Episode 276: Darin Soat: The Problem with Finfluencers, and Why it Won’t Get Better Anytime Soon

In short

The Rational Reminder Podcast - Episode 276 Summary

Episode Title

Darin Soat: The Problem with Finfluencers, and Why it Won’t Get Better Anytime Soon

Hosts

Benjamin Felix
Cameron Passmore
Dan Bortolotti

Guest

Darin Soat (known for the YouTube channel "How Money Works")

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Episode Overview

In this episode, the hosts converse with Darin Soat, a notable financial influencer on YouTube, who has recently revealed his real identity. The discussion encompasses various topics such as the challenges faced by financial influencers, the quality of financial information available on platforms like YouTube, and the gamification of investing.

Key Themes Discussed

Identity Revelation: Darin discusses his first-time association of his real name with his channel, "How Money Works."
Background: Darin shares insights from his career in investment banking and how it informs his content creation.
Content Strategy: Exploration of how Darin chooses topics for his YouTube channel, focusing on discrediting financial myths and promoting sensible financial decisions.
Financial Influencers (Finfluencers): Discussion on the problems associated with financial influencers and their impact on public perception of investing.
Gamification of Investing: How platforms turn investing into a contest, affecting real-world investor behaviors and decisions.

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Key Points from the Episode

Introduction of Darin Soat
Revealed his identity as the creator of "How Money Works."
The channel aims to provide sensible financial information, combatting myths and scams.

Background in Finance
Darin has a background in investment banking, which contributes to the quality of content he produces.
Transitioned to YouTube during the pandemic when deal flow was low.

Content Creation Insights
Content focuses on debunking myths, especially around side hustles and get-rich-quick schemes.
A mix of educational material with captivating storytelling.

Challenges of Financial Influencers
Many influencers provide misleading or overly simplified financial advice that caters to audience desires for quick returns.
The allure of financial success leads to misguided investments, especially amongst unsophisticated investors.

Impact of Crypto and Investing Gamification
Crypto investments are often glamorized, leading to substantial losses for retail investors.
Gamification encourages a betting mentality rather than prudent investing.

Criteria for Sponsorships
Darin selects sponsors carefully, avoiding any that could lead viewers to financial ruin (e.g., crypto apps, high-risk trading platforms).

The Difficulty of Quality Information on YouTube
YouTube’s entertainment-first model often prioritizes sensational content over educational material.
High-quality finance content rarely gains traction compared to more entertaining, albeit misleading, offerings.

Advice on Side Hustles
Emphasizes that side hustles require significant effort and are not a simple path to wealth.
Advocates for understanding the time and commitment required for any extra income endeavors.

Overcoming Influencer Challenges
The episode stresses the need for more responsible voices in the financial space to counteract the overwhelming presence of misleading information.

Final Thoughts on Success
Darin defines success as finding joy and fulfillment in work rather than just financial gain.

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Conclusion

The discussion highlights the complexities of navigating financial advice in the modern digital age, particularly how influencer culture and the gamification of investing can lead to detrimental financial decisions. Darin Soat’s insights reflect a commitment to improving financial literacy and promoting sensible investing practices among his audience.

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Transcript

Automatic transcript. May contain errors.

0:03This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from two Canadians. We're hosted by me, Benjamin Felix, and Cameron Passmore, portfolio managers at PWL Capital.

0:18Welcome to episode 276. And this week, we have an interesting and I would say a little different take for everybody. We had a chance to speak with Darren Sote, who is a U2 Finfluencer, I think it's safe to say. Ben, so why don't you give us the backstory. Well, he's not a Finfluencer because he's been anonymous up until the release of this episode. This is a, I don't know what I would call it, a side quest of this episode is the fact that Darren is for the first time associating his actual identity as a person with his YouTube channel, How Money Works. How Money Works is a large YouTube channel that has 839 ,000 subscribers.

1:02So as far as finance YouTube channels go, it's one of the larger ones. He does a great job covering a whole bunch of topics, but he talks about it when we ask him about the channel. He really tries to provide sensible information and debunk myths and combat the side hustle and passive income courses that people are always trying to sell. So in a lot of ways, he's very aligned with the type of content that we try to produce. He just makes it more entertaining than we do. But he's up against the algorithms of how the machinery works in these platforms. It's incredible. He watches videos. He does a really good job with pace and with graphics.

1:45It really pulls you in and makes it interesting. But then he's able to work in storytelling with really high quality, sensible information that will help people make better decisions. I know Darren because we're in a group chat, I guess, with a small handful of finance YouTubers. So we kind of chat in there occasionally. And then Darren was at Future Proof, the conference that we were at recently, and we met up there. He was already booked to come on the podcast before we met in California. He brings a unique perspective. He's got a background in investment banking. So he's very well-educated in finance.

2:20He's fairly philosophically aligned with the way that we think about providing information to people. He really does want to provide high-quality information that will truly help people make better decisions and avoid the hyped-up stuff that makes people make bad decisions. I offered or asked Darren a while ago if he would want to come on our podcast and just talk about the inside of – because he's, like I said before, He's not necessarily a Finfluencer, but he's a large YouTuber. He does YouTube full-time. He knows how all of this stuff works inside and out, but he's also spent a lot of time covering the more typical financial influencers and the crypto pumpers and people selling courses and all that kind of stuff.

3:04I think he had some pretty interesting thoughts on how all of that stuff works and how people should approach it. I don't know if he has the solution for how to combat it, but it's a really hard solution. I mean, you hear Darren talk about it. It's like you're fighting against this precisely designed algorithm designed to give you the information that you're looking for. And if you're looking for bad information, for what we would consider bad information, the algorithm is going to feed it to you. And people know that. So people wanting to provide that information in the sense that it's not good for their viewers, but it's probably good for them because it enriches them in some way, that content will be fed to you.

