TIP742: Invest like a Business Owner w/ David Fagan

26:59I want to say that it's a topic that's divisive. I don't think it is. I think more or less everyone disagrees with me, so it's probably not divisive at all. But I've increasingly starting to like companies paying dividends. And I couldn't understand it at all before. And generally, whenever I see different write-ups, I would read a sub stack or something to that. And generally, there is a selection bias. And I hope this comes across the right way. A lot of people who do sub stacks, they're up-and-comers. And they might not have a huge net worth, but they're very smart. And they want to find compounders.

27:39And they love doing stock research. And all of that is wonderful. There's a lot of great research out there. And then they don't really understand why a company would pay out dividends and feel like it's hurting shareholders. And very often they're right. So I should also say that. But the premise here for this segment is this premise of investing is best done when it's most business-like, businessman, investor, and vice versa. And so I think I see dividends a little bit differently after I have run my own business for some time. And I wanted to provide a few different examples. I've tried accumulating cash in the business of TIP, and I've realized whenever I do that, I do stupid things.

28:22Because I don't know, it might be a stick thing, and hopefully other managers are doing a better job of that. But sometimes whenever you have too much cash laying around, you do stupid stuff. And you would start bad projects, for example. And so whenever you take out cash from a bank account, you impose a bit more fiscal discipline on yourself. I mean, I still make plenty of bad decisions, even whenever we have less cash, but you think about it a little bit differently. And so I think that's part of it. And then there's another part of it where whenever you see enough projects fail, and you see how brutal capitalism is, you kind of like to get paid while you wait, while you own an asset.

29:07And so if you have, let's say that you have a founder and it might be a listed company. Now the founder might own, I don't know, let's just say 20 % of the company, that stays worth$100 million. And let's not talk about different share classes, but if you have the founder and perhaps also CEO and chairman, which you can even if you only have a 20 % depending on the bylaws and so on and so forth, from his perspective, well, perhaps it's nice to have a 2 % or 3 % dividend yield. And you might be thinking there as a budding new stock investor, like, why doesn't he buy back shares? It's like, yeah, no one's crazy.

29:46Perhaps he doesn't optimize for your shareholder yield. But if all of your money is in$100 million listed equities, and also remember, you as a budding stock analyst, you also hate whenever they sell stock. So you don't want him to sell stock. And then he's like, you also don't want him to take a salary because that's not the way to do it. We learned from Warren Buffett, not more than$100 ,000. And you also don't want him to give himself stock options. You don't want any of that. Okay, great. But then he has a, let's call it 2 % yield. That's$2 million pre-tax. Of course, $2 million is a lot of money pre-tax, but also keep in mind that he has 100 % of his net worth in the stock.

30:29So if he wants to diversify a little, he probably also wants to enjoy life a little, he might have four kids. So it's like, it sort of makes sense from that standpoint, why you might do that. Plus, the idea of reinvesting in new projects always makes sense whenever you're sitting in an Excel sheet. But whenever you run your business, you learn that you don't always have projects for that extra cash. And sometimes you meet, or you might have projects, but you don't have the right people on the team to take on those projects or it doesn't really fit with the culture you want to have. So I don't know.

31:06I guess this is just my way of saying that, yes, there's a lot of corrupt management out there. And yes, a lot of them are probably self-serving. But whenever you are on the other side of it, you sometimes look at those decisions of capital allocation a little bit differently from the other side of being a stock investor. Yeah. No, having a little bit of margin of safety on the manager's capital allocation strategy. I mean, that can definitely bode well over time. So yeah, I mean, oftentimes when I'm thinking about dividends as a Canadian who runs a small business corporation, I'm always getting into the weeds with taxes on it and stuff.

31:46I mean, that's a conversation for another day. There's so many listeners in different jurisdictions and stuff, but tax kind of factors into a big part of that conversation as well. Yeah, that's a good point, David. And that is very often why we as investors don't want to save the dividend. So again, it really depends on how you're being taxed. David, I wanted to jump to the second segment here about successful habits. And I know that you run a very successful business. And I know that you mentioned on one of the calls we have in our Mastermind community that you like to exercise and you like to read the first hour of...

32:24Do I say every day? I wish I had that discipline. Could you talk more about your habits? It's very inspiring. Yeah, sure. So yeah, within our TIP Mastermind community, I've run some accountability calls quarterly over the last year and a half. So a few of these things I've shared with everyone. I mean, we just finished talking about how your experience as a business owner can shape you as an investor and vice versa. And as a business owner executive, you know how much time and energy and intention it takes to move a company forward. I mean, you're systematizing change and you're adopting best practices.

33:03And that takes a lot of discipline to do. And honestly, that's how I approach my own personal habits. I'm constantly trying to adopt best practices and ones that work for me and only for me. I mean, you recently did an episode, Stig, about advice you'd give your 20-year-old self. And it made me really reflect because when I was in my 20s, I probably completely took for granted some of the good habits that I already had. My wife and I, we've always put a high priority on health and wellness, and that's just kind of what we did. And we were always being active and eating healthy and stuff, right?

