Billionaire's WARNING: The Housing Market Will NEVER Be The Same (Do THIS Now)

21:16That's your time to create value. So it's all about hustle and pace and that's what's missing. So the people who have hustle, and you know who they are, you've had lots of them on the show, those people are making money hand over foot. The folks that, you know, are waiting and will figure it out later, that's not the way to do it.

21:35Graham Stephan:And what's your pitch when you give one of these owners a call and you want to buy their building? What do you say that convinces them to sell on good terms? Okay, first of all, normally I pay more than anyone else. I overpay for everything and I pay because I'm going to create more value or I'm not going to buy it. So it's either going to be worth it when I buy it or I'm not going to buy it. By the way, 99 % of the time I buy it because I have a very good nose and understanding of what I'm doing. I'm not wasting my time and I'm not wasting the seller's time to do all this and not put it together.

22:10So I usually have a story. So I spent 17 years building Walmart stores across the East Coast of the United States and did all of it with no money and knew exactly what I was doing and closed on every single deal that we signed up with. How does someone know when they know enough

22:29Graham Stephan:to be able to do something like that? I think that the secret is to start really, really small. So I love little deals and happy to work on little deals and then grow the platform, grow the platform. Start at the beginning, have a buy box, and then do a smallest deal you can in that buy box, and then keep going and keep going as long as you know what you're doing. Is recreating this harder in 2026 than it was 10 years ago? Okay, so real estate is incredibly cyclical. So, for example, I started in real estate in 1988 and it was boom times. And I had from 1988 to 2005 and I developed 100 shopping centers, 10 million square feet, spectacular growth.

23:18And then it stopped, literally just stopped altogether. And I went on to do other things. I bought operating companies that own their own real estate and then played that game out, if you will, for 20 years. But not a lot of real estate deals and great opportunities as far as I'm concerned. That was sort of a slower period. Right now, I think, is a really exciting and dynamic period for a variety of reasons. Some we've discussed, folks aging out, properties transferring, conventional financing being available. and also, of course, bonus depreciation and being a real estate professional is a super exciting moment and gives a lot more juice to the real estate professionals doing deals right now.

24:02Graham Stephan:Do you see any red flags in the market? Because a lot of people could say, well, there are a lot of people aging out. There's going to be more inventory coming on the market. Interest rates are pretty high. A lot of retail is now going online. You just need big warehouses in the middle of nowhere that are pretty cheap. Okay. You're talking just broad. There is a jewel everywhere. So I'm in the jewelry business. I'm out looking for that little jewel and you can go anywhere. And some of the best jewels are in the most secondary tertiary markets in the country because people aren't there paying attention.

24:37So the interest rates don't bother me. The general economy doesn't bother me. I'm out looking for opportunities.

24:45Graham Stephan:When in your life has it been the easiest to make a lot of money? I've had a pretty consistent long run, old guy here. For the last 40 years, I've been cranking it out. And to me, you got to change your play up. So if one play isn't working, I was building strip shopping centers, that ended. I had to do something else. I was doing operating companies, that ended. Now I'm doing smaller deals and bonus depreciation. So I think you have to keep changing up what deals work at a particular time. What deal single-handedly positively affected your net worth the most? I bought a German department store chain in 2016 called Galleria Kaufhof.

25:24And three years later, I sold it to our competitor and made a billion dollar cash profit. And that was sold in August before, right before the pandemic. By the way, the story is much better. The guy was this crazy rogue. I was running a public company. I had to finish the deal. I had to fly in on a plane, land my helicopter on his yacht, finished negotiating the deal on his yacht. And then he finally closed in August of 19. By May, he went bankrupt. So he bought the business for three and a half billion euros and six months later was bankrupt. The company went bankrupt three times. And then my son bought the company for one euro two years ago.

26:09Wow.

26:10Graham Stephan:Wait, so you bought this company for how much? Galleria Kaufhof, we bought for 2.6 billion euros. Three years later, I sold it to Rene Banco for a billion dollar cash, US dollar profit. And we closed in August of 2019, right before the pandemic. Unfortunately, the pandemic hit and the business went bankrupt six months later. And it went bankrupt three times. The German government took it over. By the way, Mr. Banco, unfortunately, is in jail right now. And the private equity firm that my son runs and our D.C. equity partners bought the business out of bankruptcy from the German government in July of 2024.

26:58Graham Stephan:For one euro? For one euro. Why didn't someone else bid two euros? Because no one wanted it, because no one wants these dying old department store chains. and I've been able to buy and sell and in and out of these businesses, but they're not for the faint in heart. They're very difficult businesses. What's the risk, though? Because I feel like I would pay 20 bucks just to say I own this thing for like a day. Well, next time I need 20 bucks, I'll call you up and we'll do it. Consider me. Well, I guess the most game-changing moment for me was when I went from developing shopping centers to buying Lord & Taylor, the department store chain.

27:35So Macy's had merged with May Company. They owned Lord & Taylor. They didn't want to own Lord & Taylor. They wanted to sell it. And I sort of, before it went on the market, I got a wind that it was going to be for sale. And I did a lot of analysis on it as a real estate guy. And I analyzed the real estate. What I found was 49 spectacular properties, including the Fifth Avenue Lord & Taylor building. So I wanted to buy it for its real estate. um macy's wanted to sell it and they wanted to sell it for 1.2 billion dollars they didn't want anyone else they didn't want to take anything less and i made a deal even though i wasn't a logic i wasn't a private equity guy and kkr and all kinds of people were bidding on it they wanted me to buy it because they thought as a real estate guy i was going to liquidate it that's what they wanted to happen they wanted lord and taylor to go away they just didn't want to get their hands dirty that they were because their name was still attached to it yeah they They didn't want to be the people firing all those employees and liquidating the business.

28:34So I went in and I negotiated a deal with them to buy Lord & Taylor for$1.2 billion. So now me, my real estate attorney, we're negotiating with Federated, this many billion dollar company. And we're turning papers and negotiating every day. And my father starts calling me every day. He's like, what are you doing? We don't buy$1.2 billion companies. They're going to ask for a deposit. They're represented by J.P. Morgan, Scadden Arps, and Goldman Sachs. Your entity, I had just done 100 shopping centers with single-purpose LLCs. And so with no money, I had gotten purchase agreements, and then I had gotten approvals and closed after I had done all the work.

29:24He's like, they're not going to sell you a$1.2 billion company that way. I said, relax. I have my entity, NRDC Equity Partners Fund 7, which was a single purpose entity. And when they figure out or when they want to see a deposit or that there's money in the account, I'll go to one of my friends and I'll get someone else to do the deal and I'll manage it and get a promote. So we're doing the papers. We're doing the papers. and of course, you know, we're fairly high profile people and whatever. One day at midnight, I call my father from Times Square because the lawyer's office was in Times Square and I say to him, they signed the purchase agreement.

30:03And so all the consultants, all the best lawyers in the world and no one had asked to see the financials from my single purpose entity and they just kind of assumed that we were some fund.

30:14Graham Stephan:So you created an LLC or like some sort of - Yeah, like an LLC, like every deal we do. I have 200 LLCs. And you just created a random one. And I put a name on it, NRDC, which was the name of our private equity firm, NRDC Equity Partners Fund 7. There were no ones through six. I just, by the way, I tell people all the time, have a landing page, take your baseball hat off, wear a jacket and a white shirt, look the part. So I looked the part and they entered into a purchase agreement with me. So now my father says, well, that's great, but we're going to come up with the$1.2 billion. I said, I'll work on that tomorrow.

30:57So hung up the phone, went back to my office, my little team, and we created on a piece of paper, on a whiteboard, a holding company called Lord and Taylor Holding Company. The operating company had$120 million of EBITDA. So we created an operating company and a property company. The operating company paid$80 million in rent to the property company. And so now I had a property company that owned Fifth Avenue and Scarsdale, New York and Stanford, Connecticut and Manhasset, Long Island, 49 properties. It was 2006, the beginning of 2006. Markets were very great and bubbly. I went to these three nice institutions, Bear Stearns, Lehman Brothers, and CIT before they went bankrupt the first time.

31:44And the three of these firms lent me$1 ,175 ,000 ,000 to buy Lord & Taylor. So I now had to go back to my father and my two partners, Bill Mack and Lee Nybart, and the four of us, and I had to pitch them. This was the hardest sell of my life because in my family real estate business, we don't put money into deals. If you're not smart enough to figure out how to do it without any money or almost no money, then it's not our deal. So for them, for my family, my gang to put up 25 million was a hard sell, but to control a$1.2 billion company, a hundred percent for$25 million, everyone agreed. My father was a little grumpy, but we all put it in.

32:28And now we owned Lord & Taylor. The idea was to liquidate the whole thing as fast as possible, get all our money back and go. But a crazy thing happened on the way to the closing, which was Macy's was rebranding all of the May stores and everything Macy's instead of Marshall Fields and instead of Filene's. And some of the customers were like, I don't want to be a Macy's shopper. And the Lord & Taylor sales, even before we closed, started going up by 10%. Wow. So I was like, oh, how hard could it be to run a department store chain? I'll run it instead of liquidating it, and I'll liquidate it in the future when the time comes.