3:42It's quite the situation on YouTube. And we briefly talked about this while we were chatting with Darren, that we're talking about YouTube, but you take something then like TikTok and it's just that much worse. It's kind of a scary state of how people obtain and consume information. I'm going on here, but that's my backstory for Darren. And if you're a first time listener or viewer from the How Money Works YouTube channel, great to have you here. Hope you find some value here. I think that's good. This is a typical episode just in terms of the type of stuff that we're talking about, but I think it is important and useful information.

4:19So hopefully people enjoy it. All right. Here's a conversation with Darren Soat.

4:27Darren Soat, welcome to the Rational Reminder podcast. Thanks for having me. So Darren, how do you describe your main YouTube channel, How Money Works? Yeah, so the way I would describe it, it's really a platform I could basically make anything that I want to make. But I would say a big focus of the content themes is trying to disprove a misconception people have about personal finance, or just talk about something that's interesting that's maybe not talked about enough. And I try and use my professional experience that I had in banking to add a little bit of perspective to these things. So that it's not just kind of a regurgitation of information, maybe something I can add that's a little new.

5:08So I spend a lot of time researching these topics, or so now than I did previously, because really is kind of my full-time focus. But a big motivation of what I'm trying to do is dispel a lot of the myths behind maybe the side hustle culture, get rich quick schemes, stock picking, really in order to encourage people to make better financial decisions. And ultimately, I'm motivated out of the fact that I really, really hate seeing people lose money paying$500 for a course that is going to tell them either something that they could have learned from a YouTube video or something that is not necessarily good for their own financial decision making, like, for example, a trading course.

5:50So in addition to that, I can't really just make all my content about that because what happens is your content really gets stale. So I have to also talk about things like... I guess I choose to talk about things like how much it would cost to make an iPhone in America and why BMW was planning on charging$18 a month for heated seats. Basically, the point of the story was telling people about the importance of recurring revenue. So I like to focus on things that I think people will come away with learning something new, ultimately trying to maybe teach people some of the things that I learned when I was investment banking, in investment banking, and things that I personally had found valuable or incredibly interesting, ultimately to help people make more informed decisions about maybe their own personal finances.

6:39Maybe they could apply it in their workplace. For example, talking about recurring revenue, maybe they're a business owner, how they could implement some sort of recurring revenue model or whatever. So basically, if I were to summarize it, I would say it's like if I had the editorial section in Forbes or Bloomberg or what have you in video form. So that's, I guess, the general synopsis of the channel. What you described aligns pretty closely with what we try to do. So I guess it makes sense that we ended up talking here. You casually alluded a couple of times to your background in investment banking.

7:17Can you just say a little bit about that? Yeah. So my career really did about half a decade was in investment banking. Coming out of college, I started at a small boutique investment bank that focused on healthcare transactions and kind of around COVID was when deal flow was really starting to dry up. So there was not a lot of transaction work to do at the time, which is when I wanted to get into YouTube. I had a lot of time on my hands. And so I was inspired by some of the other creators out there, some of the more edutainment creators like Wendover Productions, Real Engineering, but also finance creators like yourself and The Plain Bagel.

7:59So I kind of used that inspiration to make my own channel, which at the time was Compounded Daily. And when we talk about influencer businesses, we could talk about why I decided to change the name to HowManyWorks. At the same time, it was a YouTube channel. It wasn't making me money. And so around year two and a half, I made the transition to a San Francisco-based technology investment bank. Founders were incredible. And the opportunity just to get out to San Francisco and have exposure to business out here really, really not only was a huge learning experience for me, but it was a really big opportunity for my career.

8:35because, you know, around year four, maybe three and a half, I made a transition to a boutique healthcare investment bank that I really admired. And I think that's when I started to really get overwhelmed. The very, very smart people and very grateful for the opportunity, but I just got to the point, it was really kind of a breaking point where, you know, I was working not only 90 hours a week to focus on banking work, but also too, I had to spend what I had of what was called protected hours, which is an allocated time that I had available to just focus on anything that I wanted to. And as you guys know, most people probably spend that with their family.

9:19I had no other option but to focus on researching, writing, and creating a new YouTube video. So So that time was really focused on YouTube and preparing video for my video editor. So fortunately, that was outsourced at the time. I wasn't editing the video by then. And it still just got really, really overwhelming. I remember anecdotally, there was a moment when I was so stressed out that I got the first draft of the video from my editor, and then I uploaded it straight to YouTube. And I should have reviewed it because it was riddled with spelling errors. But I made the decision to focus on this full-time once it really became a business that could sustain me.

10:03And ultimately, my passions are education and being creative. And I don't think that there's a better way to do that than with YouTube. So that's a long story about how I went from investment banking to focusing on this full-time. But I don't regret it at all. And I definitely enjoy doing this far more than banking. I will say this. One of the things that I do miss about the professional world in banking is that you are surrounded by a bunch of people that can just give you this incredible perspective that I really didn't realize it, but was used frequently as fodder for my videos. So I don't have that anymore.

10:41For example, I recently met up with a colleague of mine who I worked at, and he was telling me that some VCs with some pretty broad mandates are giving their money to private equity buyout funds right now in order to actually get a return. So that sort of perspective is things that you only get when you are working directly for a bank. Just running a YouTube channel, I kind of have to rely on just maybe talking with peers and reading the news. So that's the question I had for you, Darren. How do you pick topics for your channel? I would say it's really kind of just keeping my head in the financial news, trying to keep up with all the interesting stuff that Harvard Business Review puts out.