33:45And so, fast forward into my mid-40s, And I've come to really appreciate that those habits and maybe the personal algorithms that I've developed, you know, they've allowed me to produce very consistent in my life, right? And so, you know, I do consider myself really lucky that my first love in life was actually play. You know, I grew up before the technology boom. And we were in a subdivision with lots of kids and we were always outdoors after school, playing sports and running around and stuff. And so naturally, that flowed into a lifelong love of sports and activity for me. And I'm not an expert in many things.

34:28And it's funny how the older you get, you kind of realize that. But I do know what I need for the algorithms that work for me. And, you know, I believe that you can get your personal flywheel spinning in either direction, forward or backwards. And I just put a really high priority on keeping my flywheel spinning in the right direction, right? And, you know, no, I'm not perfect and I don't hold myself to some ideal that I'm 100 % compliant on my habits and stuff. But if you can get some things consistently right, maybe with an 80 % confidence, that's what I would say is a worthy habit. And one of the first things that I ever shared with Clay when I joined the TIP Mastermind community was that I lived a balanced life of work, family, exercise, and spirit.

35:20And I know without bias that I'm directionally correct with this. And, you know, we often talk about financial compounding, but the same is true for our habits. They compound both the good ones and the bad ones, right? And, you know, so of course, there's some off days, there's travel and family commitments and, you know, stuff happens. But, you know, just to kind of drill down to my specific habits, and I know you've shared yours internally with our mastermind community, but I'll just give you a quick rundown of some of my highest confidence habits, just to give you a little bit of how I structure my day.

35:58You know, I do wake up around six o 'clock every morning. I use that first hour of the day to journal and read and write. You know, we're fortunate to have a beautiful home gym in our house. So, I just walk downstairs at 7 a.m. and I'm working out for 30 to 40 minutes. And I drink a lot of water during that time, eat a solid breakfast, and I get to my desk around 8.15. And on a side note, Mr. Warren Buffett and I do have one thing in common, and probably the only thing we'll ever have in common is that we both have a five-minute drive to the office. And so for me, that's worth its weight in gold.

36:34I don't take for granted the infrastructure that I enjoy, right? And that's also part of your flywheel, right? It's how you can structure things properly. And naturally, getting up at six in the morning, I'm to bed around 10.30 or so most nights. And honestly, I think sleeping well can be a superpower in life. And that is a habit in itself. And I try to optimize for it. And I'm probably boring the listeners right now because this is like kind of basic, simple stuff, but that's kind of the point of it, really. I mean, I optimize for sleeping well. I exercise every day. I eat healthy enough so that when I don't eat healthy, I don't even think about it.

37:20And, you know, I try to do something for my spirit every day. And that's the one that's been probably the toughest for me to build an algorithm around. You know, it's taken me a long time to kind of get that one right. But, you know, now for a bunch of years now, I've been meditating around 2.30 in the afternoon for about 20 minutes. And when I get that right, I come out of that meditation. And I feel like I've started a brand new day. And for me, it's like warping time. It kind of resets me and it reshapes the rest of my afternoon. And by no means am I going to claim to be an expert in meditation.

38:01It's still very much a work in progress for me. But when I do settle in and get it right, it's wonderful. And here into my mid-40s, the big thing I've learned that it's never just one or two habits that make a difference. It's really the aggregation of all your habits. And no, you don't want to become a robot, but you do want to be directionally correct with your consistency. And just like running a business, consistency can create winners. And I think it's important, right? And so for me, I'm always just trying to strive for balance in that regard. Trey Lockerbie, Ph.D.: That is absolutely amazing, David.

38:44I wish I had that discipline. One of the community members and a good friend of mine, Thomas, he once said to me, if you don't waste hours, you're going to waste years. And I found that to be extremely helpful, partly because I sometimes need an excuse for being efficient. So it's sort of like a way of saying, oh my God, that's probably because I'm not going to waste years. But I do think that Thomas is right, that you want to avoid being in a negative spiral where you're so busy that you don't have time to question if you spent your time the right way. And so one way I would go about this is I would go for a walk.

39:27I think some people generously call it a walking meditation. I don't necessarily know if I'm on that level, but there is something to be said about going home or walking home from work. And I should say that I don't have a five-minute drive like you, David. I have a five-second walk from my bedroom to my office. So after I'm done with the day, I actually go for a walk to walk home from work because then I feel I can be a better version of myself and a better husband and I got to be present because otherwise there's just your business going on in my head. So I go for a walk just short of an hour after work, going back home from work, and reflecting on what did I achieve that day?

40:08What should I achieve tomorrow? Start planning the day for tomorrow and type that up. And so it's a little counterintuitive, but you need to have time not to be efficient, to give yourself an overview to be efficient. And a successful habit that I would like to explore a bit here together with you, David, is this idea of surrounding yourself with people who are smarter than you, because you become the average of the five people you surround yourself with. And of course, it's a little bit tricky. Whenever you say like, what is smart? Could you define smart? And all of a sudden, I kind of feel like I'll be painting myself into a corner.

40:45But we have Ralph from our community because we talked about this together. And he said that, I think he called it like a high caliber person or low caliber person. And so perhaps that's a bit more inclusive than saying just smart. But I think that perhaps some of the listeners or perhaps all the listeners can resonate with that. You meet a person and then for whatever reason, you're like, oh, that's a high caliber person or that's a low frequency person because of what they say and what they do. And so if I, because I have this excessive need to be very quantitative, so my apologies. If we say that we then assign a value from one to 10, like what's the caliber of that person?

