How Entrepreneurs Invest

DK Episode 36 - October 02, 2021 - Duration: 22:12

Viewer Requested Video: Drawk Kwast explains the three ways how entrepreneurs invest, and the order these three ways must be learned in.

Transcript

0:00:01.1 Drawk Kwast: I've got a viewer requested video and the question was, "How to invest?" And the way that I'm gonna answer this because I figured since they're asking me, they want my answer and not the answer of someone like Warren Buffet who is gonna do this completely differently. I'm gonna tell you how to invest like an entrepreneur, so their question was basically, once you have some money, what do you do with it to make more money? I'm gonna have to answer this in a slightly different way. I'm gonna start at the beginning. So there are basically three different ways that you can make money. You either create something of value, you're building something, somehow constructing something, putting something together, you're basically making something out of nothing. That's one way to make money. There's a second way to make money, which is introducing people, so what you're building, that wasn't there before, is you're building relationships. So what this might look like is maybe you meet someone that owns oil wells and you meet somebody else that makes oil barrels, and you simply introduce them and then take a cut of the action somehow. So that's the second way you can make money.

0:01:40.4 DK: The third way you can make money is to invest, so you see a kid with a successful lemonade stand and you say, Hey, that kid really knows how to sell the fuck out of his lemonade. If somebody gave him a $1,000, then he could do such and such and this and that, and make the stand better and do some advertising and make more money. So you're basically making a bet and you're saying, Hey, if I give funds to this, I'm gonna be able to get some kind of a return. Number three is what Warren Buffet does. Warren Buffett does not do number one, and he doesn't do number two either, so that's why I'm saying this guide is gonna be how you build wealth, or rather how you invest to build wealth as an entrepreneur. And I've actually heard some people on the internet that know about what these three things are, but what I always thought was real funny about these people is they don't get it completely right. They say, You can do it like this, or you can do it like this, or you can do it like this, and that's very narrow-minded thinking. Entrepreneurs don't think in terms of, I have to pick this or this or this. Successful people say, I'm gonna fucking do it all, so this is how entrepreneurs invest, they do it via all three.

0:03:06.9 DK: So let's start at the beginning. Let's say that you have absolutely nothing, nothing, you have no skills, you have no money, you just... You have nothing. So if you got nothing going on, what you do have is time. So in the beginning, when you're starting out, and this might be like a 10-year-old child, or this might be a 40-year-old man trying to get away from his 9 to 5, you're going to start with method number one, and what that looks like in the beginning is you're gonna go to somebody else that already has a business going, they're already able to make money, and you're gonna go to them very, very humbly, and you're gonna say, Hey, I see that you have a manure business and you have a tough time finding the people that are just gonna shovel shit. Well, I've got free time, and I'm willing to shovel shit for you. What is it that you're willing to pay me? Or you might be so clueless that what you have to say to them is, I will shovel shit for you for free, if you teach me about the shit shoveling business. So they're gonna put a shovel in your hand and they're gonna show you how to shovel shit.

0:04:39.3 DK: And then when you know how to shovel shit, you're going to get paid some amount to shovel shit that nobody else is willing to be paid to shovel shit, metaphorically speaking. That's how you start off. Now, I recommend, since you're gonna be taking the worst job ever, pick something that you enjoy. If you're into Barbie dolls, pick the Barbie doll business. If you're into lawn mowers, pick the lawn mower business. Why do you wanna pick something you're interested in? This is like a no-brainer that a lot of people don't understand. When you're starting out at the bottom, and I mean the bottom, doing stuff that other people don't want to do, you better pick something you're at least interested in. So to kind of stretch this metaphor out, let's say that you're really, really interested in lawn mowers, right? What you're gonna do is you're gonna go to a guy that has a lawn mower business that services and sells them, and it's the shovel shit angle. I will clean your toilets for free, if you teach me how to repair a lawn mower, or maybe the angle is, I will clean your bathrooms for free for the opportunity to be around your sales people, to learn enough about lawn mowers that I can then start selling lawn mowers for you. So again, like the metaphor is sometimes a metaphor, sometimes the shoveling shit thing really means like you're cleaning the fucking toilets. Okay.

0:06:35.4 DK: So now you've built this up to something where you have something that you can now work for actual money instead of working for free just to get knowledge. So now you're in the industry and you're making money. What is the next step after that? Well, that's part one. You're just kind of... You're trading your time to get some knowledge, so you then have something you can sell of value. So once you get that, you're gonna try to keep your eyes open and maybe you took the lawn mower repair route and you notice something about the lawn mower blades, you get some idea that, hey, if people did this, what would that solve? Would that solve a problem for the people in the business? And maybe you get a crazy idea like, hey, if we put carbon fiber on the tips of the lawn mower blades, it increases the cost of the blade twice, but it makes it last five times as long. I don't know, something like that. Right?