11:17Anybody who watches my channel will know that I'm constantly referring back to reports from HBR and And as I kind of synthesize this information, then I can kind of use it to make a video, be it maybe something that's based on my opinion or something much more straightforward in terms of what the research says. And so, again, I say some of it's a little bit editorial focus where I synthesize this information. For example, one of my videos talks about how company loyalty is a thing of the past. And people who switch jobs every two years tend to earn more than their peers who just stay loyal to one particular company.

11:55And that sort of research I use to basically make the conclusion, you need to be selfish and look out for your own career. And you need to look out for yourself. Those ideas, I would say, kind of are the ones based more on opinion. Whereas sometimes I just try and be straightforward about what's happening in the world of finance. Just trying to present the facts on the Evergrande crisis. honestly like over time you kind of get a good feel of what your audience wants to hear but you can't spend too much time just going over those same topics because your content is going to get stale if you do and people are going to not listen to you anymore if you just say the same thing over and over and over again so you have to be creative you have to talk about something new and you have to talk about something that other people find valuable and interesting Which is an interesting concept when you think about something like, and we'll come back to this later, but just a comment.

12:47When you think about something like personal finance, where what you should be doing is pretty straightforward and simple, but you can't really talk about that every day. How did you decide or why did you create your channel anonymously? So when I started the channel, I actually started it as Compounded Daily. And the thinking behind doing that was because I believed at the time, having a name that somebody could recognize that had to relate with finance was kind of an obvious way to brand the channel. You know, at the time, finance channels were taking off and there was this kind of desire to capture audiences, especially in the finance space.

13:26There was high CPMs at the time. Again, this was really around COVID to kind of bring it back to when I started the channel. I heard a lot of feedback about what you talk about chemistry. That was when I realized that maybe it's not too obvious what it's about to a general audience, that I needed to change the name of the channel. And so I did. And I also changed a few stylistic things, being a little bit more excited with the narration and also reducing the amount of time it took to produce a video using leveraging stock footage like story blocks. I think the real big reason why I wanted to remain anonymous with the YouTube channel was because I didn't want it to impact my ability to get hired at another investment bank.

14:06Because at the time, the channel wasn't making money. So I really had to focus on what was making me money, which was my job. So if I talked about it, it would probably hurt my chances of getting a job. I thought the best course of action there was to just remain anonymous with it until eventually, maybe one day it would become something that I could you know, make a career. So this is, as I understand it, your first time revealing your real identity connected to your channel. How does it feel? It's a little nerve wracking, but ultimately it's about time. So no, I mean, honestly, couldn't think of a better way to do it.

14:45I love the Rational Reminder podcast. And for my viewers who are going to be watching this, make sure to follow the Rational Reminder podcast. It's incredible. So let's go back to your career in investment banking. How did your channel impact your work while you were still in investment banking? Yeah. So I really tried to make a focus of prioritizing all my work in investment banking. Any bit of free time that I had at my banking job was used to maybe read something that could be used as research in one of my next videos. But for the most part, it was incredibly difficult. It was actually some of the most stressful times of my life.

15:23On the flip side, I would say that being surrounded by some of those people gave you perspective into things that you just don't have perspective in if you aren't working in an investment bank. You learn things that could be used as research or support for content in the videos that you're producing. Obviously, not anything deal-related, anything to do with macroeconomic trends. I remember every Monday, we would have an update in the macro economy from people in our credit division. And so that was like really, really nice to listen to because it also was, it gave you perspective and it really kind of made you smarter when it came to anything about finance or the economy.

16:08And ultimately for me, it made me, I think, valuable in the content I produce. And hopefully I could pass some of that value onto my viewers. It's really interesting. I can relate on some level because when we started doing content, I was still heavily involved in meeting with clients. I've scaled that back. Not being in client meetings, you have less insight into what people are worried about and thinking about. So it makes it a little harder to think of topics. Yeah. There's a lot that CNBC, for example, doesn't capture or any big news outlet doesn't capture that you just get from having conversations.

16:43For example, with private equity funds, changes in credit, how they're organizing their capital stack for an acquisition. Some of the more in-depth things makes you a little bit smarter when it comes to putting these videos together, but again, isn't really talked about by the major news outlets. I want to move our conversation toward a topic that you've spent a lot of time covering on your channel, which is financial influencers. You've just nailed coverage of this topic. I got a bunch of questions. How do influencer businesses work? So the way influencer businesses really work is basically, it's a marketing, it's selling your attention for some sort of money.

17:23So could speak on it specifically on YouTube, which is how my business works is there's really two sources of revenue, which is AdSense and like a paid video integration. For example, I work with companies like Morning Brew or educational brands like Brilliant to advertise, do a one-minute advertising block on the video in exchange for some amount of cash. And so one of the problems with that, especially on YouTube, is that you don't really have control over the audience. And one of the things I was thinking of when I wanted to create a YouTube channel was I wanted to create a business that I could ultimately package up and bring to a liquidity event.

18:05And at the time, it sounded like an incredible business idea. And then I could sell it. I could run off into the sunset and make my money and so be it. I wanted to create a portfolio of channels. I started another channel called How History Works that talks about anything history-based. What I learned real quickly was that there's this big thing in running a YouTube channel in that a lot of times people want to hear the same person talk about things. And so there's this key man risk where, for example, let me just explain it like this. On the History channel, I had the writer, Sam, who's really good at creative writing.

18:41And Sam, I had him at the time do voiceovers for how history works. I personally think that he is a better narrator than me, but there was so much audience pushback saying, we need to hear you, that it made it... I ultimately had to take the narration back over. And so I quickly learned one of the good things about investment banking is you have a good understanding of what a healthy business looks like. You get a good sense for those good business vitals, if you will. And key man risk is one of those things that's not good. Ultimately, creating the history channel was a way to diversify risk from how money works.

