Podcast appearances and mentions of michael sure

In this profound episode, Jonathan is joined by esteemed theologian and author Michael Horton to discuss his latest book, "Recovering Our Sanity: How the Fear of God Conquers the Fears that Divide Us." In a world teetering on the brink of chaos—from unsettling politics to the lingering effects of the global pandemic—Horton's book offers not a typical self-help guide but a deep theological exploration of how a proper fear of God can liberate us from our myriad earthly fears.Dr. Horton, Professor of Theology and Apologetics at Westminster Seminary, explains what it truly means to fear God—both biblically and theologically—and how this reverential fear can effectively drive out fears of the future, others, and even death itself.Throughout the episode, Dr. Horton discusses the different types of fears that plague our society—from cultural anxieties to personal struggles—and how these stem from a lack of genuine fear of God. He emphasizes confronting our earthly fears with the hope found in Christ, rooted in the Gospel, and the shift from self-preservation to a Christ-focused life.This episode is a humbling, thought-provoking, and hope-igniting journey that challenges listeners to replace false securities with the profound joy of knowing Christ, who commands us, "Do not be afraid." Join us as we explore how cultivating a healthy fear of God can recover our sanity in these turbulent times.To ask Jonathan a question or connect with the Candid community, visit https://LTW.org/CandidFacebook: https://www.facebook.com/candidpodInstagram: https://www.instagram.com/candidpodTwitter: https://twitter.com/thecandidpodTRANSCRIPT:This transcript recounts Candid Conversations with Jonathan Youssef Episode 249: Recovering Our Sanity: How the Fear of God Conquers the Fears That Divide Us: Michael Horton.  [00:01] Jonathan: My very special guest is Mike Horton. He is a professor of systematic theology and apologetics at Westminster Seminary in California, and he is the author of many books, including The Christian Faith Ordinary and Core Christianity. He also hosts the White Horse Inn radio program. He lives with his wife, Lisa, and their four children in Escondido, California, and it looks like he's on his back patio,  having a conversation with me and being very gracious with his time. Mike Horton, thank you so much for taking the time to be on Candid Conversations.[00:45] Michael: Thank you, Jonathan.[00:50] Jonathan: I do thank you for your time. Now Mike, I've read your books, I have subscribed and I do recommend all of our listeners subscribe to the White Horse Inn. If you could just give us a quick, whirlwind tour of your story, we can talk a little bit about the podcast and some of your books as we progress through the interview.[01:19] Michael: Well, thank you, Jonathan. Yeah, I was raised in a Christian home and came to understand the doctrines of grace partly through my older brother. Kind of had my own little, not little, my own Romans revolution and then started digging deeper into Church history and theology and biblical studies, and eventually went to Biola University, Westminster California, then to Oxford for doctoral studies and then post-doc at Yale and came back to teach at my alma mater and have been here for 25 years. Blessed to be able to have a hand, with my colleagues, in training pastors; pastors training pastors.[02:17] Jonathan: I've been a recipient of many of the students of Westminster Seminary who taught me at Reformed Theological Seminary in Atlanta, and I've been really blessed by your work. You've got a very jovial, friendly, California vibe to you, but when you speak, you're like a double-edged sword. It's so penetrating. And I think there could be a theological issue that I've been struggling with for months and you'll say it so concisely in a few sentences, and I'll think, Where was that when I needed that?[03:09] Michael: You're too kind. Thank you.[03:11] Jonathan: Tell us a little bit about the White Horse Inn. It has been on for something like thirty years.[03:17] Michael: Yeah, thirty-plus, almost thirty-five years now. It has been such a fun thing. I've learned so much from my colleagues on the program. I still learn from the new team. We produce a magazine, too, Modern Reformation Magazine, which is really—I encourage people to subscribe to that. It's a good digest of topical theology related to culture. The umbrella organization is called Sola Media, and one of the things that we do that I'm so excited about being a part of is called Theo Global, where we host theological conversations (like we do on the White Horse Inn) between Baptist, Lutheran, Reformed, Anglican traditions and bring people together from a particular region. So we've been doing it for eleven years in India and also almost that long in Nigeria or in Kenya, in Nairobi. And then also Cairo for the Middle East. We just did one in Thailand that Pakistanis and Indians were able to come to, because they're not able usually to see each other. And then we are, Lord willing, starting another one in Southeast Asia, probably Singapore.So these have been so rich. Out of them are coming, a series of theology books from the global church to the global church. And so instead of having just regional theologies or theologies that pretend that they're not culturally contextual, we want to hear the voices of people from different locations testifying to the same Gospel, and that's just really been lots of fun.[05:42] Jonathan: Well, having ministered near that area of the world in Australia, you're right, there can be a disconnect between the cultures. We read each other's books and that sort of thing, and those are Western cultures, but I think we miss out on hearing about what is happening in Southeast Asia, Because they do face similar obstacles but also some quite different. As one of the points of your book is, there is still the one true God and the one Gospel that reaches across those cultures and reaches across so many of those things that we would consider barriers. And I think that's wonderful. I pray the Lord would bless that.[06:30] Michael: Thank you. One of the things I find, Jonathan, is there is a sweet unity around the Gospel that binds us when I go to these other places. Wherever I am in the world, I don't feel like I'm a stranger because I'm with my brothers and sisters. I wish I felt the same way in America. It's very different here.[06:51] Jonathan: Yeah, I was going to say it's interesting that what you're doing is you're unifying and uniting across denominations, across cultural things, and yet that's working almost in the opposite direction of where we see things here, which is there's division within denominations; there's division within small regions. You're undoing what is happening on a bigger scale in some of the Western parts. It's exciting to hear that's not happening everywhere, that there's actually some unification taking place and that's encouraging. And I know that's going to be an aspect of what we talk about in our conversation about one of your new books.Now, I know that you had some health issues with your heart a couple of years ago. Maybe for some of our audience who didn't know or having heard any updates, are you healthy?[07:54] Michael: Thanks for asking. Yes, what it was was a valve that just exploded in my heart, so it was an emergency open-heart surgery. But they said—they know my arteries and my heart better than anybody, they said, you'll die of something, but it won't be of heart disease. You have a good heart; you have good arteries; this was just a fluke.[08:24] Jonathan: Unbelievable.[08:25] Michael: So—yeah. I'm fully recovered. They said I could go bungee jumping again if I want to.[08:32] Jonathan: Again. I'm glad that you were already doing that—I picked up your book a while ago and I've been wanting to have you on the podcast ever since reading it. And the book is called Recovering Our Sanity: How the Fear of God Conquers the Fears that Divide Us. And my goodness, what a perfect title for everything we see. Give us a little bit of the reason for writing and the timing of the book.[09:18] Michael: Well, it had been percolating for years now, actually. I wrote a book many years ago called Beyond Culture Wars: Is America a Mission Field or a Battlefield? And this is in a similar vein, but really in light of the fears that really divide us today. And the center used to be the Bible, the Gospel, getting the Gospel right and getting the Gospel out. We have our doctrinal differences across the evangelical mainstream, but basically we had different political views and those political views didn't divide between brothers and sisters and churches.And what I've seen lately has just been like a food fight in a cafeteria, and political issues and social issues raised to the level of the Trinity. And it's like, okay, well, we can argue about that over coffee, but we don't bring it into the church. That used to be kind of how people thought about things. These things are important, but they're not as important as our unity in Christ. But I hear people attacking pastors, pastors attacking their flock, back and forth over these issues. And I think people don't get this heated over the doctrine of election or justification or the Trinity. Does it suggest that these issues are deeper in our hearts than the truth of Christianity, so what really binds us?And I looked at it and I said what really binds us is salvation, what we think we're saved from. If we think we're saved from the people over there who are threatening our values, or the people over there who are different from us ethnically, or the people over there who have a different view of economics and social justice? What are we really afraid of? What are our ultimate fears? And I argue that we have all these secondary fears. The real fear deep down, the mother of all fears, is the fear of death. And none of the solutions that can be offered by FOX or CNN, there is no solution to that. But we have it. Why isn't that on our dashboard as central, getting it right and getting it out?[13:01] Jonathan: In the book you cast a broad net in kind of what you've just said up here, picking out a few of the issues that you're seeing so much division over. But then you lay out some of the theological framework to reorientate your reader to where fear should rightly be placed. And it's away from the fear of one another and having a right fear of God.And you use the word sublime in the book, which I found really helpful as an aspect of God. I wonder if you could give us a little bit of explanation and walk that out for us.[13:52] Michael: Sure. I love that word. Sublime is really, I think, what we're talking about when we talk about the fear of God. Some people will say, “Well, it's not really fear. It's reverence, awe.” Fear is a big part of it, but it's a kind of fear that attracts. Think of what happens if you've ever stood at the mouth of a volcano, looking over it, watching the lava flow. Or I live in Southern California, so we have fires, and there's a kind of weird attraction to going to the fire and seeing it. Or you're out on the ocean and you're terrified. A squall comes up you're afraid, but you're also kind of your heart is racing not just because you're afraid, but also because you're kind of in awe of what's happening. In awe of the waves.God, you know whenever an angel shows up in the Bible, an emissary of God, what's the first thing? You know the number-one commandment throughout Scripture? The number-one command is “Be not afraid.” Because when even the mailman of God shows up, people are terrified.[15:31] Jonathan: Yeah, or Moses's face is a little too bright.[15:36] Michael: Yeah. Hey, put a napkin over that or something… That's what, really, is the basis for all sublime events, encounters that we have is really the fear of God. And so it's … A Jewish writer, John Levinson, puts it well. He says, “In the Hebrew Scriptures God beckons with one hand and repels with the other.”So there's a kind of don't get too close. Even Jesus in His Resurrection, “Don't touch me. I'm different.” God is different from us. And that sense of awe, of majesty, of even terror. Think of the disciples in the boat with Jesus. They were afraid of the storm, and then Jesus calmed the storm and they were afraid of Jesus. Who is this who has control over the winds and the waves? They were terrified. And that's the kind of Who is this? What am I dealing with here? The kind of shock and awe, the surprise is something that is missing, I think, from a lot of our experience as Christians today.[17:11] Jonathan: Well, and I know in the book we've seen a lot of the statistical evidence that comes in support of what you've just said, which shows that evangelical Christians really don't know what they believe. They have a complete misunderstanding of God, of the nature of Christ, of their roles.[17:51] Michael: If the fear of God is not the beginning of our wisdom, then something else will be. We'll fear something else. We will fear other people who are different from us and we'll fear cancer, we'll fear losing our job, we'll fear environmental collapse and catastrophe, we'll fear these other people taking over. It's not that those … that there aren't legitimate concerns of a political and social and cultural nature. But we have a disordered fear. And if we have disordered fears, we have disordered loves.God is not only the source of our greatest fear, legitimate fear; He's also the only one who conquers our fears and says, “Welcome home, prodigal. Welcome home, here's the feast.”[19:22] Jonathan: And deals with our, as you refer to it, the mother of all fears.[19:27] Michael: Death. We're dying. In California, people aren't allowed to die; they pass away; and we put these cemeteries out, far away from view, or we turn them into parks and things. And it used to be every time you walked into a church there would be headstones, and it reminded you as you walked in why you're going in there. The Gospel is for dying people, and we're all on that road. And so the question is, How do we face death? … How is that ultimate anxiety relieved? We mourn, but not as those who have no hope. So what does that mean for my daily life now? I could be twelve years old and I'm dying. I could be eighty and I'm dying. So what … Let's talk about that. Let's talk about the dying and the resurrection of the dead and being attached to Jesus so that what He is in His humanity right now, glorified, we will be. Let's talk about that. That's a lot better than anything on CNN or FOX.[21:00] Jonathan: I love it. I think in the book you tell the story of when you went to a debate with, I might be messing this up, but I think it was with an atheist and you sort of said, “Yep. Great. Can I talk about Jesus now” and kind of put him off, and he sort of like, “I wasn't prepared to debate that.”[21:22] Michael: Yeah. This was years ago. Bill Nye the Science Nye.[21:24] Jonathan: Bill Nigh, that's right.[21:25] Michael: He was talking about how religion is based on false fears and so they develop myths and so forth.[21:37] Jonathan: And you were like, “Well, that's true.”[21:39] Michael: Yeah. I don't disagree; that's a pretty fair analysis of religions. I guess you'd have to take one by one and analyze it, but as a generalization, now can I talk about Jesus and His Resurrection? Let's keep getting back to the main business here.[21:59] Jonathan: The main issue. Yeah. In the book you draw this distinction between naturalistic and hyper supernatural, but then you sort of carve out this third option of ordinary. Can we talk a little bit about that and how we see that playing out in our world today, particularly in the Church?[22:23] Michael: Sure. Often what you see today is a naturalism underwriting the progressive agenda and John Lennon's “Imagine.” On the right, you tend to have a hyper supernaturalism wedded to a conservative agenda. And so what do I mean by that? Well, a naturalistic worldview says, of course, God isn't involved. If God exists, then He's not involved in this world. He didn't create it, it's self-evolving and so forth.A hyper-supernatural worldview says that God works miraculous. You know, to say that God did it means it's a miracle.[23:34] Jonathan: Yeah.[23:35] Michael: Whereas in the Bible God does all sorts of things. Mostly, He doesn't perform miracles. What about all the times when we cut our finger and it heals after a week? What about that? What about a child [who] has a brain bleed in NICU and it resolves in 24 hours. How about those? Those aren't miracles. People say, “the miracle of childbirth.” There's no miracle of childbirth; it's just a spectacular example of God's providence. That's part of our problem is we're looking for God only in the spectacular, only in the extraordinary, only in places where we can point to and say, “Oh, God did that.”So we can't explain how somebody recovered from cancer; we say, “Well, God did it, not the doctors.”[24:46] Jonathan: Right.[24:47] Michael: Well, how about God did it and the doctors did it. God did it through the doctors.[24:52] Jonathan: How much control does God have here?[24:55] Michael: Right. He has control of everything. It's not just supernatural events; it's not just miracles. God's in control of every second, every breath. Every breath that you and I take is under His dominion.[25:11] Jonathan: That's right. He holds all things together. You know, I hear that phrase a lot, “That was a God thing. That was a God thing,” and I always have to stop and say to them, “Everything is a God thing.” I mean, conversations. The fact that your brain works. The ability to read. The ability to understand and reason. It's like I hate when you get that narrow scope, as you're saying. We've lost the sublime. We've lost an understanding of how much—you know, it's almost a deistic view that, you know, God sort of—[25:42] Michael: Yes![25:43] Jonathan: He's put some things in place and then He occasionally steps in and—[25:47] Michael: That's why I argue that actually naturalism and hyper supernaturalism unintentionally conspire with each other against Christianity—[25:57] Jonathan: Right.[25:58] Michael: —you know because, you know, we get to the place where we don't see God in our ordinary, everyday existence, but only in these punctuated events, and we've got to raise things. I think we do a lot of pretending. We pretend that things that have an ordinary explanation are miracles because we have to have God in our life. These large swaths of our lives where there are no miracles are upheld by God's marvelous providence.[26:40] Jonathan: Right. Amen to that. In the book, one of the fears you mentioned is fear of losing your job. And I think in the book you helpfully distinguish between calling and vocation or job and helping us understand and distinguish the two things. I wonder if we can talk a little bit of bringing clarity to that, because we're longing for something to put our identity in. Is it a football club? Is it a university? We're currently, I don't know when this will air, but we're in the middle of March Madness. Who did you pick? What's your university? What's your background?And vocation is very much one of those things we can put our identity in, and yet I think you talk about the ultimate and the penultimate between calling and vocation. I wonder if you could bring some clarity to that, and then we'll turn to some of the practical outworkings of the division we see after that.[27:53] Michael: Yeah. Well, one of the things I try to maintain throughout the book is, look, the things I'm talking about are not unimportant. They are legitimate fears. There is a legitimate anxiety. The question is, where do we go with that? But yes, let's affirm it. It's real, it's a deal, but penultimate not ultimate.For example, if I am in a circle of people I've never met before, we're having breakfast, and I ask them, “Tell me about yourself,” very ordinarily they'll say, “Well, I'm a dentist. I'm a …”Now okay, there's an example. That is part of our identity. Vocation is a gift of God; it's a calling. So to say, you know, we shouldn't place our identity in our vocations, well, not ultimately. That's the problem. It's a part of our identity, just like being a father is part of my identity. That's a calling. And we have to realize, as Luther said, we have many callings, many vocations during our life. We're parents, we're spouses, we're children, we are extended family members, we're dentists, and cleaning movie theaters. We have all kinds of callings/vocations. Sometimes we have a vocation to suffer, to carry a cross. Sometimes we have a vocation to be a friend. We have lots of vocations, and keeping them in balance is very important.Keeping them penultimate, not ultimate, is my point. My ultimate identity is chosen, redeemed, justified, being sanctified, will be glorified, in union with Christ. That's my identity and that's really who I am. Paul talks about himself as if he's almost collapsed into Jesus. His identity is so bound up with Christ that he can even say his suffering is something he glories in because it shares in Christ's suffering. That's my identity; that's where I really find who I am. The other stuff is not just stuff I do, that turns it back into a job. It is part of my identity, but it's penultimate, not ultimate.[30:57] Jonathan: Well, as we said at the beginning, we see division in so many different places. We're, of course, as you know, we're in another election year, and that—fear is going to be used as a … it's going to be weaponized this year, particularly this year, in America. And we have an international audience, so I want to be sensitive, but I know that internationally also they see a lot of American news as well. I think you talk about how, in the book, two sides to the fear coin. You mention both in the book. One side, fear is easily exploited as a motivator. On the other, fear is a weak motivator in the long term. Why is that? Let's kind of unpack that a little bit.[32:07] Michael: Yeah. I use the analogy of deer who are … there is this fight or flight that God gave us and the animals as well. It's purely instinctual, instinctive. You don't … Whether you're a deer or a human being, you don't really think about, you don't contemplate, you don't calculate, you don't explore what … You have a car coming towards you, you flee. You get out of its way if you can. But what happens is—That's adrenaline. That adrenaline rush is just a marvelous gift of God's providence. The problem is what would happen is deer had this disease of constantly being afraid, every crack of brush of another deer drove them wild running in fear? That's what I see us doing now, and what happens is it works in the short term. If you're going to cynically use fear to get a herd of people to do what you want them to do, that might work in the short term, but long term, people can't live like that. Long term, people actually become cynical. They won't participate at all. They'll just turn it off because “I've had this scare a thousand times and I'm not going to have it anymore. I'm tired of it.” It just runs out.And that's what I think a lot of people are feeling right now with American politics. So I'm not an analyst of American politics by any stretch of the imagination; I'm simply looking at it on the pastoral side. What is driving us to be like the deer in the headlights every five minutes? And it's exhausting us.[34:33] Jonathan: Yeah.[34:34] Michael: Each side whipping up the other side against each other. If I don't win this election, dot, dot, dot. If the other person wins the election, dot, dot, dot. It's apocalypse not. I especially find offensive any use of God or the Bible or Christ for that fear. Anyone who does that, particularly cynical leaders who don't even go to church, aren't professing Christians really, but they use the lingo to gain the nomination of particular groups. When Christians participate in that, they carry crosses to the U.S. Capitol to storm it and talk about hanging the vice president, and they're carrying crosses with Bible verses, this is the sort of thing that must just aggravate our Lord and Savior whose name is taken in vain.And yeah, is that a critique especially of evangelical political conservatives? Yes, it is. Because they are my brothers and sisters closest to me. The secularists aren't really invoking the name of Jesus and Bible verses and carrying crosses. I'm more worried about evangelicals distorting the gospel than I am about who wins this next election.[36:54] Jonathan: What is that doing to your testimony to those people who don't know the Lord? What message is it giving them?[37:10] Michael: That Christianity is about power.[37:11] Jonathan: Right, exactly.[37:12] Michael: It's not about a cross with God who has all power becoming flesh being spat upon and then being crucified upon a cross, bleeding for our sins. It's about basically choosing Caesar over Jesus, making Pilate our hero rather than Jesus.[37:45] Jonathan: I found that chapter, I can't remember if it's the Christian nationalism chapter or the one before, but it was really helpful the way that you walked out American history in a way that probably a lot of the readers might say, “I don't know if I understood that.” Or “I don't know if I fully understood Thomas Jefferson and his letter to the Danbury Baptist Church in Connecticut.” Understanding separation of church and state, understanding like how we got to where we are and the creating of even thinking between the British … French revolution and those different paths that were laid out before us. And even just understanding our own history and how we got to where we are, I think a lot of it is just cast as Christian nation. And I found it helpful the way you distinguish that.Because I hear this a lot in the church in terms of America being the new Israel, are there blessings that have come with certain things? Sure, fine. Our Constitution is well put together. I love the history of Witherspoon, the Scottish Presbyterian, and you can see some of that in the language that comes out through the Constitution. Again, I think it's helpful to have your historical understanding rather than this reinterpretation that we have now that it's, as you said, it's this feeling like someone's come in and taken this from us. And now, to use the title of your other book, now we're at war, right? It's not a mission field, it's a battlefield. We're fighting for the honor of our country. And all that's done is create us and them division and a lack of clarity and a lack of what we're called to in a mission sense as Christians. Where was I going with that? Who knows? Anyway, I found it helpful.[40:10] Michael: You said it better. Preach it, brother.[40:16] Jonathan: Just random thoughts. Just reading your books and regurgitating it to the people. So later on in the book you sort of walk us through the areas where division has come in. So we have Christian nationalism has certainly seeped into churches. Then you have some really helpful, short chapters with issues with LGBTQ+ community, cancel culture, racism. Let's just kind of walk through some of these and help Christians who are listening to this who are saying, I thought this was the right way to handle that situation but you're saying something else. Let's kind of walk through maybe even just one or two of those. Again, you had a really great illustration under your LGBTQ+ chapter of the young man whose family had sent him to you and you were pastoring him and what happened with all that. If you could tell us a little bit about that, just to help kind of encapsulate what we're talking about here.[41:35] Michael: Sure, this brother struggling with homosexuality, his dad was on the board of a prominent evangelical organization, and his pastor had told him that we basically don't want your influence in the church, so he was considering leaving the faith. But then he read Putting Amazing Back Into Grace, a book I wrote a long time ago, and came out to work at our organization as just a pretext for just hanging out and shepherding this guy. He became a part of our church and a lot of people looked after him and we got a lot back from him.He went back home, and his pastor said that all this reformed teaching he was getting was heresy and so forth, and no, you've lost your salvation. Romans says that He gave them over to a depraved mind. So he committed suicide and …So what is it? Why do you do stuff like that? Well, you do it out of bad theology, to be sure, but also out of fear. There are a lot of churches that just don't want to deal with it. They don't want to have this problem. They don't want to say that they have people in their congregation who are really, really suffering. If you're a secularist, you don't suffer from homosexuality. You don't suffer with gender dysphoria. Only Christians do. And only Christians suffer with greed and envy and malice and other sins that are listed in these same sin lists in the New Testament. You don't lose your salvation over those.The key is repentance, right? We're called to a life of repentance. Whatever our tendencies are towards particular sins, we're all corrupt in heart. We're sinners and we're sinned against and we are in a sin-cursed world. And so where do we go with that fear? And then once that fear is solved objectively in Christ, having been justified through faith, we have peace with God. That's an objective fact. With that now as an objective fact, how do I respond to this brother or sister who's justified just as I am, and who is being sanctified just as I am, but has propensity toward a particular sin that I think is particularly serious, particularly great? How do I love this person? How do I respond to this person?John Calvin said a pastor needs to learn how to have two voices: one for the sheep and one for the wolves. And what I've seen in some very close cases to my own experience, what I've seen sometimes is pastors confusing the sheep for wolves and treating them as apostates or as people who, you know, if you really were a Christian, you wouldn't be suffering with that. Well, they're not saying, “I have a right to this sin.” They're not saying that it's okay. That's why they're struggling with it—and they're struggling with it in your church.So one of the surveys, actually a couple of the surveys concluded that about 80 percent of people in the LGBTQ+ community were raised in conservative Roman Catholic or Protestant churches.[46:39] Jonathan: Give that statistic again because I think we need to hear it again.[46:42] Michael: I don't know exact, it's in the 80s, 80 percent.[46:46] Jonathan: Over 80 percent.[46:49] Michael: Right. And what's even more striking is the same percentage said that they would come back to church, even if they didn't change their rules, but listened to them and cared for them. That's what I found amazing. I was glad that they asked … they added in that survey even if they didn't change their beliefs but they were kind and they listened and they cared for me.So if I'm fearful, here again the adrenaline, the deer in the headlights, that's a gift God gave us for fleeing something that is imminently threatening. This is not imminently threatening. If I come to understand that, then I'm not a deer in the headlights; instead, my brother or sister, my friend, parent, I'm someone who is looking out for the best of this person and now I can actually get ahold of myself and think and make judgments and articulate things. And ask questions and get information. That's a big part of it. It's not all spiritual. People are suffering from mental health disorders, and that's physical, that's brain chemistry. All kinds of things.People are suffering from sins that have been committed against them in the past. A lot of this is very complicated, and it's not all that person's direct fault. Again, we're all sinners, sinned against, and live in a sin-cursed world. And all those factors play into what we have to consider when we're not the deer in the headlights but can sit down with people over a long time, be willing to walk with them over a long time, be willing to read up on things, ask them questions, we're that interested in them and understanding what they're going through, understanding their pain. It's like if they have cancer we'd be at their house with casseroles, but if they have these things, you know … So let's … fear of the Lord drives out the fears of everyone and everything else. This is the beginning of wisdom.[48:52] Jonathan: Exactly. Well, I think we could probably have this conversation for probably another four more hours, which we might do just because we're having so many technical difficulties. You know, I can't recommend this book enough. Mike Horton, Recovering Our Sanity: How the Fear of God Conquers the Fears that Divide Us. I told my team I want to re-air this as we get closer to November so that we can all be reminded once again of what we're called to. Mike, what are you working on at the moment?[50:35] Michael: I've been kind of obsessive compulsive about a project, three volumes with Eerdmans. First volume is coming out in May, titled Shaman and Sage. This is a very different project. It's the history of spiritual not religious. Where does this come from? You have this divine self within trying to break out of all constraints. And so I trace it all the way back to ancient Greece and to the Renaissance. And then the second volume, Renaissance to the scientific revolution. And then the third volume is covering Romanticism to the present.[51:31] Jonathan: Oprah.[51:32] Michael: Exactly.[51:35] Jonathan: That's going to be a massive help for believers, because that's the one we see a lot in those statistics. Yeah, I hear that from quite a few people, spiritual but not religious, or whatever the phrase is. But well, Mike Horton, it's been such a privilege. I'm so grateful for your time and coming on to Candid Conversations and sharing with us.[52:10] Michael: Jonathan, thank you so much. It's been a pleasure.[52:14] Jonathan: Thank you, brother.  

In today's CIHAS episode, I'm speaking to online personal trainer and performance nutritionist, Michael Ulloa. Michael is on a mission to make the fitness industry a more welcoming and accepting space for all, which is exactly what we dive into in this ‘sode. We are unpacking some toxic myths about exercise, Michael spills the beans on his feelings about Joe Wicks, and we discuss what really goes into professional fitness models' photo shoots. Plus we answer loads of your questions like how to find a more joyful relationship with movement after a lifetime of using it as punishment for eating. Find out more about Michael's work here.Follow his work on Instagram here.Follow Laura on Instagram here.Subscribe to Laura's newsletter here.Enrol in the Raising Embodied Eaters course here.Here's the transcript in full:INTRO:Michael: The way that we're being sold health and fitness just isn't sustainable or achievable in any way and then people blame themselves and feel worse and then therefore they're more likely to spend money on all these other programs repeatedly and it's just a vicious cycle that just doesn't ever end.Laura: Hey, and welcome to the Can I Have Another Snack? Podcast, where we talk about appetite, bodies, and identity, especially through the lens of parenting. I'm Laura Thomas. I'm an anti diet registered nutritionist, and I also write the Can I Have Another Snack? Newsletter. Today, I'm talking to Michael Ulloa.Michael is an online personal trainer and performance nutritionist who is on a mission to make the fitness industry a more welcoming and accepting space for all. In today's episode, Michael and I are shooting the shit about the fitness industry, unpacking some toxic myths about exercise, and answering loads of your questions: like how to find a more joyful relationship with movement after a lifetime of using it as punishment for eating.Some of you have been asking for more episodes on movement and fitness, so I think you're going to enjoy this conversation. We'll get to Michael in just a second, but first, I want to tell you real quick about the benefits of becoming a paid subscriber to the Can I Have Another Snack? Newsletter and community.For just £5 a month, or £50 a year, you get access to the extended CIHAS universe. That means exclusive weekly discussion threads, links and recommendations, you get commenting privileges and access to my monthly Dear Laura column, as well as the whole CIHAS archive and a few other sweet perks, but more than anything, you're supporting independent evidence based nutrition information free from diet culture and anti fatness. I can't do this work without the help of paying subscribers. So if you get something out of being here, then please consider upgrading your subscription today. And if you're still not convinced, then check out this recent review I received from a reader. They said: "Laura's podcast and newsletter are always thought provoking, filled with care and compassion, and a respite from one size fits all health and nutrition advice."So if that sounds good to you, then head to laurathomas.substack.com and become a paying subscriber today. Alright team, let's get to today's episode, here's Michael. MAIN EPISODE:All right, Michael, I need to know what the deal is. Because you're like one of maybe five PTs who isn't pushing aesthetic or weight loss goals on us.Has that always been your deal? Or is this more of an evolution for you? Michael: Yeah, it's definitely an evolution and it's funny you mentioned that because I get a lot of angry messages from personal trainers that don't think that my approach is right, which is always quite funny to me. I don't know, it's, I definitely, when I first started off in the fitness industry... I've been a personal trainer now for nearly 10 years.And in terms of personal training, that kind of makes you a bit of a veteran because a lot of trainers are quite short lived on average. When I first started off, I definitely did have your typical, like, mainstream slightly bro approach to fitness and nutrition. And I know most people that maybe work in the kind of space that, like, you operate in, for example, there tends to usually be a reason or a thing that caused them to go down that path.But I didn't have that at all. It really has just been a really slow evolution of just actually reading the research, working with people on a day to day basis, getting feedback from clients about what is working and what isn't, and then just really tweaking things over a very long period of time. I've also had some very honest clients, which have been great too, who kind of really follow my content on social media and they would message me like, oh, that's not very helpful. How about approaching it like this? And i'm always open to feedback, I always want to improve my practice and my messaging and I was always just quite receptive to that and I don't know... 10 years later I now finally feel like i'm working with people in a way that genuinely helps them long term and i'm actually creating content that is useful for people rather than just almost creating content for other personal trainers, which seems to be what a lot of fitness professionals do.Laura: Tell me about the angry messages. Why are other PTs up in your shit about...? Michael: I really don't know. I wish I knew the answer. I think... I guess if you're attacking someone's entire being and their work and their ethos that they've believed in for so many years, then I guess that a lot of people will react to that in quite a negative way.I really don't understand it at all either. Usually male coaches too, are very angry in the way that I approach social media and some of the names and things I've been called are pretty grim, but I only... I wish I knew the answer to that, but some, for some reason people get very angry in the way that I am approaching fitness and nutrition.But yeah, I really don't mind. Like I, as I said, I feel like I'm really helping people now and I'm happy to keep championing that message. Laura: I mean, I'm just wondering if part of it is because that myth, certain myth of no pain, no gain. And that you need to like, basically punish yourself with exercise in order to achieve a particular body type.You're saying, actually, we don't need to do that. It's okay if you don't kill yourself with exercise. We shouldn't be weaponising it against ourselves. For me, it speaks to how deeply internalised people's anti fat bias is. You're challenging the fundamental sort of premise that their beliefs are resting on, which is that, you can't be fit and fat.Or you...yeah, like I said before, that you have to punish yourself with exercise or like that... it's somehow okay to exist in a body that isn't fulfilling this ideal that we have been told that we should not strive for. Michael: Completely. And I mean, if we're completely honest about it, the way that the fitness industry is set up now is way more profitable for these people too.So if you do start attacking the way that they're approaching their lives or their businesses too, then they're probably going to be a little bit grumpy about that. It's so much easier for me as a personal trainer to make money saying, here we go, come sign up for the six week program and we'll strip body fat off you in such a short space of time, rather than me saying, cool, let's work together for three, six, 12 months. And let's really work on those habits and have you feeling and performing better. Like it's just such a hard sell. I mean, especially for, as I mentioned, like, personal training tends to be quite a short lived career for a lot of people. And I appreciate that when people first start off, the best way to get clients is shock and awe, like showing before and after photos, like having the secrets or whatever it is. And the best way to get clients at the start is by doing that. So people are going to follow that path rather than doing it the right way. That is a bit of a slow burner. I know that a lot of coaches aren't really up for that, sadly. Laura: Yeah, no, I think you make a really good point when you're talking about... the financial aspect of things, because, yeah, there's no money to be made in being like, yeah, take a rest day or go for a gentle walk and look at the sky. Yeah, those like making huge promises of around body transformations and then making people sign up for some sort of like intensive bootcamp situation. Of course, that makes sense from like a business model perspective, but as so often is the case, anything that involves capitalism is probably not great for our health overall. Okay, so I am absolutely not in the fitness space at all. I've purged my social media account. I think I follow you and maybe a couple of other personal trainers, because I find it really annoying, honestly, watching fitness content.Michael: I strongly relate to that. And first of all, thank you for following me, but yeah, I honestly, I feel exactly the same way.  Laura: And I think, especially since having had a baby and because I have some enduring physical stuff going on as a result of my pregnancy in terms of, like, pelvic health, even the stuff that is like geared towards women who have had babies and like postpartum stuff.It's just anyway, so I've just checked out of it. So I have no idea. What is going on in that space, really? So I need you to like, translate it all for me. What are some of the most pervasive and toxic fitness myths that you're seeing at the moment? Michael: Everything. Honestly, every topic is so toxic at the moment.It's really frustrating. And I speak to... There's a few coaches that I'm really good friends with, who I think you probably know as well, that I tend to follow their content, I like engaging with them and talking about the fitness industry, but I have also removed myself from a lot of the mainstream approach because...I don't find it motivating or helpful in any way. Like I think a lot of the... Laura: You don't even hate follow some people just to have like stuff to...? Because I hate feed a lot of big feeding. I hate-feed?! I hate-follow a lot of big accounts. I just have this folder on my Instagram called Ammunition.And I just save posts in there that I want to come back and get angry about at some point. What are you seeing from... I know you do it! But what are you seeing from those folks? Michael: So I do a little bit of that. And I, so I've also, I've got an Instagram account for my dog, but I started up ages ago. I don't post anything to it, but every time I see something pop up on, like, the explore page or I see another trainer share, I'll send it to her account. And then I'll use that as fodder for, like, creating content and coming up with ideas. But I do not, I don't hate follow that many people now because like I spent a lot of time on social media, right?And I know that because of that following these accounts and seeing them on a day to day basis all of the time does massively negatively impact my mental health. And I think if i'm feeling that way as a fitness professional who knows the research, knows what these accounts are doing to us and can see through the nonsense... how are everyday people feeling? When they're seeing this content and they don't really know if it's the truth or not. So I actually don't follow that many trainers. There's probably a lot of trainers who... . Laura: So very evolved of you. Michael: Yeah. Thank you. Thank you. There's a few trainers who, like, I know through just from working in gyms or whatever, I'll follow them, but I mute them so that I don't have to see their content.Laura: Yeah, that's smart. Michael: But yeah, I don't know. There's so many myths about every topic. Like you mentioned there about, like, women's health and pelvic health and anything pre and postnatal. The stuff around that is really gross because it's not even just the fact that they're spreading misinformation. They somehow always tie in with just losing weight, like this is pretty much what it all comes down to, right? Laura: Yeah. Yeah. That's the subtext. It's always there. Michael: It's always like improve your pelvic health and slim your waist, like it's everything. It just pushes people down the route of still obsessing about body weight and focusing on body weight rather than focusing on general health and wellbeing and health promotion, and it's infuriating.I guess the same as, like, building muscle. Like it's nearly always advertised by these guys that are absolutely jacked, clearly taking steroids, using images of themselves going... you can look like this if you work out like me and buy my programs and my nutrition plans, and you're just never going to look like these people. So you're always going to fail. Like everything within the fitness space is geared towards repeat sales and having people come back for more because the way that we're being sold health and fitness, just isn't sustainable or achievable in any way. And then people blame themselves and feel worse. And then therefore they're more likely to spend money on all these other programs repeatedly. And it's just a vicious cycle that just doesn't ever end. And that's why with my page, I'm trying to step away from any aesthetic goals. Like you'll probably see through my social media, I don't, I'm not against people having aesthetic goals. I just don't really ever talk about it because I don't think it should ever be the focus of someone's fitness journey. I mean, I think that's the bit that seems to piss people off. Laura: Yeah. And I mean, there's some interesting research that shows that people who exercise for aesthetic goals, they're less likely to engage in something that is sustainable for them.Like, it's more likely that they will give up. And I don't mean that in, like, defeatist kind of way, but it just won't be sustainable for them. Versus for people who are approaching, I don't know, a type of exercise or training or whatever it is from a place of maybe wanting to feel stronger or feel more comfortable in their bodies or because they have mobility stuff that they're working through or something like that.So it's really difficult though, because And we'll get to some of the listener questions in a bit where they're asking this, like, how do you uncouple the aesthetic goals from, those more internally motivated goals from the perspective that we are just constantly being drip fed, idealised images of people all over the internet? And then, like you say, half the time those images aren't even real, right? There's people on ‘roids. There are people who are like starving themselves, like making themselves dehydrated, like posing in particular ways. I don't even know what other tactics people use to stylise these images.But I feel like the sort of falsification of these pictures is huge in the fitness industry. Michael: It's honestly horrific. And I would probably go as far as to say, like, every professional fitness model has taken or is taking steroids of some form. That's like the level of manipulation that the fitness industry...I don't know, I don't think there's any issue with... having aesthetic goals. Like I always like to hammer this point home because I think sometimes with my content, I can... people misconstrue that I'm against anyone having any aesthetic goal at all. I'm not, it's just, I think that the emphasis needs to be elsewhere.For example, when I first started in the fitness industry, I was in that loop of must build muscle, have to build muscle to show that I know what I'm talking about and also to be seen as manly and capable or whatever, and I would do a lot of strength training. I would never do cardio because cardio is bad.It ruins your gains. Laura: It's for girls.Michael: Yeah, it's just exactly that. And it's so frustrating that I would... I spent years just, like, strength training, nothing but strength training, even when I was going through cycles of really hating it. Like I had to do strength training, got to build muscle. When I switched up my training... I still do strength training now. I enjoy building muscle. The challenge of building strength and muscle is really fun, but I also do a lot of cardio because I really enjoy it and it makes me feel great in terms of physical and mental health. And actually since switching up, dropping a bit of strength training that I was doing and doing more cardio, the exercise I really enjoy, I've made so much more progress with my strength building and muscle building gains.And I've just got such a better balance with it all. So if someone listening to this is really struggling of knowing like what they should really be doing, what should they be focusing on? Honestly, just like enjoyment and mental health, that needs to be the priority. And then everything else just tends to fall into line after that.And the fitness industry, just the tactics, as I said, like the trainers use. The one thing that really annoys me is a lot of personal trainers will, anyone who follows any trainers will... I've seen this in the past where a trainer goes through a really extreme cycle of dieting, exercise regime because they're training for a photo shoot - in quotation marks - Where they'll go and get professional photos done that they've dieted down to within an inch of their lives. And they'll get a little snapshot image of look how amazing I look and then they'll use that in all their advertising of promoting healthy behaviour change or whatever other nonsense. It's if you're not using healthy, sustainable habits in achieving your physique, then you should not be allowed to use that in terms of advertising it to say that you're going to help people improve their health and their life, their health and their lives.It's just, it's incredibly infuriating and... Laura: it's false advertising. Michael: Massively. Yeah. Massively. Laura: Need to get that fucking, is it ASA, advertising...? Michael: Yeah. Yeah. Standards Agency. Absolutely. Yeah. Laura: I'm on the case! But two interesting things that I wanted to pick out from what you were saying.First of all, I think there's some complexity and nuance around this idea aesthetic goals, isn't there? Because we are all aesthetically driven, right? We are all, like we're aesthetic creatures in some ways, like when you brush your hair in the morning or I don't know, you trim your beard, Michael, or like I chose clothes that I thought looked somewhat okay together. Like those are all aesthetic goals, right? And so I think it's really, like, hard for people to decouple aesthetic goals from their overall movement, exercise routines, whatever you want to call them. But I think what you're saying, and certainly what I would advocate is that the fitness industry has just blown... yeah, they've blown up aesthetics to be like the sole purpose that people should exercise, right? And that I think is the problem is that yeah, they've just coupled exercise and aesthetics to the point that it's like you were saying, people are engaging in disorderly eating behaviours. They're using illicit drugs, they are, like, punishing themselves to look a particular way, and that's when it becomes problematic, right? Michael: Completely agree. Laura: And you end up on that slippery, slippery slope to disordered eating and eating disorders. Michael: Yeah, it's so true the barometer of success or health or knowledge within the fitness industry is body fat levels. That's pretty much what it all comes down to. Like a trainer who is absolutely jacked and really ripped is seen as being an authority figure without really knowing anything about them. And whereas you'll have a trainer who's in maybe a naturally larger sized body who naturally carries a little bit more body fat, has a much healthier balance of exercise and nutrition, a far better trainer. Just look at the comments under the content that they push out there onto social media and people will criticize them and say they don't know what they're talking about. Like our barometer of success is leanness. I don't know what the answer is to trying to combat that other than just keep churning out content, calling out this nonsense.But unfortunately you feel like you take a few steps forward when it was like two, three years ago, when you see, started to see a lot more body diversity on fitness accounts and kind of big companies like Gymshark and Nike and stuff were using people in larger bodies to advertise clothing.That's now disappearing again because it's no longer.... and it's just toxic. And you just have to go on like TikTok, the latest platform, even though it's been around a few years, I felt like we were maybe making a bit of progress. Then TikTok just flips that again, and you just got to search the hashtag fitness on TikTok.And it's just white, slim, muscular people clearly taking steroids that are the main bulk of the content that you're going to see. It's infuriating. Laura: Everyone in the fitness industry really collectively needs to be speaking out against this, but I think there's a simultaneous thing that has to happen whereby we are amplifying and centering experiences and the work of fat fitness creators, right? And I'm using fat, for anyone who's not listened to the podcast before, fat as a neutral descriptor, as a reclamation of a word that is often used to weaponise and hurt people and harm people. So, yeah, I'm just thinking of some people off the top of my head.Like Intuitive Fatty, Jessamyn Stanley is fantastic for yoga content. Lauren Leavell does a lot of barre stuff, but there's loads. I mean, is there anyone that you would want to give a shout out to like anyone that's doing...? Michael: The Instagram handle Decolonizing Fitness? Ilya. The content is amazing. We're trying to set up a time for Ilya to come into our podcast to chat about this at the moment. And I just... there's so many voices that need to be amplified. And I know that I always have to check my privilege in the content that I'm creating. Like you see very few men within the kind of body neutrality, body positivity, space, whatever you want to call the area I'm working in.So I always like to acknowledge that, okay, I'm creating content for a space that isn't really for me, but I do think that can be really powerful. And we still need more voices of guys, especially within this space, calling it out because I rarely ever see male fitness professionals creating the kind of content that I am.They tend to go down the more mainstream approach. And I like to yes, fitness can look like me. I look how the fitness industry says you're supposed to look, but it doesn't have to look like that, right? This is one way it can look, but it doesn't need to be like that for everyone. And I think that can be really powerful whilst amplifying the voices of those who are marginalised and don't get the airtime that I do.Laura: Yeah, absolutely. And I think, yeah, you make a really good point about men in this space. Like just in body neutrality, body positivity and again, there are some really great people doing stuff in that space. I agree like it's still underrepresented, but like the 300 pound runner. I don't know if you've come across his stuff? Michael: yeah, Martinus Evans.Laura: Yeah, His stuff is really cool as well. But yeah, anyway, just wanted to shout out some accounts and I'll link to them in the show notes as well. Yeah, so you mentioned that fitness professionals will embark on this really extreme diet, they will really bulk up, they'll, probably restrict what they're eating for a really long time, and then they'll do all their photos, and they'll probably go back to whatever they were doing before that. And it just reminded me when... and this is it's like really sad, but do you remember when Joe Wicks was talking all about binging? He went to America, and then it ... he just started talking about like he was eating all this chocolate and pizza and like stuff that he obviously was restricting so hard that when he went to the States, he had this like backlash against all of that and his body was just like, fuck this, and he just started eating like all of the food that he'd been denying himself.It just made me think of that and how he's... how disordered like this space is and how normalised that kind of thing is like that just like binge restrict cycle. Michael: Yeah, I mean when your entire business model relies on getting people really lean. If you're not sticking to those rules and keeping your body lean 100 percent of the time, then your business model kind of goes to shit. And I guess that's probably why he was having issues coming to terms with that. Joe Wicks is a really funny one because I don't like his content at all. I'll throw that out there. Some of the nutrition stuff he's spouted has been... I was going to say nonsense, but it's actually just damaging some of the stuff he comes out with.Also, on the other hand, I feel like, maybe this is giving him too much credit, I always feel like his heart is in the right place, but he just goes about it in completely the wrong way. I don't know if you would agree with that. When I hear him being interviewed, I feel like he's a really passionate guy who feels like he's doing the right thing, but he's just absolutely not.Because all of his content is focused on being lean and weight loss. And I just wish that... he's got such a huge platform now. It's terrifying. That if you had someone like him who could start promoting like a balanced and sensible message, it's never going to happen because he makes too much money now, then it would just be so powerful.Laura: But I don't know, like this piece around heart in the right place. I think we say that about a lot of these actually quite problematic white men. Joe Wicks, Jamie Oliver, I'm just gonna say it, don't @ me. But, of course their heart's in the right place, but their heart's also in their fucking bank balance, right?Michael: Completely, 100%. Laura: So that's one part of it, but also, I don't know when we can, when someone is, like you say, promoting harmful messages around food and around nutrition. And I don't. I think it matters where their heart is. Michael: Agreed. I wonder whether this... Laura: A murderer could use that justification to be like, Oh, well, this man is really toxic to women, so I'm just going to kill him.But that's not the solution. Michael: I know. I wonder whether kind of in my head, the reason I use those words is because I think of kind of the fitness industry as like a huge, like a line of like how problematic someone is. And I feel like he feels he's trying to do the right thing despite doing it very badly.Whereas you have a lot of people within the fitness space that go far beyond that, who are intentionally doing the really bad thing, trying to make a lot of money, it's still very bad. And Jamie Oliver is one of those as well, where he's got such a huge platform, thinks he knows what he's doing is the best thing, but it's just not. Like trying to ban the buy one get one free offers when people are really struggling to feed their families right now.It's just, I feel yes, hearts in the right place, but just no, like they need to be more informed and go about it in a better way. Laura: And especially when they are being given this feedback, right? Like it's one thing if you fuck up and you say, I was really wrong about that and I've learned some new information now like you have, right? And like I have. And you hold your hands up and you say, yeah, I was really fucking wrong and I'm sorry that I've caused harm and I don't want to do that anymore. I'm gonna learn and I'm gonna do better. And Michael: that's the sign of a good practitioner, right? And yeah. Laura: But speaking of Joe Wicks... Michael: Oh god!Laura: So, so you are a new ish parent, right? You have a seven month old. Michael: Yes, my son is seven months old, yeah. Laura: How do you feel about the prospect of Joe Wicks teaching your kid PE someday? Michael: Oh, just no, like awful. Yeah it's terrifying, isn't it? And these people do wangle their way into every aspect of our society of fitness.And there's just no getting away from them now. Personally, I never watched any of his school fitness things throughout lockdown. I know they're very popular. What was his wording? Did you watch any of them then with your kids? Laura: I didn't cause my little one was just a newborn at that point. And he's only three now.It just wasn't on my radar. I've seen his books. He has the burpee bears. And I've written a couple of like book reviews. They're super like, just tongue in cheek. But it strikes me as really problematic that he feels that we need to teach specific moves like burpees or other things like that to children, like to young children, like primary school age kids, and I don't really have a good justification for that because I'm not a fitness professional that other than does a five year old need to learn how to plank? Right? Or should we not be focusing on embodied movement that is climbing on play equipment in the playground or running or skipping or jumping or like, all of these things that kids, depending on their level of mobility and ability that they would intuitively do?Michael: I am completely with you there. I don't think we need to be teaching a five year old how to do a burpee. It's a bit ridiculous, to be honest. Yeah, that's the way that movement should be promoted and advertised to kids, if you want to use those kind of technical terms. It should just be about play and fun and movement, and that's... what it should be. Like if a kid sees their parent doing burpees or lifting weights and they want to try a bit out and get involved yeah, absolutely. But it just, it shouldn't be the go to, right? Yeah, absolutely. Laura: Yeah. My kid has seen me do a downward dog and he like gets involved and we do the cosmic kids yoga. I feel like that's a slightly different thing because it's a, it's so gentle and b it's animal poses. I don't know. All right. So I got sent through loads of questions from listeners and I thought they were really fun. So I just thought we could go through them. I think we've touched on a bit of it already, but maybe you can just give me your quick fire answers.Michael: Sure. Yeah. Laura: So this is an interesting question that Gwen from Dieticians for Teachers sent in. She said she would like to know more about the messages in your formal training. I think we can take a good guess, but I guess what she's getting at is, like, what toxic messages were in your formal training?Michael: Unfortunately, when you're learning to become a personal trainer still so much of it is about weight loss, still. You'll get taught, right, this is what we're going to learn about nutrition and this is how you help someone lose weight. So that is still at the core. And I guess a lot of the training for personal trainers, in terms of nutrition anyway, It's still very like basic government guidelines, which you can take those as you will. Some recommendations are maybe okay, others not that helpful. The training for nutrition for personal trainers is so, so, so, so basic that I would encourage any personal trainer who has recently qualified and not done any further nutrition study from there to please sign up to another course and learn more because what you learn as a personal trainer at the basic level is just nowhere near good enough to work with clients in depth.Laura: I have a lot of thoughts about personal trainers and nutrition, but I'm going to keep them to myself! Michael: No, no feel free to talk about it! It terrifies me. And it's very rare now that... a lot of the people I work with have had personal trainers in the past. The large majority of them have had negative experiences, and it's quite scary that's now just the norm.And I'll ask questions of my clients in consultations whilst working together and they'll be like, Oh, I've never been asked that before. I've never even considered that. And it just blows my mind that these things are being missed out or neglected by coaches. But the training is just not there. Laura: It's so interesting that the focus, I mean, it's not surprising, but that the focus is still on body size and not like flexibility or mobility or like rehab or like any of these, which I'm sure they like get touched on, but it sounds like from what you're saying that the real central focus is not mental health or like overall wellbeing. It's here's how you try and get people shredded, which we know is like biogenetically, if not difficult, if not impossible for most people. Michael: Pretty much. Yeah. Like I'm sure... I don't want to call out every personal training course. Like I did qualify a few years ago now, but I know there's some personal training qualifications that are trying to shift that, but it is still a large majority.And that is why a lot of the coaches coming through now, it's still very much before and after photos, weight centric. Yeah, unfortunately. Laura: Well, it's good to know that maybe there are some shifts coming down the pipe a little bit and I guess it just goes to show why again, you need to keep, like, pushing these alternative messages.Okay. This I thought was a really interesting question. And so this person asked, is exercise truly necessary? I don't enjoy exercising, but I do move a lot during the day, running errands and running after a toddler, all while baby wearing a newborn. And then the follow up question is, and if it is necessary to exercise intentionally, what form of exercise is best for someone who wouldn't otherwise prioritise it? Michael: That's such a good question. And it's very nuanced as well, depending on the person's situation. I would say, I mean, no, it's not necessary if you're moving around a lot throughout the day. However, so many health benefits come from incorporating some form of like direct exercise that it would be really sad to not explore all the potential areas that people could incorporate exercise into their life that maybe might not be the mainstream approach, right? If you are someone who moves around a lot throughout your day, if you say running errands and your general movement and step count is actually really high, then you could argue that as long as you get your nutrition, right, you're doing pretty well.However, strength training. Every time someone comes to me, no matter what their fitness goals are, I try and incorporate some form of strength training that I can, but that can take so many different forms. Laura: This person is carrying a baby around! Michael: Right. Yeah, exactly. Which is strength training, right?Exactly. So it's... when I say strength training, a lot of people listening to this episode right now will automatically... they'll think, like, gym, barbells, dumbbells, heavy weights, and it can come in so many different forms and it can be with resistance bands, body weight, dumbbells, kettlebells, barbells at home. It can be like TRX, it can be like so many different ways that you might enjoy at some point. So don't just think, Oh, I'm not an exercise-y person. I've always hated it because there are so many different ways that we can incorporate exercise. That is a very vague answer. without me knowing much more about this person. However, if you can find a form of exercise you enjoy, that should be a priority because the health benefits are huge. Laura: I'm going to push back because this is my opinion, not necessarily based on scientific fact, but it does feel as though there is this tendency, and I'm also conscious of your bias as a fitness professional, that exercise is held up as the pinnacle of health.And it's like the one thing that we need to do in order to be healthy. And I'm not disputing that there are health benefits. I also am like curious about the magnitude of those benefits within the broader context of health and health behaviours, but also nesting that within sort of social determinants of health and like, how do we measure the effect size of exercise individually from, I don't know, sleep, other elements of mental health, community? I guess what I'm maybe trying to temper is like that there are so many, like, variables and factors that contribute to someone's overall picture of health and I appreciate that movement can be an important facet of that.Michael: Yeah, no I really like that point because it is so important and I think that's why it's important to approach exercise and hence why I said without knowing more about this person, it's hard to give an exact answer. I think it's important to look at all of those things in terms of context when you're trying to prescribe or recommend exercise to someone, right?Let's say that this person is, they're likely lacking in sleep right now at the moment, right? Because their life is very busy running around after small humans. If that person is exhausted and they have no free time at all. I'm not then going to say, right, you've got to go and exercise 30 minutes a day for three times a week, because it's just not going to be helpful. There's other areas of your lifestyle that we can focus on to improve your health. However, if there is a bit of wiggle room, if you have a bit of time, then maybe there are things that we could explore that you could quite comfortably fit into your day without it taking over your life like a lot of the fitness industry wants us to do. Laura: Yeah. I think that the, maybe the TL;DR there is you don't have to sweat it when you are running around after a small child and doing other, all these other things. But if it feels like it's something that you want to explore, and you're curious to give something a try, then yeah, you could have a think about some gentle movement or something, see how that feels and how that fits in the context of your life But yeah, it's tricky to prescribe something without knowing, yeah knowing someone's life and what they want to get out of it. Michael: So true and you're never gonna know if it was directly the exercise. It could be so many other things that then, yeah, that then causes the health benefit.I would just say, once again, like anecdotally, rather than looking at research, every person that I've worked with that we've tried to think, right, how can we incorporate exercising today in some format? The large majority of the time, everything else feels better and improves as a result.Laura: Yeah, no , it can, it has a knock on effect on like sleep and pain and like all these other things. So, okay. How can I move my body without shame and guilt driving it? These are two separate questions, but I'm just lumping them together, and then this, another person asked, how to find the joy in movement after a life forcing it?Michael: I think first of all, it's really important to, like, vet where you're getting all of your inspiration and information from is a really important one because a lot of the time, if we're following the kind of general societal recommendations when it comes to exercise and nutrition. It's always going to have quite a prescriptive image focused approach to movement.And if you can shift away, like what we spoke about at the start of this, you don't follow many personal trainers because you don't think that they're motivating or helpful to you. They actually just make you feel worse. I'm the same. When I constantly see gym bros. telling me that I have to lift weights X amount of times a week, and I've got to get shredded and have low body fat levels, it has the complete opposite impact on me. So if you can first of all vet where you're getting your information from, that is absolutely huge. And then, yeah, I guess also once again, it's not beating yourself up for having the more mainstream thoughts that you used to have. I know a lot of people when they're trying to shift into kind of taking a more intuitive eating approach or a more intuitive eating approach with like exercise too, as well as nutrition, we can sometimes feel really guilty when we start slipping back into older habits that maybe are slightly disordered.I'm just... like giving yourself a bit of leeway and a bit of space to grow and learn. I'm still doing that. I still probably get things wrong and have room for improvement, but I think by doing that, removing the pressure on yourself can be really helpful. Laura: Yeah. Two things that I might add to that are something that I've explored with clients as part of working on the relationship with food and body and movement often comes up as part of that, we might explore this idea of, what it feels like in your body where you've had a period where you haven't moved at all, right? Maybe it's because you're recovering from an injury or because you just were so burnt out with exercise that you just really didn't move. How did that feel in your body? Did you get any pain or did it feel nice to rest or what was that experience? And then also thinking about periods of your life where maybe you've been really deeply invested in fitness culture. And maybe doing the punishing exercises, maybe also getting injuries because of that, maybe getting ill a lot of the time, maybe losing your period, like all kinds of different things, like different experiences that you could have in your bodies.If you've got that framing of this is what no exercise feels like in my body, and this is what too much feels like in my body, then it can help you explore what some sort of happy balance might feel like. So that's something that I encourage people to think about. And I also just wanted to shout out Tally Rye's Intuitive Movement Journal.It's her book Intuitive Movement as well. It is isn't it? Clients have found that those are helpful resources for navigating stepping back from exercise and just exploring what rest feels like through kind of the framework of, or a similar framework to intuitive being. So if intuitive being resonates with you, then maybe Tally's work will as well. So I'll link to them in the show notes. All right, this will be our last question. And it is: I cut out all deliberate movement for a while, by which I mean, I walk to get places and that's it. I'd like to try some movement. and see how it makes me feel. But where on earth do I even start? Michael: Okay, once again, without a lot of context, this is very hard to give specific advice.So I would say think about where you would feel most comfortable exercising and start from there. So I know that for a lot of people, the gym environment can be incredibly intense and intimidating for many reasons. So if you think that maybe that feels a bit much and it's going to put you off. Let's write that off. Don't do that. So let's think, okay, maybe we could start some movement at home. Is there a form of exercise that you really enjoy? Do you like dancing? Do you like jump rope? Do you like bodyweight workouts? What is it that kind of you think, Oh, actually that sounds quite fun to me and start there.And then let's say that there's so many decent content creators online, depending on what you like that I could recommend. Feel free to reach out and just start from that point. If you're thinking that kind of back to my earlier point that, okay, strength training doesn't have to look like that in the gym. What can it look like? A set of basic resistance bands from Amazon for 10 quid, you've got a gym at home. Like you don't have to go to a gym. There's so many different ways that it could look start from that start from what gives you that, Oh, that's interesting. I might give it a try, and start really, really small and build from there and that's probably the best place to start. Laura: If someone hasn't done much movement other than, like, incidental daily movements for a while... there's obviously a lot of privilege in this question but I'm wondering if you would recommend like doing a couple of one on one sessions with a trainer, like a safe trainer that could help build up strength or make like a bespoke kind of program for someone or just help them with their form so that they... I'm maybe thinking of myself here, but I know that I have to be really careful what I do at home because I'm more likely to end up injuring myself just because of my like, specific needs and in terms of managing pain. And so what I've ended up doing... and again shitload of privilege in this but, I'm, after three years of pelvic girdle pain, I'm like, at my limit. So I've started seeing a physio one on one who does clinical Pilates. So it's like very much helping me build my strength, which I could do... like I was going to a barre class before that, but I was walking away with more pain, even though it was supposedly like a supervised class, like there were no adjustments. There were no like modifications for my body, like nothing. So I personally, I have found that trying to build my strength and reduce pain, like finding someone who's really specialised has been a game changer for me. Michael: Yeah, I would say... I was gonna say one of the benefits of COVID. That's not what I meant. I was gonna say for the benefits of kind of the lockdown that happened as a result of COVID is the fitness industry got pushed forward by about five to ten years in terms of the way that it can support people, especially on a tighter budget as well. There are now so many... Laura: oh, you mean like online?Michael: Online support, right? Because I know that personal training is an investment for a lot of people. It's not a cheap route to go down. If you can afford it, absolutely, yes. If you can have the support of a professional who's got years of experience, it does speed things up and it makes things a lot more kind of personalised and perhaps more enjoyable.However, the way that the online fitness space works now, it has improved massively. And for, kind of, much cheaper options, monthly options, you can get the support of a trainer online that will be able to do a video call with you to check your form. You can send them videos. Like I speak to people that follow me on Instagram all the time and they'll ask me a question. I'll say, just send me a video of you doing the exercise. I'm happy to give you some pointers. If you find people online that are truly passionate and care. If you send them a video of you doing an exercise, they'll happily help you out. So there are so many different routes that you can go down to get the support that don't cost a huge amount of money.Once again, even the cheaper forms are still an investment, but there are different routes that you can go down now. Yeah, absolutely. Laura: Yeah. Okay. I appreciate that. And then just to add to that, like I've done some sessions with this, like a one on one physio. And now I'm going to, like the group classes as well.So it's, I think, helpful to just... if you have any kind of rehab that needs to be done, or if you just want to feel more confident in the movements. Cause like Pilates can be tricky if you don't know exactly what you're doing to just be thrown into a class situation. So it's helped me at least like doing a few sessions, even though I've done Pilates before, but just having that refresher to then go into a class setting, it's just helped build up my confidence a little bit. And it's also, I'm not going to like this, like a gym. Sorry, I said that with so much disdain, realizing you're a personal trainer! Michael: Ugh, these disgusting personal trainers!Laura: It had, like, a visceral effect. Michael: It's so funny though, isn't it? That it's so sad that's what the fitness industry has become. And especially as a trainer who is one, every time I meet someone and they'll ask oh, what do you do? I have to like preface, Oh, like I'm not like the rest of them, but I'm a personal trainer, like it's really sad.Laura: I do the same thing, but with nutrition, I'm like, I'm a nutritionist, but I'm not that kind of nutritionist. Michael: I'm not going to sell you a cleanse, I promise! Laura: All right, Michael, this has been so fun to have you on and just shoot the shit about fitness culture. But at the end of every episode, my guest and I share something that they have been snacking on. So it can be a book, a podcast, a TV show. Yeah, just about anything that, that you feel like. So what are you snacking on at the moment? Michael: So one podcast I'm listening to, this is going to be a bit of a curve ball, there's probably quite a few people, especially in the UK listening to it... I don't like politics because in this country, it's so gross the way that politics is at the moment, but I like being well informed in what's going in politics because it has such a huge knock on impact to like societal changes.Laura: I was really glad that you said that, because when you said I don't like politics, I was like, argh where is this going! Michael: no, I do, but I get so infuriated by it because it's so important and I feel like coaches need to be informed because it does directly impact everything we're doing with our clients in terms of like socioeconomic impacts and food access and education and stuff, so I've been listening to The Rest Is Politics podcast. I don't know if you've ever listened to it. It's actually really good. It's Alastair Campbell, Rory Stewart, Labour side, Tory side. They chat about all daily topics and I quite like that they disagree and argue. I, depending on what you think about those two individuals, I'm still very mixed on what I think of them.However, I think it's very good to have a nice balanced approach there. So that's the podcast I've been listening to a lot recently. I really like it. In terms of food. So I can't eat eggs and dairy. I'm lactose intolerant and intolerant to eggs as well. Laura: I think you were probably going to wait for like the bummer, yeah, for me to be like, oh, that's such a bummer. But I'm vegan, so I don't eat any of that stuff . Michael: Yeah, I know. I was saying, I'm like the worst gym bro ever. I can't have whey protein shakes and I can't eat like 12 eggs a day. So maybe that's another reason they all hate me. So I found a vegan chocolate bar from Aldi. I don't know if you've ever had it. I don't think so. What? So they do milk, in quotation marks, milk chocolate and a white chocolate. They do a dark chocolate too, but a lot of vegan chocolate is dark. Anyway, so I haven't even tried that but their milk chocolate and their white chocolate is so good .And i'm getting through far too much of this chocolate at the moment but I finally found a chocolate bar that tastes amazing. They're by far the best chocolate you can get that's vegan, hands down Laura: That sounds really good, but we don't have an Aldi near us. We have a Lidl. Michael: So it's worth commuting. Laura: Oh, is it? Michael: Yeah. Yes. Laura: Okay. Might have to go to the dark depths of Dalston too.Okay. So I'm actually going to do a podcast also, and it's Getting Curious with Jonathan van Ness, which everyone knows who JVN is, obviously. He's amazing. Yeah, love them. There was like a bit of a thing a while ago where on their Netflix show they talked about like food addiction and it was just really problematic and icky and fatphobic. But JVN seems to have really been on a bit of a journey with this stuff and the latest, well, at the time that we are recording, they've just come out with a podcast called... well, an episode of their podcast Getting Curious called What's the Cultural History of the Calorie? With Dr. Athia Chaudhry. They're a fat activist and it's immersed in like fat politics. So, yeah. I would recommend going and giving that one a listen, because yeah, JVN has been on a journey, it seems. Michael: That sounds awesome. And that is my afternoon listening. Thank you very much. Laura: I will link to all of those things in the show notes.Michael, before I let you go, can you tell everyone where they can find out more about you and your work? Michael: Of course, so, most of the content I create is through Instagram, so it's just my name, which is very hard to spell, so probably best if you check it in the show notes. Laura: Yeah, I will link to everything.Michael: Thank you very much. So it's @MichaelUlloaPT, and that's on Instagram, Threads, Twitter, TikTok, whatever platform, it's all the same. Laura: All right, Michael, I will make sure that... It's all fully linked in the show notes so that everyone can find you. Thank you so much for coming on and yeah, like I said before, shooting the shit with us about fitness culture was really fun.Michael: Thank you so much for having me.OUTRO:Laura: Thanks so much for listening to the Can I Have Another Snack? podcast. You can support the show by subscribing in your podcast player and leaving a rating and review. And if you want to support the show further and get full access to the Can I Have Another Snack? universe, you can become a paid subscriber.It's just £5 a month or £50 for the year. As well as getting tons of cool perks you help make this work sustainable and we couldn't do it without the support of paying subscribers. Head to laurathomas.substack.com to learn more and sign up today. Can I Have Another Snack? is hosted by me, Laura Thomas. Our sound engineer is Lucy Dearlove. Fiona Bray formats and schedules all of our posts and makes sure that they're out on time every week. Our funky artwork is by Caitlin Preyser, and the music is by Jason Barkhouse. Thanks so much for listening.ICYMI this week: "I'm Not Your Target Audience" - How Do We Get Men To Care?* Reclaiming our Appetites* MORE Teens, TikTok, and some Good News for a Change.* Dear Laura: I'm freaking out about what my kids eat - but is it really about them? This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit laurathomas.substack.com/subscribe

Let's talk about digital identity with Michael Palage, co-founder of InfoNetworks. In episode 77 Michael and Oscar discuss what DNS can bring to identity – what identity problems DNS can help to solve and how DNS fits with TRAIN. Michael also covers how LEIs are part of this solution. [Transcript below] "I see the DNS being in an optimal infrastructure to facilitate identity discovery and look up, and one that can seamlessly integrate with the various identity technology stacks that are in the market today." Michael Palage is an intellectual property attorney and an information technology consultant. He has been actively involved in Internet Governance and ICT issues over the last twenty years. During this time, he has been intimately involved in ICANN operational and policy matters since its formation in both an individual and leadership role, including a three-year term on the ICANN Board of Directors. Currently, Michael is President and CEO of Pharos Global, Inc. which provides consulting and management services to domain name registration authorities and other technology related companies in connection with Internet governance issues. He is also the co-founder of InfoNetworks LLC, an information technology company focused on solutions for building online trusted ecosystems incorporating the federation verified data. He has testified before the United States Congress multiple times and as an expert witness in both Federal and State Court in numerous legal proceedings. Connect with Michael on LinkedIn. We'll be continuing this conversation on Twitter using #LTADI – join us @ubisecure! Related links: FinCEN / FDIC Digital Identity Tech Sprint: Team DNS presentation InfoNetworks/Microsoft/DigiCert – Domain Name Credential Use Case: ICANN BC Presentation ICANN72 ICANN BC Presentation ICANN75   Podcast transcript Let's Talk About Digital Identity, the podcast connecting identity and business. I am your host, Oscar Santolalla. Oscar Santolalla: Hello and thank you for joining to this episode. The DNS is something you might have heard or seen and is an important component of internet. And today, we are going to hear what DNS can bring us about identity. And for that we have a special guest who is Michael Palage. He is an intellectual property attorney and an information technology consultant. He has been actively involved in ICANN which is the Internet Corporation for Assigned Names and Numbers for operational and policy matters since its formation, and that includes a three-year term on the ICANN Board of Directors. Palage is President and CEO of Pharos Global, a company that provides consulting and management services to domain name registration authorities and other technology-related companies. Also, he is co-founder of InfoNetworks, which is an information technology company focused on solutions for building online trusted ecosystems incorporating the federation verified data. Hello, Michael. Michael Palage: Thank you, Oscar. Long-time listener of your podcast, and I really welcome the opportunity to speak with you today. Oscar: Oh, thank you. It's great having you. And Michael, let's talk about digital identity. And as usual, I want to hear a bit about our guest, so please tell us a bit about yourself and your journey to this world of identity. Michael: Sure. My journey to identity actually started from the world of identifiers, or as you alluded to, more specifically, the world of internet domain name identifiers. In that journey, I still remember that rather specifically occurred in October of 1994. I had already finished up my engineering degree and I was pursuing my law degree at night at Temple University in Philadelphia while I worked during the day at an intellectual property firm as a law clerk. And in 1994, I read this article by Joshua Quittner in WIRED magazine entitled Billions Registered. And in this article,