33:06So I ended up operating as a chairman, this Lord & Taylor business from 2006, it kept running to the pandemic, a business that would have been bankrupt or closed three months later in 2006. And we did very nice. We sold the Fifth Avenue building to first to WeWork and then to Amazon, who paid$1 ,200 ,000 ,000 just for the Lord & Taylor Fifth Avenue building.

33:34Graham Stephan:Just for one building? One building. And you bought the entire - Business for$1.2 billion. So you got it all back from one building. We made money. That doesn't even include hundreds of millions of dollars of inventory and properties. We did fine, but more importantly - Fine? We did okay. We do okay. Yeah, yeah. Got by. We do. We got by. So, but more importantly, I used Lord & Taylor to buy Hudson Bay Company, which was a tremendous company and totally screwed up in every way you can imagine. Explain Hudson Bay Company. There is literally always that one part of running a business that you keep meaning to figure out later.

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36:43Graham Stephan:Explain Hudson Bay Company. Hudson Bay Company was the longest continuously operating company in North America, founded in 1662 by King Charles II, who signed a charter giving all the lands that drain into the Hudson's Bay to his cousin Rupert. who was the first governor of the Hudson Bay Company. So I unfortunately was the last governor of the Hudson Bay Company. So I took over this company. Actually, I bid on buying it. I got outbid by this other fellow, very talented entrepreneur named Jerry Zucker. And he was running the business. I called him up and said, I'd love to be your partner. I did all this work on it.

37:27I'm the chairman and owner of Lord & Taylor. I can help you in Canada. So we made a deal and I bought 20 % of the Hudson Bay company, but I needed a hundred million dollars. So, uh, I wasn't going back to my guys. So I went and I borrowed$90 million against the hundred million dollar investment on Hudson Bay. So now I was short$10 million. So I went back to my father, my partners and said, we need another$10 million. My father said to me, this is the last money you ever for the rest of my life or your life taking out of this family business. I said, all right, relax. Last money ever. Relax again.

38:07So relax. So we took the$10 million. Now we own 20 % of the Hudson Bay company. Now it's March of 2008. My phone rings. It's Jerry Zucker. I've been on the board. We've been working. Didn't make much progress. and he says to me, Richard, I have a brain tumor and I'm going to die in the next three months. I'm like, oh my God, that's terrible. You know, what can I do? And he said, I want you to buy the balance of the company. And I said, okay, we'll look, you know, we'll look at it. Got his people on the phone, talked to him, hung up the phone, never spoke to him again, he died three weeks later.

38:43Wow. So we bought from the estate, the balance of the Hudson Bay company and closed in July of, uh, July of 2008. The world was about to blow up. It was that, you know, the world blew up in September of 2008. So how did I come up with the money to buy the balance? Well, I needed$500 million because I needed to buy, I needed 200 or 180 million Canadian to buy the balance of that deal. But my other deal had a lot of debt and I was getting nervous. So I needed$500 million. dollars. So I, my partner Lee introduced me to these wonderfully nice people from Abu Dhabi and they flew in and I showed them all the real estate and everything that we have.

39:28They loved it. And I went back to the whiteboard, created a new, so I remember I had Lord and Taylor Hold Co, Lord and Taylor Real Estate, Lord and Taylor Propco. I now created Hudson Bay Trading Company on top that would own the Lord and Taylor Holding Company and the Hudson Bay Holding Company. and I sold the nice folks from Abu Dhabi for$500 million, 49 % of the Hudson Bay trading company, the holding company that would own all of it. So inflows$500 million. I pay down my debt. I buy Hudson Bay company. But now I call up my father and I say, well, dad, we put$35 million in and we own half of this thing.

40:12And these nice people from Abu Dhabi put in 500 million. So I guess our 35 million is now worth 500 million. Plus 50%. Well, if half the company was worth 500 million, our half was now worth 500 million. So my father says, and my father was wonderful and we had a great relationship, but it was a little angsty, it was 2008. He's like, just because you found someone stupid enough to buy half of this department store business that is heading for God knows where doesn't mean that our half is worth$500 million, which is by the way, true. You never, you know, just cause some one person sees one thing anyway.

40:50So long story short, we close, uh, the, the, uh, great financial, uh, uh, crisis hits, but, uh, I had merged these two companies together. They were so screwed up. So I had run this real estate company with 40 employees and we were great. We were building a million square feet a year of shopping centers. I now had 75 ,000 employees. I was the chairman and the governor of this thing. I'm a real estate guy, not an operating company guy. I had a great guy by the name of Don Watros, who was chief operating officer. He cut$500 million of expenses out of the business between October and December of that year and basically saved the enterprise.

41:40We fired 97 of the top 100 executives. People say, oh, how do you change the culture of a company? Well, you fire everybody. That's one way to do it. And we broke the company up into pieces and, um, it survived and did fine and grew. And then a little less than two years later, uh, Walmart contacted us and said they wanted to buy a division we had called Zellers, which was like the Kmart of Canada, which was kind of a crappy, at least valuable of the companies and the things that we had in Canada. And, uh, they came to visit me and they said, Richard, we've heard that Target was interested in buying Zeller's and we have all these stores in Canada.

42:24I said, well, if you want to pay for it, you can buy it. Sure, we'll sell it. And they said, well, how much do you want to sell it for? I said, well, we don't look at it as an operating company. We look at it as 400 leaseholds that are$5 a foot under value. And if you take the dollars under value and put a 6 % cap on it. We'd like to sell it to you for$2.2 billion. Of course, we just bought the entire business for 1.2 billion, you know, two years before that. So they said, Oh, that sounds a little steep, Richard. I said, it's going to be terrible if Target comes in and takes$5 billion of business.

43:04So I said to him, this is what's going to happen. no brokers, CEO of, I'm going to speak directly to Target and I'm going to speak directly to Walmart. Whoever signs a purchase agreement first with no outs can have it. And I'm going to tell each of you what the other guy is bidding. They're like, okay, I guess, you know, do we have a choice? No. So they left, they had come to my office. I pick up the phone and what do I do? I call Target because I wasn't talking to Target at that time. And I said to Target, I said, this is your last chance if you ever want to come to Canada because this is the last set of boxes available.

43:42And they had looked at it. We had talked about it over the years, but we weren't talking. So my contact, the head of real estate, spoke to the CEO. He said, we're interested, come and visit us. So I flew up to Minnesota and they said, well, we're very interested. We'll take your best 50 stores for$500 million. I said, that doesn't work for me. and I got other people. And if you don't want to come to Canada, no worries. And I flew home. So then I got my first bid from Walmart. They would take 80 stores or 90 stores for 800 million. And I said, that doesn't work. Then Target came up to a billion dollars and then Walmart came up to a billion two.

44:23And then I went back to Target, back and forth, back and forth. By the way, I was the Walmart guy. So I was kind of shocked that I hadn't, you know, that it was going this long. Finally, I get a call from Target saying, we'll take all of it for$1 ,850 ,000 ,000. We'll give you$900 ,000 ,000 at closing and the balance 90 days later. So I said, okay. So I flew up to Minnesota. By the way, Walmart at this point, it kind of like just stopped. And I, you know, I don't think they believe me that I had really gotten that much money from Target because I told them billion eight 50 it's your call and so I fly up to Minnesota uh with my small little team and the entire management team of the Target corporation and 25 lawyers all in conference rooms and we spent four and a half days this was the HR conference room the logistics conference room and we went and negotiated a purchase agreement imagine selling a division you know this large to Target.

45:26And by Friday morning, we had a completed purchase agreement. The Target board meeting was on Monday and the closing would have been on Tuesday, was scheduled for Tuesday if the board approves. I get on a plane, fly back, go to my office. I'm sitting in my office Friday at five o 'clock. My assistant comes in and she says, the CEO of Walmart and the CEO of Walmart International, Doug McMillan, is on the phone. They want to talk to you. I'm like, oh, this is your worst nightmare. So they were very gracious. They all knew what each other were doing. By the way, they all have spies at each other's offices and whatever.

46:05So they said, Richard, we are so sorry. We screwed up. We have to own that company. You cannot sell that business to Target. I'm like, and it's our fault. we are prepared to pay you another$100 million. I will send a team to your office this weekend and have it done and signed by Sunday night. So I said, guys, I'm heartbroken because I'm a Walmart guy. I did all this business with you. I had known Sam Walton and Rob Walton and I have this great relationship, but I shook hands with Target. Thank God they didn't say they would pay me$200 million more, but for$100 million, my word was still good.