19:19But if I'm the key man tied with both of those channels, it ultimately ended up being worse. Ultimately, it makes it so that it's not really a good liquidity event. So YouTube channels actually make for pretty bad businesses, if I'm honest. You don't have control over the algorithm. A lot of it is what you feel will be good content. And very often, I'm wrong about that. there's so many grifters out there talking about the formulas for making it on YouTube. You'll see thumbnail grifters on Twitter saying this thumbnail or that thumbnail. I don't want to dismiss this idea that thumbnails aren't important.

19:55They are. But what I am dismissing is this idea that there's a magic answer and that there's a clear formula for how YouTube works. And there just isn't. It really is just trying your best to understand what your audience wants to hear. And honestly, if you were to come along and try to buy something like that, you would realize really quickly that that is hard to replicate. It's hard to really kind of get a feel for what my audience wants to understand. So you can't really package it up, sell it. There is kind of this big key man risk. And so because of that, and again, going back to the trying to understand good company vitals, I started a newsletter.

20:30So I revived the name Compounded Daily because a newsletter is very similar in the business of YouTube in the sense that you are selling advertising space. The challenge though, is you don't have the algorithm that pushes your videos with the newsletter. So instead, what you have to do is you really have to use word of mouth. You have to, on my own channel, I give people the video a day early if they subscribe to my newsletter. And I also write an interesting story with that newsletter, hopefully scaling it to the point that I could actually start to monetize it. So that eliminates, again, the key man risk.

21:02That eliminates some of the concerns about liquidity if I wanted to sell it one day. I look at the multiple that Morning Brute got for their newsletter. And obviously, that might be a little bit aspirational, but hopefully one day, you know, there could be some sort of sale that would make sense from a business perspective. Really interesting. Yeah, it sure is. What problems do you see with personal finance influencers on YouTube today? I think that there is still and will be for a long time, huge problems with personal finance influencers on YouTube. Where I like to start with this is just the psyche.

21:35I remember way back when, before I really started to study finance, that I thought, basically from Hollywood depictions, that finance effectively meant day trading. As you can imagine, I was pretty disappointed when I was spending four years aligning logos on PowerPoints. And it wasn't nearly as sexy as the stock charts and the candlesticks and all that. So if you think about a general audience, you got to ask, what do they want? They don't want someone telling them to diversify their portfolio. They want a moonshot. They want a winner. They want answers. They want the stock picks. And obviously, that's in conflict with what's sound financial advice.

22:15I would actually... I'm going far in saying this. That's gambling. But I think that's the most egregious example. But even financial advice that people may think sounds good, but might not be suitable for everyone isn't good. I don't necessarily think discussing credit card benefits is necessarily a problem. But when you say invest passively in an S &P 500 index and call it good, a broad audience isn't necessarily suitable for that sort of advice. And to us, that's obvious. To a general audience, it's not. I guess one of the things that I'm really focused on is I really feel like there is this divide where you kind of have the wealth advisors, the finance professionals, and then you have the general public.

23:02And there's things that finance professionals will say like, this is obviously bad advice. This obviously doesn't make sense. You obviously shouldn't go all in on Palantir or GameStop. The truth is, is that there are so many people out there that just don't get that. And so sometimes the most basic explanations have to be regurgitated over and over and over again. Getting back on point of why some of the other problems I see with personal finance influencers, one of the things that you will commonly see is they trying to appeal again to the psyche of fortune, wealth, and success by using extravagant things in their videos as props, usually in order to sell something like a day trading course or some sort of investment class.

23:49And so they'll rent Lamborghinis, they'll rent a mansion and say, if I do this, so can you for the price of$500. And the way I look at personal finances, I actually have that belief of the index card. There's a book by Harold Pollack, where he talks about an index card. And he mentions that everything that you really need to know about personal finance should really fit on an index card. And so when people are selling these courses, it just makes me a little sick because what are they selling? Well, if they're selling that you don't... Here's an example. Some people will sell guides on how to set up a dropshipping business.

24:27Well, you have to think anybody, if you're selling a course to a general audience, then you should expect that they could follow through on those things that you're telling them to do. So if it's like set up a dropshipping course, okay, well, if I were to set up a drop shipping course, then so can anybody else. And then the barrier to entry is really low. And the problem with businesses where the barriers to entry are really low is that it becomes very hard to make money from. So when these people are selling courses to others, basically how to invest your money, how to create a side hustle business, anything along those lines, I think what they're doing is they're quite literally robbing people.

25:08because there's no way that somebody can take one of those courses. And if you are paying to take one of those courses, you probably aren't somebody that really has what it takes to go out and start a incredibly lucrative business, right? If you are somebody that's paying to take those courses, you are somebody that's in need and not somebody that really has so much capital that they just want an extra way to make money. It's one of the most frustrating things. And one of the last things I'll say about this is everyone thinks it's only unsophisticated people that would fall for something like this, right?

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25:44And I just remember when I was younger, one of my parents who's very well-educated telling me that, oh, the Motley Fool recommended these stocks right now. And I'm like, at the time, I don't know any better, right? But if you think about it, that's not just people who don't know any better, people who might not be uneducated falling for these things. It's very smart people as well. It's something that greatly concerns me. And I think I've spent a great deal of my focus on my channel talking about the issues. Crazy. It's a self-selection type situation where people who are prone to being scammed and are in need and are maybe desperate are the ones that the algorithm is going to send to the people who are offering scam courses.