0:07:56.4 DK: So now in this business, you've learnt enough and you're making a little money while you're going along the way, and you see something that you can fix in the industry that other people haven't fixed, so now you're selling your carbon fiber tipped lawn mower blades. Right? Okay. So this is all Step One, you're building something out of nothing, and I realize that the person that asked me this question, they're way past Step One, but technically it's all investing, it's investing from zero all the way through these other stages. Right? Okay, so now that you've done that, you've now really given some value to the industry, and because of that, you're going to start meeting people, and that's when it's time for part two. So the second part of this is making money by introducing people, so maybe your carbon fiber tipped lawn mower blades really take off, and you are selling a bunch of them to the lawn mower sales and repair shop that you were cleaning their fucking toilets six, eight months ago, and as you start selling these lawn mower blades, you start selling some of them directly, and you start selling them to people that have landscape businesses, right.

0:09:29.6 DK: What is hard to see here? If you're an entrepreneur, you're already putting the picture together and you're going, well, wait a second, if I know the people that sell the lawn mowers, and I know the people that buy the lawn mowers, I know the people that service the lawn mowers, and I know the people that run the lawn mowers, seems like I could put something together here. Like maybe you go to the lawn mower sales guys and you say, hey, what type of discount would you give me if I wanted to buy five lawn mowers from you? If I buy five, can I get a $100 discount on each one? Sure, they'll say, or however the numbers work out. And then you go to the guys that have the landscaping businesses and you say like, hey, if I could get you a discount of $50 per lawn mower, could you buy five of them? And now you've played the deal maker, so you're not the person that's building value so much anymore, you still got that going over there, but what your new thing is, is you're introducing people together and you're taking a cut. So in that case, if those numbers work out and that deal happens to work out, and by the way, 95% of your ideas won't fucking work, but the 5% that do, wow will those work!

0:10:56.5 DK: And over time, the more practice you get, the better those numbers will work out. So maybe your first deal and you made 250 bucks, right, 'cause you took the $500 discount and you put the 250 on when you sold it. The split is 250, so you make $250. And now you get kind of excited because making $250 selling five lawn mowers is a lot better than cleaning out the toilets for free. Right? So the way that this works kind of in practical terms, myself and my friends, and some of my friends I've been doing business with for 20 years, coincidentally, the magic number with us happens to be 20%. So it's kind of known throughout my circles, the different people that I work with and the different entrepreneurs I know, hey, if you can hook me up with a deal, like you can make a sale for me, I'll give you 20% back. So I'm not in the lawnmower business, I do different things, but all my businesses basically have that same thing where if you come to one of my businesses and you say, hey, I've got a customer for you, I'll give you 20%. And what are they taking the 20% for? For putting the people together. Okay? Okay, so that gets you through Step Two.

0:12:15.8 DK: Now we're on to Step Three, which is what my viewer was actually asking, this is what most people mean when they say invest. Well, when you've made it that far, you might be sitting on a little bit of money now. So you might have say, I don't know, a $1,000 saved up after you've done that five lawn mower package deal a few times. Right? So now you're sitting on a 1,000 bucks and you're thinking to yourself, what can I do with this thousand. Okay, in the beginning, you should be investing it in yourself, you've kind of figured out a way to make money, put it back into the company, keep on doing more of what works, but there will be a point where either more of what works doesn't work anymore, like you can only spend so much money on Google AdWords, things like that, or you've just got such an abundance that you wanna kind of spread out, hedge your bets.

0:13:16.0 DK: So this is where the Warren Buffet type investing comes in. You're not building anything, you're not introducing people, you're making an investment with money, but see the thing is, is everybody, when they're trying to figure out investing, it's like they wanna get to Part Three, they wanna get to the ending right away, and then they sit back and they say, Well, that's great, I know how to invest now, but I don't have any money to invest, so none of it matters, and it's just all masturbation. So that's why I go through the whole thing, so you actually know how to get a little bit of money to invest it, and here's the key thing, if you jump right to number three, you'll lose your fucking ass. What is it about Warren Buffet that makes it so he can invest so much money and make so much more money? He knows what the fuck he's doing. You don't. [laughter] But again, if you go all the way back to the beginning, you can start with cleaning toilets for free. Right? So we'll get you there.