41:26So if you're an eight, you want to surround yourself with people who are nine. If you're nine, you want to find people who are 10. But then I don't even know if we can agree on the numbers. But then we also run into this issue that we run out of numbers. What do you do whenever you're 10 or whatever? I never had that problem. But how do you think about this idea, David, of surrounding yourself with the higher caliber people than yourselves? And how does the math add up? David Morgan That's quite a thought experiment, Stig. I'm going to digress just for a minute. You mention of this made me think of a Black Mirror episode that I watched on Netflix.

42:01Everyone's personality was rated in a public rating system and their mark was listed above their head and people were constantly trying to move up and improve their scores and their social rankings and needless to say, it didn't really work out well for the main character in that episode. But to your point though, like this past April during one of these mastermind accountability calls that I was talking about earlier, we had a conversation about this very idea that you're the product of the five people that you spend the most time with. And we also talked about actively seeking mentorship, which sounds simple on paper, but it can be hard to put in practice sometimes.

42:42It's not always easy to seek out mentors who can help you, right? And, you know, in fact, you know, some of the traits that actually make you a successful entrepreneur, that determination and the grit, and maybe even call it stubbornness sometimes, that can actually block you from seeking out mentorships sometimes. And, you know, a lot of founders, whether they're running a small business or building something much larger, sometimes they start out with that deep drive for independence and the I'll figure it out myself mindset that kind of fuels their early success. But I feel like that can also create some blind spots.

43:25So, looking back and thinking back to that call that we had, I think many of us don't sink out mentorship early enough because maybe we're too busy just trying to prove that we can kind of do it on our own. Everyone's experience was obviously different. That's what kind of stood out on the call that there was about 10 of us or so that were on that call. And some felt it was easier in larger organizations where mentorship is kind of baked into the structure to kind of have a formalized relationship there. And others on the call talked about never having a formal mentor-mentee relationship at all.

44:08And actually, one of the members even brought up AI as a mentor and asking life questions, getting perspectives and reflecting through dialogue with like chat GPT. And I know that's probably a topic for another day, but it's fascinating. And there's some emerging research on this. I read a book recently called Co-Intelligence by Ethan Mollick. And in it, he talks about AI as a coach to kind of help you think about and reflect and grow. And I thought it was pretty fascinating. And I guess maybe we won't go down that rabbit hole today, but it is interesting, this gentleman on the call that was talking about how he used it.

44:53So, you know, and I Like partly to your point too on kind of the grading system and trying to figure stuff out, you know, I think the other thing to consider about mentorship is in surrounding yourself with people that are smarter than you. Like that doesn't actually come naturally to everyone right away. You know, I think you have to kind of learn it because you do have to fight imposter syndrome a little bit and you kind of have to get comfortable being uncomfortable when you're putting yourself in new situations. But when you hear someone like Christopher Begg talk with William in their latest episode together about how his network of friends has become a superpower in his life, I mean, it definitely inspires you to kind of seek out this level of coordination.

45:41Yeah. I think that you bring up some great points and a very interesting point about AI. I feel a discussion about how to use chat.gbt or whatnot as a mentor might already be outdated whenever we're going to publish this. I use chat.gbt for everything these days, and it seems like it's getting better every week. Not every month, not every week. It's absolutely amazing. I once had a formal mentorship whenever I was a graduate. It was extremely helpful for me. And it played a big role in changing jobs. And so for me, it was very valuable. And then, like so many others probably listening to the show, I had Buffett and Munger as...

46:29They don't know access, but it's like informal mentors because you read everything that they have said and done, and you sort of have an idea of what they would do in the situation. So to me, that's been immensely helpful too. I want to talk a bit here about friendships and probably not on the note of grading people. I don't necessarily, I kind of feel it. My example came across a bit more transactional probably that I wanted it. But my point is about friendships. I think that I've become a bit more pragmatic because I used to think that it was better to have friends from the time whenever you grew up, because there were more pure friendships.

47:12And I'll be the first to say, if you do have that, I think it's wonderful. So please don't get me wrong as I'm going to say something different here, perhaps, or it's going to sound different. I also think it really depends on what kind of friendships and relationship you want to have. And so let me give you a mental model here. So say that you are a footballer and you want to play at the best team in the world. Say you want to play for Liverpool FC. I refuse to say PSG for anyone listening to the show. And 99 % of people have no clue why I would prefer PSG and what we're talking about. And it's not the best team in the world.

47:47Anyways, what are the odds that Liverpool is going to win the next Champions League only with local players? It just won't happen, at least not the way football is today. And so you need to look outside of your local pond to compete on the world class level. And I'm not saying that we all compete on Champions League, championship kind of level, but I think it's an interesting mental model where there is something to be said about friendships and loyalty. And I think loyalty is great, but you have to be loyal to another person for the right reason and because it has to be mutual beneficial. And most relationships in life are there for a reason or a season and not for a lifetime.