26:26In the advertising too, you'll see these YouTube sponsorships from these get rich quick courses. Always on my videos, on your videos, everywhere. Yeah. And it sucks because you can't keep up with just trying to say, oh, I don't want this particular ad on my channel. And on their end, they're particularly trying to get their videos on my channel, which is funny because they haven't really watched my videos. But I hope is my audience comes out realizing that, you know, the course was obviously a scam and, you know, I take their money away from them anyway. But ultimately, I try not to have those ads on my videos.

27:02Can you affect that? Yeah, through AdSense. Oh, interesting. Never even looked into that. I'm a very amateur YouTuber. I don't know. So a question that is obvious in my mind as a follow-on to that discussion just now, how did the problems that you just talked about interact with crypto or how do, how did, how do? I mean, it's ongoing, I guess. It's still ongoing. Again, I think you just have to go back to the psyche of the general public. Imagine this, you see Bitcoin get to$1 ,000. You think, okay, whatever, so be it. And then it goes to$5 ,000 and starts to get really serious. And then it goes to$25 ,000 and then people start paying attention.

27:44And then it goes to$65 ,000. And then now you have a bunch of people thinking that there's an industry. You have venture capitalists funding these projects, right? Taking these big point allocations that they get, that they can immediately dump on the public market so that they could pump their returns. But that's a whole nother subject. The thing about crypto is it's a lot easier to start a crypto project, which is unregulated. And you could use it to pump a particular coin and dump that coin onto people who are less fortunate, if you will, because I got to think who else is buying some of those projects.

28:21CoffeeZilla covers a lot of these crypto scams. where basically what will happen is the founder of the project will hold on to a certain allocation of crypto. And then they will find some influencers that they will pay in order to bring attention to that crypto. And then they will sell that crypto to, they'll start slowly unwinding their position once the price goes up. And obviously, there's some sort of market manipulation there, but it's a lot easier to do than registering a security, maybe going public on the Toronto Stock Exchange or some sort of public exchange, and then using influence to pump up the price of something in order to get some sort of quick buck and make a quick return.

29:08And so again, I think the problems with crypto is that, well, we could talk about the problems with crypto itself. I personally think none of it makes sense, but a lot of people do have conviction that it works very much kind of like a religion. And because of that, there's kind of this tribalism. And if you think about the tribalism aspect of it, when people say, you must buy this stock or this crypto and not other cryptos, I think that's directly aligned. And I think that's intentional because people realize that the more people that buy into a particular coin, the more the price will go up.

29:44So I think that the person who said it best was Jamie Dimon when he said that it's like a decentralized Ponzi scheme because I've yet to see, and I should caveat, I guess kind of the only accepted thing to do is caveat that I don't know if blockchain technology or crypto will have some sort of application in the future. For now, I think that all it's doing is it's a way for people to use their influence to maybe get returns. And some people are making a lot of money on it, but I think a lot of people are losing a lot of money on it. More people are definitely losing a lot of money on it than are making money.

30:19It's a wealth transfer. I mean, if you look at the data on who's losing money, it's the unsophisticated retail investors. And obviously, it gives me heartburn when I see people on Twitter talk about how XYZ crypto is, let's use Bitcoin, for example, is the greatest technology to be invented since the industrial revelation. I saw that one and I couldn't believe it. But the thing is, is these influencers have massive followings and they say some things that are true. They report on news and they have an audience that people find them entertaining. So they use that influence in order to pump up whatever crypto that they have.

31:01And part of it is just like, it's just so internally frustrating that sometimes I can't even verbalize it. But I think for me, it's really just a lot of people are losing money on it. And it's not like a passive investment in the stock market where over time, it should be a good investment. But it's more so, it's really a gamble. And you're seeing a lot of grifters lose people a lot of money because of it. Were you offered crypto-related sponsorships? I was. And to this date, I still get offered crypto-related sponsorships. And yeah, something that's worth mentioning about that is crypto companies will offer anywhere from two to three times more than the typical rate I will have for a sponsorship slot.

31:48So for example, they will pay roughly$15 ,000 to$25 ,000 for an ad integration on one video on my channel. That's wild. Yeah, obviously I refuse. I don't believe in working with crypto for obvious reasons. So you mentioned earlier some of the companies that you do work with. How do you choose which sponsors that you will take? I try and have a pretty strict criteria for selecting sponsors. Generally speaking, I don't like touching most things that are finance. My criteria is I like working with newsletters. I tend to find that those are pretty harmless. You could sign up for free you know, and for them, their business is again, advertising.

32:30So they make money off selling space on their newsletter to advertisers. But you know, I basically won't work with anything that says if you put your money in X, you can expect that money to grow. So no crypto apps, no art investing. I will not work with brokerages like Robinhood for obvious reasons. Because what I think then is I think that you're giving people the tools for kind of their own financial destruction. And that's not something that I personally am willing to do. I remember seeing, so kind of as a side note, I went to see the movie Dumb Money this past weekend. And before the movie, there was an advertisement for Robin Hood.

33:09And Robin Hood, as a part of their advertisement, it was mentioned something along the lines of, you got longs, you got shorts or something as a way to say that we have all these different things, we have options. And it's like, what are you trying to do? These people lose a lot of money from these things, right? If you are somebody who has a considerable amount, let's say you're an accredited investor, I might feel a little differently about that. But for the most part, that advertisement is really trying to get to everybody. I mean, most Robinhood users don't have more than$1 ,000 in their account.

33:41So it really just kind of is encouraging gambling in a way. Why is it harder for high quality personal finance information to be seen on YouTube? It's because YouTube is an entertainment first platform. It really is the house of Mr. Beast. One example I like to use is someone who is a good friend of mine and it's Patrick Boyle. If you look at his old lectures, where he might explain something like the Fama French five-factor model, that probably doesn't get a lot of views, but it's something that's really important. Maybe not for somebody to understand about their own personal finance, but if you're trying to learn something about finance, you should probably watch that video instead of watching a day trading video.