46:47And I said, I'm going to finish with Target. If for some reason the board of directors of Target Corporation turns me down, votes it down, I'll be back to you hat in hand, but I can't back out of the deal. And they said, we respect you, Richard. We understand. And click the phone. Monday on Needles, Target approves the deal. The next day,$900 million in cash gets wired in. And then another$900 million. The nice folks from Abu Dhabi got their$500 million back, plus another$250 million during 2010. There wasn't a lot of people getting their money back. All my investors got lots of money. My father, who was the loveliest, smartest guy ever, had a smile on his face till the day he died.

47:40He never fussed with me, never raised his voice, never looked at me sideways to the day he died. And so that was that story.

47:49Graham Stephan:How much money did you make on that deal in total? It's complicated, all of these deals, because, you know, you reinvest back in the stores and you renovate stores. But basically, from 2006 to this January, when Sachs and Neemans went bankrupt, we bought and sold and bought and sold and did a whole series of transactions. And we did fine. We would have done better if Sachs and Neemans hadn't gone bankrupt. That would have been a good move. But we did just fine. So in doing some research for this podcast, I just Googled it. I'm like, okay, Richard Baker net worth. Google says$5 to$10 million. ChatGPT says conservative estimate$750 million.

48:29Graham Stephan:And then you have other things that are saying like$1.2 billion. Explain this discrepancy. I guess we shouldn't be looking at those Google and those places for people's net worth. They seem to be wildly incorrect. To me, it seems a little bit reminiscent of like war dogs. if you've ever seen that, how they're like selling government contracts and they end up in this room placing a bid on something that they have like no business doing, but they're up against a team of probably 20 lawyers and executives and yet they end up closing this deal. That kind of reminds me a little bit of what you were doing.

49:02Graham Stephan:I mean, you were like stepping foot into places that you had never thought you would be in doing deals that were completely unimaginable. Do you think that there's some credit to like fake it till you make it? Not saying you were faking it, but like you were kind of in a deep end. I would say this and how this translates to all the folks that are listening. You have to have conviction in what it is that you understand. I had spent my entire life in retail real estate, so I understood the value of the real estate inside of those operating companies. The people that ran those operating companies didn't understand the real estate, and a lot of other people didn't understand the value.

49:39And I was able, with great clarity and surety, to buy those companies and finance those transactions because I understood what the real estate was worth inside those companies. Now, the world's changed and markets go up, markets go down. But we bought Sachs in 2013 for$2 ,600 ,000 ,000. Six months later, we got a financing against the Fifth Avenue building. And the third-party lender did an appraisal on the building of$3 ,650 ,000 ,000. Six months after we bought the entire company in a public process, the largest shareholder was Carlos Slim, at the time the richest man in the world. And he sued Goldman Sachs for seven years that why did Goldman Sachs sell us the business when the one building was worth a billion dollars more than what they sold the whole company for?

50:36Graham Stephan:What do you currently own? I'm in and out of all kinds of different assets. So last year, on my spare time, I created another real estate company called ROIC, where we built a portfolio of another 10 million square feet of West Coast real estate. And I sold that to Blackstone last year for$4 billion. So that's sold. I'm out of Saks and Neiman's. Right now, I own 10 million square feet of super high quality East Coast Walmart anchored shopping centers, which is great. And I have a private equity business with a variety of different investments. And I'm playing around with new investments and doing new things.

51:25Graham Stephan:Now, a lot of people are taught to avoid debt, but you really embrace it. Where do you define the line between taking on smart debt and just being dumb with it? Let's call smart debt non-recourse debt. So we should all take as much non-recourse debt as we can get our hands on. For folks who don't understand, non-recourse debt is debt that's only recourse to your LLC. So if for some reason the property goes bad and doesn't pay the interest or doesn't pay the amortization, all the bank can do is take back that one property. So my business model is to put as little equity in every deal as I can and to take as much non-recourse debt as possible.

52:06If you believe in a world that's going to have a lot of inflation, you want to buy as much real estate as possible with as much non-recourse debt as possible, and you're going to make a lot of money.

52:17Graham Stephan:Where do you see the economy heading over the next 10 years, and where do you see the biggest opportunities? First of all, I think we're on the brink of a revolution of entrepreneur activity. I think that corporate America is going to deconstruct. We've already begun to see it in the last 10 years, but it's going to go dramatically faster. And a lot of people are going to get pushed out to the curb. And I think those people aren't just giving up. Those people are going to become entrepreneurs, many of them real estate entrepreneurs, and they're going to replicate the money that they were making in corporate America or do better.

52:54And so I think that that's going to be good for the economy. So I'm really bullish in the United States that there's going to be growth and that's going to create tax revenue and all the things that we need to have a good society and make sense here. By the way, I don't believe that's going to happen in Europe and in certain places in Asia, because in Europe they have laws that protect employees and require companies to give very long, you know, periods of coverage when they exit people. And they also have a big safety net. So I don't think there'll be the same motivation for people to become entrepreneurs like they will be here in the United States.

53:33Graham Stephan:What's really interesting about that is the investor Jeremy Grantham just went on Diary of a CEO and said that he's actually not bullish for the U.S. economy and says that emerging markets and international markets will outperform and the U.S. economy will crash. What are your thoughts? I totally disagree with that. And the risk reward of investing in the United States versus international. So much safer, much better returns for the risk that you're taking to invest in the United States. I think the answer is really you got to know what you're doing and you got to be thoughtful and smart. And now when I look at the landscape of all the things that I could invest in today, securities and AI and all of these things, I'm actually very excited and motivated to invest my money in these below the radar real estate opportunities that we're talking about, you know, um, main street retail, little unanchored strip shopping centers, multifamily.

54:31Uh, but, uh, I like it to be, to have a theme or a play if you will. So right now I'm very excited about branded university, you know, college housing, multifamily college housing. I like that as a play. I'm focused on that.

54:47Graham Stephan:Jeremy Grantham, I know you're listening to this right now on YouTube premium because there's no way you don't pay for YouTube. As a member. Come on as a member of the Ice Coffee Hour as well, paying a few bucks a month. Come on the Ice Coffee Hour podcast to debate Richard Baker. That would be really, really, really interesting. Incredible. I'm there for it. Bring it on. If you're bullish on university housing, that would suggest that you're bullish on just broader education in general. Well, I'm bullish on the top 10 universities in the United States. The top 10 universities. So I wouldn't, or maybe top 20.

55:20So by the way, I think the other universities will play out in different ways. There'll be consolidation and mergers and all kinds of things. But for a moment, I'm investing heavily at Cornell University. Cornell University has an incredible graduate program and they're growing their applicants every year and they're building new facilities and research. I don't have any worries about investing in a place like that.

55:43Graham Stephan:How could you be wrong about your thesis of the United States economy over the next 10 years? Oh, well, lots of, you know, you know, Mayor Mondani, Mondani, Mondani, Mayor Mondani could become your next president. That wouldn't be helpful. Um, but, uh, I mean, none of us know really what's going to happen in the future, but to me, I'm in the economy on a, you know, everyday basis and it feels very strong and all the concerns about labor, uh, you know, AI people losing their jobs, still not enough labor in this country. And, um, so I think people will have jobs and have incomes and, you know, uh, I stayed hotel last night.

56:27You could barely check in. There were so many people in Las Vegas in July.

56:33Graham Stephan:What's the impact that Mom Donnie's had in New York? So, you know, I've been calling it for a while and it looks like it's happening. So the Trump story has pushed everything way to the right. So obviously the risk in the next election or in seven years from now or six years, whatever it is, the risk really is it can go way left. And that would be I'm not a fan of way right, honestly, and I'm not a fan of way left. It's very unfortunate in this country we don't have any middle movement. But I think it would be I think it would be terrible for our economy to have the sort of policies that our mayor in New York City has been talking about.

57:15Graham Stephan:What are the real world implications that you have seen since he's taken office? You know, this tax on the pied de terre, you know, the second apartments and all that. But meanwhile, I haven't seen any of my friends selling their second apartments. And, you know, it's not tenable in the United States for people like Elon Musk to be a trillionaire and not get back to society. Forget he's a genius and we love him and he's giving back because he's so clever and so good for the economy. But how much money did he give to charity last year? And what is he doing for people who don't have resources? And he's making a terrible mistake.

57:51So is Bezos and so is a lot of that gang. They're not giving away nearly enough money to the people who need it. By the way, giving money or investing money in rocket ships and their passion projects don't count. So in this country, there's a lot of risk that if the rich spend too much money and don't give back. I mean, just think what Elon Musk could do for the housing crisis in San Francisco or the housing crisis in New York. I mean, he could allocate$200 billion to San Francisco and New York for low-income housing. Think what that could do for those cities and for people who don't have resources.

58:32And I think the resentment—

58:34Graham Stephan:Is it a money problem, though? It doesn't seem like the housing problem is a money issue. It seems like more of a policy issue, and the people in charge are maybe more to blame than throwing money at it. It's everything. Believe me, a couple hundred billion dollars would certainly help. and it is certainly a policy problem, easily fixable. They have to take large chunks of land and approve very dense housing, and they got to build it. They got to pay for it. Logistically, how is that even possible though? If like everyone always says we need to tax the rich more that, and I'm not necessarily saying I disagree nor agree, but they're saying that we need to tax the rich more.

