Rick Harrison: The Pawn Business, Hidden Histories, and the Best Model in Banking

0:00Being an entrepreneur is a 24-7 job. And when you're hiring, you need a partner that works as hard as you do. That hiring partner is LinkedIn Jobs. When you clock out, LinkedIn clocks in. LinkedIn makes it easy to post your job for free, share with your network, get qualified candidates that you can manage all in one place. For one thing, you can post a job. LinkedIn's new feature can help you write job descriptions and then quickly get your job in front of the right people. You get qualified candidates. At the end of the day, the most important thing to your business is the quality of the candidates.

0:30And with LinkedIn, of course, you can feel confident that you're getting the best. Based on LinkedIn data, 72 % of small and medium businesses say using LinkedIn helps them find high-quality candidates. Find out why more than 2.5 million small businesses use LinkedIn for hiring today. Find your next great hire on LinkedIn. Post your job for free at linkedin.com slash altature. That's linkedin.com slash altature to post your job for free. Terms and conditions apply. Today on the James Altucher Show Every object in here is a story and it's beautiful It's like a museum in here People don't buy collectibles and stuff because of what they are, they buy it because of what the story is behind it I personally think the pawn shop business is probably the best business model there is It's the oldest form of banking A lot of people don't know this, but something like 7 million households in the U.S.

1:25don't have a bank account They use pawn shops and payday loans Right around 20 % of the adult population cannot get a bank account. If you have bad credit, you can't even get a bank account. I've had guys call me a motherfucker. I mean, I've had so many people, when I tell them, like, oh, your stuff is fake, start cussing me out because I'm trying to rip them off. Well, how the fuck am I trying to rip you off? I just told you I don't want it because it's fake.

1:50This isn't your average business podcast, and he's not your average host. This is the James Altucher Show.

2:08The man, the myth, the legend, Rick Harrison, star of the reality TV series Pawn Stars. It's a reality show based on the world-famous gold and silver pawn shop in Las Vegas, where all sorts of crazy things have been happening for 21 seasons. I can't, I don't even know. Actually, we have, Jay, you know, we have had one guest on our show that was the star of a reality show that lasted more than 21 seasons. Can you remember which one that was? I don't remember. Tyra Banks, America's Top Model. That's been around for, I think that was around for like 23 or 24 seasons. Yeah. So we're getting our share of the big reality show.

2:52It's really fascinating. We spoke with the producer afterwards, and she was telling us all sorts of stories about how the show got made. We're going to have to have her on, Jay. Let's call her and have her on. But Rick Harris, I went on their podcast, which was a real pleasure. I went on with Chumlee, if you're familiar with the show. And we'll eventually try to air that on this feed. And on this episode, we have Rick Harrison, who's sort of the godfather of the pawn shop. and he describes to us the whole pawn business, how it works, why it's the best business model, and all sorts of fun stuff about the show.

3:26So here we go.

3:35Rick, we're on the set of Pawn After Dark and on the set of Pawn Stars, the TV show you've been doing. How many seasons has it been going on now? 20-something. How many shows, seriously, How many reality shows or any shows have gone for 20 seasons? I don't know of any. You know, any with the same cast anyway. Like, you know, you have like Survivor or whatever. Like the cast changes all the time. But like, I don't know. I think we're like, you know, like the same characters, same exact format and everything. I think it's got to be the longest lasting show. I think we've done like 750 episodes. 750 episodes.

4:11And do you ever are like, oh my, you wake up and you're like, oh my God, I got to do another episode of that series again? No, I absolutely love my job. That's right. You know, I'm one of the most spastic, weird people you ever met. I mean, I sleep four or five hours a night. I always have to stay busy. But no, I mean, I do okay. If I didn't need the money, I wouldn't do it. I mean, I don't need the money. I could retire tomorrow and live a very, very comfortable life. But I still like doing it. Just walking in here, walking in your store, seeing the people out there, seeing all the things. you get it's almost like this kid-like feeling of excitement like everything is a story every object in here is a story and it's beautiful like i it's like it's like a museum in here i mean people don't buy collectibles and stuff because of what they are they buy because what the story is behind it i don't know i mean like i have like um a cowboy hat out there and like it's just not a cowboy hat okay it's bitty binion's cowboy hat i mean the most famous gang one of the most famous gangsters in Las Vegas history.

5:15The guy who started the World Series of Poker. The guy, I think he had like two murder convictions, but they were both suspended sentence. One of the crazy cowboys downtown that the mob was afraid of. That's why the mob was on the strip and they wouldn't go downtown because the crazy cowboys downtown. I mean, and you just go on the whole story about something like that. So that's, they're buying the story, not the cowboy hat. It's almost like you should make a giant website of this store and everything you click on, you see the whole story of that object. That'd be a lot of work. Yeah, it'd be a lot of work.

5:43Yeah, and I wouldn't make that money off it. Like, you know, just for listeners who might not know, I personally think the pawn shop business is probably the best business model there is. It's like you lend money, you keep the collateral, and you're always doing it at such a discount to the value that you know you're going to be able to make money on it, ideally. So maybe you could explain just a little bit. I know this is like really basic for you, but what is the pawn shop business? Take your average pawn shop, okay? So you come in here, you have a Rolex. You need some money for the weekend.