34:21The issue with that is it's boring. And while it might be interesting to somebody like yourself or me, to a general audience, it's not. So basically for his more current videos, he has to kind of be more news related. He adds a little bit of comedy, dry humor to it. And you have to do that because if you think about how Mr. Beast operates his videos, every second is trying to keep the viewer watching for a little longer. And if you're watching for a little longer, then that's more people that the video is pushed to. And if the video is being pushed to more people, that's more people that watch the video, which is ultimately more revenue for Mr.

35:00Beast, which is more views, which leads to more revenue and more growth for his brand and more growth to his channel. So like, you know, for example, he'll do something at the beginning where he says, you know, I'm about to throw these Lamborghinis into this grinder and crunch them up. But you'll see that at the end of the video. And then kind of in between, he'll do a bunch of other different things. And the whole idea there is to keep people to watch the video for a long period of time. With that comes the fact that you have to basically compete with clickbait. I try not to use the word clickbait, but you really have to be competitive for clicks.

35:34So what I try and do is I try my best to balance making sure that what I say is with the video title and thumbnail is relevant to the video. Because if I'm not competing for clicks, then I'm not going to be seen over some of these more nefarious actors on YouTube. So I have to, in a way, find ways to be creative with my title that encourages people to click through. So it's an incredibly hard thing, especially if you're a channel like mine that brings people in and says things that they don't want to hear. It'll be harder for you to retire compared to prior generations. You won't get rich quick.

36:09And then still get views. It's incredibly hard to do that. But ultimately, you have to figure out how you can be competitive with others in YouTube. And it really just comes down to being entertaining. Because again, YouTube is really an entertainment first platform. And if you're not entertaining, then you will not make it on YouTube. You mentioned briefly earlier, side hustles, what do you think people need to understand about just the ideas of a side hustle or of a passive income stream? One of the biggest grifts I've seen on YouTube is this idea that you shouldn't trade your time for money.

36:41And you'll see a lot of these grifters sell these courses about other businesses that you could start up, how you could start buying real estate and ultimately renting that out, gain equity in that real estate and so forth. The way I see it is, and one of the things that really gets me is like, trading your time for money is really, I think, other than having an investment that you could put maybe in the market or you're putting your capital to work, in which case you're trading your capital for money. Trading your time for money is really the only way to make money. And so a lot of people have this idea that they want to work on a side hustle because they want to make a little extra money.

37:16They want to start a dropshipping course because they can just let that operate. They can go to their day job and they can make money overnight because they're going to be selling things on this dropshipping website. Well, the problem is, is there are so many people, again, creating dropshipping websites that it's so hard to actually be competitive there. And if you really want to start getting people to buy your products, you really have to spend some time marketing yourself, right? And obviously, that takes a lot of time. So let's say you want to come home and drive Uber, totally fine. But you should very, very well recognized that you're trading your time for money.

37:53So in that sense, if you're willing to make a commitment to doing that, you're more than welcome to, but just understand that, again, you are trading more of your time for money. If you want to spend 90 hours a week in banking and then come home and make YouTube videos, you're more than welcome to do that, but not sure I would recommend it. I think what people really need to understand is that there's no easy way to make money. And there's a lot of work. I mean, YouTube is a lot of work. You have to constantly be producing content. If you're not producing content, the algorithm is going to forget about you.

38:25If you are doing a side hustle, let's say you're mowing lawns, you can't just go and mow the same neighbor's lawn every single day. It takes time for grass to grow back. So you have to get a portfolio of clients that you hope to mow lawns for. In order to grow that portfolio, you're going to be spending a lot of time kind of building that up. So I really don't like this idea that it's really easy to just get into a side hustle that starts making money. It takes a lot of time, takes a lot of capital in many cases, if you want to buy real estate. And all things considered, it might be worth questioning whether or not it was really worth it to spend all that time to maybe start that side hustle, to go and mow lawns or whatever, instead of maybe working a little extra overtime at work in order to get more money that you can maybe put to work in a market.

39:11I think one of the biggest myths out there, and people are losing a of their money to buying courses about these secrets to side hustles. And truly, going back to what I said earlier, if everybody is doing them and they're so easy, then you're probably not going to make a lot of money. Another one I see is YouTube automation. This idea that you can use ChatGPT to come up with video topics and so forth. And ChatGPT is creative to some extent, but it's really, really uncreative when everybody else is using the same thing and entering the same prompts. And so it's really hard to make a YouTube channel just based on chat GPT if you wanted to do that.

39:45So the use of AI to, that's kind of become the new grift, is this idea that you could use AI to not only the graphics you use and videos, actually, some of the videos, we will use AI generated graphic content for like backgrounds and things like that. But it's not something that could totally replace the creative process, which is huge grift people are trying to sell, again, for$500, somewhere along those lines. So further to that, what problems does access to what appears to be smart and successful people through social media cause for the ultimate investors? I like to put myself in the shoes of the psyche of everyone, the people who are watching our content, or not just watching our content, but let's say the psyche of everybody following the latest trend on Twitter and what's trending on Twitter, or I guess X.

40:36One of the most dangerous things that I see out there is people who are treating people who sound smart as oracles of wisdom. To go back to Patrick, one of the videos that he did was the list of the Forbes 30 under 30 people who were indicted or had some sort of trouble going along with them, including Sam Bingman Freed and Charlie Javis. And that just goes to show that just because somebody is renowned in something, just because somebody might be a good technologist doesn't make them a good fintech entrepreneur. Just because somebody sounds really, really smart doesn't necessarily mean that they have the best investment advice, right?

