MI Rewind: The Millionaire Fastlane w/ MJ DeMarco

0:00You're listening to TIP. Hey guys, on today's show, I'm resharing a favorite episode from the past. I like to do this because we get a lot of new listeners each week, and they will never have heard this excellent episode before. And even if you've been listening for a while, you may have missed it when it first came out, or you could at least benefit from reviewing some of this episode's lessons again and reinforcing your learning. If you're not interested in episodes from the past, there's no hard feelings at all, and you can pick up with us again next week for a brand new episode. Everything going forward is from the original, and I hope you guys enjoy listening to it as much as I did.

0:38The challenge in that particular business was no longer there. It wasn't exciting. And also, this was right before Uber started getting into my space. And I recognized that I needed a significant technological injection into the company, along with multiple more employees. I mentioned I only had five employees.

1:02On today's episode, I'm joined by MJ DeMarco. MJ is an entrepreneur and international bestselling author of The Millionaire Fast Lane, Unscripted, and The Great Rat Race Escape. He's also the founder of the Fast Lane Forum, which is a worldwide forum for entrepreneurs with over 70 ,000 users and nearly 1 million and contributions. During this conversation, we uncover why MJ chose entrepreneurship as his path to building wealth, his journey in building his own successful business, how he knew it was time to sell what he had built, why following your passion is bad advice when starting a business, what MJ's definition of wealth is, ways in which entrepreneurs can validate their business ideas, and much more.

1:44With that, I hope you enjoy today's episode with the one and only MJ DeMarco. You're listening to Millennial Investing by The Investor's Podcast Network, where your hosts, Robert Leonard and Clay Fink, interview successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

2:10Welcome to The Millennial Investing Podcast. I'm your host, Clay Fink. And on today's episode, I'm joined by MJ DeMarco. MJ, it's a pleasure having you on. Hey, Clay. Great to be here. Thanks for the invite. I listened to your book, The Millionaire Fast Lane, a couple of times a few years back and really enjoyed your message and thought it was a pretty cool thing that you were the one actually reading the book to me. I just really liked that aspect of it. And I had the chance to read through your physical copy as well over the past few days in preparation for this interview. and just a fantastic book for anyone that just wants to learn how to fast track their path to building lasting wealth.

2:49Now, MJ, conventional wisdom tells us that you need to invest 10 to 20 % of each paycheck from your job into an index fund to build sustainable wealth. That's the tried and true path that many people aren't willing to really deviate from. When did you decide that this wasn't the right path for you and you wanted to push for something different and maybe bigger? I decided that as a pretty young age, when I saw that people who had success in that, I guess, domain were living pretty much mediocre lives, and that did not appeal to me. I didn't want to be subjected to a budget. I liked fast cars. I liked nice houses.

3:32I like eating out four or five times a week if I want to. And so that is not my definition of wealth is constraining yourself to a particular existence. So you can call yourself wealthy, but you really can't do anything or you can't have a good experience with life, whether it's travel or living in the house you want or living how you want to live. So for me, I was never happy with that plan, although I did accept that it is a viable plan if you want to invest 30, 40, 50 years into it with a job and whatnot, and pretty much relinquished control of your financial plan to the stock market, which I do not like doing.

4:14I would think a big show back in my era, I grew up in the late 80s, early 90s, big show back then was The Lifestyles of the Rich and Famous. I'm not sure if you've seen that show, it is quite old. I'm kind of aging myself here. But it featured celebrities and athletes, and it just showed these lavish luxury lifestyles. And I looked at that and I said, you know, I want that for my life. And I knew this saves 10 % of your paycheck, put it in index funds. I knew that was not a path to that because none of the people they featured, that's how they got their wealth. Of course, they were mostly athletes and celebrities, but I did notice a lot of them were entrepreneurs.

4:54So that's somewhat solidified my decision to become a lifetime entrepreneur, because that is the lifestyle I wanted. That is the type of wealth I wanted. Was your drive to achieve that lifestyle, or did you come to find out that you really loved being an entrepreneur? You just loved building businesses and scaling businesses and operating and managing people. I've never owned a large company. I mean, let's be honest, the most number of employees I had at any one time was only five. Small businesses here we're talking about, not these large corporations and investors with Series A funding and all that other stuff.

5:33I'm a small business owner. I'm not one of these Silicon Valley people who is in some blog or something. But I knew that I wanted to be an entrepreneur because it offered me what was most important to me, which was control. I didn't like the idea that I could be fired at any given time by a corporation. I didn't like the idea that my financial plan was going to be primarily predicated on the stock market. I did not like that. Yeah, entrepreneurship offered me ability to feel like every day of my life is a Saturday. I have not gotten up from an alarm clock or an iPhone ringing in your ear, screaming to wake you up.