About MichaelMichael is the Director of Threat Research at Sysdig, managing a team of experts tasked with discovering and defending against novel security threats. Michael has more than 20 years of industry experience in many different roles, including incident response, threat intelligence, offensive security research, and software development at companies like Rapid7, ThreatQuotient, and Mantech. Prior to joining Sysdig, Michael worked as a Gartner analyst, advising enterprise clients on security operations topics.Links Referenced: Sysdig: https://sysdig.com/ “2022 Sysdig Cloud-Native Threat Report”: https://sysdig.com/threatreport TranscriptAnnouncer: Hello, and welcome to Screaming in the Cloud with your host, Chief Cloud Economist at The Duckbill Group, Corey Quinn. This weekly show features conversations with people doing interesting work in the world of cloud, thoughtful commentary on the state of the technical world, and ridiculous titles for which Corey refuses to apologize. This is Screaming in the Cloud.Corey: Welcome to Screaming in the Cloud. I'm Corey Quinn. Something interesting about this particular promoted guest episode that is brought to us by our friends at Sysdig is that when they reached out to set this up, one of the first things out of their mouth was, “We don't want to sell anything,” which is novel. And I said, “Tell me more,” because I was also slightly skeptical. But based upon the conversations that I've had, and what I've seen, they were being honest. So, my guest today—surprising as though it may be—is Mike Clark, Director of Threat Research at Sysdig. Mike, how are you doing?Michael: I'm doing great. Thanks for having me. How are you doing?Corey: Not dead yet. So, we take what we can get sometimes. You folks have just come out with the “2022 Sysdig Cloud-Native Threat Report”, which on one hand, it feels like it's kind of a wordy title, on the other it actually encompasses everything that it is, and you need every single word of that report. At a very high level, what is that thing?Michael: Sure. So, this is our first threat report we've ever done, and it's kind of a rite of passage, I think for any security company in the space; you have to have a threat report. And the cloud-native part, Sysdig specializes in cloud and containers, so we really wanted to focus in on those areas when we were making this threat report, which talks about, you know, some of the common threats and attacks we were seeing over the past year, and we just wanted to let people know what they are and how they protect themselves.Corey: One thing that I've found about a variety of threat reports is that they tend to excel at living in the fear, uncertainty, and doubt space. And invariably, they paint a very dire picture of the internet about become cascading down. And then at the end, there's always a, “But there is hope. Click here to set up a meeting with us.” It's basically a very thinly- veiled cover around what is fundamentally a fear, uncertainty, and doubt-driven marketing strategy, and then it tries to turn into a sales pitch.This does absolutely none of that. So, I have to ask, did you set out to intentionally make something that added value in that way and have contributed to the body of knowledge, or is it because it's your inaugural report; you didn't realize you were supposed to turn it into a terrible sales pitch.Michael: We definitely went into that on purpose. There's a lot of ways to fix things, especially these days with all the different technologies, so we can easily talk about the solutions without going into specific products. And that's kind of way we went about it. There's a lot of ways to fix each of the things we mentioned in the report. And hopefully, the person reading it finds a good way to do it.Corey: I'd like to unpack a fair bit of what's in the report. And let's be clear, I don't intend to read this report into a microphone; that is generally not a great way of conveying information that I have found. But I want to highlight a few things that leapt out to me that I find interesting. Before I do that, I'm curious to know, most people who write reports, especially ones of this quality, are not sitting there cogitating in their office by themselves, and they set pen to paper and emerge four days later with the finished treatise. There's a team involved, there's more than one person that weighs in. Who was behind this?Michael: Yeah, it was a pretty big team effort across several departments. But mostly, it came to the Sysdig threat research team. It's about ten people right now. It's grown quite a bit through the past year. And, you know, it's made up of all sorts of backgrounds and expertise.So, we have machine learning people, data scientists, data engineers, former pen-testers and red team, a lot of blue team people, people from the NSA, people from other government agencies as well. And we're also a global research team, so we have people in Europe and North America working on all of this. So, we try to get perspectives on how these threats are viewed by multiple areas, not just Silicon Valley, and express fixes that appeal to them, too.Corey: Your executive summary on this report starts off with a cloud adversary analysis of TeamTNT. And my initial throwaway joke on that, it was going to be, “Oh, when you start off talking about any entity that isn't you folks, they must have gotten the platinum sponsorship package.” But then I read the rest of that paragraph and I realized that wait a minute, this is actually interesting and germane to something that I see an awful lot. Specifically, they are—and please correct me if I'm wrong on any of this; you are definitionally the expert whereas I am, obviously the peanut gallery—but you talk about TeamTNT as being a threat actor that focuses on targeting the cloud via cryptojacking, which is a fanciful word for, “Okay, I've gotten access to your cloud environment; what am I going to do with it? Mine Bitcoin and other various cryptocurrencies.” Is that generally accurate or have I missed the boat somewhere fierce on that? Which is entirely possible.Michael: That's pretty accurate. We also think it just one person, actually, and they are very prolific. So, they were pretty hard to get that platinum support package because they are everywhere. And even though it's one person, they can do a lot of damage, especially with all the automation people can make now, one person can appear like a dozen.Corey: There was an old t-shirt that basically encompassed everything that was wrong with the culture of the sysadmin world back in the naughts, that said, “Go away, or I will replace you with a very small shell script.” But, on some level, you can get a surprising amount of work done on computers, just with things like for loops and whatnot. What I found interesting was that you have put numbers and data behind something that I've always taken for granted and just implicitly assumed that everyone knew. This is a common failure mode that we all have. We all have blind spots where we assume the things that we spend our time on is easy and the stuff that other people are good at and you're not good at, those are the hard things.It has always been intuitively obvious to me as a cloud economist, that when you wind up spending $10,000 in cloud resources to mine cryptocurrency, it does not generate $10,000 of cryptocurrency on the other end. In fact, the line I've been using for years is that it's totally economical to mine Bitcoin in the cloud; the only trick is you have to do it in someone else's account. And you've taken that joke and turned it into data. Something that you found was that in one case, that you were able to attribute $8,100 of cryptocurrency that were generated by stealing $430,000 of cloud resources to do it. And oh, my God, we now have a number and a ratio, and I can talk intelligently and sound four times smarter. So, ignoring anything else in this entire report, congratulations, you have successfully turned this into what is beginning to become a talking point of mine. Value unlocked. Good work. Tell me more.Michael: Oh, thank you. Cryptomining is kind of like viruses in the old on-prem environment. Normally it just cleaned up and never thought of again; the antivirus software does its thing, life goes on. And I think cryptominers are kind of treated like that. Oh, there's a miner; let's rebuild the instance or bring a new container online or something like that.So, it's often considered a nuisance rather than a serious threat. It also doesn't have the, you know, the dangerous ransomware connotation to it. So, a lot of people generally just think of as a nuisance, as I said. So, what we wanted to show was, it's not really a nuisance and it can cost you a lot of money if you don't take it seriously. And what we found was for every dollar that they make, it costs you $53. And, you know, as you mentioned, it really puts it into view of what it could cost you by not taking it seriously. And that number can scale very quickly, just like your cloud environment can scale very quickly.Corey: They say this cloud scales infinitely and that is not true. First, tried it; didn't work. Secondly, it scales, but there is an inherent limit, which is your budget, on some level. I promise they can add hard drives to S3 faster than you can stuff data into it. I've checked.One thing that I've seen recently was—speaking of S3—I had someone reach out in what I will charitably refer to as a blind panic because they were using AWS to do something. Their bill was largely $4 a month in S3 charges. Very reasonable. That carries us surprisingly far. And then they had a credential leak and they had a threat actor spin up all the Lambda functions in all of the regions, and it went from $4 a month to $60,000 a day and it wasn't caught for six days.And then AWS as they tend to do, very straight-faced, says, “Yeah, we would like our $360,000, please.” At which point, people start panicking because a lot of the people who experience this are not themselves sophisticated customers; they're students, they're learning how this stuff works. And when I'm paying $4 a month for something, it is logical and intuitive for me to think that, well, if I wind up being sloppy with their credentials, they could run that bill up to possibly $25 a month and that wouldn't be great, so I should keep an eye on it. Yeah, you dropped a whole bunch of zeros off the end of that. Here you go. And as AWS spins up more and more regions and as they spin up more and more services, the ability to exploit this becomes greater and greater. This problem is not getting better, it is only getting worse, by a lot.Michael: Oh, yeah, absolutely. And I feel really bad for those students who do have that happen to them. I've heard on occasion that the cloud providers will forgive some debts, but there's no guarantee of that happening, from breaches. And you know, the more that breaches happen, the less likely they are going to forgive it because they still to pay for it; someone's paying for it in the end. And if you don't improve and fix your environment and it keeps happening, one day, they're just going to stick you with the bill.Corey: To my understanding, they've always done the right thing when I've highlighted something to them. I don't have intimate visibility into it and of course, they have a threat model themselves of, okay, I'm going to spin up a bunch of stuff, mine cryptocurrency for a month—cry and scream and pretend I got hacked because fraud is very much a thing, there is a financial incentive attached to this—and they mostly seem to get it right. But the danger that I see for the cloud provider is not that they're going to stop being nice and giving money away, but assume you're a student who just winds up getting more than your entire college tuition as a surprise bill for this month from a cloud provider. Even assuming at the end of that everything gets wiped and you don't owe anything. I don't know about you, but I've never used that cloud provider again because I've just gotten a firsthand lesson in exactly what those risks are, it's bad for the brand.Michael: Yeah, it really does scare people off of that. Now, some cloud providers try to offer more proactive protections against this, try to shut down instances really quick. And you know, you can take advantage of limits and other things, but they don't make that really easy to do. And setting those up is critical for everybody.Corey: The one cloud provider that I've seen get this right, of all things, has been Oracle Cloud, where they have an always free tier. Until you affirmatively upgrade your account to chargeable, they will not charge you a penny. And I have experimented with this extensively, and they're right, they will not charge you a penny. They do have warnings plastered on the site, as they should, that until you upgrade your account, do understand that if you exceed a threshold, we will stop serving traffic, we will stop servicing your workload. And yeah, for a student learner, that's absolutely what I want. For a big enterprise gearing up for a giant Superbowl commercial or whatnot, it's, “Yeah, don't care what it costs, just make sure you continue serving traffic. We don't get a redo on this.” And without understanding exactly which profile of given customer falls into, whenever the cloud provider tries to make an assumption and a default in either direction, they're wrong.Michael: Yeah, I'm surprised that Oracle Cloud of all clouds. It's good to hear that they actually have a free tier. Now, we've seen attackers have used free tiers quite a bit. It all depends on how people set it up. And it's actually a little outside the threat report, but the CI/CD pipelines in DevOps, anywhere there's free compute, attackers will try to get their miners in because it's all about scale and not quality.Corey: Well, that is something I'd be curious to know. Because you talk about focusing specifically on cloud and containers as a company, which puts you in a position to be authoritative on this. That Lambda story that I mentioned about, surprise $60,000 a day in cryptomining, what struck me about that and caught me by surprise was not what I think would catch most people who didn't swim in this world by surprise of, “You can spend that much?” In my case, what I'm wondering about is, well hang on a minute. I did an article a year or two ago, “17 Ways to Run Containers On AWS” and listed 17 AWS services that you could use to run containers.And a few months later, I wrote another article called “17 More Ways to Run Containers On AWS.” And people thought I was belaboring the point and making a silly joke, and on some level, of course I was. But I was also highlighting very clearly that every one of those containers running in a service could be mining cryptocurrency. So, if you get access to someone else's AWS account, when you see those breaches happen, are people using just the one or two services they have things ready to go for, or are they proliferating as many containers as they can through every service that borderline supports it?Michael: From what we've seen, they usually just go after a compute, like EC2 for example, as it's most well understood, it gets the job done, it's very easy to use, and then get your miner set up. So, if they happen to compromise your credentials versus the other method that cryptominers or cryptojackers do is exploitation, then they'll try to spread throughout their all their EC2 they can and spin up as much as they can. But the other interesting thing is if they get into your system, maybe via an exploit or some other misconfiguration, they'll look for the IAM metadata service as soon as they get in, to try to get your IAM credentials and see if they can leverage them to also spin up things through the API. So, they'll spin up on the thing they compromised and then actively look for other ways to get even more.Corey: Restricting the permissions that anything has in your cloud environment is important. I mean, from my perspective, if I were to have my account breached, yes, they're going to cost me a giant pile of money, but I know the magic incantations to say to AWS and worst case, everyone has a pet or something they don't want to see unfortunate things happen to, so they'll waive my fee; that's fine. The bigger concern I've got—in seriousness—I think most companies do is the data. It is the access to things in the account. In my case, I have a number of my clients' AWS bills, given that that is what they pay me to work on.And I'm not trying to undersell the value of security here, but on the plus side that helps me sleep at night, that's only money. There are datasets that are far more damaging and valuable about that. The worst sleep I ever had in my career came during a very brief stint I had about 12 years ago when I was the director of TechOps at Grindr, the gay dating site. At that scenario, if that data had been breached, people could very well have died. They live in countries where that winds up not being something that is allowed, or their family now winds up shunning them and whatnot. And that's the stuff that keeps me up at night. Compared to that, it's, “Well, you cost us some money and embarrassed a company.” It doesn't really rank on the same scale to me.Michael: Yeah. I guess the interesting part is, data requires a lot of work to do something with for a lot of attackers. Like, it may be opportunistic and come across interesting data, but they need to do something with it, there's a lot more risk once they start trying to sell the data, or like you said, if it turns into something very unfortunate, then there's a lot more risk from law enforcement coming after them. Whereas with cryptomining, there's very little risk from being chased down by the authorities. Like you said, people, they rebuild things and ask AWS for credit, or whoever, and move on with their lives. So, that's one reason I think cryptomining is so popular among threat actors right now. It's just the low risk compared to other ways of doing things.Corey: It feels like it's a nuisance. One thing that I was dreading when I got this copy of the report was that there was going to be what I see so often, which is let's talk about ransomware in the cloud, where people talk about encrypting data in S3 buckets and sneakily polluting the backups that go into different accounts and how your air -gapping and the rest. And I don't see that in the wild. I see that in the fear-driven marketing from companies that have a thing that they say will fix that, but in practice, when you hear about ransomware attacks, it's much more frequently that it is their corporate network, it is on-premises environments, it is servers, perhaps running in AWS, but they're being treated like servers would be on-prem, and that is what winds up getting encrypted. I just don't see the attacks that everyone is warning about. But again, I am not primarily in the security space. What do you see in that area?Michael: You're absolutely right. Like we don't see that at all, either. It's certainly theoretically possible and it may have happened, but there just doesn't seem to be that appetite to do that. Now, the reasoning? I'm not a hundred percent sure why, but I think it's easier to make money with cryptomining, even with the crypto markets the way they are. It's essentially free money, no expenses on your part.So, maybe they're not looking because again, that requires more effort to understand especially if it's not targeted—what data is important. And then it's not exactly the same method to do the attack. There's versioning, there's all this other hoops you have to jump through to do an extortion attack with buckets and things like that.Corey: Oh, it's high risk and feels dirty, too. Whereas if you're just, I guess, on some level, psychologically, if you're just going to spin up a bunch of coin mining somewhere and then some company finds it and turns it off, whatever. You're not, as in some cases, shaking down a children's hospital. Like that's one of those great, I can't imagine how you deal with that as a human being, but I guess it takes all types. This doesn't get us to sort of the second tentpole of the report that you've put together, specifically around the idea of supply chain attacks against containers. There have been such a tremendous number of think pieces—thought pieces, whatever they're called these days—talking about a software bill of materials and supply chain threats. Break it down for me. What are you seeing?Michael: Sure. So, containers are very fun because, you know, you can define things as code about what gets put on it, and they become so popular that sharing sites have popped up, like Docker Hub and other public registries, where you can easily share your container, it has everything built, set up, so other people can use it. But you know, attackers have kind of taken notice of this, too. Where anything's easy, an attacker will be. So, we've seen a lot of malicious containers be uploaded to these systems.A lot of times, they're just hoping for a developer or user to come along and use them because your Docker Hub does have the official designation, so while they can try to pretend to be like Ubuntu, they won't be the official. But instead, they may try to see theirs and links and things like that to entice people to use theirs instead. And then when they do, it's already pre-loaded with a miner or, you know, other malware. So, we see quite a bit of these containers in Docker Hub. And they're disguised as many different popular packages.They don't stand up to too much scrutiny, but enough that, you know, a casual looker, even Docker file may not see it. So yeah, we see a lot of—and embedded credentials and other big part that we see in these containers. That could be an organizational issue, like just a leaked credential, but you can put malicious credentials into Docker files, to0, like, say an SSH private key that, you know, if they start this up, the attacker can now just log—SSH in. Or other API keys or other AWS changing commands you can put in there. You can put really anything in there, and wherever you load it, it's going to run. So, you have to be really careful.[midroll 00:22:15]Corey: Years ago, I gave a talk at the conference circuit called, “Terrible Ideas in Git” that purported to teach people how to get worked through hilarious examples of misadventure. And the demos that I did on that were, well, this was fun and great, but it was really annoying resetting them every time I gave the talk, so I stuffed them all into a Docker image and then pushed that up to Docker Hub. Great. It was awesome. I didn't publicize it and talk about it, but I also just left it as an open repository there because what are you going to do? It's just a few directories in the route that have very specific contrived scenarios with Git, set up and ready to go.There's nothing sensitive there. And the thing is called, “Terrible Ideas.” And I just kept watching the download numbers continue to increment week over week, and I took it down because it's, I don't know what people are going to do with that. Like, you see something on there and it says, “Terrible Ideas.” For all I know, some bank is like, “And that's what we're running in production now.” So, who knows?But the idea o—not that there was necessarily anything wrong with that, but the fact that there's this theoretical possibility someone could use that or put the wrong string in if I give an example, and then wind up running something that is fairly compromisable in a serious environment was just something I didn't want to be a part of. And you see that again, and again, and again. This idea of what Docker unlocks is amazing, but there's such a tremendous risk to it. I mean, I've never understood 15 years ago, how you're going to go and spin up a Linux server on top of EC2 and just grab a community AMI and use that. It's yeah, I used to take provisioning hardware very seriously to make sure that I wasn't inadvertently using something compromised. Here, it's like, “Oh, just grab whatever seems plausible from the catalog and go ahead and run that.” But it feels like there's so much of that, turtles all the way down.Michael: Yeah. And I mean, even if you've looked at the Docker file, with all the dependencies of the things you download, it really gets to be difficult. So, I mean, to protect yourself, it really becomes about, like, you know, you can do the static scanning of it, looking for bad strings in it or bad version numbers for vulnerabilities, but it really comes down to runtime analysis. So, when you start to Docker container, you really need the tools to have visibility to what's going on in the container. That's the only real way to know if it's safe or not in the end because you can't eyeball it and really see all that, and there could be a binary assortment of layers, too, that'll get run and things like that.Corey: Hell is other people's workflows, as I'm sure everyone's experienced themselves, but one of mine has always been that if I'm doing something as a proof of concept to build it up on a developer box—and I do keep my developer environments for these sorts of things isolated—I will absolutely go and grab something that is plausible- looking from Docker Hub as I go down that process. But when it comes time to wind up putting it into a production environment, okay, now we're going to build our own resources. Yeah, I'm sure the Postgres container or whatever it is that you're using is probably fine, but just so I can sleep at night, I'm going to take the public Docker file they have, and I'm going to go ahead and build that myself. And I feel better about doing that rather than trusting some rando user out there and whatever it is that they've put up there. Which on the one hand feels like a somewhat responsible thing to do, but on the other, it feels like I'm only fooling myself because some rando putting things up there is kind of what the entire open-source world is, to a point.Michael: Yeah, that's very true. At some point, you have to trust some product or some foundation to have done the right thing. But what's also true about containers is they're attacked and use for attacks, but they're also used to conduct attacks quite a bit. And we saw a lot of that with the Russian-Ukrainian conflict this year. Containers were released that were preloaded with denial-of-service software that automatically collected target lists from, I think, GitHub they were hosted on.So, all a user to get involved had to do was really just get the container and run it. That's it. And now they're participating in this cyberwar kind of activity. And they could also use this to put on a botnet or if they compromise an organization, they could spin up at all these instances with that Docker container on it. And now that company is implicated in that cyber war. So, they can also be used for evil.Corey: This gets to the third point of your report: “Geopolitical conflict influences attacker behaviors.” Something that happened in the early days of the Russian invasion was that a bunch of open-source maintainers would wind up either disabling what their software did or subverting it into something actively harmful if it detected it was running in the Russian language and/or in a Russian timezone. And I understand the desire to do that, truly I do. I am no Russian apologist. Let's be clear.But the counterpoint to that as well is that, well, to make a reference I made earlier, Russia has children's hospitals, too, and you don't necessarily know the impact of fallout like that, not to mention that you have completely made it untenable to use anything you're doing for a regulated industry or anyone else who gets caught in that and discovers that is now in their production environment. It really sets a lot of stuff back. I've never been a believer in that particular form of vigilantism, for lack of a better term. I'm not sure that I have a better answer, let's be clear. I just, I always knew that, on some level, the risk of opening that Pandora's box were significant.Michael: Yeah. Even if you're doing it for the right reasons. It still erodes trust.Corey: Yeah.Michael: Especially it erodes trust throughout open-source. Like, not just the one project because you'll start thinking, “Oh, how many other projects might do this?” And—Corey: Wait, maybe those dirty hippies did something in our—like, I don't know, they've let those people anywhere near this operating system Linux thing that we use? I don't think they would have done that. Red Hat seems trustworthy and reliable. And it's yo, [laugh] someone needs to crack open a history book, on some level. It's a sticky situation.I do want to call out something here that it might be easy to get the wrong idea from the summary that we just gave. Very few things wind up raising my hackles quite like companies using tragedy to wind up shilling whatever it is they're trying to sell. And I'll admit when I first got this report, and I saw, “Oh, you're talking about geopolitical conflict, great.” I'm not super proud of this, but I was prepared to read you the riot act, more or less when I inevitably got to that. And I never did. Nothing in this entire report even hints in that direction.Michael: Was it you never got to it, or, uh—Corey: Oh, no. I've read the whole thing, let's be clear. You're not using that to sell things in the way that I was afraid you were. And simultaneously I want to say—I want to just point that out because that is laudable. At the same time, I am deeply and bitterly resentful that that even is laudable. That should be the common state.Capitalizing on tragedy is just not something that ever leaves any customer feeling good about one of their vendors, and you've stayed away from that. I just want to call that out is doing the right thing.Michael: Thank you. Yeah, it was actually a big topic about how we should broach this. But we have a good data point on right after it started, there was a huge spike in denial-of-service installs. And that we have a bunch of data collection technology, honeypots and other things, and we saw the day after cryptomining started going down and denial-of-service installs started going up. So, it was just interesting how that community changed their behaviors, at least for a time, to participate in whatever you want to call it, the hacktivism.Over time, though, it kind of has gone back to the norm where maybe they've gotten bored or something or, you know, run out of funds, but they're starting cryptomining again. But these events can cause big changes in the hacktivism community. And like I mentioned, it's very easy to get involved. We saw over 150,000 downloads of those pre-canned denial-of-service containers, so it's definitely something that a lot of people participated in.Corey: It's a truism that war drives innovation and different ways of thinking about things. It's a driver of progress, which says something deeply troubling about us. But it's also clear that it serves as a driver for change, even in this space, where we start to see different applications of things, we see different threat patterns start to emerge. And one thing I do want to call out here that I think often gets overlooked in the larger ecosystem and industry as a whole is, “Well, no one's going to bother to hack my nonsense. I don't have anything interesting for them to look at.”And it's, on some level, an awful lot of people running tools like this aren't sophisticated enough themselves to determine that. And combined with your first point in the report as well that, well, you have an AWS account, don't you? Congratulations. You suddenly have enormous piles of money—from their perspective—sitting there relatively unguarded. Yay. Security has now become everyone's problem, once again.Michael: Right. And it's just easier now. It means, it was always everyone's problem, but now it's even easier for attackers to leverage almost everybody. Like before, you had to get something on your PC. You had to download something. Now, your search of GitHub can find API keys, and then that's it, you know? Things like that will make it game over or your account gets compromised and big bills get run up. And yeah, it's very easy for all that to happen.Corey: Ugh. I do want to ask at some point, and I know you asked me not to do it, but I'm going to do it anyway because I have this sneaking suspicion that given that you've spent this much time on studying this problem space, that you probably, as a company, have some answers around how to address the pain that lives in these problems. What exactly, at a high level, is it that Sysdig does? Like, how would you describe that in an elevator without sabotaging the elevator for 45 minutes to explain it in depth to someone?Michael: So, I would describe it as threat detection and response for cloud containers and workloads in general. And all the other kind of acronyms for cloud, like CSPM, CIEM.Corey: They're inventing new and exciting acronyms all the time. And I honestly at this point, I want to have almost an acronym challenge of, “Is this a cybersecurity acronym or is it an audio cable? Which is it?” Because it winds up going down that path, super easily. I was at RSA walking the expo floor and I had I think 15 different companies I counted pitching XDR, without a single one bothering to explain what that meant. Okay, I guess it's just the thing we've all decided we need. It feels like security people selling to security people, on some level.Michael: I was a Gartner analyst.Corey: Yeah. Oh… that would do it then. Terrific. So, it's partially your fault, then?Michael: No. I was going to say, don't know what it means either.Corey: Yeah.Michael: So, I have no idea [laugh]. I couldn't tell you.Corey: I'm only half kidding when I say in many cases, from the vendor perspective, it seems like what it means is whatever it is they're trying to shoehorn the thing that they built into filling. It's kind of like observability. Observability means what we've been doing for ten years already, just repurposed to catch the next hype wave.Michael: Yeah. The only thing I really understand is: detection and response is a very clear detect things and respond to things. So, that's a lot of what we do.Corey: It's got to beat the default detection mechanism for an awful lot of companies who in years past have found out that they have gotten breached in the headline of The New York Times. Like it's always fun when that, “Wait, what? What? That's u—what? How did we not know this was coming?”It's when a third party tells you that you've been breached, it's never as positive—not that it's a positive experience anyway—than discovering yourself internally. And this stuff is complicated, the entire space is fraught, and it always feels like no matter how far you go, you could always go further, but left to its inevitable conclusion, you'll burn through the entire company budget purely on security without advancing the other things that company does.Michael: Yeah.Corey: It's a balance.Michael: It's tough because it's a lot to know in the security discipline, so you have to balance how much you're spending and how much your people actually know and can use the things you've spent money on.Corey: I really want to thank you for taking the time to go through the findings of the report for me. I had skimmed it before we spoke, but talking to you about this in significantly more depth, every time I start going to cite something from it, I find myself coming away more impressed. This is now actively going on my calendar to see what the 2023 version looks like. Congratulations, you've gotten me hooked. If people want to download a copy of the report for themselves, where should they go to do that?Michael: They could just go to sysdig.com/threatreport. There's no email blocking or gating, so you just download it.Corey: I'm sure someone in your marketing team is twitching at that. Like, why can't we wind up using this as a lead magnet? But ugh. I look at this and my default is, oh, wow, you definitely understand your target market. Because we all hate that stuff. Every mandatory field you put on those things makes it less likely I'm going to download something here. Click it and have a copy that's awesome.Michael: Yep. And thank you for having me. It's a lot of fun.Corey: No, thank you for coming. Thanks for taking so much time to go through this, and thanks for keeping it to the high road, which I did not expect to discover because no one ever seems to. Thanks again for your time. I really appreciate it.Michael: Thanks. Have a great day.Corey: Mike Clark, Director of Threat Research at Sysdig. I'm Cloud Economist Corey Quinn and this is Screaming in the Cloud. If you've enjoyed this podcast, please leave a five-star review on your podcast platform of choice, whereas if you've hated this podcast, please leave a five-star review on your podcast platform of choice along with an angry comment pointing out that I didn't disclose the biggest security risk at all to your AWS bill, an AWS Solutions Architect who is working on commission.Corey: If your AWS bill keeps rising and your blood pressure is doing the same, then you need The Duckbill Group. We help companies fix their AWS bill by making it smaller and less horrifying. The Duckbill Group works for you, not AWS. We tailor recommendations to your business and we get to the point. Visit duckbillgroup.com to get started.Announcer: This has been a HumblePod production. Stay humble.

Today we chat with Cisco's head of developer content, community, and events, Michael Chenetz. We discuss everything from KubeCon to kindness and Legos! Michael delves into some of the main themes he heard from creators at KubeCon, and we discuss methods for increasing adoption of new concepts in your organization. We have a conversation about attending live conferences, COVID protocol, and COVID shaming, and then we talk about how Legos can be used in talks to demonstrate concepts. We end the conversation with a discussion about combining passions to practice creativity. We discuss our time at KubeCon in Spain (5:51) Themes Michael heard at KubeCon talking with creators (7:46) Increasing adoption of new concepts (9:27) We talk conferences, COVID shaming, and blamelessness (12:21) Legos and reliability  (18:04) Michael talks about ways to exercise creativity (23:20) Links: KubeCon October 2022: https://events.linuxfoundation.org/kubecon-cloudnativecon-north-america/ Nintendo Lego Set: https://www.amazon.com/dp/B08HVXMQ87?ref_=cm_sw_r_cp_ud_dp_ED7NVBWPR8ANGT8WNGS5 Cloud Unfiltered podcast episode featuring Julie and Jason:https://podcasts.apple.com/us/podcast/ep125-chaos-engineering-with-julie-gunderson-and-jason/id1215105578?i=1000562393884 Links Referenced: Cisco: https://www.cisco.com/ Cloud Unfiltered Podcast with Julie and Jason: https://podcasts.apple.com/us/podcast/ep125-chaos-engineering-with-julie-gunderson-and-jason/id1215105578?i=1000562393884 Cloud Unfiltered Podcast: https://www.cisco.com/c/en/us/solutions/cloud/podcasts.html Nintendo Lego: https://www.amazon.com/dp/B08HVXMQ87 TranscriptJulie: And for folks that are interested in, too, what day it is—because I think we're all still a little bit confused—it is Monday, May 24th that we are recording this episode.Jason: Uh, Julie's definitely confused on what day it is because it's actually Tuesday, [laugh] May 24th.Michael: Oh, my God. [laugh]. That's great. I love it.Julie: Welcome to Break Things on Purpose, a podcast about reliability, learning from each other, and blamelessness. In this episode, we talk to Michael Chenetz, head of developer content, community, and events at Cisco, about all of the learnings from KubeCon, the importance of being kind to each other, and of course, how Lego translates into technology.Julie: Today, we are joined by Michael Chenetz. Michael, do you want to tell us a little bit about yourself?Michael: Yeah. [laugh]. Well, first of all, thank you for having me on the show. And I'm really good at breaking things, so I guess that's why I'm asked to be here is because I'm superb at it. What I'm not so good at is, like, putting things back together.Like when I was a kid, I remember taking my dad's stereo apart; wasn't too happy about that. Wasn't very good at putting it back together. But you know, so that's just going back a little ways there. But yeah, so I work for the DevRel at Cisco and my whole responsibility is, you know, to get people to know that know a little bit about us in terms of, you know, all the developer-related topics.Julie: Well, and Jason and I had the awesome opportunity to hang out with you at KubeCon, where we got to join your Cloud Unfiltered podcast. So folks, definitely go check out that episode. We have a lot of fun. We'll put a link in the [show notes 00:02:03]. But yeah, let's talk a little bit about KubeCon. So, as of recording this episode, we all just recently traveled back from Spain, for KubeCon EU, which was… amazing. I really enjoyed being there. My first time in Spain. I got back, I can tell you, less than 24 hours ago. Michael, I think—when did you get back?Michael: So, I got back Saturday night, but my bags have not arrived yet. So, they're still traveling and they're enjoying Europe. And they should be back soon, I guess when they're when they feel like they're—you know, they should be back from vacation.Julie: [laugh].Michael: So. [laugh].Julie: Jason, how about you? When did you get home?Jason: I got home on Sunday night. So, I took the train from Valencia to Barcelona on Saturday evening, and then an early morning flight on Sunday and got home late Sunday night.Julie: And for folks that are interested in, too, what day it is—because I think we're all still a little bit confused—it is Monday, May 24th that we are recording this episode.Jason: Uh, Julie's definitely confused on what day it is because it's actually Tuesday, [laugh] May 24th.Michael: Oh, my God. [laugh]. That's great. I love it. By the way, yesterday was my birthday so I'm going to say—Julie: Happy birthday.Michael: —happy birthday to myself.Julie: Oh, my gosh, happy birthday. [laugh].Michael: Thank you [laugh].Julie: So… what is time anyway?Jason: Yeah.Michael: It's all good. It's all relative. Time is relative.Julie: Time is relative. And so, you know, tell us a little bit about—I'd love to know a little bit about why you want folks to know about, like, what is the message you try to get across?Jason: Oh, that's not the question I thought you were going to ask. I thought you were going to ask, “What's on your Amazon wishlist so people can send you birthday presents?”Julie: Yeah, let's back up. Let's do that. So, let's start with your Amazon wishlist. We know that there might be some Legos involved.Michael: Oh, my God, yeah. I mean, you just told me about a cool one, which was Optimus Prime and I just—I'm already on the website, my credit card is out and I'm ready to buy. So, you know, this is the problem with talking to you guys. [laugh]. It's definitely—you know, that's definitely on my list. So, anything that, anything music-related because obviously behind me is a lot of music equipment—I love music stuff—and anything tech. The combination of tech and music, and if you can combine Legos and that, too, man that would just match all the boxes. [laugh].Julie: Just to let you know, there's a Lego Con. Like, I did not know this until last night, actually. But it is a virtual conference.Michael: Really.Julie: Yeah. But one of the things I was looking at actually on Lego, when you look at their website, like, to request one of their speakers, to request one of their engineers as a speaker, they actually don't do that because they get so many requests for their folks to speak at conferences, they actually have a dedicated part of their website that talks about this. So, I thought that was interesting.Michael: Well listen, just because of that, if they want somebody that's in, you know, cloud computing, I'm not going to go talk for Lego. And I know they really want somebody from cloud computing talking to Lego, so, you know… it's, you know, quid pro quo there, so that's just the way it's going to work. [laugh].Julie: I want to be best friends with Lego people.Michael: [laugh]. I know, me too.Julie: I'm just going to make it a goal in life now to have one of their engineers speak at DevOpsDays Boise. It's like a challenge.Michael: It is. I accept it.Julie: [laugh]. With that, though, just on other Lego news, before we start talking about all the other things that folks may also want to hear about, there is another new Lego, which is the Van Gogh Starry Night that has been newly released by the time this episode comes out.Michael: With a free ear, right?Julie: I mean—[laugh].Michael: Is that what happens?Julie: —well played. Well, played. [laugh]. So, now you really got to spend a lot of time at KubeCon, you were just really recording podcast after podcast.Michael: Oh, my God. Yeah. So, I mean, it was great. I love—because I'm a techie, so I love tech and I love to find out origin stories of stuff. So, I love to, like, talk to these people and like, “Why did that come about? How did—” you know, “What happened in your life that made you want to do this? Who hurt you?” [laugh].And so, that's what I constantly try and figure out is, like, [laugh], “What is that?” So, it was really cool because I had, like, Jimmy Zelinskie who came from CoreOS, and he came from—you know, they create, you know, Quay and some of this other kinds of stuff. And you know, just to talk about, like, some of the operators and how they came about, and like… those were the original operators, so that was pretty cool. Varun from Tetrate was supposed to come on, and he created Istio, you know? So, there were so many of these things that I just geek out knowing about, you know?And then the other thing that was really high on our list, and it's really high from where I am, is API quality, API testing, API—so really, that's why I got in touch with you guys because I was like, “Wow, that fits in really good, you know? You guys are doing stuff that's around chaos, and you know, I think that's amazing.” So, all of this stuff is just so interesting to me. But man, it was just a whirlwind of every day just recording, and by the end that was just like, you know, “I'm so sorry, but I just, I can't talk anymore.” You know, and that was it. [laugh].Jason: I love that chatting with the creators. We had Zack Butcher on who is also from Tetrate and one of the early Istio—Michael: Yeah, yeah.Jason: Contributors. And I find it fascinating because I feel like when you chat with these folks, you start to understand the context of why things were built. And it—Michael: Yes.Jason: —it opens your brain up to, like, cool, there's a software—oh, now I know exactly why it's doing things that way, right? Like, it's just so, so eye-opening. I love it.Julie: With that, though, like, did you see any trends or any themes as you were talking to all these folks?Michael: Yeah, so a few real big trends. One is everybody wants to know about eBPF. That was the biggest thing at KubeCon, by far, was that, “We want to learn how to do this low-level kernel stuff that's really fast, that can give us all the information we need, and we don't have to use sidecars and things like that.” I mean it was—you know, that was the most excitement that I saw. OTel was another one for OpenTelemetry, which was a big one.The other thing was simplification. You know, a lot of people were looking to simplify the Kubernetes ecosystem because there's so much out there, and there's so many things that you have to learn about that it was super hard, you know, for somebody to come into it to say, “Where do I even start?” You know? So, that was a big theme was simplification.I'm trying to think. I think another one is APIs, for sure. You know, because there's this whole thing about API sprawl. And people don't know what their APIs are, people just, like—you know, I always say people can see—like, developers are lazy in a good way, and I consider myself one of them. So, what that means is that when we want to develop something, what we're going to do is we're just going to pull down the nearest API that does what we need, that has the best documentation, that has the best blog, that has the best everything.We don't know what their testing strategy is; we don't know what their security strategy is; we don't know if they use other libraries. And you have to figure that stuff out. And that's the thing that—you know, so everything around APIs is super important. And you really have to test that stuff out. Yes, people, you have to test it [laugh] and know more about it. So, those are those were the big themes, I think. [laugh].Julie: You know, I know that Kerim and I gave a talk on observability where we kind of talked more high-level about some of the overarching concepts, but folks were really excited about that. I think is was because we briefly touched on OpenTelemetry, which we should have gone into a little bit more depth, but there's only so much you can fit into a 30-minute talk, so hopefully we'll be able to talk about that more at a KubeCon in the future, we [crosstalk 00:09:54] to the selection committee.Michael: Hashtag topics?Julie: Uh-huh. [laugh]. You know, that said, though, it really did seem like a huge topic that people just wanted to learn more about. I know, too, at the Gremlin booth, a lot of folks were also interested in talking about, like, how do we just get our organization to adopt some of these concepts that we're hearing about here? And I think that was the thing that surprised me the most is I expected people to be coming up to the booth and deep-diving into very, very deep, technical-level questions, and really, a lot of it was how do we get our organization to do this? How can we increase adoption? So, that was a surprise for me.Michael: Yeah, you know what, and I would say two things to that. One is, when you talk about Chaos Engineering, I think people think it's like rocket science and people are really scared and they don't want to claim to be experts in it, so they're like, “Wow, this is, like, next-level stuff, and you know, we're really scared. You guys are the experts. I don't want to even attempt this.” And the other thing is that organizations are scared because they think that it's going to, like, create mass hysteria throughout their organization.And really, none of this is true in either way. In reality, it's a very, very scripted, very exacting stuff that you're testing, and you throw stuff out there and see what kind of response you get. So, you know, it's not this, like, you know—I think people just have—there needs to be more education around a lot of areas in cloud-native. But you know, that's one of the areas. So, I think it's really interesting there.Julie: I think so too. How about for you, Jason? Like, what was your surprise from the conference or something that maybe—Jason: Yeah, I mean, I think my surprise was mostly around just seeing people coming back, right? Because we're now I would say, six months into conferences being back as a thing, right? Like, we had re:Invent last year in Vegas; we had KubeCon last year in LA, and so, like, those are okay events. They weren't, like, back to normal. And this was, I feel like, one of the first conferences, that it really started to feel back to normal.Like, there was much better attendance, there was much more just buzz and hallway tracking and everything else that we're used to. Like, the whole reason that we go to conferences is getting together with people and hanging out and stuff, and this one has so far felt the most back-to-normal out of any event that I've been to over the past six months.Michael: Can I just talk about one thing that I think, you know, people have to get over is, you know, I see a lot online, I think it was—I forget who it was that was talking about it. But this whole idea of Covid shaming. I mean, we're going to this event, and it's like, yeah, everybody wants to get out, everybody wants to learn things, but don't shame people just because they got Covid, everybody's getting Covid, okay? That's just the point of life at this point. So, let's just, you know, let's just be nice to each other, be friendly to each other, you know? I just have to say that because I think it's a shame that people are getting shamed, you know, just for going to an event. [laugh].Julie: See, and I think that—that's an interesting—there's been a lot of conversation around this. And I don't think anybody should be Covid-shamed. Look, I think that we all took a calculated risk in coming—Michael: Absolutely.Julie: To this event. I personally gave out a lot of hugs. I hugged some of the folks that have mentioned that they have come up positive from Covid, so there's a calculated risk in going. I think there has been a little bit of pushback on maybe how some of the communication has come out around it. That said, as an organizer of a small conference with, like, 400 people, I think that these are very complicated matters. And what I really think is important is to listen to feedback from attendees and to take that.And then we're always looking to improve, right?Michael: Absolutely.Julie: If everything that we did was perfect right out of the gate, then we wouldn't have Chaos Engineering because there'd be nothing [crosstalk 00:13:45] be just perfectly reliable. And so, if we take away anything, let's take away—just like what you said, first of all, Covid, you should never shame somebody for having Covid. Like, that's not cool. It's not somebody's fault that they caught an illness.Michael: Yes.Julie: I mean unless they were licking doorknobs. And that's a whole different—Michael: Yes. [laugh]. That's a whole different thing, right there.Julie: Conversation. But when we talk about just like these questions around cultural adoption, we talk about blamelessness; we talk about learning from failure; we talked about finding ways to improve, and I think all of that can come into play. So, it'll be interesting to see how we learn and grow as we move forward. And like, thank you to re:Invent, thank you to KubeCon, thank you to DevOpsDays Boise. But these conferences that have started going back in-person, at great risk to organizers and the committee because people are going to be mad, one way or the other.Michael: Yeah. And you can see that people want to be back because it was huge, you know?Julie: Yeah.Michael: Maybe you guys, I'm going to put in a feature request for Gremlin to chaos engineer crowds. Can we do that so we can figure out, like, what's going to happen when we have these big events? Can we do that?Julie: I mean, that sounds fun. I think what's going to happen is there's going to be hugs, there's going to be people getting sick, but there's going to be people learning and growing.Michael: Yes.Julie: And ultimately, I just think that we have to remember that just, like, our systems aren't perfect, and neither are people. Like, the fact that we expect people to be perfect, and maybe we should just keep some mask mandates for a little bit longer when we're at conferences with 8000 people.Michael: Sure.Julie: I mean, that's—Michael: That makes sense.Jason: Yeah. I mean, it's all about risk management, right? This is, essentially what we do in SRE is there's always a risk of a massive outage, and so it's that balance of, right, do what you can, but ultimately, that's why we have SLOs and things is, you can never be a hundred percent, so like, where do we draw the line of here are the things that we're going to do to help manage this risk, but you can never shoot for a perfectly, entirely safe space, right? Because then we'd all be having conferences in padded rooms, and not touching each other, and things like that. There's a balance there.And I think we're all just trying to find that, so yeah, as you mentioned, that whole, like, DevOps blamelessness thing, you know, treat each other with the notion that we're all trying to get through this together and do what we think is best. Nobody's just like John Allspaw said, you know, “Nobody goes to work thinking that, like, their intent is to crash everything and destroy the company.” No one's going to KubeCon or any of these conferences thinking, “Yeah, I'm going to be a super-spreader.”Julie: [laugh].Michael: Yeah, that would be [crosstalk 00:16:22].Jason: Like, everyone's trying not to do it. They're doing their best. They're not actively, like, aggressively trying to get you sick or intentionally about it. But you know—so just be kind to one another.Michael: Yeah. And that's the key.Julie: It is.Michael: The key. Be kind to one another, you know? I mean, it's a great community. People are really nice, so, you know, let's keep that up. I think that's something special about the, you know, the community around KubeCon, specifically.Julie: As we can refine this and find ways, I would take all of the hugs over virtual conferences—Michael: Yes.Julie: Any day now. Because, as Jason mentioned, is even just with you, Michael, the time we got to spend with you, or the time I kept going up to Jfrog's booth and Baruch and I would have conversations as he made me a delicious coffee, these hallway tracks, these conversations, that's what no one figured out how to recreate during the virtual events—Michael: Absolutely.Julie: —and it's just not possible, right?Michael: Yeah. I mean, I think it would take a little bit of VR and then maybe some, like, suit that you wear in order to feel the hug. And, you know, so it would take a lot more in order to do that. I mean, I guess it's technologically possible. I don't know if the graphics are there yet, so it might be like a pixelated version, like, you know, like, NES-style, or something like that. But it could look pretty cool. [laugh]. So, we'll have to see, you know?Julie: Everybody listening to this episode, I hope you're getting as much of a kick out of it as we are recording it because I mean, there are so many different topics here. One of the things that Michael and I bonded about years ago, for our listeners that are—not years ago; months ago. Again, what is time?Michael: Yeah. What is time? It's all relative.Julie: It is. It was Lego, though, and so we've been talking about that. But Michael, you asked a great question when we were recording with you, which is, like—Michael: Wow.Julie: Can—just one. Only one great question.Michael: [laugh].Julie: [laugh]. Which was, how would you incorporate Lego into a talk? And, like, when we look at our systems breaking and all of that, I've really been thinking about that and how to make our systems more reliable. And here's one of the things I really wanted to clarify that answer. I kind of went… I went talking about my Lego that I build, like, my Optim—not my Optimus Primes, I don't have it, but my Voltron or my Nintendo Lego. And those are all box sets.Michael: Yep.Julie: But one of the things if you're not playing with a box set with instruction, if you're just playing with just the—or excuse me, architecting with just the Lego blocks because it's not playing because we're adults now, I think.Michael: Yes, now it's architecting. Yes.Julie: Yes, now that we're architecting, like, that's one of the things that I was really thinking about this, and I think that it would make something really fun to talk about is how you're building upon each layer and you're testing out these new connection pieces. And then that really goes into, like, when we get into Technics, into dependencies because if you forget that one little one-inch plastic piece that goes from the one to the other, then your whole Lego can fall apart. So anyway, I just thought that was really interesting, and I'd wondered if you or Jason even gave that any more thought, or if it was just fleeting for you.Michael: It was definitely fleeting for me, but I will give it some more thought, you know? But you know, when—as you're saying that though, I'm thinking these Lego pieces really need names because you're like that little two-inch Lego piece that kind of connects this and this, like, we got to give these all names so that people can know, that's x-54 that's—that you're putting between x-53 and x-52. I don't know but you need some kind of name for these parts now.Julie: There are Lego names. You just Google it. There are actual names for all of the parts but—Michael: Wow. [laugh].Julie: Like, Jason, what do you think? I know you've got [unintelligible 00:19:59].Jason: Yeah, I mean, I think it's interesting because I am one of those, like, freeform folks, right? You know, my standard practice when I was growing up with Legos was you build the thing that you bought once and then you immediately, like, tear it apart, and you build whatever the hell you want.Michael: Absolutely.Jason: So, I think that that's kind of an interesting thing as we think about our systems and stuff, right? Like, part of it is, like, yeah, there's best practices and various companies will publish, like, you know, “Here's how to architect such-and-such system.” And it's interesting because that's just not reality, right? You're not going to go and take, like, the Amazon CloudFormation thing, and like, congrats, you're done. You know, you just implement that and your job's done; you just kick back for the rest of the week.It never works that way, right? You're taking these little bits of, like, cool, I might have, like, set that up once just to see what's happening but then you immediately, like, deconstruct it, and you take the knowledge of what you learned in those building blocks, and you, like, go and remix it to build the thing that you actually need to build.Michael: But yeah, I mean, that's exactly—so you know, Legos is what got me interested in that as a kid, but when you look at, you know, cloud services and things like that, there's so many different ways to combine things and so many different ways to, like—you know, you could use Terraform, you could use Crossplane, you could use, you know, any of the services in the cloud, you could use FaaS, you could use serverless, you could use, you know, all these different kinds of solutions and tie them together. So, there's so much choice, and what Lego teaches you is that, embrace the choice. Figure out and embrace the different pieces, embrace all the different things that you have and what the art of possibility is, and then start to build on that. So, I think it's a really good thing. And that's why there's so much correlation between, like, kind of, art and tech and things like that because that's the kind of mentality that you need in order to be really successful in tech.Jason: And I think the other thing that works really well with what you said is, as you're playing with Legos, you start to learn these hacks, right? Like, I don't have, like, a four-by-one brick, but I know that if I have three four-by-one flats, I can stack those three and it's the same height as a brick, right?Michael: Yep.Jason: And you can start combining things. And I love that engineering mentality of, like, I have this problem that I need to solve, I have a limited toolbox for whatever constraints, right, and understanding those constraints, and then cool, how can I remix what I've got in my toolbox to get this thing done?Michael: And that's a thing that I'm always doing. Like, when I used to do a lot of development, you know, it was always like, what is the right code? Or what is the library that's going to solve my problem? Or what is the API that's going to solve my problem, you know?And there's so many different ways to do it. I mean, so many people are afraid of, like, making the wrong choice, when really in programming, there is no wrong choice. It's all about how you want to do it and what makes sense to you, you know? There might be better options in formatting and in the way that you kind of, you know, format that code together and put them in different libraries and things like that, but making choices on, like, APIs and things like that, that's all up to the artist. I would say that's an artist. [laugh]. So, you know, I think it all stems though, when you go back from, you know, just being creative with things… so creativity is king.Jason: So Michael, how do you exercise your creativity, then? How do you keep up that creativity?Michael: Yeah, so there's multiple ways. And that's a great segment because one of the things that I really enjoy—so you know, I like development, but I'm also a people person. And I like product management, but I also like dealing with people. So really, to me, it's about how do I relate products, how do I relate solutions, how do I talk to people about solutions that people can understand? And that's a creative process.Like, what is the right media? What is the right demos? What is the right—you know, what do people need? And what do people need to, kind of, embrace things? And to me, that's a really creative medium to me, and I love it.So, I love that I can use my technical, I love that I can use my artistic, I love that I can use, you know, all these pieces all at once. And sometimes maybe I'll play guitar and just put it in the intro or something, I don't know. So, that kind of combines that together, too. So, we'll figure that piece out later. Maybe nobody wants to hear me play guitar, that's fine, too. [laugh].But I love to be able to use, you know, both sides of my brain to do these creative aspects. So, that's really what does it. And then sometimes I'll program again and I'll find the need, and I'll say, “Hey, look, you know, I realized there's a need for this,” just like a lot of those creators are. But I haven't created anything cool, but you know, maybe someday I will. I feel like it's just been in between all those different intersections that's really cool.Jason: I love the electric guitar stuff that you mentioned. So, for folks who are listening to this show, during our recording of the Cloud Unfiltered you were talking about bringing that art and technical together with electric guitars, and you've been building electric guitar pickups.Michael: Yes. Yeah. So, I mean, I love anything that can combine my music passion with tech, so I have a CNC machine back here that winds pickups and it does it automatically. So, I can say, “Hey, I need a 57 pickup, you know, whatever it is,” and it'll wind it to that exact spec.But that's not the only thing I do. I mean, I used to design control surfaces for artists that were a big band, and I really can't—a lot of them I can't mention because we're under NDA. But I designed a lot of these big, you know, control surfaces for a lot of the big electronic and rock bands that are out there. I taught people how to use Max for Live, which is an artist's, kind of, programming language that's graphical, so [NMax 00:25:33] and MSP and all that kind of stuff. So, I really, really like to combine that.Nowadays, you know, I'm talking about doing some kind of events that may be combined tech, with art. So, maybe doing things like Algorave, and you know, things that are live-coding music and an art. So, being able to combine all these things together, I love that. That's my ultimate passion.Jason: That is super cool.Julie: I think we have learned quite a bit on this episode of Break Things on Purpose, first of all, from the guy who said he hasn't created much—because you did say that, which I'm going to call you out on that because you just gave a long list of things that you created. And I think we need to remember that we're all creators in our own way, so it's very important to remember that. But I think that right now we've created a couple of options for talks in the future, whether or not it's with Lego, or guitar pickups.Michael: Yeah.Julie: Is that—Michael: Hey—Julie: Because I—Michael: Yeah, why not?Julie: —know you do kind of explain that a little bit to me as well when I was there. So, Michael, this has just been amazing having you. We're going to put a lot of links in the notes for everybody today. So, to Michael's podcast, to some Lego, and to anything else Michael wants to share with us as well. Oh, real quick, is there anything you want to leave our listeners with other than that? You know, are you looking to hire Cisco? Is there anything you wanted to share with us?Michael: Yeah, I mean, we're always looking for great people at Cisco, but the biggest thing I'd say is, just realize that we are doing stuff around cloud-native, we're not just network. And I think that's something to note there. But you know, I just love being on the show with you guys. I love doing anything with you guys. You guys are awesome, you know. So.Julie: You're great too, and I think we'll probably do more stuff, all of us together, in the future. And with that, I just want to thank everybody for joining us today.Michael: Thank you. Thanks so much. Thanks for having me.Jason: For links to all the information mentioned, visit our website at gremlin.com/podcast. If you liked this episode, subscribe to the Break Things on Purpose podcast on Spotify, Apple Podcasts, or your favorite podcast platform. Our theme song is called, “Battle of Pogs” by Komiku, and it's available on loyaltyfreakmusic.com.

What you'll learn in this episode: Why you won't see results if you have a “set it and forget it” mentality about your website Why jewelers should give their website as much attention as a brick-and-mortar location How jewelers can use tricks of the trade to encourage customers to purchase items online, even if jewelry is traditionally bought in person  How jewelry brands can take advantage of the new shopping feature on Instagram Why the jewelry business is more like Crate & Barrel than Sephora—and why that distinction is important About Michael Burpoe Michael Burpoe is Director of User Experience for Punchmark, a digital marketing agency that specializes in the jewelry industry. Michael created Punchmark's UX team, which was assembled to take very specific initiatives toward fine-tuning tools and features, and improving the platform on both the front-end and back-end. Since early 2019, Michael has also headed up the strategy, planning, and execution behind Punchmark's Livestream Education program, the In The Loupe podcast, and the Punchmark Community on Facebook. Originally from Saranac Lake, NY, in Michael's spare time you can find him practicing Brazilian Jiu Jitsu or painting cityscapes.  Additional Resources: In the Loupe on Spotify In the Loupe on Apple Podcasts Website Blog Facebook Photos: Design Themes: Podcast Logo: Website Samples: After working with jewelry brands of all sizes for the last several years, Michael Burpoe has learned a thing or two about the strategies that make jewelry businesses more successful online. As Director of User Experience for Punchmark, Michael has helped even the most hesitant jewelers invest in their websites and reap the rewards of a fine-tuned digital marketing strategy. He joined the Jewelry Journey Podcast to explain why selling jewelry online is only going to become more common; how to make customers feel comfortable buying luxury items online; and how jewelry companies can use digital marketing tricks to increase sales. Read the episode transcript here.  Sharon: Hello, everyone. Welcome to the Jewelry Journey Podcast. Today, my guest is Michael Burpoe with Punchmark. Michael is the Director of User Experience for this marketing agency, which specializes in creating effective and compelling websites for the jewelry industry. Today, Michael will talk with us about his journey into the world of jewelry. He'll also share with us some of the secrets about what it takes to create an effective website, one that drives revenue. Michael, welcome to the program. Michael: Thank you so much for having me. I really appreciate it. Sharon: We're so glad to have you. How did you get into the jewelry industry? I'm sure that's not where you started out when you decided to take this path. Michael: Yeah, great question. The starting point is, I went to school for design. I went to the Rochester Institute of Technology, which is called RIT, in Rochester, New York, and while I was there I was studying graphic design. I knew I wanted to study user experience. For people who aren't fully aware, that's the overall shopping ease when it comes to websites. It can extend beyond that, but that's where I was most focused. While I was doing a lot of application design and things that were related to e-commerce, I was scouted by this guy, Daniel Sirois, who is my CPO at Punchmark. He hired me on, and I've since found myself in a niche when it comes to e-commerce strategy and web design. I now am Director of User Experience at Punchmark. I lead our dev team as well as the overall production strategy when it comes to that.  Sharon: That's really interesting. I'm so surprised to hear you say you went to RIT because that's a heavy design school. All kinds of art jewelers come out of there. Michael: Yeah, it has a major, I think, in metal design as well as jewelry design. What's crazy is they do these installation pieces. I'm sure you're already aware of these pieces that almost orbit around the head, these really dynamic pieces. It might be one of the only master's programs in the U.S. for jewelry design. These pieces are absolutely stunning. They almost install around the head and then have a singular earring. It's all about how the piece is presented. It's very fascinating. I went to a couple of their shows, unbeknownst to me that I end up in the jewelry industry in the end. Sharon: I guess I thought you'd say you studied computer science. You were saying e-commerce.  Michael: Yeah. Sharon: What does Punchmark do, and why the name Punchmark for the company? Michael: The original idea behind Punchmark, as it's been told to me by the founders, is that a coin is just metal until it is punched with the original insignia that denotes its value. For example, a quarter is made of the same type of material as a dime; it's just a punch that makes the difference. That's how we see ourselves in bringing brands and businesses to life: everybody starts out, more or less, on the same footing. It's what you add to the process that adds the value.  We try to our best to stay ahead of the cutting edge and see where the ball is going, so that way we can lead our leaders. We were one of the first people to be doing serious e-commerce websites for the jewelry industry. Now, with a lot of things shifting toward e-commerce in addition to brick and mortar, what we call an omnichannel solution has had a definite, huge rise in popularity. It's really exciting to be a part of. Sharon: I really like that. That's an interesting concept. It's all the same; it's just what size, which President is on the face. We talked a little about this, but tell us more about the transition you're seeing with jewelers getting into the e-commerce space. Michael: Absolutely. Whenever people ask me about the shift towards e-commerce—obviously Covid had a huge impact on the jewelry industry, especially right in March 2020, the reason being that prior to those events, the vast majority of sales were done inside of brick-and-mortar stores. When I refer to jewelers, I'm referring to jewelry retailers. We also work with vendors and production companies and technology companies, but specifically jewelry retailers. They were doing so much of their business in their stores. When their stores were forced to close at that time, there was this real uncertainty about what they should be doing. I hate to say I told you so, so I won't, but I will say that we've been constantly pushing people as much as possible to take their online presence seriously. One of the things we are always saying is that your online store should be considered just as important or require as much time as any of your brick-and-mortar stores. Some of our retailers, they have three brick-and-mortar stores, and their website should their fourth. That's how we see it, and that's because it takes a lot of work and a lot of extra stuff. Sharon: That's a great way to look at it. It does; it takes a lot of nurturing, a lot of care and feeding to get it right. Michael: Absolutely. Sharon: I'm thinking about the dealers, maybe not so much the retailers that I've talked with. I remember an antique jewelry dealer telling me they had resisted for a long time even doing a website—this was years ago—and the first online sale they made was one of the largest sales they ever made. I know there's a lot of talk about, “Well, everybody has to touch and feel,” but I think a lot of people are getting past that. What do you think? Michael: I think it comes down to who the target customers are. What you just mentioned, being loath to adapt to these online businesses, it's very understandable. Tech is constantly changing, constantly evolving, and it can be extremely overwhelming to get into. That said, it's like learning a language. Once you learn, you learn how to learn, and then you learn how to adapt and pick up new things. That online presence, what we're seeing is—say you're a 60-year-old or 70-year-old retail jeweler. Your shoppers are not all 60 to 70-year-old shoppers. A lot of the target consumers are going to be younger.  Now millennials are buying engagement rings and jewelry in general. Gen Z is starting to have enough money that they can start shopping. These generations and Gen X as well are very tech fluent, extremely tech fluent. Speaking for myself as a millennial, I was brought up with a computer. I have had the internet as a part of my life for as long as I can remember, so the idea of me spending $200, $300, $400 online for a product that I have not touched is not as foreign to me as some retailers seem to assume because it's true for them. We're seeing that a lot of shoppers that are coming through are first-time jewelry shoppers, first-time ring buyers.  We run a podcast; we sometimes interview consumers for engagement ring buyers, and we're finding that people love the idea of sitting home alone. It's the middle of the night; their significant other might be in bed, and they're shopping online, finding information, getting an idea of what that engagement ring should look like. Whereas before, they walk into a store to buy that engagement ring, and it is intimidating because the store owner is—not breathing down your neck, but very interested. Some people just have social anxiety, and they don't want to talk to anybody. The idea of having all that information in front of them is very attractive to them. Sharon: That's really true. You mentioned two things I want to follow up on. First of all, you mentioned your podcast called In the Loupe, which is a great name; I love it. Michael: A jeweler's loupe, yep. Sharon: Tell us a little bit about that. Michael: Sure. In the Loupe actually started as a different podcast called the Jeweler Survival Kit. This launched in March 2020. Like I mentioned before, there was a lot of uncertainty when it came to how the pandemic was going to impact these businesses. There was all this silence from the movers and the shakers in the jewelry industry, and we decided to come through and be like, “Alright, here's how you do it. You should cash up your inventory by selling your unwanted products, selling them at a discount or doing Facebook sales and stuff like that.” As we did a couple of episodes of it, we realized that Coronavirus wasn't going to go away in one month or two months. We decided to shift to In the Loupe and make it more of a podcast along the lines of educating and advocating. So, not just telling people how things worked, but also saying, “You should be doing this about emerging technologies in the e-commerce space.” We talk about things like SEO, digital marketing, selling online, stuff like that. It's since evolved into a comprehensive look at the jewelry industry, and it's been a lot of fun to be a part of. Sharon: It sounds very interesting and necessary, but I could also visualize a lot of jewelers, retailers, manufacturers shutting it off and saying, “Forget it.” Michael: Yes, we started it like, “Alright, we've told you a million times that you should get SEO, which is search engine optimization. It's how you rank higher in Google. Well, we're going to tell you how it works.” We talk about Google and how it works, hoping that even if they don't buy SEO with us, they start to think, “Maybe I should get SEO.”  What we've learned is that trepidation and hesitancy towards these techniques, that doesn't go away in one day or one week or one month; it's a long-term process. I see myself as a steward for the industry in that if I do my job right with In the Loupe, which is a partnership with the Smithee Group, who we coproduce it with—if I do my job right, fewer jewelry stores will fall upon hard times in this really uncertain state. More jewelry stores will adapt and be ahead of the curve instead of being behind the curve, which the jewelry industry historically has always been. Sharon: Do you have people who have worked in the jewelry industry on your team? The reason I ask because I can see prospects pushing back and saying, “What do you know about it?” Michael: We have a GIA-certified gemologist as our CEO. He actually spent a considerable amount of time in the jewelry industry working at a jewelry store. That's how he got his founding. Also, our CTO spent a considerable amount of time in the jewelry industry— Sharon: CTO, you'll need to explain it. Go ahead. Michael: CTO is Chief Technology Officer. The Cockerham brothers, they spent many years in the jewelry industry. They grew up at a jewelry store and have done many trips to Antwerp, Belgium for different buying trips. The reason why we got into jewelry is because we have roots in the jewelry industry and we can relate to these jewelers on a deeper basis.  Sharon: First of all, you said something and then we jumped about. You said something about “we're going to tell you how to do it.” Could you just repeat that and then stop? Michael: Yeah. We're going to tell you how to do it. Sharon: What you've told me about your team, it sounds like you have deep jewelry experience on your team. Do you find that prospective clients breathe a sigh of relief when you say that?  Michael: It depends. Punchmark was founded in 2008. We've been in the jewelry industry for quite a while, and we have a history in the jewelry industry and have made a name for ourselves. We call ourselves the largest online provider for jewelry websites. We have almost 500 clients, and we can see the statistics that are inside our network. I've seen people be, again, loath or behind the curve when it comes to pushing forward with this emerging tech, but at the same time, we've also taken jewelers who are very slow to adapt and turned them into making frequent sales online. It only seems impossible before you start. Sharon: That's great. I have to remember that it only seems impossible before you start. I remember a lot that my father taught me, but one thing that always sticks in my mind and is very motivating is that he would say, “All beginnings are hard.” Michael: Yes. I also think anything that's worthwhile in business doesn't come out of the box, ready to rock and roll. There is some setup. It does require a little bit of hard work, and it requires some communication. You need to be on your email and, like I said before, it needs to be seen as a significant branch of your business if you want it to be a significant part of your business. The thought of, “Oh, I'm just going to load it up with some images and they're going to sell,” well, in reverse, let's think about it yourself. Would you buy a piece a jewelry if you have a photo of this necklace that's going for $1,000, and you took a photo through the display box window, and it's kind of grainy and the details about it are, “This necklace has 14-karat gold and it's $1,000.” Well, that seems crazy. I would never buy something with that little information, because who knows? It could be a scam. How do I know the details are there? Also, it doesn't look good.  That's why we're always advocating through In the Loupe saying, “If you want to sell, you almost need to market to yourself.” What would you look for in this jewelry? For me, at least, I want good photos, lots of details. I want to know everything about the piece of jewelry. I want to be assured that if I'm going to buy a $1,000 bracelet or watch or whatever have you that I am not going to get scammed. It's real; it's available, and I need to be assured about that. Sharon: It sounds like you are marketing to yourself. As director with user experience, you really are looking at what's going to build that trust in terms of, “this isn't a scam.” Let me ask you this: somebody we had on the podcast, a dealer, said they thought the most important thing when it comes to user experience is the return policy. What do you think about that? Michael: Absolutely. Return policies, warranties, shipping information, data policies, all of those accoutrements for an online sale, all of that information is what comes in for the trust factor. We can't get around it: jewelry is a luxury good. You can even think about a wallet or a pocketbook; these are all luxury items. When it comes to that kind of stuff, you can do without it. That's the nature of luxury; it's a want, not a need, but what ends up happening to it is that the other factors are just as important. If I buy this watch and it breaks the first day, am I SOL or am I going to be able to come back and have it refurbished? If I need a new battery, can I come in for that? If it gets shipped to me and it gets lost in the mail, am I out $1,000? All of those things are the trust.  At least with millennials and Gen Z, we're finding that they are so tech fluent that they know how to comparison shop much better. If they're not shopping at your store, if they see that there's no information and it feels like a risk, they can easily comparison shop and find the exact same product or a similar one somewhere else. That's the battle you're always going against. You want to have all of the checks in your box as much as possible. Sharon: I think that's such an important point, no matter what industry. If somebody is shopping for something, whether it's a service or whatever, and they go to one website and there's no information or it takes a long time to load, they're gone. That's it; they're on to the better website. Michael: We see that all the time with things like bounce rate. That's the rate of someone visiting your website and then leaving within, I think, 10 seconds. That means you need to load quickly. You also need to have eye-catching imagery and what we call “above the fold,” which is the information that loads that's visible on the screen first.  At lot of times, shoppers, they don't even know what they want when they start shopping. They start out as an open shopper. They're going in and they know they need to buy something for their significant other, and they know they like fancy jewelry. Well, they don't know if they want a hoop earring or a stud; they don't know that answer. It's up to you to convince them and show them the way so they can shop without feeling stupid or intimidated. I think that also has to come into the above the fold information.  

Welcome to Your Anxiety Toolkit. I’m your host, Kimberley Quinlan. This podcast is fueled by three main goals. The first goal is to provide you with some extra tools to help you manage your anxiety. Second goal, to inspire you. Anxiety doesn’t get to decide how you live your life. And number three, and I leave the best for last, is to provide you with one big, fat virtual hug, because experiencing anxiety ain’t easy. If that sounds good to you, let’s go. Hello friends, you are going to love this episode. Holy smokes, I just recorded it, so you’ve got me fresh, and I’m so excited. I just had such an amazing conversation with Mike Heady. He is an LCPC and he treats OCD and anxiety disorders. We talked about shame and shame and shame and shame, and he brought so much wisdom. You guys are going to love this episode. It is packed full of all the good stuff. So, I’m not going to waste your time. I just want you to get straight there and listen to it. Before we get started, if you haven’t left a review, please do so. I love getting reviews from you. When we get good reviews, it doesn’t just stroke my ego. That’s not the point. It is because the more reviews we get, the more people will come and listen to the podcast, which means then I get to help people with these incredible tools, these science-based tools. Hopefully, even just from today, if you’re first time listening, welcome. We are talking about shame, and you are going to get so much from this. So if you are listening, please do leave a review. I would be so grateful. And enjoy the show. ----- Kimberley: Welcome. I am so excited to have with us today, Mike Heady. He is an LCPC. That’s correct. Right? Michael: That is, yes. Kimberley: Yes. We’re going to have a conversation that actually might be my favorite topic in the whole of the podcast. We’re talking about shame. So, welcome. Michael: Thanks for having me. I share your passion for the conversation. Kimberley: Yes. Not that I love shame, but I like talking about shame. Michael: Yes. I agree. It’s hard to say you love shame. It’s like saying I love fear. Kimberley: Exactly. So, why are you interested in this topic? Michael: It’s been a professional evolution for me, originally being trained to treat anxiety disorders and OCD. We talk a lot about fear and uncertainty and we have a ceremonial way of responding to shame. We’re like, “Oh yeah, and there’s a shame too.” In the last couple of years, I’ve really done a deep dive into like, “Well, what is this?” Because a lot of clients are having a hard time getting better. I don’t think it’s the fear that’s hard for them to get past sometimes. I don’t think it’s the uncertainty. I think it’s the shame. I think it’s a different animal. When I started doing a lot of digging, I realized there’s a whole world of shame out there in the literature, and how it applies to OCD fascinated me. So, that’s my new passion project. Kimberley: Yeah. Same. Exact same experience. Also seeing how much fear in and of itself is a generator of suffering. But as you said, there’s this shame that’s generating suffering at exponential levels. So, I’m so grateful to have this conversation with you. for those who are listening and who might not really understand shame, would you be interested in giving me your working definition of what shame is? Michael: Sure. Are you okay if I elaborate on it a little bit? Kimberley: Yeah. Go for it. Michael: Okay. I think a good definition is that shame is a really painful, aversive, unpleasant emotional experience. Fear or disgust, it’s natural or instinctive for us to want to back away and get rid of shame. Shame is often brought on by some kind of real or perceived violation of a social norm that we actually believe in. So it’s not this mystical emotional thing. It’s a thing either real or perceived occurred. And then I experienced this negative, painful emotion of shame. That’s the short version of the definition. I think it’s worth talking about shame as having two levels of shame. We might call an adaptive kind of shame, the shame where we view it as a response to a specific episode, rather than some generalizable character flaw or full-on assault of our identity. I violated something I believed in, I feel bad, which is different than guilt because guilt is about apologizing to the other person for something you’ve done. But I might feel bad for violating a norm I believe in. Okay, there’s nothing toxic about that. There’s another level of shame that we tend to want to talk about more. It’s the toxic shame. That’s the shame that is unworkable. It’s always unhelpful. It is a response to a perceived or real violation of a norm that has broad sweeping characteristics to it. It is a full-on assault on our identity. It is a condemnation of the self. That’s the toxic shame. I can wrap up this as saying, what was incredibly helpful for me when I was going deep dive into what shame was is, yes, shame is an emotion. We know what emotions are. We all feel emotions. We’ve all felt shame. You and I, as therapists, spend our careers trying to help our clients have a different relationship towards painful emotions, and understanding what an emotion is, specifically around shame, I think was really enlightening for me. I derive a lot of this understanding from some work that occurred in the sixties and seventies, probably before then, but the work from the sixties and seventies is what brought it to my attention, that emotions are an emergent experience constructed by an interaction between our biology and our biography. The biography piece comes out of Silvan Tomkins work in the late sixties where he suggested that, yes, there’s a universal kind of biological experience that contributes to an emotion. But the part that completes it is our own narrative, which is unique to us. My interaction with the world, as I develop from a child to an adult, the experiences I have, my environment, that’s the secret ingredient to my shame. So what makes me feel shame isn’t necessarily what makes you feel shame. For instance, if I were to, while talking to you, suddenly break out into a red flush on my face, start sweating, and my voice start cracking, I might experience that as an embarrassment, like a small shame. But if you perhaps had terrible social anxiety disorder and the same thing happened to you, the same exact event, you might see that as a humiliation. Both are derivative emotions of shame. But humiliation is different from embarrassment in orders of magnitude of pain. Humiliation is closer to trauma than it is to anxiety. This is anyway my long-winded way of saying, yes, shame is a complex animal, and that’s the working definition I tend to have. Kimberley: Yeah. It’s a different way of explaining it. This opportunity makes me so happy. What you’re saying is, it’s on a spectrum, would you say? Michael: Oh, absolutely. Yeah. Kimberley: Now, let’s play that out. We’re talking about the biology, and then there’s the story we tell ourselves. Would you give an example for you? You and me, let’s say we both got embarrassed. Let’s say we both made a mistake or something. We embarrassed ourselves in front of each other, which is not going to happen here. But if we did, what might be a difference in the story we told each other which would indicate that higher level of shame or toxic shame? Michael: Sure. Let me clarify the story. It’s not just how we appraise the shame itself. That’s a part of it. But the story is like my upbringing. I was brought up in a blue-collar family. There wasn’t a lot of room for emotions, especially for the male members of the family. So if I encountered a situation where I felt vulnerable or sensitive or hurt, the expression of that emotion could be shut down. That expression of that emotion could be punished, ridiculed. Not that I was ridiculed, but it could have been. Someone’s narrative about a negative emotional experience could have been that and ongoing. They could have been bullied for being a sensitive kid, whereas you may not have. now you both may experience the same thing as a generic sense of shame. “I wasn’t the way I wanted to be. I wanted to be put together and intelligent and I made a stupid GAF, and I came across looking silly.” One kind of embarrassment for one is not necessarily the embarrassment for the other. That’s what I mean when I say “the narrative.” Kimberley: Yeah. Okay. This is wonderful. I think that maybe we want to take a look at, and I know I have a few questions. What I’d love to take a look at is, why would, let’s say someone feel shame for having a mental illness? Michael: Well, yeah, that’s a great question. I think there’s a whole lot of reasons why someone might feel shame. One of them could be, I feel shame because the mental illness – we can say OCD in particular since this is one of the things I primarily treat – is that the content of my obsessions themselves could have a taboo theme or they could be otherwise conceived as bizarre. That’s going to create a sense of “I shouldn’t have this thought, there’s something wrong with me I have this thought.” The helping field, in general, commonly misinterprets and doesn’t understand OCD. If you present this set of thoughts to them, you’re going to get a sense of judgment and rejection or humiliation, and that’s not made up fear. That’s a real fear. That stuff happens to people. That’s an example of how someone with a mental health issue can develop shame. It’s because they may have gotten that feedback or fear rightfully so that they would get that feedback. Another way of looking at it is just, “I shouldn’t have this because having this means I’m not working properly. I’m otherwise defective or broken.” It’s a silent problem for people – these emotional and psychological things. We have a lot more empathy and understanding for people with a physical problem than we do for someone who has a psychological or emotional problem. So, I think that there’s this built-in-- Kimberley: Stigma. Michael: Yes. Stigma. Right. Thanks. Yeah, exactly. And then there’s the people who’ve tried to get better. I’ve certainly seen a number of clients who’ve gone through years of therapy. They’ve worked diligently with great therapists, all very well-intentioned, and they failed to get better. “What’s wrong with me? I must be really broken.” I’m sure there’s countless other ways, but I’ll pass that off to you, I think. Kimberley: Yeah. I mean, I think these are all societal expectations that are placed on us. It’s funny, you brought up the question about the concept around being humiliated for having an emotion. Somebody had written a question like: How can I be considered “the man of the house” if I have anxiety? I mean, there’s so much shame in that question. There’s so much societal expectations in that question and stigma in that question. I think it’s definitely there, and I think you’re right. For the things that are unknown, I see that to be more shame. I think everybody understands sadness. So we don’t feel so much shame around it. But fear of harming your baby – let’s not talk about that. You know what I mean? Let’s push that down. Michael: Right. And not only because it’s universally taboo. We know that instinctually. We don’t need to really be told that. We know that, because that’s our response if we were to hear that from someone else. Until we have that intrusive thought ourselves and they’re like, “Oh, me too?” Shame, I think it’s distinguishing shame from the other negative emotions that people have, because I don’t think they’re all the same. Oh, negative emotions or negative emotions – let’s just learn how to handle them. Fear, that’s a tough one. But shame? Shame is the most painful. Kimberley: It’s ouch because it’s in silence too, I think. My thing I say all the time is that shame thrives in secrecy. One of the best things you could do is to tell it out loud. Michael: I was having a conversation with colleagues about this a couple of weeks ago, and someone brought up a slogan that comes from AA, which is, “We’re only as sick as our secrets.” It’s such a powerful message. The idea that speaking that secret allowed, speaking that shame aloud can be healing. Now it can also be traumatizing. We can probably get into that later in the episode. But I think that there’s discernment about how and who we share with, and us as therapists creating a space where that’s good and healthy for the person. But you’re right. Absolutely. The things that thrive in darkness are painful. Kimberley: Okay, so you have a client and they have just very typical symptoms of OCD, even if it’s very typical taboo, obsessions – this is for people listening – any disorder, depression, BFRB, eating disorders, how do you work with that shame with your patients? Michael: That’s a fantastic question. I’m always evolving on how I figure that out with a particular client. I think if I were to try to distill that down to something helpful to the listeners, I think as a therapist, it would start with the very first interaction I had with the client. The first contact is the first opportunity, probably the best opportunity to provide a safe space that’s understanding, validating, authentic so that the client can then experience this interpersonal interaction that they’re having with this therapist as welcoming towards disclosure of a secret or their shame. I think that that first contact is vital. You can come across as the kind of person they want to talk to and try to set the stage and make that an effort, build that therapeutic alliance, continue to work on a therapeutic alliance because if you don’t, it might be a lot harder to build the work to let them disclose that shame. And then from there, I think education about what shame is, like I brought up in the beginning, that shame can exist on this continuum, that there is actually an adaptive kind of shame. We don’t tend to talk about it. We don’t tend to see it because we talk about the toxic and the pathological shame, the one that keeps people stuck in hurt. Through that education, through a demystifying of it, I think, is incredibly valuable. I’ll talk about the compass of shame in a minute. I don’t want to steal all the time from you. It’s like I talk a lot. Kimberley: Go for it. No, do. Michael: I’ve been thinking about this in preparation for our conversation today. I was thinking like, how would I want to set up an ideal way of dealing with shame with a client and again, creating that therapeutic space that they’d want to share that. And then if we have this experience that once we hand our secret or shame over to another person like, “Here you go,” that’s what the clients are doing to us, they’re handing it to us. If we receive it and hold it with compassion and understanding, if we hold it with acceptance of them as a person, I think we introduced them to common humanity – one of the three things that show up with self-compassion, that common humanity – perhaps for the very first time in their life. Because this is such a secret, quiet problem, this might be the first time they’ve ever been met with common humanity and acceptance when they’ve revealed this. I think that’s immeasurably powerful for the client. I think it helps them create a healthy distance from that narrative that’s been telling them to keep it a secret, keep it a secret, or else you’ll get rejected. “Wait a minute. I wasn’t rejected.” Kimberley: Yeah. It normalizes it too. Right? Michael: Yeah. Kimberley: Sometimes when I hand over the why box that has all the different obsessions, that in of itself can be a shame killer because they’re like, “Oh my goodness, all of the things I have are right here on this piece of paper and you don’t seem alarmed at all.” Michael: Yeah. I’ve had email interactions with clients who are like, “Have you ever heard of this kind of presentation?” I’ll shoot them links to three books written about it. They’ve written entire books about this so you’re not alone. It’s so helpful for them. Kimberley: Yeah. Tell me about the compass. Michael: Yes. I was introduced to this through one of my mentors, and it really rang true for me as a useful concept. The compass of shame was developed in the 1980s by a psychiatrist by the name of Donald Nathanson. I don’t want to bore the audience with the history, but he researched shame basically that was his career. Nathanson had found through his research that there are four predictable and common unhelpful responses to shame. I’ll say toxic shame. We’re all talking about toxic shame. Those four represented the four points of a compass – north, south, east, and west. It doesn’t matter where they go. One of the points is withdrawal. Withdrawal is when we get quiet, silent, small. Like a dog who got caught chewing on the cash knows they did wrong. They get small, they get quiet. They try to disappear into the moment. That’s one common response to shame. Another one is avoidance, behavioral avoidance of situations and people and circumstances, but also through substances, through food, through sex, through anything that would be a direct response to a cue, “I’m going to avoid this feeling.” Then another part of it is to attack others. This shows up when you felt humiliated or embarrassed by someone else. Someone made you feel this way, so you’re going to lash out verbally or physically. In a sense, the way I think of it is in the sense of trying to balance the scales. “You’ve made me feel small and vulnerable and insignificant. I’m going to try to balance that out by making you feel the same way.” The last one I think by far the most common in the people that we’re going to be working with is attack the self. This is self-criticism, this is berating ourselves, self-condemnation, degrading ourselves. It’s often seen as “I’m going to be holding myself accountable for this failure real or perceived,” and that’s going to make it better, that there’s somehow a utility to this attacking self-response. But when you poke at it just a little bit, it’s completely unhelpful. It’s just a massive perpetuator of the problem. So, that’s Nathanson’s Compass of Shame. I think his point in bringing this up is, look, everyone’s toxic shame response is going to fall probably into one of those four. Where do yours? if we can bring awareness to that, maybe we can learn to pivot to a more functional or helpful response instead. Kimberley: Right. I think that that awareness, again, it’s validating and it’s normalizing the normal response to shame, which helps the shame, I think, in and of itself. Okay, so let’s play this out. If something happens, you’ve made a mistake or you’ve had a thought that you’ve deemed unacceptable, or you showed up in a way that created shame, you did all four of those things, what do we do from there? Or you did one of them. Now that we have this awareness, how might we meet shame instead in your thoughts, in your mind? Michael: I think hearing that from a client and I was watching it unfold in the moment, I might say, “Can we pause for just a minute? I think shame showed up for us.” He might even be able to see some of the behavioral changes in their eye contact and the postures. I think shame showed up. What are you doing with that right now? Because again, it’s silent. It’s not broadcasting this out loud. It’s silent. What are you doing? What’s going on in your mind? Probably reveal what you said, they did one or all four of those things – I would point that out, give it a name. We understand this process. This is somewhat of a predictable response. Can we hit the pause button and can we now make a choice to pivot to a different response. Pivot to what? Pivot to self-compassion maybe. That might be a teachable moment. What is self-compassion? Can I give you an experiential exercise on meeting this moment with self-compassion? I can model meeting this moment with you with compassion so you can see what that looks like and feels like. Instead of spending time in the head, in the verbal, in the ruminative come back to the feeling, because that’s what we’re trying to avoid. When we criticize ourselves, we’re trying to avoid and escape criticism, or using criticism to try to avoid and escape shame and humiliation. Okay, let’s come back to that. That’s painful. We can learn how to sit with that without having to beat ourselves up or escape it. I think people can sit with it in different ways. You can use it as an exposure opportunity for people who are feeling smaller kinds of shame, like embarrassment, like let’s do some exposure towards what it feels like to be embarrassed. If we’re dealing with a much more painful kind of shame, that humiliation kind of shame, let’s meet that with more direct self-compassion in this moment. I think it gets sticky a little bit when we introduce self-compassion, if we haven’t already introduced it, because like any intervention, it hinges on the client buying into it and thinking that they deserve to receive it. Kimberley: Right. I’ll give you my personal experience with this because I think, and I see a lot and I would add a fourth point to the compass, which is, now as you’re talking, I think this even different than what we talked about in previous conversations, just the two of us, is I think if I were really to track it, I think that another thing that I did when shame showed up is I swing into perfectionism. The stronger shame was, the more I would do good or be good. It’s an interesting reflection for me because I think the more I felt imperfect and the more shame that brought up, the more it’s like compulsive do good kind of thing, which I think again, might be why some of our clients get stuck around shame because there is that sort of self-punishment. “Well, I did a bad thing. Well, I have to neutralize that with a positive, good thing.” I don’t know. Just something I’m thinking about. Michael: No, I think that’s really great. I’m sure a lot of people listening are thinking right now, nodding their heads, “Yup, I go into perfectionism.” If I can channel Nathanson for a second, I imagine he would say, “That’s a type of avoidance. It’s an avoidant behavior. You’re doing this thing and it’s a compensation to numb, or to balance the scale.” If I do enough good, it cancels out the bad. The message is that that thing is intolerable to feel, and it’s not. Kimberley: Good catch. That’s true. It is. It’s like neutralizing the compulsion, right? Yeah. Okay. This is amazing. I have some questions from the audience that I think is a perfect segue, and there’s one that really hit me, really deepened my heart and I wanted to ask your opinion on. Somebody had asked, how do I manage shame for having symptoms? They didn’t express which ones, but I’m assuming it’s having symptoms of being a human of some respect. But I also have privilege and resources and the ability to get care, how do I manage shame when I have privilege? Michael: That’s a really great question. I think if I can flip that around a little bit, I can say that the cost of your privilege towards access to care, towards a good community of people, the cost of that isn’t more shame. We don’t want to shame ourselves for having opportunities. In a way, it moves you away from doing something about that, about that privilege. If you recognize I have privileged shaming yourself is useless. Who’s that for? That’s a silent response to try to balance out this. It’s an avoidance. It’s a running away from. So can we try to meet that? I’d say first with patients and then recognition, yeah, there is some privilege here and I feel bad about that, and then move into a “what’s next” kind of a mindset. Like, I still need to work on my own shame about having these symptoms. It’s not like I have to suddenly stop working on that because I also happen to have the privilege and the capacity to work on those. But I think we throw it into the same mix. It’s like, okay, so you’re shaming yourself. Which one of the four points of the compass are you doing now in recognition of a privilege? Once we get off of that unhelpful response, we can then maybe find a more helpful way to recognize the privilege, to speak out against the privilege, to prop other people up and help other people have access, things like that. But we can’t do that if we’re shaming ourselves, because shaming yourself, criticizing yourself, avoiding isn’t workable. Kimberley: Yeah. There’s so much of this like self-punishment involved as a response to shame. Like, okay, so I have this one privilege, so I must be punished for that before I can address the problem that I have almost. I’m so grateful that you answered that because I have seen that multiple times, many, many times with my patients and I’m guessing you too. You’ve talked about shame around lots of emotions. Interestingly, there were two very common questions, and I’ll leave these as the last two questions for you. There was a lot of questions around having shame for anger and there was a lot of questions around having shame for having a “groinal response,” which I’m assuming is in relation to some kind of sexual obsession or maybe even sexual orientation as well. Can you share your thoughts on those? Michael: Sure. Shame around anger, I think... I’m trying to interpret the question a little bit. I imagine it goes beyond just the feeling of being angry, but maybe the act of being aggressive, if I can make some interpretation there. I helped the client recognize that anger, like any other emotion, is universal. It’s an emergent experience. It’s not really up to you about whether you get angry or not. We don’t have to act on the anger. We don’t have to become aggressive either passively or physically aggressive about it. So, teaching them that there is some workability in our response to anger and that if we accept anger as an emotion, if we make room for anger as an emotion, we don’t need to have a response to it in the same kind of way. We can let it in. Susan David, in one of her Ted Talks, she said that emotions are data, not directives. I love it. Super helpful way of organizing your thoughts around that. It’s just, let the emotion be data. It’s if you’re responding to something in your life, something happened that it shouldn’t have happened and it wasn’t fair, and then you felt angry. Okay, I understand that process. I don’t need to do something about it to get rid of it because there’s that relationship to an emotion that can be unhelpful. Now I have to find a way to control or get rid of it. Notice we only do that with the negative side of emotions. We don’t tend to be like, “I have to get rid of my joy.” Kimberley: Too much joy. Michael: Too much joy. Kimberley: Unless we feel privileged, so then we’re not allowed to have too much joy. Michael: Right. Yeah. In response to the groinal stuff, I think, again, it comes down to your biological, your physiological, your groinal response isn’t really up to you. I think Emily Nagoski does a really great job in her talk about unwanted arousal, and such a powerful Ted Talk and really great education around that. Your body’s going to respond, whether you like it to or not. I used to joke around and say, the reason why the 13-year-old boy isn’t standing up at the end of Spanish class is because he wants to get more lessons. It’s because he’s waiting to not be embarrassed when he stands up. It’s not that he’s attracted to Spanish as a language –maybe he is – it’s because he had a response and it wasn’t really up to him. Okay, so bodies respond to things. Can we separate that out from the thing that was in our mind? Bodies respond to sex generically. It doesn’t matter who it’s with, what it is. Just the idea of it, the notion of it, the hint, and it response. So even people listening to us now, using the words like sex, might respond to the word, and that doesn’t mean you’re attracted to the word or to this podcast. Maybe you are, but it’s probably not. It’s that your body responded to things because of all these associative learning cues that are going on. That education is powerful. And then, of course, I treat shame the way I treat any toxic shame, which is, the response to it is the biggest problem that needs to try to meet it with something a little bit more akin to self-compassion and common humanity. Kimberley: I love it. Thank you. Oh, you nailed it. Is there anything else you want to share? Michael: I mean, not off the top of my head. I’m sure that we could dive into so many different rabbit holes on the subject, but I think this was a good intro to it. Kimberley: Yeah. Intro, but also with depth. I’m really grateful. I love to give as many applicable tools as we can. I feel like there is some better understanding. The compass is so good. It’s so helpful to be able to deconstruct it that way. Michael: Yeah. That was a game-changer for me when I heard about that too. I will add a couple of things, just in passing other ways of therapeutically addressing shame. Once we’ve agreed that those four points in the compass are not the way we want to handle it, we have to have a new way. There’s a, what used to be, I think, a Broadway show called Get Mortified. It’s now a podcast, and it’s people sharing humiliating and mortifying personal stories. Again, this is going out to strangers and this is an idea that I’m normalizing these experiences in my life. Maybe someone else can relate to it and maybe we can bring some humor to it. It’s not about making fun of the person or the situation, it’s about saying, can we all just laugh at the fact that we’re busy concealing something that is so universal and ubiquitous. Kimberley: Yup. Life happens, right? It doesn’t go to plan. Michael: Yeah. I think that’s the other piece. Once you’re ready for it, humor is hard to think of a more helpful response to shame. Kimberley: I’m holding back every urge right now to be like, “What’s the most mortifying thing that’s ever happened to you?” Michael: That’s a different podcast. Kimberley: I was once on a podcast where he asked that, a very similar question. It was on OCD and he asked me a similar question. I think I completely went into your shame compass, like all the things, “What can I do to avoid this conversation?” Michael: Yes, yes. I think that would be like a few cocktails and we’re going to record a podcast and maybe we can talk about that. But again, you can see, you can notice how even here, I could easily come up with two very shaming experiences in my life, and the difficulty of sharing that when I think that other people are listening to it. Why should I care? It’s because it’s a painful emotion. So even us therapists have a lot of work to do with personally so that we can show up with the client in a way that’s helpful. Kimberley: Right. When I was doing one of the Mindful Self-compassion intensives, this is with Kristin Neff and Christopher Germer, one of the activities where we had to stop and do activity with the puzzle we came with if you came with someone. And then you had to turn to a person you didn’t know, and you had to tell them one of the most painful things that’s ever happened to you. They didn’t really give you a lot of choices either. They were like, you’re here, you’re going to do it. The whole act was there was tears everywhere, flying across the room. But the thing was then, the person who’s listening was not allowed to say anything, except “Thank you for sharing.” It was so powerful. It was so powerful. They weren’t allowed to say, oh. You weren’t allowed to touch them. You weren’t allowed to say anything, except “Thank you for sharing.” Michael: And again, an immeasurably effective and important thing. That wasn’t self-compassion. That was compassion, right? This is why I think like you with your Instagram work and people like Chrissie Hodges and OCD peers, and anyone who’s an advocate for OCD that is building a community of people where they can interact like OCD has a community of people. These communities allow other people who are struggling with OCD to interact with each other. You create this group acceptance. The group has accepted you in, shame and all. You no longer need to conceal or keep secret this thing. The weight, the anvil that gets lifted off your shoulders, you no longer have to be weighted in the past. It’d be nice if we could generalize that outside of an OCD community and just say, the community at large has now been sufficiently educated about what OCD is and isn’t, what depression is and isn’t, what eating disorders are and are not, trauma, so we can be a lot more understanding of one another. Perhaps that’s a little Pollyanna-ish to hope for, but I think that that’s the direction we should head on. Kimberley: That’s the mission. Yeah. Well, I actually think that this is a perfect place for us to end because I think that that is where we’re at. That common humanity, we all have it. You’re not alone. Yes, it’s the most painful thing you’ll feel. You’ll feel like your heart is breaking at the time. All of these things are so normal and part of being a human. So I love that that’s where we’re at. Thank you. Michael: Thank you for indulging the conversation. Kimberley: Easily, so easily. Tell us about where people can hear more about you and know about you. Michael: Sure. As you mentioned, my name is Mike Heady. I’m the Co-Director of the Anxiety and Stress Disorders Institute of Maryland. I work with my other Co-Director, Dr. Sarah Crawley, who’s a Child and Adolescent Psychologist. The Executive Director and Founder is Dr. Sally Winston. She’s written a number of books on OCD. We’re in Baltimore, Maryland. We’re an outpatient, private group practice. We have over 20 clinicians that specialize in depression, OCD, anxiety disorders, and other related conditions. Yeah, that’s us. That’s me. Kimberley: Amazing. Well, thank you. I really am grateful. I feel so calm after these conversations too because I feel like it’s the more you guess, you get to settle into it. So thank you. I’m so grateful personally, and for the community here, who sounded like they were very excited about this episode. Michael: Well, thank you for having me on. Kimberley: My pleasure. ----- Please note that this podcast or any other resources from cbtschool.com should not replace professional mental health care. If you feel you would benefit, please reach out to a provider in your area. Have a wonderful day, and thank you for supporting cbtschool.com.