59:10Graham Stephan:They need to give away more money to charity. When in actuality, how much money does Elon have sitting in his JP Morgan checking account? Like we don't necessarily - How much money do you think Elon gave away last year? I have no idea. Someone here could figure it out. But my understanding is it was something like he built a not-for-profit school for$200 million on the campus of SpaceX for his employees. Yeah, but isn't he also paying like$400 million a year in taxes or it could be more than that? I don't think he's paying$400. I'm not the expert. But how is he paying taxes? He's not getting income.

59:42He's just creating value. So he has nothing to pay taxes on.

59:46Graham Stephan:you would then suggest that it makes sense for him to borrow against his companies or like how would he get the money in order to i'm suggesting that uh uh that we're gonna have problems in this country if we have a class of very wealthy people who live extravagant lifestyles and don't contribute enough to society to do good things do you live an extravagant lifestyle i live a very comfortable lifestyle. Where do you draw the line between comfortable and extravagant? I'm not here to judge how other folks live. I'm saying, you asked a question about politics and society, and I'm telling you in this country that if people don't participate, I'm spending a lot of my time and energy helping to teach people about real estate entrepreneurship.

1:00:33I give huge amounts of money to different types of charities and different types of organization. So do lots of other people, tremendous sums of money, you know, the Gates Foundation and Warren Buffett and a lot of these folks do. I think it's important for society that there's a balance. And I'm all for, I'm not for taxing the rich and I'm all for, you know, people being able to enjoy the sweat of their labor and the benefits that they make. But I think we're living in a very dangerous time and And we have to be careful.

1:01:05Graham Stephan:I completely agree with you that I think when the rich keep getting so rich and the poor are really struggling to get by. I agree that that's that that is something worth addressing. But I'd also tend to think that, my gosh, it's it's more of a spending problem. And it just seems like a problem by who? Just the entire country. Like when you look at the deficits of like individual states, too, it's just like it's insane. And even like the California rail line, how many tens or hundred billion dollars that is wasted there. And it just seems like, you know, why tax rich people more when there are so many problems?

1:01:44Like when you when like you ever look at the pressure, the pressure to tax rich people will go down if rich people continue to be responsible members of the community and participate proportionately to whatever needs to be done.

1:01:57Graham Stephan:So, see, I just tend to think that if you were to solve someone's individual problem, let's just say that someone has, you know, they're not saving enough. The first thing you'd look at is how much are you spending? And if the spending is going to be out of control, it really doesn't matter how much money they make, because just as many people are living paycheck to paycheck, make 200 ,000 is like 70 ,000. So it's obviously not an income problem, it's spending problem. So we solve the spending problem first and then we work on everything else. So it seems to me like, why don't we solve spending issues and the deficit, then see how much you really need and then try to bridge that gap.

1:02:31I'm all for it. Who do I vote for? Tell me who to vote for. I'm all for it.

1:02:33Graham Stephan:I wish we had an answer on that. It's kind of similar to your philosophy on investing in the first place, because you say you don't pay attention to like the macro economy. You just consider on like a day to day basis. And what can you do? Not even with respect to what's going on out here to better your position. And I think Graham's kind of saying the same thing with the average person. It's like they can say that I'm not wealthy because Elon Musk has a trillion dollars. But in actuality, that's not going to change their financial situation. What will change their financial situation is taking all of that thought, all of that belief and putting it in their mind of like, how can I make myself better today than I was yesterday?

1:03:09Anyway, I think that there's a lot of entrepreneurial opportunities for folks, whether it's, you know, on one end driving an Uber car or another end creating a real estate venture or a small business or it's a great country. We have a lot of ability in order to create new businesses. And I think people who have that entrepreneurial energy and desire, we have opportunities for that.

1:03:35Graham Stephan:I'm curious about this one. Do you believe in diversification or do you think that most fortunes come from concentration? That's a great question. So intellectually, I would say diversification is very smart and intelligent and I have very smart friends who are well diversified. I can't seem to ever get myself there because I'm so, you know, when you're a real estate person, you're illiquid.

1:04:02and you have to keep, in order for me to get bonus depreciation, I have to buy more real estate. And so I just keep getting more and more concentrated in real estate. And when I had a large real estate portfolio, what did I do? I went out and bought operating companies that owned real estate. So I guess I tend to do what I know and I wish I knew more about AI companies and that type of thing and diversify my interest that way, but I don't.

1:04:32Graham Stephan:How are you currently investing then? If you were to divide up your portfolio, what does it look like? You have like, you know, this in, you know, department stores, retail stores. You have this in like stocks, bonds, treasuries. I would say, you know, 80 to 90 % of my net worth is in real estate and 1020 in liquid assets. What is a liquid asset to you? Liquid assets, stocks. So stocks, and is it like real estate-based stocks? I'm curious, realty grew up. How dumb would I be to be buying real estate stocks? I know, that's what I, but I thought it was funny. Having said that, my very clever son recently put some of my stock into Vornado stock because there you go.

1:05:22So how dumb? So that's back to your point. You know, now, of course, we have all Elon stocks and SpaceX and all those kinds of things. And that's been great. But yeah, occasionally we're, you know, we have a lot of respect for a guy like Steve Roth who runs for NATO. By the way, it's up 30 percent since we bought it. So it's just fine.

1:05:40Graham Stephan:So it's concentration. It seems like everything you touch is doing well. That's not true. What's the biggest loss? Oh, my God. I've had so many failures and so many losses. And I hope the people that are listening don't for a minute think that me or any of the other people that are on that come on and talk win, win, win, because that's not the reality of the world. The reality is that life is one miserable failure after another. and what you have to do is try to make your failures small and you need to be resilient and able to bounce back up and go do something else. And I'm very entrepreneurial energetic and I do a lot of different things and a lot of them don't work and I fail small and I've had all kinds of failures and when I win, I try to put myself in a position where I can win big.

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1:08:53Graham Stephan:8HOPENY. Text HOPENYNY. Call 1-877-770-7867-Louisiana. What's the largest amount of money you've ever lost? I've lost$200 million in a company called Gilt. We bought Gilt and it didn't go the way we wanted it to go. What happened? Where did you go wrong? So we bought it because they had good technology or so we thought. And we thought that the good technology would be good for our bigger business. and maybe we got some benefit out of it. But in the end, the culture of the folks that worked at Gilt didn't work well with the folks that worked at Saks. And so it was not a successful acquisition. How did you lose the money?

1:09:33Graham Stephan:Was it a sale? We bought it for 200 million and then over time it became worth very little. Then we sold it off. I sold it to Michael Rubin at Fanatics. What did that feel like losing 200 million? It sucked really bad. And I still wake up in the middle of the night and go, oh, what did I do? How dumb was I? And by the way, I've made billions and billions of dollars, but it keeps me up at night. And I've lost$100 million here and$100 million there. It's not my only bad thing. I've lost plenty of money inside of some of these operating companies. And you second guess yourself and you try to rethink what you did.

1:10:11But as a general rule, I'm really a small time entrepreneur where I put a little bit of money and create value. And I do everything in a separate company. This Sachs Global thing, I invested$6 million, which I had taken out of a refinancing that I had done the year before. And the$6 million turned into a$10 billion company. And I sat there on top of this$10 billion company. money oh my god what am i doing here i like my little deals where i could you know not put a deposit down or figure out my little deals and i was trapped in this monster and um but we

1:10:52Graham Stephan:accomplished a lot and i don't regret it so a question that i asked michael saylor uh was you know back when we filmed the podcast with him i think his net worth was publicly like four billion dollars. And micro strategy and Bitcoin would fluctuate one, 5%, you know, like quite a bit per day. And so his net worth would swing. Like if he just checked, you know, his Schwab portfolio, Robinhood portfolio or whatever, like he could see maybe$50 million just on a given morning, $100 million gone like this. And I asked him, how does that put into perspective other problems that you exist outside of finances on a daily basis.

1:11:32Graham Stephan:Like I asked him, for example, if your house floods, it's like, does this not even bother you at this point? Because your tolerance has gotten so high for what you have to deal with on a daily basis. If you freaked out every time you lost$50 million, you'd be freaking out or gained$50 million. You'd probably be freaking out 10 times a day. And so I'm curious, how has this affected your overall problem-solving tolerance or just things that you encounter on a daily basis having these huge financial swings,$6 million to$10 billion, losing$100 million because of a phone call, you know, stuff like this.

1:12:06Okay. So, uh, you have to keep life in perspective. So, uh, when it all boils down, you have your spouse, you have your kids, you have your family, you have your friends. And I recently lost two friends who, and, uh, that's so trumps, whether your net worth goes up 5%, 10%, 20%. And I think you get to a point in life where you have to really keep things in perspective. My grandfather was a great entrepreneur, a great real estate guy, and was very successful. And I remember going to his funeral. And to me, he was like a king. And I went to his funeral and this horrible, ugly cemetery in Brooklyn on the side of a mountain, side of a hill.