48:30And I would just encourage people to think that's perfectly fine. And whenever I say mutual beneficial, I'm not talking about it from a money-changing hands kind of way. But from whenever you meet up with your friends, you should both leave with this positive energy and looking forward to seeing your friend again and not feel like, oh, I just checked off a box of, oh, I'm so grounded and I hang out with the cats from the block whenever I grew up. And so now I've reset the counter to zero, and then in another month from now, I'm going to reset the counter again. Even if you haven't enjoyed it, they haven't enjoyed it, because you feel that there's some kind of moral obligation to do so.

49:10Believe me, I made the mistake myself. So that's why I'm saying this. And so it sounds beautiful to have the same friends throughout your lifetime. But let me give you another perspective. Life is like a long train ride. You stop from time to time to pick up different passengers who want to be a part of your journey, and then sometimes you also stop and some of those people jump off. And it's not because of a fallout. Could be, but most, most often it's not because of a fallout. It's just you're no longer on the same journey. Perhaps you chose a different journey. Perhaps your friend wanted to be on another train, and that's perfectly fine because the best things in life come from compounding.

49:51And if you're lucky enough to find someone who wants to be part of your journey through life, that's amazing. And if not, that's also kind of fine. So anyways, to me, that has been very helpful to think about friendships that way. Yeah. Friends for a reason, a season, and a lifetime. That's definitely a mental model that people can grab onto. As you know, Stig, my wife and I have been together for a very long time. almost 30 years and of course we're not the same people at 46 as we are at 16 and you know but the one thing we've managed to get right and it's kind of helped us whether all the natural up and downs in any relationship is that we've grown together roughly the same times in the same pace in life and you know as you mature you start to understand yourself so much better and I think it's that deeper understanding that you do want to surround yourself by people who are congruent with your values in your life.

50:56And, you know, sometimes that can be your childhood friends and business associates, and maybe sometimes it may not be. I mean, it's a little bit like your train analogy, you know, we're all kind of moving around and eventually we meet up with people that are in sync in the direction that we're going, right? And if we rewind back to where we started off this podcast about being a better business owner makes you a better investor and vice versa, well, another trait for both of those realms is the desire to be a continuous learner. And so, when you've committed to continuous learning, naturally, you're going to grow and you're going to probably want to connect with people that are on kind of that same path with you, right?

51:40And yeah, maybe a bit of a side note, Stig, but as I think when we get older, I think being a little less competitive can actually be a good thing as well. And that will actually open the door for connections with people. And I'll give you a little bit of a backstory for this. I mean, when I was in my 20s, when someone new would show up to play basketball with our men's group, I'd always make sure I stepped up to my game and I went at them really hard and as hard as I could. And surprise, surprise, that didn't really win me many friends. And it wasn't really until I moved away and found myself as the new guy in another men's group that I realized just how bad that energy was.

52:23And let me be clear, men's basketball in rural Nova Scotia, it wouldn't even qualify for the G League halftime show. So, what I was really doing was blocking potential relationships with like-minded people because of ego, right? And to be honest, I probably carried some of that mentality into my early business career, that sense of competitiveness. I mean, it's great for some things, but it could actually cost you as well. And looking, when I look back and kind of reflect, it probably did cost me some mental energy that I could have used elsewhere and maybe even a few meaningful relationships with like-minded people, right?

53:04And so, as I've gotten older, I've tried to really think about being a little more vulnerable in life and kind of that shift away from always needing to win to kind of slowing down and listening a bit more and being vulnerable. It's been interesting to see kind of how it's played out. Let's take a quick break and hear from today's sponsors. Curious about online trading, but haven't taken the first step yet. You're not alone. and plus 500 futures is a great place to start. The futures markets are moving fast. And with plus 500, you can explore popular assets like oil, gold, S &P 500, Bitcoin, and more.

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56:55I can't help myself. And I'm going to reference a bunch of different calls we had people didn't tune into. So it's kind of unfair. But I do remember we had a call where we talked about financial independence. And one thing that stuck with me was that you said that once you reach your financial goals, it's really all about your why. And I just think that was such a brilliant observation. And I think I've said that multiple times here on the show. It's been such a big part of my journey. I just burningly wanted to become financial independent. And that feeling and achieving that feeling and the opportunities and so on and so forth.

57:35But it also brings you a myriad of different questions you never had before. I was probably naive. I'm probably still naive, but I remember thinking, whenever I hit this number, I'm never going to have a care in the world anymore. Of course, the world isn't that kind. You hit a certain number and you have different problems. It's just the name of the game. And I feel I've been on this journey with different friends. This was actually something we talked about here before we hit record, where you meet old friends, new friends, and this path to financial independence. And it's just very interesting to see what happens to yourself, but also to other people whenever they achieve whatever the number is.

58:21Most people, they lose their drive. They set a goal, they achieved it, and then they stop. And they say, you only have one life, why spend it on working if you don't need to? And of course, then you also have other people who say, you only have one life, so why wouldn't you spend doing that and changing the world or at least your own small pocket of the world? And there's a self-selection there, of course, because whenever you achieve financial independence at a certain age, it's typically because you have that competitive side of you. It's fun to compete. It's fun to win. And most people are just not smart enough to compete in such a brutal world of capitalism and do that part-time.