In this episode, Emil and Michael chat with Tyler Jahnke about how he persevered through a nightmare of a first deal to being a part of 100s of unit of real estate.   --- Transcript   Emil: Hey everyone. Welcome back to another episode of The Remote Real Estate Investor. My name is Emil Shour, and today I'm joined by my cohost,   Michael: Michael Albaum.   Emil: And we are interviewing Tyler Jahnke. Tyler has become a good friend of ours and is also one of the writers on the Roofstock blog. So you may be familiar with him on some of the content he's written there. And this was a really fun episode. We got to talk to Tyler about the story of his first rental property. He lives up in the Bay area and he talks about investing in the Midwest and some of the painful lessons he learned along the way of buying that first property and how he's grown to be a partner and owner of over a hundred units through syndication deals. All right, without further ado, let's hop into this episode.   Theme Song   Emil: Tyler. Welcome to the show, man. We're excited to have you.   Tyler: Thanks very much. I appreciate you reaching out and getting my attention and allowing me to hop on today and talk with you and Michael.   Michael: This is going to very much feel like every day on Twitter when we're always chatting about real estate investing stuff. Anyway, it's just on an audio format.   Tyler: A quick little plug for Twitter there, I guess, right? Like most of us I think, met on Twitter and that's been a great platform for both of us or all of us and engaging in and connecting with people so happy. We met there and happy to talk real estate as much as we want.   Emil: Yeah, it's funny. I've been on Twitter for years and I never realized there was this real estate investing and money, Twitter corner of Twitter. Like I always just used it for marketing and other stuff. And I was so stoked when I found this little community that's super engaged and loves talking and sharing best practices. So it's been fun, man.   Michael: It's funny. This is my first live Twitter interaction coming off Twitter. And I'm so glad to see Tyler and I were chatting before we started recording it. And his personality on Twitter matches his personality in real life, which is always great because sometimes you meet folks. It's like, wow, you're really well written. And I can't stand you as a person, not the case at all here, which is always nice.   Tyler: I'll be honest. I was a little worried thinking it just through like seeing you in person, it's like, how is he going to think I come across in reality versus someone who's behind a keyboard or a, you know, a mobile device typing 280 characters. I'm sure there's plenty of people out there that are completely different. And I was like, hopefully I come across similar, online as I do in person.   Michael: I think by the same thing, I don't want to catfish anybody.   Tyler: Yeah. Now I will mention the first thing I noticed about you and Michael was the longer hair. I'll say that.   Michael: For anyone who hasn't seen, the reason they have leveled, they let myself go with the head hair and facial hair department. I'm going out the quarantine cut on, call it.   Emil: Cool. So Tyler, before we hop into the good stuff what's going on in your world, what's new.   Tyler: Oh, that's I mean, that's a big question. So first things first I work full time still. I am not a full time real estate investor. That's something that I think some people maybe assume that I am. So I do work full time in a sales and business role out here in the Bay area, born and raised in Berkeley, California. My office is in as in San Francisco, clearly we're all working from home right now, but so, you know, a lot of my day is still consumed by that full time job. But my nights weekends are still very much real estate or whether that's analyzing deals, talking to partners, talking to investors and networking, engaging, and then doing a lot of content build out on my platform and then just, you know, talking real estate as much as I can on my nights and weekends. So that's kind of what my day looks like right now. It's, it's becoming somewhat repetitive, but I have enjoyed it. And I do try and get out on weekends and hike and see the outdoors a little bit.   Emil: Now that you've mentioned that you live in the Bay, my follow up question is how did you get into real estate investing? And why did you choose remote real estate investing? I think part of the, you answered with you live in the Bay area, but give us the back story.   Tyler: Yeah, I guess I'll tackle the question of how I got in first and then we'll go to why out of state. But so I started investing in 2016, so about three and a half years ago now I was working a good job that I enjoyed in an industry that I also enjoy and still enjoy. But I did see myself, you know, kind of the future Tyler down the line, probably having to work another 40 years and reaching that age of 65 and then maybe retiring. So I think in my late twenties, a little bit of self reflection and trying to figure out what I wanted to accomplish in life. And a lot of that had to do with time freedom, which I think a number of your listeners are probably also conscious of right now, if they're thinking about real estate. And so I had to try and figure out ways to bring an income outside of my W2 job and just try and accelerate my growth on the financial side.   So through business podcasts, through investing podcasts came along this topic and strategy of real estate, which is abundant and everywhere, but no one really thinks about it. I mean, when I say no one, the majority may not really think of it as an investing opportunity. And so, you know, I saw it as somewhat of a logical step and I guess, strategy just by the fact that you could bring in monthly recurring income through tenants, paying off your mortgage and insurance and taxes, and maybe even letting you cashflow a little bit. And then to answer your question on why out of state for me at the time, it was pretty obvious. I couldn't afford anything in the Bay area. And I also wanted that cashflow and it's very hard to cashflow property in Oakland when you're going to pay $750,000 for it. It's quite impossible. Now I'm not saying it's impossible, but there's definitely challenges there.   So, you know, jumping into, out of state investing made sense for me, it was definitely a little scary because you emotionally get attached to these investments. I think as a newbie and you're like, I want to see it in person. I want to touch the front door, but at the end of the day, it's not necessary. If you have the right team on the ground to help you out and really guide you along the way. And so long story short, why out of state, it was affordability and the cashflow potential.   Michael: So I want to know Tyler, how did you make that leap? Really, a lot of people call it a leap of faith jumping into this out-of-state market. Having never been there, maybe having never met your team on the ground, walk us through the mindset and the decision making that you went through to end up where you did.   Tyler: That's the important part is to make the actual leap. And I think I will admit early on, I was rather naive and I didn't have everything buttoned up from an education standpoint. I didn't really know how to properly run the numbers that actually worked for me. I'm not saying, you know, leap in uneducated. I think again, that helped me initially because I was naive in the challenges and maybe dangers of investing at a state. But now thinking back, you know, over the years, my advice to others that are in a position of, okay, I want to do this, but how do I take the next step? I think it can actually be seen as a quite simple process. If you are educated in a market that you want to invest in, if you know how to analyze property, and if you have, you know, the longterm vision of what real estate can do for you, I think that's enough confidence to make the next step.   If you know the market you want to invest in, you know how to analyze property, you have the vision, like it's just going to be a mental at that point. So I don't have the exact advice for people on how to make the next step, because it's completely mental. Once you get those three things down, a market analysis and a vision, once you have that, it's all mental. So it's just going to come down to the individual and some people do it. Some people don't and that's fine. It's just mindset and personality.   Michael: How did you find your first market? What did that look like?   Tyler: My very first property that I bought in closed in December of 2016, I went the turnkey route and I felt that the fact that I had a full time job and working 40 plus hours a week, I felt that the turnkey route would be the best option for me to at least dip my toe into real estate. I will say the turnkey route is not always the best method. If you don't understand the partners on the ground properly, like I found out later. So I went to Turkey about found the market in the Indianapolis area. So the Midwest, which had high cashflow potential good acquisition to price ratio and had some of the metrics of a cashflow market, like population growth, job growth with higher wages, diverse economy. This could be a whole separate topic. So I apologize if I'm jumping too far ahead on what to look for in a market.   Michael: This is great.   Tyler: But I'll say that I hooked up with a drinky company out in the Midwest thought I vetted them properly, picked up a property for $37,000 cash back in the day, which is like the cost of a somewhat nice car. But it actually, instead of depreciated quickly, it's actually an asset that would produce income. So yeah, first property turnkey out in Indianapolis.   Emil: I read your blog a bunch and I know you've talked about the experience of this first property and it's such a good one. And I'd love for you to share the story of, okay, you bought this property 37 [inaudible] on paper. It looks like it's going to cashflow nicely. I'll let you take the floor. Tell us about the story.   Tyler: Yeah, yeah, yeah. So this is the best and worst investment of my life. So best in a sense that it got me in the game, right? I'll keep preaching this, like getting the game, getting the game, getting the game, whether that's a good or bad investment on paper, it's kind of a start that snowball. So yeah, $37,000 cash worked with a turnkey company that I barely vetted. I hopped on the phone a couple of times they started sending me leads via email routinely.   Michael: Did you chat with any other turnkey companies or this was the one?   Tyler: You know, me, you know, I didn't talk to anyone else. So it was all, I put all my eggs in one basket and that's kind of also my personality too. I'm pretty quick to trust and that's a double edged sword, as we all know, I'm usually pretty optimistic and very trusting. So that's good and bad, good and bad. So anyways, I talked to this company, you know, I started getting leads. I started evaluating the properties and my simplistic formula of figuring out how to actually calculate cash flow back in the day. I remember, you know, the estimated rents at seven 50 a month for a property that costs $37,000 napkin math on that was basically okay. Let's give the property manager 10% and let's account for property taxes and insurance. But you know, in my eyes, seven 50 a month, taking away all those expenses, I could probably cash flow 300, three 25 a month. We'll call it, which I wouldn't even touch anyways. My plan wasn't to actually spend that cashflow. So I was like, okay, if I could get a few of these properties in the next five years, you know, now we're talking substantial numbers on the cashflow side.   So I acquired this property and then that's when I decided to fly out. So after I actually close on this property in December of 2016, I decided to fly out to Indianapolis in March of 17. I initially wasn't even going to do that, but my parents were like, Tyler, I think you might want to like meet the people you're working with and just see if that property exists. I was actually kind of reluctant, but now I kind of make it a routine to check on my markets annually. We'll call it pre COVID. So we closed on that property. It takes about two or three months to actually renovate. And it wasn't really a big rehab job. They refinished like the hardwood floors. They replaced a window. They did a little bit of painting.   Emil: The turn-key company is doing that for you?   Tyler: Correct, yes. So the turnkey company, I guess the term turn-key by definition means it should be easy. There are some good Turkey companies out there and there's bad ones. My advice is just to vet them properly, if you go that route. So it took a few months to really quote unquote renovate it. And there were some red flags that popped up initially. And those were some things that I've, you know, looking back I've learned from if red flags are popping up, that you're not happy with in terms of maybe lack of communication or miss deadlines and timelines, I kind of became ignorant or I guess I ignored them because I really wanted to just close on this property and become a real estate investor. And so I think emotion took over and in some points where I was like, you know, realistically, I should have questioned these red flags up front, but I didn't. Cause I was like, real estate is a thing I'm going to acquire 10 properties and become financially free.   So I was too focused on that end goal. Finally got that thing rented. We did have a tenant in there for about 11 months. They paid on time every month, seven 50 a month. I took out, you know, 10% for property management. I made sure I had some reserves for property taxes, insurance. And then I just kind of pocketed that cashflow fast forward to the, you know, as I mentioned that cashflow for 11 months, we'll fast forward to that 12th month. My buddy who's actually in the real estate space as well in the Indianapolis market. He randomly drove by my property just to check up on it. And it was like Tyler, there's a lockbox on the front door. And I'm like, what do you mean? There's a lock box in the front door? Like what, first of all, I was shocked and I trusted him, but I didn't know what that actually meant.   So that caused some alarms in my brain, I guess you could say. It was like at that moment I was like, is this real estate thing gonna actually work? Because that was my first real, real big hurdle. And I guess I had to think through from a business standpoint, what would the next step be? So I didn't mention anything to my turnkey provider. I actually kept that quiet to start with. I wanted to get some verification from others. So I then began the process of actually building another team on the ground out there, aside from the turnkey company I worked with. And that was kind of again, why I go back to like this being my best and worst investment. It forced me to overcome these challenges and build a new team on the ground.   Michael: So Tyler was this turnkey provider also managing the property for you?   Tyler: Yep. They did everything. They sourced the deal. They walked me through the closing process, set me up with insurance and insurance agent. They renovated it. They managed it from a property management standpoint.   Michael: One stop shop.   Tyler: A one stop shop, everything you could have in one box there. Okay. So anyways, I called a couple of property management companies had them drive out there, pay them a little bit money to help me out and just verify that it was in fact clearly that the lock box on the front door meant it was vacant. I don't know the whole story. Apparently the tenant had left without telling anyone and the property was vacant and I was never notified. And that was the last straw. So I fired the turnkey company, had another property manager, take it over. I know this story is kind of going on, on and on and on.   Michael: This is all great stuff.   Tyler: We're getting towards the end of that first property. So after having a new company take over management, after vetting a number of them, I really had to make sure that this next hire of a property management company would be right. So I was on the phone, every lunch at work and at night, just talking to people to try and figure out who the best property managers in Indianapolis were finally selected someone. They went out there, cleaned it up, took over management and they crafted a scope of work on what would be needed to get this thing rent ready. Cause my thought was okay, small little blip in the radar. Let's just get this thing cleaned up, get this thing rented again, get it back on the market and get a tenant in there and then start cash flowing again. And then I'll live my happy life. So they go in there, they craft the scope of work. First of all, I'll say the scope of work was probably a little more than I needed, but it was still a bill for $16,000. And I'm like, uh, wait, what? So, uh, so the property cost 37,000 up front. I need to put another 16 K into this thing to get this thing a rent ready. And I was like, there's no way I'm going to do that. Now along those, you know, the first 12 months of me owning that property too, I think I became a little bit more savvy. I actually, I learned a lot more after I had closed on real estate than I had. And so that's when I started really focusing more on the impact of location and obviously like the partners you work with. So my strategy in owning that first property had actually changed within those 12 months.   And I decided that buying in better neighborhoods with a little bit less risk and a different tenant profile would be the strategy I wanted to take. So ultimately I ended up selling that property. I did not put the 16 K into it. I did not think that that property would have a good longterm outlook. And I started buying in better neighborhoods. So long story short bought the property for 37,000, sold it for 41 a year later, took a year of cashflow minus closing expenses or closing costs. I probably netted, I think it was like 2% in a year. So I honestly call that a really big win on my part. I was like, if I could just break even on that first property, I think there's just so much knowledge and education and experience you get from that first property.   Emil: So why did you decide to keep going? This is, I feel like I've heard so many stories where people, something like this happens and they give up and they're like, ah, this real estate investing thing isn't for me or someone who's new has zero properties is hearing this and is like, I don't ever want to deal with this. Yeah. Why did you keep going?   Tyler: I'll give you a couple answers. Some you may want to hear some of you may not. The first answer you may not want to hear is I already had a second property under contract. So by default I had to keep going.   Michael: That's great.   Tyler: But so I was actually really confident after that first property, given all those circumstances and those challenges, I was like, I know what I did wrong. Like I bought in a bad neighborhood. I hired the wrong people. I just followed, you know, my napkin math. And I touched on this earlier. Like I became better at analyzing properties. So the deals would be better. And then again, like just buying in a better neighborhood with a different tenant class profile, that to me was important. I wanted someone who could afford rent and not be challenged by if their car broke down, that they have to decide between the car repair or rent.   I wanted, I guess, a little bit more security. So that's why I started buying in better neighborhoods. But I felt like, you know, after that first property round to the second property, I had learned so much in that first one, I could do it better and I could just get better every time. And so that was, it actually built confidence. And so, yeah, I went through some short term struggles and I think a lot of people will go through that short term struggle period. But if you really think that real estate is something that's going to be part of your life for 40 years, and it's a longterm strategy that one year of education and challenges will just amplify our growth, you know, as you move forward,   Emil: I love that.   Michael: Such a good story Tyler. I've got a couple of questions for you. And then 11 month period, when you were collecting rent and cashflow, did you think that you were a fricking genius that you had just got a dialed?   Tyler: Yeah.   Michael: Me too.   Tyler: Oh, I was smiling. Every check that came in, the first check that came in, I was traveling with my buddies in Vietnam and I remember waking up one morning and I'm on vacation. Right. I'm on vacation Vietnam. And I got a paycheck. I got a check that came in at like one in the morning and I was like, this is unbelievable. I need to keep buying these as soon as just rapidly. And so, yeah. And it's funny because I started off my journey in the content space by just posting on bigger pockets and I kind of posted my life experience and I love going back online and be like, Hey guys, just want to give you an update. I got my payment, my check came in and I'm good. So yeah, it was definitely all smiles for a solid 11 months until, you know.   Michael: Until it wasn't until it wasn't.   Tyler: And so that's what got me back to reality.   Michael: The learning process that you're talking about and the education process that you're talking about, it seems like that'll happen in month 12. Like that was a massive ramp up for you because for 11 months things were good. So you thought you had done everything right?   Tyler: My education prior to closing was not the greatest, but I really started ramping up the education process after I started closing. So that was, I got addicted to podcasts. I got addicted to bigger pockets. I got addicted to just consuming, consuming, consuming content in the real estate space. And that's why I had my second property already under contract. By the time, you know, all these challenges popped up. So I guess I would say I really started continuing that education process, you know, after I closed and I still do today, even though, you know, I've kind of grown in, in the investing space, but it's podcasts, it's books, it's websites, and it's talking to people like you guys.   Michael: I think that's such a big takeaway for everybody listening is, Hey, after you've accomplished the goal of purchasing that property, whether it's your first fifth, 10th, or whatever, don't stop being educated. Don't stop getting educated because I think too many folks sit on their laurels and think, well, great. I did it. I know how to do it now. Yeah. Well you did that deal. Maybe the next one's going to be slightly different. And so there are things you can learn in the interim that are gonna help make that next subsequent deal even better for you. So I love that.   Emil: I feel dumber now than when I first started. When I first started six months in same thing, I'm laughing, I'm getting checks. I'll just do this 10 times and I'm going to be rolling in dough. And then like reality hits and you learn more and then you're like, wow, I know nothing. The more you learn…   Michael: I think it's because we all started so similarly right? Buy one single family house, your purview is no one can see my hands, but they're very narrow right there. It's a very small scope. And then as we grow and expand and learn and educate ourselves, we realize there's this entire investing world out there that is comprised of so many different things. And we know so little about it. So I think that's a great point. And the old that just further goes to illustrate don't stop getting educated. Can't stop. Won't stop. Right.   Emil: Rockefeller records.   Michael: That's right. That's right. So I'm curious now, Tyler, you, you did that deal a couple of years ago, you know, what are you doing today? Where did you go from there?   Tyler: Yeah. So it's been a journey and I don't want to come across as any type of expert. I'll say that, you know, looking back at my timeline, I've been investing for three and a half years now. So started in my late twenties now in my early thirties, I think there's still a long, long, long ways to go. But I will say within that timeline of three and a half years, my strategies have definitely changed. And so, you know, after that first I learned about, you know, the importance of location and really building that team on the ground. So I bought a second property and other single family house I'm in a better neighborhood with a better team.   I then kind of tiptoed into we'll call it the journey of scaling, scaling up. And so I bought a duplex that was like huge for me. So I went from like a couple single families to a duplex that was me scaling up. I think from my standpoint, my strategy now has changed because like you mentioned earlier, Michael, the education process, there's some things I do now in the real estate space that I was not even aware of, you know, a few years ago. And so I tiptoed around and investing passively in larger multifamily complexes. That's how I started off in the multifamily space was literally, you know, I come in as almost like a silent partner, we'll call it limited partner, they'd say invest in my cash in these larger deals for some equity. And then through that process, learn more about the larger multifamily value of ad space.   And that's where I am now focusing on the value add, but multifamily space, the GP role in these larger apartment complexes. But my portfolio is kind of two prominent we'll call it. We had the cash flowing properties in the Midwest and then the work that my partners and I do in Phoenix on the value of ad side. And like I said, in three and a half years, I've learned so much. And like you said, a meal too, like it's such a massive world out there in real estate. There's so many different techniques and strategies that you can go down into some rabbit holes, but yeah, it's a combination of cash line properties and Midwest plus some value add deals with partners in the, in the, in the Southwest region.   Michael: For those of our listeners who don't know what is that LP GP thing called and what are those roles?   Tyler: The term is syndication, which has good and bad, I think connotations or I guess definitions, but it's really just, it's a partnership between two groups. The general partnership group is generally a group of individuals that are tasked with acquisition of a property lending up financing, building out the business plan, building up the strategy, managing the actual renovation and reposition, and then really making all the decisions on whether to refinance or exit or whatnot. The LP limited partner side is a bunch of investors that come into these deals with some capital and with the intention of really not being involved in the day to day, it's a passive investment. It's like any business that needs, that requires funding and you have the team that's managing everything and then the, like I keep saying this, the silent partners that come in with capital to help fund the project, that's the basic structure of what a syndication is, but it's almost like any type of startup even, or any type of business that needs capital to close. And then you execute a business plan and hopefully pay off, you know, yourself as well as your investors primarily   Emil: I know you're a part of a couple of different indications, your general partner in some where you're more active and your limited partner in some others. Right?   Tyler: Correct.   Emil: How did you decide to get into that? And which one did you start out with? I'm curious.   Tyler: I started out on the LP side after I bought my first two houses and then the duplex, I wanted to experience life, not as a landlord to put it bluntly. There's always going to be some stresses as being a landlord. You know, you're going to have the email from your property manager saying a pipe has burst and we need some money or there's a hole in the roof and we need some money. That's just part of being a landlord. And so I was like, well, you know, at that point in my life too, I was really trying to value my time to one of the biggest things I try and follow right now is kind of, there's a quote out there that says, like start with the end in mind. And I envisioned my life, you know, 40 years down the line where I am selfishly bringing in income without really much active work.   That's kind of what my ideal life looks like right now from a freedom standpoint. And so I was like, let's just try out what this passive investing really is. And I know passive is always going to be a loose term, but I felt that if I could hop into a deal passively and try and learn the business plan and a strategy of what value add is, and then tap into the power of multifamily, which is extremely powerful. We're pretty much doing what people call. Like, I call it the big BRRRR. We're finding a undervalued property, repositioning it through innovation and then bumping rents up that leads to additional cashflow plus increasing the value of the property. So I liked that strategy. So I wanted to kind of hop in there, learn from those people passively and then eventually get into those deals more on the active side events.   Michael: So in syndications, I've only done them locally, kind of with friends and family, never on a big scale, but when you were an LP on your first deal, and you mentioned several times that you learned from the GPS, were they happy to answer your questions as an LP? I mean, how did you go about learning this business as a quote unquote silent partner.   Tyler: It's not like a relationship where you automatically become, you know, the mentee and they take you under your wing. Really what I was just trying to figure out was to slowly get into the game. And that was to begin to just review what a, an offering memorandum looks like, what do these business strategies look like? What do the cost of renovation look like? What are the loan terms like? That was the very first step for me. And as an LP, you get to do that because you're reviewing all of the terms and strategies.   So that was a very, very, very first step of me in education. Now, to your point, Michael, there's no way that these GPS are like, yeah, I'll take, I mean, maybe there's some out there, but I wasn't gonna email them and call in and be like, Hey, can you just tell me exactly what to do and how to do it? They're not going to say yes to that. They have much more important things to do. So really it was just being exposed to the industry and the business plans. That was the very first step. Luckily, you know, after that, the second deal. So the first deal I did was in Louisville as an LP, second deal was in Phoenix, which is now with partners that I work with. So through networking, through connections, through some mutual friends, I was able to kind of position myself in a way where yes, I was an LP, but the GPs actually knew who I was.   And so that led to further opportunity down the line. I'm really just through connection and through building relationships. But yeah. So I think to answer your question, Michael, how do you learn as an LP? There's some you can pick up just by being exposed to the industry, but again, you're not going to have someone take you under your wing most likely   Michael: And hold your hand and say, this is..   Tyler: Exactly.   Michael: Okay. Yeah. Cool. Man, So, you know, I am also a multifamily value add guy. I've always done things on my own for the most part. What is it that you look for in these undervalued deals that are right for syndication? If you had to pick two or three things that like, yep, this is going to make a screaming deal. What are they?   Tyler: The first thing I will say is I am no master of acquisition. That's not my role, but luckily I have partners on the ground that are, you know, educated and know the market much better than I do. But really what you're looking for is, as you mentioned, is undervalued property. And that in the multifamily space can be something that maybe it's mismanaged. Maybe they have a lack of capital to make any renovations. So, you know, the properties that we're acquiring generally are occupied pretty well in our market, which is Phoenix, but they're outdated. And because of that, rents are lower than what they could command. So that's one area where value add is really, you can take advantage of is just an old dilapidated property that maybe mismanaged, maybe you're not even collecting rent properly. There's just so many different areas in where you can find that value add. So to answer your question, I mean, what we're looking for is a specific type of asset that is in need of a cash infusion because the amenities are not the greatest and can definitely attract a better tenant with a higher rent.   Now we're also kind of in areas and neighborhoods where there's actually a lot of class A stuff going up. And so we're, we're buying things that we think we can reposition to be just under class A, to kind of create a little bit of a subclass. So similar amenities, you know, the grant granite countertops, the under Mount sinks, new cabinets, washer, dryer in unit, the dog park, that, all that stuff, right. So we're building a property that's right under class a but more affordable. So we're kind of creating that subclass and that's, I think another way that we're protecting ourselves and being able to draw in that tenant and be able to bring in that rent that we've backed. So yeah. Undervalued property and then creating that subclass is what we do.   Michael: Love it. I do the exact same thing, just on a much smaller scale. That's great.   Tyler: Yeah.   Emil: So you've been on both sides, you acquire properties yourself, you've been part of syndications. Do you have a preference of which one you like, or do you kind of mix and match in both in you kind of see that happening in the future?   Tyler: Yeah. I see myself mixing and matching. Like I mentioned, I have kind of two prong attack of the cashflow, the immediate cashflow in the Midwest right now. And that portfolio is small and I still have some time to keep building that thing up. I, you know, I still am attracted to the immediate cash flow of those properties in the Midwest because the bigger deals are great, but they're a little bit more of a longterm play for me. If anyone is familiar with how this structure works, you know, you, as an LP, you get paid out quarterly as a GP. You know, the big pallet kind of comes at the end when you exit. So that side of my portfolio is more of a longterm play. And when I say longterm, we're talking five to seven years, which really isn't super long term. But I think having a combination of both is really a nice way to diversify having that cashflow from the Midwest or wherever your market is in individual properties that I own personally mixed with the passive income on a syndication and then a big pile. Hopefully once those properties are sold and you exit. So I think ideally I continue to keep attacking those two prongs, keep building those portfolios side-by-side and parallel.   Michael: So Tyler, something we talk a lot about in the restock Academy is about risk adjusted returns and that, you know, in the more risky areas we should anticipate and expect and really demand a higher return and the less risky areas say for investment, we could expect a lower return where you willing to give up a little on the cashflow or on the return side of things, making that transition over to a better neighborhood or a more expensive neighborhood.   Tyler: A hundred percent. Yeah. I don't think I had the specific data on what that would actually look like.   Michael: Sure.   Tyler: But to me, even just from an emotional standpoint, I was like, I'd rather have an investment in a neighborhood with better schools, less crime, you know, community amenities, a grocery store. Like I felt that I was a hundred percent willing to take less cash flow for a better neighborhood, but also on the flip side, generally in a better neighborhood, you might have better appreciation as well.  So it's almost like right to me. Yes. I wanted to get out of that CD class neighborhood, get into that B class, we'll call it on my personal portfolio. I'm already seeing a much better appreciation numbers on that side of things. And it just, there's a lot more comfort in, in, in knowing that you have a property in a, that's not in a war zone, it's not crime ridden. You know, it, it's a good suburban neighborhood with consistent cashflow and, and most importantly, a tenant that's going to pay on time. That to me was a lot more important than the amazing numbers on paper in that war zone. That would cause me more headaches.   Michael: Yeah. You bring up such a great point that, you know, on paper and mathematically and physically, sometimes those properties in the war zone pencil out really well and might even perform really well. But there's the mental health side of this business too. And, and I think that's so important so often gets overlooked of, yeah, I can make a killing over here, but I'm gonna make myself crazy and not sleep at night. And so we often say that there shouldn't be emotion when it comes to investing, but there is sometimes is. And that, you know, based on how it makes us how the investment makes us feel from an owner and operational standpoint, I think does need to get factored into the calculation   Tyler: A hundred percent. Yeah. I'm all on board with buying, you know, it's not the A-class stuff that, not the D class stuff somewhere in that middle, you know, BC area. That to me is the most safe investment, at least in my opinion.   Emil: Right. You see a lot of people, you know, they'll, they'll flash the similar situation, right. 35, 40 K home it's renting for basically the 2% rule. Right. So it will be running for seven to 800 and it's just like, it looks so good on paper, but there's all these other risk factors that you have to adjust for. And you have to have the appetite for like, dealing with messes more often than something in a better class neighborhood. So always important to consider that   Tyler: Nice little segue to there on like just evaluating cap rates too. Like people will flash, Oh, I got, I got a 12 cap, right? It's like that's numbers. But like, if you look at it from a perspective of risk versus reward, that's probably going to be a more risky investment than a six or seven cap, you know? So it's been interesting to kind of learn that through the years to that high return on paper, doesn't always mean a high return in real life.   Michael: Well, and also what's your time worth. If you've got to go spend 20 hours a week dealing with a 12 cap property, or you can spend two hours a month dealing with a six or seven cat property, you have the opportunity now to go buy more, you know, go buy two or three of those six caps and make us the same or even better returns. Yeah, absolutely. I think that's such a valid point.   Emil: So we've been ending a lot of these episodes. We used to quick fire questions. We've been transitioning into…   Tyler: Slow fire?   Emil: Think about this for five minutes before you answer. No, it was just a random question that we just kind of riff on.   Tyler: I'm all about that, man.   Emil: I know you travel a bunch. Where's the first place you're going to travel to once all the restrictions are done and like, we can start moving around again.   Tyler: I actually had a flight booked to Paris that I got super cheap and my buddy and I were going to go out there and explore the Dolomites in Northern Italy that is still in the back of our heads. And if, and when travel restrictions kind of open up, I think that's where we might go as the Dolomites in Northern Italy.   Michael: I was just there in January Tyler. And it's unbelievable.   Tyler: Yeah.   Michael: Unbelievable. You can go in the winter. I don't know if you're planning on going in winter or summer, but the ski, like the snow sports, they're the snowboarding skiing, snowshoeing is unbelievable.   Tyler: The plan was to go this summer actually, but just seeing photos of it is like, we were inspired to just find a way to get there. So that would be the first destination.   Emil: I'm looking at pictures now. Cause I had never even heard of it. And it is…   Tyler: I hadn't heard of it till recently as well, but yeah, the Dolomites.   Michael: They get, I think the most sun out of anywhere in Europe, in winter, they have the most like sunny Bluebird days and yeah, just don't have enough good things to say about it. Emil, where are you going to go?   Emil: Well, now that I have a kid makes traveling, you have to think a little bit more. You're like, Hmm, where can we go? That's kid friendly and things like that. Probably a surf trip. I'm thinking Costa Rica, Costa Rica is like one of the more family friendly areas that has really good surf. That's not too far from Southern California. So probably Costa Rica, friends. And I have been talking about doing a trip down there for a while.   Michael: Right on.   Pierre: Michael can we get your synopsis of Costa Rica since you live there as well too?   Tyler: We now have a travel podcast guys!   Emil: Hey this is The Remote Real Estate Investor.   Michael: Bait and switch everybody. Yeah that Costa Rica is awesome, man. It's a super, like you said, I know it's a super easy, but you've been there before, right?   Emil: Yeah, I went there like seven years ago with a buddy. Yeah. Different type of trip.   Michael: The surf is so killer. Yeah. You were also Nicaragua. We talked about that to you, right?   Emil: Yup. Nicaragua's surf is amazing.   Tyler: You've also mentioned Bali to me, Emil as well.   Emil: I sound really cool right now. Cause have you guys been there. I've been there, but yeah, Bali, I need to go back to Bali. It is like surf paradise and there's so many good waves and I will probably watch a video on YouTube three times a week of incredible waves there. And I'm just like drooling. But anyway…   Michael: Drooling at waves.   Emil: That's right. That's right. What about you, Michael? Where are you headed?   Michael: I think I have to go back to Portugal. I'm purchasing some investment property out there and sort of do some paperwork type stuff we need to get back out there.   Emil: No big deal. Just buying a property in another country.   Tyler: Are you going the Airbnb route on that.   Michael: Yeah. So it's the Airbnb it's like professionally managed, but actually we're applying for what's called the golden visa so we can get our permanent residency status and ultimately citizenship out there as well to be able to live and work and travel in the EU without needing…   Tyler: Awesome stuff.   Michael: Yeah. So we're pretty pumped on that.   Tyler: My buddies living in Portugal right now and he's just been working abroad for the last year. He did, he actually did Costa Rica for a while and then just flew to Portugal. And he's, he's actually writing a book right now about working from, uh, working abroad.   Michael: That's awesome.   Tyler: I'll connect you guys with him.   Michael: That would be great. That's something that I did last year too, is a lot of fun. I've actually been to Costa Rica, Latin American then all over Europe. Portugal also has amazing surf, has amazing, awesome waves. Pierre, where are you headed, man?   Pierre: I was thinking to go to Mexico, but I'm out of maple syrup. So I might have to go up to Canada.   Michael: Get up to Canada.   Pierre: Yeah.   Emil: Can't live without that maple syrup.   Pierre: No man.   Michael: It's a lifeblood.   Pierre: It really is.   Tyler: I mean, you even have a piece of bark on your wall back there, it's like yeah.   Emil: It's probably a good spot for us to end this one. Tell her before we let you go. Where is a good place that people can get in touch with you? Maybe ask you some questions.   Tyler: My website is jump in real estate.com. You can find my contact info. They're always happy to hop on a phone call or even just exchange emails with anyone really, really enjoy chatting with people like yourselves. And I'm sure your listeners as well. So I just love talking to real estate.   Michael: Awesome. And Tyler if someone wanted to be an LP and one of your syndications is your website the best place for them to get in touch with you regarding that type of stuff as well?   Tyler: Yeah, I would say that's probably the main route I'd want people to kind of route to me is the website. So jumpinrealestate.com. There's an ask Tyler tab. You can just find my contact info there and, or follow me on Twitter at jumpinRE very active on that, which I talked to Emil and Michael pretty much daily on.   Emil: Yes, follow Tyler on Twitter. Very good follow. Awesome man. Thanks again so much. Really appreciate you coming on.   Tyler: Thanks.   Michael: This was so awesome.   Tyler: Definitely. Thank you both.   Emil: All right, so that's our episode. Thanks again, everyone for tuning in. Before you go and make sure you subscribe to the podcast, you get an update every time we release a new episode and let us know what you think of the show. We're always looking for feedback, leave us a review. Let us know you think what you want to see more of maybe what you want to see less of and we'll catch you in next week's episode. Happy investing!  

In this episode, Michael and Emil speak with real estate lawyer Kellie Chrisman about the pros and cons of LLCs and Legal entities in regards to protecting your investments.    --- Transcript Michael: Hey, everybody. Welcome to another episode of remote real estate investor. I'm Mike Albaum and as always, I'm joined by..   Emil: The good ol' Emil Shour   Michael: And today we've got a very special guest in Kellie Chrisman, who is actually a real estate attorney. So today we're going to dive deep into all things LLC and trust related. And Kelly is going to answer a ton of our questions. And for those of you who can't make it through the episode, cause it does get a little bit long, make sure to listen to the end of the episode where she gives her contact information in case you have any real estate specific questions for Kellie. So let's go ahead and jump right in to it.   Michael: Kellie. Thank you so much for taking the time for joining us today. We really appreciate it.   Kellie: Yeah, no problem. Thanks for having me guys.   Michael: Absolutely. So I was hoping you could give our listeners a little bit of background on you, you know, where do you come from? What kind of law do you practice and we'll start with there.   Kellie: All right. Sounds good. So I'm originally from Northern California, Chico and I have been practicing in California for seven years college at UCLA and couldn't leave LA and we stayed down there with Loyola Law school lived in Santa Monica, practice down there, my first, probably four or five years, and then moved back to Sacramento to be closer to family and go all over California and practice all sorts of exciting law that no one usually likes to talk about unless I get real estate people, or unfortunately somebody's going through a hard situation. So I do trust the States business planning and then estate planning as well. And they all kind of intermingle and go together. And it's interesting.   Michael: It's very interesting. And in full disclosure, Kellie and I have done quite a bit of work together in the real estate arena and the trust arena. And now I think Emil has now as well, right?   Emil: Yes. From your referral. So thank you.   Michael: Another convert to team Kellie.   Kellie: That's right. But I can't confirm unless you guys can confirm. Attorney client privileges.   Michael: Awesome. Well, Kellie, I was hoping we could jump into kind of the meat and potatoes of what we want to talk about today and start with some definitions to give folks, because I think so often in the real estate realm/arena, people throw around terms without really defining what they are. So for those of our listeners that have no idea, I would love to just run through some definitions of maybe sole proprietorship, LLCs, S Corps, C Corp and trusts. Can you break down for everybody? What those are?   Kellie: For me, I am a visual learner, which doesn't work necessarily here, but I can at least try and break it down. And I always have to give the disclaimer, I'm not getting legal advice, getting general recommendation based on things that I know. And we can always talk more detailed than I can get legal advice. I see those as two different things. So a trust is, is in its own category from the sole proprietorship partnership, LLCs, Corporations S Corp C Corp, cause they're really accomplishing two different things. So on the most basic level, the trust is something that's going to plan for worst case scenario. So something bad happens, who's in charge where everything is going and what you want that. Then we get onto the other side, the entity side, every other kind of thing we've mentioned. And that's the type of business or entity protection liability protection. So sole proprietorship is if you are going to own a rental property and you don't do anything, you are automatically. So if there's nothing you want to do, you can of course draft stuff and make it more.   But on its most basic level can do nothing. That's what, no, if you do nothing with someone else, then you are a partnership. You can automatically be a partnership. If you do nothing, or you can spend a lot of money to draft beautiful documents and be a general partnership. They're taxed at the individual level, LLC is a limited liability company. And a corporation is both of those. Together are something you file with a secretary of state, whatever state you live in and they give you liability protection so they can have one member. It can be just you, it can be you and a sibling or you want a friend or it can be in corporations and Apple has countless shareholders. So it can go from there, LLCs, the incorporations provide that protection. And then within a corporation you can be two different texts, escort, which is a closely held corporation or a C Corp, which is what we're most commonly used to. So like an Apple or a year, it can be somebody small.   Michael: So if I'm hearing you right, if I just bought the property and do nothing, I take title in my personal name. I'm a sole proprietor. Yep. Okay, cool.   Kellie: And if you do nothing with a friend, then you're a partnership.   Michael: Got it. Okay.   Emil: Yeah. I was going to ask. Okay. So I think for people listening, what are you potentially opening yourself up to? If you're a sole proprietorship owning real estate, what are the risks?   Kellie: Okay.   Michael: How deep do we want to go down that dark dark?   Kellie: Don't ask the lawyer that question. So I don't like to scare people, but I always like to be realistic and everybody has their own comfort level. If you are a sole proprietorship, you are leaving everything on the line. So to put it in real estate terms, you, if it's a commercial property, somebody walks into your tenants property and they slip and fall on the curb. You are technically responsible in certain situations, most situations for keeping that curve maintained and safe. So if you get sued, everything you own is on the line, your home, all your other property, your retirement, your income, and it can follow you. So you can get a judgment that you might not have a lot now, but in a little while. Well, so the risk, if you have nothing, that's huge is everything. However, how common that? It's not so, but not so uncommon. I mean, it can be something as simple. If you have a rental property, I had clients that their tenant had a party to make people on the balcony and somebody moved on the ledge. And once we went over and got hurt, whether they're reliable or not, they're included in the lawsuit. So there can be a lot of expense just to prove you're not liable.   Michael: Versus going the LLC or corporation routes. Now that's a very different scenario that we're looking at.   Kellie: Yeah. So then we're looking at the only thing on the line is what's owned in that corporation or LLC. So you cap your liability and we'll talk, I'm sure a little bit about how that happened and how to maintain that. But if I don't have something in place, everything you own is on the line. If you do have a corporation or an LLC, then just whatever is held in that corporation of the LLC. And so a lot of times you'll see corporations or LLC get sued and then they go bankrupt because they're not going to put more assets into that and they'll have to be other risks. If you just have to go back to the most question, if you just have a sole proprietorship or partnership, you know, if you don't get along with with your partner, if you die, what happens to it? If something tax wise, there's a lot of stuff you can do within this corporation, that instruction. So it gets very strategic and fun if I can say that.   Michael: Yeah. So it just sounds like you have, from a very high level inside an entity structure, as opposed to a sole proprietorship, more options and more liability protection than if you're just a sole proprietorship, is that accurate or fair to say?   Kellie: Yeah, I think that's fair to say. There's a lot more that you can do and there's a level of comfort that comes with it.   Michael: Sure. Okay. And so I get the question all the time of Michael, do I need an LLC to invest in real estate? And I think in the real estate community, there's this very hotly debated topic of pro LLC. No, LLC. So it sounds like we touched on, you know, what the pros are of having an LLC. Are there any pros to just being a sole proprietorship that you really lose out on if you have an LLC?   Kellie: Yeah. So, and it's funny cause I I'm preaching all of this and, and I just went through it as an attorney. You know, whether I want to become an LLC, a limited liability corporation or whether I want to stay the sole proprietor. And when I talk with my accountant, who is usually my they're usually the person that I work with clients tax wise, there can be consequences. So if you do create an LLC, obviously the first thing is that there's a cost associated with it, just filing it with the state. The state has asked me, um, to create it. Usually you're, you're going to need to either pay somebody to do it, or you're going to buy a package online to do it. And there's some things that come within each state that you have to do. So in California, for example, you have to then start paying payroll taxes. So rather than in a sole proprietorship where I just pull my stake and then I get taxed at my own level, I now have a couple of additional tax requirements, but at a point it becomes worth. So that's where I always recommend working with a CPA or a tax professional.   Michael: Okay, great.   Emil Like let's say I buy a property in Florida. I decided to put an LLC, you can set up the LLC in Florida, but California will still require you pay like the franchise tax fee. Like you're an LLC, here right?   Kellie: The problem is, the government writes the law, um, and they always find a way to get their fingers on a little bit of something. So if you have a corporation or an entity in another state and you live in California and you're essentially running it out of California, which is, I own a rental property that I rent, but I received my rent and my California bank account, you have to register as a foreign entity and you pay a small fee to do that. But that's one of the costs of doing the upside of that liability protection.   Emil: Totally   Michael: Wait. So did I, maybe I misunderstood that. So if I own property in Ohio, but I live in California and I registered my, I created my LLC in Ohio and registered it as a foreign entity in California. Should I be paying the $800 annual California franchise tax fee?   Kellie: You do what it is for a foreign corporation, whatever they require for that.   Michael: I got, I got to take a closer look at that. Cause if I've been overpaying, I got to talk to somebody that's ridiculous.   Kellie: That's why I say, talk to your tax professional. Michael: Right, right. Right. All right. Cool. Well, I will definitely have to look into that then, but so for, in California, I mean, there's really no way to get around telling California that we have even a foreign entity in California if we're living here, right?   Kellie: Yeah. They're going to figure it out because the second you file your income taxes, you're going to have that income from the corporation. And they're going to say, Hey, right. So it's a small price. You take my lawyer hat off. And $800 is not a small price for me, but I put my lawyer hat back on and I say, this is $800 is a small price to pay. But when you're looking at the amount of money that you're investing in, what you're building and hoping to gain from creating an entity in front of investing in multiple properties, it's really a drop, hopefully, in the bucket in the grand scheme of things.   Michael: Sure. And kind of getting back to that original two camps, right? The pro LLC, the new LLC. I think the biggest argument that the no LLC camp makes is that, Hey, I can get the same type of asset protection of liability protection with high liability insurance limits and then get an umbrella on top of that. What are your thoughts around that?   Kellie: Yes, super common. It just… This is such a lawyer answer. It just depends. So I worked with a medium sized firm here in Sacramento and that's what the partner is. He would tell clients, you know, why spend $800 a year when I can buy you a hell of an umbrella policy? And I agree with that in some situations, and I don't agree with it and others. So there's no the person that, you know, maybe they bought their first house and they're going to keep it and buy their next house. Never going to be a longterm investor. That makes sense. You know, if it's a single family home that you're renting, that's a good amount of insurance. But if somebody slips and falls in that house, I mean, slip and falls was one of many things that can happen. It's just common place. Example. You're hoping, and you're, you're gambling that you bought enough insurance to cover that lawsuit and your lawyer fees.   Because if you didn't, then now everything was on the line. Now that dream home you bought is on the line for this rental home that you have. A lot of times it works in, comes down to, and I'll probably touch on this throughout. It's how risk averse, how well you're going to sleep at night. Wonder, I always use the example of my husband. And so I I'm a little bit of a gambler. We had one property. I don't know if I put it in an LLC. I probably would seeing, having seen other things that I had done and worked on my husband is extremely risky because he's an engineering he would, before we bought the property, he would have an LLC set up. He would make sure everything was like perfect and Excel and everything. And it would be, everything would be in separate LLC, which I'm sure we'll talk about too. So it depends.   Michael: Yeah. I love that answer. Cause I think so many people approach it with a one size fits all, but it sounds like you can't look at it through that lens.   Kellie: No. And every situation is different. Every set of facts, if it's commercial property and they're going to be multiple people on this property every day, if there's going to be any kind of manufacturing, any kind of longterm structure to me, that's a no brainer. I would advise my clients to immediately do it and have an entity in place. But it just depends if there's an accident.   Emil: Yeah. So one of the questions we wanted to ask you is how do you handle insurance if you're using an LLC, does it differ if you're a sole proprietor versus LLC, do insurance companies look at those differently?   Kellie: So you talked to your insurance agent and each insurance company is going to handle them differently. A lot of times you will insure the LLC itself or the entity LLC, or corporation, and then insure yourself separately. So you can, I mean, if you're extremely risk averse and we send it, my husband would probably have insurance on the LLC and then we'd have an umbrella personally, over ourselves as owners of the LLC as well. So you're, you're double protected, but each insurance company saying that a little differently.   Emil: So you don't insure the property, you insure the LLC. So if I acquire more..   Kellie: So you would insure the property, but the property is going to be owned by the LLC itself. So if you're insuring you can insure business and then you can insure the property, but you're likely going to do both. And if you have a mortgage on the property, they're likely going to require that you meet the minimum requirements, ensuring that properties.   Emil: Right. Got it.   Michael: So let's just take an example. I've got two properties, both in the same city, both currently insured with the same insurance carrier and I move one of those properties into an LLC. Can I use that same policy, so to speak, that'll cover both properties or do I need now a separate insurance policy for the LLC property and then a separate insurance policy for my, the one I own my personal name.   Kellie: Yeah. So I'm going to punt to your insurance agent, i'ts going to depend on what they want to do. So, and it's interesting because this area of law is something that's rapidly developing and becoming more common. I think that a lot of smaller investors are becoming more sophisticated. And so now they're looking into these LLC avenues and now lenders and insurance agents are catching up. So I've had clients who, that's not a problem. They're able to do that and just list the entity as a second finer or additional party. And then some insurance companies will say no way, you're not touching separate policies now. So it's just gonna depend on your insurance agent.   Micheal: Okay. Something that I know we've talked about in the past, Kelly is commingling funds and we'll kind of get there in a minute, but I want to talk about maybe commingling insurance. So if the insurance company is okay with it, right, they're happy to write both my LLC property and my property owned in my personal name on the same policy. Can someone look at that and say, Hey, look, he's insuring these two things on the same policy just cause the insurance company is okay with it. Does that mean it's, I'm safe from a legal perspective.   Kellie: That is one that I have not encountered before. I believe you would be okay. Simply because you are, you're listing them separately as separate entities. I mean, if you want it to be perfectly safe, have no, you know, gray line. I wouldn't have them completely separate because obviously that's the easiest way to never have it come up in court. There's even an insurance policy that's owned, but I don't, we're looking at the commingling is whether we it's, what's called pierce the corporate veil. And I don't think that the insurance policy would do that on its own. You would have to also be doing additional things. So if that's the only thing you're, you're doing that it shares an insurance policy. I don't think it would be a problem. I don't think that would be enough for the court to look at you and say, Hey, he's treating this corporation or this entity as if it's his own personal bank account as if it doesn't really exist. However, if you're also buying all of your groceries out of the bank account and paying your, your home mortgage and buying all of your diapers, that's going to be like completely different analysis. From the court's perspective.   Michael: I thought I told you, I haven't worn diapers in years.   Kellie: I didn't know. You know, it's this whole quarantine thing.   Michael: This is kind of a nice segue into bank accounts.   Emil: Okay. So if I'm using an entity structure like an LLC, do I need a separate bank account for that?   Kellie: Yes, it's very quickly. So the biggest thing that you want to do, and then the purpose of the corporation is going to call corporation LLC interchangeably. Unless we're talking about structure, purpose of the entity is to protect you. And we have to create the corporate veil. We have to create the entity and maintain it as if it is a real thing, because it is. So one of the things, the most basic thing to do to do that is to create a bank account, which is very easy to do. They usually want what you filed with the secretary of state. And what's called an EIN number, employer identification number, which is it's very easy to obtain, or your attorney can do it. You can really do it. It's a little dicey. One of those things that might be worth having your tax professional or attorney do and the bank will create it.   That shows that you are intending to treat them separately. You are intending to honor the law and keep things separate. So it's the first line of defense that I just show that you have created the entity. It also makes me, so you set up your entity, you create your bank account and now, you know, what's coming in and the most basic level, you put all your income for the business, they're all your rent checks. And then you pull all of your premiums for insurance or whatever you need out. And then you can pull your hat when the time comes. So, I mean, I told her the first thing that I recommend the clients do and I recommend they do it.   Michael: I often get the question, you know, how do I pull money out of this LLC account? Cause I'm the LLC owner. I'm ultimately the owner, but I'm setting up this corporation a structure to limit the liability exposure. So once I received the rent, all the expenses get paid out of that account. Can then I just move that money from the account into my personal bank account.   Kellie: Mhhmm. So by putting it in the business bank account, first, you're creating a record. You're saying, Hey, this money, this check that I cash was right. And here's where I put it in. And here's where I pulled it out. And this is my thing. So if you are non-graded record keeping and your accountant is not going to, it's going to make it easier for them to do their job for you to pay your taxes. And it also from a legal perspective, shows that you are, you know, you're, you've created an entity in your needs, so you have honored it. You've used it. You've put it in there. You've pulled out the money to yourself. You're not using that business account as nerd ATM or debit card.   Michael: Okay. So if I wanted to take $50 from my business to go buy groceries, instead of going to use my business debit card at the grocery store, I should simply move the $50 out of my business account into my personal account and then pay for it with my personal debit card.   Kellie: Yeah. Or put it on your personal credit card and then use the business account down the road. So you pay yourself and then you can pay that off. Okay. Now, if we had a CPA on or an accountant, they'd be saying, well, what are you buying? You know, are you buying, you know, the business expense can now, can we have them leave? I mean, that's my dream. CPA is trying to figure out how exactly they can make it work with business expense. But the point is that you are not intermingling your day to day life with your business life. You're keeping them separate.   Michael: Got it. You touched on it a little bit ago and I just want to circle back to it. So let's say somebody is interested now in setting up an LLC, what do they do? Who do they call? I mean, they can obviously call you, we'll give everyone your contact information at the end of this, but what are the steps involved with setting up an LLC?   Kellie: Yeah. So this is an ongoing debate. And I love talking about this because in the most common thing I hear is why can't I just go out and buy this package that I found online for $95, that's going to do it all for me. Why would I pay you? And it's as simple as you just need to file the required documents with the state that you want to create your entity. That's what you have to do on the most basic level that creates your entity. And then from there, you need to build off. So depending on whether you have an LLC or corporation, there are certain documents that need to go into place. So when you file either your articles of incorporation or articles of organization, so organization is the LLC corporation is corporation with the secretary of state. From there, you're going to need that EIN number to help you set up the bank account.   You're going to need the documentation to support and show that you created. So just like we create the business account and we don't intermingle funds where we're showing we've created it by having that business account. We're also showing we've created the entity by having the paperwork that supports it and actually creates it in place. It's fairly common that I have clients come in and all they've done is file. Well, I created it and I'm paying my yearly fee and that's all I have. And when I asked them, you know, who's in charge, if you die or what happens if you and your partner disagree or who, you know, who's the treasurer, who's this, then people go, I don't know. I didn't do that. In that time I bought packaged. I didn't thought paperwork, or I just signed it. I bought that, but I didn't read it.   I don't understand it. Yeah. They have the skeleton in place, but not the details. So I mean, ideally what you're setting up when you, when you do it, you're filing and you're setting up the background paperwork and getting all of the documents. You need to have a successful business going forward. If you do it right at the beginning, you build on it and you have, and you're confident in this round foundation. So if you're going to invest the money to do it at all and the best, the annual fees, then why not just do it a little bit more into it. Right. So that you don't ever have [inaudible].   Michael: Yeah and if we did have an accountant on the show, they would tell us that that's a startup expense. So keep track of it.   Emil: I think we need a follow up with an accountant and Kellie!   Kellie: Love that.   Emil: Imagine the nuggets we're going to get out of that one.   Michael: Oh, the fireworks will be flying.   Kellie: I'm sure. Just agreeing with each other. I'm sure.   Michael: Right, right, right.   Emil: I actually want to run through my personal scenario. I think there's some stuff we can pull out for listeners. So when you and I started working together, I had almost all of my properties in my personal name. And I got married a couple of years ago, had a daughter and realized everything sitting in my name there's issues with that. Right. There's… if something happens to me, obviously that doesn't happen. But something happens to me. There's something called probate that I wanted to avoid. Can you really quickly just touch on what probate is?   Kellie: Yeah, so it's the thing people don't like to talk about.   Emil: I'll explain where I'm going with this after.   Kellie: Super important, because I mean, so probate in its most simple form is a court monitored administration of an estate, of somebody's assets. Once they die, it is not the state taking a percentage of what you want. That's the most common thing I hear probate is a nightmare for a host of reasons, mostly being that it's lengthy, it's public, so everything you all is public and open to really looking at it. And in some situations, if you have nothing in place, it goes according to law. So it's going to your kid. Right. And who's getting it in the meantime. You know, if your kid is, you know, one or two, like I know I have, you know, who's watching it for her and do I want my 18 year old getting access to everything that I own at 18 years old? No. So probate is a little bit, but a fun nightmare.   Emil: Yeah. And I had a family member deal with it and which is why the alarm sounded off for me personally. And so that's why I decided to put these properties in a trust again, moving them out of just my name, avoiding any headaches. If anything happened to me, you touched on what an LLC is just real quickly again, what is the advantage of the trust?   Kellie: Yeah. So the trust is going to say where everything goes when you die and it avoids probate. So they work together a trust and an LLC. They're not a trust is not going to give you liability protection. I wish it could. I could save my clients so much money. I can trust you liability protection, but a basic revokable trust does not. And really for anybody young, that's all I'm recommending because you don't want to buy property you can't sell. The trust is going to allow you to say, if something happens to me, here's where I want it to go. I want it to go to my daughter. When she reaches the age of 25. If she goes to college, I want everything paid for, you know, she needs a car.   She can have a camry she doesn't need a Ferrari -- because her dad likes cars. And you know, she graduates from college. She can have 10% or it's a little incentive if I'm not there to help her. But if you don't have kids, it can become even more important. You know, where do you want it to go? You want parents to have it. Do you want your siblings to have it? Do you want your girlfriend to have it? Do you want a charity to get half? You can be super creative. And then from, I think a more important level, if you are in an accident and you're in a coma, who's maintaining everything that you have. And so we want to make sure someone's collecting the right on your property. So once paying your insurance premiums so that you're in a coma, and if you have the worst year ever with 2020, you never know you're in a coma and your property catches on fire. We want to make sure that your transplants are paid and everything is contained. So when you wake up, your life is the same.   Emil: Awesome. Yeah.   Michael: And are there any financial benefits to not going through probate?   Kellie: Yeah. So probate, the fees are set by law. So especially here in California, a percentage of your estate goes to your attorney and a percentage of your States into the person that's running it. So it's an executor administrator. They get it generally is about two to 3% of your estate goes to your administrator. And two to 3% goes to their attorney, being an attorney that practices this all the time. I don't handle a probate that I don't pick up. The probate code. There is always something weird. There's never, and it's kind of a running joke about people that do this area of law. I don't think it's boring and it's, it's shocking how not boring and bizarre. And it's so it's hard to go through without an attorney. So I've worked for firms that they get great deals on wills because a will is perfect.   The trust is not people go, wow, you paid $300 for a will. Or I paid 3000 for a trust. That's ridiculous. I'm getting a will. And the reason attorneys are doing that is because down the road, they're going to be making a lot more money off of you, probating your will. Then they're going to now, if you set up your trust and do it right the first time, not a little attorney, we of, we joke in our, in our industry kind of about, you know, people oftentimes will go do it themselves. And I always tell clients, great, go do it yourself. And then let's have a free consultation. I'll read through what you put together and I'll tell you, honestly, you know, I'm not going to charge somebody money if I don't need you. That's not why I'm in this area of law. But a lot of times people will do it themselves. Think they've done it and they don't execute it. Right. They put something in there. They don't intend. So we hear their properties going where they don't want it to, or it's not valid at all. And the attorneys then making more money than they would have the probate, because now we're fixing what you did wrong through whatever software was cheaper around, seemed like it was cheaper, I should say.   Michael: So. I mean, we just kind of glided over that fact, but I want to circle back to it. If I have a will in place that does not help me avoid probate, I might be able to dictate where things go and to whom and when, but I still got to go through probate. Well, my, whoever is around has to go through probate. If I've got a trust, I can also dictate where things go to whom and when. And I can avoid paying that two to 3% fee   Kellie: In the probate. It's attorney's fees and administrator executor fees. So probate is if I have nothing in place, then it's probated and it goes disposition or where it's going. My state, it goes according to law and the law assumes your kids are going to get it as soon as their legal is in 32. And if I don't have to, it goes to my parents. And if I don't have my parents, because my is, and news is full. That's how you hear these people that didn't long loss, fifth cousins or whatever.   Emil: I remember when we were going through the process of doing this with you. And I'm like, after this person, I just don't know who else at this point   Kellie: We always, so in that case, what we always do and you'll see in any well drafted will, it will always say, and if everybody's gone to their heirs at law, because if I'm going to keep making, like, I call it like the worst car accident. So if you tell me, okay, I want it to go to my wife and my daughter. And then I go, okay, well, great. You know what? If they're dead and you say, okay, well then I want it to go to my brother and sister. And I go, okay, great. What if they're dead too? And it doesn't matter how many people you tell me I'm going to kill them. Everybody loves talking to lawyers and everyone loves talking about death. So people love talking to me.   Because I, I try to joke with clients and make it light. Cause it's a hard topic. A lot of times, you know, if there's a, everybody that you can name, I'm going to stick them on an airplane or some terrible accident. Cause these things happen. Right. And not super uncommon. I like to use the example of, do you ever go to dinner and do you drive in the same car? And if the answer is yes, then you need a second person or you need to be okay with it going, you know, if I'm off. So if you have nothing in place, the law has something is simple. And if you put together a will, so in a little can be as simple as you can write out, depending on your state, you can write out before you get on the airplane and you sign and date where you want things to go, or you can pay $10,000 to the best attorney in the world and have a 50 page will. And it's still going perfect in that case to go back to my example of, well, I want my daughter to get it at 25 or if she graduates from college, 10% early, she can do that in a little. I can do that through probate, but I have to wait through that year and a half long process.   I'm paying about three to 6% depending if the administrator has an attorney of my estate and what am I gaining? You know, I could've put that same energy and that money into a trust fund given more than my daughter down the road. So it makes total sense. The trust is that I think a gift to the family.   Emil: I agree. Yeah. That's why I decided to do that. And I know Michael, you've done the same. So my next, and probably the last question on this one is, okay, so right now I have all my properties in a trust. Let's say I go out at some point and I start buying properties in an LLC. Do you move the LLC into the trust? How do you get those properties into the trust as well?   Kellie: Yeah. So your, your LLC is going to own the property. And then your trust is going to own the LLC, or you can assign your LLC interests into the task. So in that case, it would take effect. If something happened to you down the road, we're pulling it in to the trust itself. So we're avoiding probate by doing it that way. So if I could draw it out, I would have the trust at the top. Well, really you're at the top. And then I'd have a line down. Then we bought a bubble with your trust, uh, the, a mill trust. And then we've got a line down to a bubble with the mill LLC. And now it shows ownership who has control of what? So it doesn't go the other way. So the LLC doesn't have control over the trust and the trust doesn't have control over you.   You have control over everything. And so for each complete protection, really for you and your family, you have the LLC to protect you. Somebody sees you, they can't go past that first bubble, unless you are buying your diapers every single day out of your LLC, you're breaching the corporate veil. So it stops at the LLC level. And then if something happens and you pass away, then we've got everything in place to protect your family. So you're covering both sides and I joke with clients, but this is the scary truth is that none of us get out alive and in a trust, in a will or nothing or probate, we're all headed in that direction. There's, you know, in this crazy world, everything that's going on, the one thing we all have in common and people don't like to talk about it, people don't like to acknowledge it, but accidents happen and aging happens. And so it's something that if you put it together right now, you can build on it for a lifetime and never have the expense.   Emil: Yep.   Michael: Awesome. I just wanna ask a clarifying question. When a meal says that he owns the trust, owns his property. What's the name on the title? Is it a meals trust or is it Emil as a person?   Kellie: When, and your trust owns the property? So when I bought my house, I had Ellie Chrisman. I was married. So Kellie Chrisman and married woman as joint tenants with the husband. Now, when we put our trust together, which as any good attorney does, I want you to talk with me before I close and to put together, I then transferred. Once we closed into Kellie Chrisman as trustee of the Chrisman family trust, those are the goals of the words that place it into the trust. So when you want something to be owned by the trust, when there's a title document to it, what we do to accomplish that is that you own it. You, the individual as trustee of your trust.   Michael: Okay? Yeah. So if I already own five rental properties and I want to see in my own personal name, and I want to now put them into a trust, we're going to have to change the title of those five properties.   Kellie: Yep. That could be a whole podcast in itself is if I want to try and do this on my own, where am I most likely to mess up? Titling is number one. So you created a trust or you kind of attorney create it for you. That's half the battle. Now we need to fund it. So now we need to make sure your title to your properties and anything that can be retitled is federal correct. So we're transferring it from you as an individual to us trustee and the deed has to be done correctly. It has to be recorded and usually that's included. And so a lot of times you'll see, Oh, this trust is a hundred dollars and this attorney's 1500, this attorney's 5,000. What's the difference. And it's what they're including for you within the trust package. So the funding should, in my opinion, always be included in done for you. I mean, that's the last thing you want to do is spend the time to go through all of this legal stuff and then have a ton of homework to do, including a legally complex thing like titling.   Michael: Okay. So Kelly. So just so I understand. So if I've got those five properties in an LLC and I want assign, you know, put all those into the trust as well, I don't have to change the title on those five properties. I can simply assign the interest of the LLC to the trust. Is that right?   Kellie: Yeah. You don't want to change the title. So if you move it out of the LLC, the issue then becomes that. Now you don't have that protection. It's no longer owned by the LLC. So you want the trust to own the LLC. And whether you do that by assigning it, or, I mean, so I always have a good veteran best, right? So good is listed as an asset. It's find your schedule of assets of your trust. Better is you assign the LLC to the trust itself. And that is the workable solution for most of my clients. Best is within the LLC paperwork itself, the setup of the entity, you have the trust. So you as trustee of your family, trust, owning the LLC interest itself, and that will get the LLC and therefore, anything else you own. So those five properties into your trust,   Michael: Man, we could go on with this stuff for like probably days, but we're getting along. And the two that I want to be very conscientious of your time. I think the last question that I want to ask, and then I'll give them a chance to ask is, you know, where do you see new investors getting into trouble legally?   Kellie: Yeah. So saving the penny. And I hate to say that that seems like such a lawyer answer to, Oh, hire me, but it's not just that. I mean, obviously that's ultimately how I make my money, but, but the reason I did this area of law is that I feel like the law gets in people's way so often. And it prevents somebody that has a great idea or a great investment portfolio from protecting themselves correctly. And then people either say, I'm just not going to worry about it. I'm just going to jump over this hurdle of law. I don't have time to deal with it or they try and do it themselves and it makes it worse or they skimp on what ends up being the most important thing and putting everything else on the line. So if you're setting up a investment strategy and you're going to buy hopefully hundreds of thousands of dollars in property and be making significant income, why not invest in an attorney's time?   And it doesn't have to be a lot of attorneys will offer a free consultation and the right attorney is going to work with you to make it affordable. And it's the best investment, the best foundation you can do. And I think the thing that saves people the most money over time, you will end up spending more fixing it, but then you will just doing it, right. I mean, UCLA Bruin. And I like to quote John Wooden as we all do. And then he said, if you don't have time to do it right the first time, when are you going to have time to do it over? And that's something that I always try to put into my own personal, my personal life and my practice. But I think a good attorney is going to work with you. They're going to make sure that you're comfortable. They're going to make sure that you're not surprised. And that's the goal is to make sure that you're empowered to do what you can do, what you can do, right. And then hire when you need to.   Michael: Awesome love that.   Emil: I don't know if it's a question, more of a clarification. I know we didn't get to one thing I think people should think about as they're considering personal LLC, all those things. If you're going out to get financing, it's a little bit different with an LLC. Most of the 30 year fixed rate, Fannie Freddie government backed mortgages. Those aren't available. If you take the property in an LLC, C I'll usually have to go to a different type of lender, commercial lender, different type of product, but just something else I think is important to consider as you're evaluating all this and navigating it.   Kellie: I found with clients that I've worked with in the past. So having an attorney that's read through your stuff, or, you know, if I have a client that I'm helping, I can work with the lender, my dad's a small business lender. So I kind of heard that my whole life in my ear. And so I will work with lenders to do whatever we need to do. And sometimes it's, you know, you're going to take the property in the mortgage in your own name, and we're going to let the lender know, Hey, we're transferring it into an LLC. And they're going to give us a letter that that's okay, or they're going to tell us their procedure, or they might want something else from me. So they might just say, Hey Kellie, can you give us, you know, a letter on your letterhead with your signature that says, you know, they have an entity, here's all the information. It's kind of their way to be past liability to me. But also sometimes it's ridiculous as it is just having the, the Esquire, the attorney at law, after my name, I can write the things you need to do and note that it more weight, but it's just that extra team player in your pocket so that you have all the tools that you need [inaudible]   Michael: Yeah. Great. Awesome. So Kellie, this has been so awesome. Thank you. So, so, so much if people have additional questions, want to form a trust, need help with an LLC, how legal type questions what's the best way.   Kellie: So email's always great. Or, you know, check out my website Avvo is a nationwide attorney referral website. It's kind of like a Yelp for attorneys, how exciting!  But taylorchrismanlaw.com. Um, and then my email is just my name. I tried to make it easy. Kellie, K E L L I E @ taylorchrismanlaw.com . And I always liked to have a conversation. I always tell clients, don't be afraid that I'm going to charge you. I'll tell you before I charge you. I never want to surprise clients with a bill. That's my worst case scenario.   Emil: Yeah. I can attest to that   Kellie: I'll talk to you about the weather. Kellie. How much are we paying you for this? And maybe it's because I'm a little selfish and I like to know my clients, but you know, always happy to have a conversation and then no, somebody doesn't go with me or they go with legal zoom or they do it. I'm always happy to look at what they've got. And I mean, to me, the biggest compliment is down the road. If they refer me to somebody else, you know, that's huge. And so whatever I can do to help, I'm more than happy to be there. And I'll tell you if I charge you and if I don't do it, I'm going to send you to somebody. I'm not just going to say, Oh, sorry, good luck. I'm going to try and find you that person that can help you wherever you are.   Michael: Great. And can you just spell your last name? So everybody ensures they have the proper spelling   Kellie: It's like a Chris and a man stuck together. So it's C H R I S M A N.   Michael: Kellie. Thank you so much for sharing your contact information. You're a California attorney. We've got listeners all over the country and I think a lot of international as well. Can those folks reach out to you if they don't live in California for help with their legal type stuff?   Kellie: Yeah. So my restriction is, you know, I know California law the best, and if I'm ever uncomfortable, I'm going to send you or refer you to somebody in your own state. But I regularly handle stuff for clients that either live in California and are investing in property, out of state for clients that live out of state or investing in property in another state. And then I'm helping them through the legal process. So I can draft deeds, you know, all over the country in a trust. You're just going to pick California law. And in this area of law, it's not really that dissimilar from state to state. And so it's something I can help people with and have a conversation. And if it's ever something I can't do it's I refer you out and I'll let you know that I can handle whatever it may be.   Michael: Fantastic. And before we let you go, what is your favorite kind of pizza?   Kellie: So pepperoni, jalapeno. And now I want pizza.   Michael: I've never heard of that combo, but I like it.   Kellie: Aye. That's what Adam and I used to order   Michael: Pepperoni and jalapeno. I've got a quick follow up for the group. A question for the group. How do we feel about pineapple on the pizza?   Kellie: No, that's a strong no.   Emil: So a little bit of a long winded answer. I used to work at my first job in high school was Domino's. I worked at Domino's   Michael: Awesome.   Emil: Both making pizza and delivering. So I have tried every single type of pizza. You could imagine, like triple Decker, pizza and Kelly. You just reminded me how good pepperoni jalapeno is. I haven't had that since I, I worked at Domino's in high school and it's incredible. I'm gonna have to get that next time. I order some pizza. I do not like pineapple anymore. I think I got pineapples out at Domino's back in. That might happen.   Michael: I'm a strong pineapple advocate. I just like the sweet and the salty together. Pierre, what's your take pineapple on pizza, yea or nea?   Pierre: I'm just not into pizza.   Michael: I don't like pineapple and I don't like pizza.   Emil: Pierre's too shredded for, for pizza.   Pierre: No it's one of those things where I never crave it, but I'll enjoy it when it's there, but I will always make a choice over pizza if it's me choosing, but I don't see what the big rage against pineapple is either though. I'm…   Michael: Kellie's face is make a barf.   Kellie: It's not supposed to be hot. It's just not.   Pierre: But barbecued pineapple is pretty darn good. I got to say, got to say, but I agree jalapenos on everything. I eat a jalapeno a day. Every single day. I have a fresh one,   Michael: Keeps the doctor away.   Pierre: I don't know. Yeah. I mean probably.   Michael: Awesome. Kellie, thank you so much for coming on and we will have to have you back at some point down the road because there is just so much good meat here to dig into. Emil any final thoughts before we let Kellie out of here?   Emil: No, thank you so much, Kellie. I know you've always been very helpful for me with all the legal questions I send you. So thank you on a personal level. And thanks for coming on the podcast.   Kellie: I can always tell when I'm in the right area. Cause I'm exciting.   Michael: Awesome. Well, Kellie, I'm sure we'll be chatting soon, but until then have yourself a great one stay safe. Alright.   Kellie: Thanks guys.   Michael: Well, everyone, that was our episode. A massive, massive, massive thank you to Kellie. As we mentioned, the sheer number of time we could go on for hours, days, maybe even years about this stuff. I think that's why law school is so long, but we would absolutely love to have Kellie back another episode. Hopefully everybody got a little bit of value out of this and realize just how complicated things can get and how quickly. So I've always touted it. I think Emil would agree. Go get legal advice, go get tax professional advice. Don't try to do this stuff yourself. Just like you're taking your car to the mechanic. They're professionals. Let the professionals handle it. Feel free, if you'd like the episode, to give us a rating and review wherever you listen to your podcasts, go ahead and subscribe. If you want to get automatic downloads on the episodes that come out twice a week. Thanks again for listening. We'll see you on the next one. Happy investing.   Emil: Happy investing.  