1:12:53with the highway there. And, you know, at the end of the game, the king and the queen go back in the same box with the pawns. So don't over, you know, don't over imagine all this stuff. In the end, we all die and it doesn't mean anything. So keep it all in perspective. Try to have fun. Try to work with good people. Take care of your family and your friends. Take care of yourself. That's way more important.

1:13:17Graham Stephan:You've always been good at spotting opportunities. Do you think that's something that you learned growing up or something that you're just intrinsically good at? Like you're born with this way to speak. I think it's both, honestly. But I've identified a key factor. So I was very blessed as an entrepreneur to be able to have my father to talk to. And I have my son to talk to now. My son talks to me. We talk all the time. And what I recently set up was this conference, we call it office hours, where anybody can come on the office hours and ask questions. What's happening in this country is there's all these entrepreneurs and they're sitting at home on their computer and they're looking and they're thinking and they're watching this or other things.

1:14:04They don't have anyone to talk to or ask questions, simple questions. And these lawyers and consultants cost a fortune. So I'm doing these office hours, I'm doing these boot camps, and these kids and these folks are asking great but pretty basic kind of questions And I give them the answer in two seconds because to me, it's like nothing. And that's really valuable. So living in a box by yourself, not having someone to be able to communicate with and ask questions is a big disadvantage. Trying to figure out how to get these folks who are working on real estate deals to be able to have groups to talk to and ask questions is a huge advantage.

1:14:45Graham Stephan:What do you say to people that would claim nepotism on your end, saying that you grew up in a wealthy real estate knowledgeable family. And so you had access to certain resources that others don't. Look, everyone should take advantage of every single opportunity they have. So if I was opportunistic to having grown up in a real estate family, I'm going to take, I'd be stupid not to take every advantage I could and period. That's it. I'm going to take every, by the way, if there's a deal down the street as I drive out of here that I see that, you know, I'm going to take advantage of that opportunity because that's America and that's what we do.

1:15:20Having said that, I think everyone has a responsibility to participate in the community and give back and be responsible. And that's how the world goes. I'm a responsible citizen. My wife and I support Cornell and all kinds of charities. I'm here talking to you in order to help entrepreneurs figure out how to be real estate entrepreneurs and what have you. And we all do what we do.

1:15:41Graham Stephan:Do you have access to investments that the average person does not have access to? This is like a big argument that people have that are not where they want to be financially. They say the rich people are able to buy a business or something that the average person can't or leverage their money in other ways. What would you say to that? I suspect certain people do. I don't see a lot of that. I have regular securities that anybody can buy, nothing special there. And I go out and I buy real estate assets and create value because I'm on the ball and I know what I'm doing. So it's more of a knowledge thing than it is like an access thing.

1:16:22Having access to knowledge is really important. And I think we're in a very interesting moment in time. It used to be the people who were the smartest, they were the winners. But now I have this friend of mine, Claude, who sits in my pocket all day. I talk to Claude two hours a day until he cuts me off or whatever the problem is. And I now have all the knowledge in the world in my pocket. So creativity, effort, desire now trumps knowledge. And so I think that's a great equalizer for a lot of people who don't have as much knowledge. Now what's really important is being creative and having that hustle to get things done.

1:17:06Graham Stephan:One thing I've noticed is that you seem to be very good at negotiating. What tips do you have to negotiate that the average person is unaware of? I would say that I overpay. How did I get all those deals done? I must have been willing to pay more than anyone else. But I don't overpay to buy every company because I only bought a handful of companies. So I think the issue is that I see value where other people don't see value. Yeah, but you also oversell. You get these companies to pit against each other and then you sell for these incredible prices. ballsy move saying, hey, look, I'm just going to shop exactly what you offer me with this one other company.

1:17:49Graham Stephan:Because like you said, all these companies have spies in the other companies. And so they could have just gotten in cahoots and said, hey, how about we just split the difference? You know, we don't want the other person to have this company. Coin flip it. Coin flip it, you know, and we'll just we'll just make sure that we can not overpay for this asset. Well, just, you know, intelligent, careful guy. You know, that's I handled that process well. And what tips would you give someone, though, who's coming to you and be like, listen, I want to know how do I negotiate? How do I get my way in this deal?

1:18:19Graham Stephan:Boy, I'm never going to make another deal if I give that to you. I don't know. You don't have to give us everything, but can you give us 20 percent of it? Yeah. Look, I think and we read about this all the time. I think a good deal is when both sides feel happy that they got something good. and understanding what something is worth to the other party. So I understood that both Walmart and Target, the prize of having that asset was big bucks to them. And I had a partner, a little junior kind of partner who was working for me when I was doing that deal. And when I offered the assets of Walmart for 2.2 billion, the other fellow wanted me to offer it to Walmart for 900 million.

1:19:06and yelled and screamed and big fuss because the EBITDA was only 90 million. He wanted me to chart. He wanted me to look at it as 10 time multiple on EBITDA. And I said that, what does that have to do with anything? We're doing a multiple on the cap rate on the rent savings. So, you know, I was, it was thoughtful, thoughtful, a good thinker.

1:19:29Graham Stephan:That's interesting. So if you reframe your brain and you have like an actual light at the end of the tunnel, like an exit strategy, maybe it's knowing what other people that have more money want and then knowing it before they know they want it and then getting that. Yes. You said it exactly. I don't know. You said a lot of words, but yes, you said it exactly right. Another way of saying it, they accused me of creating a reality distortion field, which I don't really think about, but I have my way of thinking about it. So I guess you're right. I'm analyzing what it's worth to them and I'm trying to get closer to what it's worth to them when I'm selling something.

1:20:07Graham Stephan:Okay. That is, that is fascinating. I've never, I've never, when you buy assets, do you already have someone else in mind that you know will want to buy it? As I told you earlier, uh, everything I've ever bought, I stalked and worked on for years. So in 2005, I had identified all five companies that I wanted to buy during the next 20 years. I spent 20 years finishing this one memo. So it wasn't like I woke up. And that's why a lot of these kids that are out and young folks and all kinds of folks looking at real estate deals, they're just randomly looking at listings. Stop, go back to your box, have a box and live in that box and be the expert in that box.

1:20:49I had a box. I wanted to buy those five companies. I wanted to just do Walmart deals. That was my box. I have a box now that I'm playing with and you need to have a plan and execute that plan.

1:21:00Graham Stephan:And this can be applied to like any business. Like if you know that there's a certain guy who's very ambitious and he wants to run all of the power washing in a certain city, you're like, okay, well, I know that there's this one other person that could be operating better. And I know this guy will eventually want to buy out this person, but they just don't know it yet. You should go on my Instagram, Baker house, 1921 are on my website. And we have all these principles. We have 10 principles that work for every business you can imagine as an entrepreneur and understand those principles and you can buy anything.

1:21:30Graham Stephan:How much variance can you get out of a sale price based off of sales strategy? Like 100 % variance? Because that's what it seemed like it was in this case, 900 million to 1.8 billion. It was worth to us 900 million and it was worth to them 5 billion. and I sold it for$1.850.000. That's how I think about it. This is the other very, very important detail of all this. It can't be a commodity asset. It has to be a blue diamond. It's not like there was three other chains to buy in Canada. It was the only chain left in Canada that you could buy if you were Target or Walmart, primarily Target, to come into the country.

1:22:10The Lord & Taylor building that I sold to Amazon that Amazon paid$1.2 billion for, Or that was the only building of its kind in that area that they could buy and they wanted to be in that area. So constantly looking for unique assets is different than buying a commodity asset.

1:22:30Graham Stephan:How unique do you go, though? Because I understand getting that one of one property. But how do you know it's not too unique so that you don't find anybody? It's like maybe it's too specialized. It took me a lot of years. I spent a lot of time. I found the one guy, this nice guy, Adam Newman from WeWork, and he wanted it. And he had a plan and an idea and he wanted it. And that was the one guy. And then they had troubles and it got sold to Amazon. But yes, when you buy unique assets that have one of a kind buyers, it can take a while to sell it. So I'm curious, what's the biggest mistake the average person is making right now when it comes to being successful?

1:23:09Yeah, I think they're sitting in their home office or their computer or their phone, and they think they can do it all from there. And I had someone today I was talking to about a property, and I said, did you drive and did you walk around the property? Oh, I've been looking at it on Google Maps. Well, you got to get out there and look at these properties. You can't do it that way. So if you turn down places, 5%, 6%, 10 % cap rate, whatever it may be, I'm curious, what rate of growth do you strive for on a year-to-year basis?