59:02And then you have this thing where even if they can, they perhaps don't signal the right thing to their team. Oh, I'm just doing this part-time, but you're supposed to do this full-time. It's like, there are a lot of different threats we can pull from this, David. So I think I want to throw it over to you and sort of like here, what is your why? Let's start with that. That's a big question. I'll see if I can get this narrowed in. I mean, there are so many different paths to financial independence, right? And when you're working towards it, it can feel like a destination. But if you love the game of business and investing, and Stig, I've heard you say this many times, your natural state is always thinking about wealth creation, right?

59:49And so I think when you become financially independent, it's only prudent to ask yourself why, you know, what is it all for? You know, I was listening to your recent conversation with Manish, which aired during the Berkshire weekend, and he shared in that episode that he was financially independent at 34 years old. And like so many of the greats in business and investing world. I mean, building wealth past financial independence, that really isn't the goal. It's just a byproduct of what they love to do, right? And so, when you've reached that stage, I think it's important to ask yourself what comes next, right?

1:00:27And while I've reached financial independence myself, I'm certainly not a steward of significant wealth, but I do think about what that stewardship would look like in the future? How would I manage it? What kind of legacy would I want to leave behind? And there's a mental model that I think about often. It's unearned and unlearned wealth can be dangerous for others. And so just to create wealth, just to leave it to the next generation without preparing them for the responsibility of managing that, sometimes that can do more harm than good. And unfortunately, I've seen that situation where there's been a generational shift in wealth and it's been a burden more so than an asset.

1:01:13So I think probably going in circles here a little bit, but to actually answer your question on my why, I love to work. Maybe it's the accountant in me. I've been in public practice for 25 years and I'm kind of wired a bit for productivity. And I like working. I like, especially when it's creative and value-driven. And so, I need to structure my life to support this rhythm. And not in a way that burns me out, but in a way that most days feel like play, right? And yes, there's some hard days, but you want to be directionally correct with that. And so, there's a Japanese term that I really connect with and it's called a key guy and it's the intersection of what you love what you're good at what the world needs and what you can be financially rewarded for and in my own small way i actually use this framework to help focus my why you know i love to lead by example you know i wouldn't ask anyone to do something that i wouldn't do myself i like to teach others about wealth creation and what good financial habits can do, especially when someone's starting off with a zero balance in life.

1:02:30That really gets me excited. And I'm deeply rooted in the Canadian small business world, helping people understand how to execute their business structures and corporate and personal tax planning and how to build their own path towards financial independence. So, you know, over the past two decades, I've worked with hundreds of clients and the clients that I've been able to lead them on their path to prosperity, those are the relationships that have given me the most satisfaction in my career. And, you know, really in a nutshell, that's my why. Thank you for sharing, David. And I think it's very different from person to person what the why is and what i would encourage you to not necessarily you david uh but but because i i think it sounds like you you got it covered but if there was if there's something to clone from the audience and it sounds very generic it probably is but i i'd like to sort of like peel a few different layers on that i i often get asked for advice which is of course wonderful it's also a little ironic they say that no one's a prophet in his own country and And I couldn't imagine people be more unimpressed by the type of advice I give than my family.

1:03:45So whenever I get the X-Cort advice, it's always wonderful. People think I have something to contribute. But I more or less always say the same thing, which is, I don't know what decision is right for you, but it has to be aligned with your values. And so some people would probably look at the way you structured your life, David, and say, okay, six o 'clock in the morning, and then exercise, and you want to read, and you want to do, and they're like, oh my God, it sounds so stressful. Well, I think, but it's the right mix for you, because that is the way you want to live your life. And everyone loves Buffett, right?

1:04:22But then the hardcore value investors, they generally tend to like Munger more than Buffett. And one quote that's getting thrown around a lot is this Munger quote of, I'm going to butcher it completely, but trading small pieces of paper is a wasted life. And so I think a lot of people resonate with the breadth of Munger, and I think that's absolutely wonderful. And then the look at Buffett is like, oh, shouldn't he be spending more time with his kids? Or isn't he too much of a one-string banjo just sitting there reading 10Ks and Moody's and whatever? And I don't necessarily think I need to defend Buffett.

1:04:58So please don't get me wrong. Again, he had no clue who I am. I don't think Buffett wakes up in the morning and thinks, oh my God, if only I was as interested in architecture like my friend Charlie, or I would build my own boat. I don't think he wakes up thinking like it. I think he's 100 % aligned with his inner scorecard, living a life that's true to his values. And so whenever I get asked for advice, And also why I asked you, David, about your why's, it goes back to this idea of how are you aligned with your values? And if I don't know your values, I can't tell you what to do, but that's key here.

1:05:39And it's probably quite easy to look at different successful people and then say, oh, this person, there's probably also an element of sour grapes there. Like, oh, yeah, but he doesn't live a good life like I do because, well, perhaps you're right. Perhaps that is a deeply broken, terrible person, or perhaps that person just have different values than you. Not because he's not enlightened enough or not just because like, no, he's just white a little bit different than you. And that's why he's still super happy living a different life than you. And so it's going to sound a bit like a cliche. One point in time, I'm going to try to start a sentence without saying it's going to sound like a cliche, but it didn't happen this time, David.