In our second Ask Us Anything, Tom and Michael bring on guest host, Mark Woodling to tackle listener submitted questions on buying from wholesalers, the difference between auction and foreclosure sites, preferences between umbrella policies and LLCs, tax liens, how Roofstock selects markets and more.    --- Transcript     Tom: Greetings and welcome to The Remote Real Estate Investor. And today's episode, we're doing another ask me anything. And on today's episode, we have myself, Tom Schneider. We also have one of our hosts, Michael. Michael, say hello.   Michael: Hey everybody, how's it going?   Tom: And we also have a guest host today with some special expertise in the auction world, as well as some experience on tax liens of wholesales and all that good stuff. So we have Mark with us today. Mark Woodling say hello.   Mark: Hey, thanks for having me on.   Tom: All right, let's do it.   Theme Song ♫   Tom: Welcome back. We have another ask me anything episode, super excited about it and let's jump right into it. So, as we mentioned before, with some of these questions that we saw, you know, they might not be in our wheelhouse, so we wanted to bring in experts and that's why we are fortunate to have Mark Woodling on today. So, Mark, do you want to give the 32nd kind of pitch on all the interesting stuff that you've done in the real estate space to give a little bit of background? Uh, you've been on an episode before, but maybe a brief reminder to folks who haven't listened to that episode.   Mark: Sure, sure. Thanks for having me on guys. I work as the director of local market growth for Roofstock. So really it's a unique role where I work on opening up new markets and how we can really bring new supply into those markets, but it's kind of a unique role. So having a unique background was really why they picked me for this cause I used to go around the country, traveling to tax lien, auctions. I would go and bid for a private equity firm around the country about 26 different States every single year. So a young buck out of college really had no limits, I guess you could say, but learning the real estate game, I've also worked at Fannie Mae in the recession. I was there in their auction group. So we're selling about 18,000 properties a year, just through auction in all 50 States in DC. And then after that worked at a company called Xome X-O-M-E and was their chief auctioneer and with selling glide, the Countrywide portfolio that was kind of leftover toxic asset group after the recession. So, you know, became licensed as an auctioneer in 27 different States and it was doing everything online. So have a bit of a marketplace background as well as just a ton of unique kind of distress real estate background.   Tom: Awesome. Love it. Well, well, let's jump right into it. So our first question we have came in from LinkedIn. This is from Dave and Dave asks, what's the best way to scale your portfolio in the smallest amount of time. And let's see, Michael, do you want to take the first pass at this one? Or do you want me to lead the way?   Michael: Yeah, I would say just get a bunch of money.   Tom: Honestly. The way that I was thinking about this question is kind of twofold. It's like if you have a bunch of money, that's a different answer, right? So if you have a lot of money already, like, okay, getting into portfolios, just buying portfolios outright, or, you know, building a fund with an actual like employment of like acquisition folks like that works really well, but let's go ahead and assume this question is if you don't have a money machine in your basement and you're just scaling and scrapping, what would be your feedback on the quickest way to scale in the shortest amount of time with the limitation on funds?   Michael: I think that there's going to be no quicker way to scale than by partnering with people that have what you don't have. And so if money is tight, you don't have the money go out and make a name for yourself as someone who can put deals together and acquire doors. And I would rather there's this very famous, I don't know how famous it is, but a lot of people say, you know, I'd rather have 50% of one deal than a 100% of no deals. And so if acquisition scaling is the name of the game, go find people that don't have the time or the knowhow or the ability to put deals together and bring them to those people who are looking to get into the real estate game and have the money to do so. That would be my advice. Mark, what do you think?   Mark: I think you're right in line where going to portfolio route really is the easiest way, because then again, you're dealing with one property manager in one city, you know, if you're spreading yourself too thin, you can buy a lot of properties in different markets, but then again, you're having to manage all these property managers and that takes a lot of time. It takes a lot of resources of your own. So I think if you're going to get right to it, you really need to focus on a concentrated area of figuring out diversity, maybe within one market or a few markets, and really figuring out, you know, how to leverage your time when you only have so much time.   Tom: My last little tidbit I'll add on this is the best way to scale your portfolio. My recommendation is really tapping into your, any appreciation and equity that you have in ramping up your leverage as much as possible. Now there's some downsides and risks. If values go the opposite way. And you're only planning on holding these a short period of time. There's some risks for getting under water where the loan is worth more than the property. But if you're trying to squeeze as much dollar as you can into scaling and building acquisitions, it would be basically getting the most leverage that you can. So every single dollar of equity you can have, you're using to scale scale scale. So excellent. Let's go on to the next question. And we have a shout out to Michael on this question, Michael, why don't you read this question?   Michael: This next question comes to us from Ricardo from Walnut Creek and Ricardo is a good buddy of mine. So the question is what's up Roofstock, shout out to my boy, Michael Albaum. This question has to do with working with wholesalers, from what I've seen, you can get some pretty spectacular deals with less competition, but it seems you assume much more risk as far as condition of the property, as well as constraints with financing. What has been your experience working with wholesalers? And what advice would you tell to a new investor who are the wholesalers and what do they do? How do they make money and how do you find them? So, Mark, do you want to take a stab at this one with your background?   Mark: Yeah, absolutely. I go to a lot of mastermind groups and you know, these mastermind groups are really for more advanced real estate investors and many of them are actually wholesalers, but they also and hold. And then, you know, they have their fix and flip models and so forth, but wholesaling could be a very lucrative business because when you put a property under contract, right, you're tying up the contract, that buyer who tied it up under contract is then going to sell their equitable interest, right. They're selling that contract and assigning it to someone else. So they really don't have a specific range of, you know, how much they can make and they don't need to be a real estate licensee. So anybody could be a wholesaler. Really so if you want to get to really who the wholesalers are and what they do, you need to go find guys that are doing this for a living. They go really find great properties that are going to be marketable to the masses. And they will tie up that property. They'll sit down, visit the property, take pictures, you know, run some after repair value type values.   And then they present it to the market as off market deals. So, you know, their job is really go out there when I call bird dog, right? They're the boots on the ground. They're spending a lot of money on marketing and then tying up these opportunities to then sell it without having have any risk or money down besides a small earnest money deposit. So it's not that they own the property ever. They only have it under contract and how they make money. So they'll say at closing, I'm going to make a certain amount of money or they can say, Hey, you're going to have to put $5,000 down and I'll give you my contract. And so they're going to make money one way or the other. And the thing is, you're never connected to the person actually selling the property at the beginning. So, you know, things go a different direction, you know, it can get kind of sticky.   So you really need to know who you're dealing with and really have some trust and not just chase after deals because the property may not be in great condition. And you may never even see the property before you tie it up under contract by how you find them. I'll just finish up on that. You know, the interesting part about that is you can go to Facebook and get on investment groups and say, Hey, I am a qualified buyer. I have cash rate of spend in a specific market. And here's my email address, put me on your buyer list. So you're kind of putting yourself out there and into the worldwide web a little bit and exposing yourself, but that's a great way just to get on these lists and see what kind of flow comes through. But again, these don't sit on the market for very long. So you really need to be able to act quickly in order to take advantage of those opportunities. But yeah, wholesaling's a wild West game. So, you know, proceed with caution.   Tom: Sure. I'm going to paraphrase a little bit. So at a super high level wholesalers, they're out looking for distressed or people need to sell right away. That's right. And they basically get it in contract this wholesaler, and then they sell that contract and never actually take ownership. Right. They almost, it's almost like an arbitrage position. Am I accurately depicting that?   Mark: Exactly. That's exactly the way to put it.   Tom: Awesome.   Michael: Tom, have you ever bought a wholesale deal, a deal from a wholesaler?   Tom: I have not. You know, I definitely have been approached to sell to wholesalers. Their marketing is relentless.   Michael: We buy homes for cash!   Tom: We buy ugly homes. Those guys are all the wholesaler ecosystem. And it's funny, the list of people that they're looking to potentially buy from. It's a kind of a rough list. They're like looking for death divorce, like whatever, kind of like quickly to sell. So, you know, as an investor, there's some potential to buy some off market deals from wholesalers, but you know, to Mark's point, you know, you got to still have a really good diligence process and know the deal. Yeah, no, your buy box. Awesome. All right. So this next question we have is from Andy Dobbs in New Jersey. So Andy asks, does Roofstock provide property management or do we need to find one ourselves? Mark, do you want to take the lead on this guy?   Mark: Sure. So Roofstock doesn't actually provide the property management, but we do guide you through the process of how to find really qualified property management companies. So we take a significant amount of time when we bring on what we call our preferred property managers, we certify them and vet them to make sure that they really do work well with outside investors. So, you know, being an investor from out of state, you do have a different level of expectation with property managers because you will never see that property. You, you may not even be able to drive by it, right? So they can really be your eyes and ears. So we establish that network. So that really transitions to investors, having higher levels of confidence. So we will always guide you in that direction and have great profiles on our website, but you are always free to manage with an outside vendor, but you know, these are always great vendors that we're dealing with on a massive scale. So we do see, you know, how they're acting around other investors and that's great data to make sure that we're always working with the best.   Tom: Yeah. And you know, I think it's great that Roofstock does this initial diligence, but I highly recommend as an investor doing that extra step and giving them a call and asking for some references and making that decision and you don't have to use one of Roofstock's property managers that has gone through this process. It's just available for you as a resource. And if you want to, you can self manage or you can find a different third party, property manager, you have options. It's just kind of giving you a step ahead in that process. Excellent. So this next question we have is from Steve in St. Louis. So Steve asks, so he's seen auction sites, auction.com, an example Xome where Mark used to work at are these sites like actual foreclosure sites and how do they different? What are considerations if I were to buy on one of these auction site, could I use financing? Is there contingencies? What are some of the unique risks? So Mark, this is right in your wheelhouse. So do you want to spiel for a little bit on some of these different auction platforms?   Mark: Absolutely. This is an area that I stumbled into my first job, right out of college back in 2001. So, you know, there there's a lot of different types of auctions in the sense of there's tax lien, auctions. There's an actual foreclosure auction, which is what most people will understand what the courthouse steps. And then there's also REO options that even retail auctions. So kind of walking through, you know, the foreclosure and the REO, meaning real estate owned. That means the property has already been foreclosed on when it's an REO, it's typically bank owned, but what's happened in the last, last real decade is that, you know, after the recession that banks were realizing that there was less inventory available. And there earlier on in the process of buyer can kind of get the edge to buy that property the quicker they can get it off their books.   So again, if a property has been foreclosed upon it, typically in certain States will go to the courthouse steps and you can buy it as a foreclosure. The actual auction is like the final step of the foreclosure process, but in this instance that it doesn't matter there. Then it would go back to the bank and then they can sell it with full ownership. So let's just go into, you know, the foreclosure aspect. If you want to go to the courthouse steps and buy, I mean, it's a great time to be able to buy, but typically you're buying sight unseen. So you really don't know what's on the other side of that door and you cannot use financing. So there may be some really creative ways to get financing, but you're going to need to pay for that property, either at the courthouse step with a cashier's check or you put a certain amount down and then pay the rest soon after.   So that part you're going to have to be really buttoned up for. And these are nowadays being conducted even by auction.com, Xome or Hubzu, which are actually at the courthouse steps and working as a third party to really replace the attorneys who are doing these foreclosure auctions before. So you may see like the full on auction going on, where there's a big tent, big TVs, you know, there's a level of organization that's happened in the last, I would say five, six years to really make those more friend link to anybody coming in from the outside so that they actually have customer service representatives there to answer questions. So if you're really curious about those, I always suggest go, it is fun. It is really exciting. And there may be multiple auctions, like I'm in Dallas. So in Texas, they have what they call super Tuesday and you go to the courthouse steps.   There could be four different companies out there doing four different auctions. So it's really something that you need to get comfortable with and ask a bunch of questions that you'll meet people there they're wholesaling, you'll meet people there they're buying for their own. And then you'll have major institutions that are there and they probably won't talk to you about their strategy. That's kind of holding the cards close to the vest, but I would just say coming from an auction background, the risks, that's really something that you need to understand your own risk appetite because there's online auction portals, where you could go in and bid on properties that may have either been foreclosed upon or are just about to get foreclosed upon. And they're trying to sell it before it goes to foreclosure. So if you are going to take the risk, really understand, you know, what kind of websites you can go to and dig in deep, because if it's going to foreclosure, there may be other liens, whether it's federal liens or just other kind of sticky liens that you may have to navigate through.   So you really need to be prepared for that. But most of the time at the foreclosure, you know, any other liens are wiped out. So study, study, study, understand your risk, understand buying sight unseen, you know, have numbers in mind, don't get caught up in the auction. Cause that's something a lot of people get caught up in because it's that active bidding. It's a lot of energy. That's what the auctioneers do. I come from that background. I only have done online, but I have watched and studied the live auctions and they are entertainers. They want to squeeze money out of you. So go in, know your numbers, understand your risk, understand your rehab, know your numbers, know your numbers, know your numbers, and then proceed with that strategy that you've been putting together.   Michael: Mark, I've got a question. Did I hear you right in saying that the banks might want to get these things at auction before the final step of foreclosure, but did I miss hear you?   Mark: Yeah, well the banks have a few different plays sometimes. So if they bring it to foreclosure auction, they get to set a bid and they are the ones that say here's the amount that I would be owed and that I would set as the reserve. And so if they're going to go in and they are there and somebody is going to bid on that property, they need to meet that certain amount. And if that amount is not met and they can foreclose at that point on the property and then bring it to sell any other way that they would want, they could put it into a retail platform like MLS, or they could bring it to another auction site and try the auction again, because typically these are properties in distress situations, but the bank's goal is typically to sell the property as early on in the process. So they don't need to do all of these asset management post foreclosure, which means they have to have staff. You know, they have a lot of costs to get the property cleaned up and presented and ready for market. So they typically want to dispose of that as early in the process. And some of them don't even let it go to foreclosure auction. They'll sell alone in a 90 day delinquency just to say, Hey, I'd rather sell this off to someone else rather than have to go through this longer timeline, even though they could potentially make more money. It just makes more sense to them to take the money and, you know, let somebody else take care of the risk.   Michael: Got it. Thanks.   Tom: All right. This next question, I think is a good one for Michael here. Gilbert, from LinkedIn asked, what parts of the team should in can be local and what doesn't really matter in your, in your own state, or just thinking about locations of that real estate team that you have, where they should sit.   Michael: Yeah, that's a great question, Gilbert. So I'll just share kind of how my team looks on a personal level. And so I've got property managers and agents and insurance agents local to the property out where the property is physically located and my CPA and my attorney are in California. And so that's kind of how I've set up shop. Now. I was chatting with an attorney, uh, excuse me, with a CPA. We had Joel Jensen on from Tax Sentry on the podcast a few episodes ago, and he's out in Utah and prepares returns in all 50 States for investors. And so I'm realizing now that you know, more and more of your team can likely be remote. I think having an attorney local to where you live in your state, because you're going to be subject to local laws. If you're setting up LLCs in your state, I think it's important to have an attorney locally, but it could also be beneficial to have a local attorney to where the property is since if you are going to get pulled into a lawsuit resulting from that property, the local laws to where the property are, are the ones that are going to be applicable. So understanding how to cover your bases in that state is I think important as well.   Tom: I think an interesting point you make is having the insurance agent be local to the property. I'd love your thoughts on that. It's just, you know, being able to squeeze out the best deal on insurance or   Michael: Yeah just having access to local markets, which isn't the case across the board. So for example, I work with a company in California that doesn't write that, that doesn't write insurance in the Midwest. And so the, a lot of the Midwest insurance agents just have access to different carriers and these carriers are gonna know the markets inside and out. There's a reason why the California insurance companies aren't participating in the Midwest because they don't know the market. And so very similar to having a local lender to the property. They can often be more creative because they know the market better allows them to be more competitive. So again, that's another part, a team member that I left off is lenders. So I have lenders local to the property in which the property is located. I also have lenders that work on the national level and I give them both a shot at it and whoever can come up with the best terms and financing usually gets the cake. So I think it's important. Your property manager obviously should be local. Your real estate agent, I think should also be local, pretty much everybody else. It could go either way. I think it's very beneficial to have local people to the, so at least you can ask those questions as a comparison to the folks that you have locally to where you live.   Tom: That makes sense. You know, one of the markets that Roofstock operates in, in Florida and for properties that go through our certification process, we come up with an insurance quote that is an insurance quote. That will be, that is bindable, right? That a company is willing to agree to. But oftentimes we found that Florida, the national provider that we use is rates are a little bit higher than some of the local ones. So I guess in markets work and be a little bit more tricky and there's more potential liability on the insurance side really worth going in and getting the local quotes. And even if it's not that tricky, I like that. That's a great point. This goes in very nicely to the next question that Corey from Austin is asking. So, Hey, Roofstock a long time listener. First time caller. I'm about to acquire my third SFR with you guys. Awesome. Congrats Corey. And I'm wondering when is hazard insurance enough versus getting an umbrella policy, a related question that we got from somebody else as well, a good umbrella policy help replace the LLC. And I think kind of the hardest question is, you know, at what point do you start kind of bundling properties into umbrella versus like individual? So Michael this is right in your wheelhouse. What are your thoughts on this?   Michael: Yeah, I would say Corey again. Great question. We just recorded a podcast with actually my California attorney and we asked this exact question. So I would say, definitely give that episode of listen. That episode should be released in about two weeks or so, but so again, I'll just share kind of my personal anecdote. When I first started investing in single family homes, there was a couple thousand dollars in cashflow a year coming off each property and to have an LLC in California, it costs $800 a year just simply to have it. So that expense wasn't justified given the amount of cashflow these properties were generating. So I bought three properties prior to opening up an LLC and then put everything, wrapped, everything up, did a quick claim deed and transferred everything to the LLC. Now there's two very distinct camps. There's the pro LLC camp and the no LLC camp.   And the pro LLC camp argues that, Hey, if you can bundle everything, put it into a silo and segregate your assets from your personal stuff. That's really great. The no LOC camp argues that you can get that same type of coverage, that same type of asset protection with a high liability insurance policy and an umbrella policy. Who's right, will only be determined once there's a lawsuit. And so it's all comes down to your comfort level, your comfortability, you can get very high liability insurance limits on the underlying policy itself on each specific property policy itself. And couple that with an umbrella policy and umbrella policies are very inexpensive for the amount of coverage that you're getting. And so you've just got to decide for yourself, Hey, how much do I have personally? And how much am I going to be putting at risk with this investment property that will often lead you down the right decision path to what makes the most sense for you? But I think a lot of people really hung up on is, Oh, I need an LLC though, they're pro LLC camp. And they think I need an LLC before I ever start investing. I would say that soften backwards. And I would say focus on getting the property first, making sure that the property is a good fit, then look to see how that LLC plays into the picture. And what's important to note here on this long soapbox rant is that a lot of lenders won't lend to LLCs if they're purchasing single family homes. So have a conversation with your lender, have a conversation with an attorney about what's involved with setting up and maintaining an LLC in your state. And just look to understand what the implications are of having one and have not having one. And then look to make your decision because it's really not a one size fits all approach Michael out.   Tom: Well, you know that the benefit of the LLC is you can name it something. Cool. Did you name yourself a cool LLC Michael?   Michael: I named… no. I just, well, it's tough because a lot of the cool names are already taken. And so you've got to make sure that it's not a, you know, that name is available. All the cool ones like surfer dude23 was already taken. I was pretty bummed.   Tom: Sounds like your AOL chat bot.   Michael: That's how I got my inspiration from.   Tom: Awesome. Our next question is from front of the show, Bobby from Seattle asks, I've heard of investors making money, buying tax lien. What does this really mean? And is this a viable strategy for investing in real estate? Mark Mr. Tax lien? What are your thoughts there?   Mark: Yeah. Right up my alley. Gosh, you've teed up these questions very nicely. I'm going to sound like the smartest guy. Well, here's really what it comes down to a tax lien is, you know, a municipal tax lien means that you owe money to the government. And that's really what when tax liens are purchased, it's typically because somebody didn't pay their County taxes. Right. And what's interesting about tax liens is a tax lien is a municipal tax lien sits in front of any other liens, like a mortgage. Okay. Now, you know, there's a caveat to that. Like federal tax lien, that's a whole nother story, but most properties don't have a federal tax lien if they have delinquent County taxes. So really what happens is every single state has different state statutes of what they're supposed to do with delinquent taxes, right? Because the County needs money to pay for schools, to pay for police officers, to pay for so many more things.   So they need that money and they sell off those tax liens just like at the County courthouse. And the person that buys them basically is paying the delinquent taxes on behalf of that homeowner. And in turn, they're going to earn a percentage of interest off of those tax liens. And so when you buy a tax lien, you don't just buy the property, but you're sitting in that first position, even beyond a mortgage. So in the event, let's say the, what they call redemption period. It's typically one, two or three years when that redemption period goes by. And if you're still the tax lien holder, you have the right to foreclose on that property and own the property. So when you used to hear about all these old infomercials about buying properties for pennies on the dollar, I guess they would say that's what the tax lien buying was all about.   So what people don't realize is that probably 99.5% of the time, somebody has got to pay off those tax liens. And you can earn anywhere typically between eight to 24% on that investment. And so look at it as almost like buying a note where you're very passively investing in real estate, but the kicker is you may have the ability to foreclose on that property, take ownership and own that property for potentially pennies on the dollar. But again, those stories are the rare ones it's like watching Storage Wars and finding that, you know, old school Bronco sitting in, you know, if the storage unit, you're the guy that bought that yeah. That is made for TV, but it does have, so the tax lien industry, um, it can be safe in some ways, if you're doing your due diligence and really understanding, Hey, if this property takes two years to what they called redeem, or when that redemption period expires, is it going to be in good enough condition where they're still valuing the property? And if you feel comfortable, you can invest knowing they're going to probably get that interest. If not, you could potentially foreclose on that property and own it for very little.   Michael: So we should have a new segment on the show called confessional corner.   Tom: Yeah.   Michael: So I did this, I purchased tax liens, read a book and thought, Oh, this is easy. So I've purchased some tax liens out in Arizona. And the auction is while it was an online auction. And so I did some due diligence and understood, okay, what counties and, and Arizona, what States I should be looking at. So I decided on Arizona. And so I ended up purchasing a bunch. I ended up winning a bunch of these tax lanes and probably 80% of them paid us. And I was like, this is the easiest money I've ever made. This is so awesome. But so what I'm wondering Mark is, so the 20% that haven't paid off, this was probably three, three and a half years ago that I did this. The ones that haven't paid off, I think the redemption period in this County, Arizona is two years. What should I go do now? Because my understanding is that if I decide to for clothes in order to, for clothes, you need to pay off all the existing liens on the property. And so if someone had purchased the tax liens from four, five and six years prior to me, there are still these existing liens on the property that I would need to pay off in order to foreclose on the property. Is that accurate? Or do you know, what do I do now?   Mark: Yeah. So two things I would do. Number one, I would send somebody out there to look at the property. Number two, I would, you know, really understand what the timeline looks like and understand if it's a judicial or administrative state where, you know, when the foreclosure happens, you know, like let's say you can actually file to get the tax deed. You need to know, you know, what all those steps are. And sometimes it's an admitted straight of approach. It's just paperwork. But if you have to go to the judicial approach, it means that you would have to actually have to go before a judge in order to earn those rights and earn the tax deed, where did that person would lose the property? So for you, you just need to understand what positions are out there, where do you fit in? And so a title search would show what other liens are out there.   Or you could go to potentially, yeah, I would say run a simple type of report, but also understand the condition of the property because it's something that you're like, man, I do not want that property. I want to I'll even pay my own taxes off. You can get yourself out of that position. If you happen to be the front runner, I would say, or if you happen to be in a position kind of buried in the middle, you may end up getting paid off at somebody ends up foreclosing and taking ownership of that property plus the interest, of course. So I would just understand your position and then if you need to spend some money to go out there and take a look at the property, because there's a chance you may get it. I would know what you actually are holding the golden ticket to.   Michael: Sure, sure. And let's just say as a thought experiment that I'm in first position that they paid their taxes prior to when I purchased them. And, you know, I decided that I don't want to foreclose on the property. It's a mess. It's something I don't want to get involved in. Is there any risk to me having paid those taxes and kind of being that first position lien holder that I need to then do something or pay additional fees as a result of being that first lien holder?   Mark: Yeah. Every state's going to be so different. I mean, these are state statues written back in like, you know, this 17, 18, 19 hundreds, like early, like way back when, so..   Michael: Four score and seven years ago..   Mark: It doesn't hurt to pick up and review on your own and really get to know, Hey, if I am the first lien holder, you know, and there's no other mortgages and this thing is clear to go, you know, what do I need to do? Do I want this? So there's a lot of questions that come with it. But I mean, if 80% of paid off, you'll probably find as it gets closer to actually redeeming during that period where you could potentially take the property, most of the delinquencies get paid off. Right, right. At the very end. So it may turn into that 99% kind of statistic that I gave you before.   So there's a lot of who knows at this point, but as you get closer, I would definitely want to know more information about, you know, what the condition is, where you fit in, in the front runner position. And it could be something that you could be that a half a percentile that ends up really good. So you never know. I mean, the story I used to tell people was we ended up doing a tax lien in Hilton Head, South Carolina. And it was a condo sitting on the water. I think we had 35 into it with this private equity firm and the kids that they have just lost a father who owned the property. None of them wanted to pay the property taxes there. They were just had a fight. Well, it went all the way through the foreclosure process. We ended up with a tax deed to that property and had 50, I think it was 58,000 into a $700,000 property. It happens, but don't expect it to happen.   Michael: Right, right, right. I think there's a, I just had a couple aha moments. And the vast majority of them is that I had no idea what I was doing and for those listeners, but go get educated. Good. Don't do what I did.   Tom: What is it like, ready shoot aim?   Michael: That's right. That's right. Yeah. That was a good learning experience.   Tom: Gosh, love this tangent right here. All right. Well, we're going to jump into the question.   Michael: Great question. Bobby.   Tom: Bobby K the man. Last question we have from Jessica out of Boston is how does Roofstock choose their markets and a related question, why is restock not available in all States? Mark, do you wanna take a quick pass at this guy?   Mark: Yeah, absolutely. This is a kind of what I work on every day, just for those listeners out there. Uh, you, but Roofstock when we started, they really went to markets with a specific intention and that was around cashflow. Right? That's what most of our investors are always chasing is really quality cashflow. But what we're realizing is that, you know, appreciation may be a different play that other investors are more interested in and, or maybe even a blend of the two. So as Roofstock went to markets from like the st Louis is to the Cleveland's to Memphis and Birmingham, kind of the typical suspects, right? Those are just very highly demanded markets because investors require a certain amount of cash flow. You can get 10% plus cap rates in some of those markets. But what we're trying to do is really balance out different investment strategies for all the different, uh, investors out there. So when it comes to, how do we choose our markets? We want to go to markets where we feel the real estate economy is definitely going in the right direction. That not only from a macro level, but also from a micro level, that there's really healthy local markets where the risk and return really feels good from, you know, the areas compared to what you can make in that cashflow. But we're also looking at kind of expanding that logic where we're saying, Hey, let's just make sure we're going to markets where there's enough supply. Right. And there's some affordability because certain markets like here in Dallas, I mean, it's gotten really tight.   And so there's just not much supply that we can source because there's so many other exit strategies that I would say are more geared towards owner occupants, right? So fix and flippers are sourcing properties and going towards those exit strategies rather than investors, because they think they can get more money. So being a marketplace, we have to really grant it, we have to react to the market and let it ebb and flow where we're trying to be the guys in the middle where supply and demand meet. Right? So that just goes to the whole, whole logic of it. You know, we're not available in every state, you know, Washington state, Oregon, California. Those are very much appreciation markets and you're just not going to have the same level of demand from investors. So we're always trying to cater to our network, but please reach out, be vocal, tell us where you want to go. And it really is a conversation point between what Tom and I talk about all the time. And he gives me a lot of feedback where the demand is. So if there's enough demand, the markets make sense. Like we're about to open up and De Moines, Iowa in Richmond, Virginia. And we feel really good about these markets. They're kind of economics. Those are areas we want to go to, but we want to hear your feedback so we can open up in more States and cities like that.   Tom: Love it, love it. And opening up new markets all the time. Excellent guys. Well, thanks for the questions that everybody's been sending in and please continue to fire them in and don't be shy on how either advanced or how novice the question is. We're going to bring in the right folks. If we can't answer the questions ourselves, I think that's a fun thing about this network that we have. And Mark, thank you very much for joining us today.   Mark: Thanks for having me on always a pleasure.   Michael: No, the pleasure is ours.   Tom: The pleasure is ours. Storage Wars. That was such a great show. My favorite part is when they, that one guy Darren. Yeah. And he's like, Oh, that's a $3 bill or, Oh, that's a $50 bill or a nonsensical bill. $50 is a real bill, like a $45 bill. Anyways. Okay. Enough of that. All right.   Mark: I'll leave you with a good story if you wouldn't mind. So talking about storage Wars. So I had to go to auction school to become an auctioneer, right? And they actually have an auction school where you show up and for eight, you have to do 80 hours in Texas. And for two hours every day, we had to do tongue twisters and we had to do, you know, counting up, counting down five, 10, 15, 20, 25, 30 to 35, 40. What do you do around the rough and rugged rock, the ragged rascal ran, right. And do it all day long. And I'm just scratching my head like, teacher, I'm going to be an online option that really make a difference. So funny enough, but they always did a charity auction at the very end. And guess who walks into my auction school in Texas? It was Walt Cade of Texas storage Wars. I'm like, get out. This is, this is like living in a weird world, but the auctioneer world is really interesting, different real estate to watches, to tobacco and cattle. And there's all kinds of things you learn. But again, I kind of raised my hand, like I'm just here for the real estate online course. We don't have that. Get back to your tongue twisters Mark. So if you really want to talk about some funny stories, it's a great world. Auctioneer's are fun, but you know, there's kind of a new regime coming through more online auctions, which is a fun way for people to kind of get comfortable with, you know, buying from anywhere in the world. Very much like what Roofstock is doing with our marketplace. So yeah. Full of fun stories, but had to share that one.   Tom: Awesome.   Michael: So cool.   Michael: Alrighty, everybody. That was our episode for today. Thank you so much for listening in a big, big, big, thank you to Mark Woodling. Always a real pleasure to have him on as always. If you liked the episode, feel free to give us a rating or review, or even if you didn't like the episode. No, don't give us a rating review if you didn't like the episode, wherever you listen to your podcasts, we look forward to seeing you on the next one.   Tom: Happy investing.   Michael: Happy investing.    

In this Episode Tom, Michael and Emil share their systems that take the headache out of acquisitions and ownership to effectively scale up.  --- Transcript:   Tom: Greetings and welcome to the remote real estate investor. My name is Tom Schneider, and I'm here with Emil Shour and Michael Albaum. And today we're going to be talking about something that is near and dear to my heart. We're talking about building systems. We're talking about automation. We're talking about scaling. We're going to touch on these topics and a couple of specific strategies as it relates to acquisitions and ownership. All right, let's do it.   Tom: All right. Welcome back to The Remote Real Estate Investor. Before we get going today, we're going to do a quick introduction from the host a little bit about ourselves and our experience and background and all that good stuff. So, Michael, why don't you go ahead and lead us off?   Michael: Sure. So I'm Michael Albaum. I used to work in my past life as a professional fire protection engineer in the commercial property insurance industry. So everyone has to bear with me if I speak in math terms, cause I'm a reformed engineer. I've been an investor for the better part of a decade and started very traditionally with single families. And now I've found a, found my stride and niche with multifamily value, add projects out in the Midwest. And I'm also the head coach of the Roofstock Academy program and meal. Can you introduce us to yourself and your mustache?   Emil: Hey everybody. My name is Emil Shour. I work on the marketing team here at Roofstock. My fun fact is I actually bought a couple properties through Roofstock before I was ever working here. It was a big fan of what the company was doing and now lucky enough to get to help spread the word. And I own a couple single family rentals across the Southeast and Midwest.   Tom: And my name is Tom Schneider. I am the director of investor education here at Roofstock. My career has been focusing on putting technology process to scale and build systems. So this episode is particularly exciting for me is how I do this personally, with my investing. I've been in real estate investing for over the past 10 years, and I'm also a California broker.   Michael: Nice.   Emil: The only one of us who's licensed. Where do you have your license hung somewhere as a broker?   Tom: You can just hang it right around here.   Michael: Yeah. Hang it on yourself.   Tom: Hang it on myself.   Michael: The broker test. Isn't so much more work than just the agent test, right?   Tom: It is. They've made it harder when I got my broker's license, it wasn't quite as difficult, but they made the experience requirements a lot more difficult. It was kind of funny. I initially worked in acquisitions for one of the publicly traded rates and literally the day that I passed the broker test, the person who was leading our technology says, Hey Tom, we need a can-do guy to help build out a bunch of systems. And I was like, okay, cool. Let's do it. So I got my broker's license and then proceeded to never use it until I did use it when I bought my own house. So I guess it paid for itself there.   Emil: What is the difference between an agent and a broker?   Tom: I'll tell you, I should kind of have an idea on this. So an agent needs their license to be hung underneath the broker. The idea is a broker understands the business a little more and folks who are agents can eventually become a broker. If they wish to, they basically can operate on their own. So within California, you can apply for an agent or a broker. And the broker aspect of the test is a little bit harder and the requirements to get it is a little bit more difficult.   Emil: Got it. So a broker can do everything an agent can do, but an agent can't do everything a broker can do.   Tom: Yes. Yes, that's correct. That's a good way to put it.   Michael: Getting ready for my broker tests.   Emil: Awesome. I've already learned something on this episode!   Tom: Early and often, baby early and often. All right. We'll jump into some system stuff. So we have a variety of different things and we're going to have a different one of the hosts take the lead in talking about. So we're going to start with acquisitions. And Emil, why don't you lead us off on some systems, some practical systems that folks can do on their own.   Emil: It might be a little obvious, but I still think it's worth stating. Set up automated filters and alerts on the places you look for properties. If you're on Roofstock. If you guys are familiar with stock is our marketplace where people can buy and sell single family rental properties. You can go and filter by whatever meets your criteria and save that filter. So you get notifications when new properties hit the site that meet that filter requirement, same thing on other sites like Zillow or Redfin or realtor.com, wherever you're, once you've figured out your buy box. And I'll talk about that in a second. Defining it, plugging it in as a filter so you get automatic notifications cause you want to be on top of those listings, right? When they hit the site, right? It's a lot more effective than just constantly going on them and checking your listings. Even though I do that all the time anyways,   Michael: I don't know about you guys, but I constantly get notifications from Zillow and Redfin about new properties that have hit the market, but I didn't save a filter even, you know, I searched there twice or three times and now I was like, Oh great. You're super hungry for properties in that market. So I'm just getting blasted by these emails. Yeah.   Emil: Every time I look@realtor.com, like I was curious the other day about like, what do multifamily in Bakersfield sell for? And now I've just, I've been getting Bakersfield filter notifications from realtor.com. It's like, man,   Tom: What's cool about these websites and the filters, a little pro tip is you can get really granular with your filters and set up multiple filters. So what I'll do is on my inbox that I have all set up multiple inboxes and I'll set up a filter within my I'm gonna, we're gonna do filters on filters. This is a very layered,   Michael: Filter-ception   Tom: Yeah. Very meta. So within my inbox, shout out Gmail, just kidding   Emil: @Gmail, let us know if you want to sponsor us.   Michael: Yeah. I've never heard of this Gmail, but this Tom Schneider guy talked about it.   Tom: Anywho, I set up like a master folder for like incoming property leads. Right. Then within that I'll set up additional folders for each different type of either region or property type. So as new listings that meet my criteria are hitting. I have them in a nice clean folder, so, Oh, great. A new Florida property. That's a duplex in this area and I have a special folder for that. What I'll also do is oftentimes timing can be pretty important and moving quickly, instead of setting up a filter that comes just once a week or once a month, since I have this infrastructure within my Google Gmail, shout out again, I'll have it actually doing real time. So I'm not getting pinged in my main inbox if I'm working on some other stuff, but I have a way to see immediately based on whatever that criteria it's hitting that inbox. So again, the super simple paraphrase, but this isn't that complicated. I have a bunch of different inboxes within my Gmail. And then within the, my buying platforms, I'll set up many filters and many alerts and many immediate alerts. So it'll hit right into my Gmail and I'll know at that time, all right, this one looks pretty good and I can move pretty quickly. And I don't have that issue of, Oh, Property. It's already pending. Like I'm not passively looking for it. It's proactively hitting me as soon as it hits the market and I can act and jumped on it. So that was my extra tidbit on that piece of mill,   Michael: That description Tom was amazing. It gave me such a visual of kind of how you operate. And it made me reflect about how I operate. And you, I'm picturing this nice, neat cubby with nice section organizers. And mind's like just a fricking melted pizza, but it's just crap everywhere. It's, I'm so jealous. I want to be like you and I grow up and have these systems, but in place, I love that.   Tom: That's why we make a great team, Michael. That's why we make great team   Michael: Coffee-man, and melted pizza.   Emil: Oh yeah. I'm not surprised Tom is like the most organized out of all of us internally. And I'm not surprised when it comes to acquisitions. You're equally as organized with the pick and choose you pick and choose. There's definitely lots of messages. So one thing, if you're going to one of the sites we mentioned, and you're not sure how you should set your criteria, just know that it's okay to start a little wider. And then as you've looked at more and more listings, I think you'll get better at defining your buy box. I know we talk about it a lot and we say, okay, build your buy box. And sometimes it's hard to just like, know what to choose. Right. I kind of started larger. For example, I chose a couple of different markets, couple of different properties, size, like a bigger property size.   Tom: I like it. You feel that you need to shoot with a sniper. I keep using these weapon analogies, but it's okay if you're not sure to start with like a broader spray and then work your way down as you refine what you're looking for. But I'd say it's better to keep it an open, an open range, and then, then shrink that down.   Michael: Nick it down.   Emil: Yup, exactly. And also because sometimes whoever uploaded the listing, sometimes they don't include that information. Right? So if you have like really, really specific defined criteria, you may miss something where whoever listed at the seller or the agent or whatever, just didn't submit that information. It doesn't hit the filter. I've noticed that on a couple of things.   Michael:   And just a pro tip for everybody listening to, if your budget is a hundred grand on the high end, set your filter up to one 20 to include properties that are listed above that because you might offer a 100K and get it. Versus if you set your filter criteria right at your end budget, you might never have seen those properties.   Emil: Yeah great tip, go like 10, 20% above what you are actually planning on spending.   Michael: It also gives you an idea of what the next tier of property looks like. So if you did want to ultimately spend more, no. What would that buy you?   Tom: One last piece of advice on building a bike box is to think about how many properties do you practically want to evaluate at a given time? And yeah, you can control this with your buybacks by how targeted it is. So if I have a lot of time and I want to look at a lot of product properties, I'm going to have a really wide buy box. If I don't have a lot of time right now to evaluate properties, I'm going to tighten my buybacks down a little bit. So one way to think about it is to work backwards about what your kind of capacity is for evaluating effectively.   Emil: It's also, I think when you're first starting out, I think it's okay to, again, to nail this point of going a little broader, I think with time and experience and having different property types, you'll start to get an idea of like, this is the exact property I want in this exact area.   Tom: Awesome. Michael, do you wanna jump on your next acquisition system?   Michael: Yeah, absolutely. So, so much of this, in addition to searching, can be done socially kind of quote unquote. And so just talking to everybody who's willing to listen and maybe even some of those who aren't, about what it is that you're looking for. So just in everyday conversations, talk to friends, family members, people in your network about what it is you're doing and what it is you're looking to do because so many eyes are going to be better than, than just one set. So if someone then comes across a property just in their everyday life and thinks, Oh, well, I remember Tom mentioning that he was kind of looking for something like this. That can be a great deal funnel for you as well. Property managers can also be a fantastic, fantastic source of deals for you, which is pretty automatic. You just tell them, Hey, this is what I'm looking for. You, you set your filter, so to speak with them and any property that comes across their radar. Oh, Hey. Yeah. I remember, you know, Emil, I kind of managed this property for him. And he's looking for something like this. It becomes so easy. And so automatic that it's one of those things you can just kind of say it and continue saying it and then forget it. There's not a whole lot of nurturing that has to be done with those types of things, other than some, you know, reminders. And don't be the person that, Hey, have you found any properties yet? Have you found any properties? Just put it out into the universe and just kind of let it, let it bake for a bit and see.   Tom: It's like The Secret. You guys remember that book?   Pierre: I'm still waiting for that check in the mail.   Tom: It's coming! Wasn't it The Secret and then The Answer as a followup or something.   Emil: Yeah.   Tom: Incredible. Incredible marketing.   Michael: I didn't read that one. What's The Secret about?   Pierre: It's the laws attraction.   Michael: Uh, okay. Okay.   Pierre: It's when you focus on something for long enough and eventually it comes to you, essentially.   Emil: That's right. You don't have to actually do anything. Just think about it every day. Hope for it every morning, but no action required. Just think about it.   Michael: Million dollars, Million dollars! So it's interesting. So for the Academy book club, we just did Think and Grow Rich. And I thought that, you know, that was such a great title by Napoleon Hill and we read it and I thought it was really awesome and talked about a lot of kind of high level things, mindset type stuff. And it was talked about very similar type stuff. And it was, it was interesting. They're all talking about, you know, if we stand around here and talk about blue cars, we'll probably go out and see a bunch more blue cars. And it's not so much that there are more blue cars on the road. It's just that now we're cognizant of that thing. It's kind of front of mind. So it appears more often for us.   Tom: Yeah. I love that example, Michael, cause not all systems are digital or not all systems are technology, but it's, it's leveraging the people side of your network of funneling in deals through that. So at the end of the day, like a lot of real estate is a people business and nurturing that and building a system that you want and funneling them in deals is excellent.   Michael: All the real estate meetups that I went to, um, pre COVID, they all talk about they'll usually start or end with the needs and wants section. So people talk about, okay, this is what I need or is it “have and wants”   Tom: Maybe it's a “give and a take”, I think I know what you are talking about.   Michael: Yeah. You announced to the group, what it is that you have to offer to the group and then what it is that you're looking for from the group or from in general, until people say I have money and I'm looking for a deal or whatever. And so it's that those are great opportunities as well. And so again, just kind of reiterating, put it out to the world, don't be embarrassed by it. Don't be shy about it. Just make it known what it is you're looking for. Cause it's tough to help people if they haven't told you what it is that they're looking for.   Tom: Awesome. Great example. All right. So I'll touch on the last acquisition related systems slash tip slash ways to scale. And this is a special perk that we have within Roofstock Academy is that members can actually export the listings on Roofstock into Excel. And whenever you can do things evaluating a lot of deals at once, like doing it in Excel, that's a great way to do it. So I guess that the main theme is, you know, try to batch processes together. And in this particular example of being able to download all the listings in Excel, batch that whole evaluation of the whole inventory, you know, in one run where, okay, I'm filtering down to these particular property types or, Oh, I'm filtering down for this particular return. So being able to, if you can get a spreadsheet of what you're evaluating or any kind of way, being able to batch it together, do it saves time.   Michael: And for anybody that's really intimidated by Excel because I know it can often seem very intimidating. There are some really great free courses on YouTube and there are also paid courses. If you want to get more in depth with it, about how to use Excel and maybe how to do some of that batch sorting because it's a really powerful tool. So I guess we're plugging Excel and Gmail in this episode.   Emil: Shout to Google and Microsoft!   Tom: Let's continue on. We're going to go into ownership now and Emil why don't you lead us off.   Emil: Cool. All right. So the first one we're gonna be talking about is cash flow automation. So the first thing I do and you guys let me know if you do this as well. I set up auto pay on all my mortgages. I don't want to think about, did I pay this mortgage? I have to mail a check. I auto pay everything just to make it super easy. Especially when you have multiple properties automating. It is like, step number one. You guys do that as well.   Michael: Yeah, definitely. Absolutely.   Tom: Do you also impound your insurance and property taxes when you pay your mortgage payment?   Emil: I do. I know a lot of people won't because they want that capital and would rather use it throughout the year versus giving it to your lender, to hold it to whatever you like to be able to use that capital. I just don't want to have to think about like, okay, I need to come up with X amount to pay my property tax and insurance. It's kind of like duping yourself into thinking you're richer than you are.   Michael: I don't, I don't use the impound accounts. I will, if they'll give me a better rate for the mortgage. And then as soon as the loan closes, I cancel the escrow account and just pay it myself.   Tom: Sneaky move Michael.   Michael: It's something I'm considering doing just from like a meal mentioned ease of operations. It's just one less thing to think about. So it can be great either way.   Emil: Why do you not impound it?   Michael: For the exact reason you mentioned there are significant funds that are going to be paid to property taxes and insurance on an annual basis. And so I'd rather have that kind of, well, that one time hit is kind of a bummer. I'm able to use that cash. I mean, it's a significant amount such that it's usable on a monthly basis to do other stuff with. And so I just know in the back of my mind that, okay, come this time of year, I've got this big, big property tax bill that's going to be due.   Emil: Yeah. I wonder if there is something there in terms of like at a certain scale, it's a lot more money to be working with versus like, let's say you have one to five properties just for ease and it's not that much extra capital that you'd be able to do something with.   Michael: Yeah, no, that's a good point. I mean, I think everyone should think about it for themselves because even at that five property level, one to five, your property tax bill could be, you know, $25,000 if we're talking about.   Emil: Yeah, that's true. Yeah. Good point.   Tom: Just to clarify impounding your taxes insurance is if you haven't deduced this or don't already know this, it's when you pay your mortgage payment, the mortgage company will also collect a percentage of the annual taxes.   Michael: They'll take one 12th of the annual tax bill, one 12th of the annual insurance bill with your mortgage payment on a monthly basis. So that you're paying equal payments every month. You're not getting hit with your tax bill or insurance bill just at one time.   Tom: And then the mortgage company will just pay it for you. So you don't have to think about it. So, boom, that's another system. So that's a good question about, you know, do you use that money in the meantime, if you don't have to pay it for 12 months, but that could be another potential system. Alright. Emil, I broke your flow.   Emil: Finishing up there. My favorite thing is when they audit your account and you have an excess balance and they send you like a check for a couple of hundred bucks and you're like, Ooh, it's like a Christmas bonus or something. Hanukkah bonus baby. For me,   Tom: I think I might've mentioned this on another podcast. I like it, but it pisses me off. Cause I'm like, oh geez, what check am I missing? Yeah, it makes me think like, okay, this is great having this check. But I'm like, like honestly concerned that like I may have missed something in the mail because man, there's just so much junk mail as a real estate investor. The wholesalers that email you all kinds of things and like just general, getting a lot of mail. I just get really concerned that I see a check here. That's awesome. But what checks am I not seeing? Because they're buried in between a Serina and Lilly or whatever, a  catalog, that's like five pounds and 500 pages. Anyways, go ahead, please continue your answer.   Emil: No, please continue your rant. I want to hear that.   Tom: I got to build it up a little bit. I got to build it up a little bit.   Michael: Tell us more about what other junk mail you received.   Tom: We Buy Ugly Houses Houses. So many of those. Yeah. If there's any wholesalers listening, I want off your mailing lists.   Emil: Okay. So the next one, this one's probably obvious a lot of people, setting up ACH auto payment from your property manager. So they collect your rent checks. I don't even know if any property managers do this, but like sending you a check in the mail. I imagine most people already set up you raising your hand, Michael. Cause do you do that?   Michael: I used to get paper checks because my property manager was pretty old school and I said, okay, please, please, please, please, please, please, please. Can we do this and other way? Yeah, this is just not awesome anymore.   Emil: I mean, so that should be like, even part of your PM property management vetting, right? Like, do you do, do you have an online portal where you ACH payments to me? So just make sure you set that up. If it's an option, most property managers in 2020, you will have that.   Emil: Maybe Michael went to one that was established in 1925 or something.   Michael: 1833    Tom: Is this is the one in Alaska?   Michael: No, it's actually properties that I've since sold, but out in Missouri kind, of rural Missouri. And so just to expand upon this a little bit is I think we've talked about in another episode, but my property manager, there was only willing to use a certain bank or the local bank branch wasn't anything that we had locally or that I use. So they would go to this bank deposit, the rent check and then would cut me a check to my bank. It was just a whole pain in the butt kind of thing. So what we've automated is now they'll deposit the rent check and then those rent checks we'll get bill paid from that bank to my local bank where I actually do my banking and then from there and get distributed. And so if you can automate as many of those processes as possible, it becomes much easier. So ACH transfer a potentially from multiple bank accounts to multiple bank accounts,   Tom: Are you're hiding something Michael? I'm just kidding.   Michael: I don't know. You ever been to the Cayman islands?   Tom: That's interesting that a local property manager had a preferred bank that they worked with and yeah, yeah.   Michael: They're just like no Wells Fargo or B of A or union bank out there. So they're like, this is what we use. It's like cool, pony express it over to me.   Emil: Carrier pigeon that's right. So the last one in this section, we recommend I do this. I have a separate bank account for all real estate stuff. It just makes things easier, especially come tax time. I also just like having it separate cause I try to treat real estate investing like a business to have its own checking account checking account. I use Chase, it's free to set up another checking account and it's just much easier to track things going in and out and it'll make your CPA's life easier. Do you guys do that as well?   Michael: I was going to ask if you guys have separate accounts for every property?   Tom: You know, it's funny, I just got off a Roofstock Academy coaching session before we started recording this episode and we were just jumping into it with a member exactly on this topic. I don't, I use just one account for all properties. It's just, I don't know, easier. And I don't understand necessarily see the value. Not that it's a lot of overhead to have different bank accounts because you can set them up for free on so many different banks, but I just use one for all the rental properties and yourself, Michael,   Tom: I have one account per LLC. And so I've got LLCs that own multiple properties. So all that was kind of funnel into that one. Yeah. What about you, Emil?   Emil? I'm just one checking account where everything funnels into nice. Just for ease. Makes it easy.   Pierre: What would be one of the benefits of setting up an individual bank account for each property?   Tom: The benefit of setting up, if you were to set up a different bank account for each property, you know, what I like about it at a portfolio level is I just have a really tight grip on cashflow within that portfolio. If I was to do it at an individual property, man, it would be just so clear if I'm making money or losing money. You know, we have these assumptions that we use when we are acquiring properties, but ultimately, you know, when the rubber hits the road, you hope to hit those or even exceed them. But you know, by having an individual bank account for that property, you have a really immediate, transparent view into, is this property performing to how I was projecting it with the cashflow.   Michael: I was going to say, it's a really good question Pierre. I'm glad you asked it. So because I only have the one bank account set up, I think I'm echoing Tom's viewpoints and opinions that, yeah, it's very easy to see what the actual numbers are, but I found that I just keep an Excel file, very detailed document of, Hey, anytime there's an expense on a given property, I log it the date, the expense, and then the dollar amount. And so that for me, suffices as a very similar type of scenario without the headache, I would argue of having 10 different property accounts searching through which one has what I've got it all in a file for me, that's worked really, really well over the years.   Emil: And your property manager, a lot of them you'll have a portal where you'll be able to see all your rent, all the management fees they've taken, they handle a lot of the smaller maintenance. So you'll see those expenses as well. So you also have your property manager, you can lean on, that's going to keep track off a lot of this stuff. The only other thing to track outside of that would be your payments to your lender and then property taxes and insurance.   Michael: There's all kinds of miscellaneous stuff that you'll likely have to pay outside of that. So like business licenses, if you're required in that state or LLC fees, franchise tax fees in, you know, wherever you live and wherever it's registered, just misc miscellaneous stuff. And I just attach that to each property and whatever it's paid for, you know, even might have to pay a contractor, something if they're that's outside the scope of what your property manager is doing. And so having a place to document all of that, I find it to be very, very, helpful.   Emil: Yup. I also keep a detailed Excel. I don't do it every month. I do it like bi-annually.   Michael: Do you do it when you incur the expense or you do it as a reconciliation, every, you know, twice a year,   Emil: The latter I do reconciliation. It's probably not the best, but I don't know.   Pierre: Yeah. I mean, we're talking about automation,   Emil: We're telling you what to aim for. We're not necessarily saying we all do this all the time.   Michael: Do, as I say, not as I do.   Emil: Exactly. And you know, you don't have to be perfect in all these areas. We're giving people just different ideas, you know, what makes sense to automate.   Pierre: Cool   Michael: It's one of those too like, we all have bad habits that we've fallen into over the years. And now in hindsight, we'd say, man, I wish I had formed this better habit. So here's what I would do differently. And it's so hard to break those bad habits. Like it's so hard.   Tom: Getting the grove for sure.   Michael: Yup. Very true.   Emil: One other thing, we don't have it here, but I want to talk about it as well. This kind of goes back to acquisition automation, but, it goes back to the concept of paying yourself first. So a lot of us, you know, we have a full time job or we have W2, whatever it is, make sure you set up like an automatic percentage that every paycheck coming in is going towards your investing. So right now, like my process is 20% of every paycheck automatically gets taken out of my checking, put into a separate investing account. And I highly recommend people who are listening, check out a website called I will teach you to be rich by Ramit Satie he has this awesome guide. If you look up, I will teach you to be rich, personal finance guide. It shows you how to automate all this stuff, like having separate accounts for different things you're saving up for. I found that super easy and like a really good way to separate your money and like have kind of different categories and use them for separate things. So I have a separate investing savings account that automatically, you know, income coming in goes into that. So that's another automation thing I do.   Michael: Piggybacking off that a meal I've also automated paying myself first from the rental amount every month. So when we do our analyses, we see, okay, we've got the mortgage payment, property taxes, all these other expenses that may or may not actually occur on a monthly basis, but we modeled them that way. So it makes the cash flow easier to understand. And so your property is going to collect rent. They're going to take their fee and are going to give you the rest. Well, now that's a huge chunk of change, but we've still got to pay some of these other expenses. And so we all have calculated on a monthly basis what our cash flow should be. And so I will automatically set up that deduction amount from my property bank account, going to my personal bank account, if I'm planning on using that cashflow for everyday life stuff. So if it's a hundred bucks a month, I just receive rent on the 10th or whatever of the month. And then I automatically have a hundred dollars transfer into my personal account. Everything else stays in the property account to then pay all those other expenses for. And at the end of the year, you had a good year. You might have some extra dollars left over and you can pay yourself again. Or if you had a bad year, you might need to put some additional money back into that. But it's a really easy way to just start collecting money from your properties without overdoing it.   Tom: I like it. So the next operational system I'll jump on, has to do with documentation. So if you're an active investor, you will be regularly buying new properties. You will be regularly refinancing had a good episode, I guess it would be two weeks ago. Once this episode is launched on ways to take out equity, anywho, when you are going through that exercise, you're going to need the same documents again and again and again, you're going to need a copy of the current lease. You're gonna need a certificate of insurance. You're gonna need a sample mortgage payment. And what I like to do with this is to streamline this process is set up a folder structure that is secure. There's a couple of different platforms out there, Dropbox, maybe even Google drive, but you know, in a secure folder online, I'll have my relevant documents in there.And then I can use sharing functionality to give it specifically to my lender or specifically to my CPA. That way I'm not needing to constantly track down these documents that I'm going to need again and again and again, and I can safely share it with whoever needs it. So the main takeaway for this system, I guess you can call it that is, you know, don't sleep on it, just have that document structure set up a do it once and do it right and do it early and then have that available for whenever you go through one of these maneuvers, be it refinancing or taking on a new loan or going through tax time.   Michael: It's so valuable. I know for my first property, I didn't have these systems really set up in place. I thought I did and then came tax time and I was like, Oh my God. So this is going to take so long to figure this out and go back and collect all these things. So, you know, it's one of those things. It's tough to know what you're looking for until you know what to look for. So ask somebody, ask, you know, ask your CPA, ask your tax professional. Hey, I'm investing in real estate. What things you're going to need from you at the end of the year, they're going to tell you, okay, we need your 1098. We're gonna need all your expenses, property tax, receipts, all these types of things. So that way you can start that ahead of time developing and building these good habits and systems. It makes it so much easier. Come tax time.   Emil: I don't have anything else that neither does my mustache. Good job guys. Excellent.   Tom: I actually thought of this while you were talking about it. So I love the concept of paying yourself first, right? And with paying yourself first, when you get your paycheck, it's pretty straight forward, right? You take the first 10%, 20%, whatever, and either save it or spend it. However, I like to think about this with your day. So paying yourself first, the first 10% of your day, how are you guys going to pay yourself first with the first 10% of your day? And you're not allowed to say surfing,   Emil: I'll go one level up then and just say exercising. I think exercising for me has become as equally as important for my mental wellbeing for the day as it is physical. So for me, that's how I pay myself first to start the day, right?   Tom: What are you doing for exercise?   Michael: Surfing!   Emil: I wish more surfing. Having a small child will put a dent in your surfing ability and it's summer, so the waves were a little slower. I will do. I'll either go for a run or I will do a combination of like pushups pull ups. Or I also use this thing called the seven minute workout app. It's literally a seven minute workout. I don't do long workouts. I don't like, I don't know. I used to spend more time working out, but for me, it's just a matter of like doing it almost daily to just start the day right. Whether it's seven minutes or 30 minutes.   Michael: Classic Emil fashion, he stole my answer. But that's why I went first because you're going to try to take that out. So not surfing, but I like to do kite surfing and I also work out. Do you exercise in the morning? I find that getting my blood pumping helps kind of burn off that haziness in the morning. But since the meal took that already, I really liked journaling in the morning. Just even for a few minutes, a few paragraphs, just kind of what I'm thinking about. What's going on personally in my life and what my goals are. I read that book think and grow rich. And that reaffirm that journaling is a super powerful tool. I've always known it, but again, it's one of those bad habits that it's hard to break into if you're not used to doing it. So starting slow and just trying to get my thoughts out on paper outside of myself, I find it to be helpful and worthwhile. What about you Tom?   Tom: So the first 10% of my day has gotten a lot earlier with a small child. So, you know, it's, it's now like the, you know, late five's early 6:00 AM is the first 10% of my day, but excellent partnership with my wife helping out. Well, she has the lion's share for sure, but on the extra early days, all right. I'm digressing. Okay. Going on a walk. So, I mean, I guess this is exercise. Sure. Why not? So getting the baby early morning, throwing him in a little jogger or the stroller walking around the street in the morning when like everything's still quiet and the sun's just creeping up over the Hills and the fog is kind of lifting journal in my head. I dunno. So like walking around in the early morning when nothing else is going on, I know that's a fine first 10% of the day way to pay yourself first.   Michael: As the only person without a baby, just a PSA, you know, you probably shouldn't throw babies into or at anything whether it be a jogger or cribs.   Tom: Oh, they're, they're pretty durable, but yeah, for sure,   Emil: They are very durable.   Pierre: Antifragile.   Emil: Antifragile.   Tom: Antifragile! Yes, they get stronger with it. Yeah. How about yourself Pierre? Your first 10% of the day?   Pierre: I like to save my working out for the end of the day so I can have a break between my work day and the evening. So the morning is a good time for me to read.   Emil: I used to read a lot in the morning, baby killed that.   Tom: Got anything good? Any good books going?   Pierre: I'm a little bit behind with the book club, but I'm reading the book that Michael chose for the RSA book club, Never Split the Difference.   Emil: Great book.   Pierre: And this morning I read the ebook that email sent me and the article on how to write better titles for the podcast.   Emil: Got to keep the audience clicking.   Michael: Yeah, that's great. Speaking of our audience, if anybody has any thoughts, suggestions, insights, hot topics they want to hear about. Please feel free to let us know at eshour@roofstock.com, malbaum@roofstoo.com, or tom@roofstock.com.   Emil: Or hit us up on Twitter. I'm @emilshour, Michael you're @albaummichael. and Tom you are.   Tom: I am not positive… I'm @tscnheido   Michael: Freaky deaky Tom   Tom: Yea, created like whatever, 15 years ago, something like that.   Emil: I like it.   Michael: Skater dude, 27 with an eight.   Tom: Exactly. Awesome guys. Well, thank you so much for listening today. To our episode, we hope that you got some value out of it. If you liked it, please don't be shy. Please rate us. Please subscribe as a meal set. And like Michael and Emil said, reach out to us. We love to hear your feedback on future content to do and to keep driving. So, alright, happy investing.   Emil: Happy, investing.   Michael: Happy investing.    

My guest today is Michael J. Metts. Michael designs digital products and services, with a focus on the impact of writing on the user's experience. He and co-author Andy Welfle have written a new book on this subject. In this conversation, Michael and I discuss the relationship between writing and design, and how being more aware of how we use language can make us more effective. Listen to the full conversation https://theinformeddotlife.files.wordpress.com/2019/12/the-informed-life-episode-24-michael-j-metts.mp3   Show notes Michael J. Metts on Twitter Michael J. Metts on LinkedIn Michael J. Metts on Instagram Michael's blog Writing is Designing: Words and the User Experience, by Michael J. Metts & Andy Welfle Card sorting Tree testing The Informed Life Episode 11: Lisa Welchman on Governance Microsoft Word GOV.UK highlighter method IA Writer Ulysses Markdown Slack Microsoft Teams Read the full transcript Jorge: So, Michael, welcome to the show. Michael: Thanks, it's great to be here. Jorge: Well, it's great to have you. For folks who don't know you, why don't you tell us about yourself. Michael: Well, I have spent the better part of my career now designing digital experiences of different kinds. I initially began in that field as a writer, in terms of what people called me, my title and that kind of thing. And now I have titles like designer, but there's been a lot of crossover between those two worlds throughout my career. Jorge: So, you and your coauthor Andy Welfle have written a book called Writing is Designing, which addresses this subject. How do design and writing relate to each other? Michael: Yeah, I think It's hard for a lot of people to make that connection because you run into a lot of people who tend to be wired one way or the other or feel like they're more capable in one area than the other. But really, if you think about any sort of experience that you interact with, like a mobile app, that's the one we use as an example right in the beginning of the book. Your mobile app, if you open it up and you start tapping through it, you start looking at it, you start to see words everywhere. You're interacting with language just as much as you're interacting with visual elements like menu items and buttons and all those other things. So, our thesis really is just that you should treat those words as part of the design and that you should apply design techniques and practices to those words and how you get there, and not treat them as something that's inconsequential or after the fact. So, we've done that in our own careers, and we've seen how vital it is to building a good experience, and we just want to share that with others. Jorge: I think that the word design for a lot of folks evokes visual artifacts like drawings and sketches and stuff like that. And when you say that you apply design techniques, can you tell us a bit more about what that looks like? Michael: Yeah. So, design, it took me a while in my own career to make that shift from thinking of design as something that was inherently visual. I think the first type of design people interact with usually is graphic design, if you've come across designs of signs and brochures and handouts and different things like that. And you can kind of tell inherently if one is designed well or if it's designed poorly. But you know, the, the thing about it is that the words that make up those artifacts are typically the same, whether it's designed well or designed poorly. So, I think that's why people tend to think of design is like the polish that comes at the end. But the way I think of design, and I think the way a lot of my field thinks about design, is that you design the experience someone has with a thing. And when you frame it that way, then you begin to think of it more broadly, and you begin to think of all the things that impact it. So, it's not just words, it's not just visuals, it's maybe even the business policies that affect how that thing works, or maybe it's the number of steps involved. All those things are critical pieces of the design that you can't even see as the person using it. So that's why, when I talk about design techniques when I'm talking about is thinking of prototyping the language you use and testing it with people to see how they respond. So, a prototype of language can just be some written sentences on a piece of paper that you go and ask people about, you ask them to read through it and ask how they perceive it. Those are all valid ways to design the language we're using rather than just writing it and going forward with it without really thinking about the impact it has or actually getting information about the impact it has on the people who interact with Jorge: You talked about an example of a mobile app and the words that you see in the screen, and that is one way of encountering language. You also have just talked about a sentence, and that strikes me as a very different way of encountering language. The former is within the realm of what I understand of as information architecture, right? Like this notion that you create these structures of language that allow you to understand and move about an information environment. Are you more of a writer of sentences or a writer of user interfaces?  Michael: Even in interfaces, there's always a tension between what the experience is trying to do and how people feel about the language you're working in, whether it's English or any other language. Maybe you feel like those error messages should be sentences, right? And maybe you're applying all the same thoughts that you would when coming up with a sentence for an essay or something to the way you write that error message. But the important thing is that you unpack it and think about why you're thinking that way. Think about what's appropriate for that particular use case and be intentional. Like that's what I mean by designing with words. So, a sentence could be part of that information architecture you're describing, and there's nothing wrong with that, but the important thing is unpacking why and being clear about it. This is something Andy and I do for a living every day, and then we wrote a book about it, which was a very different way of writing and a very different way of expressing our ideas than the type of writing we'd done for these digital products. And so I think we saw a lot of things creep in to our writing that we didn't see every day in our work. So, in trying to string all these sentences together into a book, that was a really interesting exercise and it was very, very different. So, the writing definitely is different. You know, you're writing in a digital product, you're writing to help someone move through a situation, your writing started to be invisible. You're not trying to draw attention to yourself, to talk about the merit of your ideas. I mean, those things. So that to me is where the line is, you know, it's more about your intention and about what you're trying to do with it. Jorge: When you used the mobile app image, the image that it evoked in my mind had to do with things like heading labels and navigation links. But you talked about the error messages. Error messages to me are more prose-like in that you have to give the user a little bit more context of what's going on. Whereas with things like labels, you're peppering words around the thing. You have a little bit less of that kind of sentence structure to play with. And I'm wondering if there's a difference in writing for the one versus the other. Michael: That's interesting. I think people who have jobs like mine are asked to drift in and out of those spaces without thinking about the boundaries. Because it's interesting that, in your mind, there's a very clear boundary between the two, but one of the challenges as someone who writes for a digital product, you have to figure out how to make it seem like there isn't, you have to make it feel like this is a cohesive experience where all this language works together and fits together. So, obviously there are big differences. Like you may have fewer iterations of that structural stuff, like if you think of the items in a navigation, you may do testing — you know, there are really specific testing techniques in the world of information architecture, like cards sorts or tree testing to help you figure out what those things should be. And you're not really trying to mess with them a whole lot after that or iterate on them a whole lot, unless you have reason to believe that they're not working that well, or unless there are changes in the organization. So those are like really big structural things. The rest of the language though, it really has to fit into everything else the user's experiencing. So, examples of the types of writing, you have the error message, you have the push notification, you have onboarding messages, you have a little tips and helpful hints that pop up throughout the experience. That's very specific to the mobile app experience. So then if you have something like a voice experience or a chat bot, then you have dialogue that has to accomplish all those things just as text, as language. So, there are definitely different ways to think about it, different techniques you use when you're working with those things. But they do all have to work together. And that to me is the exciting thing about seeing it come together and practicing this type of work, is that you can start to build a whole ecosystem of language within whenever you're working on. Jorge: How is that ecosystem of language managed? Michael: I think it's different for everyone, you know, every organization. There's a really encouraging trend in design systems recently. I think design systems originally began as pattern libraries where people would put like their front-end code in a place where it was manageable. And then it became a place where you could talk about design standards and visual specs and things like that. And now the latest trend, which is really cool, is that you're describing patterns that are more structural. So, things like the language we use and how we write for certain situations and how you keep it consistent and how you may have a clear voice for your product that comes across. So to me, that's one of the more common ways I've seen it happen. There's also style guides many companies are using and then adapting style guides to their own means. Those tend to be more at the individual word level, word choice or an abbreviation or things like that. I think this trend of design systems is a really neat one. Jorge: Are there any tools that you've seen or used to help do that? Michael: It's an interesting thing, because in websites you have the sort of foregone conclusion is that you have a CMS, right? You have this content management system. Products usually don't, or if they do, it's nothing like their website CMS, which is designed to run an author experience. Okay. So that is interesting. I think it's a space we'll see a lot more, and I think are a few startups and companies that are experimenting with things like that. But honestly, a lot of times when I'm trying to manage content for our product, I will partner with the engineering team and we'll work directly in the code, so they might do some sort of a markup language that makes it easier for me to write and contributing. But that helps us look at like, okay, here's everything that's in the system, and maybe we could just reuse this over again in this situation, or maybe this necessitates a new variation that we haven't thought of before. So, I think it's really an emerging space, which is kind of surprising to me, but at the same time, I guess you're moving so quickly, you're not really thinking about how to control that language. It's easy enough to just put it, to use the code to manage it.  Jorge: And beyond tools, I'm also wondering what is the role in the organization who has the ultimate responsibility for managing language? Michael: That's a really interesting question. I know you had Lisa Welchman on your show a while back, and she was talking about how organizations manage the content governance and the types of things they go through. And I think it's interesting because I don't know how many organizations are thinking of governance, in terms of what shows up in a product, in terms of what shows up in an interactive experience. I feel like it's usually thought of in terms of the static web content. So, I think there's a need for that. And I think what makes it complex is that there's no clear owner and there's no clear role. You know, everyone is capable of writing. Like if you have a job working on one of these digital products, chances are you're fairly competent as a writer, or at least you think so. So, if someone asks you, ” Hey, can you write this?” You'll do your best and you'll get it out there. And all you need is a word processor. You know, you fire up Microsoft Word and get something down. And that's really different from the way design in the traditional sense is practiced now, where you have a tool that's very difficult to learn and has a lot of quirks to it, and you've invested a lot of time in learning that tool, and you can use that tool as a governance mechanism in itself. You can say, “Well, I'm the one who uses the tool. So, I decided the designs.” And I think that's why designers of words have a harder time. In a sense because they're going to have to rely on building relationships and building trust and making a case for why we should use this particular language because it feels so accessible and malleable by just about anyone. If you're a designer with words, you don't have a tool to fall back on and say, “Yeah, this is my complex thing that only I understand that only I can use.” Jorge: So, I'm wondering how you… Like, I would like to hear an example of how you go about designing with words. Like what are the tools that you're using? What is the process? How do you put it in front of people? How do you test it? Michael: So let's walk through an example. So going back to the example of an error message that I talked to at the beginning, if you were asked to write an error message, you could take the scenario that someone gave to you and say, “Well, here's my best effort at what that error message should be.” There's actually a story about this in the book. Someone named Lauren Lucchese, she's a design manager here in Chicago. She talks about the first time that she was asked to dive into writing some error messages for a login screen. And she was given this spreadsheet of 50 error codes and told to write something general that would work for most of the situations, if not all of them. And she started this project just trying to respond to the need that was given to her and trying to make her best effort to write the right error message. But there were a lot of different things in that spreadsheet. There were things like a code for when the user of the account, when records showed that that person was deceased, for example, or when there was a notice of fraudulent activity on their account. So, there could be all sorts of reasons that this person can't get into their account, and some of those merited some unique handling. So, while she started to just write, she realized that that wouldn't meet the needs of the users. And in fact, when some of those initial flows were tested with users, they saw that it wasn't working that well. So, what she did was she started asking questions about these different scenarios and how it would be resolved on the business side. So, for example, if there's fraudulent activity, they could give a phone number that would go directly to the fraud department, then this person could get the help they needed quickly and they wouldn't have to go through a phone tree because they already had identified the person's problem via that error code. So that's an example of how Lauren was able to identify unique needs by asking questions, by being curious. And that's applying… that's an example of applying the design mindset to this. And then when you think of testing, like the tools that you're using for this, a lot of times it's just a text editor. I use a plain text editor for my first passes when I'm designing an interface like this. We're having a conversation as a team about a new feature we want to build out, I'll offer to share my screen and start writing just in big text what we think that feature would be or what we think it will say. And getting it in front of people tends to get some really good reactions that are helpful for the team to process that. It's sort of akin to what you might get by sketching on a piece of paper what the interface might look like. Doing that same thing for the words you write, treating them not as precious, but as something to just to get out there and try to express, is a really practical way to apply design to writing. So, put three options out there that are wildly different, and see where they take you and see what conversations the team has about them. And then beyond that, I use paper a lot for testing. Testing can be pretty complex when you're dealing with a visual interface, but I find there's a lot of value in abstracting the words from an interface and testing them on the run and seeing how people respond to them. So, you can give enough of a setup that people understand the scenario that they'd be facing and then get their reaction. So, one of the methods we talk about in the book was popularized by GOV.UK, they call it the highlighter method. They print off the content just by itself outside of any sort of screen and then they ask people to highlight in green the things that work especially well, and they highlight in red the things that don't work as well. Then they're able to ask follow-up questions about why. You know, why is that working very well? Why is that? Maybe it's confusing, you know. Maybe people didn't understand the language, maybe there was jargon involved. And so that's how you actually make a case for your design decisions using words, by getting it in front of people and getting data from your users. Otherwise, you're just going to have a lot of discussions back and forth with decision-makers and say, “Well, I think it should be this way.” And they say, “I think it should be this way.” Again, that's kind of the. beauty of what a design practice brings to writing: you can start to think about it more objectively and apply some rigor to it that you wouldn't be able to if you just kept writing the way you normally do. Jorge: I can see how that is a more designerly approach to writing. I want to come back to the text editor. You said that that's a tool that you use to do this, and I'm wondering if you have a favorite text editor, and if so, why? Michael: Yeah. I've tried a lot of them. I guess it's like a hobby when you're a writer, you're just downloading text editors constantly. The one that I use as a scratch pad at work is called IA Writer, and I just like it because it gets out of the way pretty easily. You can get the type nice and big for when you're sharing your screen, and that one, it's just simple. And of course, writing the book, I used a different one: I used Ulysses for just because it was easier to organize things. And that's what I use when I'm writing on my own, just to get things down and in an organized way. So, it does nice things there. But IA writer as my favorite just scratch pad with the team, I'm sharing my screen, kind of a text editor. Jorge: Can you talk a little bit more about how you choose one versus the other? When you say scratch pad, does that imply that it's for shorter-form texts? Michael: Yeah, I mean like there's no organization, right? You're just opening individual documents, so it's easy to just open one and then they're automatically saved to a certain folder on my computer so I can just open it, open a new document, and I know it's there, saved to the cloud as soon as I open it. So that's a nice thing about it. And then there's just the simplicity. I think a big trend in those texts editors is that they're like a distraction-free environment. And that's what I look for as well. I don't want anything but the words on the screen when we're looking at it. In full screen in IA Writer, that's all you can see. It does support Markdown as well, which I'm a big fan of. I use that all the time to give hierarchy to the things that I'm working on. That's a nice thing too you can borrow from the design world because you know, there's this idea of hierarchy. How do we apply that to language as well? And that translates pretty well to Markdown. Jorge: Can you speak more, for folks who may not be familiar with Markdown? Can you tell us the elevator pitch for Markdown? Michael: Sure. Yeah. I mean, I don't know if anyone needs to be burdened with it, but… the reason I like it is because you can really easily apply some formatting without going overboard. You know? So, like, if you think of the Word document that you may have received from a coworker with all sorts of different colors and fun fonts, that's not the type of formatting I looked for. Markdown, you just put for example, a pound sign in front of a line of text, and that is your largest heading. So, if you put two pound signs, then it's one size smaller, and you can use that to break it up. In this section, you can do italics, you can do underlying, you can do bolding. But it's really minimal formatting that you can easily remove. So that's what I like about it. Jorge: When you were talking about creating variations that you would put in front of people, you used the phrase, “abstracting the words from the interface.” And I'm wondering about the relationship between this designerly way of writing and typography; the actual rendering of the letterforms and words when people encounter them. So, a resignation letter reads very differently if it's set in Times New Roman than if it's set in Comic Sans, right? Michael: Yeah. Yeah. I mean, I think that applies to like the importance of… I don't know, sometimes I worry people hear me talking about how writing is designing, and they think like, “Oh, well you don't care about the visual side of things.” That couldn't be further from the truth. I think that the best design happens when someone whose core skill is language teams up with someone who's core skill is visual design and they work together to build an experience. If you could find both those skills in one person, that's incredible as well, but that's really difficult to do. But I think that's a reason why you have to be in partnership with people. Again, like visual design is another part that dramatically affects the experience people are going to have. So, when you're abstracting from the interface, you've gotta be careful with that. You're not saying this is the final ruling on how this should be. What it does give you is, it gives users a chance to interact with the or language without being burdened by the usability issues of a form, for example. So, you can get information that you know is about the language itself. So that's what's really powerful. You don't want to use it in isolation. You don't want to over rely on a technique like that. my question is, how often do teams actually try that, right? Like how often do they actually get the message in front of people by itself so that they can understand how people in processing it?  Jorge: So, I have one final question for you, just to try to make it actionable for folks who might not be designers using writing as their day-to-day work. All of us have to communicate using language. And I was wondering if you have any tools, tips, techniques to help folks be better writers. Michael: Yeah. So, I think you could still think of writing as designing, even if you're never making it an interface. And what I mean by that is when you write something, when you write an email to a friend, take a step back before you send it. This is common and advice that, that seasoned writers will give people all the time. Take a step back, read it out loud to yourself. Think about the effect it will have on that, that person. And try to put yourself in the place of the reader as often as possible. That's, that's such a good exercise. Think about the effect that the words you have written will have on the audience. And, you can even test it too. That's another neat thing you see it happening where people will be like, they'll come up to you with something like, can you read this? Does this doesn't make sense? Apply those types of thinking to your everyday writing. And, and don't be afraid to get those other perspectives involved. I think what's beneficial about design especially, is this idea of being clear about what you want to learn. So, when you show that to someone else, don't come at it trying to answer, “Is this any good?” You know, like come at it with, “I want to see how this person perceives the way I wrote the greeting.” Or, “I want to learn more about what they think I was trying to get across here.” And make sure that you're really clear about that at every step of the way. I think it's very rare that we take a step back in our own lives and try to look at what we're trying to accomplish with the little things we write every day. Even something as simple as like an instant message to someone on Slack. I see frequently people complaining on Twitter about coworkers who just say, “Hi!” on Slack or Teams or whatever, and then wait 10 minutes for the person to respond before saying whatever they needed. So, there's this emerging idea of having some IM etiquette and saying what you want along with your greeting so that you're not wasting people's time and aren't breaking their concentration, all those things. So, you can do that just by being intentional and being thoughtful and not being so reactionary, right? Like the reason people type “Hi” and just hit send and then go away is because it's really easy. But what would happen if you started to think about the people on the other end more whenever you're writing. I think that's the, that's the direction we want to move in. Jorge: Fantastic, that is great advice. Thank you. The book is available now for preorder, right? It's Writing is Designing. Michael: Yeah. Jorge: It's available in the Rosenfeld Media website. Where can folks follow up with you other than by buying the book? Michael: Well, they could follow on Twitter, LinkedIn — I'll accept connections from people in the field. And I also have Instagram, if you're interested in photography. That's how I began this journey. I think that that side of me is a lot more fun than the writing sides. But yeah, any of those venues. I'm also trying to write a little bit more. The book got me interested in writing outside of work. So, you can follow my blog at mjmetts.com. And I write there just a lot about the methods that I use to help teams work together effectively, how I help people understand my work, and those kinds of things. Jorge: Well, great. I will include all of those in the show notes. Michael, thank you so much for being on the show. Michael: Thanks for having me. It's been great.