6:17Rolex might be worth 10 grand. I mean, retail 10 grand. That's what I can sell it for. But you, on the other hand, maybe you only want 500 bucks because that's all you need. So I loan you 500 bucks, come back a month later, pay me 550, you pick up your watch. So it's like 10 % a month. Yeah. If you don't pay me back, I'll still do business with you. You're not going to get a bad work on your credit score or anything else like that. It's the oldest form of banking. And then how long does it take before, and I'm sorry these are going to be basic questions, but I'm just fascinated by the model. How long does it take for the Rolex to become yours?

6:49Like, do they have to default two or three times? Okay, so if you don't pick it up 90 days, it's mine. Usually I get my customers a little bit more time. But, and if you don't pick it up, it becomes mine. Just it's the way Nevada law works. And title reverts to me. And it's like I said, just really simple banking. There's no, there's no, doesn't go against your credit or anything else like that. That's, you lost your collateral. And a lot of people don't know this, but something like 7 million households in the US don't have a bank account. They use pawn shops and payday loans. I think payday loans are like the worst thing in the world.

7:22Yeah, because it's a huge interest rate if you annualize it. If you don't pay them, they take you to court, they garnish your wages. Don't pay me, I just take the collateral and it's done. Right, because you have the collateral. That's why it's so great. You don't have to chase anybody. No, it's more than 7 million households. It's probably, it's right around 20 % of the adult population cannot get a bank account. If you have bad credit, you can't even get a bank account. I didn't know that. When you go to get a bank account, I forget the name of the system, they run you through a particular system.

7:49And if you've previously had a bank account, you bounce a lot of checks, and you basically cost the bank money, you're not going to be able to get a bank account. And it's over 20 million people can't get a bank account in this country. You know, they can't get a credit card or anything else like that. If you don't have a bank, you don't have an ATM card, you need cash on the weekends, you come to a pawn shop. And up until the 1950s, pawn shops were just a part, just a fact of life and part of the community. I mean, the number one form of consumer finance up until the 1950s was pawn shops. I didn't know that.

8:24Yeah. I mean, so before there was credit cards, before there was ATMs, before you could go to, you know, it was just, remember back, you're not as old as me, but I remember a world where everything was closed on Sunday. If you needed some cash, it was the only place you could go. You couldn't go to the bank and get a$50 loan. So it sounds like it's not just the unbanked, someone with a Rolex who needs like a thousand bucks on the weekend, how many people are also just quietly well-to-do, but kind of get their financial needs satisfied here at the pawn shop? It's a lot more people than you would think that just need money.

9:04I mean, how do you think pawn shops get so many Rolexes? Yeah, why is that? I don't know. Okay, just suppose you're a lawyer, and you do pretty well, all right? But, I don't know, you got some... Everything's sort of crashed out around you. Where are you going to go get some money? You're not going to go to your friends because it's going to be embarrassing. You go to the pawn shop. Yeah. Okay, and if things don't get better, you don't pick your pawn shop, your watch up in the pawn shop. Right, and then you don't think about it again. It's just gone. And then, and you know, and how do you know what the right price is to pay?

9:37So you gave, let's say someone comes in and top retail price, like if you buy it on the website or something, the Rolex website, it's$20 ,000. What are you paying for it, max? Okay, well, the Rolex business is just completely different than that because there's no, you cannot go into a, like you can go like to the forum shops on the strip. The most expensive, one of the most successful malls in the United States. And you walk into the Rolex store. There's no Rolexes for sale. You go in the Rolex store and you put your name on a waiting list for four years. So the Rolex world is really, really weird when it comes to that.

10:12But when I buy something, it's generally kind of just a weird formula in my head. Say it's a piece of art and it might be a little weird piece of art, so you have of a very small portion of the population that's going to build by it. It's also going to take up real estate on the wall and everything like that. And it might take me two or three years to sell it. I'm going to probably offer you 25 cents on the dollar what I think I'm going to sell it for because it's going to sit around for three or four years and maybe even longer. And then if it's sitting around for a while, I'm going to massively discount it.

10:46But if you bring me a gold bar that I can sell immediately, I'll pay you one or 2 % off you because I literally can pick up the phone the second I buy it and sell it. Do you get a lot of people with engagement rings coming in? Like, an engagement didn't work out? The girl's got the engagement ring? Oh, yeah. I get diamond... Remember, like, 45 % of weddings end in divorce? And they're not going to wear that ring no more. Right. This is what I always wonder. Why would someone ever buy a diamond ring in Tiffany's when they can go to a pawn shop and probably buy it for the same ring for 50, 60 % less.