1:06:19But I sort of like look at this through the lens of optimizing for happiness, which I think we all do to a lot extent, even though we might not think about it like that. And some people would say, oh, I work hard to make sure I can give my kids, I don't know,$10 million the time I'm not here. Or they might say, I'm doing this, and then I make sure to give all the money away because I don't want to spoil my kids. Or perhaps Buffett said it best when he talks about giving his kids enough money to do anything but not nothing. And so the idea of optimizing for happiness is also why I would have friends who say, I reached my number, why would I ever work?

1:07:00And why I have other friends who say, I have so much money, so why wouldn't I continue working? This is so much fun. It's all a part of the idea of optimizing for happiness. And so a big part of my why is I really enjoy being on this metaphorical journey with wonderful people. And so we get wonderful applications from people who have been listening to the show in college, and then they run out of a very, very nice Ivy League school. They want to join TIP. And I've always said no. I should always say we didn't have a professor from Howard who wanted to join the team. but I believe that all good things in life come from compounding and the same goes from relationships.

1:07:42So whenever I hired Clay or Kyle, I hoped they would stay with TAP for at least a decade and way longer. It was the same thing whenever William joined the team. And I know that the world isn't always that kind and you're not going to work for decades with wonderful people always, but that is the mindset I go into my why with from the professional and from the personal side. And so William taught me this wonderful mental model of don't work with friends before you're 40 and then only work with friends after you're 40. And I think that there is like everything that William says, there's an element of wisdom there, a huge element of wisdom there.

1:08:21And so that is just something that financial independence allows you to do. How do you look at that framework, David? Yeah, sure. It's funny how we use dates and milestones to kind of anchor wholesale changes in our lives. Daniel Pink actually talks about this in a book that he wrote about when, the secrets of perfect timing. And I guess maybe it's no surprise, Stig, that you're thinking about this because you just turned 40, right? And you're maybe reflecting through that lens. So a couple things to unpack here. First, the notion of not working with friends before 40. I feel like that's almost the opposite of how things work in smaller communities.

1:09:05I mean, in many cases, those early personal relationships that you have are the ones that open up the doors for opportunities for you in the first place, right? But eventually, I think what we really want to do is kind of build aligned relationships with people, right? And, you know, we want to work with people who we can build a high degree of confidence with. And, you know, that can only be built from trust and from time, right? And, you know, trust is a form of compounding, like you said, like wonderful relationships and like anything that compounds it, you can't rush it. And, you know, like most people have probably likely heard of the concept of the trust bank, you know you build it up by showing up and keeping commitments and hitting milestones together but on the flip side you know if you're missing expectations and brushing off priorities or more serious missteps i mean those are withdrawals and they can cost you and you know that's why you know listening to what you said stig about wanting to work with clay and Kyle for a really long time.

1:10:14That's wonderful, right? It's like little small, consistent steps that you can kind of build sustaining trust with over time. I mean, that sounds like a wonderful recipe for success, right? And I'm sure you apply that with many relationships that you have at TIP and among other people. Just to give you a little bit of personal context on this, My business partner, James Allen, joined me back in 2017. And he had just moved back to the area. And we had worked on a few small engagements together while he was with another accounting firm. And we didn't really know each other that well at the start, but we had just enough clarity to believe that we were on track in forming our partnership, right?

1:11:00And now, eight years later, going into our ninth year, so getting close to that decade of work together, I can confidently say that we're far better friends and business partners today than when we started. And we're starting to see the compounding effects of our partnership. And we've been battle-tested too, which can deepen your relationship. I mean, there was a 24-month period that tested us more than anything. I mean, we had to send our entire staff home during COVID. We had to rehaul our systems to allow that to happen. We were building a new office right in the middle of the pandemic. And we were also dealing with a significant client tax issue that had the potential to go sideways, right?

1:11:47And fortunately, everything worked out and everything was fine. But it's in those moments that you want to make sure you're surrounded by the right people. And I can remember telling James, I remember the day I told him, I was like, nothing we're going to face together will be more challenging than what we just went through. And we both knew it. We came out on the other side and we had a deeper understanding for each other, right? And just like a long marriage, you're going to go through your ups and downs and probably Dalio said it best when he was like, pain plus reflection equals progress, right?

1:12:26But when you go through those moments with someone else and you actually get it right, it doesn't just make you stronger individually. It can really fortify your relationships with people. You know, I'm very happy that you say that, David. I kind of feel like I'm a one-string banjo with quote after quote, but you can have anything but not everything, right? And so if you want to achieve something really valuable in relationships, it's not, I mean, And like any wonderful relationship, they're going to be ups and downs. Hopefully a lot more ups than downs, but it's a pack of steel. And I feel that with myself.

1:13:05I see that with friends where at certain stages of your life, you become a bit more complacent. And there are different types of pain you're just not willing to do anymore. Some of it is probably good, but you can't really... the things in life that you want to do, even if you don't need the money, still come with some pain. If you want to run a successful business, there are going to be different frictions, different things you want to be without. And if you opt out and say, I just don't want those problems, then you can't run a business. And it's just that simple. You can't only have all the good stuff.