Are you sure your kitchen table or big-screen TV will fit? If you’re interested in renting or buying a specific property, there’s a few steps to take before actually visiting it. Watch a virtual tour video and get pre-qualified. Today, I am talking with Michael Sanz of Neesh Property, which started in 2009 and has more than 650 doors. We discuss the benefits of automating property showings, including the opportunity to spend more time with people and to travel. Who wouldn’t want to operate a property management business from beaches around the world? You’ll Learn... [02:25] Purpose of Neesh Property: Holistic real estate that helps people buy, sell, rent, and arrange financing. [03:20] Same Startup Suffering: Michael struggled to start a business, grow new doors, and retain customers. [03:37] Identify and Prevent Problems: Michael controls and protects his business and simplifies his life through systemization and automation. [05:45] Workforce Reduction: Michael went from 18 to 1½ staff members and replaced them with property management software to save money. [07:58] Eliminate Office Space: Doesn’t affect how you do business. [09:43] Competitive Advantage: Neesh Property closes deals and acquires new business by leasing properties quickly. [10:30] Retain Relationships: Be client-focused, not location-focused when managing properties. [12:40] Learn from Mistakes: Try and implement new things, which may or may not work completely; pivot when necessary. [14:29] What’s the problem? Any problem, big or small, should be documented and automated to disappear. [16:10] Build Knowledge Base: Take time to make “how-to, what to do...” videos, recordings, and other visuals to help people understand processes/procedures. [21:05] Leverage People as Process: Create core team of people who are thinkers and decision-makers. [27:38] Virtual Tour Stats: Neesh Property gets over 85% of its real estate booked based on the virtual platform and averages 1.8 showings per property. [31:05] Good Tenants Gone Bad: Rather than giving best to the bad, give it to the best of everyone; mesh type of tenant to property. [50:55] Common Beginner Pitfall: You don’t need to be cheaper than everybody else to get started and compete; change your value proposition. Tweetables Save Money: Replace staff members with property management software. Be client-focused, not location-focused. Meaningful Connections/Conversations: The rest just falls into place; it’s all systems. Automation offers the opportunity to simplify your life and spend more time with people. Resources Neesh Property Michael Sanz on Facebook Ricoh 360 Camera Matterport: 3D Camera and Virtual Tour Platform Vieweet Skype Zoom Housecraft GatherKudos Oculus Rift DoorGrowClub Facebook Group DoorGrowLive Transcript Jason: Welcome, DoorGrow hackers to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow hacker. DoorGrow hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it, you think they’re crazy for not, because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income. At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let’s get into the show. I am welcoming all the way from across the pond or even further maybe, Michael Sanz of Neesh Property Management. Michael, welcome to the show. Michael: Thank you very much for having me. Jason: I’m excited to have you. You’re a really cool guy. I got to connect with you in the past in person, which was great to meet you in person, and you’ve done some really cool things. But before we get into some of that, and today’s topic for those listening, is automating property showings. We’re going to be talking about that. But before we get into that, why don’t you give people a little bit of background on you and let everyone know why I think you’re so awesome. Michael: Thanks for the introduction and thanks for having me at the conference in Missouri last year. It was amazing. Perfect. As Jason said, I’m Michael Sanz. I am from Australia, from Melbourne, and I have a company called Neesh Property Residential that has been going since 2009, has over 650 doors. I started how everybody else started out in real estate and started from zero, or how much people started, started from zero doors. I had a new relationship started at the time. Add the pressure and the stress of a new relationship coming into a new business, setting all that up. I started from the study nook in an apartment that I had. I had left a previous business. It was quite a successful business. Left the partnership at the time and I started Neesh Property. What was Neesh Property to me? It was a holistic real estate that help people buy property, sell property, rent property, and arrange the finance. It’s holistic all under one roof. I had suffered the same problems everybody else has suffered from starting a business, trying to grow new doors, I guess retain business when people sell their properties or go to other agencies. I spent a lot of time methodically going through all the pros and cons of a property management business and I really started to systemize it, automate it, and not let the business control me from an early point, but how I could control my real estate business and what protections I could put in place to make sure that I could do some hyper growth, retain the customers that I had, and simplify life. A lot of people that know me would have say that I will operate Neesh Property from many beaches around the world. I would close down the company every Christmas time for two months. In real estate, people say, “That’s unheard of. What about maintenance? What about all the problems?” But I identified all these problems and I’ve been out of able to do a lot of travel, and I’ve spend a lot of family time while automating the business. Jason, as you’re talking about today, automating how I show properties and really break down that process meant that I could be in Missouri and show people property before I went on stage, after I went on stage, and successfully lease property without really having to do anything at all. Jason: This is wild. I think everybody listening goes, “Michael’s some sort of crazy, weird robot. This is some magical impossible thing. Nobody else can do this.” You’re maybe some sort of savant or guru. But you started your business and from the beginning had this intention of systemizing things and keeping things off your plate to keep that space, and some people, their intentions and focus is very different. They build a business that’s very difficult to manage and to run. Paint a picture. You’ve got 650 doors right now, I think you’ve said, right? Michael: I just sold a bulk of that and I’ve got Neesh Property. I’ve automated even more with a new portfolio, but that’s for a whole other conversation. Jason: Help people understand your business logistically. How many team members do you have? I think this is where it really showcases how different your business is than most companies that are at a similar size. Michael: Sure. At a point with the business, we had about 18 staff members. We had acquired another smaller business, and we acquired their team, and we had an office. A lot of which goes against the grain having office to me. But when I acquired another business, I took the office and it had a receptionist, it had a business development person, it had an account, they had all these people there. I couldn’t see, with total respect to their role, I couldn’t see the purpose of it, so I knocked them down from 18 down to 1½ staff members. One full-time property manager and one part-time who did routines and edit some showings as required. Jason: Wait. So, you went from 18, bring on another company, and then you whittled that down to 1½ team members. Michael: Yeah, correct. I couldn’t see the massive need to have all these people doing accounts when a lot of the property management software already did all the reconciliation. I was just having a bum on a seat to press a button to reconcile. I couldn’t see the purpose of having a receptionist when there are people there who could answer the phone, so we put in a good IVR, a good voicemail system, and we educated. We identified that a lot of the calls that were coming in were from tenants either trying to report maintenance or [...] it was. Then we put in automated responses there, too, and if there’s any business call, “Press one if you’re a landlord, press two if it’s new business,” and then it would come through to my cell where I could answer and respond to it quite fast. Identifying the flow of calls, the type of calls that are coming through the office meant I no longer had to have a receptionist there. In Australia, the wages are quite high. We’d be paying someone $50,000–$60,000 to sit at a front desk, to greet people if they came in. We have also identified that as property change, people will less and less likely to come to an office. Tenants wouldn’t necessarily walk into the office and let’s say they did walk into the office, we would be there to greet them but no one was really walking in. Owners rarely walk into an office anymore because they could call you, they could video call you. We ended up getting rid of the office. We have spent from a big 250 square meter office place to a two-bedroom apartment, and guess what? It didn’t affect how we did business, didn’t affect us picking up new business, didn’t affect us losing any business, and the world still spins. It’s not chaos. For us identifying all these headaches we’re able to see what mattered. If the team couldn’t adapt to technology changes, video, virtual reality, automated IVR systems, and things like that, then there wasn’t really a place in the business for them, respectfully. I actually have one property manager leave to go with a company where they still did paper condition reports because that’s how she wanted to do them. Jason: Right. You’re welcome to it. That’s so funny. Okay, so this will make a lot of sense and I think you and I have both significant, nerdy, technological side to us. This stuff sounds obvious to me and maybe obvious to you, some people listening maybe not so obvious. If they have all these questions, “How would I do this? I would I do that?” It’s scary. But if you make that your intention and your goal, you’ll figure it out just like you figured out whatever you’re doing now. One of your big competitive advantages now in closing deals and in acquiring new business is your ability to lease properties so rapidly. Paint this picture of how rapidly and how different your leasing process is, just to prime the pump here. Michael: To put it into another perspective—I know we touched on it previously—we were full suburbs. We manage properties in over 84 suburbs and we also have properties in two other states, which was Sydney and New South Wales in WA. WA is a four-hour plane ride and Sydney is 1½-hour plane ride from us. Now, we weren’t insane, crazy totally. We only manage properties of the clients that we actually had on our book and we did that so that we could retain the relationship with them and we would appoint other local agents to help with open inspections or routine inspections, or things like that. And because I’m a frequent traveler, when I was in the area, I would pop in, say good day to the tenants, and just touch face that way, so the owners knew that they are getting full kind of service. In Victoria, it is very much managed by our office and again, we are client-focused and not location-focused, which was one of our main selling points and is quite attractive to landlords that we had. Because we also offered mortgage brokering, we really didn’t do too many sales, we were mainly property management and then we offered mortgage brokering we saw the value in that. If it was [...] other agents that could help us do the menial tasks. It wasn’t a headache for us, we didn’t stress about it, but we covered a lot of space. You can imagine when properties come up for rent. It’s cyclical because people [...] properties around at Christmas time, they go home to their families and their friends. We would have sometimes 10%–15% of the book would start to come up for rent and you can imagine the franticness of trying to get out all the inspections, deal with tenants, vacates, and all those headaches that came with it. Now, it’s probably 11 where I started [...] this. This wouldn’t be a problem with the spread of properties. As I sat down, I started writing down all the problems that I could have. Petrol, time on the road, who am I going to have, how many staff members I need to to do this if I’m going to have potential growth? How do I automate this? That was the biggest thing. How do I automate this? What if it’s Christmas time and I want to go away on holiday? What am I going to do? The selfishness in me also came out because I still wanted to live and being an owner-operator. What would you do? I identified with myself that if I made mistakes, that was okay because being a business owner, if we don’t try and implement the things we’re looking, that ain’t worth. But it doesn’t mean that it’s not going to work in its entirety. It might mean that you just need to pivot a little bit and change what you’ve been doing to give another go. I had to automate the whole thing and I started the journey. Jason: I’m hearing a process here and I think you’ve mentioned this twice now. For those listening, you may have caught on this but it sounds like you have this mental process that you go through probably constantly where you list out potential problems, and then you sit down and figure out what are the solutions, and then you have this intention throughout that whole process of, “How can I have vacations? How can I make sure that I don’t have to always be doing it?” Which is a very different mindset than most ppl have. They’re just figuring out, “How to do I keep the business running? How do I make sure that we don’t drop the ball?” And you’re like, “No. How can I,” as you put it, “take Christmas and not have to work? How can I go on holiday and not have to do this, and it would still work?” That’s a different problem to solve. As entrepreneurs, we’re great at solving problems. But if we don’t give ourselves the right problem to work on, our subconscious isn’t going to work on it, our brains are not going to work on it, we’re not going to find those solutions. We stop prematurely at something superficial and that’s a whole level of depth to go beyond just making sure things work, it’s making sure things work without you. Maybe just describe that. What do you actually do? Do you just pull out a piece of paper and you write all the problems? Michael: A big point when I had staff in the office is that if anyone reported any type of problem, big or small, it had to be written down. If an owner said, for example, “I can’t reach you on your mobile phone.” Or, “I don’t understand the statement,” just general questions. If someone doesn’t understand the statement, what we did was we recorded what the landlord income statement meant. “This is your name, this is the date and everything.” We do a video. We do a screenshare/screengrab video and in that was a link. If anyone asks anything about statement, it was there for them. It was in one of our FAQs. People could see it. All of a sudden, we didn’t get all these calls. We worked out any problem in the business. Someone turned out in our office at 7:00 in the morning and said, “Why aren’t you open?” We address those things, we have better signage on the front door, and then all of a sudden, all these problems that a business would have were just disappearing and it was automated. By using video, by using written text, by having window displays, just simple things, the business became automated. So much so that religiously we close before Christmas and we open up towards the end of January, so that everyone gets time off to spend time with their family. Jason: And everyone being your 1½ team members. Michael: When I had a lot of team members, they were loving it big time. If people want to go on holiday, they can go on holiday because the business can run. Jason: All right, so this is really cool. Basically, what you’re talking about is you built a knowledge base of frequently asked questions and leveraged video screen shares, recordings, showing them how to do things so they visually could see, hear, and understand what needed to happen. As they would go through these and have these questions, or you send them a link to this frequently asked questions or in your knowledge base, or you send them this video, they would watch this video. The magic of video is they would feel like you’re right there, walking them through it, tell them, they’d hear you, see you, they feel like you’re taking care of them, and you’re not even there. You did it one time and now, it can be used for 650 different people or however many clients ;that you have. They can go through it multiple times instead of just once because they may not remember. But they’ll remember, “Oh, there’s this thing I can go to to get it.” Michael: Correct. A lot of the agents who I would speak to is on video. I don’t have to speak to video where it takes time, I don’t have enough time. A lot of the videos early on that I did [...] showing or like a routine inspection or open for inspection. I would just have the camera on a tripod and while I was waiting for people to come, I would do a video. “I’m at this property here. Look at this one,” or, “This is a leaking tap. This is how we address it. This is what we do.” Just small videos and I just built up content. I had the tenants any problems, what to do if it’s raining. What to do if your hot water service breaks. What to do if your dog runs out to your next door neighbor. Just simple things I turned into a video so I didn’t have to answer again and again. Again, this is like I’ve touched on before when people could call up and they address the problem or an issue or concern, we try to turn that into a video so that it was answered once, solved 100 times. Jason: The trick is that if you’re going to have to answer ever, once, take note of it, then put it on your to-do list to make a video so you don’t ever have to answer that again. Michael: Yeah. I think as business owners we need to give ourselves the emotional permission today to take the time, even if takes us half an hour to do it, so we bank up future time. That task is going to take us a 30-minute phone call or whatever it is, we spend 30 minutes recording it now, and you’re going to have that conversation a hundred times, you just saved yourself 50 future hours and you could be doing other things. Jason: Absolutely. We have done the same thing with clients who go through our program. I used to coach them all directly, but shifting it into video content allowed me to make sure that I said the same thing and got the best information to each client, and it allowed them to watch it more than once. My memory is not so amazing that I could remember every single thing I’ve said to every single clients about every single topic and not miss something. But I could put it into content. If I get a bunch of questions, I can add more content. I think some people would say, “Jason,” or, “Michael, you guys are really lazy.” I think there’s brilliance in that. I wouldn’t call it laziness; I would call it, we don’t like doing stupid stuff over and over. I mean, really simply, and that’s really frustrating to have to do redundant work. But some people, they love that. They would just do the same thing everyday. They love doing that. That’s not me. I would guess that that’s not really you, either. You like being able to have freedom and not have to answer the same questions over and over and over again. Michael: That’s the definition of insanity, isn’t it? Doing the same thing over and over again, getting the same result. I can’t understand doing the same thing over and over. I guess as business owners, we also get caught up in the really small things, and those small things we think become really important but they’re not. I’ve got some VAs that do the really menial, small tasks that I don’t even have to think about. Things that our software doesn’t do that a VA would do. Get out of that mindset that you have to do these really small things because it’s not important and when we identified that owners and tenants just want to get that problem resolved. If it needs to get escalated, then yeah of course, take it on. But the small things, they don’t really care who answers, it’s fine. As long as it’s clear, their problem is solved, they can walk away happy, then they’re good. Don’t stress. Jason: So, part of this automation, you’re leveraging technology, you’re leveraging video, you’re leveraging a database or knowledge base of frequently asked questions but also, you are leveraging people as process. You’re bringing people almost in a position of almost operating software in some instances. And then you have a core team of people that actually are thinkers and decision-makers that’s really small based on what you said. Let’s get into then the topic at hand, which is automating property showing. How can those listening start to move towards automating property showings and what are the benefits you’ve seen by doing that? Let’s get them excited about the why they should do this first. Michael: As a business owner, having staff members and having multiple properties that would come out open for inspection and also understanding that tenants are really demanding, they want to see the property, they would call you up and say, “Is it open now? Is somebody there now? Can I go now?” And then having a staff member get in the car, drive half an hour listening to music, speaking to their family and friends, doing whatever they want to do in the car, get to the property, wait for the tenant to turn up, show them the property, have them say, “Oh, yeah. It’s nice. The walls really look like they did in the photos.” Whatever it is, or they love it and again they’ll buy for it. “Can you wait for my friend to turn up? My partner’s on their way.” All these headaches. They do the inspection and then they spend another half an hour driving back or getting lunch on the way, or however long it is. One time, okay, but if you replicate that, you’ve got 8, or 10, or 15 properties for rent at that time, that’s a headache for any company because of all these inefficiencies on the road. I identified, “Okay. Well, what do we do?” My wife was working for a ticketing and event company based in San Diego. She was running it from Australia, it’s the operations. We’re in San Diego one time, I had this massive 3D 360 camera. I was going through all the theaters and from every seat there would be a 360 [...] so that people, when they go to buy a ticket, they could see their exact view of how they’re going to see the stage. I was like, “Hang on. Why can’t I do this in real estate? What’s stopping me from doing [...]? This is so simple.” The camera was huge. It was massive at the time. Even three months later, I couldn’t find an actual camera to do it. What I was doing was going to the room and taking 100 shots everywhere and then stitching it together. For one image it was taking way too long. At Christmas time, I was in London, closed the business down, before virtual reality [...]. It can be done. I was walking up the high street in London and I just thought, “I need to find something simple, cheap, to get the job done, and save me more time.” I just went on the phone, I looked at my phone, and I found a local supplier that had the Ricoh 360 camera. It has just been released. I went out and picked it up, and from that point in time, everything I did for real estate, for property had a 360 video. And went then into step two, and I made sure that all the rental properties had a normal video, just with a smartphone or SLR. From that moment on, when I brought the 360 camera, I really hit all our properties hard. Before I go with 360 virtual reality and video, a lot of people that I speak to, they go out and buy the camera, they’ll do one tour which generally happens after the tenant has vacated and they’ve already had marketing for 4–6 weeks, they’ll do the tour and they’ll say, “You know what? Michael, I tried that. It’s not for me. Didn’t help me get a tenant. It was no good.” That’s the biggest feedback I had. That’s cool. That’s fine. But for me, I want to persevere. I made sure that every single property we came up for rent, had a 360 virtual tour. Also in the start, it didn’t help with every single property because I had marketed without photos for four weeks prior, and I was able to find tenants thereabouts, most often than not. With the 360 virtual tours, it was the next time that it came up for rent. A tenant would give me notice to vacate. The day they gave me notice to vacate, the virtual tour went up on all the real estate platforms that are out there. We have the video and we have our photos which are okay. They’re good, they’re okay. But from day one, people could start to see the property without me having to worry about booking an open for inspection and the condition of the property is all boxed up, or the whole family’s home or whatever excuse the tenant was, people could start to see the property. That started to change things. Just to reiterate, if you’re starting off, you have a property that’s coming up for rent, the tenant’s moving out, you can do the 360 tour afterwards. You may not get the hyper result that you’re expecting. Don’t stress. Replicate it on every single property you’ve got and you will start to see massive change from the next time it’s for rent and every time after that. Don’t stress. Give it time. People fail because they give up straight away. Jason: And then each new door that you’re getting on, you’re going to do the virtual tour at the beginning so you’ll have that moving forward. Michael: Correct. I got to the point where if a tenant gave notice to vacate, I went in there, and I do the 360 tour with all the furniture in there as it was. I didn’t put that on publicly but I was able to show people with the tenant’s permission, just give them a link, and remove the link after they see it afterwards. I wouldn’t get it publicly on the real estate platforms but I would have the tour and I would give it to people. That changed everything, too. Tenants were okay with that because you can edit the 360 images to blur out photos in the wall and things like that. That was pretty good. I also just did on the iPhone walk-through videos that I could also comment on. I would take just photos, too. We had over 85% of our real estate booked on virtual platform. Can you imagine, Jason, having 85% of your business, that people can view the property without you having to worry about putting a lot box on, be physically attending the property, and having the issue of staff or even yourself going to have to show that property multiple times? To touch on that, we were averaging at 1.8 showings per property and I’ve got to cancel one showing per property on average. Jason: No kidding. Michael: Huge time savings. If you were to quantify that and you’re breaking out 15 properties a month, let’s say, that’s like $150,000 saving in a year, of time and profit based on our letting fees. Our letting fees are small than American letting fees. It’d be significantly higher in America but for us, it’s about $150,000 just the base saving in 15 properties a month. Jason: Oh, yeah. So, the cost savings compared to the cost of getting the digital cameras and maybe the little bit of work and labor that would take to get these virtual tours done and everything, it was an obvious no brainer, financially. Michael: Obviously, yeah. For me at the start, I would have spent a couple of thousand dollars, maybe more, trying to really solve it. I have a lot of cameras now, a lot of VR, a lot of 360 cameras, and I’m still using the same one that I bought years ago which was the Ricoh. But I’m trying to find the next camera that gives me more depth immersion like the Matterport but something that fits in my pocket. So, for me to do it, if it does not fit in my pocket, I’m not going to take it with me. The Ricoh fits in the pocket. I think it’s $170 or something like that on Amazon. A tripod is $30 or $40 on Amazon. To host 22 platforms of the year is $20. The platform that I use is Vieweet It’s one of the cheapest one out there. It’s robust, it’s simple, it’s no frills. If you’re an agency, you’re just starting out, and you’re looking for cheap ways to do 360 automated showings, $130 for the camera, $30 for the tripod, $20 a year to list 20 showings that you can put up and take down. A lot of people don’t have more than 20 properties available all at once. Jason: It's called Vieweet? Michael: Yes. If you're in $200-$250 US, you can be up and running today to do these things. But just remember, you may not get that sprinkled dust straight away. It’s something where you build that new catalog that does work. Results have been quite fast because I kept at it and you will, I can’t say, you'll get the same if not similar results that I was getting because what it all sold for us—that’s just kind of the odd part of things, Jason. Our property to more people around the world in different that [...] the property. Rather than having to rely on people to come into a lock box or view the property physically, they may not have been the best quality tenant. Rather than giving the best to the bad bunch, we’re able to give it to the best of everyone. Anyone who wants to see it within the markets to high-end income, at least they could go to relocation consultants that were actually being paid by people to come into the country to show them properties. We were showing it to the people before they go to relocation agencies in the end. If they will apply, they would inquire, “Hi, Michael. I'm actually relocating from America or Europe. I'll be there next month, try to arrange a viewing.” I’ll send in the link. They view the property. They don’t need to worry about looking at 10 properties when they get here. We can do the process, we can get them out of Skype or Zoom. At the end of the day, good tenants can go bad. Make sure you get landlord insurance if you can get that. We were so efficient with what we did and that’s probably for another conversation, but we got rent arrears to 0%. Not only will we have to get the best tenants in the marketplace, we get the best tenants that could afford to pay rent and not have any arrears and it solved a massive problem for us too. We are probably at about I think 3½ of rent arrears sometimes because people, they’re just lazy. By changing the type of tenants that we had, also made all the knock on effects that we had so that our arrears is 0% vacancy because we’re able to work credibly with our leases to make sure that longer leases we had better type of tenants. We’re also able to mesh the type of tenants to the property. For example, if we have an application that was someone 50 years plus as opposed to 18-25 year olds. An 18-25 year old would be more transient and they wouldn’t stay on the property for a long period of time, maybe 12 months. But someone who’s older is typically settling down, they don’t want to be moving around everywhere. We have a bit of a tenant selection too. Jason: I realized it might be a little different in Australia than here though. Michael: Well, what we did inside the office, we can verbalize it to the people that apply. Jason: Got it. Michael: No one from Australia is watching this, yeah? No tenants that I had. Jason: Right. This all makes a lot of sense. You have 0% vacancy rate. You’re renting out some of these places before they're even vacant because you're marketing them from the second there's a notice. You're getting people out of state or out of country that are able to look at it. I think it’s brilliant that you've got partnerships you've created in alignment with relocation agencies and relocation agents. I think that's sharp. All of this sounds really fascinating and this is something that anybody can do. Michael: Anyone can do it. Even like staff members. You’ve got people who work for bosses, there's no reason why [...] to help automate your showing. If a virtual tour or a video, or someone contact you at 10:00 o’clock at night and you're this type of person that picks up the phone at 10:00 o’clock and tries to make a time, you can send them link that’ll pre-qualify them. The good thing about UVR, it shows you the room, the whole room. They can be looking at the whole kitchen. They can be looking at the whole bathroom for so many times you go online and you just see a corner of the bathroom which shows the tiles, the toilet, the shower, and the bath. It eradicates all of that, it’s gone. I think I showed you too, when we got to the actual property, the other headache was, I'm not sure if my table would fit, or the fridge might fit in the cavity so then we included an incorporated AR, so the augmented reality which was just another boat. With the AR, you can record the screen, so you can be at the property while it’s taken and actually do a video recording of, “This is where your catch goes. This is where the fridge goes, and the TV goes,” and put the furniture down. Then you can send that video to people too when they inquire about, “Will it fit a king sofa bed, or what size is the fridge cavity?” Because people are visual, mostly. Jason: How are you doing that? How are you putting in beds, virtual beds and things like this into a video? Michael: The app that I use is a free app. I love this stuff. It isn’t going to cost anyone here. Housecraft. Now that’s free augmented reality application. Jason: Housecraft, it sounds like witchcraft, it’s like magic. Housecraft, okay. Michael: It is magic. Again, I have all these tools because they're objection handlers. I don't need to over complicate things because then it just starts making problems. These are free things that anyone can be using. Anyone can do anything that I've been doing. None of it is hard. It’s just I have a better use of my time. Jason: Yeah. You’re using Housecraft, you're using Vieweet, you’ve got your Ricoh camera, are there any other technological tools that help you automate the showing thing? Michael: Basically, how it would work for us was a tenant will give notice to vacate or we would have a brand new property come on. We would have the tour or take the tour. We would put that as a link on a description. A lot of the feedback I had from people around the world was, our property software, our showing software doesn't allow us to put a hyperlink in there. We just put it in the ads, we put it in the ad there too. We had every second photo for us was, “Did you know this property is in virtual reality? Make sure you click on the link in the description.” When people are looking on their smart device, because most people are probably looking ad property searches from their mobiles, it’s important that we could grab their attention with a nice bit of photo, grab their attention saying, “Hey, we've got a virtual tour, or a video, make sure you look at it and prequalify.” Rather than coming to the property and saying it’s for them. If someone did call and inquire the questions was, “Great. Have you seen the virtual tour?” If it was no, it’s like, “Okay, here’s the virtual tour,” and they all had to see it. We would not go to a property unless the person had seen the virtual tour. Jason: Right. Virtual tour first and then if you've watched that and it's still a go, then we will show you the property. Michael: Correct. When we did that, when we went to the property, we knew that it was really just a case of them checking if there's a smell, just their general feel, their juju. It was basically they’re going to apply for the property. Typically, if I went to the property, there's a 93% chance they got the property, and it was 96% that they would apply or they’d rent the property. Jason: Because the virtual tours have filtered out so much. Michael: Prequalified. Jason: Now, in the photos where you doing stuff like box brownie and like this kind of stuff or are we just getting photos? Michael: We change it to make sure that the header photo, the main photo in this sort of style—we’d have a blue sky, green grass—it was just a nice attractive image so that people would click on that, like a clickbait basically. It'll look nice, they click on it, and then the next image was the virtual tour. They knew that there was a virtual tour there and then there are the other photos. They were the only photos that were relevant like the way you actually see the room. If you couldn’t see the room or it was cut off, we wouldn’t show it, because the virtual tour was going to show the property in its entirety. This just meant that I would not put 20 photos up of a half-baked house when I can put three photos up, a virtual tour video, and a walkthrough video—far greater impact. That’s why we’re leasing properties four times faster than our competitors, and we were getting more than double the amount of views on all our properties according to realestate.com.au which is a massive property platform in Australia. What we were doing was, no major cost difference to competitors, but we were getting twice the people looking at our property, and four times faster with being leased. Jason: Michael, this sounds really incredible. Having all these stuff in place, it sounds really low cost, and it sounds like it actually saves you a ton of time, and a ton of money to get these things implemented. Now, what I love to do is connect this to how is this helping you grow your business. Obviously, it’s reducing cost, it's reducing staff, but this sounds like a huge competitive advantage selling point when you're pitching to new owners to say, “We have zero vacancy rate. We’re managing hundreds of properties…” which is unheard of in our industry, “…and we can we can get this thing taken care of and lease it out really rapidly. I've got the cameras on me, I'm ready to go. Let’s do this.” Michael: Correct. There’s a lot of white noise and noise generally in property management. When you're going to a listing presentation, it runs based on the same topics. “We collect rent. We have low vacancy. We are fantastic. We have good systems.” You can basically walk into a presentation and know verbatim what people are going to saying. If somebody inquired about renting out a property, they will get an email from me with our reviews, true statements, and things that we do differently. When I would go to the appraisal, I wouldn't actually bring anything other than a set of virtual reality goggles. For me, I didn’t go in with a booklet. Everyone kind of expects you to walk in with a booklet and pamphlet like all your competitors do. But me, it’s straight away, “Let's work on that trust that rapport with the owner.” I would walk into the presentation, I put the virtual goggles down the table which is a gimmick, they're a gimmick, and then I put them on the table and then I say, “Mr. and Mrs. Landlord, so tell me, what do you love about your property? What are the tenants going to love about the property? What would you do differently to the property that tenants might also think that they wouldn’t want changed?” I get them speaking about it. None of it is about my fees, none of it is about my service, none of it is about anything else about me, it’s just about them. Then it gets to the point where, “I can totally see why people fall in love in this property and it's so important that we show people what this property actually offers. Here are a couple of ways that we can do that.” Bear in mind, by the time they've already got to ask and called us, they've gone and seen our Google reviews. They've seen our social profile. They’ve already assessed us when they make the phone call. Jason: Sure. Michael: It’s so important that you’ve got some social proof and some history there. If you're just starting out as an agent, get reviews, get some social proof because you really are fantastic. As people, we’re fantastic, and there's so many great attributes. If you're starting fresh, you don't have to look fresh. Jason, you're helping build websites. You can make someone who's just starting out look as a major player in the marketplace. Jason: Absolutely. I tell potential clients, there's no reason why a company with zero doors or even five doors has to look any different than a company with a 1000 doors. They can have just as good a branding, just as good of a website, and we can help them with the reputation stuff. We have our service gatherkudos.com for those listening that you can check out, which helps you facilitate or lubricate I guess if you will, that process of getting more reviews from clients. Michael: There's no reason why you can’t. “I don’t have clients to get reviews.” “I'm sure you've done business with people before and they can leave you reviews.” That’s all you need, just that momentum. From the time that we’re meeting with them, they know a little bit about us. I'm not concerned about any other services because they all know that we collect rent, and we find tenants, and we manage maintenance, and we do all that stuff. It's going to the owners that we will love their property, and really focus on the things that they love also, and identify the weaknesses of the property too because it’s important for us at the start the owners to acknowledge their property may have some shortcomings. They wouldn’t have to have that awkward conversation later. The prospective tenants said that, “I like the pink wall in the kitchen.” We get the owners to draw out what they think is needed in the start, and then it sets the time. Then I bring out the virtual goggles, and I say, “This is one way that people are really going to immerse themselves in your property from their own lounge room. We also had virtual goggles and Oculus Rift in our office, so when people came in and they want to get a rental list, we stop giving out paper and we would say, “What are you after? A three-bedroom, two-bedroom?” And give them the goggles, and show them a property. We have far greater success than coming in, picking up some paper in the office, leaving, throwing it in the bin later on for one property they might be interested in. We cut down on paper too, Jason. That was a pretty good experience. We went paperless. For new owners, they could say that we were focused on serving the customer, rather than they burdened with admin and just a slow death in a real estate office. We could show them some of the other tours we've done. We were doing drone work too Jason, where we would showcase the aerial view of the property in proximity to shops because that was another question that people would say, “Probably looks great, but what's it near?” In Australia, with Google maps, sometimes, they hadn't caught up, so the area would look like just massive farmland, but actually, they’ve built up a state with shopping malls, and freeways going through it. We take aerial shot, and show it from what it was near. With owners, I think, I was at 140 doors and 141 appraisals. Jason: You show up for these initial contacts at the property, or these appraisals, or whatever you're doing, and you would pull out virtual reality goggles, and set your camera there, and start describing what you do. Michael: Correct. Now, fast forward a few more years, we didn’t have to go to the property anymore, because I had the virtual tours online, and people can see them, and it would tie on my websites, so people could see that too, and they got to the point where people would make an inquiry, and I will send them a video message. They're already seeing all the proof statements, and a video message to start the initial conversation. I didn't have to meet all these owners, I try to meet all the owners. Sometimes I make time for if they're interstate, they were overseas, whatever the reason. I found other ways to get inside the living room without being in their living room. You have the virtual tours, and then you get the video text messages, and a lot of people will say, “I’m too scared to do a video text message. What if I say the wrong thing?” I say, “It's easy, don’t send it. Just do it again.” Jason: Right, re-record it. Michael: If you're doing a video, you can edit it. If it’s not live, edit. If it’s live, I’d say laugh. So what? Make a mistake, we’re human. I will make the same mistake speaking with you, as I would do on a video. Recapping on it, our process was, every property had to have a virtual tour. When I had the staff, they weren't happy going out and taking a virtual tour, because it would take them between 15 minutes to 30 minutes, maybe depending on how many rooms there were. It's a very fast process to take photos and then you just copy them on to the Vieweet platform, and you put the hyperlinks, the hotspots, and the tour is done. The tour might take you 45 minutes to do. For me, that's no problem at all, if it’s a big one. If it’s small one bedroom place, might take you five minutes to stitch it together. It just depends. The more you do it, the faster you become. Every property had the virtual tour, had the video, had some updated photos. It just meant that as a tenant, trying to select for the property, all the problems were answered. As an owner, we're now looking at other agents online who’s going to rent out their property, they can take the methodical process of photo, virtual tour, application form. That’s very simple process. We then are going to back it up with proof statements, like the rent is zero vacancy. All those other things that were important, because if you guys are doing an appraisal and start just reeling off everything you do, you're the same as everyone else, but if you can show proof statements, then it's 97% there. Jason: Love it. You can easily send a video introducing yourself, and you can send them link to a page of video testimonials from clients. If you can give them all the social proof, and you say, “Look at how we market the properties.” Send them the link to your rental listings. “Here's an example. Here's a property similar to yours maybe.” Suddenly, they can imagine all of it, they can see it, and it becomes real to them. This becomes this huge competitive advantage in this huge differentiator between you, and other property management companies, and then it's allowing you to close more deals. I would imagine it facilitates word-of-mouth, because people are going to talk about you because they're probably impressed. I would be impressive if somebody showed up with goggles, and camera, and show me tours, and sent me a video text message. I'd be like, “These guys are on top of things, and they're tech savvy, and they're going to take care of me out of the gate.” Michael: I guess one of the great things is, I won't mention the exact pricing, but we were full fee. We weren’t competing with, “But that agent is offering a cheaper fee,” anymore. We’re full fee, we’re doing full leasing fee for management estate. In Australia, we can't charge as many fees as you can in America. I wish we could, but we were full fees. I was maximizing every potential fee that I could, so routine inspection fees, higher statement fees. We were full fees, we don’t have to compete with someone. I remember when I started, Jason, and I’m trying to get traction, I sent out a thousand flyers to people and offered a low management fee to people for three months. I got one person out of the thousand that I sent out, that was great, because there were multiple referring client. But starting out, thinking that I have to charge something low, so that I can get in front of more people was one of the biggest crazy thoughts that I had at the very start. Jason: It's one of the most common beginner pitfalls is, “I need to be cheaper than everybody else to get started and to compete.” Michael: Yeah. If I just realized back over 10 years ago that my value proposition had to change. Jason: Yeah. Michael: “Not with my fees but with my value proposition. How do I not complicate it? Now, I no longer have any other office. I work from a home office. I've restructured because I don’t want to have physical staff. I've got VAs that do all the menial tasks. All the properties that we have are on the virtual platform. I've got no properties arranged at the moment. No rent arrears. Last year, I was abroad seven months of the year. I was in Turkey for two months, Indonesia for two months, in and out of America, or like interstate. I traveled a lot. This year, maybe four months of the year. If I get a new business, I will have someone go and do the virtual tool for me. I’ll train a simple person who doesn't want to do anything else if I'm not around. I enjoy going to the properties and checking them out. I'm a bit of a property nerd, I like checking them out, seeing how we can add value and connecting. The most important thing for me as an agency was to make sure that we have meaningful conversations, getting rid of all the clutter and all the noise. Instead, we will focus on the good happy goals, the meaningful connections, making sure that we can add value to our customers and our clients. That was our end result, to have that meaningful connection. The rest just all falls into place, it’s all systems. Jason: You didn't go into it thinking, “I just want to automate everything to the nines.” Your core end goal was, “We want to have meaningful connections,” and then, “I want to have freedom as I'm doing this,” to just focus on that. Michael: Yeah. Automating it just allows the opportunity to spend more time with people. Jason: I love it. Michael: It wasn't to make it so easy that I could travel a lot. It just meant that I need to get better connections. I pick up properties from going overseas. So many Americans travel. I've been in Europe and picked up a new management system [...] abroad. It gives me that flexibility. Also, you get to actually get new systems. People do things differently, so go out and see how other people are doing things to make their businesses better and how can you implement it in your business. It’s so important. Jason: Yeah. I think I heard a quote the other day that was, “Travel is the language of peace.” The amount of tolerance, and learning, and growth that happens just from being in different environments and different cultures, I remember taking a trip to Israel and it just was so different than what I was used to in the US. Even the checkpoints where kids were holding machine guns. It was just all so different and it was just really eye opening. I've been in Mexico, very different. You’ve been exposed to so many different cultures. You get to really fill your soul with having this variety in life. I think that's part of why a lot of people are in property management. They love that unique variety. There's all these different unique challenges that come with it. There’s all these unique opportunities to meet unique people. You really got to focus on the even best and highest portions of that by being able to treat that freedom. Michael: Don't be scared of doing anything. Don’t be scared of making mistakes. Trial it. If it’s not 360 for someone, if it’s not video for someone. Go ahead and trial things and see how it can give you that freedom, but also to be able to engage with people, family, and friends. Imagine if you live in a suburb and you've got a sports club, a church, a local pub, or whatever you’ve got, all these meeting places but you never get to go there because you're so busy trying to do the admin. You're a local real estate agent and you're not even able to local. Flip that upside down. Imagine if you're a local real estate agent doing local things because you have all these other things automated and being done for you while you're networking, and meeting, and engaging with people in your area. Imagine for a second how different that looks. Jason: Yeah, I love it. I think, Michael, everybody listening has probably by now hopefully felt a little bit inspired that there's this possibility that you've painted for them that is probably for a lot of property manager still outside the current world view. I think that's exciting. I appreciate you coming on the show. How can people get in touch with you and what sort of take away would you want to leave them with? Michael: Well, if you’ve got any questions about anything we've spoken about today, just hit me up on Facebook and send me a message and I'll respond that way. It’s probably the easiest way rather than giving you a cell number or an email, just go to Facebook, we can connect there. I'm on messenger, it’s the simplest way. Again, I guess the constant message that we've been discussing today is try it; don’t give up, try new things that may automate your business and give you more time tomorrow even though you’re spending more time today to get it done. Jason: Perfect. This is an episode I will hope that people will listen to more than once. Michael, I appreciate you coming on the show. Michael: You're welcome. Jason: I think you gave a lot of value. I'm grateful to you. Thanks for being here and sharing so many ideas. Michael: Thank you. Jason: Alright, cool. That was really fun for me as a nerd to have Michael on. Message him through Facebook. If you are a property management entrepreneur that wants to add doors and make a difference, as I said in the intro, then you should be a part of our community. You would love it in there. Make sure you join the DoorGrow Club. You can get into that by going to doorgrowclub.com. Our Facebook group, there's really cool people in there like Michael, and there's just some phenomenal helpful property managers. People that buy into this vision that good property management can change the world. That what the industry needs here, especially in the US is collaboration over competition. These are people that are willing to collaborate, willing to help, willing to support you. Make sure you get inside the DoorGrow Club Facebook group and check it out. If you join that group, if you apply and join that group, it's free, but you have to apply. We will give you some free gifts including a fee bible and some other really cool takeaways and gifts over the next few days after we welcome you to the group, just to welcome you aboard, part of our Facebook group. Check that out at doorgrowclub.com. Until next time everybody, to our mutual growth. Bye everybody.  

We discuss the idea of being a black executive in Corporate America with Frost Bank President Michael Williams.Michael Williams' LinkedInHelp Beat Triple Negative DCIS Breast CancerTRANSCRIPTZach: It was a dream job, the type of assignment that could make or break the career of an ambitious executive with an eye towards the top. "It was my first big promotion," says Bernard J. Tyson, the 57-year-old CEO of Kaiser Permanente, a health care company with nearly $60 billion in annual revenue. The year was 1992, and Tyson, then in his early thirties, had been named administrator of one of Kaiser's newest hospitals in Santa Rosa, California. "Everyone knew this was the hospital to lead," he says. His physician partner, an elderly white gentleman named Dr. Richard Stein, was less excited by the news. "It was one of those "Guess who's coming to dinner?" sort of welcomes," Tyson recalls, and it went downhill from there. The two men were constantly at odds, unable to collaborate, with most conversations ending in angry standoffs. "He would say something, and I would react," says Tyson. "It was the most difficult relationship I have ever had." Failure seemed inevitable. One day, Stein invited Tyson for a walk. "He said, "I have to confess something to you, something that may end our relationship,"" Tyson recalls. "I have never worked with a black man like this." He meant as a peer. Stein, it seems, didn't know what to say, to act, what to expect. Tyson saw it for the opening it was. "It was this moment I realized the majority of the population doesn't have any sort of mental road map for how to relate to and work with someone different from themselves." This is an excerpt from Why Race and Culture Matter in the C-Suite, an article written by Ellen McGirt, for Fortune Magazine, and I believe it highlights the reality many people of color in leadership face every day. Being in spaces where few of us are present is challenging enough, but compounding that with the task of leading teams, as in telling them what to do? How does one succeed in that environment? Further, what does success even look like? This is Zach, and you're listening to Living Corporate.Zach: So today we're talking about what it means to be a leader of people while also being a person of color in Corporate America.Ade: Yeah. So to be honest, I usually get so focused on making sure that I'm good in my career and navigating all the nonsense involved with making sure that my individual contributions are recognized. I usually don't even think about what it means to lead a team full of people who don't look, think, or behave like I do.Zach: I know, right? And to your point, all of those things you just mentioned, they're critical and of course very important and really don't change as you become a leader, but it's interesting because when you look at that article that I read by Ellen McGirt, it highlights Bernard Tyson's experience about white men having to engage him as a equal. So I'm a manager, so I'm not an executive. I'm not a CEO. Nothing fancy like that. I'm the manager, but even as my managerial experience, I can say that beyond leading a team, being in a position where folks who would typically have to--or typically would overlook me actually have to submit to listening to my ideas and my proposals and my direction. It's been a really interesting experience. Ade: Hm. So I hear you, I get your point, but do you perhaps have any examples for us?Zach: For sure. So a few years ago I was working on a project where I was dealing with a manager, and I was telling them what the approach should be for a specific task. I was walking them through the methodology and just the reason and rationale behind why we were gonna make this approach, and as I'm talking to him his face starts just turning bright red. Ade: What? [laughs]Zach: Yeah. [laughs] Like, it's like he ate, like, a habanero pepper or a ghost pepper, and he's trying to hold it in that it's not spicy. Like, he doesn't want anyone to know it's spicy, right? So he's just sitting in there, and his head is shaking, and he's got a little vein bulging out the side of his head. I'm like--Ade: What in the world?Zach: I know! And so I'm talking to him, and I'm just kind of--I'm just having my normal--I'm not talking at him, right? I'm just talking to him. I'm having a normal exchange, and I'm trying to, like, keep up the same casual cadence of my talk while seeing him clearly, clearly be uncomfortable.Ade: Huh. So I'm just curious. Like, was there anyone else in the room who saw this? Who, like, witnessed what was going on and pointing it out?Zach: Yeah. So I was in the room, then my manager was in the room, and he was in the room of course. So they saw this the whole time, and it wasn't like a one-time occurrence, right? So for those folks listening like, "Well, maybe it was just a one-time thing. Maybe he had a hard day." He had multiple hard days, okay? Ade: [laughs] It be like that sometimes.Zach: [laughs] Right? It happened so many times. It happened, like, literally every time we spoke. We spoke once a week for, like, two months, two or three months, and I'm like, "This happens every single time." So now--even when I spoke to my manager about it, I'm like, "Hey, are you noticing this?" Like, "Do you see what's happening here?" You know, she was even reluctant to admit and acknowledge, like, "Oh, I do notice this," and so why she was so uncomfortable talking about the situation and why she was even more reticent to talk to other people about the situation, including, like, our project manager, is for another podcast, but needless to say it was pretty weird.Ade: Okay. Well, I know that you've had experiences as a manager. I personally have not. I am, like we've said multiple times, at the beginning of my career, but wouldn't it be great if we had someone on the show who had about 20 years of experience as an executive within the finance industry, which--Zach: 20 years?Ade: 20. I would argue that the finance industry is one of the most politically-charged spaces, but you didn't hear that from me. So I'm not sure. I feel like it would be good if we had someone who has had to climb multiple ladders, maybe build coalitions of support, maybe who has had active participation as a leader in his community and has acted as a mentor to other people of color.Zach: Hm. You mean like--wait a minute, let me check my notes--you mean like our guest Michael Williams?Ade and Zach: Whaaaat?Zach: [imitating air horns]Ade: Never gonna get tired of that. [laughs] All right, so next we're going to get into our interview with our guest Michael Williams. Hope you guys enjoy.Zach: And we're back. And as Ade said, we have Michael Williams on the show. Michael, thank you for joining us. Welcome to the pod, man.Michael: Man, thank you so much for inviting me.Zach: Absolutely. So for those of us who don't know you, would you mind sharing a little bit about your background?Michael: Sure, sure. I guess--where to start? I'm originally from Dallas, but I moved here and attended Texas Southern University and the University of Houston. Met my wife, who is an only child, and guess what? I was gonna stay a Houstonian. So after school--I had always wanted to be in banking, so I started down that line of pursuing a career in banking, and I have not looked back since. I guess it's been going on 27 years. 26, 27 years. Somewhere in there. I need to do the math. It's in there.Zach: [laughing] That's awesome. So when did you first start leading and managing teams in Corporate America?Michael: So I've been leading a team of corporate bankers for about eight years now, and I actually--for the bank I'm currently employed, I actually am what's called a market president. I run the entire [Southwood?] side for the bank. So I have a team of 13 commercial lenders that work directly for me, and the way we're structured, while I don't do anything in the branches, I have three branches--excuse me, five branches where my people are located, but all of those individuals have a dotted line responsibility under me as well. So while I in effect manage 13 directly, I have actually management I guess authority for somewhere over about 40, 45 people.Zach: Wow, that's amazing. So, you know, this show we're talking about--we're talking about leading while black, and so can you explain a bit for the audience--and shoot, for myself as well--the difference between being a manager and being an executive? And in your career, how do you manage that shift?Michael: Sure, sure. You know, it's--one of the things I continue to do is just aspire to read. I'm an avid reader, and I've read many books on not only how to manage but also--frankly, if someone would have told me management was more about managing the people relative to how they coexist, I would've actually got--instead of getting a degree in finance, I would've gotten a degree in psychology, because really that's where the buck stops. If you can understand that you have influence as a manager, you can easily--and I don't mean just regular influence. I mean you have to understand that everything you do has the ability to set the table up for your future, and those decisions that you make, you need to be calculating because you have the ability to influence people without you even knowing it. And so when I made the switch is when I decided to get an advocate for me at a senior level that allowed that person to see me and my skill set and be able to be my advocate above my pay grade to allow people to say, "Okay, this guy, he not only knows what he's doing, but he's also someone that we can actually incorporate into our senior management team."Zach: That's really interesting. Can you talk a little bit more about when you say advocate and really what you mean when you say advocate, and what were some of the things that they were able to do for you as you were able to transition into that next level of leadership?Michael: Sure. Here's the one thing we all have to--the people who--the vast majority of your audience needs to understand. As a minority--and I'm African-American, so as an African-American minority, the one thing that we don't have is direct access to the highest levels of any corporation, and in many instances, as it stands today, there are not gonna be a lot of people that look like us. And so I remember back when I was at another institution and there was one senior-level African-American gentleman there. That individual decided that it was in his own best interest not to uplift and promote and advocate for younger African-Americans. It was a sad--it was a sad sight to see. It was a very difficult experience to go through personally, but what I learned from that, I took away from that is I will never do that to anyone.Zach: Amen.Michael: Because people sitting back trying to figure out how to gain more ability--excuse me, more control and/or allow their skill set to show that they have the ability to be at the next table, and he would block them 100%.Zach: Wow.Michael: And so my career has been all about making sure that I help those coming behind me who have the requisite skill set and the requisite training. That's first and foremost. So in terms of--in terms of understanding your point, how you make that switch, the biggest thing is you need to--I said find an advocate, but you also, in my mind, have to bring people up behind you that are highly competent and qualified, and now you've got this team of people around you, and if you have that advocate, they see that and they want talent. They want talent absolutely. They just have not been used to having talent, and they certainly--in terms of African-American talent. So they don't necessarily embrace that, but what they do is they lead those people to the side to try to figure out who's on first, what's on second, and how you actually get to tell them you're on first and John is on second and Theodore is on third or whatever the case is is you have to embrace getting someone to get to know you. So in my--in my (life?) career, when I figured that out in my previous institution, I actually had the chairman of the bank--excuse me, the president of the bank here in Texas as my mentor. Today, I've got the president of the bank as my mentor. He is the #2 in the bank. We meet on a quarterly basis. I don't ask him for anything. I ask him for his time, and I want to share his--I want him to share his thoughts, and he wants to hear my thoughts about a various, just a various amount of things. It has nothing to do directly with "How do I get promoted?" "How do I do this?" It's all about just communication, because what I'm trying to do and what I have learned, if you break those walls down and are able to communicate, then that allows that person to see you as someone that they can feel comfortable with, and that really is the biggest barrier to any minority trying to break into the upper levels of executive management if it's not your company because they don't know us as a people, as a rule. All they do is listen to, unfortunately, Fox News and other similar detracting and negative news accounts about us as a people in general, and they make these generalizations without knowing you individually.Zach: We introed the show talking about and sharing a story from Bernard Tyson, who is the CEO of Kaiser Permanente, his experience in having to deal with individuals who had never worked with a black man as a peer. So I'm curious to know how many instances you've had where you've said, "Wow, you've clearly never worked with a black man before." Like, has that happened? And if so, would you mind sharing a story or two?Michael: Sure, sure. That has absolutely happened, and you could see it coming 100% down the line. It's amazing. I've had it happen so many times, but I remember a couple of different instances. I'll give you a couple stories. One, as a young analyst, you know, all of us who come through commercial lending, investment banking, all of these corporate-type lending groups, we all have to go through this vetting process and this training process, and it's generally about a year, and we'd learn all this stuff, and then we're out--we're put into these groups, and we're analysts, so we're at the bottom of the rung, right? We're [runts?]. And so I'm in this group, and this--[laughs] calling him a gentleman is good. It's way above where he was in [inaudible], however this gentleman ran the group, and this was--this was in the early '90s. And so this guy--to give you kind of just an overall view of who he is, this guy would smoke in his office. It was illegal to smoke inside of the building, but he would smoke in his office. But he was an old head, he was a successful old head, and senior management didn't bother him. So they let him smoke in his office. Well, okay. So this guy, the manager of group, he was clear that he did not like me, and he made himself clear by several different things that he did. And I'll give you one nice example. So I am in the habit of drinking a gallon of water today, and actually I still do that to this day, and I had my jug that had a lot of water in it, and we were in meetings, and he turns to me in front of everybody and says, "Why do you have all that water?" "Because I like to drink a lot of water." He said, "Well, you know what? That is so sophomoric of you. It's like you're a little kid with a jug." I was like, "Whoa. Okay, this is just water." So we go forward. I take that as a note and I keep moving. Of course I didn't get rid of my water. I just decided to hide it from him all of the time. So there was an instance where when we get into work in the morning we would go get something to eat for breakfast, 'cause typically we'd have to get in early, so we typically would get something to eat for breakfast. My counterpart, the young analyst that was with me, would go--she would check into the office, sit down, turn her computer on, and then go get something to eat. I would go get something to eat, come back, check in and sit down and get something--and start working. I was told that I was habitually late. Now, mind you, I got in before it was the normal working hours all of the time, but because I got breakfast first, came back to my desk, she came to her desk, checked in, meaning face time--and I'm using total air quotes right now--Zach: Right. [laughs]Michael: Meaning face time. It was acceptable to do what she was doing and unacceptable to do what I was doing, and these are very small, minor things, right? Well, one thing everyone needs to take away from anything--if you don't take anything else away from what I'm saying, it is absolutely this - you cannot progress, move up, move forward in any career unless management likes you. Period. Stop. End of story. You could be the most highly-qualified, the brightest--have the brightest mind, have the best work ethic, but if your manager does not like you you will not be able to move up. As a matter of fact, your job is in peril and you don't even know it.Zach: So that was when you were, you know, a new analyst. You were coming in. You were getting hired. You're working for the old head. Was there anybody--was there any instance or experience you had as a leader where you were like, "Wow. Okay, you've clearly never dealt with a person of color before." Michael: Oh, sure. Sure. So we're working on a very sizeable transaction, and my team is managing--I am managing my team, and it's one of my lender's opportunities, and this deal is north of $100 million, so it's gonna be a nice year--Zach: Whoa, whoa, whoa, whoa. Whoa, whoa, whoa. You said one zero zero million dollars?Michael: Yes, sir. Yes, sir. I do corporate lendings, so, I mean, I've worked on several significant-sized transactions for many publicly-traded companies in my past.Zach: Wow.Michael: So at any rate, this is gonna be our year. This deal is basically gonna make our year. So this is my deal. We're working on it, and unbeknownst to me there was some chatter in the background by a counterpart, so another manager, and this person made some questionable comments about me and my ability to lead us through the closing of this deal. I had never even interacted with this guy, so the things that he was saying about me and my inefficiencies. He went on about being efficient, not having ever done a deal of this size before, it actually needs to be done by him and his group. Zach: Wow.Michael: You know? And I sat back and I said, "Wow, interesting." For me, one of the things I'm real keen on is documentation, and so along the way of that particular process I was able to have my documentation in order so that the president, who was the final arbiter, came down to find out what was going on and why we were having some discord, and I simply said, "I'm not sure." And this is another nice little note here. Michelle Obama said it best. "When they go low, we go high." Never get into the mud when people are throwing mud at you. Never. Never. Because you will never win that situation as a minority. You will never win that situation. Even if you win that situation, you've lost. You've just lost because they're already afraid of you, they don't know you, and then now you've got quote-unquote real with somebody, oh, they don't want you around. They don't want you around. That scares the living crap out of them.Zach: But this is my thing. So Michael--like, for those--you know, I've known you, or at least I've known of you for a while, and so I know--but you are a keep it real type of dude, and you're definitely not, like, a back down kind of guy. So let's talk about this documentation and how you stood up for yourself, right? 'Cause I know that's not who you are, so let's keep it real, right? Like, let's--Michael: [laughs] Oh, you are so real with it, and I will admit 100% to have always been an enforcer. I'm just gonna be clear about that. I'm not gonna lie about who I am as a person. Zach: Amen. [laughs]Michael: I grew up--I didn't give you all of the background, but I grew up in the projects of south Dallas. So I grew up fighting. I know how to fight, man. That's not even a question. These hands are real good. These hands are real good. However, what I've--what I've learned over my career is that in order for me to be who I want to be--and now, maybe earlier on I probably would've put hands on him or done something that probably would have not allowed me to move forward as far as I have today, however he caught me at a time in my life where I know better, and I know that I am--my level of intelligence taught me early on, through my mistakes probably, but I wanted to be able to be smarter, more intelligent, and more calculating. I can't say that enough. Here's my phrase that I say all of the time. "I play chess, not checkers." And in life and in Corporate America, it's always chess. If you think you're playing checkers, you've just lost. It's always chess. You've got to think two to three steps ahead and why is that going on and why did that just happen? See, it just didn't happen for a reason. Something happened. And oh, by the way, there are multiple conversations going on without you even knowing about it. You don't even know conversations are happening and they're happening. So it's not about trying to be paranoid or being paranoid. It's all about realizing that they're having these conversations, making these judgments, making some assumptions about you without you even knowing about it. So go back to your question. I have always documented what's going on, and I've always done that to the point of understanding two things. One, it helps me to make sure I'm clear about what's going on, and then two, there's a little saying--although I've never been soothed, there's a little saying that says, "Everything is discoverable," meaning I look at--I look at every situation like there's a lawsuit pending, and as long as I'm looking at it like there's a lawsuit pending or this could promote a lawsuit, I make sure that not only am I keeping my ducks in a row, but I make sure I limit the things that I say that are a part of public record, be it in writing or orally, because I want to limit my exposure while documenting and keeping up with what everybody else is doing.Zach: See, the thing about it is I'm kind of--I'm kind of shook, to be honest with you. Right? [laughs] I'm kind of like, "Okay." Like, I'm listening to you, and honestly I'm hoping that my sound man puts a little bit of House of Cards type music in the background because I'm hearing what you're saying. I don't disagree, right? So this is just good information to have, and I'm a few rungs down the ladder, and so politically understanding how to navigate these spaces--and there are plenty of people who are listening to this show who are aspiring to get there. I'm curious though. We have folks in our spaces, and I think as you know when you look at the history of civil rights and just black liberation, you have to have allies. You have to have folks that don't look like you who are advocating for you. You talked about advocacy at the beginning of our interview. I'm curious to know--you know, there are people who do look like us, but there are people who don't look like us also who listen to this show who are passionate about diversity and inclusion, who are passionate about being supportive and really leading that next generation. What advice do you have, right, for our non-Wakandan brothers and sisters listening in?Michael: As I cross my arms and let my fists down.Zach: And bounce your shoulders a little bit. [laughs]Michael: [laughs] Right, bounce up a little bit. Let me tell you this. The thing that I can say is judge people--I mean, it's funny. MLK said it best. "Judge people for the content of their character, not for the color of their skin." Yes. Are there people out there that have--are trying to run a [gang?] Maybe not as qualified but have snuck into the door, yes, but guess what? That's on both sides. Zach: Hm.Michael: That is not exclusive to minorities, and in particular African-American minorities. That's on both sides of the equation. So judge people for their content, their capacity, and their intellect. That's how you--that's how someone with aspirations of being an advocate can do--get work in whatever their chosen field of human endeavor is, because there--first of all, there's not enough room at the top for everyone. Period. Stop. End of story. Full stop. However, people get passed over for reasons that, in a lot of instances, didn't have to be necessarily. But it happens because that's life, right? You know, life is truly Mike Tyson's big ol' heavy hands. It just keeps coming at you, and you're gonna get your butt knocked down, and you gotta figure out whether or not you can get up and/or have the will and the power to get up because they gonna come right back at you. Those people who get up, those people who have that fighting instinct, who are intelligent, who are hungry, those are the individuals. If you can just look at them for who they are and what they bring to the table, that's a good deal.Zach: Absolutely. I'm curious--I'm curious about this, kind of as a follow-up to really what you just said. You know, are there any--are there any specific experiences or points of advice you've received in your career that have stuck with you and really helped you drive and continue forward to the place where you are today?Michael: One, have that drive, have that inquisitive nature. Always ask the question. You don't ever know what the answer is, nor should you think you would know the answer, but you've got to be willing to ask the question. And once you ask the question? Oh, by the way, learn and don't repeat whatever it is you did before. Okay? So I'm a big one-time guy. Ask me the question or let me ask the question one time or tell me one time, I got it. I've got to move forward. Now, the responsibility thereafter is on me 'cause you told me. So now I want to demonstrate whatever it is. I have the capacity not only to remember what's supposed to happen here but to incorporate it into what I'm doing and move forward. That's one. Two, more important than anything else, never ever lose yourself. Whoever you are, it is you. God brought you into this world. Your experiences up to whatever that point is have made you who you are. Never lose yourself. Learn to navigate within the political world that we live in, especially in Corporate America, and refine your edges. Like you said, you've known me. You guessed that I was a fighter, [laughs] but I've learned to smooth my edges out and to be able to be--to walk in any room and strike up a conversation. Insert name here, insert title here puts his pants on every single day like I do, one leg at a time. So he's no more special than I am in that regard. All he has done is he has made himself or have been able to get the breaks to make himself--put himself in a leadership position. Maybe at the top of the company. Maybe at the next level. It doesn't matter. He's still a person who puts his clothes on--his pants on one leg at a time, therefore I have the ability to interact with this person and find maybe some level of commonness that would allow us to engage in conversation and then, again, continuing to erode any kind of preconceived notions and ideals about who I am simply because I showed up and my skin was a little bit darker than yours. Zach: This is just so helpful, Michael. Thank you so much for joining us today. Before we let you go though, do you have any plugs? Any shout outs?Michael: Oh, what could I shout out? I could shout out my wife's foundation. I lost my wife now seven years ago to breast cancer, and I started a foundation for her in an effort to help find a cure for this dreaded, horrible cancer called triple negative DCIS cancer. It is one of the most aggressive forms of breast cancer for--unfortunately for African-American women, and we have an annual walk to celebrate her life, but also to raise funds. We raise funds through corporate giving as well. The website is www.YEF.org, and that stands for Yolanda E. Williams Foundation. YEF.org. You can go on the site. We're preparing for our October walk now. The date has not been set. We will be doing that in a matter of weeks, and you can go on the site and check that out. And so my plug is help me figure out, through raising funds and donating to research, how to get rid of this scourge called triple negative DCIS breast cancer. I don't want anything else.Zach: Amen. So this is what we're gonna do. So first of all, we'll make sure that we have that website in our show notes, and we'll shout that out when we publish this, and then what we'll also do is when you confirm the date, Michael, let us know, and we'll make sure that we shout that out on the podcast as well.Michael: I will do just that.Zach: Okay. Well, first of all, just thank you so much for joining the call. I appreciate you joining the show. I appreciate the insights and just stories that you've been able to share. We wouldn't have had you on the show if we didn't know and trust that you would give us honest, frank, transparent conversation, and I believe we've had that today. We'd like to think you're a friend of the show, and I want to thank you again, and we hope to have you back real soon.Michael: I look forward to it.Zach: All right, Michael.Michael: Count me as a friend.Zach: I will. All right, now. Peace.Michael: All right. Thank you.Ade: And we're back. Zach, that was a great interview. One thing it did remind me of though was the fact that we interviewed a black man, but because the way the system is set up--you know, sexism, racism, and all of the other -isms--I believe that if we had had a black woman on the show talking about this we might've had a slightly different conversation due to the relationship of being a black woman in positions of authority.Zach: You know what, I agree. If you don't mind though, go ahead and expound on that.Ade: Right. So I'm sure you've heard of intersectionality, although for those of our listeners who haven't, it's simply the idea that there are--that your identity form different axes of the way you relate with the world, and so that means your relationships with the world and with certain aspects of the world such as Corporate America as a black man differs from mine as a black woman, and there are different aspects of that. So your sexuality also interacts with that. Your age interacts with that. Your class interacts with that. And so all of that said, I think that if we think about things like the angry black woman trope and how that would reflect in being a leader and how, for example, black women usually aren't allowed to get angry or to express dissatisfaction with anything, otherwise it's "Oh, she's so bitter. She's so angry," as opposed to "No, I'm rightly disappointed in your work product," and all the other ways in which that could affect, you know, the final outcome as a--as a leader. I definitely would like to have that conversation with a black woman in maybe a part two, you know?Zach: You know what? That's a good point, and I agree. Let's make sure that we get a part two on the schedule and get going on that.Ade: Most def. I definitely want to interview, like, an Oprah. Trying to get my auntie on the show. Maybe a Viola Davis. Let's see what we can pop on. How are you feeling?Zach: I feel great about that. You said a Viola Davis?Ade: Or an Oprah. You know, I'm not too picky.Zach: An Ava DuVernay, perhaps?Ade: Ava DuVer--see? [inaudible]Zach: Maybe an Issa Rae?Ade: Stop it. I have a girl crush on her. I have a crush crush on her, but I also have a girl crush on her.Zach: I have an artistic cross on Issa Rae for sure. I was gonna say Issa DuVernay, which would be an amazing combination if both of those, like, fused into one person. My gosh.Ade: Oh, my God. Think of awkward black girl but [shot by?]--[Sound Man throws in a swerve sound effect]Zach: What?Ade: [laughs] Okay, now we're going down different tangents. Okay, anyway. Today we have a listener letter, so as a reminder to everybody at home, we encourage conversation, and so we're looking forward to reading any letters, comments, questions from everyone. So let's get into it. So today we have this letter. We're gonna call this listener Nicole, and let's read Nicole's thoughts. Okay, so it says, "Hi, guys." Hi. "I love your podcast and your insightful advice. This is a career question." All right, let's go. "I usually don't ask anyone I don't personally know about advice, but when I told my circle of friends about this particular situation they were stumped. They didn't know what to say, so here we go. I've been at my job for close to three years, and I've adapted to the many changes that came within my department. A year in, I got switched to a different sector of my department, which meant that I was part of a team of two - the manager and I. My manager has been working with this company for close to ten years and is jaded by all of the politics that comes with working at a large company and in our department. She's much older than me and has been working in this particular industry for decades. My manager and I obviously make for a small department since it's just the two of us, but we're overloaded with work and last-minute projects, which sucks, but it's part of the inner workings of the culture. Anyway, very recently my manager was having a meeting with the director during which the convo switched to me. I was not attending the meeting, but my name came up. The director then asked my manager, "How are you expanding her role?" It seemed as though it was a slew of questions about my potential and what my manager was doing for me in order to make that happen. This didn't seem to go over too well. When I came back from lunch, my manager was venting to me about this meeting. She basically told the director that if she, being my manager, is unclear of her own role and didn't see how she could advance in the company, how could she advance me? And this is just a paraphrasing of the events. And so while she was venting I was simply nodding my head because what else could I say to someone who feels stuck in their job and is managing me? For someone who is much older, I thought she was gonna be a good example, but I've come to realize she isn't. Lately I've been looking for new jobs that pay better because even though my department seems to make millions for the higher-ups, they're stingy when it comes to raises. I've only received one raise, which equated to pennies in my paycheck." Pennies? Oh, Lord. Okay, all right. Anyway. "Should I hit the pavement looking for a new job that pays more or should I try to stick it out and work with my jaded manager? Thanks again, and I hope to get some encouraging advice. Nicole." My goodness. Okay, Nicole. There's so much happening here. I don't--I hate to sound like a typical situation, but this really did rock Zach and I when we gave this a first read-through. And so, Zach, if you don't mind, I'm just gonna go ahead and give my thoughts on it. Or did you want to go first?Zach: The floor is yours.Ade: Okay. So as I see it, there are, like, several different layers of suck here. I'm sorry that--first of all, I'm sorry that you're going through this. It's not a fun or funny situation when you feel as though your career is in the hands of someone who doesn't care about you, but like I said, there are several different layers, and I think it would be best to separate all of those things. So on the one hand, you have a situation where--and at the beginning of Living Corporate, we actually had--I believe it's our very first episode--where we were talking about separating your sponsors for your mentors, knowing the two and leveraging the two. Currently I believe what you need is a sponsor, not a mentor. Your current mentor isn't doing her job. And then the other issue is the matter of your money and getting a new job. So I'm just gonna address them one after the other. So I believe you need to go on the hunt for a sponsor, whether that is within your company, somebody who has a role that you eventually see yourself taking. So obviously this requires first figuring out what you want your trajectory to be at this current moment. That doesn't mean that it can't change, but I believe that everybody needs a five-year plan for themselves. And so in five years, where do you see yourself? In ten years, where do you see yourself? And find people who have optimized their career and go talk to them, whether it's within your company or without. Go on coffee dates. Hit people up on LinkedIn. And I promise you that's not a weird thing. I just came to realize that myself. Like, I'll hit up people on LinkedIn and just kind of ask them to go for coffee or, you know, get their thoughts on certain things. So that's one. The other is that, you know, I understand that you might be feeling hurt, but what your manager is going through is about her and not you, and so although it feels as though she's kind of set herself up as a barrier instead of helping you in your career, I wouldn't take that too personally. Don't let that reflect in your work. If anything, allow that to spur more conversations with, again, those sponsors that you're looking for because they're the ones--within your company, they're the ones who will be putting you on new projects, who will be putting you in places, in rooms, in situations where they feel you have the potential to progress. And outside of your company, those sponsors are the ones who will slide you those job links like, "Hey, I saw this come up. I think you'd be a perfect fit in this situation. What do you think? Go ahead and apply," which brings me to my next point. Any raise that's pennies per paycheck--Zach: Yeah. If that's literal then yeah, that's a pause-worthy statement.Ade: Yeah, that's not it. That's not the lifestyle that I'm hoping and praying for for all my people. I was actually just having this conversation with a group of my friends that closed mouths don't get fed, and it's very typical, particularly of people of color, particularly of women of color, to feel as though we should be grateful for, you know, the pennies as opposed to asking for the thousands, and I don't know if that's gonna, for you, look like--and this is all gonna be personal to you, whether you feel as though you need to be in this company and so you need to figure out how to have the conversation about raises or if you need to step outside and start looking for new jobs. And to that I would say optimize your LinkedIn, get your resume together. If you need to find a professional to look at your resume for you or if, again, those sponsors that you're looking for can take a look at your resume and help you in that regard. But I would definitely say you should start networking. Go to industry events. So whatever your industry is, Meetup is a really good place to find organizations or groups where you can network and meet people and kind of--if you have business cards--give your business cards out, ask people out to coffee at those events. People there are open and willing to mentor you, but you just have to ask. And so those would be my two biggest recommendations for you, and definitely, definitely, definitely keep your head up because this is something that I can relate to personally, and I'm sure Zach has, in some form or fashion, been in a position where he's had to advocate for himself, but you are always your own best advocate, and so this is just a matter of fine-tuning the language and finding the people who are willing to listen to you. Zach, what you got?Zach: Yeah. I mean, one I absolutely agree with your point, right? With all the points that you've made. Ultimately, just to keep it a little bit more succinct, I think it comes down to two things. First of all, you are your best advocate, and then two it's your own career. So it's really one point, right? So you have a couple things here, right? So you have challenges internally where you have your manager who's a bit frustrated and jaded to the language that you're used to, and you now have concerns if they're going to be able to advocate for you. Well, like to what we've been saying, rejecting the premise that anyone else is responsible for advocating for you and that you own your career, it starts with you saying, "Okay, what is it that I want to achieve here?" And then just talking to people, knocking on doors inside your company and being like, "Look, this is what I want to do. This is how I want to do it. Can you help me?" And be comfortable with the people who say no. And they may say no by just flat out saying no. They may say no by just not following up. They may say no by some long-winded answer, but just be comfortable with the people saying no 'cause eventually you'll find someone saying yes. Now, if you can't find the yes internally then it is time to leave, and you already were talking about the fact that you're looking for--you're exploring another opportunity. So your salary--like, your salary is a personal problem. So what do I mean by that? Your salary is a personal problem, meaning you having an issue with your salary, that's an issue between you and you. So you need to figure out a way how you're gonna answer that question. So are you going to get put together a case internally and say, "Hey, look. This is the number I'm looking for because I haven't had a raise in this many years," or "I've only had this one raise," or whatever the case is, or are you going to find another job, right? So plenty of studies show that when it comes to job hunting, you know, you're gonna get a bigger bump transitioning away from a company than you are staying inside. And I'll--there might be people who argue or disagree with me on that. If you do, please send in a letter, send in your comments. And there's more to a job than just your salary, but my point is you have to figure out a way to address that for yourself, right? And, like, I'm not attacking you. I definitely understand where you're coming from. I've definitely been there, where I've got caught up in the illusion of waiting for people to advocate for me, but I realized that people only advocate for you as much as it helps themselves. And so your manager who has her frustrations and things of that nature, that's perfectly human, and she shouldn't be shamed for that. At the same time, that's not your problem. Your problem is how are you gonna make sure that you take care of yourself? So Nicole, like, we're really excited about you sending us another letter, like, letting us know what's going on. We definitely are praying for the best. There's definitely a lot going on for sure, but yeah, advocate for yourself. And we actually have an article dropping on Living Corporate soon about strategic self-advocacy, so keep an eye out for that. If you have any additional questions, just reach back out and we'll make sure to chop it up. Offline.Ade: And definitely thank you for writing us and trusting us with this. So that about wraps it up for our listener letter portion of the segment. As a reminder, we do encourage conversation, so please reach out if you have any questions, comments, or concerns for us.[segment break]Ade: All right, y'all. It is another episode of Favorite Things. So I have a confession actually, guys. Please, please, please keep this on the downlow, as I say this on a podcast. I had my first bite of mac and cheese recently. I know. I know.Zach: Your first bite? Like, you've just now--you've just now tried--Ade: I just--like, I literally just tried mac and cheese, and it was--and I feel like the only real reason that I liked it was because it was a seafood mac and cheese because I've always been really, really averse to cheese, but I've only recently started being okay with it. Like, it doesn't automatically make me nauseous. And so, like, I had my--my friend made--there was a kickback, and my friend made seafood mac and cheese, and I was like, "Seafood? I guess I can give it a shot." I don't know what that voice was. [laughs] But I gave it a shot and I ate it, and it was good. Like, it was really, really good, and I was like, "Hold on, wait a minute. Are you telling me that I've been missing out on deliciousness this whole time?" I was like, "No, this is probably a one-off. It's because of the seafood." And then I went to another event with friends, and my friend made just regular old mac and cheese, and I was like, "You know what? I'm gonna give it another shot," and it was astounding.Zach: [laughs] It was astounding?Ade: Astounding. Astounding. Are you kidding me? And so now I am mad that I have wasted all of these years of my life not eating cheese, specifically not eating mac and cheese, especially since I apparently make good mac and cheese, but I've never eaten it because I've always been afraid of what it does to my life afterwards--of what cheese does to my life. And so now I'm just trying to spend all this time, like, making up for lost time.Zach: With cheese.Ade: With mac and cheese, to be specific. Zach: With mac and cheese, to be specific. Okay. First of all, that's very funny. Ade: [laughs]Zach: Because mac and cheese is--first of all, it's just such a common dish from my perspective, right? But at the same time I'm excited for you, and I actually think what we should do is maybe add a fun segment from time to time just called Ade's Cheese, right? Like, where you try, like, a new cheese, right? So, like, maybe next time you try Gouda, and then another time you try feta. Ade: Actually--it's so funny you say that because I bought a smoked Gouda from the Amish [inaudible] market in my apartment, and it's in my fridge right now, okay?Zach: Okay. So okay, great. So look, let's take a note 'cause the next time--the next time we're together we'll bring up your review on Gouda. Ade: Look, listen. I actually already took a slice of it with some pepper jelly, and I want to fight every single one of my friends who did not inform me that cheese was this good.Zach: Right. Now, look, cheese is--cheese is good. Like, it's a seller for a reason.Ade: I want y'all to know that there's no way you love me and left me out of the secret for this long.Zach: Nah, see--actually, I challenge that, right? I challenge that because they could've been holding you back from cheese purely for the health reasons, right? Like, there's no--Ade: Nah, forget all that, because, like, they watch me eat three slices of cake and they actually encourage me. Like, "Here, have my slice of cake." Zach: Okay. Well, then I understand your frustration.Ade: See? Mm-hmm. They're not loyal. Not a single one of 'em. [laughs] My only other thing this week, it's a book called Perfect Peace by Daniel Black. So it's a book about what happens--there are several different themes. Part of it is gender. Part of it is, like, family betrayal. And so, like, the plot is it's this family in the rural south. Mama has six boys already, and she's pregnant with her seventh, and she, the whole time, is thinking, "Oh, this is gonna be my girl." She has a lot of issues surrounding her relationship with her mother, and so she wants to really, like, nurture a girl, a daughter. Turns out that she has a son, and so what she decides to do is raise her son as a daughter, and so she names this boy Perfect. Their family's called Peace. And so Perfect is raised, up until he's 8, as a girl. It's just this really, really gripping story about, like, love and family and what it means to--like, what gender means and what family means and what truth means and all of these other things, and you find yourself just, like, shocked every other page. But yeah, that's my favorite thing, and that was a whole lot, but I hope y'all take a look. What about you, Zach?Zach: Well, first of all, that's cool. We've got to make sure that we add Perfect Peace to our reading list.Ade: Oh, yeah.Zach: That's right. Make sure you check out our reading list. It's great. So sticking with my record of aggressive book titles, my favorite thing right now has to be this book I'm rereading called This Nonviolent Stuff'll Get You Killed by Charles Cobb. It explores the history of nonviolence during the civil rights era and its function. It also breaks down the history and culture of gun ownership for black people in America. It's a really interesting read. Academic while not being too heavy. It's just a really approachable book, and it's also on our reading list, so make sure you check that out.Ade: And that's our show. Thank you for joining us on the Living Corporate podcast. Make sure to follow us on Instagram at LivingCorporate, Twitter at LivingCorp_Pod, and subscribe to our newsletter through www.living-corporate.com. If you have a question you'd like us to answer and read on the show, please make sure you email us at livingcorporatepodcast@gmail.com. Also, don't forget to check out our Patreon at LivingCorporate as well. And that does it for this show. My name's Ade.Zach: And this has been Zach.Ade and Zach: Peace.Kiara: Living Corporate is a podcast by Living Corporate, LLC. Our logo was designed by David Dawkins. Our theme music was produced by Ken Brown. Additional music production by Antoine Franklin from Musical Elevation. Post-production is handled by Jeremy Jackson. Got a topic suggestion? Email us at livingcorporatepodcast@gmail.com. You can find us online on Twitter, Facebook, Instagram, and living-corporate.com. Thanks for listening. Stay tuned.