6:15In the last year, actually, it would be the last three years, I've had to awake to an alarm clock or an iPhone buzzer twice. And one of those times was because I was speaking to a European group. So it was three o 'clock in the afternoon there, it was 6am where I am. That's why. But that's the kind of reason why I wanted to be an entrepreneur because it offered just an incredible amount of control and freedom. Robert Leonard It feels like there is almost this assumption in society that being an entrepreneur means you're Elon Musk or Jeff Bezos, and you're almost a superhuman figure that builds a billion-dollar business and comes up with all these new ideas.

6:54When in reality, most entrepreneurs are more so your everyday person that is just really pulling ideas from others and tweaking it a little bit or improving upon it. Most business owners are, like you mentioned, small business owners. And often when you tell someone that you're starting a business or you're a new entrepreneur, they will tell you that that's a very risky thing to do. Do you agree with that? Or do you think that people have a belief that keeps them from just reaching their full potential? That's a huge illusion. I would just flat out say it's false. Entrepreneurship is risky. You want to know what risky is?

7:30Risky is going to a job five days a week and expecting to be employed for 40 years. Risky is watching your job disappear because of a COVID lockdown or a COVID pandemic. Risky is devoting your entire net worth into the stock market and hoping it just keeps to hyper and keeps hyperinflating. These are all aspects of a financial plan that you cannot control. And I realized that it's probably adverse to a lot of guests that you have, and that's fine, but I want to control my financial plan. I want to control my existence. And having a corporation in charge of that existence, whether it be the economy and politicians and bureaucrats, or the stock market or the Federal Reserve who's printing money at will and causing inflation, all those dollars you are saving are becoming less and less anyways.

8:20I don't understand how entrepreneurship is risky, but here you getting a job is safe. It just makes no sense. Now, I will confess or admit that, yeah, certain aspects of entrepreneurship can be risky. And that's part of my message is, here is how you do not make it risky. Here is what you can do to eliminate some of that risk. And then you'll discover it is the most fantastic existence. I mean, I pinch myself every morning that this is my life, that I don't have to worry about money. the word budget is not in my vocabulary. My house is a virtual resort. I never have to leave. And there's no financial stress associated with that.

9:03There's no Excel spreadsheet saying, I can only withdraw 4%. I can only do this. And the rule is 72. I need to do that. There's none of that in my life because I have complete financial freedom. And it's all through the power of a particular type of entrepreneurship, which I call fast lane entrepreneurship, which is obviously what the book is about, being able to obtain a lifestyle like that, not in 20, 30, or 40 years, but in five years, maybe seven years or 10 years, real short period of time. And then you discover that the old adage of, oh, save 10 % of your paycheck becomes ridiculous because now you can save 80 % of your profit because you're not making$4 ,000 a month, you're making$40 ,000 a month.

9:47You're making$60 ,000,$80 ,000. So then it becomes very easy to stockpile cash and really have investments mean something. Because if you make a 4 % yield on$10 ,000, that's not even going to cover inflation nowadays. Regardless of what they're saying, the number is, we all know inflation is not 5 % right now. It's more like 10 % or 12%. But they're not going to tell you that because there's political agendas in play. The whole idea here is, yeah, we want to save some money, but this saving$100 a month and stop drinking coffee so you can invest that sheds a light on some of the insanity that goes around in this particular space for investing in financial freedom.

10:27I'm really curious, how many years of experimenting with starting businesses did it take for you to align all the pieces to build that first successful business? You mentioned that you had started businesses really young and you had known you had wanted to be an entrepreneur. So how long did that take for you to strike that first big win? I had many failures right from the beginning. When I graduated from college, I said, I'm not going to get a job. I'm going to start a business. There was several years there, and I think it was about three or four years where I started various types of businesses and they all failed.

11:02And in hindsight, looking back, the reason why I was failing was pretty clear. I was following my passion. We've heard that statement before, right? Follow your passion. Well, that's what I did. I followed my passion for four years. And you know what? The passion disappeared because I couldn't pay the bills. No one wanted what I was offering, or there was too many people offering what I was selling. I remember selling bodybuilding jewelry. That's because I was passionate about bodybuilding and fitness. So let's do that. Well, I sold nothing on that because the market didn't want it, but it was something I was passionate about.