41:12Just because Kevin O 'Leary or Mark Cuban feels very strongly about their crypto investments doesn't necessarily mean that crypto is a good investment. I think people use this heuristic that because they're successful, they know what they're talking about. And that's actually kind of dangerous because they're successful because maybe they had one really good investment, or maybe they were at the right place at the right time. So people really need to consider survivorship bias when trying to understand, is this person telling me something that is necessarily good for my investing decisions or what have you?

41:49But one of the things that I can tell people is just because maybe somebody is an expert in astronomy, it doesn't mean that they're an expert in the stock market. Yeah. I mean, the survivorship bias point is huge too. It's the expertise in one domain, not necessarily transferring to another is for sure important, but it's almost like luck in one domain. If you think about survivorship bias, someone had a good outcome for whatever reason in one domain, that may not even make them a good source of information for their own domain. Then people ascribe wisdom to them in other domains because they were successful in one way.

42:24It's just a total mess, but it's so common to see people think that this wealthy person said I should do this. I've even had in comments in my videos, people have said, why would I listen to you? You're not even a billionaire or not even a millionaire or whatever. It's like, what does that have to do with anything? Many of these people made a lot of money based on just one investment. Good on them for making that investment. One example I like to use is every time Michael Burry tweets something, you know there's these twitter accounts that will say justin michael burry said this assuming that he has the answer he knows and obviously like to us that's like ridiculous to a lot of people that he knows how do you think people can overcome the allure of i mean stuff like what we were just talking about but also the financial influencers who are out there promising to make them rich are they doomed you know we struggle with this too because of the selection bias we talked about earlier, like the people who want to get rich quick are not going to come and watch my channel talking about low cost index funds.

43:29This is something I struggle with, right? Because the algorithm itself is going to put people in front of content they really want to see. I mean, the algorithm is incredible. If they want the answer, if they want to know how to get rich quick, they're going to get content that says that. So how do you overcome the allure? Well, hopefully what I try and do is I try my best to capture people by videos that they might click on and say, I have a video thumbnail called the passive income scam, which if you're watching videos on how to invest or how to get passive income, you may click on my video.

44:08Because the more click beta you get, the more people feel like you're discredited. But sometimes the way I see it is it's like, do the ends justify the means here? If people view my video and ultimately don't fall for some of these get rich quick courses. I don't want to say like, you know, the answer is like quick bait. I truly think the answer is people who understand, I am speaking to your audience here, people who understand personal finance and, you know, the important parts about personal finance who maybe want to get into, who feel like they're also creative, who have charisma and feel like they could tell these stories in interesting ways that could help steer people away from getting scammed.

44:50If you have that creative ability, then get started making content. Please. I think part of it is just more voices out there talking people off the cliff than there are voices trying to make a quick buck off the audience that is looking to invest or stock pick or what have you. I think it's a combination of more voices and also just trying your best to be creatively competitive with getting exposure to these audiences and hopefully discouraging them from making poor financial decisions. The clickbait thing is so tough. I think my second most viewed video is a video called Reasons to Avoid Index Funds.

45:30And it's a little clickbaity, but in the video, I go through all the reasons that people give that you should avoid index funds and I debunk them. But that's my one video where there's so many comments saying this was clip paid, this is terrible, whatever. It's an important message to get across. So if ultimately the message is more important than the title, then I say, go for it. Because it's like, where do you draw the line? Some YouTubers, for example, especially in the finance space, will have a video thumbnail that says something like it's all over, right? And then you watch the video and it's just updated news about decisions that the Federal Reserve made.

46:06They decided to do a rate hike or whatever. And And people are like, oh, is it really all over? I guess it might be. But ultimately, the information was good information. So thanks for sharing this. And so people really don't get upset. But the problem then becomes when you do a video that one day it's all over. And another video, same people do a thumbnail that says, invest now. And then another video thumbnail the next day, why I'm selling all my socks or something like that. And I don't know. It just kind of looks like it's a bad look. And ultimately, I don't want to say it's okay to do something like that.

46:39If you're trying to spread a good message that hopefully looks out for people's best interests, then sometimes you have to be a little bit competitive with those thumbnails. So you mentioned Robinhood earlier made me think of this question. How do you think the gamification of investing has affected investors? When I think of this, I think the obvious one is the subreddit WallStreetBets. It's done a few things. And I think a good example of this is, I think I mentioned, I went to see the movie Dumb Money. And I was actually getting really frustrated when I was watching that movie, because the whole synopsis behind it was glorifying the retail investor, sticking it to the man, sticking it to Wall Street.

47:16And it talked about these people who were clearly in vulnerable positions. It literally talked about a nurse. It talked about an employee working for a GameStop retail store and two college students. And these people at the beginning, it said, okay, when these people's net worth, negative hundreds of thousands of dollars, in some cases, negative$50 ,000. And then it talked about these billionaires and how much wealth that they had, billion, Gabriel Plotkin, a couple hundred million dollars, I think more than that, a little less than a billion. The whole movie was really kind of glorifying, basically treating these retail investors as doing something heroic, sticking it to the man, sticking it to Wall Street, rather than making a really, really bad financial decision for themselves.

48:01And ultimately it paid off for them, but they're the lucky few. And that's not a message that the movie gets across. I think the gamification of investing has really distorted what investing should be. Investing should be something that's not immediate. You should be investing for the long-term. You should be investing really for retirement. But ultimately, the gamification of it and apps like Robinhood have turned it into a contest to see who can make a lot of money really quickly. The flip side of that is it loses a lot of people, most people, a lot of money really quickly. Again, going back to that whole dumb money thing, the movie, I think a lot of the issue too, is kind of this misconception about really kind of who the antagonist is.