Listen Here: iTunes | Overcast | PlayerFM Keep up with the North Star Podcast. My guest today is Michael Nielsen a scientist, writer and computer programmer who works as a research fellow at Y Combinator Research. Michael has written on various topics from quantum teleportation, geometric complexity and the future of science. Michael is the most original thinker I have discovered in a long time when it comes to artificial intelligence, augmenting human intelligence, reinventing explanation and using new media to enable new ways of thinking. Michael has pushed my mind towards new and unexpected places. This conversation gets a little wonky at times, but as you know, the best conversations are difficult. They are challenging because they venture into new, unexplored territory and that's exactly what we did here today.  Michael and I explored the history of tools and jump back to the invention of language, the defining feature of human collaboration and communication. We explore the future of data visualization and talk about the history of the spreadsheet as a tool for human thought.  “Before writing and mathematics, you have the invention of language which is the most significant event in some ways. That’s probably the defining feature of the human species as compared to other species.” LINKS Find Michael Online Michael’s Website Michael’s Twitter Michael’s Free Ebook: Neural Networks and Deep Learning Reinventing Discovery: The New Era of Networked Science Quantum Computation and Quantum Information Mentioned In the Show 2:12 Michael’s Essay Extreme Thinking 21:48 Photoshop 21:49 Microsoft Word 24:02 The David Bowie Exhibit 28:08 Google AI’s Deep Dream Images 29:26 Alpha Go 30:26 Brian Eno’s Infamous Airport Music 33:41 Listen to Speed of Life by Dirty South Books Mentioned 46:06 Zen and The Art of Motorcycle Maintenance by Robert M. Pirsig 54:12 Cat’s Cradle by Kurt Vonnegut People Mentioned 13:27 Rembrandt Van Rijn’s Artwork 15:01 Monet’s Gallery 15:02 Pierre Auguste Renoir’s Impressionist Art 15:05 Picasso’s Paintings 15:18 Paul Cezanne’s Post-Impressionist Art 25:40 David Brooke’s NYT Column 35:19 Franco of Cologne 56:58 Alan Kay’s Ted Talk on the future of education 57:04 Doug Engelbart 58:35 Karl Schroeder 01:02:06 Elon Musk’s Mars-bound company, SpaceX 01:04:25 Alex Tabarrok Show Topics 4:01 Michael’s North Star, which drives the direction of his research 5:32 Michael talks about how he sets his long-term goals and how he’s propelled by ideas he’s excited to see in the world. 7:13 The invention of language. Michael discusses human biology and how it’s easier to learn a language than writing or mathematics.  9:28 Michael talks about humanity’s ability to bootstrap itself. Examples include maps, planes, and photography  17:33 Limitations in media due to consolidation and the small number of communication platforms available to us  18:30 How self-driving cars and smartphones highlight the strange intersection where artificial intelligence meets human interaction and the possibilities that exist as technology improves 21:45 Why does Photoshop improve your editing skills, while Microsoft Word doesn’t improve your writing skills? 27:07 Michael’s opinion on how Artificial Intelligence can help people be more creative “Really good AI systems are going to depend upon building and currently depend on building very good models of different parts of the world, to the extent that we can then build tools to actually look in and see what those models are telling us about the world.”  30:22 The intersection of algorithms and creativity. Are algorithms the musicians of the future? 36:51 The emerging ability to create interactive visual representations of spreadsheets that are used in media, internally in companies, elections and more. “I’m interested in the shift from having media be predominantly static to dynamic, which the New York Times is a perfect example of. They can tell stories on newyorktimes.com that they can’t tell in the newspaper that gets delivered to your doorstep.” 45:42 The strategies Michael uses to successfully trail blaze uncharted territory and how they emulate building a sculpture   53:30 Michael’s learning and information consumption process, inspired by the idea that you are what you pretend to be 56:44 The foundation of Michael’s worldview. The people and ideas that have shaped and inspired Michael.  01:02:26 Michael’s hypothesis for the 21st century project involving blockchain and cryptocurrencies and their ability to make implementing marketplaces easier than ever before “The key point is that some of these cryptocurrencies actually, potentially, make it very easy to implement marketplaces. It’s plausible to me that the 21st century [project] turns out to be about [marketplaces]. It’s about inventing new types of markets, which really means inventing new types of collective action.” Host David Perell and Guest Michael Nielsen TRANSCRIPT Hello and welcome to the North Star. I'm your host, David Perell, the founder of North Star Media, and this is the North Star podcast. This show is a deep dive into the stories, habits, ideas, strategies, and rituals that guide fulfilled people and create enormous success for them, and while the guests are diverse, they share profound similarities. They're guided by purpose, live with intense joy, learn passionately, and see the world with a unique lens. With each episode, we get to jump into their minds, soak up their hard-earned wisdom and apply it to our lives. My guest today is Michael Nielson, a scientist, writer, and computer programmer, who works as a research fellow at Y Combinator Research. Michael's written on various topics from quantum teleportation to geometric complexity to the future of science, and now Michael is the most original thinker I've discovered in a long time. When it comes to artificial intelligence to augmenting human intelligence, reinventing explanation, or using new media to enable new ways of thinking, Michael has pushed my mind towards new and unexpected places. Now, this conversation gets a little wonky at times, but as you know, the best conversations are difficult. They're challenging because they venture into new, unexplored territory and that's exactly what we did here today. Michael and I explored the history of tools. This is an extension of human thought and we jump back to the invention of language, the defining feature of human collaboration and communication. We explore the future of data visualization and talk about the history of this spreadsheet as a tool for human thought. Here's my conversation with Michael Nielson. DAVID: Michael Nielson, welcome to the North Star Podcast. MICHAEL: Thank you, David. DAVID: So tell me a little bit about yourself and what you do. MICHAEL: So day to day, I'm a researcher at Y Combinator Research. I'm basically a reformed theoretical physicist. My original background is doing quantum computing work. And then I've moved around a bit over the years. I've worked on open science, I've worked on artificial intelligence and most of my current work is around tools for thought. DAVID: So you wrote an essay which I really enjoyed called Extreme Thinking. And in it, you said that one of the single most important principle of learning is having a strong sense of purpose and a strong sense of meaning. So let's be in there. What is that for you? MICHAEL: Okay. You've done your background. Haven't thought about that essay in years. God knows how long ago I wrote it. Having a strong sense of purpose. What did I actually mean? Let me kind of reboot my own thinking. It's, it's kind of the banal point of view. How much you want something really matters. There's this lovely interview with the physicist Richard Feynman, where he's asked about this Indian mathematical prodigy Ramanujan. A movie was made about Ramanujan’s mathematical prowess a couple of years ago. He was kind of this great genius. And a Feynman was asked what made Ramanujan so good. And the interview was expecting him to say something about how bright this guy was or whatever. And Feynman said instead, that it was desire. It was just that love of mathematics was at the heart of it. And he couldn't stop thinking about it and he was thinking about it. He was doing in many ways, I guess the hard things. It's very difficult to do the hard things that actually block you unless you have such a strong desire that you're willing to go through those things. Of course, I think you see that in all people who get really good at something, whether it be sort of a, just a skill like playing the violin or something, which is much more complicated. DAVID: So what is it for you? What is that sort of, I hate to say I want to just throw that out here, that North Star, so to speak, of what drives you in your research? MICHAEL: Research is funny. You go through these sort of down periods in which you don't necessarily have something driving you on. That used to really bother me early in my career. That was sort of a need to always be moving. But now I think that it's actually important to allow yourself to do that. That's actually how you find the problems, which really get, get you excited. If you don't sort of take those pauses, then you're not gonna find something that's really worth working on. I haven't actually answered your question. I think I know I've jumped to that other point because that's one thing that really matters to me and it was something that was hard to learn. DAVID: So one thing that I've been thinking a lot about recently is you sort of see it in companies. You see it in countries like Singapore, companies like Amazon and then something like the Long Now Foundation with like the 10,000-year clock. And I'm wondering to you in terms of learning, there's always sort of a tension between short-term learning and long-term learning. Like short-term learning so often is maybe trying to learn something that feels a little bit richer. So for me, that's reading, whereas maybe for a long-term learning project there are things I'd like to learn like Python. I'd like to learn some other things like that. And I'm wondering, do you set long-term learning goals for yourself or how would you think about that trade off? MICHAEL: I try to sit long-time learning goals to myself, in many ways against my better judgment. It's funny like you're very disconnected from you a year from now or five years from now, or 10 years from now. I can't remember, but Eisenhower or Bonaparte or somebody like that said that the planning is invaluable or planning plans are overrated, but planning is invaluable. And I think that's true. And this is the right sort of attitude to take towards these long-term lending goals. Sure. It's a great idea to decide that you're going out. Actually, I wouldn't say it was a great idea to say that you're going to learn python, I might say. However, there was a great idea to learn python if you had some project that you desperately wanted to do that it required you to learn python, then it's worth doing, otherwise stay away from python. I certainly favor, coupling learning stuff to projects that you're excited to actually see in the world. But also, then you may give stuff up, you don't become a master of python and instead you spend whatever, a hundred hours or so learning about it for this project that takes you a few hundred hours, and if you want to do a successor project which involves it, more of it. Great, you'll become better. And if you don't, well you move onto something else. DAVID: Right. Well now I want to dive into the thing that I'm most excited to talk to you about today and that's tools that extend human thought. And so let's start with the history of that. We'll go back sort of the history of tools and there's had great Walter Ong quote about how there are no new thoughts without new technologies. And maybe we can start there with maybe the invention of writing, the invention of mathematics and then work through that and work to where you see the future of human thought going with new technologies. MICHAEL: Actually, I mean before writing and mathematics, you have the invention of language, which is almost certainly the most significant single event in some ways. The history of the planet suddenly, you know, that's probably the defining feature of the human species as compared to other species. Um, I say invention, but it's not even really invention. There's certainly a lot of evidence to suggest that language is in some important sense built into our biology. Not the details of language. Um, but this second language acquisition device, it seems like every human is relatively very set to receive language. The actual details depend on the culture we grow up on. Obviously, you don't grow up speaking French if you were born in San Francisco and unless you were in a French-speaking household, some very interesting process of evolution going on there where you have something which is fundamentally a technology in some sense languages, humans, a human invention. It's something that's constructed. It's culturally carried. Um, it, there's all these connections between different words. There's almost sort of a graph of connections between the words if you like, or all sorts of interesting associations. So in that sense, it's a technology, something that's been constructed, but it's also something which has been over time built into our biology. Now if you look at later technologies of thought things like say mathematics, those are much, much later. That hasn't been the same sort of period of time. Those don't seem to be built into our biology in quite the same way. There's actually some hints of that we have some intrinsic sense of number and there's some sort of interesting experiments that suggest that we were built to do certain rudimentary kinds of mathematical reasoning but there's no, you know, section of the brain which specializes sort of from birth in solving quadratic equations, much less doing algebraic geometry or whatever, you know, super advanced. So it becomes this cultural thing over the last few thousand years, this kind of amazing process whereby we've started to bootstrap ourselves. If you think about something like say the invention of maps, which really has changed the way people relate to the environment. Initially, they were very rudimentary things. Um, and people just kept having new ideas for making maps more and more powerful as tools for thought. Okay. I can give you an example. You know, a very simple thing, if you've ever been to say the underground in London or most other subway systems around the world. It was actually the underground when this first happened, if you look at the map of the underground, I mean it's a very complicated map, but you can get pretty good at reasoning about how to get from one place to another. And if you look at maps prior to, I think it was 1936, in fact, the maps were much more complicated. And the reason was that mapmakers up to that point had the idea that where the stations were shown on the map had to correspond to the geography of London. Exactly. And then somebody involved in producing the underground map had just a brilliant insight that actually people don't care. They care about the connections between the stations and they want to know about the lines and they want some rough idea of the geography, but they're quite happy for it to be very rough indeed and he was able to dramatically simplify that map by simply doing away with any notion of exact geography. DAVID: Well, it's funny because I noticed the exact same thing in New York and so often you have insights when you see two things coming together. So I was on the subway coming home one day and I was looking at the map and I always thought that Manhattan was way smaller than Brooklyn, but on the subway map, Manhattan is actually the same size as Brooklyn. And in Manhattan where the majority of the subway action is, it takes up a disproportionate share of the New York City subway map. And then I went home to go read Power Broker, which is a book about Robert Moses building the highways and they had to scale map. And what I saw was that Brooklyn was way, way bigger than Manhattan. And from predominantly looking at subway maps. Actually, my topological geographical understanding of New York was flawed and I think exactly to your point. MICHAEL: It's interesting. When you think about what's going on there and what it is, is some person or a small group of people is thinking very hard about how to represent their understanding of the city and then the building, tools, sort of a technological tool of thought that actually then saves millions or in the case of a New York subway or the London underground, hundreds of millions or billions of people, mostly just seconds, sometimes, probably minutes. Like those maps would be substantially more complicated sort of every single day. So it's only a small difference. I mean, and it's just one invention, right? But, you know, our culture is of course accumulated thousands or millions of these inventions. DAVID: One of my other favorite ones from being a kid was I would always go on airplanes and I'd look at the route map and it would always show that the airplanes would fly over the North Pole, but on two-dimensional space that was never clear to me. And I remember being with my dad one night, we bought a globe and we took a rubber band and we stretched why it was actually shorter to fly over the North Pole, say if you're going from New York to India. And that was one of the first times in my life that I actually didn't realize it at the time, but understood exactly what I think you're trying to get at there. How about photography? Because that's another one that I think is really striking, vivid from the horse to slow motion to time lapses. MICHAEL: Photography I think is interesting in this vein in two separate ways. One is actually what it did to painting, which is of course painters have been getting more and more interested in being more and more realistic. And honestly, by the beginning of the 19th century, I think painting was pretty boring. Yeah, if you go back to say the 16th and 17th centuries, you have people who are already just astoundingly good at depicting things in a realistic fashion. To my mind, Rembrandt is probably still the best portrait painter in some sense to ever live. DAVID: And is that because he was the best at painting something that looked real? MICHAEL: I think he did something better than that. He did this very clever thing, you know, you will see a photograph or a picture of somebody and you'll say, oh, that really looks like them. And I think actually most of the time we, our minds almost construct this kind of composite image that we think of as what David looks like or what our mother looks like or whatever. But actually moment to moment, they mostly don't look like that. They mostly, you know, their faces a little bit more drawn or it's, you know, the skin color is a little bit different. And my guess, my theory of Rembrandt, is that he may have actually been very, very good at figuring out almost what that image was and actually capturing that. So, yeah, I mean this is purely hypothetical. I have no real reason to believe it, but I think it's why I responded so strongly to his paintings. DAVID: And then what happened? So after Rembrandt, what changed? MICHAEL: So like I said, you mean you keep going for a sort of another 200 years, people just keep getting more and more realistic in some sense. You have all the great landscape painters and then you have this catastrophe where photography comes along and all of a sudden you're being able to paint in a more and more realistic fashion. It doesn't seem like such a hot thing to be doing anymore. And if for some painters, I think this was a bit of a disaster, a bit of dose. I said of this modern wave, you start to see through people like Monet and Renoir. But then I think Picasso, for me anyway, was really the pivotal figure in realizing that actually what art could become, is the invention of completely new ways of seeing. And he starts to play inspired by Cezanne and others in really interesting ways with the construction of figures and such. Showing things from multiple angles in one painting and different points of view. And he just plays with hundreds of ideas along these lines, through all of his painting and how we see and what we see in how we actually construct reality in their heads from the images that we see. And he did so much of that. It really became something that I think a lot of artists, I'm not an artist or a sophisticated art theory person, but it became something that other people realized was actually an extraordinarily interesting thing to be doing. And much of the most interesting modern art is really a descendant of that understanding that it's a useful thing to be doing. A really interesting thing to be doing rather than becoming more and more realistic is actually finding more and more interesting ways of seeing and being able to represent the world. DAVID: So I think that the quote is attributed to Marshall McLuhan, but I have heard that Winston Churchill said it. And first, we shape our tools and then our tools shape us. And that seems to be sort of the foundation of a lot of the things that you're saying. MICHAEL: Yeah, that's absolutely right. I mean, on the other side, you also have, to your original question about photography. Photographers have gradually started to realize that they could shape how they saw nature. Ansel Adams and people like this, you know. Just what an eye. And understanding his tools so verbally he's not just capturing what you see. He's constructing stuff in really, really interesting ways. DAVID: And how about moving forward in terms of your work, thinking about where we are now to thinking about the future of technology. For example, one thing that frustrates me a bit as a podcast host is, you know, we just had this conversation about art and it's the limits of the audio medium to not be able to show the paintings of Rembrandt and Cezanne that we just alluded to. So as you think about jumping off of that, as you think about where we are now in terms of media to moving forward, what are some of the challenges that you see and the issues that you're grappling with? MICHAEL: One thing for sure, which I think inhibits a lot of exploration. We're trapped in a relatively small number of platforms. The web is this amazing thing as our phones, iOS and whatnot, but they're also pretty limited and that bothers me a little bit. Basically when you sort of narrow down to just a few platforms which have captured almost all of the attention, that's quite limiting. People also, they tend not to make their own hardware. They don't do these kinds of these kinds of things. If that were to change, I think that would certainly be exciting. Something that I think is very, very interesting over the next few years, artificial intelligence has gotten to the point now where we can do a pretty good job in understanding what's actually going on inside a room. Like we can set up sufficient cameras. If you think about something like self-driving cars, essentially what they're doing is they're building up a complete model of the environment and if that model is not pretty darned good, then you can't do self-driving cars, you need to know where the pedestrians are and where the signs are and all these kinds of things and if there's an obstruction and that technology when brought into, you know, the whole of the rest of the world means that you're pretty good at passing out. You know what's inside the room. Oh, there's a chair over there, there's a dog which is moving in that direction, there's a person, there’s a baby and sort of understanding all those actions and ideally starting to understand all the gestures which people are making as well. So we're in this very strange state right at the moment. Where the way we talk to computers is we have these tiny little rectangles and we talk to them through basically a square inch or so of sort of skin, which is our eyes. And then we, you know, we tap away with our fingers and the whole of the rest of our body and our existence is completely uncoupled from that. We've effectively reduced ourselves to our fingers and our eyes. We a couple to it only through the whatever, 100 square inches, couple hundred square inches of our screens or less if you're on a phone and everything else in the environment is gone. But we're actually at a point where we're nearly able to do an understanding of all of that sufficiently well that actually other modes of interaction will become possible. I don't think we're quite there yet, but we're pretty close. And you start to think about, something like one of my favorite sport is tennis. You think about what a tennis player can do with their body or you think about what a dancer can do with their body. It's just extraordinary. And all of that mode of being human and sort of understanding we can build up antibodies is completely shut out from the computing experience at the moment. And I think over the next sort of five to ten years that will start to reenter and then in the decades hence, it will just seem strange that it was ever shut out. DAVID: So help me understand this. So when you mean by start to reenter, do mean that we'll be able to control computers with other parts of our bodies or that we'll be spending less time maybe typing on keyboards. Help me flesh this out. MICHAEL: I just mean that at the moment. As you speak to David, you are waving your arms around and all sorts of interesting ways and there is no computer system which is aware of it, what your computer system is aware of. You're doing this recording. That's it. And even that, it doesn't understand in any sort of significant way. Once you've gained the ability to understand the environment. Lots of interesting things become possible. The obvious example, which everybody immediately understands is that self driving cars become possible. There's this sort of enormous capacity. But I think it's certainly reasonably likely that much more than that will become possible over the next 10 to 20 years. As your computer system becomes completely aware of your environment or as aware as you're willing to allow it to be. DAVID: You made a really interesting analogy in one of your essays about the difference between Photoshop and Microsoft Word. That was really fascinating to me because I know both programs pretty well. But to know Microsoft word doesn't necessarily mean that I'm a better writer. It actually doesn't mean that at all. But to know Photoshop well probably makes me pretty good at image manipulation. I'm sure there's more there, but if you could walk me through your thought process as you were thinking through that. I think that's really interesting. MICHAEL: So it's really about a difference in the type of tools which are built into the program. So in Photoshop, which I should say, I don't know that well, I know Word pretty well. I've certainly spent a lot more time in it than I have ever spent in Photoshop. But in Photoshop, you do have these very interesting tools which have been built in, which really condense an enormous amount of understanding of ideas like layers or an idea, different brushes, these kinds of ideas. There's just a tremendous amount of understanding which has been built in there. When I watch friends who are really good with these kinds of programs, what they can do with layers is just amazing. They understand all these kind of clever screening techniques. It seems like such a simple idea and yet they're able to do these things that let you do astonishing things just with sort of three or four apparently very simple operations. So in that sense, there are some very deep ideas about image manipulation, which had been built directly into Photoshop. By contrast, there's not really very many deep ideas about writing built into Microsoft Word. If you talk to writers about how they go about their actual craft and you say, well, you know, what heuristics do use to write stories and whatnot. Most of the ideas which they use aren't, you know, they don't correspond directly to any set of tools inside Word. Probably the one exception is ideas, like outlining. There are some tools which have been built into word and that's maybe an example where in fact Word does help the writer a little bit, but I don't think to nearly the same extent as Photoshop seems to. DAVID: I went to an awesome exhibit for David Bowie and one of the things that David but we did when he was writing songs was he had this word manipulator which would just throw him like 20, 30 words and the point wasn't that he would use those words. The point was that by getting words, his mind would then go to different places and so often when you're in my experience and clearly his, when you're trying to create something, it helps to just be thrown raw material at you rather than the perennial, oh my goodness, I'm looking at a white screen with like this clicking thing that is just terrifying, Word doesn't help you in that way. MICHAEL: So an example of something which does operate a little bit in that way, it was a Ph.D. thesis was somebody wrote at MIT about what was called the Remembrance Agent. And what it would do, it was a plugin essentially for a text editor that it would, look at what you are currently writing and it would search through your hard disk for documents that seemed like they might actually be relevant. Just kind of prompt you with what you're writing. Seems like it might be related to this or this or this or this or this. And to be perfectly honest, it didn't actually work all that well. I think mostly because the underlying machine learning algorithms it used weren't very clever. It's defunct now as far as I know. I tried to get it to run on my machine or a year or two ago and I couldn't get it running. It was still an interesting thing to do. It had exactly this same kind of the belly sort of experience. Even if they weren't terribly relevant. You kind of couldn't understand why on earth you are being shown it. It's still jogged your mind in an interesting way. DAVID: Yeah. I get a lot of help out of that. Actually, I’ll put this example. So David Brooks, you know the columnist for the New York Times. When he writes, what he does is he gets all of his notes and he just puts his notes on the floor and he literally crawls all around and tries to piece the notes together and so he's not even writing. He's just organizing ideas and it must really help him as it helps me to just have raw material and just organize it all in the same place. MICHAEL: There's a great British humorist, PG Boathouse, he supposedly wrote on I think it was the three by five-inch cards. He'd write a paragraph on each one, but he had supposedly a very complicated system in his office, well not complicated at all, but it must have looked amazing where he would basically paste the cards to the wall and as the quality of each paragraph rose, he would move the paragraph up the wall and I think the idea was something like once it got to the end, it was a lion or something, every paragraph in the book had to get above that line and at that point it was ready to go. DAVID: So I've been thinking a lot about sort of so often in normal media we take AI sort of on one side and art on another side. But I think that so many of the really interesting things that will emerge out of this as the collaboration between the two. And you've written a bit about art and AI, so how can maybe art or artificial intelligence help people be more creative in this way? MICHAEL: I think we still don't know the answer to the question, unfortunately. The hoped-for answer the answer that might turn out to be true. Real AI systems are going to build up very good models of different parts of the world, maybe better than any human has of those parts of the world. It might be the case, I don't know. It might be the case that something like the Google translate system, maybe in some sense that system already knows some facts about translation that would be pretty difficult to track down in any individual human mind and sort of so much about translation in some significant ways. I'm just speculating here. But if you can start to interrogate that understanding, it becomes a really useful sort of a prosthetic for human beings. If you've seen any of these amazing, well I guess probably the classics, the deep dream images that came out of Google brain a couple of years ago. Basically, you take ordinary images and you're sort of running them backwards through a neural net somehow. You're sort of seeing something about how the neural net sees that image. You get these very beautiful images as a result. There's something strange going on and sort of revealing about your own way of seeing the world. And at the same time, it's based on some structure which this neural net has discovered inside these images which is not ordinarily directly accessible to you. It's showing you that structure. So sort of I think the right way to think about this is that really good AI systems are going to depend upon building and do currently depend on building very good models of different parts of the world and to the extent that we can then build tools to actually look in and see what those models are telling us about the world, we can learn interesting new things which are useful for us. I think the conventional way, certainly the science fiction way to think about AI is that we're going to give it commands and it's going to do stuff. How you shut the whatever it is, the door or so on and so forth, and there was certainly will be a certain amount of that. Or with AlphaGo what is the best move to take now, but actually in some sense, with something like AlphaGo, it's probably more interesting to be able to look into it and see what it's understanding is of the board position than it is to ask what's the best move to be taken. A colleague showed me a go program, a prototype, what it would do. It was a very simple kind of a thing, but it would help train beginners. I think it was Go, but by essentially colorizing different parts of the board according to whether they were good or bad moves to be taking in its estimation. If you're a sophisticated player, it probably wasn't terribly helpful, but if you're just a beginner, there's an interesting kind of a conditioning going on there. At least potentially a which lets you start to see. You get a feeling for immediate feedback from. And all that's happening there is that you're seeing a little bit into one of these machine learning algorithms and that's maybe helping you see the world in a slightly different way. DAVID: As I was preparing for this podcast, you've liked a lot to Brian Eno and his work. So I spent as much time reading Brian Eno, which I'm super happy that I went down those rabbit holes. But one of the things that he said that was really interesting, so he's one of the fathers of ambient music and he said that a lot of art and especially music, there will sort of be algorithms where you sort of create an algorithm that to the listener might even sound better than what a human would produce. And he said two things that were interesting. The first one is that you create an algorithm and then a bunch of different musical forms could flower out of that algorithm. And then also said that often the art that algorithms create is more appealing to the viewer. But it takes some time to get there. And had the creator just followed their intuition. They probably would have never gotten there. MICHAEL: It certainly seems like it might be true. And that's the whole sort of interesting thing with that kind of computer-generated music is to, I think the creators of it often don't know where they're gonna end up. To be honest, I think my favorite music is all still by human composers. I do enjoy performances by people who live code. There's something really spectacular about that. So there are people who, they will set up the computer and hook it up to speakers and they will hook the text editor up to a projector and they'll have essentially usually a modified form of the programming language list a or people use a few different systems I guess. And they will write a program which producers music onstage and they'll just do it in real time and you know, it starts out sounding terrible of course. And that lasts for about 20 seconds and by about sort of 30 or 40 seconds in, already it's approaching the limits of complex, interesting music and I think even if you don't really have a clue what they're doing as they program, there's still something really hypnotic and interesting about watching them actually go through this process of creating music sort of both before your eyes and before your ears. It's a really interesting creative experience and sometimes quite beautiful. I think I suspect that if I just heard one of those pieces separately, I probably wouldn't do so much for me, but actually having a done in real time and sort of seeing the process of creation, it really changes the experience and makes it very, very interesting. And sometimes, I mean, sometimes it's just beautiful. That's the good moment, right? When clearly the person doing it has something beautiful happen. You feel something beautiful happen and everybody else around you feel something beautiful and spontaneous. It's just happened. That's quite a remarkable experience. Something really interesting is happening with the computer. It's not something that was anticipated by the creator. It arose out of an interaction between them and their machine. And it is actually beautiful. DAVID: Absolutely. Sort of on a similar vein, there's a song called Speed of Life by Dirty South. So I really liked electronic music, but what he does is he constructs a symphony, but he goes one layer at a time. It's about eight and a half minute song and he just goes layer after layer, after layer, after layer. And what's really cool about listening to it is you appreciate the depth of a piece of music that you would never be able to appreciate if you didn't have that. And also by being able to listen to it over and over again. Because before we had recording, you would only hear a certain piece of music live and one time. And so there are new forms that are bursting out of now because we listen to songs so often. MICHAEL: It's interesting to think, there's a sort of a history to that as well. If you go back, essentially modern systems for recording music, if you go back much more than a thousand years. And we didn't really have them. There's a multi-thousand-year history of recorded music. But a lot of the early technology was lost and it wasn't until sort of I think the eighth, ninth century that people started to do it again. But we didn't get all the way to button sheet music overnight. There was a whole lot of different inventions. For instance, the early representations didn't show absolute pitch. They didn't show the duration of the note. Those were ideas that had to be invented. So in I think it was 1026, somebody introduced the idea of actually showing a scale where you can have absolute pitch. And then a century or two after that, Franco of Cologne had the idea of representing duration. And so they said like tiny little things, but then you start to think about, well, what does that mean for the ability to compose music? It means now that actually, you can start to compose pieces, which for many, many, many different instruments. So you start to get the ability to have orchestral music. So you go from being able to basically you have to kind of instruct small groups of players that's the best you can hope to do and get them to practice together and whatever. So maybe you can do something like a piece for a relatively small number of people, but it's very hard to do something for an 80 piece orchestra. Right? So all of a sudden that kind of amazing orchestral music I think becomes possible. And then, you know, we're sort of in version 2.0 of that now where of course you can lay a thousand tracks on top of one another if you want. You get ideas like micropolyphony. And these things where you look at the score and it's just incredible, there are 10,000 notes in 10 seconds. DAVID: Well, to your point I was at a tea house in Berkeley on Monday right by UC Berkeley's campus and the people next to me, they were debating the musical notes that they were looking at but not listening to the music and it was evident that they both had such a clear ability to listen to music without even listening to it, that they could write the notes together and have this discussion and it was somebody who doesn't know so much about music. It was really impressive. MICHAEL: That sounds like a very interesting conversation. DAVID: I think it was. So one thing that I'm interested in and that sort of have this dream of, is I have a lot of friends in New York who do data visualization and sort of two things parallel. I have this vision of like remember the Harry Potter book where the newspaper comes alive and it becomes like a rich dynamic medium. So I have that compared with some immersive world that you can walk through and be able to like touch and move around data and I actually think there's some cool opportunities there and whatnot. But in terms of thinking about the future of being able to visualize numbers and the way that things change and whatnot. MICHAEL: I think it's a really complicated question like it actually needs to be broken down. So one thing, for example, I think it's one of the most interesting things you can do with computers. Lots of people never really get much experience playing with models and yet it's possible to do this. Now, basically, you can start to build very simple models. The example that a lot of people do get that they didn't use to get, is spreadsheets. So, you can sort of create a spreadsheet that is a simple model of your company or some organization or a country or of whatever. And the interesting thing about the spreadsheet is really that you can play with it. And it sort of, it's reactive in this interesting way. Anybody who spends as much time with spreadsheets is they start to build up hypotheses, oh, what would happen if I changed this number over here? How would it affect my bottom line? How would it affect the GDP of the country? How would it affect this? How would it affect that? And you know, as you kind of use it, you start to introduce, you start to make your model more complicated. If you're modeling some kind of a factory yet maybe you start to say, well, what would be the effect if a carbon tax was introduced? So you introduce some new column into the spreadsheet or maybe several extra columns into the spreadsheet and you start to ask questions, well, what would the structure of the carbon tax be? What would help you know, all these sorts of what if questions. And you start very incrementally to build up models. So this experience, of course, so many people take for granted. It was not an experience that almost anybody in the world had say 20 or 30 years ago. Well, spreadsheets data about 1980 or so, but this is certainly an experience that was extremely rare prior to 1980 and it's become a relatively common, but it hasn't made its way out into mass media. We don't as part of our everyday lives or the great majority of people don't have this experience of just exploring models. And I think it's one of the most interesting things which particularly the New York Times and to some extent some of the other newsrooms have done is they've started in a small way to build these models into the news reading experience. So, in particular, the data visualization team at the New York Times, people like Amanda Cox and others have done this really interesting thing where you start to get some of these models. You might have seen, for example, in the last few elections. They've built this very interesting model showing basically if you can sort of make choices about how different states will vote. So if such and such votes for Trump, what are Hillary's chances of winning the election. And you may have seen they have this sort of amazing interactive visualization of it where you can just go through and you can sort of look at the key swing states, what happens if Pennsylvania votes for so and so what happens if Florida does? And that's an example where they've built an enormous amount of sort of pulling information into this model and then you can play with it to build up some sort of understanding. And I mean, it's a very simple example. I certainly think that you know, normatively, we're not there yet. We don't actually have a shared understanding. There's very little shared language even around these models. You think about something like a map. A map is an incredibly sophisticated object, which however we will start learning from a very young age. And so we're actually really good at parsing them. We know if somebody shows us a map, how to engage, how to interpret it, how to use it. And if somebody just came from another planet, actually they need to learn all those things. How do you represent a road? How do you represent a shop on a map? How do you represent this or that, why do we know that up is north like that's a convention. All those kinds of things actually need to be learned and we learned them when we were small. With these kinds of things which the Times and other media outlets are trying to do, we lack all of that collective knowledge and so they're having to start from scratch and I think that over a couple of generations actually, they'll start to evolve a lot of conventions and people will start to take it for granted. But in a lot of contexts actually you're not just going to be given a narrative, you know, just going to be told sort of how some columnist thinks the world is. Instead, you'll actually expect to be given some kind of a model which you can play with. You can start to ask questions and sort of run your own hypotheses in much the same way as somebody who runs a business might actually set up a spreadsheet to model their business and ask interesting questions. It's not perfect. The model is certainly that the map is not the territory as they say, but it is nonetheless a different way of engaging rather than just having some expert tell you, oh, the world is this way. DAVID: I'm interested in sort of the shift from having media be predominantly static to dynamic, which the New York Times is a perfect example. They can tell stories on Newyorktimes.com that they can't tell in the newspaper that gets delivered to your doorstep. But what's really cool about spreadsheets that you're talking about is like when I use Excel, being able to go from numbers, so then different graphs and have the exact same data set, but some ways of visualizing that data totally clicked for me and sometimes nothing happens. MICHAEL: Sure. Yeah. And we're still in the early days of that too. There's so much sort of about literacy there. And I think so much about literacy is really about opportunity. People have been complaining essentially forever that the kids of today are not literate enough. But of course, once you actually provide people with the opportunity and a good reason to want to do something, then they can become very literate very quickly. I think basically going back to the rise of social media sort of 10 or 15 years ago, so Facebook around whatever, 2006, 2007 twitter a little bit later, and then all the other platforms which have come along since. They reward being a good writer. So all of a sudden a whole lot of people who normally wouldn't have necessarily been good writers are significantly more likely to become good writers. It depends on the platform. Certainly, Facebook is a relatively visual medium. Twitter probably helps. I think twitter and text messaging probably are actually good. Certainly, you're rewarded for being able to condense an awful lot into a small period. People complain that it's not good English, whatever that is. But I think I'm more interested in whether something is a virtuosic English than I am and whether or not it's grammatically correct. People are astonishingly good at that, but the same thing needs to start to happen with these kinds of models and with data visualizations and things like that. At the moment, you know, you have this priestly caste that makes a few of them and that's an interesting thing to be able to do, but it's not really part of the everyday experience of most people. It's an interesting question whether or not that's gonna change as it going to in the province of some small group of people, or will it actually become something that people just expect to be able to do? Spreadsheets are super interesting in that regard. They actually did. I think if you've talked to somebody in 1960 and said that by 2018, tens of millions of people around the world would be building sophisticated mathematical models as just part of their everyday life. It would've seemed absolutely ludicrous. But actually, that kind of model of literacy has become relatively common. I don't know whether we'll get to 8 billion people though. I think we probably will. DAVID: So when I was in high school I went to, what I like to say is the weirdest school in the weirdest city in America. I went to the weirdest high school in San Francisco and rather than teaching us math, they had us get in groups of three and four and they had us discover everything on our own. So we would have these things called problem sets and we would do about one a week and the teacher would come around and sort of help us every now and then. But the goal was really to get three or four people to think through every single problem. And they called it discovery-based learning, which you've also talked about too. So my question to you is we're really used to learning when the map is clear and it's clear what to do and you can sort of follow a set path, but you actually do the opposite. The map is unclear and you're actually trailblazing and charting new territory. What strategies do you have to sort of sense where to move? MICHAEL: There's sort of a precursor question which is how do you maintain your morale and the Robert Pirsig book, Zen and the Art of Motorcycle Maintenance. He proposes a university subject, gumptionology 101. Gumption is almost the most important quality that we have. The ability to keep going when things don't seem very good. And mostly that's about having ways of being playful and ways of essentially not running out of ideas. Some of that is about a very interesting tension between having, being ambitious in what you'd like to achieve, but also being very willing to sort of celebrate the tiniest, tiniest, tiniest successes. Suddenly a lot of creative people I know I think really struggle with that. They might be very good at celebrating tiny successes but not have that significant ambitions, but they might be extremely ambitious, but because they're so ambitious, if an idea doesn't look Nobel prize worthy, they're not particularly interested in it. You know, they struggle with just kind of the goofing around and they often feel pretty bad because of course most days you're not at your best, you don't actually have the greatest idea. So there's some interesting tension to manage there. There's really two different types of work. One is where you have a pretty good goal, you know what success looks like, right? But you may also be doing something that's more like problem discovery where you don't even know where you're going. Typically if you're going to compose a piece of music. Well, I'm not a composer, but certainly, my understanding from, from friends who are, is that they don't necessarily start out with a very clear idea of where they're going. Some composers do, but a lot, it's a process of discovery. Actually, a publisher once told me somebody who has published a lot of well-known books that she described one of her authors as a writing for discovery. Like he didn't know what his book was going to be about, he had a bunch of kind of vague ideas and the whole point of writing the book was to actually figure out what it was that he wanted to say, what problem was he really interested in. So we'd start with some very, very good ideas and they kind of get gradually refined. And it was very interesting. I really liked his books and it was interesting to see that. They looked like they'd been very carefully planned and he really knew what he was doing and she told me that no, he'd sort of come in and chat with her and be like, well, I'm sort of interested over here. And he'd have phrases and sort of ideas. But he didn't actually have a clear plan and then he'd get through this process of several years of gradually figuring out what it was that he wanted to say. And often the most significant themes wouldn't actually emerge until relatively late in that whole process. I asked another actually quite a well-known writer, I just bumped into when he was, he was reporting a story for a major magazine and I think he'd been working, he'd been reporting for two weeks, I think at that point. So just out interviewing people and whatever. And I said, how's it going? And he said, Oh yeah, pretty good. I said, what's your story about? He said, I don't know yet, which I thought was very interesting. He had a subject, he was following a person around. But he didn't actually know what his story was. DAVID: So the analogy that I have in my head as you're talking about this, it's like sculpture, right? Where you start maybe with a big thing of granite or whatnot, and slowly but surely you're carving the stone or whatnot and you're trying to come up with a form. But so often maybe it's the little details at the end that are so far removed from that piece of stone at the very beginning that make a sculpture exceptional. MICHAEL: Indeed. And you wonder what's going on. I haven't done sculpture. I've done a lot of writing and writing often feels so sometimes I know what I want to say. Those are the easy pieces to write, but more often it's writing for discovery and there you need to be very happy celebrating tiny improvements. I mean just fixing a word needs to be an event you actually enjoy, if not, the process will be an absolute nightmare. But then there's this sort of instinct where you realize, oh, that's a phrase that A: I should really refine and B: it might actually be the key to making this whole thing work and that seems to be a very instinctive kind of a process. Something that you, if you write enough, you start to get some sense of what actually works for you in those ways. The recognition is really hard. It's very tempting to just discount yourself. Like to not notice when you have a good phrase or something like that and sort of contrary wise sometimes to hang onto your darlings too long. You have the idea that you think it's about and it's actually wrong. DAVID: Why do you write and why do you choose the medium of writing to think through things sometimes? I know that you choose other ones as well. MICHAEL: Writing has this beautiful quality that you can improve your thoughts. That's really helpful. A friend of mine who makes very popular YouTube videos about mathematics has said to me that he doesn't really feel like people are learning much mathematics from them. Instead, it's almost a form of advertising like they get some sense of what it is. They know that it's very beautiful. They get excited. All those things are very important and matter a lot to him, but he believes that only a tiny, tiny number of people are actually really understanding much detail at all. There's actually a small group who have apparently do kind of. They have a way of processing video that lets them understand. DAVID: Also, I think you probably have to, with something like math, I've been trying to learn economics online and with something like math or economics that's a bit complex and difficult, you have to go back and re-watch and re-watch, but I think that there's a human tendency to want to watch more and more and more and it's hard to learn that way. You actually have to watch things again. MICHAEL: Absolutely. Totally. And you know, I have a friend who when he listens to podcasts, if he doesn't understand something, he, he rewinds it 30 seconds. But most people just don't have that discipline. Of course, you want to keep going. So I think the written word for most people is a little bit easier if they want to do that kind of detailed understanding. It's more random access to start with. It's easier to kind of skip around and to concentrate and say, well, I didn't really get that sentence. I'm going to think about it a little bit more, or yeah, I can see what's going to happen in those two or three paragraphs. I'll just very quickly skip through them. It's more built for that kind of detailed understanding, so you're getting really two very different experiences. In the case of the video, very often really what you're getting is principally an emotional experience with some bits and pieces of understanding tacked on with the written word. Often a lot of that emotion is stripped out, which makes can make it much harder to motivate yourself. You need that sort of emotional connection to the material, but it is actually, I think a great deal easier to understand sort of the details of it. There's a real kind of choice to be to be made. There's also the fact that people just seem to respond better to videos. If you want a large audience, you're probably better off making YouTube videos than you are publishing essays. DAVID: My last question to you, as somebody who admires your pace and speed of learning and what's been really fun about preparing for this podcast and come across your work is I really do feel like I've accessed a new perspective on the world which is really cool and I get excited probably most excited when I come across thinkers who don't think like anyone who I've come across before, so I'm asking to you first of all, how do you think about your learning process and what you consume and second of all, who have been the people and the ideas that have really formed the foundation of your thought? MICHAEL: A Kurt Vonnegut quote from his book, I think it's Cat's Cradle. He says, we become what we pretend to be, so you must be careful what we pretend to be and I think there's something closely analogously true, which is that we become what we pay attention to, so we should be careful what we pay attention to and that means being fairly careful how you curate your information diet. There's a lot of things. There's a lot of mistakes I've made. Paying attention to angry people is not very good. I think ideas like the filter bubble, for example, are actually bad ideas. And for the most part, it sounds virtuous to say, oh, I'm going to pay attention to people who disagree with me politically and whatever. Well, okay, there's a certain amount of truth to that. It's a good idea probably to pay attention to the very best arguments from the very best exponents of the other different political views. So sure, seek those people out, but you don't need to seek out the random person who has a different political view from you. And that's how most people actually interpret that kind of injunction. They, they're not looking for the very best alternate points of view. So that's something you need to be careful about. There's a whole lot of things like that I enjoy. So for example, I think one person, it's interesting on twitter to look, he's, he's no longer active but he's still following people is Marc Andreessen and I think he follows, it's like 18,000 people or something and it's really interesting just to look through the list of followers because it's all over the map and much of it I wouldn't find interesting at all, but you'll find the strangest corners people in sort of remote villages in India and people doing really interesting things in South Africa. Okay. So he's a venture capitalist but they're not connected to venture capital at all. So many of them, they're just doing interesting things all over the world and I wouldn't advocate doing the same thing. You kind of need to cultivate your own tastes and your own interests. But there's something very interesting about that sort of capitalist city of interests and curiosity about the world, which I think is probably very good for almost anybody to cultivate. I haven't really answered your question. DAVID: I do want to ask who were the people or the ideas or the areas of the world that have really shaped and inspired your thinking because I'm asking selfishly because I want to go down those rabbit holes. MICHAEL: Alright. A couple of people, Alan Kay and Doug Engelbart, who are two of the people who really developed the idea of what a computer might be. In the 1950's and 60's, people mostly thought computers were machines for solving mathematical problems, predicting the weather next week, computing artillery tables, doing these kinds of things. And they understood that actually there could be devices which humans would use for themselves to solve their own problems. That would be sort of almost personal prosthetics for the mind. They'd be new media. We could use to think with and a lot of their best ideas I think out there, there's still this kind of vision for the future. And if you look particularly at some of Alan Kay's talks, there's still a lot of interesting ideas there. DAVID: That the perspective is worth 80 IQ points. That's still true. MICHAEL: For example, the best way to predict the future is to invent it, right? He's actually, he's got a real gift for coming up with piddly little things, but there's also quite deep ideas. They're not two-year projects or five-year projects, they're thousand year projects or an entire civilization. And we're just getting started on them. I think that's true. Actually. It's in general, maybe that's an interesting variation question, which is, you know, what are the thousand year projects? A friend of mine, Cal Schroeder, who's a science fiction writer, has this term, The Project, which he uses to organize some of his thinking about science fictional civilizations. So The Project is whatever a civilization is currently doing, which possibly no member of the civilization is even aware of. So you might ask the question, what was the project for our planet in the 20th century? I think one plausible answer might be, for example, it was actually eliminating infectious diseases. You think about things like polio and smallpox and so many of these diseases were huge things at the start of the 20th century and they become much, much smaller by the end of the 20th century. Obviously AIDS is this terrible disease, but in fact, by historical comparison, even something like the Spanish flu, it's actually relatively small. I think it's several hundred million people it may have killed. Maybe that was actually the project for human civilization in the 20th century. I think it's interesting to think about those kinds of questions and sort of the, you know, where are the people who are sort of most connected to those? So I certainly think Doug Engelbart and Alan Kay. DAVID: Talk about Doug Engelbart, I know nothing about him. MICHAEL: So Engelbart is the person who I think more than anybody invented modern computing. He did this famous demo in 1968, 1969. It's often called the mother of all demos, in front of an audience of a thousand people I believe. Quite a while since I've watched it and it demonstrates a windowing system and what looks like a modern word processor, but it's not just a word processor. They're actually hooked up remotely to a person in another location and they're actually collaborating in real time. And it's the first public showing I believe of the mouse and of all these different sorts of ideas. And you look at other images of computers at the time and they're these giant machines with tapes and whatever. And here's this vision that looks a lot more like sort of Microsoft Windows and a than anything else. And it's got all these things like real-time collaboration between people in different locations that we really didn't have at scale until relatively recently. And he lays out a huge fraction of these ideas in 1962 in a paper he wrote then. But that paper is another one of these huge things. He's asking questions that you don't answer over two years or five years. You answer over a thousand years. I think it's Augmenting Human Intellect is the title of that paper. So he's certainly somebody else that I think is a very interesting thinker. There's something really interesting about the ability to ask an enormous question, but then actually to have other questions at every scale. So you know what to do in the next 10 minutes that will move you a little bit towar

Michael: Hello everybody. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. We are here for your monthly May video podcast from OptionSellers.com. James, welcome to the monthly show. James: Thank you, Michael. Can you believe we’re going into May already? Michael: It sure went fast. This last month here we saw some key developments in the markets. We have a lot of tensions between China and the U.S. over trade, and then we’re, lately, looking at 10-year treasuries going over 3%. A lot of people are wondering how this may affect commodities. What’s your take on that? James: Well, the trade wars that are supposedly about to take place, I think, are simply negotiation. President Trump mentioned many times going into the election that he was going to do “the art of the deal” and get us some more fair playing field, especially with China. Certainly the deficit that many goes out to China and doesn’t come back is something that he’s going to work on and, I believe, it’s more negotiating than it’s actually going to be major changes, as far as trade tariffs and such. Will some be put in place and some enacted? Probably so, but I know Mr. Mnuchin is going to China I believe in the next week or two, and he’s going to have probably the checkbook ready so he can basically get an olive branch going out. Needless to say, everybody wants a strong economic global growth and a trade war is not going to help that; however, getting a more fair and balanced trade, especially with China, I think is a really good idea and I think that’s what we’re going to get over the next month or two. All the discussion about it, I think, is going to be more of just that: just discussion. Michael: So, you don’t see any major changes in any commodities in the immediate term? Any immediate strategies people should be doing right now or as a result of that or, primarily, do you just see things leveling out here? James: Michael, the discussion of a trade war, like in soybeans or something that’s going to affect the demand for oil, I think a person or an investor should use that to look at the idea that it’s going to be settled. It’s not going to be a large disruption to production or demand in any of these commodities. When the price of a commodity is affected by discussion of it, I think you should take advantage of that. 3-6 months later, the fundamentals that we see now are going to be in place then, and basically it was hype that was going on and I think it’s going to offer opportunities. For markets that you’re following, if there’s trade discussion that’s going to move up or down the market that you were hoping to sell either puts or calls on, I think that’s going to be great picking in order to do that. Michael: Okay. Well, for those of you watching, we have an exciting show for you ahead this month. We’re going to be addressing a very common question we get. A lot of times, people sell an option, they get into the trade, the option moves a little bit against them, and then the question is “Well, what do I do now? Do I adjust the trade? Do I get out of it? If so, where do I get out of it?” What we’re going to do this month is we’re actually going to take you into some of our real trades we are doing in portfolios. Some of these, you’ve probably seen us talk about before. Pull back the curtain a little bit and show you a risk-parameter we might use and then recommend something you can use at home, as well, if you’re trading on your own or just get a little bit better insight into how we might do it professionally. A good analogy, and, James, I know you can comment on this, is we all saw the incident with Southwest Airlines this month where they had the problem with the engine. Certainly a tragedy for the people involved that it effected; however, one thing that really stuck out to me is the pilots that landed that plane and saved all those people. Have you heard the transcripts? They’re just cool as a cucumber. They knew exactly what to do, they had processes in place for every situation or condition, and you pilots out there that are clients, you know exactly what I’m talking about. When people are trading, and you know this more than anyone, James, you should have a contingency. Anything that happens, you should have a plan for that happening and have that type of control. That’s how you avoid that “what should I do” when you get into certain situations. When you’re trading, you deal with the same thing, James, am I right? James: I certainly do, nothing like that pilot was facing this past week, but in a similar note, you do have a plan. We are generally positioned in anywhere from 8-10 commodities and when one is causing the plane or the bow to veer right or veer left you simply need to make the adjustment. It shouldn’t be a huge deal to your portfolio. You should really be able to make a minor adjustment. If you’re in 10 commodities and 1 is going really in a direction you weren’t thinking, you should have a plan for that. It shouldn’t be a panic. It shouldn’t be large turns like this. You should just be turning the wheel like this and we’ve got an adjustment that needs to be made, the cocoa market or the coffee market or the silver market, and you just steer the plane and get it flying level again. Your portfolio, whether you’re having a portfolio with us or you’re investing with one on your own, you should never have a position that makes that much variance to your account. If you have 1 position in your account, name the commodity- it doesn’t really matter, and if it moves 5-10% in a short period of time, if that makes your account move larger than it really should be, it shouldn’t have a large variance because the market moved 5% or 10%. If it is doing that, you’re simply not positioned correctly. Always have in your portfolio 8-10 commodities and if 1 is making the plane go like this then you just pull it back like that. You should never have a position on your account that you can’t, in order to make the plane fly smoothly again, if you would. It happens all the time. We’re not right all the time. We’ll have 8-10 commodities in a portfolio and by-goodness, 1 is going to be causing this to happen and you just straighten the plane. Just like that brave pilot did, he knew exactly what to do. My goodness, 1 engine went out and he was able to do that. We have 10 engines on our plane. We should never have one commodity or another commodity make the plane go like this. It really shouldn’t happen. For your investors at home, if that’s happening to your portfolio you don’t have a diversified portfolio, and that is something that we at OptionSellers.com always strive to have so that when something happens that was unexpected, there’s a big headline in a certain commodity, you just straighten the plane and that’s what we do. Michael: That’s what we’re going to talk about today. If you’re trading at home or you’re checking out this strategy, one of the biggest advantages you have as an option seller is that flexibility James was talking about where if you’re trading, and say you are worried about a Chinese trade war or this or that, you have the ability to build out a strategy that can benefit from nearly any type of economic condition. It’s one you should use if you’re an option seller. We’re going to address and use a specific example this month from a market we talked about. We’ll show you how to adjust a trade if you do get into those type of situations where it’s not working exactly the way you hoped it would, and we’re going to give you a couple examples here of how to do just that. James, why don’t we move into the trading room and we’ll talk about our markets this month. James: Sounds good. Michael: Welcome to the markets segment of the OptionSellers.com May Podcast. We are going to talk about a market this month that we featured in last month’s podcast and that we’ve got a lot of questions on over the past month so we’re going to talk a little bit about it. This does go into the topic of this month’s podcast, which is how to turn a losing trade into a winning trade. So, first let’s talk about the market… this is the cocoa market. You saw us feature this market in last month’s podcast. Cocoa we talked about selling the 32 December call options. The markets rallied a little bit since then, did not threaten a strike, but it’s up a little bit. James, do you want to tell us what’s going on with this trade and this market? James: Michael, what’s going on with cocoa right now is the last several years we’ve had a production surplus worldwide. In 2018 and 2019, some of the largest cocoa analysis around the country is predicting the first deficit in quite some time for world production. Basically, high prices cure high prices and low prices cure low prices. The initial trade is that we’re going to have a production deficit this coming year and then the market must go much higher because we’re running out of cocoa, but in all actuality what happens when the price of something is rising that is dampening down demand. So, for example, when cocoa was trading around $2,000 and $2,100 a ton, chocolate manufacturers were purchasing cocoa. As it rallies, they purchase less and less and less, and the demand has already taken place. So, when we do get an announcement of a production deficit, that usually gets the last of the buyers, the headline traders, to get involved with the market. We saw a spike here recently in the last day or two where cocoa was threatening $2,900 a ton. Keep in mind that’s up almost 50% in price over the last few months. Basically what that does is commercial demand then starts to fall and then basically it’s a speculatively driven market. Usually a market that has moved 50%, we have just a couple percent difference in production, 2-3 years ago up until now, and yet we’ve had a 50% increase in price; thus, we think that’s a temporary move in the market. While we were suggesting selling the $3,200 calls last month, the market did not get anywhere near that level but, as some of the viewers and readers have mentioned, the price of those options are up slightly from, maybe, when we discussed selling them. Michael: Sure. I think that goes back to a good point is, we always say this, we don’t know where the top or bottom of a market’s going to be. That’s why we are selling options in the first place. We’re not trying to pick that anymore. You don’t have to pick that either as an option seller. It’s an important point to make as an option seller… you’re not trying to call the market, you’re just picking a window where you think prices should remain and then selling options outside that range. James: Exactly right. Fundamentally, the price of cocoa over the next 3-6 months should be at this level. The price of coffee or crude oil based on fundamentals will be at a certain level, as well. Basically, you’re selling option premium that puts you out-of-the-money sometimes 40-50-60%, and some 8 times out of 10, that leeway is all you’ll ever need. As a matter of fact, anyone listening to us right now and, of course, our clients are long-term investors. So, if you are, like we discussed just recently, you are flying a plane and you want it to have several engines, okay? Your portfolio should have several commodities; however, when one does exceed a level that you thought it would, you can roll up your position. For example, each day that cocoa gets more and more expensive, the likelihood of it staying above its fundamental value diminishes. So, if you did short cocoa prices at, for example, $3,200 a ton by selling the $3,200 call, you may choose to roll it up to the $3,400 or the $3,500 if in fact it’s something that if you want to stay with the market or you want to stay with your position, but speculatively the market is driven higher than we thought it would do. That is certainly one approach that we often take and someone who maybe has that position on right now might want to take that, as well. Michael: So, what you’ve just explained is how to turn a losing trade into a winning trade, the title of our podcast here today. Let’s go back and just explore that briefly. When we talked about selling the call here, we talked about selling it and we were right about here, now the market has rallied a little bit. As you said earlier, it really hasn’t threatened the original strike. In fact, I don’t even think the original premium has doubled yet. James: No, they hadn’t. Michael: Yet, we got a handful of people writing, “Ah, I sold a cocoa call. What do I do now?” Well, there’s 2 points to that. One, we’re not really an advisory service, we are managed fund here, so we can’t really instruct you all the way through the trade. The bigger point here is when we went back to the beginning of the podcast that James just referred to, we talk about the pilot steering the plane. If you’re putting a trade like this on, you better have a plan for what you’re going to do for when you go into that trade if it doesn’t move the way you think. Now, the movement in cocoa right now, it hasn’t really been extreme, it is pressuring the strike price a little bit. James feels it’s still fundamentally justified trade, but if you’re getting uncomfortable or it keeps rallying or starts pressuring that, he’s talking about rolling the positions up. James, do you want to explain the mechanics of that if you were, or if somebody was holding a 32 call what they would do to recapture that premium? James: Okay, so let’s say you sold 10 contracts of the 3,200 December call strike and the price is now exceeding your risk tolerance. Let’s say you sold them for $500 or $600. Let’s say you have the 100% rule for your portfolio, so the option has now doubled to approximately $1,000-$1,200. Now what I would do, if you were considering staying with a fundamental trade, which I think cocoa will probably be in the high 20’s at the end of the year and nowhere near 3,200; however, you buy back your $3,200 call and you can sell 20 now of the $3,400-$3,500 call. Eventually, the fundamental factors are going to slow this market down and we think that come November, when the December contracts expire, we’ll probably be in the high 20’s… like 2,800-2,900 at the most. So, if we do exceed 3,000 for a brief period, I would use that certainly as an option selling opportunity in cocoa calls. 3,400-3,500, I think, the market will not exceed that level in our opinion. We’ll have to wait and find out, but come November I think the market will be much below that. Michael: So, you’re doubling up on those strikes. So, you sold 10 and then when you roll you’re selling 20. That allows you to, one, get back your original premium, but it also allows you to recover the loss. James: That’s exactly right. Keep in mind as we discuss this, we always want to be in 8-10 commodities. We are selling options sometimes 40%, 50%, 60% out-of-the-money. You can’t, or you probably don’t want to, base your entire investment and the viability of this type of investment for you based on the idea that you sold 10 contracts of cocoa. Okay? We are selling commodity options in approximately 8-10 different sectors and, over the long-term, selling options 40%, 50%, 60% out-of-the-money is going to work out quite well, but, by all means, we stub our toe. We get kicked in the shin once in a while, but if you’re a long-term investor, and everyone should be, whether you’re long stocks or the real estate market or you’re selling options as an investment portfolio, you just know that 1 or 2 may not go your way and you definitely need to manage your portfolio. This is one way to do it. Another idea is, you know, taking a losing trade. If the investment idea wasn’t correct, we’ll take a look at it again. Let’s see if the market continues to rally, we’ll sell options on another day, or we’ll come and visit cocoa again next year. Have that ability to do that. Michael: That’s an excellent point. If you’re watching some of the things we do and you’re trying to trade just at home online saying “Oh I like that trade. I’ll sell this and see how it goes”, that’s really not how these are meant to go. When we are putting trades on a portfolio, we are putting them on as part of an overall portfolio of, as you said, 6, 8, 10 different positions. Sometimes they’re hedged on the other side of the market, sometimes they’re balanced by a long or short position somewhere else. So, these are incorporated into a much bigger scheme. If you’re just taking them and you’re really selling them out of context, so if something like this does move against you it’s a big deal for your portfolio, where for us is just like the captain of the plane. It’s a flip of a switch, just something different you need to do to adjust the position. James: Exactly, Michael. You should always be able to have both hands on the wheel and just make small adjustments. If you sold cocoa calls recently, your positioning should only be going like this and you shouldn’t be turning the wheel like this. If you’re doing that with your portfolio, you’re not doing it right. Michael: And as we talked about earlier for managed clients, we are going to be taking a closer look at this market this month. It is starting to get interesting and maybe look to see what we can do there in the coming weeks here. Let’s talk about another market here for our second part of the podcast this month. That will be the crude oil market. If you want a market that has been in the news lately, one that has been in the headlines has been the crude oil market. We’ve been closing in on the $70 mark for the first time in 2014. It’s been one of the strongest commodities on the board since last fall. James, you want to tell us what’s going on here? What’s behind this rally? What’s been pushing prices higher? James: Michael, Saudi Arabia has done just an incredible job leading the OPEC nations, as well as Russian production. Someone sat down with members of OPEC and said, “Listen. We cut production by 2-3%, we’re looking at the possibility of a 20%, 30%, or 40% gain in crude oil prices.” Lo and behold, that math sounded good to the OPEC producers, they did start cutting production, not a great deal, just a couple percent. Basically, we were looking at a 300-400 million barrel of surplus floating around the world, both in tankers and at storage facilities in some of the OPEC nations. After some 18 months of oil production cuts by OPEC and along with Russia, that 300-400 million barrel surplus is down to some 30 or 40 million barrels… just a huge gain for OPEC. Their ability to cut production has just paid off in spades. We have approximately 35-40% increase in oil prices. OPEC is very cohesive right now, something that a lot of analysts are quite surprised at and we are surprised at it, as well. The ability to keep that production offline when prices are going up, my hats off to OPEC, they’ve done a very nice job in order to do this. The market is now balanced. Basically, for every barrel that is being produced there is a consumer right now. We have a very balanced market and, as you can see, it’s up some $20-$25 from where we were just not that long ago. Michael: Yeah, compliance has been surprising, too. I read somewhere that they’re at like 138% compliance. Before, they used to have trouble even getting half the members to hit their quotas, now they’re above 100%. James: Someone did the math for the OPEC producers and said a small 2-3% cut can possibly increase the prices 20-30%. They nailed it. Here are the final results. Michael: As you mentioned, that’s taking quite a bit of oil off the market. OPEC production down 11.4% since these started in January 2017. So, that’s a pretty good drawdown. That’s really, what James is saying, is behind this rally right now. That and we have a pretty good seasonal in effect that’s helping drive prices now, as well. James: Basically, as we get into driving season in the U.S., the largest consumer of oil and gasoline in the world, you have a ramp-up of production where you’re cracking oil into gasoline and, generally, that happens between the months of March, April, and May getting ready for summer driving season. So, that cracking of oil takes oil production and supply off the market, turns it into gasoline, so you have, once again, a temporary shortage of oil as not only OPEC taking barrels off the market but also you have the largest refining season coming up going into driving times of June, July, and August here in the United States. This takes barrels of oil off the market, they are cracked into gasoline, and that’s why you usually have this seasonal rally going into May and June. Michael: Which seems to be following it very closely this year, the seasonal tendency. Now, one thing we’re seeing this year, and you and I were talking about this earlier, is refineries are operating at a torrid pace right now. They’re really hitting it pretty hard as far as production goes. Right now, gasoline production running about 4.2% ahead of pace for where it normally is. So, you’re thinking that they may hit those levels earlier this year and we may see a topping action in crude a little bit earlier this year? James: You know, consumption for gasoline in the United States peaks in June and July right around the 4th of July, or so it seems, but the price of crude oil will often top before then. Crude oil is clearly where gasoline comes from, and as those barrels come offline, in other words, they’re cracked into gasoline, the price of oil will often top before gasoline does. So, the demand is still there but it has already been produced. So, while the greatest demand in the United States is around the middle of the summer holidays, the demand for oil to produce that gasoline has already taken place and thus the seasonal comes down sooner than you would think. Michael: Sure, and this chart’s showing you can see a top in crude any time between mid-May to early-July, as you said; however, if refineries are hitting those levels where they deem supply adequate, they’re going to cut back production sooner and that will hurt demand for crude. James: And then the crude barrels start to accumulate more. Michael: Okay. So, we have that and then also, on the other side of the coin, what we have coming up or what’s even surprised OPEC is the level at which the United States has been able to ramp up production. They’re taking advantage of these higher prices and you referred to high prices carrying high prices earlier. We’re seeing U.S. production just blowing up, going up about 10.5 million barrels a day. Is this having an affect right now on the supply? James: Well, basically it’s balancing… the additional barrels coming from the United States is balancing what OPEC’s not producing. The fact that production in the United States is going to probably exceed 11 million barrels a day coming up in 2019 and 2020. We do see this plateauing and the excitement in oil right now is probably going to be rolling over. If the United States wasn’t the largest consumer, let’s say all these barrels were being produced on the opposite side of the globe, getting them to the United States would be difficult and then maybe the largest producer, now the United States, wouldn’t be such a big deal, but the fact that we’re producing it exactly where we need it, here in the United States, that will offset some of the global demand and price shock around the world. Everyone always talked about, “The United States is susceptible to what OPEC does”… well, we’re producing all the oil we need now, so the fact that oil is approaching $70 and here in the United States we can produce it for between $35-$45, how long is it going to stay above $70? It can only exceed it by a certain amount of dollars per barrel and for a certain period of time. If this level gets to 11 million barrels a day or 11.5 million barrels a day, oil will be coming back down into the low-mid 60’s at the very least, and probably setting up a sale here that’s looking like in May or June for option sellers. Michael: Okay. So, your outlook for the intermediate turn, obviously we talked earlier and we’re not trying to predict what prices are going to do, only what they’re not going to do, but do you see a little more strength coming in and then weakening, or what’s just the general outlook for that window? James: What’s so interesting right now is in some global economies, especially throughout Europe, they are going to feel this large gain in the price of oil. Japan is going to start feeling this large gain in the price of oil. Basically, they are 100% consumers and produce nothing, so oil going from $45 up to $70 will start slowing demand from these major consuming nations. At the same time, when the United States is now producing the most they ever have and now the largest producer in the world, we see oil kind of plateauing here this summer right around maybe June or July, but not falling a whole lot. The fact that we had a 400 million barrel world surplus and it’s not approximately 40 million barrels, the market’s extremely well balanced right now. So, we see some of the excitement that’s going on now in crude oil plateauing somewhat, maybe coming down some $3-$5, but not falling through the floor by any means. Oil production right now is down with OPEC. They have been rewarded for keeping barrels off the market, and I don’t think they’re going to forget that any time soon. I don’t see them going back and ramping up production. They’ve been rewarded so well, they’ve learned a great lesson by keeping, at first, some 3% oil barrels off the market, now it’s up to some 9%, 10%, or 11% of barrels off the market. They’ve learned a great lesson and they’re being rewarded for it, so we don’t see production swamping this market. We see oil possibly trading at about a $10 trading range from where it is now throughout the end of the year. Michael: All that media coverage and, of course, the price rally has increased the volatility, which is what we like to see as option sellers. Taking a look at a trading strategy, how to trade that exact scenario you just described, you’re looking at one of your favorite strategies, a strangle. James: It certainly is. You discussed, just now, headlines and OPEC and trade wars with China and the value of a dollar. All of this really has the volatility of petroleum, especially crude oil, at record levels that I haven’t seen almost since I’ve been investing in commodities, but right now you have put premium extremely high, even with a bullish fundamentals, and you have call premium through the roof right now. My favorite position in crude oil for the rest of the year is practically a $45-$50 strangle around the price of oil. So, in other words, we would be selling calls at the $90 level and selling puts at the $45 level. We think that the idea that strong fundamentals right now will keep the market from falling, but yet the fact that prices are high right now and that’s going to start curtailing demand. My prediction for the rest of the year is about a $10-$12 trade range for crude oil and here we have one of the best opportunities I’ve seen to position in crude oil in a long time. That’s putting a $45-$50 strangle around oil. We’re not right all the time and every once in a while we don’t get it right, but for oil to stay between 45 and 90 through the end of the year, I think, is an incredibly high probability position and that’s something that we’re taking advantage of, as you know, Michael, right now. Michael: You couldn’t do that a year ago. You didn’t get that wide of window, and now we have it, it’s on the table, and you want to take it. James: Michael, that volatility is your friend. I know when it first happens and you already have positions on, “Oh, it’s too volatile for us”… that’s what you like. A year ago, 2 years ago, 3 years ago, the widest strangle you would write on crude oil was approximately $15-$20 and now you’re writing a $45 strangle. We, as well, are going out slightly further in writing and $50 strangle around crude oil. We’re pretty confident it’s going to stay inside that window. We’ll have to wait and see. Michael: And again, watching this at home, this is an example. We are not recommending this to you personally as the perfect trade. In our portfolios, we are diversified over December, January, February, and March. Different strategies and different risk management techniques, but in going out to a month like February, a lot of people think that’s a long time out. We’re about 9 months out, but your plan isn’t to necessarily hold these until February or March or whatever you’re writing out there. Often times, with the right decay, you can be getting out of these a few months early. James: Michael, as we discuss with our clients when they first become clients, we will sell options 6 months, 9 months, 12 months out into the future, but not with the idea that we’re going to stay into that position until the very last day and try and collect the very last dollar. It’s really not important to do that. If we select options fairly well, for example, on the position that we’re looking at right here, after maybe let’s say you sell options 9 months out, if you selected them fairly well, 5-6 months later you should have collected about 85-90% of the potential premium. That is a great place to ring the register and lower your risk and be happy with the position and get out of the trade and buy it back early. Often, we look at February or March or April when we’re talking about selling options. Basically, you’re Tom Brady and you’re throwing it to where the market is not going to be. That is what we’re doing. So, when Michael discusses layering different months and different commodities that’s what we’re doing. To own a portfolio like that, it looks like a great deal of layering in the market and that is what it is and it allows you to have 10 engines on your plane so that when one goes a little bit awry you have other positions to make sure that 80% of your portfolio is going the right direction. This is a great example of doing that. Michael: Great advice. If you would like to read more about the crude oil market, what we’re recommending there this month, or going into our managed portfolios, you will want to read this month’s newsletter… that’s the May edition of the OptionSellers Newsletter. That comes out May 1st. It should be in your e-mail box or showing up in your hard copy mailbox a couple days after that. Of course, if you want to learn more about the strategies we discussed here or the rolling or strangle or some of the other concepts James mentioned, if you don’t have it yet, The Complete Guide to Option Selling: Third Edition, you can get it on our website at a discount, on Amazon, or the bookstore. The link to that is www.OptionSellers.com/book. Let’s move into our closing section for this month. Michael: Thank you for watching this month’s edition of OptionSellers TV. James, thank you for those insights on the cocoa and the oil markets. You have any predictions for the upcoming month? James: The month of May 2018, Michael, I think is going to be the realization that the U.S. dollar is not the weakest currency in the world. The U.S. is looking at probably 2 or 3 rate hikes this year. The U.S. economy is still doing quite well and its counterparts, especially in Europe, the economies in Germany, Italy, France, and England have been doing pretty well over the last 12-18 months, but the expansion in countries like Germany especially, the major driver of the European economy, is showing signs that it may be peaking already. Consumer Confidence in Germany is down, a lot of the sales in Germany is down right now, and not that it’s going into recession, if it does that would be the shortest-lived recovery ever, now don’t see that happening, but the U.S. economy still is on this footing and the European economy is fluttering already. That is going to make the U.S. dollar more buoyant than a lot of investors thought it would be and that is going to stabilize a lot of the commodities. So, getting into short options right now, whether it be puts or calls on precious metals, energies especially, and some of the foods, I think it will be a great calming effect in the 3rd or 4th quarter of this year. So, any discussion about the U.S. dollar isn’t doing so good, any discussion about inflation, I would fade those ideas and sell options on those ideas and, I think, later on this year you’ll be well rewarded. Michael: Sounds like a good outlook. We’ll have to keep an eye out for that. Also, May is a very active month in the grain markets. We have corn and soybean plantings going on here in the United States, so that can often create opportunities there, as well, for option sellers, sometimes on both sides of the market. James: Practically every year we have large influx of volatility in corn, wheat, and soybeans and we are ready and waiting for that to happen. Michael: Excellent. For those of you interested in finding out more about managed option selling portfolios with OptionSellers.com, you can call to request a consultation. At this point, we are booked out through July for our upcoming consultations; however, I believe we still have some spots left for consultations in June for those July account openings. I believe I misspoke there. The consultations are open in June, the account openings are for July. So, if you are interested in those upcoming openings, feel free to give our office a call here and speak with Rosemary. The number is 800-346-1949. If you’re calling from overseas, the number is 813-472-5760. James, again thank you for your insights this month. James: My pleasure, Michael. It’s always great to give our wisdoms and our insight. We’re not right all the time, but I do like the landscape for selling options here in May and June. Michael: Perfect. We’ll look forward to the month of May and we’ll talk to all of you again in 30 days. Thank you.