1:23:43Graham Stephan:How do you know if that year was a success? I'd like to cover all my expenses so I didn't lose any money. I'd like to cover all my living expenses so I didn't burn cash. And I'd like to make deals that I think are going to be accretive and make money going forward. I don't look at it that way. But I think that this could be educational for the viewer watching this right now, because that's kind of the language that they speak. And so if you were to talk to them, communicate with them in the language that they speak, they think, oh, well, my portfolio grew 15 % this year. You know, it grew 5 % this year.

1:24:13Graham Stephan:It grew 180 % this year. My international allocation is 50%, Jack. Are those liquid assets or those real estate? Yeah, but that's not real estate. So sure, for liquid assets, we could talk about that, but it's very hard to mark to market every year your real estate assets. So you don't really see real estate as an investment. You see it more as like a career, like a job. And if you treat it as an investment, maybe it's better if - I don't look at it as an investment because my goal is not to leave cash behind. So my goal is to put little to no money in a real estate deal and then to refinance and get the money out.

1:24:49So to me, it's not an investment. It's my craft.

1:24:54Graham Stephan:And in terms of people becoming either wealthy or successful, how much blame would you put on individual choices versus the economy? Look, I think the government and the economy and the education system, and there's lots of things that you could look at that could help people live a more productive and profitable life. But in the end, it really comes down to each individual. How do we live in a world where some people are constantly creating value and getting things done and making money and other people aren't? So I think we need to embrace and figure out what the successful folks are doing and whatever that means and try to train yourself to mimic that and create value like they do.

1:25:35Graham Stephan:How do you instill those values in your children growing up in an environment where they don't need to necessarily make money? I think that falls into a couple of buckets. One, I think folks are born with a desire to create value or to be successful and to strive. And some people perhaps aren't. So that's one characteristic. Secondly, I spent a tremendous amount of time with my family, my kids, my nieces and nephews. teaching them and spending time with them, talking to them. When your kid is in the back of the car, that's code for talking to them and getting their brain to understand what to do and how to do things.

1:26:18And every child is different. I have an artist. I have a business person. I have a daughter who's getting her advanced degree. Each child is different. And I think you want to put them in a position where they can be successful in whatever it is they want to do.

1:26:35Graham Stephan:If the average viewer were to follow these exact steps to become wealthy, what would you say they are? I would say if they want to be a real estate entrepreneur, they should focus in on a category that they really enjoy, whether that's retail or hospitality or multifamily. And they should focus in on a very narrow category or location, build a plan, a business plan, if you will, for how they want to execute. and then they should work really hard to execute that plan. And the best way by far to create value is to create value before you close on the transaction so that you can get the largest amount of non-recourse debt or purchase money mortgage possible.

1:27:22And that's the best way to create value.

1:27:24Graham Stephan:What percentage of the time when you get into contract on a deal do you actually end up closing? A hundred percent. I mean, 99.9%. Oh, really? Yeah. Okay. So I was kind of under the impression that you would do like a shotgun approach and get like a lot under contract. And then from there, that's the time where you kind of want to do all the due diligence and negotiate hard. I'm a shotgun looking at a lot of things and then, and I might put in offers, but by the time I sign the purchase agreement, I'm usually pretty sure that that's a property I want. So I don't want to waste my time or the seller's time unless I'm really sure.

1:28:00Now, something could change, a tenant that I thought was coming could go bankrupt or something could happen and I might adjust my thinking. But once I sign a purchase agreement, I feel pretty good about what I'm doing.

1:28:11Graham Stephan:How do you divide your time up now then? Because it seems like you've made a few Hail Mary plays that ended up making you a ton of money. And now you could be like, I'm sorry, I didn't mean to diminish it down to like a few Hail Mary plays. A few very calculated, but crazy. I would pause you for a second. I spent 17 years and I built a portfolio of 10 million square feet of Walmart anchored shopping centers with no partners, not a lot of debt. So that's a tremendous chunk of value. So that was long, hard grinding out work. And then I segued from that into buying a series of unusual operating companies that own real estate that turned into kind of crazy situations.

1:28:57That's how I look at it.

1:28:58Graham Stephan:It's like the slingshot analogy, which I keep thinking about as of late, which is like, it only launches because you pull it back. And so like this part was just as important as the launch. All of like the 17 years that you did prior. But I am curious, after having a few deals make tremendous amounts of wealth, how do you choose what to spend your time on now when it's like - Ironically, I'm spending my time on these types of deals, these small starter kind of deals that the general population is sort of very enamored with doing. And because I think this is a roadmap to a lot of value going forward.

1:29:34And I think they're deals that anybody can do. And I'm not working on big, complicated, multinational corporations. I'm working on buying, as I said to you, 250 beds of housing. I'm closing next week on.

1:29:50Graham Stephan:And why does that excite you? I think the whole process excites me. It's amazing. So I'll just give you a little more detail at Cornell University. I bought, I used to belong to a fraternity. They were having problems. I was sitting in on the meetings and I ended up making a deal to lease the property for 99 years. So beautiful Greek revival mansion. It's going to be called Baker House, a private club and think tank for entrepreneurs. And it's going to have a Nordic spa and a gym and a restaurant and all kinds of event space and tons of content. Then I was with my lawyer in the house, local guy.

1:30:33And he's like, you know, you really should buy some of these housing developments around the house. I said, I'd love to. Were they for sale? Oh, no, but I know the guy. He's kind of an older fellow, and maybe he'd be interested. I said, call him up. I'm interested. So we called him up, a beautiful pre-war building right across the street, and then a whole bunch of housing right next door. And he called up the guy, and the guy said, sure, I would sell the properties. So off market. So I did the analysis, and the properties were doing terribly. and they were 40 % vacant on Cornell University's campus.

1:31:14How could this be? Well, because their graduate housing, the guy's 83 years old. What happened over the years at Cornell is a large percentage of the graduate population are foreigners. They need furnished apartments and they want washer dryers. This project, these projects, he wasn't putting furniture in them and they didn't have washer and dryers in the apartments. So I made a very, so I said to him, I'd love to buy your property, but they're unfinanceable because you have 40 % vacancy and no bank's going to lend. It's like, all right, if you give me my price, I'll loan you 80 % of the money at 4.5 % interest, non-recourse, no brokers.

1:31:54So I said, okay. So now I entered into a purchase agreement to buy the properties with just 20 % money, no deposit, and I'm going to renovate them and make them beautiful bonus depreciation for a real estate professional. So that's great. And I'm going to brand all the housing Baker house. And now you can be a resident. You can be a resident member of the club if you live there. So imagine the value per month increase that the apartments are worth after the renovated furnished washer and dryers, fantastic real estate entrepreneur content. So I'm having fun. We're renovating buildings and

1:32:35Graham Stephan:it's all good. What do you think is the biggest mistake successful people make after they've already made money? There's this terrible thing called ego. And I think that successful people all of a sudden start to believe that they're important and successful and they don't want to make mistakes and they get scared to fail. So if you clutch and you're scared, I'm not scared to fail because I'm used to, you know, failure is my friend. I fail and I fail small. But if I thought I was such a big shot and I would be embarrassed to fail, then I wouldn't do anything new. And I think that's the biggest problem I see with my very successful friends.

1:33:19Graham Stephan:Is it failing or is it losing money? I think publicly looking like they that they failed at something. They might have tons of money, but if you have tons of money and everyone's laughing at you because you failed at something, some people have an ego problem. I'm more curious about like what to optimize for next. Well, Graham, do you have a spouse? Do you have kids? Yes, spouse. Okay. So one day. Okay. So is that spouse kicking you in the ass and, you know, I need a house at the lake and I need this and I need that? No. Well, maybe that spouse needs to give you a little more of a kick in the ass.

1:33:52Graham Stephan:That would really upset me, though, because I don't like being pushed either. Well, look, I think all of us, many of us, you know, want to live better lives or give more money to our favorite charities or take care of our parents or take care of our siblings or whatever it is. And I think that's part of what drives some of us to create more value for ourselves and do more. But that's also just not real, because at a certain point, you don't need to continue making money to actually take care of people. If anything, if you continue trying to make a ton of money and spending all of your time and energy on that, that must mean that that energy is coming from something else, like spending time with people.

1:34:29Have you been talking to my therapist? I don't know what's going on here. So, yeah. So, I don't know. Yeah, I'm driven. I have plenty of money. I don't ever need to work again. And I like working. I like doing things. And I have people on my team that I'm looking to create value for. And that's important to me. And I'm just not ready to go hang out at the beach.

1:34:49Graham Stephan:Are there any true tiers to wealth? It's a great question. Last year, I flew around 500 hours on a private plane because I was running a$10 billion company, and it was exhausting. And that's made sense, and that was very logical, logical expense. This year, I'm working on very small deals. It's hard to justify to fly on a private plane, to go look at a little deal. The plane costs more than, you know, whatever. It's like my it's it's mind bending. So I don't know the right answer. I kind of I kind of spend money based on, you know, what it is I'm working on. So I came to see you nice folks. I flew commercially on this nice airline called United and it was great.