11:36Then I was passionate about fitness supplements, again, in the same space. Well, that's what I know, so that's what I'm going to sell. But the market didn't even need anything. I didn't start my own brand. I didn't start anything with a unique skew. I was just selling someone else's product, trying to make money, chasing money. And I failed miserably for a good three or four years. And The Millionaire Fastlane is kind of that book that I wish I had right when I graduated college. It has all the things I wish I would have known when I was just getting started. That was a big learning experience for me.

12:12As for putting all the pieces together, here's the reality is the pieces are never put together because entrepreneurship is completely fluid and dynamic. You always have to be learning. When I went through the initial scaling of my business many years ago, the first business, the techniques I used to use back then are completely irrelevant today. And then when I brought it back four or five years later, again, I grew it. And the techniques there are completely irrelevant today. It's always changing. So if I started a business today, I'm actually not at a bigger advantage than the average person because everything has changed.

12:53So things change and they're very dynamic and fluid. So this is why venture capitalists still, they fail 80 % of the time because things are always changing. Culture is changing. Technology is changing. Entrepreneurship is pretty much you're deciding to become a lifetime problem solver. So that's an expectation that anyone in your audience says, I want to become an entrepreneur. I like what you're saying. Well, then you're deciding to have your career as a lifetime I'm a problem solver, or as I call a scientist, because that process never changes. You're always having to learn new things. You mentioned the problem solver aspect, and that just reminds me how so many nine to five jobs, you clock in, you show up, and they tell you exactly what you need to do.

13:40You need to do this list of tasks. And that aligns with the school system where you show up to class and they tell you all the assignments you have to do. Whereas near an entrepreneur, it's nothing like that at all. You have to solve the problems yourself. You don't know what's going to work, what's not going to work. You're just going to have to test it out and really just figure it out. And the market tells you if you're right or wrong. Yeah. Their feedback, man. Absolutely. Let's take a quick break and hear from today's sponsors. Even Einstein had blind spots. That's why modern science is built on the idea of peer review.

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16:42To begin getting smarter about investing, just visit theinvestorspodcast.com slash get started with stocks. That's theinvestorspodcast.com slash get started with stocks. And for a limited time, you can use code stocks15 for a 15 % discount at checkout. All right, back to the show. What was the business that ended up taking off for you? Robert Leonard I was the CEO and founder of a ground transportation company. It was called limos.com. And also a auto. It's been so long. The selling commercial transportation business is like an auto trader, if that makes sense. But it was for limousines, buses.

17:24So I own that. And then I also owned a aggregation site for if you needed a ride in Rome, Italy from the airport, I could arrange that. I owned that company for about 10 years after I sold that. I sold it twice. After I sold it, I started a publishing company. I started the Fastlane Forum, which is a community of entrepreneurs with about 70 ,000 people there that discuss Fastlane entrepreneurship. In your book, you talk about how you started an online limousine booking business, sold it around the dot-com bubble, and ended up repurchasing it for less than you sold it for. When you have a very profitable internet business, I'm curious about your thought process on how you decided to sell it, or if you should have just hung onto it and outsourced much of the day-to-day tasks.

18:12What was the deciding factor that led you to sell your booking company again? Actually, when I sold it the first time, it didn't go well for me because a lot of the purchase price, it was like$1.2 million. And half of that, more than half of that, I think it was 750 ,000 of that was based on an earn out. If you're not familiar with earn outs, that means after we buy the company, if your company does X, Y, Z, we'll pay you another 750. And of course, this was way back in the dot-com boom where things were starting to go south. I lost that immediately. That never happened. And then the money that I did get, which was about a half a million dollars, I invested it all in tech stocks.

18:54And at the time, there's a movement today called FIRE, I was familiar with that type of mentality way back then, I mean, 20 plus years ago. And I said, I'm going to do that. I never have to work another day in my life. And it kind of lit me up and made me realize this is why you don't want the stock market being your major wealth conduit, because eventually I lost a good 60 % of that money. and then there was taxes on top of it. So by the time it was all said and done, I had virtually nothing left. That's certainly something that couldn't support me for the next 40 or 50 years. And the thing is, people say, well, you shouldn't have sold.

19:35Well, you need to sell if you have to support your life. You have to pay the rent. You have to pay the car bills. You have to pay the health insurance. So at some point, you have to sell or something to get that money in order to keep yourself afloat. But the reason why the second time around, which I sold, was because I realized at that point, because it was a much higher valuation, that I truly could never work another day in my life, and based on without having the stock market as a major contributor to that. So the reason why that becomes a decision is because the day-to-day operations of it was no longer challenging.