48:47I know in the movie, they talked about Melvin Capital, a hedge fund, right? I think one of the things, and I honestly don't know who the LPs are in Melvin Capital, but one of the things that people tend to forget is that even in hedge funds, there's a lot of Main Street money. That's an important concept. When people feel like there's kind of like this war between the retail investor and Wall Street, what they really don't realize is that many of the time, or very often, it's a war between Main Street and Main Street, retail investors versus retail investors. You might have brought down Melvin Capital, but you also took down your teacher's pension funds.

49:24Obviously, they're much more diversified than that, but that's the point. So I think it's done a couple of things. It's given people an incorrect understanding of what investing is. And then And the second thing is it's muddied this perception of financial institutions and what they are, right? Hedge funds, for example. I don't think that's necessarily a product of the gamification of investing. I think that was just me going on my soapbox about things that I don't like about the movie. But I think what it really comes down to is that it's really turned investing into gambling, and people are losing a lot of money.

50:03And I don't know when or if these companies will be held accountable for. Free speech laws generally give them the right to advertise in ways that they want. I mean, but truly struggle to see some of those advertisements like the ones Robinhood is putting out and say, this is a good thing. I tend to think that it's actually not. It's actually pretty bad. My second and last question for you, throughout watching your videos, there's often references to what sensible investing actually does look like. and they're always brief little references, but it's what you said earlier. You make it really entertaining, but then you insert these little tidbits.

50:39For our listeners, what do you think, in your opinion, are the main points that most people need to understand about investing? First of all, I need to say this, and I really don't feel like I should have to say this, but I think this is something that needs to be said because I like to talk about the things that are obviously consider investing. The first thing is let's just debunk the mess. Investing will not make you rich. And you invest for retirement. You don't invest to make a quick buck. And then obviously, kind of the more general things that everyone needs to say, which is you invest for the long term, invest broadly, diversify.

51:15I think what people need to know about investing really comes down to this idea that you won't get returns overnight. You're in for the long game. And ultimately, you should have that expectation that it's not about playing a game. It's not about trying to make an extra dollar immediately. It's about preparing for a time in the future when you don't have income from, let's say, work that, and you need some sort of income. The whole idea is you invest so that you can retire and have some sort of income when you're unable to trade your time for money. Yes. It's a good way to explain it. It's also like not a game, like you said, and the gamification stuff, it's become a game of not even necessarily trying to win.

52:00You use the Wall Street bets example. They get excited about sharing how much money they lost. It's gamifying losing money. Yeah. And I don't particularly think that's funny. No, I don't either. I guess some people do. Final question for you, Darren. How do you define success in your life? So this is actually something that I really thought about around that period when I had finished investment banking, right? Or really kind of, you know, the months leading up to that. I think for success for me, it's just joy, being happy in my life. You know, I thought about if I were to do a whole career in investment banking, and I lived a whole life doing that, I'm sure, you know, it would have been super lucrative, probably could have made a lot of money, wouldn't have had a lot of time to spend that money.

52:44And so could have passed that money on to another generation. And who knows what they would have done with it, they would have lost it. And the question is, was it really worth it? Was it really worth spending my entire life to make all that money? There were parts that I definitely feel fulfilled about in investment banking, closing a deal, super exciting, especially when you go to the closing dinner with founders and things like that. But for the most part, it was stressful. And I couldn't imagine living my whole life doing something like that. So I think what it comes down to in happiness for me is optimizing for happiness or joy, finding what makes you fulfilled.

53:25And for me, I genuinely enjoy being creative, hopefully encouraging people to make smarter decisions with their money using that creativity. Great answer. Well, Darren, we appreciate you coming onto our podcast to talk about your story and some of the things that you've spent a lot of time covering on your on your YouTube channel. It's been great. Awesome. And thanks for having me. Great to see you again, Darren. Thanks, Cameron. Thanks, Ben.

From the publisher

If you’re in the world of finance, you’d know today’s guest from YouTube — but you’ve probably never heard his real name. However, today and for the first time, he chooses to associate his actual identity with his YouTube channel! It’s an honour to introduce to you, Mr. How Money Works himself, Darin Soat. On his YouTube channel, Darin combines captivating storytelling with high-quality, sensible information that helps you to make better financial decisions. Today, he joins us to explain How Money Works, why he chose to create his channel anonymously, and how he feels after his grand reveal. He describes how his channel informed his career as an investment banker, and gives us his insider breakdown of how influencer businesses work. Then, we dive deep into YouTube as we explore the problems with today’s financial influencers (finfluencers), how these problems are carried through to the crypto market, why it’s rare to find high-quality financial information on YouTube, and everything you need to know about the gamification of investing, creating passive income, and the ins and outs of investing from the perspective of one of YouTube’s top finfluencers, Darin Soat!

Key Points From This Episode:

We’re thrilled to reveal the real identity behind How Money Works – Darin Soat! (0:00:42)
Darin’s professional background. (0:01:41)
A thorough description of How Money Works, straight from the source. (0:04:33)
Exploring Darin’s background in investment banking. (0:07:08)
How he chooses content for his YouTube channel. (0:11:05)
Why he created his channel anonymously, and how he feels after his reveal. (0:12:54)
How his channel impacted his work while he was still in investment banking. (0:14:54)
Darin’s summation of how influencer businesses work. (0:17:00)
The problems with today’s financial influencers on YouTube. (0:21:17)
How the aforementioned problems relate to the crypto market. (0:27:11)
His criteria for selecting sponsors for How Money Works. (0:32:03)
Why high-quality personal financial information is rarely seen on YouTube. (0:33:45)
Darin’s advice on side hustles and creating passive income. (0:36:25)
How financial influencers and the gamification of investing affect real-world investors. (0:40:11)
What everyone needs to know about investing, according to Darin. (0:50:38)