1:13:45And then something comes in for left field. And I know like the situation for you guys, of course, was a little bit different because you have an actual office and we're a small company with 20 people and it's all virtual and so on. So it's a little bit different for us, but we didn't have a protocol that said, in case of the world shutting down due to a pandemic, this is what you do. Here are the 12 steps. We didn't have that protocol. So we had to figure that out. So I wanted to go back to this framework here of partnering up. And partnering up, it could be an equity, it could be a 50-50 partnership, an 80-20 partnership, but whatever it might be, it could also be you being an employer and hiring an employee, whatever it is.

1:14:27I look at it as an alliance, I look at it as a partnership. And so one of the things that I've learned as I've gotten a little older has been always to look at the track record of that person. Success leaves clues. And of course, this is a little bit different if you're hiring someone right out of college, or if you're teaming up with someone who's 60, of course, there are different types of clues you're looking for. But one example that is top of mind is a good friend I have who, at the time in his 40s, wanted to run a company, and he was looking for a business partner. And one of the things I said to him was that he should find a business partner who should put money down to enter the partnership.

1:15:13And my friend was looking at me like, we don't really need the cash. So why would I do it? Well, it's like, you want to make sure that he's committed. That's point number one, but they're also different kind of signaling into it. And so it wasn't, I don't know if I'm going to offend anyone here, but I don't remember it as a big commitment. It was in the$40 ,000 range. And of course, we all come from different walks of life and to some people and 40 ,000 is a lot of people. But I would imagine here, if you're looking for a business partner in Denmark and it's in the$40 ,000 range, and he was looking at candidates in their 40s and 50s, it's not a lot of money.

1:15:53And so if the person doesn't fork up that money, there are different reasons for it, right? One of them is the person has the money, but doesn't believe in the company. Probably don't want to partner up with him. Or he really believes in the company, but he hasn't accumulated$40 ,000. Then that's probably also the wrong person to team up with. And so what ended up happening was that he got an exemption for the$40 ,000 and he turned out to be a terrible business partner. and there were still different issues and there were legal actions and it was just absolutely terrible. And so of course, this is just an anecdote.

1:16:29But to me, I think that there are some things that is somewhat evergreen there. And then I would also say that don't team up with your friends because they're your friends. I have some wonderful friends I would never go into business with because I'm quite sure we would not be friends if we did that. So please don't get me wrong whenever I'm making those observations. Another observation I wanted to share here with the audience is that if you want a lot out of life and business, you have to ask for it. Don't ask for everything though, because if you ask everything, you end up with nothing. But if you're like David and me, and you love working, why not work with friends?

1:17:10And it's probably going to sound a little spoiled, but I don't want to be one of those guys to say that I don't have time for my friends because I've worked too much. And I'm like, I love working. I love my friends. Can we get the best of both worlds? And so, of course, make sure it's for the right reason. But probably one thing I would say is that people do change, yes, but they don't change because you want them to change or at the pace you want them to change. It goes to David's point before about a partnership is like a marriage. No, I can say I've been married almost 15 years. Your wife is not going to change because you want her to change, and you're not going to change because your wife wants you to change.

1:17:51It just doesn't work like that. And so you need to, like every good marriage, you need to be respectful. You need to listen. You need to know how to pick your battles. And one mental model I would like to share up with the audience is that be ready to give in. Every time I work with someone, I give in a lot, probably nine out of 10 times. And of course, whenever you have that approach, you also need to make sure that you partner up with high caliber people who don't exploit it. But there are different ways you can identify those people. But I want to give you three scenarios here. So why do I give in so much whenever I work with other people, if we have different opinion.

1:18:34Well, your partner's idea might be better than yours. That is definitely possible, especially in my case. It could also be that your ideas are equally good. But if it's your partner who are executing on it and their idea is equally good, I can guarantee you that you should follow your partner's idea because he's, after all, the guy executing. And then there's also the situation where your idea is still better, but then your partner still has to execute it. So if it's only a little bit better, you're going to get up with a better result for both of you if you give in. And then, of course, you have this one out of 10 times where you just have such a high conviction that you're right.

1:19:10And then if you find the right caliber of business partner, you know that he's going to or she's going to disagree and commit. And that's really where you are being tested. And if you find the right person, that is exactly what's going to happen. Leadership and relationships, they can be complicated, can't they? If you want someone to take real ownership of their work. And sometimes, you know, you just have to sprinkle a little bit of pixie dust, and then you need to step back and just let them own it, right? And yes, it might not be 100 % of the way that you would have had it done, but if it's 80 % is quote-unquote as good as you imagined it, well, that's still 100 % on something you didn't have to execute on.

1:19:53And to me, that's actually worth a lot, right? And, you know, another thing to kind of unpack here a bit too, Stig, as you brought up a great point about going into business with someone who maybe hasn't organized their financial life, that's a huge red flag. It's like watching a fitness coach who doesn't work out. Most exercise leaders, they're the ones that are developing the content. They can perform the movements themselves. I mean, you've got to be an exemplar of the lifestyle that you're promoting, right? So if you're considering going into business and partnering up with someone and maybe they've never saved or they're living beyond their means or maybe they don't understand how leverage works or one of my personal favorites maybe they haven't filed their tax return in three and four years i mean there's no debate you get that you've got to make an automatic no there when you're developing these relationships and roles and responsibilities right and as we talked about earlier i mean our habits both good and bad they're super strong and you know, it's no surprising that your friend had a rough experience, right?