Michael Coté: @cote | cote.io | Pivotal | Software Defined Talk Show Notes: 00:54 - Pivotal 04:39 - Being a Professional Muller aka Analyst 11:08 - Iterative Development 32:54 - Getting a Job as a Professional Muller aka Analyst Resources: Pivotal Cloud Foundry GemFire Greenplum Pivotal Labs Wardley Maps Software Defined Talk Episode #79: From a vegan, clothing optional co-op to working with banks and oil companies - Coté's professional life, part 1 Software Defined Talk Episode #85: Being an analyst without being an asshole - Coté's professional life, part 2 RedMonk Transcript: CHARLES: Hello everybody and welcome to The Frontside Podcast, Episode #66. I am a developer, Charles Lowell at The Frontside and also host-in-training for 65 episodes. This is my 66th and I'm flying alone this week but we do have on the show with us a very special guest. Actually, the person who taught me how to podcast, I think it was about 10 years ago and he was like, "Charles, we should do this podcasting thing." I started my very first podcast with him and I still haven't figured it out. But his name is Michael Coté and he's a fantastic guy and welcome to the show, Coté. MICHAEL: Thanks for having me, Charles. It's great to be here. CHARLES: Now, what are you up to these days? You're over at Pivotal. MICHAEL: That's right. I work at Pivotal and probably people who are in the developing world know them for Spring. We have most of the Spring people. Then we also have this thing Pivotal Cloud Foundry. We're not supposed to call it a platform as a service but for matters of concision, it's a platform as a service that's the runtime that you run your stuff in. Then we also have a bunch of data products like GemFire and Greenplum and things like that. Then, 'openymously', if that's a word, we have Pivotal Labs. Now -- CHARLES: I think, it's eponymously. MICHAEL: Eponymously, yes. Now, you might remember Pivotal Labs as the people who use Chef Scripts to configure their desktops. Remember that? CHARLES: Yeah, I remember that. I was into that. MICHAEL: Yeah, in coincidental kind of way, the inspiration for the project Sputnik thing, which is coincidentally because now Dell Technologies owns Pivotal so all of that stuff has come for a full circle. I guess also since I'm intro-ing myself, I work on what we call the Advocate Team because we don't call them evangelists. No one likes to be called that I guess. I guess there's 12 of us now. We just hired this person, also in Austin actually McNorma who's big in the Go community and apparently can make images of gophers really well. I'm sure she does many other extraordinary things, not just the illustrator master. Everyone else basically like codes or uses the terminal but I do slides. CHARLES: Well, that's your weapon of choice, right? It's a more elegant weapon for civilized time or something like that. I'm going to look it up on Wikia. MICHAEL: Yeah, basically what we do on our team is we just talk about all the stuff Pivotal does and problems that we solve in the way people in an organizations like would think to care about our stuff. Most of what I do is I guess you call it the management consultant type of stuff. Since I have a background as an analyst and I used to work on corporate strategy and M&A at Dell so I have a vantage point in addition to having programmed a long time ago. If you're changing your organization over to be more agile or trying to devops, we would say cloud-native with a hyphen. How do you change your organization over what works and doesn't work? Most people in large organizations, they sort of pat you on your head. I'm sure you encounter this. That sounds really nice that we would be doing all of the good, correct ways of using computers but we're basically terrible and we could never make that happen here. Thanks for talking with us, we're going to go back and stew in our own juices of awfulness. You've got to pluck them out of that self-imposed cannibal pot there in the jungle and show them that they actually can improve and do things well. CHARLES: Would you say you feel like your job is being that person who shakes them away and can be like, "Good God! Get a grip on yourself!" MICHAEL: Sure. That's a very popular second or third slide in a presentation -- the FUD slide, the Fear of Uncertainty and Doubt slide where you're basically like, "Uber!" and then everyone just like soils their pants because they're afraid that are like Airbnb and Uber and [inaudible] and Google is going to come in and, as they say, disrupt their state industry. I try not to use the slides anymore because they're obnoxious. Also, most people in large organizations nowadays, they know all of that and they've already moved to putting on a new pair of pants stage of their strategizing. CHARLES: You've got the kind of the corporate wakeup call aspect of it but then it's also seems like a huge component of your job which is when you were at RedMonk, when you were at 451 and even to a lesser extent, it was Dell who was paid well to just kind of mull it over, like just kind of sit there and asynchronously process the tech industry, kind of like organizational yeast and let it ferment, kind of trying to see where the connections lie and then once you've made that presented, do you think that's fair? That's what sprung to mind when I heard you say like, "Yeah, we just kind of sit around and think about what is Pivotal and what does it do and what's it going," but like how do you get that job of like, "I'm just kind of a professional muller." MICHAEL: That's right. First of all, I think professional muller is accurate, as long as, I guess mulling is also for -- what's that thing you drink at Christmas that you put the little -- CHARLES: Mulled wine. Like low wine. MICHAEL: I can feel like that sometimes late at night. But having a job as an analyst, I was an industry analyst at two places for a total of about eight years or so. Then as you're saying doing strategy at a company, now what I do here, essentially a lot of what you do is very difficult. I know it sounds to people. You just read a lot of the Internet. You just consume a lot of the commentary and the ideas of things that are going out there and you try to understand it and then synthesize to use that cheesy word. Synthesize it into a new form that explains what it is and then finally, the consultant part comes in where you go and meet with people or you proactively think about what people might be asking and they say something like, "What does this mean for me? And how would I apply it to solve my problems?" I guess as an example of that -- I apologize for being a little commercial but these are just the ideas I have in my head -- Ford is a customer of ours and they also have invested in us which is kind of novel. We have GE and Ford invested in Pivotal and Microsoft and Dell Technologies as an interesting mix but anyways, they have this application called the Ford Pass Application. I drive a Ford Focus -- CHARLES: Like Subaru? But you do drive a Ford. MICHAEL: Yeah, because I don't care about cars. It's a bunch of nonsense. I see this app and basically the app, if you have a more advanced one, it might tell you your mileage and even like remotely start your car. But it doesn't really do that much. You have the app and it will tell you information about your car and where to park and it even has this thing where it links to another site to book a dealership thing, which is annoying. CHARLES: Why would you want to book a dealership? To buy another car? MICHAEL: Well because the Ford Focus I have is notorious for having transmission problems so you're like, "I got to go and take it into the dealer to get all this recall stuff taken care of," so wouldn't it be nice... I don't know if you've ever worked with a car dealer but it's not desirable. CHARLES: Yeah, it would be nice if they didn't charge $6000 for everything. MICHAEL: Right. It's a classic system of having a closed market, therefore that jacks up prices and lowers customer service usually. What's the fancy word if there is a negative correlation, if you were to chart it out? Like price is negatively correlated to your satisfaction with it. Kind of like the airline industry, not to bring up a contemporary topic. You pay a lot of money to fly and you're like, "This is one of the worst experiences I've had in my life," whereas you go to the dentist and get a root canal and you're like $20 co-pay. Loving it. [Laughter] MICHAEL: Anyhow, this Ford Pass application doesn't really do very much so what does that mean for what I was explaining. If you go look up and read about it, starting back in the late-90s, your extreme programming and then your Agile Software Development and your devops nowadays, one of the major principles is what you should do is ship often. Maybe you should even ship every week or every day. Don't worry about this gigantic stack of requirements that you have and whatever you should be shipping all the time and then we've trained ourselves to no longer say failing fast. That was a fun cheeky thing back in the late-2000s. CHARLES: Did we trained ourselves not to say that anymore? MICHAEL: I don't hear it very often. CHARLES: Man, I got to go scrub my brain. MICHAEL: Yeah, well this is why you consult with me every 10 years as I tell you the new things. CHARLES: Okay, here we go. We're going to have you on the podcast again. MICHAEL: That's right. You have this idea of like, "We should be releasing weekly," but then if you go to Ford, you're like, "What does that mean?" To shave the shaggy dog here, essentially the idea that they're shipping this mobile application that doesn't really do very much is an embodiment of the idea that they should be shipping more frequently. This may be a stupid example. It's not that it's not going to do very much like permanently but as I have witnessed, very frequently they add new features so Ford is in this cadence but there's this app that instead of working on an application for two years and having everything in it, they're actually releasing it on, I don't know if it's weekly but they're releasing it on a very frequent basis, which allows them to add features. What that gets you is all the advantages of a fast iteration cycle small batch thing where they can study this actually a good feature. They can do all your Lean Startup nonsense. That's a very like weird, perhaps example of how you explain to someone like a large car manufacturer like Ford, this is what devops means for you. Therefore, why you should spend a lot of money on Pivotal? Now that's the part that lets me pay my mortgage every month, the last bit there. CHARLES: Right so Pivotal builds apps. MICHAEL: Well, the Labs people build apps for you. CHARLES: I'm kidding Coté. MICHAEL: Yeah, they actually do. The Labs people are like a boutique of another boutique like ThoughtWorks is kind of a boutique but they're kind of a boutique-y version of ThoughtWorks. That probably is terrible as someone who markets for Pivotal to do that. Do you ever notice how political candidates never really name their opposition? Like you never really want to name your competition but anyways... CHARLES: Pivotal marketing are going to come crashing through your window. Everybody, if we hear them in the next five seconds -- well, I guess you can't call 911 because this is not live. MICHAEL: Yeah, that's true. The Labs people build stuff for you and then the part that I work, in the Pivotal Cloud Foundry people, they have the actual runtime environment, the cloud platform that you would run all that stuff. Plus all the Spring nonsense for your microservices and your Spring Boot. I understand people like that. CHARLES: So good for Ford, for actually being able to experience, either in the development and the joys and the benefits that come with it. But this is actually something that I actually want to talk about independently was as I kind of advance in my career, I find myself pushing back a little bit against that incredibly tight, iterative schedule. Shipping things is fantastic and it's great but I find so much of my job these days is just trying to think out and chart a course for where those iterations will carry you and there is a huge amount of upfront design and upfront thought that it is speculatory but it's very necessary. You need to speculate about what needs to happen. Then you kind of measure against what's actually happening but I feel that kind of upfront design, upfront thought, we had this moment we're like, "We don't need that anymore. Let's throw it all in the garbage." In favor of doing things in these incredibly tight loops and finding where's the clutch point, that kind of long range thinking and long range planning comes and meets with the iterative development. I have no idea. What's the best way for those to match up those long cycles and those short cycles? Where is the clutch play? MICHAEL: I'll give you two and a half, so to speak trains of thoughts on that. One of them is I think -- CHARLES: Two and half trains of thought, I like that. Can we get straight to the half train of thought? MICHAEL: Yeah, I'm going to start with the half, which is just taking all of your questions and putting periods at the end of them before I round up to answering the question. I think a lot of the lore and the learnings you get from the Agile world is basically from consultants and teams of consultants. Necessarily, they are not domain experts in what they're doing so their notion is that we're going to learn about what it is we're doing and we don't actually know we can't predict ahead of time because we're not domain experts so they almost have this attitude of like, "We'll just figure it out on the job." Let's say The Frontside gets hired to go work on a system that allows the Forest Service to figure out which trees to go chop down or not -- CHARLES: If you're the Forest Service, we are available to do that. MICHAEL: I'm guessing you don't have a lot of arborists who have 10 or 20 years of experience working there. CHARLES: No, we don't. MICHAEL: And so you have no idea about that domain so in doing an iterative thing, you won't be able to sit down and predict like everyone knows that when you send the lumberjacks out, they're going to need these five things so we're going to have to put that that feature on there. They need to be able to call in flapjacks when they run out. That's just what's going to happen so you don't know all of these things they need to do so you just can't sit down and cogitate about it ahead of time. Also this comes in from the Lean Startup where there's a small percentage of software that's actually done globally and the notion of a Lean Startup is that when you're doing a startup, you're never going to be determined what your exit is, how you cash out, whether that's building a successful long term company while you get sold to someone or whether you IPO, you're not going to able to predict what that business model is so you just need to start churning and not think a lot ahead of time. Now, the problem becomes, I think that if you are a domain expert, as you can do the inverse of all the jokes I was just making there, you actually can sit down and start to predict things. You're like, "We know we're going to need a flapjack service," so we can predict that out and start to design around that and you can do some upfront thinking. Now similarly, developers often overlook the huge amount of governance and planning that they do for their own tools, which I know you're more cognizant of being older or more experienced, as they like to say. But basically, there's a bunch of, as we used to call it when I did real work and develop stuff, iteration zero work like we're going to need to build a build system, we're going to need a version control. You actually do know all these things you're going to need so there are all the things you can plan out and that's analogous to whatever domain you're working in. Sometimes, at least for your toolchain, it is worth sitting down and planning out what you want. Now, to hold back the people who are going to crash in my window, one of the things you should consider is using Pivotal Cloud Foundry. That's probably something you should cogitate on ahead of time. CHARLES: I think they're going to crash through your window and give you a Martini, if the marketing ninjas are going to do that and if you mention them in a positive light. MICHAEL: You know, it's 10:52 Central but if we were in London, it would probably be an appropriate time so we'll just think about that. Now, on the other hand, you don't want to go too overboard on this pre-planning. I'll give you an example from a large health insurance company that I was talking with recently. They had this mobile app -- it's always a mobile app -- that had been languishing for 15 months and it really wasn't doing anything very interesting. It was just not working well and they could never release it. This is a classic example of like, "We took a long time to release a mobile app and then we never released it again and then it blows." It's not achieving all of the business goals that we wanted. Mostly, what a health insurance company -- I've talked with a lot of the health insurance companies -- want with their mobile app is at least two things and probably many more but these would be the top of the list. One, they want their customers, their users to look up what their health insurance is, figure out doctors they can go to, the basic functioning that you expect from your health insurance company. And two, they want to encourage their customers to do healthy behaviors because if you think about it as a health insurance company, health insurance in my mind is basically like this weird gamble of like, "I'm gambling on the fact that you are going to be healthy," because then I pay out less to you and you just give me money so the healthier that your users can be, the more profit you're going to make. That's why they're always trying to encourage you to be healthy and stuff like that. The mobile app was not achieving, at least these two, if not other business goals they have. They basically were rebooting the effort. The way they started off is they had -- I don't know how many inches thick it was -- a big, old stack of requirements and the first few iterations, the product team was working on it and talking with the business analyst about this and going over it and what they sort of, as we were calling Pivotal Labs the product owner but the person who runs the team, realize is like -- to cut a long story short -- "This is kind of a waste of time. We shouldn't just prioritize these 300 features and put them in some back road and execute on them because these are the same features that we based the more abundant application on, we should probably just start releasing up the application," kind of like the FordPass app. That said, they did have a bunch of domain experience so they had a notion of basically what this app was going to do and they could start planning it out but they figured out a good balance of not paying attention to, as Martin Fowler used to call it the almighty thud, of all the requirements. What they ended up doing is they basically -- CHARLES: What's the almighty thud? MICHAEL: You know, he's got some bleaky or whatever. It's basically like we started a project and I think it's from 2004 and someone FedExed me about 600 pages of an MRD or whatever and I put it down on my table and it made a loud noise so he calls that the 'almighty thud', when you get this gigantic upfront requirement thing. What happened in this health insurance thing is they stopped listening and talking with those people and they kind of like chaff them out, not like when your rub your legs together but they kind of distracted them to that fact but eventually, they just got them out of the cycle and they started working on the app. Then lo and behold, they shipped it and things are working out better now. CHARLES: Hearing what you're saying and kind of thinking it over, I think if you're going to have an almighty thud, what you really want is you want all that upfront research and all that upfront requirements gathering or whatever, not necessarily to take the form of a set of features or some backlog of 300 things that the app 'needs' to do or 'should' do but just a catalogue of the problems, like a roadmap of the problems. MICHAEL: Exactly. CHARLES: You know, that actually is very valuable. If it's like, "These are things that are true about our users and these are the obstacles that they face. If we do choose that we want to go from Point A to Point B, where we are at Point A, then we actually have a map of what are the things that are sitting in front of that and what are the risks involved." It's like if you got -- you played, you're from my generation, you play the Oregon Trail, right? MICHAEL: Yeah. "You have dysentery." CHARLES: Right. I don't know where I'm going with this analogy but my point is developing that app is like going from Kansas City to Portland. But the thing about software is you don't necessarily have your corn meal. You don't need to say like, "We're going to need six pounds of cornmeal and we're going to need these wagons and we're going to need these mules," because this is software and you can just code a mule if you need it. But you might not need a mule, if the rivers are not in flood... I don't know. Like I said, I don't know where I'm going with this analogy. But do you see what I'm saying? The point I'm trying to make is that having the map of the Rockies and where the passes are is going to help you. MICHAEL: Yeah, this is probably where I'm supposed to expertly rattle off what Wardley maps are and how they help, which is fine. I think that's a great tool. There's this guy Simon Wardley and he's actually a great contemporary philosophizer on IT-led strategy. I think he works for CSC who no longer owns mercenaries but they used to -- Computer Science Corporations. I think they own a little bit of HP Services Division but he works for some think tank associated with CSC and he has got a couple of OSCON talks on it, where it's called a Wardley map and it's a way that you start figuring out what you're saying, which is to say your company's strategy. Using your front metaphor of the era of tall hats, if you remember that other movie, if you're on the Oregon Trail, broadly your strategy is -- and people get all up in your face about the difference between a plan and a strategy and we'll just put mute on them and edit them out of the audio because they're very annoying -- CHARLES: We'll call it an approach. MICHAEL: That's right. Your plan or your strategy -- and pardon me if I use these phrase free and loosely and everything -- is you would like to get to Oregon and you would like to live there and maybe grow apples or start a mustache wax company or some donuts, whatever it is you do out there once you get to Oregon and their strategy is -- what are the assets that I have. I have a family, I have some money and I also know some people who are going there so I'm going to buy a stagecoach and a mule, then I'm going to kind of wangle it out and we're going to go over there. Also, part of our strategy is we're going to go through the northern pass because we're used to winter versus the southern pass, which isn't the Oregon Trail because reasons. Maybe Texas isn't part of The Union yet so I don't want to deal with the transition between whatever that weird Texas thing down there -- CHARLES: The desert, there's the southwest and the desert. MICHAEL: I don't have the capabilities to survive in a desert so I need to go to the north and hopefully I won't be like that movie and have a grizzly bear rip up my backside and everything. You sort of put together this plan. Now going back to what you would do in IT world is to your point, someone does need to define what we would call the business value or the strategy, like what you want to do. Looking at the Ford thing, what Ford wants to do is they do cogitating thing ahead of time and they're like, "We manufacture cars," and you've got electric cars and Uber. That's where the scarce light comes in. In the future, who knows that people will still buy cars? It might be like that I-Robot movie where all the cars are automated and you just go into one. As a company, whose responsibility is to be as immortal as possible, we need to start making plans about how we can survive if individuals no longer buy cars. Let's do that. This is a huge upfront notion that you would have and then that does trickle down into things like my Ford thing -- I'm kind of speaking on their behalf -- if we have a direct connection with people, maybe eventually we introduce an Uber-like service. You can just check-out a Ford car. Then maybe this and maybe that. It's the strategy of how do we set ourselves up to do that. Now, I think the Agile people, what they would go for is it's really good to have that upfront strategy and you'll notice that in a lot of lean manufacturing in Agile talk, no one ever talks about this stuff, much to my extreme annoyance. They don't ever talk about who defines the strategy and who defines that you're working on this project. That's sort of left as an exercise to the reader. The Agile people would say like, "The implementation details of that are best left to the development team in an Agile model." Just like the developers are always arrogantly are like, "Hey, product manager. How about you f-off about how I should implement this? I am the expert here and let me decide how I'm going to implement the feature that you want for me." It's kind of like that rushing dolling down of things. To the development team, you worked on some, what was it? Band frame wire thing, a long time ago? It was basically like, "We don't know it. Maybe this is not the case. Let's pretend like it was." We don't know exactly how you're going to implement this stuff but our goal is that there's bands and they need sides and ways of interacting with their users so let's just figure out what that looks like but they had that upfront idea of ways that they were doing things. CHARLES: Let's start walking. MICHAEL: To add on some more. There's another edge case that you're making me think of, which is a good way of thinking through almighty thuds versus how much planning you have and that's government work. Government work that's done by contractors and especially, military contracting work. What you notice in government work is they have, seemingly way too much paperwork and process. They literally will have project managers for project managers and the project managers have to update how the project is going and they reports. If they don't do the reports correctly, their contract is penalize and you might even get fired for doing it. If anyone stops and says while the software is working, they were like, "No, no, no. don't be naive. It doesn't matter if the software is working or not, if we don't fill up the project report, we're fired." Until someone like yourself or me, it's just like your head explodes and you're like, "But working software, not a concern." In that case, it actually is part of the feature set, part of the deliverable is this nauseating amount of project reporting and upfront requirements, which has this trickle-down effect of annoyance but that's what you're getting paid for so that's what you do and if you want to make yourself feel better about it. I don't know how it is in the rest of the world but in the US, basically we think the only person worse than maybe, Lucifer is the government. I don't know why this comes about. We enjoy the fruits of the government all the time but for some reason, we just think they're awful. Whenever we give money over the government, we want to make sure that they're spending it well and if they're not corrupt and they don't hire their entire family to help them run the government and make sure that they're making extra money globally in their businesses, I wouldn't know anything about that. But essentially, you want to make sure there's no corruption so transparency is almost more important than working software. The way you achieve that transparency is with all this crazy documentation. CHARLES: Here's the thing. I agree the transparency is fantastic but nothing is more transparent than working software. Nothing is more transparent than monitored software. Nothing is more transparent than software whose, by its very nature is radiating information about itself. You can fudge a report but you can't fudge a million happy users. MICHAEL: Don't get me wrong. I'm not saying that the way that things currently operate is the ideal state. I'm saying that that desire for transparency has to be addressed and for example, using your example, let's say you were delivering working software but you were also skimming 20% off the top into some Swiss bank account -- you're basically embezzling -- and then it turns out that you need 500 developers but you only actually had 30 developers. There was corruption. The means even though the ends, even though the outcome was awesome, the means was corrupt so that's the thing in a lot of government work that you want to protect against. I just bring that up as an edge case so a principle to draw from that, when it comes to almighty thudding is like sometimes, that is part of the deliverable. We would aspire in our fail, fast, Agile world to not have a bunch of gratuitous documentation as part of the deliverable because it seems like a waste. It would be like every morning when you battle with your kids to get their shoes on, you had to write a two-page report about how you're getting ready to go to school stuff with your kids was going. As a parent you would be like, "I don't need that." However, maybe if you were like an abusive parent and it was required for you to fill out a daily status report for you to retain the parentship of your kids, maybe it would be worth of your time to fill out your daily status report. That was an awfully depressing example there. CHARLES: Let's go back to the Oregon Trail. What I'm hearing is that -- and we will take it back to the Oregon Trail -- you also need to consider, as were saying, you have some sort of strategy which is we want to go sell apples and moustache wax. But what we're going to do is we're just going to start walking, even though we don't have a map. But obviously, if you send out scouting missions, like you know where you're going, you know the West Coast is out there somewhere, you start walking but the stakes determine how much of your resources you spend on scouting and map drawing -- MICHAEL: Yeah. My way of thinking about strategy and again, people strategy is this overloaded word. But my way of thinking about strategy is you establish a goal: I would like to go to the West Coast. Now, how you figure that out could be a strategy on its own, like how did you figure out you want to go to the West Coast. But somehow, you've got to get to a prime mover. Maybe those tall hat people keep beating me up so I want to go to the West Coast. I want to go the West Coast is the prime mover. There's nothing before that. Then you've got to deal in a series of constraints. What capabilities do I have, which is another way of saying, what do I not have? And what's my current situation and context? On the Oregon Trail thing, you might be like, "I have a family of seven. I can't just get a horse and go buy a pack of cigarettes and never show up again." I guess I could do that. That's probably popular but I, as an individual have to take this family of six other people. Do I have the capabilities to do that? How could I get the cash for it? Because I need to defend against all the madness out there, I'm going to need to find some people to meet with. You're thinking and scenario planning out all of this stuff and this gets to your point of like, "If you're going to Oregon, it probably is a good idea to plan things out." You don't want to just like the next day, just figure it out. [inaudible] tell a joke. It's like, "Why do they sell luggage at the airport? Is anyone is just like, 'Screw it. Pack a clothes and we'll sort it out at the airport.'" It's an odd thing to sell at the airport. But you do some planning and you figure out ahead of time. Now, to continue the sort of pedantry of this metaphor, the other characteristic of going to the Oregon Trail, unless you're the first 10 people to do it is hundreds, if not thousands of people have done it already so you kind of know what it's going to be like. It's the equivalent, in a piece of software, if they were like, "This application is written in COBOL. I want you to now write it in --" I don't know, what are the kids do nowadays? Something.io? I-want-you-to-write-this-in-a-hot-new-language.io and basically just duplicate it. You're going to still have to discover how to do things and solve problems but if the job is just one-to-one duplicate something, then you can do a lot more upfront planning for it. CHARLES: While you're doing it, making the Uber and Airbnb. MICHAEL: Yes. CHARLES: Then you're done. MICHAEL: I think that's the truth and I want to put it another way. We used to be down here in Texas, the way we run government here is just lovely but we used to have this notion of a zero-budget, which is basically like, "Assume I'm going to give you nothing and justify every penny that I'm going to give you." I think that's a good way to think about defaults. I mean, about requirements is default is you don't need any and only get as many requirements as you need. If you're building tanks or going to the Oregon Trail, you might need a lot of requirements upfront that are actually helpful. CHARLES: But like a suit, you're just going to just strike out naked walking with. MICHAEL: That's probably a bad idea unless you -- CHARLES: Yeah, that is a bad idea but that's the bar but what happened if I were to do that? I might make it for 20 miles. MICHAEL: And build up from there and then have all the requirements that you need. I'm sure when Lewis and Clark went they were like, "We're going to need a quill and some paper and maybe a canoe and probably some guns and then let's see what happens." But that was a whole different situation than going to establish Portland. CHARLES: That was an ultimate Agile move. That was a pretty Agile project. They needed boats, they built them but they didn't leave St Louis carrying boats. MICHAEL: Right and they also didn't have a family of six that they needed to support and all this kind of stuff, right? CHARLES: Uhm-mm. MICHAEL: There was a question you asked a long time ago, not to steal the emceeing for you -- CHARLES: I would say, we need to get onto our topic -- MICHAEL: Oh, yeah. Well, maybe this is a good saying, what you're asking is, "How do you get this job?" and I don't think we ever addressed that. CHARLES: Yeah, that's a great question. You said you had to consume a lot of stuff on the internet. MICHAEL: Right. That's definitely how I do the job but I think how I get the job, there's an extended two-part interview with me on my Software Defined Talk Podcast Episode, available at SoftwareDefinedTalk.com, where I talk about my history of becoming an analyst and things like that but the way it happened is I don't have any visible hobbies, as you know Charles except reading the stuff in the Techworld. I would read about what's happening in the Techworld and would blog about it back in 2004, 2005 and I was discovered as it were by the people at RedMonk. I remember for some reason, I wrote some lengthy opinion piece about a release of Lotus Notes. I don't know why but that was a good example. This is back when all of the programming job were going to be off shored and I thought it was imminent that I was going to lose my job. I was looking for a job and I shifted over to being an analyst. That like the way that you get into this kind of business is you establish, there's two ways -- CHARLES: You established expertise, right? MICHAEL: Yeah, which is like always an unhelpful answer because it's sort of like, I was joking about this in another podcast, it's like Seth Godin's advice about doing good marketing, which is the way you do good marketing is you have an excellent product. If you have an excellent product that everyone wants to buy, then your marketing will take care of itself. I think if I'm asking how to market, I'm trying to figure out how to market a bad product. That's really what people want. CHARLES: That's also just not true. That's just like flat ass not true. That's a lie. MICHAEL: I mean, people who want to know how to diet better are not already healthy and dieting successful. You can't start with the base assumption of things are going well. CHARLES: Well, it is true. I like to think that we have an excellent product. We sell an excellent product but the thing is you can just sit on your excellent product all day and you have to tell people about it. If you want them to come sample it and try, maybe eventually buy it like the advice that you just need an excellent product. I'm amazed at anyone who can actually can say that with a straight face. MICHAEL: Well, he only writes like 150-word blogpost. I think his point is that you should aspire to have a unique situation and then marketing is easier. Similar with everyone's favorite example like an Apple or like a Pivotal or a ThoughtWorks. We eat all three of us and yourself as well, once someone gives you the benefit of the doubt of listening, you can explain why what you have is not available anywhere else. CHARLES: What it boils down to is if you want to easily differentiate, allow people to differentiate your products from others, then be different. That's fair. I'll give -- MICHAEL: To summarize it, it begets more of the tactics of how one gets a job like I do. What's the name of the short guy in Game of Thrones? 'Tyrian'? 'Tyran'? 'Tyron'? CHARLES: Tyrion. MICHAEL: At one point, Tyrion is like, "I do two things. I know things and I drink," so that's how you get into this type of business as you establish yourself as an expert and you know things. Now, the third thing which I guess Tyrion was not always required to do is you have to be able to communicate in pretty much all forms. You need to be good at written communication, at verbal communication, at PowerPoint communication, whatever all the mediums are. Just knowing something is not very useful. You also have to tell people these things. CHARLES: I think Tyrion is pretty good at that. MICHAEL: Yeah, that's true but he doesn't ever write anything. There is no Twitter or things like that. CHARLES: I feel like [inaudible] been a pretty big deal in the blogosphere. MICHAEL: Sure, no doubt. The metaphor kind of breaks down because the lattice for the continuing counterarguments do not exist in the Game of Thrones universe but whatever. CHARLES: They've got the ravens. That's like Twitter and it's bird. MICHAEL: That is true. Knowing how to deploy a raven at the right time, with the right message is valuable. CHARLES: We buffer up our ravens so that they fly right at eleven o'clock. MICHAEL: That's true. I could be convinced otherwise. CHARLES: That's why they arrived both at 6PM in the Westeros -- MICHAEL: I guess true to the metaphor of a tweet, most of the communications in Game of Thrones is either, what are they called? Little Birds? That the [inaudible] always has and then the Big Birds. You've got to tweets and the blogs. CHARLES: This is like it's nothing but Twitter. MICHAEL: Exactly. You got to really communicate across mediums. Now that the other thing that's helpful and you don't necessarily have to do this but this is what I think gets you into the larger margin. The more profitable parts of the work that I do is you have to be able to consult with people and give them advice and consulting is largely about, first figuring out the right opportunity to tell them how they can improve, which usually is it's good if they ask you first. I don't know about you but I've found that if you just pro-offer advice, especially with your spouse, you're basically told that you're a jerk. CHARLES: Well, it'd be like a personal trainer and walking around me like, "Hey man. Your muscle tone is kind of flabby. You got to really work on that." MICHAEL: The line between a good consultant and being overly-explain-y is difficult to discern but it's something that you have to master. Now, the other way you consult with people is you study them and understand what their problems are and you're sympathetic to them and I guess you can be like a British nanny and just scold them. That's a certain subset of consulting. CHARLES: Don Rickles of consulting? MICHAEL: That's right. You just help them understand how all of this knowledge that you have applies to them and hope solve their problems like the FordPass thing. When I went from being a developer to an analyst, it was a big risk to take on. I think I probably took like a $30,000 pay cut and I went from a big company health insurance to being on a $10.99 and buying your own health insurance which a whole other conversation. We talked about that every now and then but like it's a risky affair. It's not a promotion or even a lateral move. It's just an entirely different career that you go into. Then you talk with people a lot. As an analyst, you're constantly having to sort out the biases that you have with vendors who want to pay you to save things versus end-users who want to hear the truth. You can't really see a lot of Gartner and Forrester work but the work that you can see publicly from people like RedMonk, it's pretty straightforward. CHARLES: Yeah it is and whatever they did, a piece that was for one of their clients, there was always a big fat disclaimer. MICHAEL: Now, the other thing I would say is what I've noticed -- not to be all navel-gazing -- about myself and other people who are successful at whatever it is I do is there's two things. One, they constantly are putting themselves out there. I remember and this is probably still the case. This is probably all in Medium. There's probably a Medium post every quarter that's like, "If you're a developer, how do you give more talks. What your first conference talk?" Basically, the chief advice in there, other than bring business cards and rehearse is essentially like you just got to get over that idea of self-promotion. You basically have to self-promote yourself incessantly and do all those things that you find nauseous and be like, "Me, me, me," which is true. You've got to get over that thing. If you're like me and you're an introvert who actually doesn't really like that many people, except a handful of people like yourself that I'm friends or family with, you have to put on the mask of an extrovert and go out there and do all this extrovert stuff or you'll fail. I shouldn't say you'll fail, you won't increase your overall comp and margin and everything. You'll basically bottom out at about $120,000 a year or so because that's about as much as anyone will pay for someone who just write stuff but doesn't actually engage in the world and consult. You've got to do that. Then the other consequence of that is you always have to be trying out new types of content and mediums like here we are in a podcast. Long ago, you and I, in 2005 or 2004 -- CHARLES: You got me to sign up for Twitter. MICHAEL: Yeah, like we started off a podcast because I remember hearing the IT conversation stuff and John [inaudible], who is a big inspiration for me, a role model, I remember he was just trying out podcast and I was like, "All right. I'll try that out. That looks like fun," and then here we are. CHARLES: I remember you tried out the podcast and you're like, "Let's go into your backyard or my backyard. Let's talk about software for 15 minutes." I remember that very clearly and that was 12 years ago. Then I remember also like with Twitter, you're like, "Now, you should sign up for this Twitter thing," and I remember I did and that's when it was still coming through SMS on your phone and like "I'm walking around Teatown Lake. I'm going to get tea." And I was like, "Oh, my God. This is so fucking stupid." But little did I know, you were actually signed me up to a service that changed my life. MICHAEL: Yeah, it was the stage direction era of Web 2.0 where you're just supposed to give people your status updates, instead of your searing insights. But yeah, you've tried it all these different mediums because again it goes back to your job is to communicate. You need to tell people things that you know. CHARLES: Coté, what is your strategy on virtual reality? MICHAEL: My strategy in virtual reality. Well, you've caught me, Charles because I'm not into that. You remember when Time Magazine had that Chinese lady who was like a... Not Frontside. What was the name of the big virtual reality thing that was big...? CHARLES: Second Life. MICHAEL: Second Life, who is a Second Life millionaire. CHARLES: Yeah, she had armies of people. She was mining some resource in Second Life and then reselling it and she made a lot of money. MICHAEL: I don't really like visual mediums so as Marshall McLuhan would say 'hot mediums'. I guess I like the cool mediums. That's not my thing. That's where my principle fails. Maybe I'll do that one day. CHARLES: This is pretty hot. This medium is pretty like -- MICHAEL: I think maybe audio broadcast is hot. I'm just pretending like I know. This is another trick that you can deploy that my wife has picked on is most of the time, 78% of the time, I actually have no idea what I'm talking about. I just know words. I don't actually know Marshall McLuhan theory. I read that one book a long time ago and I remember that scene in Annie Hall where he gives a little diatribe to whatever the Woody Allen character is. That's the extent of my Marshall McLuhan knowledge. CHARLES: Was Marshall McLuhan actually in Annie Hall? MICHAEL: He was. CHARLES: Don't sell yourself short, Coté. MICHAEL: Sure. CHARLES: You know things and you drink so let's talk about that second aspect because I know that you like me whole tearing up as a role model. MICHAEL: I should say since we're both happily married, except for the third thing that he does which he -- CHARLES: Oh, right. MICHAEL: Another unmentionable word. He too freely hangs out with the ladies. CHARLES: Right, anyway aside from that, throughout doing all this stuff, you keep a very, very chill perspective on things. I feel like the tech world gets so wound up around itself and it gets so tight and so stressed about its own problems. There's constantly wars in JavaScript and before we were in the JavaScript world, we were warring in Ruby. I remember when Twitter went over to using Scala instead of Ruby. Oh, my goodness, it was terrible times. I feel like there's a lot of stress and yes, you want to take it seriously but I feel like you've always been able to maintain an even-keeled perspective about technology which actually allows you to commentate on it effectively and intelligently because you're able to unwind yourself from the squabbles of the day and see maybe a bigger picture or something like that. MICHAEL: That's nice of you to characterize me to use a -- is that a hanging, dangling participle there, when you're in [inaudible]? CHARLES: Yeah, I don't know. MICHAEL: I think that's also just a function of being old. CHARLES: So are you actually not stressed or is it just part of your persona of being an extrovert or something like that? MICHAEL: About the tech world? No, I'm not stressed about that. As you kind of outlined, especially I was not sent the demographics for the show, which is fine. I'll overlook that but I'm guessing that that was a joke. CHARLES: Who got some designers, developers -- MICHAEL: I'm guessing there's a lot of people who actually are on the frontlines of working on software. I think this happens also in the white collar set. But essentially, it's really easy to slip into over allegiance to something and I don't know what rhetorical fallacy this is but it's the bias of over allegiance to something, you get all wrapped up in defending a tool over something and the virtue of it, whether it's Emacs and vi. I'm sure reactive people, whatever that is, have all sorts of debates. The thing is when you're heads down on this stuff, you don't realize how petty all those discussions are. It's not so much that it's a waste of your time but it's just one battle in an overall war that you have. It's good to have opinions and figure things out but you should just relax about it because the more angry and emotional you get, you're going to make a lot of mistakes and decision and problems. I wish I had an example of this but this is one of those things that intuitively as you ages as developer, it's not like your literal age. It's just the amount of time you've been developing software. You could be a 25-year old who's been developing software for 10 years and you would probably get this notion but you just realize that stuff changes and you just learn the new things. It's kind of not a big deal like one day, you're going on and on about how vi is great and the next day you're using that Atom editor and then whatever and you just use the tool that's appropriate and it's annoying when you're younger and people are applying Hacker News with like, "You should use the tool that is appropriate," which is a stupid reply. That's just kind of how it is. Also the other thing, in the more white collar world, as an analyst, especially doing strategy for a company, you can't be biased by things because then you'll make poor decisions as an analyst. Also when you're doing strategy in M&A that result in bad business outcomes so you actually be very unbiased about things. CHARLES: I think it applies in everything. If you get too emotionally invested in one particular approach in software, literally in anything you do, it does result in bad outcomes. The problem is you may not actually realize the consequences of those bad outcomes far down the road from the poor decision that you made that caused you that outcome so you might not necessarily connect it back. MICHAEL: Yeah, and I keep bringing this up but I think another effect of being calmer in your nerd life is having something that you do outside of your programming life, which is either having a family or having hobbies or something like that but you know -- CHARLES: Or having a wild turkey. MICHAEL: Yeah but you've got to have something, a reason to stop thinking about your tech stuff or it'll consume you. I suspect when you see the older graybeards who go on and on about open source and they're very like... I don't know. What's the word? They're very over the top and fervent about tech stuff. It's probably because like me, that's their only hobby and they haven't figured out how to how to control it. It becomes part of their identity and it defines them and then they're down this twisty, turny path of annoyance to the rest of us. CHARLES: Again, don't sell yourself short, Coté. You've got plenty: you love the cooking and eating and the drinking so close this. Do you have a favorite drink that you've been mixing lately? MICHAEL: No. CHARLES: Or any kind of favorite food because every time I go over to your house, even if we're having pizza, there's always a nice hors d'oeuvre or something to drink, something to tweak that appetite for something special. I kind of wondering if there's anything that you're into. MICHAEL: I have some very basics. One, I don't know if I drink a lot or drink a little. I think the science on this is very confusing, kind of like drinking coffee. I try to drink less. I basically go back to the basics of I want cheap wine that's not terrible. That's what I'm always trying to discover. I think I've also started to rediscover just straight vodka. That's pretty good. I think that fits into the grand scheme. CHARLES: I just can't do it. I can't follow you there. I need some, what do they call them? Gin florals? I can drink gin -- MICHAEL: Oh yeah, that's good too. CHARLES: That's about as close as I can get to straight vodka. MICHAEL: And then food-wise, I just wrapped up finally figuring out how to cook fish and chicken without it tasting terrible. CHARLES: Oh! What's the secret? MICHAEL: No, I want to put a disclaimer out. There's a EULA on this. I'm not responsible for anything bad that happens but what you want to do is cook at about 10 degrees less than you're supposed to. A chicken is supposed to be 165 degrees but you take it out of the pot when it's like 150 or 155 on another part of the pan. Fish is supposed to be 145 degrees but you take it off when it's about 130 or 135. It cooks a little bit more but these guidelines to cook your meat to that thing, it ruins it. Also you can brine a chicken and things like that. Also, what you want to get is an instant meat thermometer. One of those that you can just poke in your meat so you're always checking the temperature. That's what I've been working on. CHARLES: I have a theory about that. I will laid out really quickly, maybe it's just because the juices. It's the juice that so yummy there so you want those to be locked in and boiling but not boiled away. I'm going to give that a try on my -- MICHAEL: And fish is particularly tricky. CHARLES: Because all it takes is five minutes. Sometimes, it's two minutes and 30 seconds too long and you ruin the fish. MICHAEL: Then the next theory I want to try out is that you can actually fry fish in pure butter but you've got to paper towel it off afterwards because too much butter ruins it. But I think if your paper tower it off like you do grease off of bacon, then I think that's how you achieve -- not as good as a restaurant because in a restaurant, they have those butane torches and the crisp it up on the outside or reverse sear or whatever -- CHARLES: Is that what they do? Do they just run their torch right over the fish? MICHAEL: That's all I can figure. They might also be professional cooks who know how to cook things. CHARLES: They might have done it a lot of times. They might have had someone like Gordon Ramsay yelling at them constantly. "I can't believe this fish is so terrible. Waah!" All right. I'm going to give the fish a try. I'm going to give the chicken a try and I'm going to give everything that you just spent the last hour talking about, also a try. MICHAEL: Well, thanks for having me on. It's always fun to have a show with you. I just posted yesterday our second revival of the Drunken Retired Podcast, which is over at Cote.show. It's just '.show'. URLs are crazy nowadays. I guess the only self-promotional thing I have is I'm over in Twitter @Cote. It'd be nice if everyone should just go follow me there because I'm always very sad that I don't have enough followers and they'll never verify me. I don't understand what the problem is. I'm clearly me. Then I mentioned earlier, the main podcast that I do is Software Defined Talk, which is at SoftwareDefinedTalk.com and you should come spend a lot of money on Pivotal stuff. I'm happy to tell you all about that. Just go check out Pivotal at Pivotal.io CHARLES: I guess that is about it. We will talk to everybody later. Thank you for staying tuned and listening to this supersized episode. Come check us out sometime!

Michael: Hello everyone, this is Michael Gross of OptionSellers.com, here with your monthly guest expert interview. This month’s guest expert is Don Singletary, author of the Options Exposed Playbook. Don spent 25 years as a consultant for commercial commodity hedge plans, helping him to implement option strategies to lower cost and increase their efficiency. He has also spent much of that time as an individual options trader. He is going to bring a unique perspective on that to you today. Don, welcome to OptionSeller.com Guest Expert Series. Don: Well, thank you very much, Michael. I’m glad to be here. It’s my pleasure. Michael: Don, let’s start off by telling us a little bit about your background and how you got started in the trading industry. Don: Well, there is a lot to talk about today about options and making money, so I’ll get to the buy out part pretty quickly here. I started in broadcasting at the age of 15 and I grew up in a small town that only had 2 radio stations. I worked for both of them- they used a different name at each one. While I was in high school, I became a licensed broadcast engineer, continued electronics in the Air Force, worked countermeasures during the Vietnam era, and worked for the Motion Picture Bureau at the Florida Department of Commerce and Economic Development. I had the pleasure for several years, a week every month, I spent in Hollywood, California. It’s a pretty remarkable “bubble-world” out there, and it still is. Patty and I were just starting a family in those years and that took a lot of travel, so I gave being a stockbroker a try. One of my specialties there was introducing customers to the covered call writings, sort of a specialty of mine. Now, back in those days, in the mid 1980’s, it was very much a bull market. I think a drunk monkey with a dartboard could’ve made money. As luck would have it, I got to be a broker during those few months. I got a good offer to teach at a technical college right before the big bust in October of ’87. I took a lot of my customers in cash before I left, not because I was smart or I knew a market crash was coming, I just needed to make a lot of money and they had become friends of mine and I didn’t want to leave them hanging. I kind of put them all in cash and gave them a proper goodbye. Now, when the market crashed 30 days after I left to take the college professor job, my clients thought I was a genius. That’s certainly not true- I was just lucky! So, the greatest work and financial undertaking I ever had was the last 20-25 years. I never saw it coming. I don’t think anybody grows up to be a consultant to private corporations for risk management. I never even knew such a thing existed. I spent thousands of dollars on commodity books and the best option modeling software that I could ever find, and I bought a few of the newest and most powerful computers in the early 90’s. I think I thought I was going to be a trader and make a lot of money, but fate stepped in. That was coming, but it’d be later. It was something I never even thought. I got a call from a commodity producer who’d seen some of my option modeling that I’d faxed to a buddy. That phone call resulted in the working in risk management for the next 25 years. I got to work with some amazingly smart and creative people at the top levels of some major corporations, and it was just my good luck. I really got an education that money can’t buy. Michael: Well, we’re hoping you can share some of the pointers you picked up there with us today, Don. I know one of the reasons we wanted to have you on was that you kind of have a unique insight and you have insight into the commercial side of this business, but you’ve also been an individual investor, so you have insight into that side as well and can give maybe people a perspective from both sides of that coin. Before we get into that, Don, I want to talk just a minute about you book, Options Exposed Playbook. Just a great options book for anybody that’s interested in learning about options. Don does cover some option selling strategies in there that I thought were very excellent discussion of. Don, you told me a great story earlier about how you came about writing the book. Can you share that with our listeners? Don: Yeah, I’d be glad to do it. I was winding down my standards of risk management consulting, and I decided to stay home. There’s an old saying by Ernest Hemingway that says, “I drink in order that my friends are more interesting”. I wanted to take some time off and give that theory a test. Fate wasn’t to be. A friend of mine had called and we often talk investments. He said “Hey, I got something here I have to show you. I want to get your opinion. You’ve got to see it!” I said okay. So I met him for breakfast one morning and he showed up with two or three pages he had printed out on the Internet. Attached to the papers, the first thing I saw was that he had already made out a $3,500 check to some investment guru to buy this system. Now, my friend, he’s usually not that excitable, but he was just real excited and said “Look here”, he put his finger on the paper, and I read with him. It said “98% winners for 5 years”. It promised that anyone could probably turn $25,000 into $2 million in that 3-5 years, and that it would only take a couple hours a week, and it took almost no work. I stopped believing in the tooth fairy a long time ago. There are people that live in Austin, Texas in a little bubble who still believe in him, but I’m not one of those. So anyway, I took a good look at the pages he gave me and this magic system used vertical credit spreads, covered calls, and iron condor spreads. It promised the subscribers all they need to make themselves plenty rich with almost no work and in quick time. Now, years ago, I did a stint in the Air Force and I lived a while in West Texas. West Texans have a colorful way with language, so I told my friend a little saying I picked up back in those days in West Texas. “If a fella comes at you with a ten gallon hat pulled over his ears in an ear to ear grin, and he seems too glad to see you while shaking your hand a bit too much, you better look down and make sure he ain’t peeing on your boots”. We’ve all seen them, and we get these kinds of things in e-mails and in the regular postal mail all the time. By the way, Boone Pickens didn’t say that, but maybe he should. I took a couple of sheets and scratch paper and I showed my buddy how to do these pre-strategies. I had a little experience with them doing options. But I just told him, this is all the guy is really doing and he is doing it over and over again. Personally, I don’t believe for a minute the fantastic claims he makes. My friend interrupted and said, “Well, if he’s half right, I’m going to do really good!” I said “Yeah, that’s true! I can’t argue with that!” After I took a couple of pieces of note paper and scratched out some diagrams and made a few notes, suggested a few places where he could find some more information, he tore up the check and he said “You should write a book about this”, and I was giving my friend all the reasons why I was not, absolutely not, going to write any book on options right now. I left that meeting thinking that I had done my good turn for the day. When somebody tells you not to think of elephants for the next 2 hours, every time you close your eyes it’s all you can see. So, I started thinking about it if I was to write this book. I’m more or less retired now, but if I were going to write this book, what would be in it? Before I knew it, I was consumed by it and it only took about 10 weeks to write the book. That’s the Options Exposed Playbook that I have and I was a lucky man as far as selling really well right away. I got very interesting e-mails from a lot of readers. Some had absolutely no experience and ranging all the way up to Ph.D’s who were asking me about the inadequacies of the Black Scholes Formula, and that’s a conversation that I did not want to get into. Before I finish this story, I was preparing for this interview this morning, and here’s one here from The GURUS Selling System. It says “I know I’m reaching you on Sunday, so I’ll be brief, but you’re about to miss out on the best opportunity to make money you’ve ever seen….You see, this guy selects trade recommendations with a high probability of doubling your money. For example, on May 16th, made 106.9% gains in 3 days. May 17th- 70.4% in 2 days. May 23rd, I made an amazing $8,000 in 24 hours.” Now, these kinds of ads prey on people. Often, it’s people who are desperate who could believe an ad like that. Here’s another one that says “Just 7 days, you pocket $2,000 on one trade and you make $725 the next day in 4 short days. You make another $950 and people make $100,000 a year this way”. These types of ads cater to people- not a sophisticated audience, but they cater to people who are hardworking people and think like my friend did that if they’re half-right, they’re going to make a fortune. One of my motivations in writing that book- I don’t spend a lot of time in it bashing these kinds of systems, I think that’s a waste of time- I simply wanted to save beginner and small intermediate investors, beginners small and medium sized accounts, I wanted to save them from playing the slot machines. I noticed in your book and mine, as we did this completely independent from each other years ago, we used casinos as an example when we talk about selling options. In my book, there’s a line in there that says “You went to a casino and the manager said ‘you’re kind of stupid. We’re only going to let you play the slot machines’.” You can’t sell options if you’re not sophisticated yet because you don’t have the experience. The slot machines pay out 95-98% of the money that’s put into it, and there’s always somebody that’s at the machine ringing and flashing its lights. When I go to Las Vegas, the first thing I do, just to remind me where I am, is I go down… Las Vegas is a Petri dish for human behavior, and I’m a people watcher…. I go down and I pick out rows of a hundred slot machines. At any given time, one of them is ringing and flashing loud bells and whistles, but I’m looking at the other 99 who all have losers sitting in front of them. Those things are like parking meters. The more you play, the more you lose. I think buying options can be that kind of game, but somebody hits it big once in a while. It’s like playing golf- you tell somebody about your hole in one you made for years, but you never talk about the ones you lost flushing them into the woods. I think investing and gambling may have some of that human behavior in common. There’s an old saying that says “Experience is what you get when you get what you didn’t want”. I’ve had a lot of experience! Michael: Well, your experience has certainly resulted in an excellent book, Don. Wanted to congratulate you on that and certainly recommend that to anybody reading the book. I wanted to go back and touch on the point you made about the guy selling courses for thousands of dollars, and usually selling them to the people that aren’t really educated that much in trading, although not always. Even experienced investors sometimes will buy these courses. I don’t want to bash all of them, because I know some of them have some good information. Don: Sure they do, Michael. One of my favorite books is by the old guy Will Rodgers. It’s what keeps me humble- that and investing. He said that everybody’s ignorant, just about different things. When I’m talking about neophyte investors, who earnestly are hardworking people, are very prodigious people in their work and their demands, and they’re just trying to do better, their motivation is absolutely stellar. Anyway, go ahead. Michael: Sure, no, that’s a great point. But there are a lot of these courses at there that they are charging these thousands of dollars for promising outrageous profits. In fact, I wrote about one in the upcoming newsletter where there’s a guy on CNBC now that said he took $4,600 and turned it into $460,000 in 2 years. I would be a little skeptical of those types of claims. The thing about it that a lot of these people don’t realize, even these courses that are good, a lot of that information you can get by picking up a couple of books for $30, $40, $50 a piece. Your book is a perfect example. When I talk to you about this book, I said “So, are you selling a course? Do you have a seminar?” and you said no, I just wrote the book to help people understand how to do this, so you don’t have anything you’re selling. It’s purely a book that is showing people option strategies that have worked for you, kind of bringing a perspective of both the personal and individual investor side to it. When you wrote the book, what would you think the biggest difference is or maybe the biggest advantages of being a commercial player or the advantages of being an individual investor? Don: That’s a great question. A lot of people- just hate the word hedge fund, which when you’re in risk management working with a corporation, usually ad commodities, it’ll be something like cotton, coffee, or orange juice or sugar. The goals of the commercials and the individual speculators are almost polar opposites. In helping people with their commercial risk management plans, and the term hedge fund is not the same as a fund you use to hedge for risk management. I don’t want to get into the semantics of it, but there is a big difference between the two. Commercial players I work with and the people who use hedge funds, their motivation is to preserve their capitol, to eliminate risk, and to get the highest possible margins on their products that they can. Now, some of them are selling commodities and some of them are buying them, and these can be commercial players on both sides of the same market, of course. It’s not just the speculators vs. the commercial players. I’ll give you an example: Maybe a speculator is selling a $5 bushel call for a relatively small premium and maybe this plant makes ethanol and has to buy corn. If corn goes over $5 a bushel and he has to pay that price, then he’s not going to have much profit margin, if any at all. So, what he does is buy a $5 corn call and if pollination doesn’t occur right, or weather gets too hot, or demand ceases or whatever the reason, if corn prices soon pass $5, instead of going out of business or having a year so bad he has to work the next 2 years just to make up losses, then they buy $5 calls and pay too much for their product, corn, which helps them make ethanol. At the same moment, somebody else on the other side of the market is saying, maybe a speculator, “Boy, corn has got some of the lowest stocks it has had in 5 years. Last year topped at $4.60 and maybe it’ll hit over $5 this year. Maybe I can afford to spend a few hundred dollars to bet that corn prices are going to hit the ceiling. Then, these two orders at the markets someplace meet, the transaction occurs, and everybody’s happy with what they did. It’s just about a zero sum gain. I don’t really see what we did. In fact, we used to have a rule and I explained this to my customers because I knew the CEO’s I was talking to would be talking about risk management. I discouraged them from using the word “profit” at all, and substitute the word “margins”, because we don’t care. We lose a bunch of money in a risk management account, and they say they’re startled to hear me say that. I say “Well, if it means you make more profits, then that’s fine! A higher profit margin is the goal and we’re not going to call them profits because they aren’t profits for the company.” Motivations in conserving capital to get rid of price risk and delivery risk, weather, or government upheavals, or changes in the laws and all those things. Plus, frankly, in the risk management programs, they can make some very creative contracts about buying options that they can offer their potential customers to give them an edge over their competitor…. things like that. Michael: Okay. So, a lot of the things you did in the commercial side of it was really helping to manage the true definition of hedging, where you’re helping them manage their risk for the price of the commodities they’re actually working with, whether they’re taking delivery or selling them. You have speculators on the other side that are taking the other side of those trades and both sides are getting what they want. Don: Many times, I work for an orange juice company, _____, at a processing plant, and they had a lot of their products sold, but they still had millions of gallons of orange juice in the tank. It wasn’t priced yet, it wasn’t sold, and they had uncertain profit margins to consider. Another of my clients, at the same time, was on the other side of the market. It was a very large grocery store chain, and they knew how much shelf space they had for orange juice, and they knew from years and years of selling orange juice about how much they were going to sell in the coming year. All the orange juice they know they have to put on the shelf but they haven’t bought yet is a price risk to them. If you had a freeze and all of the sudden prices went up and people who couldn’t even deliver the orange juice because of the damaged crops, the grocery store still has the same shelf space and demands from their customers. So, they would hedge and release themselves by selling options and contracts to speculators, they could insulate themselves so the contingency of price and delivery risk, that kind of thing. What’s fascinating is I felt like Dr. Jekyll and Mr. Hyde for working both sides of the market, but, actually, they weren’t really at odds with each other, they were at odds with the risk that was in the market – and both of them could successfully make trades to help meet their margin goals. Michael: Yeah, that’s a great point. A question we get often here is, a lot of people ask, “Well, you guys are selling these options. Who’s buying these deep out-of-the-money options? Yeah, sometimes it’s other speculators that are buying lottery tickets, but a lot of the time it’s these commercial players that don’t want to buy them, they have to buy them to insure their business. It’s like buying insurance. Don: Absolutely. It may be from a speculator who said, “Man, I’d never do that. Who’s crazy enough to take the other side of this trade?” 80% of the options expire worthless, as you point out in all of your material, too. That’s pretty good odds from the start. The thing I love most about selling options, and this is all in your book and mine I supposed, it doesn’t demand that you have to guess price direction. The amplitude of the price changes, nor do we have to do that within a defined time. Buying options is like standing on one leg and shooting at a moving target. Selling options can be like making a partnership with gravity. Gravity and time decay both work regardless, rain or shine, 24/7, in all kinds of conditions. They’re not dependent on the stock market and commodities, and they don’t depend on public opinion or on anything. One of the things about the financial channels, and, you know, this is July of 2016 and we’re in the middle of this presidential thing going on, which is the real Petri dish of human behavior, I think. It’s interesting no matter which side you’re on. It’s just crazy what the news channels do. It was all about the candidates a few days ago, they were running out of news, they were getting in experts to talk about every contingency that might happen. It was a slow news day, so they would take the small stories and somehow embellish them a little bit and bring them to the top so they could keep listeners, so they can sell adds, so they can make more money. It’s really funny on the financial channels, they even do that. This tragedy that happened in Orlando, Florida 2 days ago, now the financial channels are not talking about politics, but they’re talking about terrorism and what that means to investments and which investments would be best if there is a terrorist attack. These guys, with all do respect, they have some very bright people, but they have a tough job. They have to show up every day to a non-scripted program, and this goes for network news, too, and they have to take whatever is in front of them and make it sound like the sizzle on a steak and sell it to the listeners every day. With TV, they’re able to do that. Aaron Spelling, I think it was, said one time “The TV, you don’t have to be really good at programming because TV is a medium that has a default that’s kind of the most effortless thing to do- you just sit there and watch it.” I do it, everybody does it sometimes. It’s a rest for your brain sometimes, or whatever your reasons. It’s interesting and all of this fast Internet information everywhere we can get, it’s a lot of toxic half-truths and innuendo information. My mother-in-law, who’s in her 90’s, I tried to keep her from watching the news because she would just buy a new lock to put on the door every time she saw the nightly crime report. I think investors made that mistake when they watch the financial channels, and maybe some of the other news. It’s just a type of telescopic fear. It’s like you never think about an asteroid hitting earth. Matter of fact, just 3 weeks ago, there was a comet that came within 2.2 million miles of the earth and it was ½ a mile wide, and it would have had a giant impact and probably killed hundreds of millions of people. But you didn’t hear about that in the news, and we’re always in that unlimited risk like that, or satellites breaking, or things like that. I think unlimited risk gets a really bad rap because people are always taught to be afraid of it. There’s some merits that you go into in some great detail, and you and James Cordier’s material about what unlimited risk is and what other people sometimes fear. There’s a way to understand it and a way to be able to use and to do it intelligently and within the laws of a very good mathematical probability. You guys do a great job with that. Michael: Thank, Don. I appreciate that. You made a great point there I want to go back to for just a second, because I think it’s important and we talk about it a lot as well. The role of the media in both stock and commodities prices… we talk about, in some ways, you can actually use it to your advantage. The way you do that is by doing your own research or knowing where to go to look for that fundamental research on your own, and knowing what’s important and what isn’t, because if the media, like you said, they have a slow news day or they feel like covering something, they can take something that’s really, in the big picture, somewhat insignificant, and make it seem like it’s a big story for that individual stock or commodity. That can move the price- maybe not for the long term, but for the short term. If you know what the real story is, you can take advantage of that as a trader. It’s one of the reasons we spend a lot of time on fundamental research here and we recommend individual traders, if they’re trading on their own, they do the same thing. Don: Right, and that’s another reason why I love commodities. I have great respect for the work that you and James do there. It’s because you study the fundamental information on these markets. You know where the corn stocks are, you know the seasonal patterns, you know when grain pollinates, you know when the harvest begins, you understand world market, and you understand the United States Market. There was a story on TV on something that kept the commodity prices really not in sync with the true supply and demand. You have the ability because of your experience and because you stay up on these things- that’s your job. You can talk with your investor and let them know that it’s a puff news story or rumor or whatever. A number of years ago, there was one case of mad cow disease in Canada or someplace that crossed the Northwest United States. This sent ripples through the commodity markets, just on potential that we might not be able to buy a steak in 6 months. As a result of that, on down the line, prices went way up on the cattle. A lot of people that thought they wouldn’t be able to afford cattle got rid of the breeding stock and we’re still recovering from that, even though it was years ago. It takes a specialist in commodities and in these markets. Each market can be very specialized, and I don’t know very many people, any people, who are good at all the commodities markets. I know people claim to be, but I’ve never seen it and I’ve never heard of it. You have to go with 4 or 5 markets that I’m familiar with and have experience with and it’s kind of like writing a book. You have to write what you know and you invest what you know. You take things that you have all that experience in, rather than take a whack at something that might look attractive temporarily but you really don’t understand the market. That’s the value of having somebody like you at Option Sellers. These high net investors you serve, that’s the pivot and the very heart of what you do. The other side of that is being able to know the math and understand the mechanics of the market and things like seasonal volatility, and you incorporate fundamentals in there. With a high net worth investor, they can do things that most of my readers probably will never be able to do. They have a large enough capitol. You take a small investor that’s just starting out and maybe has an account of $10,000. There’s no way he can afford to draw down $5,000 the first week he makes a commodities option investment. I find net worth investors are not only able to tolerate that, but able to use the system that you guys use. I think it’s amazing and they can have a great deal of success with that. The huge benefit to investor for the types you do, I don’t recommend people start off dealing with a highly complicated commodity market, and the strategy that might be a naked option with unlimited risk, because, for a small investor, that can put you out of business in 2 days. You’re done. I teach that we’re going to start this way, we’re going to practice it, and we’re going to build it slow and sure and they can be able to do that. They can’t afford the same programs you offer for high net worth investors. For the people who do fit that category, I’ve never seen a better way to do it than what you guys do. Michael: Well, I appreciate that Don. I do, that’s a great point to make, as well. I do agree with you. I think there are some advantages of economy of scale when you get into and working with higher dollar amounts. Obviously, that’s one of the reasons why we have our minimum where we do. There are strategies that can fit almost any size of investor. It’s just a matter of matching the strategy. Let’s talk about that a little bit, Don. You’ve traded commodity options, you’ve traded stock options, do you have a preference for either one or an advantage(s) you think one might have over the other? Don: Yeah, well, like you just said, you’ve got to find suitable investments for the right advisors. For myself personally, since I have a lot of experience in both stocks and commodities, I stay in both. To me, normally, people will trade stocks first because some of the volatilities and some of the limits on all the smaller accounts, and they will start off in stocks and things. Those are the people that I suggest in my book a great deal, and I don’t talk a lot about commodities in there because I don’t want to give beginning investors the impression that they can make a killing in commodities. I’d start to sound like one of those ads I read a moment ago. Those things are doable, but they have to be doable to the right investor. Giving advice to my readers, one of my favorite trades is the vertical credit spread. They can put a capitol on a risk and make a relatively high return in 30-60 days out selling some options, and then they buy an option further out-of-the-money so they put a cap on any lawsuits they might have. When you do that, you can compute the risk of war ratios and it helps you with your money management in the account. Just like a floor trader, your first job every morning is to get up and survive to invest another day in preservation of the capitol, whether you’re a large investor or a small one. That’s number one above everything else. Now, I don’t get paid for selling any advisory services. I just do not want to do that. I ran around for a long time and managed a lot of money in hedge accounts and things, so it’s not something that I want to spend, at my age, the rest of my life doing. So now, I just love being able to write and share some of the information every day. I had a note here that I wanted to go over with you… These days, the old pros that learned years ago when they were doing Black Scholes computations, slide rules, it’s so 1985, to tell new investors that you don’t have the experience, you’re better off not even going with those options at all. You go find yourself different stocks. I read a Warren Buffet story one time that had a great impact on me. You remember the old mutual funds, and still many people have them these days. The ETF did kind of a better version of some of that type of investing. I don’t miss mutual funds lately, but I don’t choose investing in them. It’s because of what I read that Warren Buffett had said. I’m paraphrasing, “If I own race horses and I have a stable of 80 horses, and I know that 10 of those horses win 90% of their races. I’m not going to run all 80 horses, I’m just going to run the winners and stop picking now when the market has a new normal because of the news channels, the types of investments, and the sophistication. I think you have to find some winning bets. Frankly, 80% of options expire worthless; they’re certainly investigating to be able to go there. But you don’t race the whole stable, even though they are all thoroughbreds, because you just tend to jot down your profits. We live in an age with Internet and all the toxic information along with the good. The trick is being able to shift that out and to be able to discern which kind of investment is right for you.” I think Warren Buffett was on to something there. You know what they say about normal- it’s just a setting on the dryer. None of us are normal. Our needs and aspirations and everything are just not the same. I think those are decisions everybody has to make for themselves. Michael: I love that analogy of the racehorses and I also like the way you applied it to the options because it really does carry over like that. As you mentioned, if Warren is listening to the OptionSellers.com Radio Show, we certainly invite him to call in and give his opinion on that. Don: Well, he has been known to make millions off of covered calls. Michael: I know. It’s surprising if you go in at times in different part of the Wall Street Journal articles about who bought or sold these many options in the options market, and you don’t picture guys like Warren Buffett and Carl Icahn making these big option trades. You see them taking positions in stock, but they sell a ton of options. It’s well documented. Don: They’ll buy a great dividend stock these days that’s 2 ½ or 3% and then they sell covered calls on it. I don’t have their numbers in front of me, and I never will, but they might be able to make 5-15% more a year depending on the markets and the timing, but they can make a very nice return. Putting your money in the bank these days, you remember the old rule of 72... you just divide the annual interest rate into 72 and you get the years that it takes to double your money. If interest rates are 2%, it’ll take 36 years with your money in a bank savings account in CD’s to be able to double the money. For most of us, that’s just not acceptable. Michael: Yeah. I agree. I want to go back to something you mentioned because I did want to re-visit your book for just a second. You describe some really solid option strategies in there, but you said your favorite option selling strategy, you preferred vertical credit spreads. That’s one of our favorite strategies, too. Can you maybe just go through a quick description of how you would write that if you’re writing it on a stock or commodity, for instance? You probably talk about stocks in the book, so maybe just talk about how you would do that on a stock. Don: Sure. Well, first of all, I’d pick a stock. The nice thing is, and you go over this in your material too, anybody selling options has to understand that one of the major advantages is that I don’t have to guess prices direction or the amplitude of the timing. I just need to know where I think the stock price will not go. Then, in ¾ of the time, I’ll make money with it. That’s the whole thing. Vertical credit spreads limit themselves to this. If I had a stock that I think is going down or that it has already gone too high, I don’t try to press the reversals, but maybe it starts reversing. You want to be able to try and sell some options. With the market near it’s top all-time highs now, there’s a school that thinks it’s going higher, a school that think it has got to turn around and go lower, citing the bad economic news given daily now. I have no idea which one is going to be right. That’s why I don’t sell the apart, out-of-the-money call if I think the stock is going down. That leaves you with unlimited outside risk, because if price overruns your strike price, you’re going to be in the hole- it’s going to cost you and you’re going to lose money. With a vertical credit spread, you go just a little bit above the strike price. You go a little bit above the price where you sold the call and you buy a cheaper, less expensive call, and that puts a cap on your potential losses. So, with a cap on your losses, let’s say you’re a beginning option writer in stocks. You may collect $150 in premium by selling the call at a lower strike and then by buying one of the higher strike you might spend a third or a half that money, say $50 out of $150 to put a cap on your losses. So, if you have losses that are at the most $500, and you can make $100 profit off of it, that’s 20% in 30-60 days, which is great return on your money. Michael: Now, that’s a great strategy. I was glad to hear you say that because a lot of books and going back to some of these courses out there, they’ll talk about things like converted butterflies and everything. I know those can have their place, but a lot of times, especially for individual investors, they can be difficult to implement, especially if you’re doing it on a larger scale. We always say simple is better and vertical spreads are a great, simple strategy that can also be very effective. Don: One of the things, I get a lot of e-mails from my readers, and a lot of these people have never dealt with options. Most of them have little stock experience. A lot of them, frankly, are young millennials who had a couple of babies, they’re married, and they’re working as hard as they can, and they have money saved and they want to be able to use their laptop or iPad or whatever it is to be able to fiddle with options to try and make a little extra money. Of course, I try to tell them fiddling is not the preferred word and let’s get to work. You can make some money that way, but you have to be very, very careful about what you do as part of that with money management controlling your risks. The vertical credit spread and small steps are able for that. Another thing about most of the e-mails I get from my readers- almost everybody and I think that as a society, the financial planners have taught us to think this way. Maybe they’ve heard too many bank commercials, I don’t know what it is, but people immediately start thinking in terms of making thousands of dollars over years of time. I think that doesn’t allow them the focus that they need. It’s fine to dream and have a plan, we all do it, but when you wake up in the morning and you have something in front of you that you have to deal with, investing some place, so I try to tell them just to find an easy goal. Maybe start with trying to make $50 or $100 a day or a week or whatever suits their account. That’s very doable. You can’t get up in the morning and make several hundred thousand dollars and put it away and wait 20 years to collect it. I suppose there are some ways you could do that, but for an individual investor, you have to deal with what’s in front of you. I think trying to help people focus their attention to something they can do right now to begin to achieve some of the longer-term goals is the way to go. Michael: Yeah, that’s a great point. It’s a great discussion on options there, Don, and I appreciate that feedback. Let’s just talk a little bit briefly here to talk about how you pretty much trade for a living now. Would you say that’s a fair assessment?... or professional trader? I know you trade a lot of your own money, but do you have an opinion on the stock market right now for 2016? What’s your outlook? Don: Well, it depends on what the talking heads on the network say. What’s so funny to me is that those guys can come out one day and explain a bull market and then get up the next morning, go in at 6:30, and they’re talking about the bear market that we’re in and they never bat an eye. They can change. There’s a reason for that- it’s almost impossible to forecast what the market is going to do next. I can’t do it- I’m not that good. For that reason, I choose options and I try to make my money by knowing probably ¾ guess on what’s not going to happen instead of trying to predict what is going to happen. I think my odds are a lot better. I know it’s a disappointing answer, and when they get these experts on CNBC or wherever, at the end of the interview they say, “Well, what do you think about the market?” They always have a good answer and then they back-petal a little bit. Then, when it’s all said and done, I’m thinking, “What exactly did you say?” It’s confusing to me. I can’t tell the future. All of us can connect the dots backwards, but trying to do it forward is just impossible, which we talked about the other day. Nassim Nicholas Taleb has a book called Black Swan, and it’s about improbable events. If you’re a little bit of a sophisticated investor and you love to figure the odds of investing I think it’s a must-read. It’s a really interesting book. Whether you’re an investor or not, it’s a little walk down probability and philosophical terms. Michael: I’m familiar with the book. It’s a great book for especially sophisticated investors- somebody that’s really looking to get into trading and understand the nuances of it. Your answer was not disappointing at all. In fact, the guys that say “I don’t know what the market’s going to do. Nobody knows what it’s going to do”, those are usually the guys that really know what’s going on. I like that answer. Don: It’s like you say in your new material- sometimes you can take a news event or whatever happened, whether it’s stocks or commodities, sometimes those over-reactions or under-reactions can present some great investment opportunities. Michael: I agree 100%. One of the things we like to say is, and it takes people a while to get their arms around that, because it’s almost the opposite of what everyone else is doing, but you’re saying “Look, I don’t know what the market is going to do. I’m just going to pick something I think it’s not going to do.” Once people can understand that approach, it changes their whole outlook on how they invest. Don: That’s right, and a lot of people will tell you otherwise. But by and by, just keep your boots dry. Michael: Yeah. That takes a minute to think about, but that makes a lot of sense. Going forward, I know we’re not making predictions here, but do you have any favorite sectors of stocks or commodities or anything you’re keeping an eye on for the rest of 2016? Don: Well, I think part of the new normal that is developing, and we don’t know if it’s right, hindsight or not, but I look at the individual stocks and the ones that are my favorites are not gambles on new technology, but trends because of disruptive technology. The greatest example of that right now is a stock that I own known as Amazon. To these people, there seems no end. Half of their income now is from AWS, Amazon Web Services, in this cloud computing that they’re selling. They’re not even famous for that and it’s half of their income for the company. I’ll be the first one to tell you, on our way downtown, my wife asked me the other day what I want for Father’s Day. I said, “Well, I have a few items”, and she said, “Well, I’ll take you shopping”. Immediately I’m thinking, “Whatever it is, I can get it cheaper on Amazon and have it here in 48 hours”. I’m guilty. I know people do this all the time but I’ll admit it that I walk into brick and mortar stores and I’ll find something there and I’ll just think that I can make a better deal by internet shopping. I’ve done it for years. I’ll step outside the store and get a cup of coffee, get my iPad, and I’ll order one. A lot of retailers get mad at me for saying that, but it’s just the elephant in the room- that’s what people are doing. Not in every instance, of course, there is still people who enjoy going through the deals and being able to go out, it’s a social activity. When I need something, I’m busy and I don’t want to spend 30 minutes in the car to go down and buy what little item I needed- I’ll just order it online. Again, that’s my point with disrupted technology. This is what happens for investors, too, specifically smaller investors. Maybe you and I were investors a few years ago and we didn’t have the same information the pros have, we didn’t have instant quotes, and our smart phone has more electronics in it than the Apollo 11 Moon Mission to put a man on the moon. Commissions have fallen- first it was the discount commissions, you know, Charles Schwab and those who were innovative in that area. Now, electronic trading on a portable computerized device - iPhone, iPad, Tablet, Microsoft, whatever it is – that has displaced a lot of the brokerage business. For small investors who want to use self-directed accounts, it’s a perfectly great way of doing it. Conditions are low and you have the same (virtually) news and quotes that the pros have. Of course, for high net worth investors, they have the option because of their accomplishments of being able to probably find an easier entry point by finding somebody like you guys. Michael: Well, yeah. I agree with your assessment there. Disruptive technology is really affecting almost every industry. It’s certainly a sector to keep an eye on if you’re a stock investor. Don, just on a personal note, what’s your favorite investment book? Not counting yours or mine… Don: Well, like I say, although it’s not written as an investment book, I like books like Black Swan. I’m a voracious reader and I always have 2 or 3 books going at one time. I’ve got all 3 of the Taleb books right now and I’m alternating between them. There’s such good information out there in many things. I’ll just say Black Swan for right now, it’s not the book of a lifetime, but it’s one of the books I find pertinent in the type of environment that we have to invest in. We have to be aware and keep in mind those black swans – if you’re read the book or heard those terms, those are things that seem to come out of the blue and they’re totally unexpected but they have a very profound and lasting impact on society and culture and finance and everything else. It’s a wonderful topic and it’s very interesting to explore. Michael: Absolutely. Don, how can investors buy your book? If they want to get a copy of it where can they go? Don: One word: Amazon. The quickest, fastest way to get the best price, just go to Amazon.com and you can search for Options Exposed Playbook. That’s it. Michael: Excellent. Well, Don, this has been a great interview. We really appreciate you coming on. We hope you’ll be willing to come back again sometime to give us some great information here. Don: You bet, Michael. It is a pleasure to be able to talk with you more. I appreciate the opportunity and I want to thank all of the listeners you have out there and the people who have been reading your blog. Thank you very much, good day, and I’ll see you later. Michael: Great, Don. Thank you.