11:27Yeah, because believe it or not, if you go into the most prestigious, you go to Fifth Avenue, the most prestigious jewelry stores they have there, there's a very good chance all those diamonds and those rings came from a pot shop. Because there's no such thing as a used diamond. This is federal law. This is a federal trade commission. There's no such thing as a used diamond. Because what's the difference between a diamond in someone's ring and a new diamond? nothing, nothing. It's diamonds don't wear. Diamonds don't get worn out. Right. So you don't have to disclose all this is used. So like, you know, back when I didn't have money, I mean, like, you know, like when I first started off, I'd have cash rushes and stuff like that.

12:08I'd gather up a bunch of diamonds in the case and fly to New York, go to the diamond district, sell them. Okay. I would deal with that nightmare. And that's where all the jewelry stores go to buy their diamonds. They go to the diamond district. And so they're paying higher than what you paid because they got a market. So I'd go wholesale them and then I'd sell them to a wholesaler and the wholesalers sell them to the jewelry stores. And then they're selling it for retail for like three times what you paid for. Yeah, well, no, it's the same thing with everything. If I'm buying an engagement ring, I could just come here to begin with.

12:37Yeah. So why doesn't everybody go to pawn shops to buy their jewelry? Because they don't know better. I feel like they do know better. I wouldn't buy my ring at a pawn shop. You know what I mean? So it's like a stigma. Yeah, a little bit to a stigma. I mean, it was really... In the 60s and the 70s, there was like, you know, suddenly pawn shops got portrayed as like this bad place. But like I said, number one form of consumer credit was pawn shops until the 1950s. Believe it or not, Charlie Chaplin's breakout movie was The Pawn Broker. Oh, I didn't know that. If you ever get a chance to see it, it's really, really funny.

13:13Yeah. Someone comes in with like, you know, those big alarm clocks that you wind up in the back. It's just classic Charlie Chaplin. You know, he winds it up. It doesn't work. And takes a can opener, opens the back, starts taking it all apart. And then he can't put it back together. So he just pushes all the parts in front of him and go like, no, I don't want it. But you have to watch it. It's really fun. It's actually, it's a great thing about Charlie Chapman to the state. It's still funny. And now, what about lab-grown diamonds? How has that affected the business in the past few years? Not really.

13:39I mean, they're easy, you know. Are they easy to spot? Like the difference between that? It's not zirconium. I got an$8 ,000 or$9 ,000 machine set up front. I put the diamond on it. goes like lab grown. The crystalline structure, it's weird. But you can't see with the eye though. No, the crystalline structure is a little bit different and it's very easy to detect. So it's not really affecting the industry. Like people want the real thing. No, everybody, yeah. It's like, it's really equivalent. Like, you know, I could tell you like, you got real Picassos, you got fake Picassos. Which one do we all buy?

14:13Well, that is a good question because I do have a fake Picasso hanging up in my house. Like I got a collection of forged artworks that are really, really good. And it costs almost nothing. Yeah. Well, you know, some people are cool. That's why lab diamonds actually sell. Some people are cool with the fake one. Just like Kubrick Zirconia and everything else. And Mazinite, for years, people have bought them. But people also, you know, the majority of the people want the real thing. Yeah. And it's funny how, like let's say it's like a Gucci handbag. You can't really tell the difference between a fake, the average person can't tell the difference between a fake, I mean, it comes out of the same factory, even in China, you know, and yet people, they have, there's some meaning, there's some psychological value.

14:54Well, I mean, people want the real thing. I mean, like if you take a Gucci bag or something like that, if you know what you're looking at, you can definitely tell the difference, but people want the real thing.

15:05Take a quick break. If you like this episode, I'd really, really appreciate it. It means so much to me. Please share it with your friends and subscribe to the podcast. email me at altature at gmail.com and tell me why you subscribed. Thanks.

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20:29and so you know you've obviously been doing this for so long you've been doing the the tv aspect for so long which means there's a lot of there's a lot of drama and every time someone i feel like every time someone comes into this store there's a story like you said with the with the cowboy hat there's a story so like what's what's maybe i don't know in all these seasons what's maybe one of the most emotional stories you've seen where someone's selling you something that had so much meaning to them? I don't know because they really don't care if it has meaning to them. That's fair. Maybe that's how you can do this.

21:02It's just stuff. I don't understand the sentimental attachment to it. I mean, it might be a little bit sentimental to somebody, but at least you've got stuff. What about the person who has no stuff and they're broke? Yeah, that's a good point. So you're not a collector? there. Oh, no, I got all sorts of bizarro shit. I mean, I have the oldest stained glass window in the United States of my house. I have a NASA rocket engine that was piloted by Neil Armstrong. I have like books on, you know, I have one book on how to try a witch. How to try a witch? How to bring to trial, yeah. Oh, how to try a trial.

21:44Trial. Yeah. Yeah, the proper way to bring a witch to trial. That's from the 1600s. Wow. I have books on alchemy, how to turn, you know, base metals into gold for like, they're hundreds of years old. I just got all kinds of weird stuff. What rises to the level where you're like, oh, that's interesting for me? I think it's just super cool. I mean, but like, then again, I turn around, you know, someone offers me enough money, I'll sell it. But like, yeah. Well, let me frame the question a different way in the sense that what's a customer where it's not emotional for you, but it was the most emotional you've seen someone react to parting with something.