20:11I suggest that people move around into different things that challenge them. The challenge in that particular business was no longer there. It wasn't exciting. And so this was right before Uber started getting into my space. And I recognized that I needed a significant technological injection into the company, along with multiple more employees. I mentioned I only had five employees. Well, I really didn't want 10 employees. And I really didn't want to go down that avenue because that just doesn't appeal to me. I did sell the company to another company out in San Francisco who wanted to, I guess, compete with Uber, which they did not.

20:52They did not do that very well. But I think if you're going to be an entrepreneur, you have to align that with your personal goals and how you want to live. So for me, it's always been, do I want to do this another five, seven, 10 years? And the answer was no. And actually, I wanted to write because I've always wrote my entire life. When I was a little boy, I was always writing stories. So I wanted to become a writer, and I knew that money was no longer an issue for me. So I can do that without having financial encumbrances or financial breweries. Because writing as a career is kind of a starving artist type of career.

21:30It's not something I would recommend for someone who wants to get wealthy. So that allowed me, having that financial wherewithal allowed me to pursue that, I guess you could say, passion of mine and not worry about not having that passion pay money. That's kind of a difference there when I frame passion, is having a passion and trying to make money off of it and having a passion and just pursuing it because you can't. Robert Leonard Yeah, I really like that. I think that following your passion when it comes to building a business is probably taking yourself towards the industries that are the most crowded and saturated, it's going to be the most competitive.

22:06You'll oftentimes hear that the best businesses to start are those that are not sexy and the ones that most people just do not want to deal with at all. And just to reflect on what you just said, the passionate industries are terribly crowded, which means one thing, you have to be excellent. You have to be like the NBA player of that industry. If you follow something that is an unpassionate industry or an unsexy industry, then you just have to execute fairly or well. You don't have to be the NBA player of that industry. You just have to do well. And if you do well in that unsexy industry, it can set yourself free for a lifetime and sometimes maybe even the generations that come after you.

22:50So this is why I don't advocate following passions because it is a selfish inclination. versus a market-centered inclination of finding where there's actual vacancies and problems and voids in the market that you can attack and exploit. And I always say this, once someone loves your value, you're going to feel passion, no matter what that business is. A good example, I always use is Native Deodorant. It was a deodorant startup, I think, in 2018. He sold that company for$100 million to, I think it was Procter & Gamble. But I guarantee you, he was very passionate about his product. So you can be passionate about your offer, your product, your value.

23:32You don't have to be passionate about the particular space. Since you mentioned Uber, I looked up how many employees they have just to give reference to how big they actually are. They have 29 ,000 employees. And I think it's really cool that as an entrepreneur in the 2000s, you foresaw that there are going to be some problems going ahead for your company, things like mobile phones coming out and all this new competition coming into the technology space. I think it's pretty cool that it almost seems like you recognize that you fulfilled this need and this problem. And there's probably a lot of competition coming to eat your lunch.

24:09So I think that's pretty cool too. Yeah. And as I said, you have to align your business with the market, but it also has to align with yourself. To this day, I still don't want 10, 20 employees. So I will always be a small business entrepreneur with minimal employees. And you still can make tens of millions of dollars in a system like that if you're willing to follow what I call the sense framework, which is the cornerstone of my philosophy. There's some misconceptions out there that, well, you have to be this big business, you have to get funded, you have to do this, you have to do that. And that's simply not true.

24:47I'm surrounded, my particular neighborhood is surrounded by tech money. It's like the mini Silicon Valley here. And I guarantee you all them are involved with bigger, larger companies. And me, I'm just a small business entrepreneur trying to tell people that there's this alternative way to wealth and financial freedom. And again, you have to align that with your person self. For me, freedom is the most important thing I value is my freedom. So getting up at six in the morning and managing 50 employees, I don't see that contributing to my freedom. So that's a state I avoid. If I ever built another company that's not related to my current business and it needed dozens and dozens of employees, I again would seek to sell and find somebody who wanted to take it to the next level.

25:38Recently, we had an episode that covered the idea of what is money. And I really enjoy diving into that subject with Jim Kreider. That is episode 164 for anyone that's interested in checking out that millennial investing episode, episode 164. When I was reading your book, you talked a lot about the definition of wealth and you just alluded to this a little bit. Like the definition of money, I think many people have different definitions of wealth, some of which might not be very constructive. I'd like to ask you to share with our audience what your definition of wealth looks like. Robert Leonard Sure.