1:35:42and they served me lunch when I came over yesterday. I thought that was great. And that was perfectly suitable. I wasn't going to spend, you know, $100 ,000 to come and visit you guys, as charming as you are. And though I certainly could afford it, it just doesn't seem to make sense. So it is a debate. How much do you spend? We were in Beverly Hills a week ago and we stayed at the Beverly Hills Marriott. It was very nice. and I think it was, it wasn't cheap by the way. Um, and, um, I, I think, uh, spending, uh, based on what's going on in any particular situation, if you're taking your spouse on your family on a vacation and you might choose to spend more.

1:36:26Um, but I think in business, I try to be, uh, as thoughtful and careful on spending what's appropriate for the situation.

1:36:34Graham Stephan:Do you fly economy? I often fly economy because I'm like, this is first class is so bad. It's such a waste, but not if it's a long, long flight. I'm finally getting to the point where if it's a long flight or it's international, I'll fly first class. When do you fly first class versus economy? Is there like a number of hours or a number? Well, is there a net worth? Nothing to do with it. It's purely value. It's purely like, you know, I'm flying to Boston. Like, who cares? Like from New York to Boston, why do I care? But if I'm flying to L.A., I'll either fly private or I'll fly first class. So it's more of a value of what you get for it.

1:37:14I don't know. These are warped. I'm sure these are all warped kind of response. We were all a little weird, like, you know. Well, I'm just curious.

1:37:21Graham Stephan:Because I always fly economy, no matter what. And it's only recent. And if you fly to Europe, if you fly to Europe, you'll fly. It was always premium economy. Right. Always. Right. And it was just recent that we had a guest on the show who said, you're flying back from Europe, get first class. And I resisted it. And I was like, no, a premium economy. Why would I spend the extra? I spent the extra money. But still in the back of my mind, I think, was that really worth it? I'll tell you a funny story. So when I was starting out building shopping centers, I had to travel a lot and I bought a little Cessna and I had a pilot and I'd fly from place to place.

1:37:59and the plane went up and down and I'd get sick. It was horrible. And one day I sat down and I said, I am going to do bigger deals so I can get a bigger plane because this is making me sick. So it motivated me to do bigger deals. Then I did bigger deals and I got a bigger plane and I kept doing bigger and bigger deals and getting a bigger and bigger plane because the business could afford, if you have a bigger business or a bigger deal, it can afford the costs related to the plane. So a lot of my motivation for all those big companies were to be able to fly in a better situation.

1:38:33Graham Stephan:Now, here's what I'm really curious about. Do you get the plane before you could technically afford it as motivation to then do the deals? Or do you do the deals first to pay for the thing that you wanted? I think you fly in a plane that's a little less than what, you know, the next deal is going to get you. By the way, now, you know, if you have a spouse and you're like and your spouse will be like, you know you were fussing with me on redoing the uh the deck for ten thousand dollars and you're flying to la on a private plane i don't think so honey so you know if i'm going to keep control over the rest of the family you have to be you have to show some discipline also to me it's very funny because i'm just trying to understand the way in which you make decisions like the decision making engine that dictates how you're going to approach a problem and for me if i see okay well you need to build another business in order to afford a bigger plane.

1:39:23Graham Stephan:And with this bigger plane, you can then travel to these businesses. That's sort of like a circular problem. And if you wanted to, like, if you actually wanted the plane, then you technically probably you could have afforded the plane. You didn't need that as a motivator. No, but it just sounds so wasteful. And so. But that's not tied to reality. That's just an emotional. You asked. So I'm telling you. So I want to be efficient. I do a lot of travel and I take helicopters, boats, planes. I had a boat, my office was downtown. I live in Connecticut. Every day I would, a car would drive me to the marina in Tarrytown.

1:40:00I would take the boat down the Hudson River to my office and then back again. And I would save 30 minutes in traffic on a high-speed boat. So I'm very efficient. I count my time and I like to be thoughtful of the value of my time. So that decision impacts what I do a lot. Do you think that that is the most productive decision engine that you could be running on? My time?

1:40:31Graham Stephan:Yeah, I suppose you could say it's your time, but it's also more than that because your time value is not consistent. Up until very recently, I was tremendously busy. So for me, every hour that I was able to be home earlier or whatever, to have the time to do other things was super valuable to me. So whatever I spent on transportation the last decade, well worth it. I mean, I very efficient. Now I have more time. So, you know, do I need to save two hours to come here and, you know, four hours and fly private to Las Vegas? Absolutely not. I had plenty of time. I came early. I'm staying late. We're having a good time.

1:41:09and I'm not stressed about it.

1:41:13Graham Stephan:What's the first thing that comes to mind if I ask you, what does money mean to you? I think money means security and ability to take care of your family and do good things. What are the best things to spend money on? Okay, remember, I'm a guy that just came off of mind-boggling travel schedule. I was in Africa three times last year. I was in Paris four times. traveling around like crazy. So I am so happy this summer. I have a beautiful place on the North Fork of Long Island. I'm not going anywhere this summer other than you. You're my last. I'm not going anywhere. I'm going to be at my office in New York City or I'm going to be in Long Island and I got my dog and my kids and my family and it's going to be great.

1:42:01So if I have to go somewhere, I'll either fly private or I'll take a commercial flight depending on the situation.

1:42:08Graham Stephan:Are there any purchases that you found were 100 % worth it and contributed to a life increase? Let's just say like, for me as examples, I'll just say like the eight sleep. I sleep way better having the eight sleep. They're not sponsoring that. And they're not sponsoring, but I will say an eight sleep. I also think that having a peaceful place to come home every night is really, really, really important. and I really like the Tesla because I could pre-cool it before I get in the car. Like little things like this. You know what's interesting is there is a scientific answer to like the best way to spend money to get like a return on happiness and everything that you've said is actually in accordance with the most scientifically correct way of spending money.

1:42:57Graham Stephan:For example, one of them is having a quiet home. If you live in an apartment near a bunch of road noise, that actually decreases happiness according to the science. What's also really interesting, the biggest decrease to happiness is how long your commute is. Yeah. And I think it was a commute of more than 45 minutes saw significant life dissatisfaction. I don't collect watches. I don't care about cars. I live nicely in nice, quiet, great communities, safe and all of that. So I'm very lucky about that. The more you talk about it, I value efficiency and travel. So that is probably my number one thought about spending money in a year is how many hours did I save so that I could be home in my quiet place with my family and my, you know, whatever my situation is.

1:43:49Graham Stephan:What are the worst things to spend money on? Like things that you've tried and you just said that's not worth it. Well, maybe I'm too clever to try some things, but, you know, people, uh, uh, you, you know, people have, uh, boats and all kinds of, uh, you know, cars and watches and all kinds of crazy things, clothes. Um, and, um, but that's what makes them happy. I think everyone should be able to do what they want to do. What are you working on now? I went away for a month and, uh, first time I got a chance to have a full break in like 20 years or longer, 40 years. And I walked 40 ,000 steps a day.

1:44:28And I thought about where's the world going. And as I said, I believe that there is going to be a revolution of entrepreneurs in the United States where companies are going to exit all kinds of very high quality, capable people. And these folks aren't just going home to do nothing. And they're not going to another company. They're going to start their own businesses and they're going to scrape a little bit from the company they were at. So whether it's newscasters at CBS who start their own podcasts or whether it's a law firm who exits half of their lawyers or whatever it may be, those folks are going to be entrepreneurs.

1:45:11And what I wanted to do was I wanted to do something that I thought would be good for the world and good for that I would enjoy, that would be fun and something I've done my whole career. And that is helping entrepreneurs and coaching entrepreneurs. As I told you earlier, my wife and I sponsor this program at Cornell for real estate folks. It's a two-year master's called the Baker Program at Cornell. And it's awesome. So people who weren't born in a real estate family could have the opportunity to learn about the real estate business. And they reached out to me and said, Richard, could you build us a real estate, a two day real estate entrepreneur program for credit?

1:45:54And I said, that's a great idea. And I built it and it's awesome. And we have done two practice sessions. We did one this past weekend sponsored by Joe DeSena from Spartan Races up in Vermont. We had 51 people show up. They flew in from Brazil and Japan and kids from Stanford, Wharton, Cornell, Bapson, local people from Pittsfield, Vermont. And we spent two days talking about real estate entrepreneurship and people pitched deals and we dissected deals. And so very exciting to me, very great opportunity for folks to be able to have this two-day bootcamp. And really, I have a book. They take the book and they learn everything there is about real estate entrepreneurship.

1:46:43But the most exciting part, I think, for me is the opportunity for women to be real estate entrepreneurs. We talked earlier about, yeah, there's lots of women brokers, but being a broker is a totally different thing than being a real estate entrepreneur. The opportunity, there's so many women in the United States in the military or all parts of society where they've left their career to raise their family, take care of the house, take care of the family, whatever it is, and then those kids leave and there's the most dynamic, incredible workforce in this country and they're looking for something where they can be creative, be fulfilled, make money, and we have it.