0:14:16.4 DK: So this is how this works, the idea of giving money to someone and when they get the money, they can then blow their business up and you get a piece of that back, but the trick is to know where to do it, when to do it, under what terms, because what you're basically talking about here is you've heard the saying before, a bird in the hand is more valuable than two in the bush, Well, investment is about two in the bush, it's not about what is right now, you don't give somebody money for what they have right now, you give them money, you give them the investment for what it could be later, and the trick is to figure out if it's really gonna happen like you think or not, because otherwise you just lose your investment and you're fucked. And you're not going to do that game very, very long, losing, losing, losing, losing until you run out of money.

0:15:10.3 DK: And I've seen people that have successful businesses and they invest all their money like idiots, and then at the end of the day, they're working their ass off for nothing. So just a little bit at a time in the beginning, until you learn how to do this, but here's the thing, realize that if you went through those stages, you know what real work is, you know how to put people together. In the process of making introductions and putting people together, you figured out, hey, I can't introduce any business to this company because the guy that runs it is a fucking idiot. So when you've figured that out, now when all of a sudden you're at Step Three and you're looking at, hey, is this the type of business that I wanna give a $1,000 to or $10,000 or $100,000 or a million, you're gonna be thinking back of the lessons you learned when you were introducing people and you're gonna ask yourself based off of your experience, not something you have read in a book, hey, do these people know what real work is? Do they have a work ethic? Do they have their shit together? If I have a meeting with them, 5 o'clock on Friday, do they show up late drunk? [chuckle] If I have a meeting with them 8AM Monday, are they prepared? Do they have their shit together? If I come visit their office at 2 o'clock on a Wednesday, is it a fucking circus?

0:16:45.2 DK: So that's how you do it. And you can't skip ahead. You have to go through the process. And what you'll see in the end is that a successful entrepreneur, usually we've got about seven things going on at any given time, like right now, I run three companies, and then each of those companies kind of have these projects that may or may not be working out, and that's really how you make money. Like I've seen people that run online businesses where they're selling widgets and they'll spend a bunch of money on Google AdWords and they'll sell their widgets and their widgets only have a 10% markup, and they make a little bit of money, and they can't figure out why their competition can afford to pay so much more money than they do for AdWords. Well, the pricing is the same for the widgets, but for some reason, they're out-bidding on the AdWords. Well, what their competition figured out is they can pay too much money for AdWords, take a loss selling a widget, and then take the customer from selling the widget 'cause the most expensive thing is to find the customer, take that customer and then sell them widget insurance at their widget insurance business.

0:18:25.0 DK: So you see how that works out. They're taking a loss for the advertising to sell the widget, which means they can outbid all of their competition that sells widgets, and their competition can't figure out how they do that, and then their widget insurance business, how is it that they're getting all of these leads and it's not costing them anything? The people that are competing with their widget insurance business are sitting there going like, where the fuck do these people get all their leads from? Like we don't... see any ads on AdWords for the widget insurance business. How are they getting it? So that's why I say like a successful entrepreneur isn't gonna pick one of these three things, they're gonna be doing all of them, and the more stuff you have going on, as long as you can stay organized, its hedging your bets. So if you wake up one morning like a friend of mine did, to find out that the FDA has made his business illegal, you better have had a couple other things that you've come up with. In his case, he had a way of doing business, a method that he learned with that business that then got put out a business by the FDA, that he could then just take the same thing he was doing and kind of apply it to something a little different.

0:19:50.3 DK: So if you're only doing one thing and that one thing gets knocked out, you're screwed, but if you're covering all three of those things, you'll be fine if something gets knocked out. So I hope that explains a little bit about how an entrepreneur goes about investing. Start off on something you love, and don't worry about making money if you're totally clueless and without skill. Do what nobody else is willing to do. Shovel shit, clean their toilets, right? And learn something that you can use to make money with. Then trade your time to make a little bit of money. Stick in the business long enough that you figure out how to do something in the business where you can make money without trading your time, the deal maker part two, the second method. And then once you've done enough of those deals and you figured out how businesses actually work and you get a good read for someone and you can just sense it... I don't know, entrepreneurs have this thing where we can sit there with someone that's brand new starting out, and we get an idea like, hey, this kid's gonna make it. Then you can take a little bit of the money that you made after investing it in yourself and start investing it into other people, because that's what investment is. You're never investing into a business, you're investing into that business', people.

0:21:24.3 DK: So I hope that answers the question for my guy that wanted to know how to invest, and if you have ideas for viewer requested content, go to my website, drawkkwast.com, and you can go to the contact form and give us a request for a video. We don't do them all, and some of them take a little while to get out, like I think the request for this one is like 10 months old. I apologize that it took me a while, but the good ones, we'll eventually get to them. I'll keep the videos coming.

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