with you, which I think is one thing people don't ponder as much as if you're always trying to beat somebody else up, then they're never going to bring you opportunity. That's for sure. And so I think it's cool. And it's also important because these days people are crazy about rich people. They think we don't. I mean, how many a different way, I guess you could say is like, how many billions of dollars in value and like assets do you think you've created in order to have to become a quote unquote, billionaire.

1:04:07Wow. A huge multiple. 20 X, 50 X, 100 X. It's a huge multiple more of, you know, again, it's kind of like build these businesses and hope something's left for you. Right. And that's kind of what's happened over the years. And that piece, fortunately, has gotten bigger over time.

1:04:26David Adelman:Let's say you had to go back. You're somewhere between 13 because you're a crazy person and 25 with no money, no network, no reputation. Where would you go looking for your first million? What would you do? In my mind, it's not looking for the first million. It's looking for what education can I get that'll lead me on a path. Okay. So I would, I would show up and we had talked about this. If, if knowing what I know today, I'd go back to somebody's operating business and say, can I be an entrepreneur in your business, learn your business, and then ultimately become like so valuable that you want to give me equity or tie me up or do something that either can make a huge part while I'm there?

1:05:05I mean, you know, you worked at Goldman, right? A lot of people have hugely wealthy working there and getting a piece of the action. So could I become so invaluable to this organization after learning that you can't live without me? Or did I learn enough to go out on my own and do it with a few people? And, you know, hopefully you can gather some money to start small and get big.

1:05:23David Adelman:All right, David, you're the man. Awesome. Appreciate you. Thank you.

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