1:21:02Trying to do that. Like you said, I mean, people aren't going to change for you. They have to come to the conclusion that they're going to change themselves, right? And, you know, I think what makes it easier for anyone to team up later in life with someone is, isn't that you know them so much better. It's that you actually know yourself a lot better and you know what you need in a relationship to make it successful, right? And I think that awareness helps you clearly recognize what you're looking for in others. And then, you know, kind of divvying up roles and responsibilities and all of that stuff.

1:21:37So, you know, on a slightly different line of thinking, but on the topic of working with others, I mean, one of the models that we use at our firm is helping people find their superpower, right? I mean, we want to discover what makes someone tick, you know, what they love to do. and we want to help move people from what feels like a job to something that feels like fulfillment, right? And it's kind of like letting your winners ride in your portfolio. I mean, if a person is really good at something and they love it, you don't want to interrupt it. You just want to give them more of it and you want to let it grow, right?

1:22:11And, you know, I often say that you love your kids for different reasons. I mean, you love them for what makes them special, not because they're the same, right? And I think that same mindset is great for leadership. And, you know, finding each person's superpower, if you can find each person's superpower, feed them a lot of it and let them thrive, that's going to be fantastic. I mean, you know, of course, it sounds great on paper, you don't always get it right. And, you know, to be honest, I still sometimes wrestle with the idea of building integrated teams with different personalities and stuff.

1:22:47And so leadership can be really tough, right? And, you know, as your network grows with people that you're connected with and stuff, and, you know, some of the leadership philosophies out there say you need a diverse mix of people to cross balance perspectives within your organization. And, you know, but in a highly systemized world like accounting, you know, in our own business, we've got about 25 people or so, you know, I've found that bringing in someone who's overly free spirited and non-routine can create some real challenges. So, you know, I, you know, Stig, our teams are actually very similar in size.

1:23:24So I'll throw this back to you. I mean, have you ever thought about hiring someone who you know is great, but who just operates completely different than the rest of the team? Yeah, we have one of those. His name is William. I knew you were going to say that one. But that's been absolutely wonderful. And I don't think that there is any... I don't think that there's like a one-size-fits-all type solution to that. I think it's very important that you have the same values, though. You still need to have the same values, even if you operate very differently. If you don't have the same values, it's going to be tricky.

1:24:04And luckily, William has the same values, so it's not difficult at all. It really depends on what kind of life you want to live. It sounds absolutely terrible because all companies, of course, have a culture and so many companies feel that they have an amazing culture. And then perhaps that's not the case. And whenever you speak to the founder, sometimes they talk about a culture being better than perhaps other people in the organization. One thing that's very telling of our culture is that what people see is the hosts. And we have obviously way more people than we have hosts on the show, but the show or the host get all the attention.

1:24:43And so it's very important to have a culture, at least it is for me, where we don't work with big egos, because it's just not fun. And then it also depends on what is it that you're optimizing for. So if we were optimizing purely for dollars, there have been different situations in the lifetime of TAP where we could have worked with some high-profile names and gone a route that's quite different than what we're doing today. And we could have built up some franchises around different people. And if we optimize for money, that is probably the way to go. But then it would have eroded the culture.

1:25:22And we optimize for a wonderful culture. And so we do different things on the team that's absolutely ridiculous from a profit maximization standpoint. One of the things we do, for example, is we have the support team rate the host from a scale from one to five. And then we literally have a company handbook where it talks about if the hosts are not nice to work with, they can't be a part of the team. We don't have that for our support team. We probably should have, but we don't have that. And I would also say we probably don't need that because the people who seek a job in support are just wired a little bit different than whenever we would open up for Clay's position.

1:26:02We got like 100 applicants. A lot of people want to be minus-side resistance in the investing space and be paid to do their hobby. So it requires a very special personality such as Clay to stay grounded and stay humble when a lot of things are happening around you. I kind of feel like I was trying to avoid saying a lot of different things there in what I said before, but it's really important. And so to answer your question, and not just in the cheeky way of saying, yeah, we have one of those, his name is William, I think it very much depends on what is it that you're optimizing for. And you have to be aligned with those values, and then the rest would take care of itself.

1:26:44I mean, that's wonderful. It sounds like you're optimizing for the macro level. If you can be directionally correct with values, culture, yeah, you can certainly merge in a lot of the other characteristics of the people that you work with. Yeah. But you've got to be at the macro level, you've got to be correct and aligned, like you said. David, this has been absolutely amazing. Thank you so much for making time for us. And not just on the podcast, but you're also spending time with us. in the mastermind community and teaching us about accountability and habits. Where can the audience learn more about you?

1:27:22And do you have any concluding remarks? Yeah, I just want to say thank you so much for the opportunity to chat with you today, Stig. It means a lot. You've given me lots of opportunities within the community. I want to thank Kyle and Clay for their hard work organizing the community. And just a shout out to the other members that I've connected with in the past and in the future. And I'll just leave it at that. I don't need any personal shout outs for my rural accounting firm in Nova Scotia. So I just want to say thanks. Thank you, David. What a way to end the episode. All right. Thank you so much.

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