1:47:26It's all of these deals we've been talking about. Being a real estate entrepreneur is perfect for women and all kinds of folks in the United States. I know this because my grandmother, who came here in 1921 from Poland, didn't speak any English, arrived on the 4th of July at Ellis Island. By 1933, she had married my grandfather, who was a lawyer, and they were living in Hoboken. And all the big mansions on Hudson Street were vacant, and the kids were breaking the windows because the stock market crashed, the rich families lost all their money, gave their mortgage, gave their properties back to the bank.

1:48:04She went to go visit the bank and said, you guys have to clean up these properties. They're breaking the windows. And they said, there's nothing we can do. No one wants the properties. And my grandmother said, well, why don't you break them up into multifamily units? And we can, and they said, because it's not approved by the planning board. So my grandmother made a deal with the bank. Her friend was the sister of the mayor. She went to the planning board and she got the properties rezone. She bought the properties from the bank with no money, fixed them up with the help of the bank, and then kept them, managed them, eventually sold them, and did more.

1:48:42And a woman from Poland barely spoke English, spoke English by that time, spoke no English when she got here, and she was an awesome real estate entrepreneur. And four generations later, her grandson, my son, is still doing deals similar to her. So there's no reason that any capable, thoughtful man or woman in this country can't be a real estate entrepreneur at a very basic starting level and then work their way up from there. It's been going on for over 100 years.

1:49:15Graham Stephan:What's the harshest truth about money that you've learned over the past 25 years? Money won't make you happy. Make you more comfortable though. And so you used to think that it would. I don't know. I think I worked very hard to make money because I, you know, uh, uh, uh, good things would happen when you had money. Then you have a lot of money and you're like, uh, you know, uh, that's not the good thing in your life. The good thing in your life is the relationships with your family and your, your, your spouse and your kids and what have you. The most important lesson is don't blow your relationship with your spouse or your kids while you're on this epic journey to create more money.

1:49:57That's a mistake. You'll be very unhappy if you make all the money and then you don't have the wife or kids at the end.

1:50:03Graham Stephan:When do you think you learned that? And how often do you reflect on that now? My father was wonderful and we had a great relationship, but he was a flawed guy sometimes. So I was able to learn from his mistakes so I didn't have to make his mistakes. So my father and my parents got divorced when I was young, and I got to live through that. And I'm like, oh, that's not such a good idea. So I was able to sort of learn without having to make the same mistakes. What advice do you have for people in a marriage to keep the marriage happy? It took me a long, long, long time to figure out the answer. I spent a lot of time arguing with my wife.

1:50:41My wife would say, go left, go right, go up, go down. And I'd say, well, why go left? you know, the right, go right and go down, go up. And, and by the way, she was usually right. So I just eventually said, okay. And, uh, we call that the power of yes. So sometimes the right answer is just yes. Okay. Let's do it.

1:51:04Graham Stephan:Why do you, how do you know when to let her win? Like, you know, you, you're not married, obviously, right? No. No. So, uh, you'll know when they, You know, you'll marry, you'll find the right person or whatever. And the right answer is always yes. When you say the right answer is always yes, what are we talking? Are we talking like anything? Are we talking like, hey, what's for dinner? Where do you want to go? And just like you just say yes to what? Like what? My guess is you were a very thoughtful guy and you married someone who's very thoughtful and appropriate and logical and whatever. And I'm sure there's not a whole lot of conversations where that person is asking you to do unreasonable things.

1:51:42and it's just not worth it. Yes, dear. Just, that's it. Yes, dear. What about the idea of like,

1:51:49Graham Stephan:you know, you give them an inch, they take a mile. Is that a thing? Not if you married the right person. I'm still trying to figure out what the yes, dear is. Is it like, hey, don't go into work this weekend because you got to be doing this instead and it's like, yes, dear. Or is it like a, hey, this deal that you brought, I don't have a good feeling about it. Don't do that. life got much easier when I learned the word yes instead of the word no. I'm not allowed to use the word no at home. It's a very painful situation. So if she comes to you and says, hey, we got to redo this whole closet. I literally was...

1:52:23Graham Stephan:I was going to say, for example, that's a great example. I have a very good... You want to hear what you say? Yes. What if you don't want to redo the closet? Oh, that's really good. Know what you do then? yes, you suck it up. Okay, but here's another example. Let's say you redid the closet a year ago, but she wants you to redo it again. Is your wife irrational and difficult? No. I don't think, no. So she's not going to tell you to redo the closet unless you did it up dramatically or whatever it was. So it took me a long time. By the way, I'm much older than you. It took me like 25 years to have this epiphany, and the epiphany was it wasn't worth it.

1:53:06So you want to know why I'm still working so hard? I'd rather go make more money than worry about whatever money is getting spent on the other side of the. What made it not worth it? Because if I say no, then there's a discussion and an argument and why and it just wasn't worth it. It was easier to let her go do whatever it is she wants. How important, though, are those disagreements and discussions to like set certain boundaries in a relationship?

1:53:30Graham Stephan:Or is it just like if it's so young, you guys are so young, it doesn't matter. And by the way, I'm only yes, 99.9 % of the time. Every, you know, one out of a hundred, I lose my mind and I say no. When's the last time you've said no? I still can't control myself. Sometimes I say no and then I say, oh, okay, yes, I don't care. Do what we want. So it wasn't really a no. My wife is usually right. So whatever she says is usually just fine. And that's the way. And I've been married for over 30 years. And that's the secret. That is, yes, is the secret. By the way, we talk, yes is a secret for a lot of things.

1:54:08Sometimes we're negotiating on a deal and everybody wants a little more and the cap rate is 5.5, whatever. Sometimes yes is the right answer. We call it the power of yes.

1:54:19Graham Stephan:And just agree to it if it's small enough where it's not going to make that big of a difference. Yes. We talk about negotiating, how to get done in negotiations. Sometimes the right answer is yes. Graham's favorite word is no. That's like his all-time favorite word. So you should practice. Yes. It's really powerful. How much better has your life gotten outside of relationships saying yes? It's just a way of getting things done. But I'll give you something else that I do. We talk about rituals. Sorry. Talk about rituals. So I wake up every morning. And the first thing I do when I wake up is I think about three things that I'm very grateful for.

1:54:58And in the evening before I go to bed, I think about three things that I'm very grateful for. and I basically rewired my brain because I used to wake up and like, oh my God, what do I have to do? And I'd go to bed like, oh, I got all these problems, all these things I have to deal with. And now it's totally changed the way I feel and the way I live. Think of it like those people who are like, that glass is half full and other people are half empty. And so, you know, there's some rituals and some, uh, things that you can do to make your, you know, make yourself more efficient or feel better.

1:55:34Graham Stephan:Is there such thing as too much money? Uh, I don't think there's such thing as too much money cause you can give it away and do good things with it. And, um, um, but I think, uh, I think people shouldn't be hoarders and I think people should, uh, and I don't think you do good things for your family if you spend too much money and have too much money. Is there a sweet spot to wealth and income though? I think it's good to be motivated to work hard. I employ lots of people and I produce for the economy and I pay lots of taxes and all that kind of stuff. So I think that's what we're supposed to be doing.

1:56:08Graham Stephan:When in your life did you feel the most rich? When the digital businesses were worth the multiples of revenue, that was a good time. And what did that feel like? Ironically, it's a great question. Ironically, in the end, it was very disappointing because it was nothing I could buy, nothing I wanted to buy different. There's nothing I wanted to do different at all. It was really maybe the best lesson of my life. Having the net worth go up dramatically because the world decided that certain businesses were worth more had zero impact on my lifestyle. And what was it like realizing that? Depressing.

1:56:43Graham Stephan:And was that like immediate or was that like a... I kept like, oh, what should I buy? I could go buy a big yacht. I don't want a yacht. Well, why would I want to? I mean, there was nothing to buy or do. And so how did you come to that conclusion then? Like, what was it like crossing that bridge? I'm curious, like the entire like emotional journey of wanting all these things. I don't want all those things. And I work because I enjoy working and I enjoy the process and all of that. I think that's what it clearly, you said earlier, you know, why do you, you know, why do people work so hard when they have so much money or whatever?

1:57:15because they actually like working and they like being productive and doing things. And I'd lose my mind if I was at home saying yes all day, sitting at the whatever at the pool. So I'd go crazy. It'd be horrible. So I work because I enjoy it. And I love being with people and creating value for myself and my partners and people I'm with. And that's what's fun. And having more money doesn't really mean that much.

1:57:42Graham Stephan:All right, Richard, thank you so much for coming on the Ice Coffee Hour. That was an awesome episode. Thank you to everyone for watching this. Thank you to the members. Thank you to the sponsors. Really means the world for tuning in. If you've made it this far, appreciate it. Would not be here without you. We're also going to be linking your information down below in the description, your Instagram. Yep, great. And any other information you want to include, it's down below in the description. I highly recommend you go and follow it. Cool. Until next time.

1:58:16Thank you.