Michael: Hello, everyone. Welcome to the monthly Option Seller Radio Show. This is Michael Gross here with James Cordier, coming to you from Tampa, Florida- our main office. We’re going to talk a little bit about the markets, a little bit about trading this month. Quite a bit going on, including what could be the final game of the series between the Tampa Bay Lightning and the Pittsburgh Penguins. My colleague, James Cordier, happens to be a Tampa Bay Lightning fan, and, being from Pittsburgh originally, I’m a Pittsburgh Penguins fan. James, what do you think on the series possible finale tonight? James: Well, it’s interesting, Michael, we’re using our backup goalie and he had little butterflies the first game or two. He wasn’t getting any support from the other players, and finally he is, and certainly a great series right now. We’re ahead 3-2. We being the Tampa Bay Lightning. For your sake, I hope it goes a little bit further. For our sake, hopefully we get to win tonight and we get to watch for a day or two before the Lightning hopefully take on the San Jose Sharks. We have a couple clients in the San Jose area and it would be fun to get a little friendly bet going there, too. Michael: By the time our listeners here this, they’ll know the results. They can visualize our reactions, I suppose. What a lot going on in the markets this month. Volatilities are subject of the month as an options seller. Volatility is obviously a very good thing, and probably the best place to start this month. You’ve been talking a lot about volatility in some of your videos, and I know we’re talking about it in the newsletter this month. Maybe just kick off, we’ve seen a lot of pick-up in the last 6 months across many sectors in commodities in volatility. What are some of the macro-reasons or why are we seeing this rebound? James: The rebound in volatility is coming from the uncertainty, especially from the FED. Earlier this year, as we described, they were going to have four rate hikes in 2016. That got backed off to maybe one. Now, the Federal Reserve, one governor is being walked out after the other in front of the microphone, talking about possibly three or four rate hikes again. This back and forth is really gyrating currencies around the world, and certainly the currency play is directly affecting gold prices, silver prices, and oil prices. Volatility right now is through the roof, and this is certainly low-hanging fruit for option sellers. I know not everything applies to option selling however, because there is a world outside of this, but the volatility right now this is certainly a by-product of what’s going on, and certainly that does help what we do immensely. Michael: Yeah, and a good point to make as an option seller, a lot of people asking now “Are they going to raise rates? Are they not going to raise rates?” People positioning on one way or the other are really gambling on a decision, and, as an option seller, you don’t have to do that. In fact, it really ushers in some of the strategies we talk about in our book as far as credit spreading. I know it’s one of your favorite ways to sell options. Maybe talk a little bit about that, how volatility does favor credit spreads, what advantages come to an investor for using a credit spread in this type of environment. James: Michael, this environment, as we are referring to, certainly has the large volatility, which is blowing out premiums on option prices. In times of low volatility, in order to get decent premium, you do have to sell naked calls or puts based on if you’re bullish or bearish. Being naked is certainly not our first choice. Certainly we sell naked options because we don’t have the premiums available that further out strikes. Right now, it’s available by being able to sell protection against your short position, slow and steady option decay is what we’re after. Now, this environment offers that luxury to do that. Michael: Yeah, you not only get the protection aspect of it, but a thing a lot of investors don’t always realize is, often times because you have that protective aspect, your margin requirement drops. There are certain occasions where credit spreading can even offer a higher ROI than selling naked. Would you agree with that? James: It does. Not only does it help you stay in your position through ups and downs in the market, but it offers smaller margin requirements and it allows you the ability to participate in practically all the opportunities you see in the different markets. Often, if volatility is too high, selling naked just doesn’t allow you to protect assets like you’d like to. Smooth and steady is what the goal is, and having the ability to buy protection against your short position is the utmost performance year’s end. What we’re always looking for is slow and steady currently, and the only excitement we’re looking for is on December 31st reading statements. Michael: Very good then. Let’s talk a little bit about volatility in particular markets. We’ve seen a little burst of volatility in the soybean market here over the last several weeks. We had talked last month about selling calls in soybeans, and we had a big move up in that market. It’s a good market to address because I think you can’t just assume that every option you sell is going to slowly decay to zero. Sometimes, the market moves against you. Maybe talk to our listeners and clients right now about how we reacted to that and how we recommend reacting to a market like that. James: That is true. We’re selling options in eight different markets, and, from time to time, the market exceeds our expectations. A lot of what’s going on in commodities right now is headline driven. There are so many hedge funds and money managers right now chasing performance and chasing return, and they’re looking at eight commodities like we are. They see headlines for the gold market or for the soybean market or they’re having problems in Argentina getting soybeans to the market. That kicks in buying or selling form computerized generated funds, and that’s what happened to soybeans the last two or three weeks. There were headlines from Argentina and China was buying a little bit more soybeans than a lot of people anticipated, and soybeans rally an extra dollar probably above their fair value. As we talked about recently, later this fall, I think the United States is going to be producing a great deal of soybeans, probably in excess of what we need. The headline news really moves the markets and that is what happened over the last week or two. We did cover some of our short positions. We rolled up some of them to higher strikes, and we’re still holding a short position there, but from time to time the market exceeds your expectations and you know you have to take evasive action from time to time, and that’s what we did last week. Michael: Sure. You’re talking about headlines; the big headline driving the soybeans was the May USDA report. The number that really jumped that really caused the spike is, not this year’s ‘15-‘16 ending stock, but the USDA is looking at next year, ‘16-’17 ending stocks. The trade pretty much had them coming in around 400 million bushel, and USDA says it’s only going to be 305, which is a pretty significant drop. It’s interesting, because the harvested acres are, more or less, the same as last year, but they knocked down the yield estimate. Not really sure why they felt they needed to do that yet, but they also bumped up demand substantially for next year. That, at least for now, they’re looking for substantially low ending stocks. I know you and I had talked earlier that we thought they would have to increase acreage because we’ve had a little bit of a wet spring, and that can cause them to shift some of the corn acreage over to soybeans. So, the jury is still out on that. The market has backed off since we got the big spike, but when we talked about defensive strategy, taking evasive action, so we’re short the calls and the market rallies, maybe explain the strategy we executed there to deal with that. James: Well, we are selling calls earlier this year, based on the fact that we are going to have a very large crop come this fall. Quite often, soybeans will have a weather rally, a spring-summer rally. This year’s rally was based on a very large cut from the USDA, as far as ending stocks. We did cover some of our shorter positions. We rolled them up to higher strikes. That’s a trade that is going to not perform the way you hoped it would, but they don’t always do that and that was certainly one of them. Michael: Yeah, and you had emphasized this previously, but the reason we roll strikes up like that is, often times after a big rally like that, that’s when the volatility is the highest, that’s when the premiums are highest. The fundamentals did shift a little bit, but they didn’t shift that much to where those higher strikes we felt would be threatened. In fact, as you mentioned, they were so far out that it was a difficult opportunity to pass up. So, often times, even if you’re in a market, you get a big move like that, the volatility that’s created by that move can often make it an optimum time to be selling options in that very same market. That’s one benefit of the roll. James, let’s move over and talk a little bit about oil prices. You have been in high demand this month from various media sources. You had an appearance on CNBC earlier in the month, and you’ve made a pretty bold prediction there on oil prices. Let’s talk a little bit about where prices are now and where you see them going later in the summer. James: Michael, similar to headlines that have been driving a lot of the different markets, crude oil certainly is included as being one of those. There were some difficulties in Canada where some of the fires there were actually keeping production down. They’re looking at 2 million barrels a day in certain regions of Canada, which was knocked down to just 1 million barrels per day, simply because workers couldn’t get to the oil fields. That is going to be a situation that is going to be calming down in the coming days and weeks. That was a headline, there were some headlines out of Nigeria, Saudi Arabia has been making noise about getting away from production of oil as their main economic resource. All of these headlines will not change the fundamentals in oil going on later this year. As driving season, we’re into now, starts wrapping up a little bit later this year, investors and traders alike start looking at global supplies. Right now, there are tankers that circle each other just off the coast of China, just waiting for the phone call to come into port and unload their oil. There is so much oil right now floating on the Seven Seas, it’s record breaking. As this little bit of euphoria that’s right now developed in oil because it has finally rallied. When that subsides, and we think it will this fall, I think we’re going to see oil prices back down into the 30’s. Right now we’re trading in the upper 40’s, and we think this is a great opportunity based on fundamental availability of oil later this year. Supplies are going to be in a glut situation again, and selling calls right now in oil is one of our favorite opportunities, we feel. Michael: It’s a pretty solid fundamentally based case, and I know when places like CNBC and Fox come calling, they typically want you to make a call. A lot of times, they don’t understand that we do that for them but we don’t necessarily have to do that in trading and the way you trade- you’re selling options. But, when you’re talking to reporters like that or you’re on camera, do you ever get a feel that they’re pulling one way or the other for what they want you to say? James: That’s interesting, Michael. CNBC, I think, is probably notorious for bringing people on when the markets are rallying and they want to talk bullish. When oil is falling, they want to bring analysts on that are talking bearish. I think CNBC is probably the biggest culprit for simply frenzied, if you will, interpretation of what the market is doing. Rarely do they want to hear an analyst or trader talk about it’s a good time to buy oil when it’s falling. I remember back in January and February, we were on CNBC and saying this route in oil is probably almost over. Our girl in Los Angeles who helps us get on to the different television stations when they call us, they simply didn’t want to hear about buying oil back in January. Finally, they thought maybe we should take another perspective, and CNBC rarely wants to put someone on that has a contrarian view. I think they’re learning a little bit. Back in January, we were talking about going long oil and the whole world knew it was going to zero. Lo and behold, the market did rally. Now, recently, we were asked to be on CNBC, reluctantly, talking about bearish oil factors later on this year. So, you know, we talked about how we feel about the market. We’re not “Ra-Ra” cheerleaders when the market’s going up or down. We look at the base fundamentals and we make predictions on 3-6 months out. I know CNBC loves talking about what the market’s doing today and what it’s likely going to do tomorrow. As we know, no one knows these facts. If, in fact, a person that comes on CNBC knows what the market’s going to do tomorrow they wouldn’t be on CNBC, they would be on an island right now eating cracked crab, like they did at the end of Trading Places. Can’t we have both? Michael: I know when they’re shooting you remotely, they’re shooting you from the studio here in town, but you’ve been in the studio right there with them before, as well. Do they ever talk when the camera goes off? Do they ever say, “I think it’s going this way” or “I wish you would’ve said that”? James: I think one of the most interesting memories I have of being in New York and being on set was, I think, when we were interviewed on Bloomberg. They probably have several hundred people walking through the lobby, going in and out of the offices, going in and out of the green rooms, making sure that you have everything you want. When you see the anchors walking through the lobby at Bloomberg, they’re like gods there. When you’re sitting in the green room you’re also like a god, because everyone’s job at Bloomberg resides on providing great content. So, when you’re going to be on for a half hour-an hour, they’re looking at you like “Dude, don’t screw up. I hope you do something really interesting and speak intelligently, because my job relies on great content”. I think Bloomberg walking through their offices there was very memorable. We’re going to be invited to do that again this fall. We’re going to be on set there for probably a very long segment. I think Bloomberg, which is a fantastic operation, I think they cover the fundamentals more than anybody else. Some of the Fox, not as much, but CNBC, they’re “Ra-Ra” stations. Bloomberg actually gets down to the nitty-gritty. They actually talk about the fundamentals, the markets that are actually moving for fundamental reasons. It’s so much fun being on Bloomberg and that operation, I’ve found, is just a Class-1. It’s just fantastic being on there and to walk through the lobbies there, you have your credentials and people are looking at you like “Yeah, you’re the man”. It’s pretty cool. Michael: That’s an interesting point. You know, in this month’s newsletter we interview Mark Sebastian. One of the many things he does is he’s a writer for the Street and Mad Money, and he works a lot with Jim Cramer. One of the things he said in the interview is that Cramer is a really smart guy, but he can’t always say what he thinks on the show because the network has certain rules or guidelines they have to abide by, or I don’t know the reasons- he didn’t really go into that. But, he says if you really want to know what he thinks you have to read what his blog on Real Money… I’m not going to spoil the interview. He was kind of speaking to that same thing, where they have a framework of where they want you to go and where they don’t want you to go, and it sounds like Bloomberg gives you a little more freedom to explore the fundamentals. If you do want to see that interview amongst our other items we’re covering in this month’s newsletter, you will be getting it next week. I think you’ll find that a very interesting interview. Mark brought some things to my attention that I was not aware of that takes place up there. James, we started off the show today talking about credit spreads. I know, we’re going to spend a little time here talking about one of your absolute favorite credit spreads that you describe as the “Maserati of option spreads” in our book, The Complete Guide to Option Selling. Maybe talk a little bit about what this spread is and how it works. James: Of all the option trades that we do, a credit spread generally buying one against selling three, buying one against selling four, gives us an incredible amount of flexibility to be in the position for slow and steady decay. If in fact we see a market that we determine to be fair valued, we’re actually going to sell a credit spread on both sides of the market. Anyone who has read the Third Edition: The Complete Guide to Option Selling, I really suggest you take a look at chapter 10. It talks all about the “Maserati of all option sales”. Basically, what is does, is it allows the investor, whether they’re clients of ours and we’re managing the portfolio for them, or if you’re doing it yourself, it gives you an incredible amount of flexibility to stay in the position, allow your fundamental analysis of the silver market or the coffee market to actually play out the way you thought it would. So often, investors get involved in commodities or in Apple Stock or what have you, and the gyrations of the market simply take you out of your position. The “Maserati of all option sales” is a credit spread that’s done sometimes on both sides of the market, and it gives you an incredible amount of staying power to allow you to be in the market when your options expire or at the time that you want to pull profits and close out the position. Being in a credit spread, sometimes on both sides of the market, allows you to adjust the position, at the same time, keeping 80-90% of the premium that you sold your options for. Quite often, the protection that you buy you only need for 30-60 days. Sometimes, you want to keep it on until the end of the position, but the idea is for all of your options to expire worthless. Anyone reading chapter 10 in our book the Third Edition: The Complete Guide to Option Selling, can learn and understand the greatest trade in option selling that there is. If you do it yourself or if you want to manage an account that we do for you, I think you’re going to find that it allows you to stay in the trade and allows you to see the end of option expiration on the positions that you have. It seems to be boring, it seems to be slow, it really locks down your position, but, in essence, that’s what you want. More often than not, at the end of the year, having this credit spread on, you’re going to be very happy with the results if, in fact, that’s the way you traded throughout the year. Michael: James, for those that haven’t read the book yet or read that chapter, you’re referring to the ratio credit spread where you’re selling maybe 2, 3, 4 options out-of-the-money, and then for every 2, 3, or 4 that you sell, you’re buying a closer-to-the-money option for protection. The reason you do that is it protects your distant calls, but it’s one of the only option spread that I know of, if the market moves the wrong way you can actually end up taking a higher profit on that. Is that correct in some circumstances? James: There are some circumstances where your long protection actually goes in-the-money, and the further out options that you sold stay out-of-the-money. It is truly designed to hit singles and doubles all year long. If the market does make a slightly more dramatic move than you first anticipated, that long option can actually turn out to be extremely profitable. Of course, your options on the other side of this strangle, if in fact that is the position that you’re implying, that expires worthless and your one long option can actually go in-the-money. That is more than a single or a double. That’s not how we have positioned, that’s not the rationale for doing it, but if you are selling 10. One of those options can go in-the-money and just dramatically increase the profitability of this trade. The long options are there for insurance, they’re there for stayability in the position. The ability for this option trade to produce profits in extents of what you first anticipated is there, but primarily it keeps you in the trade and allows you to be there when the options expire, preferably worthless. Michael: Again, for those of you that would like to read about it, that’s in chapter 10 of The Complete Guide to Option Selling. You’ll certainly want to take a look at that if you’re interested in it. That’s all we have for this month. We do recommend you look for the newsletter next week in your mailbox and/or e-mail box. If you’d like more information on accounts this month, learn all about what’s available, the different programs we have, you can get a full information pack at www.optionsellers.com/discovery. We also do still have some new investor interview consultations available in June. James, I don’t believe you have any account openings left in June, but do you know or do you have to check with Rosemary? James: Rosemary said we are full for June. Michael: Okay. We do have consultations available in June for July account openings, so if you would like to book one of those, feel free to call Rosemary at 800-346-1949. Have a great month of premium collection, and we’ll look forward to the outcome of the hockey games over the next 2-3 days. We’ll talk to you all next month. James: As we say here in Tampa, “Go Bolts!” Michael: Have a great month, everyone.

Michael: Hello everybody, this is Michael Gross of OptionSellers.com here with your Option Seller Radio Show. We have a very special guest for you this month. This month’s guest is Price Headley. Price is the founder and president of BigTrends.com. He is one of the nations most well known experts on options trading and technical analysis. Price was also inducted into the trader’s hall of fame in 2007. Price, welcome to the show. Price: Thanks Michael, great to be here. Michael: Price, I know you’re very familiar with many different types of options strategies. I’m sure several of our listeners have been to BigTrends.com. It’s a very informative website. Maybe we can start out, Price, by you just telling us a little bit about your background and how you got started in the trading industry. Price: Sure. I was a student at Duke University, actually, studying to be an equine veterinarian. My family’s been in the thoroughbred horse business for generations, and I think I was going to go down that path and then got hooked into a trading contest, a collegiate contest, where ironically I was in the bottom quartile of participants in a four month contest with a month to go, and realized I needed to do something different. So I started actively trading it every day. This is just paper money back in the late 80’s. Turned around and finished in the top 1% of participants and said “Yeah, I think there’s some opportunity here, something I’m really good at, so I told my dad I wanted to do something more conservative than thoroughbred horse breeding. I wanted to trade stocks and options. He thought I was a little crazy, but actually it worked out really well. That was kind of a formative point for me of realizing I really enjoyed more active trading and saw lots of opportunities there. That was back in the day before the Internet, just reading the paper and seeing things that were happening. Now, of course, there’s just even more at all of our fingertips with the Internet, and the ease of access of information. Michael: Okay. So tell us about BigTrends. What do you provide there? How can investors benefit from that? Price: Yeah, sure. I launched BigTrends.com back in 1999 and did it because I thought such a push for information on the web. At the BigTrends.com site, for starters, a lot of free educational information about active trading, and, in particular, you allude to option trading. I’ve always felt like once you learn the core principals of how to find the right stock or market to trade, you of course then can learn option strategies to figure out how to trade that with a lot less capital and a lot more potential return on your investment and still control your risk. We teach people all kinds of strategies, not just in technical analysis, which is pretty much a driving factor for active traders, but then also aspects related to the psychology of trading related to how to build your trading plan. Really just all the different aspects that a trader’s going to go through to assess how to create essentially a business plan to be successful in trading over time. Michael: So, if somebody wanted to be a self-directed trader or, especially, self-directed options trader, your site would really show them a system of a way to get set up to do that. Price: Exactly. Whether you trade stocks, options, even futures, you can apply those principals, but yes, the options is really our focus so that you can really take more control over that part of your portfolio that you want to control. We don’t tell people that you shouldn’t put all of your money into options strategies. We recommend diversification across a lot of different vehicles, but for that piece that you want more of a kicker on your portfolio for additional growth, and then come opportunities. We see more and more people taking that step to empower themselves, and, of course, education is really the starting point to have the proper knowledge to then do things correctly over time. Michael: Okay. You authored a book, Price, called Big Trends in Trading. It’s an Amazon.com investing bestseller. Can you explain a little bit about what that title means and what type of an approach you recommend in the book? Price: Absolutely. So, Big Trends in Trading, I really wanted to take a more quantitative approach in terms of showing people. I wasn’t just talking the talk but actually backing up what I was suggesting as the appropriate strategies to have a meaningful edge by actually showing a lot of systematic trading that I had done and testing that I had done, so actual results based testing. Everything we do here at BigTrends is really geared around that philosophy, which is it has got to have a meaningful edge, not just a little edge, because you’ve got to, obviously, as a trader overcome the cost side in terms of the commissions that you pay, plus any of your other setup costs for your computer and what not. Basically, our view is looking at systems that had a meaningful edge. I started BigTrends in trading with really the overall market-based systems how to really effectively time the market. A lot of the conventional literature says you can’t time the market, but my experience has said that there are a lot of opportunities where you can time the market. More importantly, all of the big mutual funds will tell you that you can’t because they want to have you keep your money with them so they can keep collecting fees on your mutual fund money, but the reality is that would have you miss the best twenty days how much return you give up. But actually, if you miss the best twenty days and the worst twenty days, you’re still ahead of the game because of how painful those crashes can be if you’re invested. Of course, we also like to teach people on options, you know, how to profit from the downside as well as the upside. So, to me, options open you up to a lot more opportunities. We take big trends in trading from the overall market to then stock selection trading, including some indicators I’ve developed, like one called Acceleration Bands, which of course is, as the name sounds, geared around finding faster moving situations which is pretty much how I built my capital to be able to start BigTrends from money I made myself in the 90’s. Basically, from that point, taking you into options strategies and then some people even say the last chapter is the best one, which is the trading psychology money management piece, where there’s a lot of smart minds on Wall Street that have blown themselves up because they basically flew too close to the sign, had too much leverage, got too aggressive. So, it’s about how to keep yourself balanced through the invariable winning and losing trades and how to stick with the game for the long haul. Michael: You made some great points there, Price, and anybody listening, if you want to take some notes there there’s some great insights to any type of trading there that Price just mentioned. Price, one of those things, the reason I bring it up is because we preach a lot of those same principles when we’re talking about applying options in the commodities markets. Two things that I wanted to touch on that you made a good point of there: One is the importance of systems, which we talk about a lot. I think a lot of people, especially investors I talk to, they start out on options “Oh, I’m going to try one here, try one there”, and a lot of people that just dabble end up losing initially because they’re just testing it out. The people that really benefit over the long haul use a system. They have system, they have rules they follow, and it sounds like that’s one of the big things that you’re talking about in your book. Price: Absolutely. Those systems can be critical. If you’re just kind of saying “which way did you wake up on which side of the bed this morning”, and kind of just trying to react to the news, that reactivity is what gets a lot of traders in trouble. You really have to take a more proactive approach and, as you said, Michael, that’s what the systems approach will help you with. Michael: Price, there was another point there that’s very interesting you brought up. Tell me if you agree with this. It’s been my experience that a lot of investors that aren’t real familiar with options yet, they tend to have a biased to the upside, where we have to buy and hope the price goes up. One of the biggest adjustments, or benefits, you could possibly make for any type of options trading really is it doesn’t matter which way the market is going. If you have the right options strategy on, you can benefit if it’s going up, sideways, or down, just depends on the strategy you have on. Price: Absolutely. Like we were saying, it just opens you up to so many more scenarios. That was always the attraction to me to options. I’d say tell me which scenario you want- up, down, or sideways and under what timeframe, and we can construct an options strategy that will succeed if that basic view plays out. You can start cash-flowing markets that are going nowhere. You can, like you said, make money on the downside. As we all know, stocks fall faster than they rise. So, when you catch it correctly, there’s even more money to be made more quickly in put options, which are essentially rights to sell a security, which will become more valuable as the market drops. It really does open people up to a lot more opportunities, but as you said, the typical beginning trader comes in and maybe does some cover call options on stocks they own, still essentially neutral to both bullish types of strategies or just looks to buy calls, so I’m betting on the upside. You’re right, it’s a big conversion in mindset. You can’t just buy low with options, you can’t just think, “Well, stocks are down, so therefore I’ll buy some calls and it should start working it’s way back up”. You’ve got that time component on options are a limit life asset. So, basically, if you just sit still in a stock, it’s not going down anymore, but if it’s not going up and you bought calls betting on it going up, a lot of people, of course, buy the at-the-money calls that are about where the current price of the stock is, those are most vulnerable to the passage of time. So you really need to get speed of movement, which is why the techniques like the acceleration bands are so important to catch. That phase of a trend that’s moving faster than essentially what the market expects. Michael: Sure, those are all great points as well. I’m going to talk to you a little bit about your preferences in trading here. I know you’re both an expert in technical timing as well as options, but in reading some of your blog entries and articles, CBOE and on your website, you also provide an incredible amount of fundamental data on stocks, the economy as a whole. Do you feel fundamentals play a role in technical trading? Price: Certainly, fundamentals really create the backdrop. If you think of it as kind of a time frame sort of a differentiation, the fundamentals create your long-term backdrop and your technicals are much more of the short-term, sort of how your zigging and zagging within what kind of an environment fundamentally you’re in. Remember, also, it’s not just the environment we’re in, but the markets are going to anticipate when the environment is due to change. You know, if we’re talking about changes in interest rates, obviously interest rate policies had a huge impact on the bull market that we’ve had in the last seven years or so. Basically, you’re looking at that quantitative easing, creating that kind of easy money approach where really made stocks the only game in town, comparatively at least. From that perspective, that pushed a lot more money into stocks. When that starts to shift and you start to see when and if higher rates ever do come around, that obviously will change that fundamental, and not become more of a monetary landscape, but it’s still part of this bigger picture of fundamentals you allude to. You’ve got to be careful though about certain fundamentals like if you look at, say, the unemployment rate and the jobs data, that’s a very lagging kind of indicator. So yes, the unemployment rate’s been cut in half over the last seven or eight years, but basically if you say “buy because they unemployment rate’s low”, you’ve got to make sure those fundamentals are really catalyst in drivers of future impact. We put a lot of energy into things like earnings, because earnings are very important in determining the ultimate value of a stock, as essentially the amount of anticipated cash flow, not just now what it’s generating, and how it’s anticipated to generate in the future. From that perspective, I’d say if there’s one fundamental that I constantly look at, it’s earnings and how not just the actual earnings but how the stock is behaving after those earnings reports. So that’s a really good one to keep in mind, because good news tends to beget more good news, and ones will tend to pile on to positive news and start upgrading the stocks, so those things kind of almost become self-fulfilling prophecies when you’ve got a really positive earnings surprise. On the other side, when it’s starting to roll over and you start to miss earnings estimates, you really do see the analysts jump ship a lot and you see a lot of pressure on stocks that are missing their estimated earnings. Watch the news and, of course, watch how the stock behaves after that news with different rallies, after earnings news it also can be a pretty good sign that there’s still more institutions that want to be a part of that earnings story going forward. So, you get kind of an extended catalyst that can last from quarter to quarter and even from year to year. Michael: Okay. Yeah, that’s very similar what we do over here on the commodities side, Price. We’re using the fundamentals as the background, maybe leaning on them a little bit more because we’re focusing on supply/demand here. From what you’re saying, it sounds like the fundamentals are the backdrop, and if you do get, say, a stock that gets a positive earnings, maybe you’re watching technical signals a little bit closer for buy signals at that point. Would that be fair to say? Price: It would be fair to say that, assuming you’ll align your technicals with that backdrop of the fundamentals. If they don’t align, you’ve got good fundamental news but you’re seeing things that look bad technically, we kind of will pay attention to that, but maybe just not try to take those trades where you don’t have that alignment between the technicals and the fundamentals. So, to us, a lot of traders think, especially newer traders, when they get into the game they’ve got to trade every day to justify their choice to be a more active and more involved trader a big part of their time, but, actually, a good thing to remember is that being a good trader means you’re first a good observer of what’s going on. You know when the odds are in your favor versus if they’re not in your favor, you get these cross currents between those technicals and fundamentals, and you learn to back off and that it’s okay to have a good portion of cash if you don’t have a clear edge, and wait until you have your edge to start to then make your investments accordingly. Michael: Okay. Let’s talk about technicals for a minute. I’m sure you could probably talk to us for the next eight hours about technical trading. From a real technical guy like yourself, do you have any favorite indicators that you like to lean on? Price: Absolutely. There are several that I go back to again and again. I’ve mentioned my Acceleration Bands, which people always ask “Is that like a Bollinger Band”, you know, John Bollinger developed a standard deviation band that’s become a real staple in a lot of people’s analysis. There are some similarities to it. The difference I would say with Acceleration Bands is they factor in the trend component more, in addition to the volatility component. We want to know what the expected range of prices should be for a stock or a market, but then we want to know when it moves out of that expected area. That’s when you see shifts in people’s perceptions of value, that’s when you see major trends develop to the upside or to the downside. We’ve added in other indicators, some of which are out there on most platforms, for example, Larry Williams developed an indicator called the Percent Range Indicator, or often just called %R, and it measures where the stock is in it’s existing range from typically a low to high range, 0-100%, essentially is what we look at. We’ve found that actually stocks that continually stay in the upper quintile, that is, the upper 20% of their readings, are stocks that are usually continued to make higher and higher prices. So, therefore, it becomes almost a trend definer when something is staying in that “over bought” area. A lot of people have been trained in the technical world that over bought is a very bad word- that you should be looking for the downside. We found that, actually, over bought can be very good if it fits a certain profile. Does that idea that in an uptrend, sure, strength begets strength, but people want to be a part of things that are going up and want to bail on things that are going down. So, sometimes in the bottom 20% where you see some of the crash-type scenarios happen for stocks and markets, or the institutions keep saying no, they don’t want to be a part of that, they want out. From that perspective you’ve got to sometimes retrain yourself, and that’s what we’ve ended up doing at BigTrends a lot is retraining newer traders that come to us or traders that think they know how it works from other things they’ve been doing, and saying yes, in a trading range, over bought/over sold, it’s kind of just going to chop around, up and down. We’re looking for the more meaningful moves where you get really a flush. For example, January of 2016, beginning of this year, you had just a quick initial gap down in the markets very first day- very unusual. Usually that’s a positive day, more often than not, to try and see if we can get off to a good start for the new year. It gaps down and then we fall through the downside right behind that, and that led to really several weeks of persistent selling pressure in January. That created a real opportunity for downside traders in put options or, you know, other strategies geared toward the bearish side for options. So, my view is that you have to see something like that through the Acceleration Bands or through the %R, what we call the BigTrends way, which is just looking at those top 20 and bottom 20 percent areas where something can really start to really move more dramatically. Make sure, if you’re the typical trading range trader, that you don’t get caught trying to fade or bet against those over bought periods and think it’s going to come down or in over sold periods think it’s going to bounce back up, because as the old trading motto goes “the markets can remain ‘irrational’ longer than you can remain solvent”. So, the idea becomes see what the wind up trend opportunity is and learn how to take advantage of it. One of the nice things too, Michael, that we have showed people within say a %R trend phase is re-entry strategies. Once you see that first break down point, how do you get back on the wagon to play it for another pot down after a bounce? What we have taught and found quite useful is finding these what we call “re-tests”, and variably, of course, you’re in a downtrend, you will get a bounce. It might be a one or two day kind of a bounce on a daily chart, the short-covering rally kind of phase, and the question is, is that the bottom or is that just a quick short list sort of flush of some of the we cans, and then you see it stop, and you see it go into another leg down. That retracement phase is really where we find some really good, especially on a risk-adjusted basis, a really good opportunities to hop on board a train. If we’re wrong, and it does violate that little retracement area, then we’ll get right back out, but if we’re right about it kind of retracing and holding into that support of resistance, then we get the wonderful entries within a trend. That’s something a lot of trader’s miss, is they think “Oh, I missed the first breakout move, therefore I’ve got to watch from the sidelines. I can’t chase it now, it’s too late.” Yet, you’ll go back and look later and see wow, there’s a lot more life in that trend. We show people those retracement points to get back on the horse. Often times two, three, four, five times in a daily chart trend we’ve seen some that have lasted up to as many as ten really good re-entry points before that trend will finally fade. So, if you’ve got multiple times you can hop on effectively and then you finally get stomped out on a trend, it gives you a lot of confidence to say “okay, I can keep my risks low. If I’m wrong, I’ll be out quickly”. Especially with options that’s important because you don’t lose a lot of time, and if I’m right I catch a wonderful spot to hop on board for the next trend phase. Michael: Thus the term Big Trends. Price: Exactly. That’s what we’re looking for. Leave the little trends to everybody else and focus on the bigger trends for sure. Michael: Okay. Let’s talk about options strategy a little bit. Most of our listeners here, Price, are options sellers, but I’m sure a lot of them are interested in all different types of options strategies. I noticed BigTrends offers quite a bit of information, courses, and resources on trading options in general. Having experience in so many kinds of options trading, do you have one or two favorite bread and butter options strategies that you tend to favor in your personal trading? Price: Well, the first step would be to identify that there are opportunities, I believe, on both the selling side of options and the buying side of options. We know markets don’t trend the majority of the time, although there’s always a bull market and a bear market somewhere. That’s why we look at, of the 4,000 plus optionable stocks in the ETS, we probably look at several hundred of them we consider to be liquid and active enough to handle plenty of volume for our subscribers. On the sell side, we tend to prefer the credit spread approach where you’re sewing an option out-of-the-money, so you’re benefitting from that time erosion. Then, at the same time you sell one option, you’re buying another option a little further out, a cheaper one to protect yourself, so you’re still getting that credit, that initial premium, in that an option seller wants, but you’re also protecting yourself and defining what your worst-case risk is. We just found that we just like the credit spreads better for the defined protected risk. You know, if the market has a crazy gap or stock has a crazy gap, then you’re on the wrong side of it. You’re avoiding that bigger hit in the case of some kind of really bad news day that goes against you. So, defining your risk is very important, and we always want to go into a trade knowing what our maximum risk is on the trade. So, that’s why credit spread’s a favorite neutral to time-based strategy to collect premium. Michael: Okay, so your preferred selling strategy is the vertical selling spreads. Price: That’s right. Michael: Sure. Okay, that’s some great insight, Price. Let’s shift gears here a bit and talk about today’s market. There seems to be just kind of a general sense of anxiety right now about the state of the world and the markets. Are you seeing that reflected in stock option values you follow? Is anxiety still driving the VIX or do you see it calming down now? Price: Well, certainly the VIX has really plunged back down, you know, as the markets have rallied back up here and by mid-April the volatility indexes have really fallen. You know, those things tend to move kind of in opposite fashion as the stocks were dropping. In January, you saw that big volatility spike upwards, so those things and patterns really haven’t changed, in my view. We do expect to see a lot of second half volatility in 2016 as we head into and even after the presidential election coming up in November. We would expect, as you look back when we elected new presidents back in 2008 and also in 2000, those were pretty rough times for the markets there in the second half, and into really even the beginning of the next year, if not further. So, our view would be that, not to say we’re expecting there has to be another great recession and another 2008 necessarily to kind of collapse, but we are expecting that we will see more volatility. Of course, that’s where you can kind of use options accordingly. One caution of course would be some people will look at the VIX and look at the VIX options and think, “well, the VIX is at 13. If I’m buying a 13 call or a 13 put it should be the same price”. Well, it’s not, because the VIX is priced against the futures on volatility, which are expecting that we will see a snap back in volatility in the second half. So, I’m not necessarily saying anything the market’s not already expecting to some degree, the question is can we get more volatility than what the markets expect? So, just be careful on that when you look at your options. You’ve got to make sure you’re pricing against the proper vehicle on volatility levels. Bottom line, we think that there is some bit of resonance, even as the market’s snapped back towards these highs, we see that people are kind of worried with the way the markets started in January this year, and worried about if that’s a pattern that is going to be played out again like what we saw in 2008. I would say, that’s a real simple, technical indication that you can keep an eye on with the 200 day moving average. That’s just a simple trend line looking back to the last 200 day closes. If you look back in 2008, we never retook that after the break down early that year. We got back up into it about April/May, tested it, and then failed there. This year, we’ve actually retaken it on the major averages, at least on the SNP, the Dow, the NASDAQ 100, the rest of 2000 has not retaken it, so the small caps are lagging here. We said stay away from those. Some other areas like Biotech and Healthcare have been lagging, you know, so if you watch just that simple trend line, that will tell you, in the longer term sense, kind of who’s winning the war between the bulls and the bears in that bigger picture battle. So for now, we’re back above it. We’ll see if we can hold it here, which will be a good sign if we can, and if we can’t, that’s probably where you’ll see a lot more caution starting to develop if things start to unravel below that support line, which is maybe a couple percent below current levels right now. Michael: Price, do you have any gut feel for the year 2016 and the big election coming up? Do you see stocks continuing higher or do you feel like there may be another correction? Price: I’m kind of at two camps there. I kind of gave you that little overview that we’re expecting more volatility in the second half. I think certainly in the short term, we’ve been rioting the up-trend signal that we got on %R and from the other tools back in late February, and basically have been benefitting from that kind of steady adjustment back up. I am expecting, based on history, the uncertainty, the fear factor, of who the president’s going to be. You know, we know we’re going to get a new one, one way or the other, but we don’t know which one, per say. A lot of potential of adjustments that can happen there, so basically I’m expecting that we’ll probably see some selling pressure in the second half. So, with that in mind, it wouldn’t surprise me to come back and eventually retest the lows some 10% lower than current levels right here in mid-April. My view would be that, short-term, we think we can get a little bit more out of the market on the upside, but, longer term, we’re expecting that the markets will probably have some adjustment down in the late summer through the fall, and then we’ll see what happens, how the markets behave after the election. The big thing, regardless of what you kind of lean towards on some of those longer term expectations, is you still have to trade what you see not what you believe, right? So, you can’t start to buy a bunch of put options here betting on it, and then, meanwhile, watch those get eroded further because we’re in a short-term up-trend, and then basically blow them out because you just couldn’t take the pain, kind of a thing. Of course, like in life, timing in trading is everything. Our view is pretty much short-term. We’re riding the up-trend while we can, but kind of keeping maybe a little smaller allocation, maybe a little less exposure than we might otherwise have with those longer-term concerns. Again, like we said before, you don’t have to try to hit a home run on every trade, you don’t have to be allocated heavily on every trade. You can, certainly, if you have those lingering concerns in your mind, you can always take smaller positions. You can always sit on the sidelines if you’re really not sure, but if you’ve got some opportunities happening in the short-term, you can still trade them, you might just trade them a little smaller. So, that’s part of trading too, is knowing when to pressure bets, when things will wind up short-term and longer-term, versus if you have some of those crosscurrents, when to maybe trade smaller and be a little quicker to tighten your stop or pull the trigger on a trade at a smaller profit target if you’re just feeling like, “Well, we’ll take it and be happy with it and move back to cash, and wait for the next low risk entry point”. That’s the big part of it, right now, expecting some of those crosscurrents we’re going to trade a little smaller and try to wait until we really see things line up, if we move into the second half in front of and after the election. Michael: Okay. Price, I know you’re not a commodities guy, per say, but a lot of stock guys follow some commodities like gold and oil because it can have an impact on overall global economy. Do you follow any commodities prices like that? Price: Certainly oil and gold have been ones that have been on our radar for a long time. Oil is one that we were real bearish on in the middle of ’14 and as we got some of our really major breakdown signals. Those downtrends, in the longer-term, still remain in place. We’re getting some stabilization in oil here, but certainly nothing that I would view as any kind of a longer term buy signal yet. So, we continue to side with being cautious on oil and meanwhile, gold though, the other big one that would fall into the commodities space, you know, that saying that started this year, we had some wonderful breakouts. So, my view would be that, yeah, that looks like it’s an improving trend that might create some real nice opportunities perhaps in the near term as we stay in this very accommodative monetary policy, not just in the U.S., but around the world. So, paying very close attention to gold here as we go through the rest of the year and into next year. Michael: Okay. Alright, Price, it’s just kind of a personal interest question, but do you have a personal favorite investment book? Not counting yours or mine. Price: Yeah, what I always tell people, I mean, there’s so many great ones, but Reminiscences of a Stock Operator by Lefevre. It’s based on the life of Jesse Livermore, the famed trader who lived some hundred years ago. Those principals still apply. I always have myself and my staff read that book at least once a year, because it’s just, more than anything, about the psychology of trading, how the crowd kind of reacts during different stages of a move, how Livermore essentially was trading it in the day and it’s a fascinating read and it’s one that those timeless psychological principles still apply, not just for stocks, but for any type of trading. I just think there’s something great about reading about what was going on a hundred years ago and seeing this stuff even with all the changes in technology, even with all the changes in computers, and what not, and hey, we can have a systematic approach, and guess what? Somebody’s still programming the computers, and that’s humans. There’s still a human element and you can’t eliminate emotions, but it’s like learning how to manage those emotions in your trading will, I think, give you a big leg up on the rest of the crowd. Michael: It’s a great book and it’s still in print and they still reprint it today. It’s certainly a classic and any investor should read if you’re really considering being a trader. Price, as far as your website goes as somebody just coming there, just looking at BigTrends, where would you recommend they start? What resources would you recommend first? Price: I mean, obviously, on the BigTrends.com site there’s so much free content there. That’s a great way to just kind of dive into the educational link on the top. I’ll walk you through a lot of free educational articles and content. Then there’s a way that people can, with my compliments, become a BigTrends insider. There’s a sign-up box you can just put in your name and e-mail, and basically you can get on our list for, not just the newest articles, but also other special education events. We do a lot of complimentary webinars, depending on the time of year and where we see things we want to point out to people that might be opportunities to consider. So, getting into becoming a BigTrends insider on that little sign-up box there, on the top right of the site there on BigTrends.com, gives people the ability to get invitations to those complimentary events from time to time. So, that’s become a real popular starting place and we realize that everybody’s educational journey is different. Some people can absorb a lot real fast, other people want to take it a little slower, and we tend to encourage people to make sure that you get educated first before you try to rush into trading, because, of course, you rush into trading without the proper education, the markets will give you an education of it’s own that probably won’t be as favorable to your portfolio as if you actually get properly educated first and really make sure you understand risk as well as the right way to trade going forward. We’re big believers that education is critical. A lot of people think they get out of school, when they’re done with school, for their life. I think that’s the exact wrong approach. I always say it’s better to be grieving growing than ripe and rotting. So, you want to make sure that you always feel like you’re looking to add that next edge into your portfolio, that next opportunity. I’ve been trading for more than 25 years and still always looking and testing for additional edges, additional things to add, because that just keeps you sharp. That way, you don’t get complacent, and the markets have a way of humbling those that get a little bit too overconfident in their ability. So, we always want to stay humble and stay in that constant learning mode. I think it’s a really powerful value that can serve you for the rest of your life, in trading and in life in general. Michael: Great points, Price. One thing I want to mention to our readers and listeners is one of the things we talk a lot about is, not only diversification of strategy, but diversification of asset class. Both of those things are important. If you’re listening to our radio show here or reading our newsletter and you probably have an interest in either commodities or selling commodities options, a lot of people want to diversify into stock or stock options, or vice versa. That’s what Price does. That’s what BigTrends does. If you want to learn more about it, it’s a great website to learn more about stock options, stock option trading, and I looked at it and I certainly recommend it to anyone interested in that aspect of that asset class of stock and stock options. Price, I want to thank you. This has been a great interview. You got some good information to share with our listeners here, and we hope to have you back again at some time in the future, if you’re willing. Price: Oh, anytime Michael. I really look forward to it. It was a lot of fun and I enjoyed it as well. Look forward to staying in touch and wish everybody great trading in the rest of 2016 and beyond. Michael: Perfect. Thank you, Price, for everything.

How Colorit.com 's Michael Jackness grew a Million Dollar eCommerce business in 1 year using niche selection and Facebook marketing through ads. EXCLUSIVE RESOURCE: Get my Million Dollar Cheat Sheet + the transcribe from this episode. . Subscribe: iTunes | Stitcher You know, usually there is a fair amount of luck involved when someone achieves extreme growth. They stumbled into the right niche or made the right strategy partnership. Highlights How the death of affiliate marketing led Michael to build 4 eCommerce stores The importance of reviews and how quality products can sell themselves Testing your products on eCommerce MVP’s How viral contesting can work in a tight-knit online community Facebook Marketing – Using Facebook insights for detailed audience data Micheal’s SEO Strategy for success How eCommerece is an 8 cylinder engine Micheal's TWO pro tips for rapid growth Links / Resources The (sign up to unlock freebies) Colorit.com Treadmill.com Cuttingboard.com Icewraps.com Transcript Prefer to read rather than listen to the podcast episode? No problem, you'll find a text transcribe below, and you can also for later. → Read the Transcript Drew:  Hey everybody, welcome to the Nerd Marketing podcast. This is Drew Sanocki and now we are talking with Michael Jackness, who's one of my favorite e-commerce entrepreneurs. Micheal, welcome to the show. Michael: Thank you and now I have a lot to live up to. Want to save this transcribe to read later? download it as a PDF. Drew: Well, I'm just sort of fascinated by you because you've got, I mean your skills run the gamut. You've got a millions irons on the fire, you're flipping domains, you're starting e-commerce businesses, Amazon businesses, you're going to China, you run a podcast. Did I miss anything? Michael:  I'm a husband. Drew: You're a sumo wrestler. Michael:  Yeah, as far as business goes that pretty much covers it but, yeah and I guess you could even argue that maybe I have too many irons in the fire. It's something I've been working on a lot over the last two years. I think there's that saying, if you chase two rabbits both will get away. Drew:  Right. Michael: We've really been focusing on e-commerce lately and really just doubling down on that and I've been basically living life with blinders on when it comes to e-commerce. Whether it's running stores or running an e-commerce podcast and blog or going to events. Everything that I think about and dream about these days is in e-commerce world. Drew: Dream about. Michael: I've had dreams about it, nightmares I guess which actually came true here with one of our products, but, yeah I think when you're so immersed in it, yeah, you can even have dreams about e-commerce, which is pretty sad. Drew:  Yeah, I had a nice Shopify dream last night, it was great. The series I'm working on here is I'm talking to a lot of entrepreneurs who have bootstrapped companies up to seven figures in revenue. I say seven figures in a year but it doesn't really matter, you've achieved some sort of rapid growth with an e-commerce store and I think that is really interesting. It appeals to a lot of people and it represents another alternative to all the venture backed companies we hear about all the time. That's why you're here as my guest and I would love to talk about Color It, but before we do, it's nice to hear a little bit more about how you got here and maybe a little bit about your history in e-commerce, maybe you can talk about that for a sec. Michael: Sure, so before we got into e-commerce, the story kind of starts there really because we were affiliate marketers and basically that means that you put links in your site and if someone clicks through them and buys or signs up or whatever the action they're taking, you get a commission and you're pretty much hands off once they click that link. It was a wonderful world to live in for eight ...

Michael: Hello everybody. This is Michael Gross, of OptionSellers.com. I’m here with our monthly guest expert series. This month’s guest expert is Jerry Toepke, of Moore Research Center, that’s MRCI.com. For those of you who read our book and followed some of the seasonal charts, in the book, Jerry is the man behind those charts. He works heavily with Moore Research in their seasonal research. He does a lot of the price comparisons, coming up with the charts you see and I think he’s going to have some great information for you here today. Jerry, welcome to Option Sellers Radio. Jerry: Thank you, Michael, good to be here. Michael: Jerry, to get started, why don’t you start by telling us a little more about Moore Research and what you guys do over there. Jerry: Okay, at Moore Research Center, we’re a small research company situated on a 73 acre ranch, a hillside ranch, about 8 miles outside of Eugene, Oregon. We actually started out as a computer research facility for a major commodity firm back in the late 80’s and early 90’s. That kind of evolved into a separate independent research firm here where our stock in trade basically is seasonal analysis of futures markets in the publication era. Michael: Okay, great! Now as far as your position there what do you do at Moore Research? Jerry: Well, my official title is Editor, but I’m kind of an analyst, a researcher, and basically all around gopher is pretty much my position. Again, we’re a small firm. We can be light on our feet, we can move quickly. Everybody kind of pitches in and tries to help with everything else. So we’re a small team. Michael: Okay. Now as far as your background or how you got into this field of study, studying seasonals, what was your journey to get there? Jerry: Well, I grew up on a farm in central Illinois, so I was pretty familiar with corn and soybeans and wheat and cattle and hogs and those kind of markets. When I was little, I remember my father would load up our truck with cattle and we would haul them up to the Chicago stockyards. I even remember him taking me to the old Chicago Mercantile Exchange when they were still doing prices on chalkboards. That was one of my earlier memories there. So anyway, after going to school in Chicago, to college, why there was the calling for me to go west, young man, and so I actually moved out to Oregon for several years and then my father, who had dabbled in the commodity market for years and actually did quite well in the early 70’s, mid 70’s commodity boom, thought maybe this might be something I would like because I was good at math and I enjoyed numbers and he thought maybe this would be something that I could help him with. So I went back to Illinois, learned the business, did some trading, became a broker, but then I found out about Steve Moore and his research and I loved the idea of research and analyzing. So it gave me a chance also to come back out to Oregon, where I owned some property already, get involved in research. And again, we did some brokerage in the early 90’s and then turned into the independent computer research firm we are today. I’ve enjoyed it ever since. Michael: That’s a fascinating journey. So you have a pretty good foundation for what you’re doing, growing up around these types of products, working in the industry and I guess that probably helped in giving you a little bit of insight into the actual products you’re studying. Jerry: Yeah, it gives me some perspective, again some fundamental background we as a company don’t really deal in fundamental analysis, but our research depends on market responses to fundamentals, so it helps us to know the more fundamentals, underlying fundamentals that we know to a market, the better off we are in being able to analyze the seasonal tendencies, is maybe the best way I could put it. Michael: Yeah, I think that’s one of the most fascinating parts of your website. I think it’s in your subscription service, that you do provide in different months, little summaries of why these seasonals are taking place, why they tend to happen in this way at certain times of the year. One of the things we often talk about is the seasonal tendencies are often times reflecting underlying fundamentals going on in the market. Would you agree with that? Jerry: Yes, and, you know, in general I would say they always reflect some kind of underlying fundamental. The problem is, we may not always know it – what that fundamental might be. So like I say, the more you can know of underlying fundamentals of market, the better you understand it’s movement and it’s seasonal movements. Yes, fundamentals drive markets, there’s sentiment and there’s technical studies and there’s momentum trading and so on and so forth. The fundamentals overall are going to drive the market and if you can understand some basic fundamentals, I guess maybe would be my point. Then you can more readily understand it’s seasonal tendencies. Michael: Sure, that’s a great point. Jerry, I’m going to throw a little broad question to you here. You answer it as you see fit, but for our listeners who maybe don’t understand exactly what a seasonal is and how it’s calculated, can you talk a little bit about that? How you go about defining it and calculating it, how you come up with that chart that we look at? Jerry: Surely, or I can try certainly. Again, to me, fundamentals can tend to drive a market. A seasonal, to me, a seasonal movement, a seasonal trend, to me is nothing more than the markets own exhibited tendency, historical tendency to move in basically the same direction with a great degree of reliability and in a more or less timely manner. If it does it with a great degree of reliability it’s most likely a response to an annually recurring fundamental event or condition. An obvious example to me would be grains at harvest time. You plant corn, for instance, in the spring and it grows during the spring and early summer. It pollinates in July, so mid-July is a very critical time for corn and the market’s very anxious until it does pollinate, because pollination determines yield. Once it does pollinate, then the market, you know, that anxiety is eased, the market is more assured in the knowledge that “hey, we have a brand new crop coming”. Usually, there is very little in the way of fundamentals to stimulate much of a rally in between pollination and harvest, and harvest starts mid-September, but it’s primarily October-November for corn in the U.S. So, you tend to get from mid-July, no matter what the market has done before then, and assuming a normal year, from mid-July into harvest you tend to get a seasonal downtrend. The market starts to anticipate, anxieties relieved, the market starts to anticipate this enormous crop, which will come in September, October, or November. That’s something that’s very easy to understand. It happens over and over and over again, barring some extremely unusual fundamental overriding occurrence, be it a drought or whatever the case may be. That tends to drive a seasonal trend. Now, what Moore Research Center does is to go kind of beyond that generalized knowledge, which people in the industry have, you know, that happens year after year after year. People get all excited in July, and oh, we’re going to have not enough rain, and so forth. The industry knows that after mid-July barring something really extreme, prices probably are going to go lower. So, Moore Research Center goes a step further. So, we create a seasonal pattern for the year, which will tend to show when prices over that 15 year period, or whatever period we might be studying, but our basic is 15 years. During the year, let’s take December corn for example, during the year, when does that market tend to make a seasonal high. When do prices tend to be lowest? For something like December corn, prices tend to be lowest, say, early October when the new crop year begins. We generate a seasonal pattern. Nothing more than a graph, it’s a visual of what prices have tended to do over those 15 years. It’s not something we’re saying “this is what the market should do, this is what we think it will do this year”. This seasonal pattern, is a data based visualization of what market prices have done over the last 15 years. It’s a composite of how prices have tended to behave. Michael: Yeah, Jerry, one thing I do want our listeners to know is that the reason the seasonals are so powerful is that they bring an element of science and Jerry makes a great point, as people get caught up in the news and is it too dry, is it too wet, and here’s some actual science you bring into it that says, look here’s the stats, here’s what’s not necessarily going to happen but maybe have a very high likelihood of happening. Jerry: That’s a great point, Michael. We try to provide the science and we leave the art of trading to the individual trader. That’s a very good point. Michael: Yeah, and that’s another point I wanted to address. There’s a number of ways you can use these things, a number of ways you can use these seasonals. The way we use them, Jerry, and I don’t know if you know this or not, but all we do and all, well not all our listeners, but a lot of our listeners are selling options on the contracts. So the reason they’re such a powerful tool for us is we don’t necessarily need to know what the market’s going to do tomorrow or next week, we’re only concerned with the general direction and so if we have a seasonal that shows the price tends to go down this time of year, we can just go far above the market and sell calls and so it doesn’t necessarily have to go down, it can go sideways or even move counter-seasonally for awhile and we can still benefit from that. So, if you’re an option seller, seasonals are a powerful tool that you can use, in our opinion, to really give yourself an advantage. Jerry: I couldn’t agree more, yes. Michael: Jerry, speaking of individual markets, you just talked about the corn market, it’s been our experience, and you correct me if you disagree with this, but it’s been our experience that a lot of the physical commodities, like energies, grains, some of the softs, they have more consistent seasonal patterns than some of the financial futures. Would you agree with that, or if not, tell me why I’m wrong. Jerry: I would have to answer that with a definite yes and no. Again, for instance, the grains, corn, wheat, and soybeans, tend to be obvious candidates. You have harvest and you have planting season and those year after year after year after year, you may get, the timing of one or the other may move a little bit, depending on conditions but those recur every single year without question. But, you also, once every 5 years, once every 8 years, once every 10 years, you will get something like an overriding fundamental, like a drought condition. Or I remember back in the 80’s, the grain embargo – something like that. That will throw, when you get a truly unusual condition, and that’s usually what it takes to override a solid fundamental seasonal event or seasonal move, is to take something, because a seasonal really is nothing more than the norm. So, because once something like that becomes well established in the market, producers depend on it, consumers depend on it, middle men depend on it, it typically happens. You can also get, and I don’t know that it’s quite so much in the last few years has it been the case because of the zero interest rate policy, it used to be that the bonds and the notes and the Euro dollars were extremely seasonal during a particular part of the year. Interest rates tended to be seasonally highest in March, April, May. Why? Because the U.S. collects income taxes mid April. That massive transfer of financial assets from out of the private sector and in the public sector tends to tighten monetary liquidity into March, April, May. From there on out, once that’s done, interest rates have, with a great degree of reliability, have tended to ease, going down through the remainder of the U.S. fiscal year, which ends September 30th. You used to get a lot of 14 out of 15, 15 out of 15 years where bonds, for instance, would bottom by no later than mid-May and rally all the way into mid-September. The same thing with Euro dollars, the same thing with 10-year notes, and all with different paces. As that monetary liquidity went from tightened to loosened through the end of the year, those were extremely reliable. That hasn’t been quite the case recently and I suspect in part because of the zero interest rate policies. So, in currencies, probably are one of those that you might think in terms of being less reliable, and I think our statistical studies have shown that they do tend to be a little bit less reliable. Michael: Okay, yeah, those currencies are a different ballgame. There seems to be a lot of moving part there and I agree with you. I’m much more comfortable and I think it’s much more reliable trading, you know, physical products, here’s the harvest, here’s the planting, here’s the times of year and they happen every year. Jerry: Yes, yes, although still as with all of the commodities, you know, seasonals help you, they give you a little better understanding, maybe I should say, of that underlying market. You know, why does it tend to do something, even if you don’t trade that particular seasonal move or seasonal tendencies, it can help you understand a little bit better maybe why the market is behaving as it is. Michael: Sure. Let’s talk, right now we are moving into springtime. There are a lot of seasonal coming into some different commodity markets. I just wanted to touch on a couple of specific markets. For instance, springtime crude oil tends to have a pretty strong seasonal this time of the year. Can you talk a bit more about that and what you say happening here? Jerry: Sure, and again, how different this year may be I don’t know because you know we are in an extreme case with crude oil, but the underlying fundamentals during spring tend to be crude oil has two primary products, obviously gasoline and heating oil. The seasonal bulge and consumption for heating oil is during the winter, the seasonal bulge for gasoline is during the vacation-driving season of June, July and August. That is obvious to everybody. But what does that have to do with crude oil and seasonal patterns in crude oil? Well, as you come out of winter you have depleted heating oil stocks, normally. Well, maybe they are not as depleted this year because it has been probably warmer than usual; but, nonetheless, you have heating oil stocks that are normally at their annual low at the end of winter. On the other side of the coin, you have vacation-driving season coming up in, well, the traditional opening of the vacation driving-season is Memorial Day… end of May. So, in spring, once winter is over and heating oil consumption declines, refiners, you know, shut or slow down production, I should say, temporarily in March and April… April usually, so that they can make a switch over. You know, refiners have the luxury of being able to recalibrate their crack spread to maximize production of heating oil versus gasoline, or vice versa. So, during winter they are obviously maximizing production of heating oil, but in the spring in the shoulder months between the two, they will make the switch over to maximize production of gasoline to prepare for the upcoming season at the expense of heating oil, so they slow production, but during that period of time, they are busily accumulating stocks of crude oil so that when they come back online, in full production, they can operate at capacity because they are going to need, not only, to start replenishing those depleted supplies of heating oil, but they’re really going to be needing to build up stocks of gasoline, you know, because the industry is going to want them, distributors are going to want to start accumulating stocks of gasoline, because not only are our driving conditions improving during the spring, which means a little more driving, a little more consumption of gasoline, but then all of the sudden come Memorial Day, boom, the industry has got to be ready for the vacation and driving-season. School is out, you know, families get out on the road and, you know, they will drive from New York to Yellowstone or Los Angeles to Charleston or New Orleans or something like that, and they will just get out on the road you know people like to drive. There are more daylight hours, they like to get out and about. So, refiners are going to be needing to operate at capacity to replenish heating oil and meet bulging demands for accumulating stocks of gasoline. All of that drives up the price of crude oil in the spring. Michael: Those are some great points, Jerry, and I wanted to point out one of the reasons why these can be so valuable. My colleague here, James Cordier, he has been talking about crude oil for some time now the last couple of months. He was actually on CNBC at the beginning of the year, and when everybody said crude was going to $20, and he was saying we are either at or near the bottom the thing is going to start strengthening, it is going to start strengthening, and he talked about the fundamentals, but one of the things he was referring to was the seasonal. He was relying on the seasonal, and, sure enough, the thing is back to $40 now. Everybody is trying to explain it, but they underestimate the powerful force that seasonal tendency is and just you pointing out the reasons there, I think, is some great insight to anybody listening who wants to trade crude or energy futures. ________________________________________ CUT AND PASTE THIS SECTION Michael: Now, you guys put out some books and resources and some things over there. Is there anything, any books or resources that you have that you would recommend to traders wanting to learn more about seasonals? Jerry: Well, it kind of depends on what you’re looking for, I guess. Our primary service is the MRCI Online, of course. Michael: … and the website’s just MRCI.com. Jerry: Correct. It’s really a relatively inexpensive service. It starts with seasonal patterns for every individual delivery month for well over 40 markets for the major futures we follow, and stock indexes. It goes from those seasonal patterns to specific seasonal strategies. Each month it will show you 15 seasonal specific seasonal strategies of the nature. Michael: Jerry, this has been some fascinating information and for everybody listening or reading this in our newsletter, I can’t stress the importance of knowing and studying seasonal tendencies if you’re going to trade commodities, especially if you’re going to be an option seller, these are an invaluable tool.

Michael: Hello readers and listeners, this is Michael Gross of optionsellers.com, I have a very special guest for you today. Today we have with us John “Dr. J” Najarian, for any of you that watch CNBC you’ll see Jon on Closing Bell and also as a feature trader on Half Time Report. He’s also co-author with his brother Pete of the book “How We Trade Options”, he’s co-founder of optionmonster.com and trademonster.com. For those of you who don’t know John he was a floor trader at the CBOE for 23 years before founding these enterprises. For those of you that trade stock options, Jon has some deep insight into that form of trading he’s going to share with some of those with us today. John welcome to optionsellers.com, guest expert series. John: Well it’s my pleasure Michael, thank you very much for having me. Michael: Sure, John you’ve got a pretty rich background in the industry, one thing many of our listeners might not know is that your resume includes a job as a linebacker with the Chicago Bears. Can you tell us a little bit about that and how you got started with your career in trading? John: Sure, well I was lucky enough back in 1981 to come out of college and go right to the Chicago Bears, and unfortunately even though I picked a good team I think too, – because I was a free agent, I was not drafted – so it was my choice because several teams had contacted me Michael, and the Bears looked like they were probably my best chance. So I went there but unfortunately Michael Singletary ended up being a number two pick that year and obviously a future Hall-of-Famer, it was not long before they figured out that they’d rather have him at middle linebacker than me. So at least it got me to Chicago and that’s what I always thank Mike Singletary about. Michael: That’s some pretty tough competition. John: Yup it is, and he’s a really tough guy and a good guy, so my mother is the only one that resents him. I instead admire him, and I'm sure if my mom had met him she’d admire him too. Michael: Okay, so you were in Chicago and then you ended up on the floor of the CBOE, can you tell us how that got started and what you did there? John: Sure, basically my agent was a trader and a money manager, and he was on the floor of the Chicago Board Option Exchange, managing money for clients. And when he asked me what I was going to do, and I told him that I thought I’d go into the markets, from being around so many interesting people up at our training camp. Bears training camp at that time was up at Lake Forrest, a suburb on the northern edge of Chicago. So he said “well if you’re even interested in that, you’d much rather be on the floor John, trust me”, so he gave me a job and I did that with him for about six months and worked with another trader for about six months, and then went off and started trading my own money out on the floor. Michael: Wow that’s a great story, now when you first started trading Jon, were you trading options, were you trading or were you selling options, were you buying options, what type of trading were you doing? John: Basically as a market maker, so I would have to do both, buy and sell, but I was primarily I guess a premium buyer. Because most traders you will find that are on the floor end up having long premium positions I think, but the primary reason is that they’re scalping throughout the trading day. In other words that long gamut, the fact that you’re long on option contracts, and that it gets longer as it goes higher, and shorter as you go down, means that scalping can be a very lucrative way to make a living. So basically scalping gamma is what most traders do, and obviously the further you get from the trading floor, the more it favors the strategy like what you guys do where you’re and options seller rather than an options buyer. Because a combination of people just don’t have a full time access to the markets like a floor trader does, and the time decay can just eat you up as an off floor trader that trades a couple times a day or a couple times a week or a couple times a month. That’s different from a floor trader who probably trades hundreds of times per day. So again I think the closer you are to the pits and being in there and trading, the more likely you are to be a long gamma trader, and the further you are – more upstairs, which is what I am now like you Michael – the more you are an options seller I think. Michael: Well that’s a great observation. In your opinion John is there still as much activity on the floor or is most of this going online now? John: Of course the volumes show up attributed to a floor, but most of the volume really occurs down in the data centers of Mahwah New Jersey, Carteret New Jersey, Chicago or wherever, in other words at the CME or at the CBOE, at Arca, wherever it might be. The traders are still on the floor but most of the volume is really transacted by people on computer via remote, so long winded explanation I guess, most of the volumes coming in trading electronically rather than in open outcry in the pits. Michael: Okay I'm sure a lot of our listeners and readers are interested to hear that because we do get a lot of questions of “is floor trading what it used to be”, you read a lot now about things going online and a lot of people are curious about that. John, so you spent a lot of time with the CBOE, 23 years, you eventually went on to found trade monster and option monster, and trade monster recently rated best for option traders by Barons. Can you tell us a little bit about those two enterprises, who they’re for and what they offer to investors? John: Sure, well the trade monster was something that my brother Pete and I created to be an online trading platform similar to offering over at Pinker Slim or Charles Schwab with their option express purchase. So we basically sought out to create a venue for people to give them a lot of tools so that they could trade using various types of analysis of both options and stocks, and technical analysis for charts and all the rest on one platform, so that they wouldn’t have to download something. They could just use it as a web based service from wherever they were on mobile or sitting at a desktop. So we did that, and that became known as trade monster. Then we did a deal with a private equity firm a year ago, that private equity firm bought a majority of the firm from us. And we immediately rolled up another firm and now call it Options House. So options plural, house, that’s our technology on that much bigger and much more widely distributed trading platform. Michael: Okay so options house is based primarily on technology that you’ve developed or you and your team have developed? John: Yes exactly, we developed the technology and the tools to both analyze trades and for investors to be able to see where the heat was. We can’t really redistribute the heat seekers that we do because the bandwidth it requires is just too large, so instead we give a slimmed down version for free to many of the clients of Options House so that they can see where there are unusual calls or push. And many times those are signals that somebody is getting involved, somebody’s buying and is establishing {unintelligible 12:22-12:24} that particular equity. Michael: Okay, Jon now you’ve also authored a book with your brother Pete called “How We Trade Options”, and that’s based on your experience on trading stock options. I know one of your key concepts is looking for options with unusual activity. Can you explain what that means and talk a little about the approach you recommend taking in the book? John: Sure, well we start to give a basic primer if you will Michael for people understanding how options work and then how they could apply various strategies to either enhance yield for selling options for instance against stocks that they own, or to instead of investing in stocks at all, perhaps stimulating a long position through the use of options, either buying in deeper in the money call or a lead, or by putting in a call vertical spread, a one by one spread, they can simulate the long stock that have far less risk than the open ended down side of purchasing Chipotle or Apple or any of the other high fliers that people tend to want to trade. But could have a considerable downside if there is a negative event that impacts both stocks like of course this just happened over the last month or so in Chipotle. Michael: Okay so a lot of the strategies you’re looking at are what some people call synthetic positions? Is that – am I on the right track there, or am I off somewhere else? John: You sure are, no you guys know your options, so I'm not going to correct you Michael, you’re exactly right. Many of these synthetics are ways that people are getting long and expressing that bullish outlook – or short – for instance right now because of some of the things that I've seen in the market, I am long a lot on put spreads in the Spider, the SPY. And I expressed that bearish position not by shorting but by owning the put at for instance the 205 strike and being short of goods at the 195 strike in the SPY therefore putting on a position whereby I make money if the market drops and you know `that kind of spread, that vertical spread is the way that I probably trade 70% of the time either being bullish or bearish through calls Michael: Ok. Excellent I’m sure a lot of our listeners will certainly understand what you’re doing there. John many of our listeners here either trade or are interested in both stock and commodities options; however many of the option strategies are the same. Do you have any individual option strategies other than- I know you said your favorite here is the vertical type of long spreads, any other strategies that you favor that you like that you would recommend to investors? John: Well I think for investors that are just learning the course many of them will be better served since they probably own stocks learning about the writing of calls- covered calls against stocks that they own. And then perhaps as they're learning about options eventually they’ll want to understand insurance which is of course a good option collecting a premium for a call can help offset some of the pain that you feel if the market moves to the downside but it can only provide the perfection up to that premium that you've collected so I think the next step is that people tend to understand putting on a put versus their stock and then perhaps writing a call against it and that's something that traders refer to as Callers? And that's a very popular way for people to invest because it can really cut off at downside risk of owning upstart through that put option and then hopefully pay for it by selling them upside call the truncate are upside but it seems like a reasonable trade-off to most of us when you see some of the rapid decline that we’ve seen in 2015 I can’t remember a year where we've seen more of these Michael. Michael: Well that's an interesting observation. I'm going to ask you something, shift gears here a little bit John; many of our listeners, readers here, they've read our book: The Complete Guide to Option Selling some of them sell options on commodities, a lot of them sell stock options. One of the tenets that we always preach is hey look this isn’t the only way to trade options... there's hundreds of ways you can trade options this is one way that works for us it's what we recommend. Obviously you have some ways that work for you; what’s your opinion of selling options as a strategy and do you use the strategy at all in your trading? John: I use it all the time in my trading, I would say that for our clients over on the wealth management side in particular for foundations and endowments and thing, that’s why people come to us; they want somebody to prudently manage a covered write or an option overwrite and I think that’s the same sort of appeal that you guys in your department have Michael is that people seek that additional yield and one of the ways that you can do it most on efficiency- efficiently rather, is through those option strategies; listed options, prices every night there’s nothing over the counter that is in our portfolios for folks just basically writing listed options form or in some cases options that are created select options where you can basically call strike price for American or European exercise and all that sort of thing that's extremely popular for us with the larger accounts that we do because you're not necessarily impacting the market the same way as if you tried to go in and basically put a market in between the bid and the offer or something like that, you’re asking for a quote for specific strategy and most of those big trading desks are more than willing to accommodate that. Michael: Ok, now these strategies when you’re-- when you are doing these rights for clients, these are equity options these are stock options. Is that correct? John: That's correct, yeah. They are equity options that we're establishing for those clients. Michael: And these are primarily clients that are – are they just looking for high returns or they hedging other portfolios- or what’s their primary draw? John: On the wealth management side, they tend to be either like I say pensions, endowments... foundation and things like that when they have their own portfolio of stocks they haven’t asked us to pick those and instead we are putting on positions for them to enhance the yield and/or to cut the risk of owning what they own and that's probably 60/70% of our business. The rest is for us to {inaudible} put stock and/or ETF and then put on the protected strategies or enhance yield around a particular portfolio that we have selected. So we do it either way {inaudible} goes 'cause they have already put on their stocks or we will be happy to set what we think is a representative portfolio that hopefully outperforms the broader market. We have someone within capital this past year, created a unit investment trust that either people buy as an investment trust or UIT or you can either buy stocks without that unit investment trust {inaudible} depending on the portfolio they pick and then we'll do overwrites or call {inaudible} to come enhance that Michael: okay that does sound like some complex strategies that you’re obviously very good at and it’s very interesting to hear how you’re doing it because we were we just do the commodities on this side and hearing what the you’re doing with the equities is - sure be fascinating to a lot of our listeners. John: cool. Well Thank you. Michael: Sure... John I’m going to shift gears here just for a minute and ask you about some your views of the market and the world right now. There seems to be a lot of anxiety about the state of the world, the markets as of late; are you seeing that reflected in stock option values you follow, the Vicks, those types of things? John: We absolutely are seeing that risk or that fear and you can smell it. When you've been in this as long as I have you definitely can smell it. Here is something that is either fear or greed that are the 2 primary drivers and the greed you can tell by how euphoric voices sound when you're on a trading floor, you can probably even tell it when you're watching some of the talking heads on TV discussing various stocks and how the market reaction, for instance, after the jobs report we saw just a dramatic jump to November jobs report- reported on I believe December 4th or 5th. You saw Mario Grogey come on and explain that the market's up a hundred, 200 points, 300 points, nearly 400 points on the day; that kind of euphoric buying is that greed that I’m speaking up and also sent it downside; and you have a 200 point sell off and you are definitely hearing more of the fear in that trade and with the commodity meltdown that is going on and most of 2015 you can certainly see why at the end of the year we've seen a lot of tax lost harvesting at the end of the year. Michael: OK, that’s fascinating you- I'm probably kind of guessing that your answer to this based on your- when you were talking about writing put spreads earlier but as far as your thoughts on the market for 2016 I know no one can predict the future but do you have an Outlook right now? John: Well overall I think that again, we're sort of lucky on one side that the prices had come down and since crude oil which almost everybody - in one way or another - a Tesla driver probably impacted a little in a positive way by lower energy prices; whether it's the energy to basically power that Tesla by plugging it in or the natural gas in their homes or whatever it might be. Crude oil as a form of eating oil on the East Coast, any of these are imports that are less in 2015 than they were in 2016 and that number has basically still dropped throughout the year... and I believe we're at almost half the United States 24 stock- of 24 States where gasoline is less than 2 dollars a gallon. I think that's a positive I think some of the negative impacts to stocks and stock market will be mitigated by the fact that less participation as I said think we said earlier in the broadcast that these energy stocks are now only about six and a half percent of the SEP 500 previously they were closer to 15% so they've been cut in half their impact on the SEP. So some of the downward pulls that those {inaudible} prices have on the economy or at least on the stock market I think will be lessened just because of that percentage of the SEP 500 that is in load stock and represented by those stocks; on the other hand, everybody from Amazon, people from UPS or whomever is delivering packages I keep seeing a positive from these energy prices being cheaper. I think that one of the dangers in the early part of next year, 2015 is that if Grogey and the ECB move too quickly to increase the equity and basically increase their buying European gas that we can see a dramatic drop in the value of the Euro, it would correspond to of course the big rise in the dollar. I think they're going to be very measured about the way they do that, 'cause as I said everything's going to be measured in the way that the moved rate goes on our side of the globe. So if I’m right about then I think these 2 factors could be much less of a negative impact on US stocks and on our market and the outlier which is if either go up faster on our side than anticipated Again I think that a 20% chance not an 80% chance and I think that Grogey is 80% chance to move slowly and measured with the increases to quantitative using overseas. So in other words my overall outlook is that the market grade is higher although probably only 5 or 6% higher in 26 weeks and I think given that he has said there'll be a fire of European debt through March of 2017 means it should not really be much of a paper roll for their overseas until the end of next year; so again I think all that we will likely see equity prices higher without too much of a drag from either [[28:00]] {inaudible} quantitative using here which too fast of or the acceleration which key fast of quantitative using over there Michael: OK. Now you mentioned earlier that you had some long put spreads on, are you more bearish in the short term and bullish in a longer-term or what- okay John: that’s exactly it. I am not necessarily off bearish but I wanted to vote-- most time Michael when I get here the same if I’m talking about what people quote unquote should do I’m probably doing that. I’m not one of those guys that says 'Oh you guys should do this' but I'm doing the opposite. Michael: sure John: but for my account and for my clients we are protecting portfolios and we're only put and/or volatility and there's a way to do both with the Spider I think. I literally preyed the volatility EPS because I think they’re very inefficient in how they express my view. I would rather say if I think volatility is going to move up that means 99 times out of 100 the market is going to go down. Given that I’d rather have a put spread like the one I described earlier - the 205 195 that $10 put spread I'd much rather have that on than I would buy a bunch of VXX or VXY or any of the EPS that allegedly cracks the volatility because I found that those are inefficient ways to prey because the other just sprayed out access to the short side of the market through a Spider or an SPY put spread is a much more efficient way for them to express that same opinion that I have so that’s why I’m more likely to do that. Michael: Ok. John it's refreshing to hear your Outlook as compared to-- not a lot of analysts in people that discuss the market seldom have extreme views right now. You seem to have a very measured reasonable view of the markets and going forward 2016. Do you have any favorite stocks or sectors that you think might be better than others in the upcoming year? John: Well I’ve got to think that many of the sectors that people can get exposed to either stocks or commodities playing right into your strength. I think these guys -- I think commodities can't and I mean cannot be as big a problem for the market in 2016 as they have been in 2015. I can’t imagine that we're going to see copper for instances that basically are down to $2 and change have a similar fall in 2016. Nor can I see crude oil down from the 60s into the 50s into the 40s and now in the $37 range; I can't see a similar percentage drop there. I just really can't. I think there's just too many other factor that would be to have a man slack dramatically to have either of those have as big an impact as a negative impact on the media in those sectors or on the support mechanisms for them. Support meaning like Caterpillar, for instance, for like Acres News or Slumber Jays depending on if we're talking about mining or going global. We're talking about crude oil and extraction or exploration of natural gas and crude oil. I can't imagine the same sort of negative pull there so those two sectors mining oil and gas, those two sectors would be what I would have in focus. I think that the early part of next year, technology will probably be a significant driver; something that will unfortunately commodities probably don't give you as much access to but I think the rest of the year could be pretty significantly impacted by a turnaround in commodity prices even if it's not a dramatic move to the upside, even if it’s just stabilization I think that's going to be something that happens in 2016. Michael: Yeah that's a great point and maybe one that not a lot of traditional investors get is when you're over on the option side you don’t necessarily need to be outright bullish marketer, guns blazing bullish or even guns blazing bearish just maybe you’re not so bearish on something. There’s an option strategy that you can take advantage of that viewpoint. It doesn’t have to be outright black or white and I’m sure you’re very familiar with that, in fact some of the strategies you just discussed target exactly that. John: Yup. That’s right. I think doing what you and I do Michael gives an investor some confidence that they can own a particular asset, commodity asset or stock exchange created asset and there are ways that you can protect it from the downside, because the world really is about risk versus reward; how much risk am I willing to take for that additional reward? And if the reward is too small for the risk, then I think that's not really an asset that I want to own. On the other hand if I could either do a bearish expression or bullish, have exposure to the market that's exactly what these products are so good at and why I want to be in them. Michael: Excellent and just to quick summarize John and correct me if I’m wrong but just to summarize some of the things you've said, your bullish tech early on 2016 as far as sectors you're leaning towards 2016. You think the mining and energy sectors may not be all out bullish but you think the downside could be somewhat limited in 2016? Did I get that right, was it mining and energies? John: Yup. You're spot on. I think just to summarize technology I believe leads out of the gate in 2016 but by the end of the year the commodities will have their day again and that many of the prices that we'll see as tax loss selling carries us into the end of 2015 people will see gains from those levels by the second half or maybe even before that of 2016 and some of these will be silly how cheap they will have looked in hind sight. Michael: That’s a great point. John I know you’re not a commodities guy per se but you do follow obviously have to follow world asset prices oil certainly something I know you’re familiar with, do you know of-- I know you talked a little bit about this earlier as far as oil goes we just had OPEC come out and they are not going to cut production in the near term, do you have an opinion on that right now? Do you see us heading to a major bottom here over the next 1 to 2 months early 2016 here or do you see things leveling out? Or what's kind of your gut feeling right now? John: Yeah I do, I think that the-- I think overall we will but I don’t know that it's a V-shaped bottom so that’s why I said that I don’t think the first half of 2016 is necessarily off to the races for those sectors {inaudible} I think it’ll take a little while to that mindset and to that pain to be-- fall out of people's minds; but then at some point greed will kick in when they realize that enough production has come off-line in the way that we've seen rig-counts coming down every week now. Early in 2015 Michael they were coming down 23 straight weeks then as commodity prices and energy states rebounded, we saw them build back up. It never got to where they were in 2014 but they nonetheless build back up and now they've been leading off to the last 2 almost 3 months every single week. I think that continues and that cutback of that swing delivery of energies will be one of the reasons that we actually see prices move up. Michael: Ok, case of low prices curing low prices. John: Yup Michael: John this has been some great information and everybody listening out there I'm sure you probably want to go back through and listen to this again or read it John has really given you some great strategies here, some great insight into the markets. John if investors want to learn more about you, your strategies, your firm, where do you recommend that they go? John: Well if they could go to optionmonster.com or howwetradeoptions.com either of those two sites they could learn a lot more about it and have some pretty good free tools available to them as well... Michael: Perfect. That’s optionmonster.com and howwetradeoptions.com. John- John: Well thank you Michael it's been a pleasure. Michael: thank you John it’s been some great information we're glad to have you hopefully you'd like to come back again sometime and- John: I’m sure I would. Michael: It's been a pleasure to have you, I'm going to stop the recording here at this point John: Ok.

Brad: Last week we talked about search warrants. We're going to continue that conversation today, but do you want to give us a brief recap of what we talked about? Michael: Sure, the search warrants come up when the government is going to execute what's called a search on a person's property or home. The term search is a very important legal term. It's only considered a search if a person's reasonable expectation of privacy has been implicated. We talked last week about the reasonable expectation of privacy a person in their home is considered to have a much higher expectation of privacy than they would when they're having a conversation with somebody on a park bench in a crowded park where people are walking by. Same thing with a person doing something kind of in plain view within the confines of their vehicle that has windows all around it. So that is the time where we have to determine whether or not there is actually a search. If a search happened, then the other question is, "was there probable cause?" and probable cause, which we defined last week, essentially a fair probability that contraband or evidence of a crime will be found inside of the car. The officer is going to have to have specific facts that he can point to, observations that he can provide to the court that is reviewing the search to determine that he did have probable cause. And then finally, if the officer has that, he would have to get a warrant to execute a search. Meaning he would have to petition the court, show the court the affidavit of probable cause and provide those facts to the court, the court can make the determination that he has the warrant to execute a search on the property. There are some exceptions to that requirement which we talked about last week and that brings us to a whole other area of questions. What happens if a person is subject to a search and the officer doesn't have probable cause or a warrant? That's something that we can discuss during our next conversation. B:Real quick, Mike, you guys practice criminal defense law in Penniless County, Pasco County,  Hillsborough County, you know, the Tampa area. Is this search warrant that you're talking about Florida specific or ? M:That's a good question, actually, because a lot of people know that we've got two types of system. We've got the State System where we have state laws and state courts and then we have the Federal System where we have everything's kind of controlled by the US Constitution. In the State of Florida we have a specific clause in our Constitution called the Conformity Clause. The Conformity Clause means essentially what it says, that whatever decisions made by the US Supreme Court about the 4th Amendment, which covers search and seizure type issues, whatever decisions the US Supreme Court makes, the State Courts will conform their bindings and will adopt, basically, those decisions and we use those as the standard. So anything that we talk about in Florida about search and seizure issues is really gonna have the same exact implication throughout the US. The only time it wouldn't is if there is some new and novel decision made, like a case of first impression that came up for instance in the state that hasn't happened anywhere else. But for the most part, it's exactly the same.   3:56 B: Ok good, well what about, let's talk specifically about search warrants just on computers, computer files, contents on your computer... M: Alright, well the first question that would come up is does a person have a reasonable expectation of privacy for the content of his or her computer. And I think most people would  answer, "Absolutely!" I think if you ask most people if they believe that the programs on their computer, the photographs on their computer, any kind of data files that they have, that they believe that those things are personal and secure and that they expect those things are private from other people's eyes. I think most people would answer with a resounding "yes!" Most people probably have a passcode on their computer. The sole of keeping unauthorized users out and prying eyes out, I would say. So it becomes very interesting with certain types of cases when we're talking about search warrants specifically for computers. Most of the time, people have their computer. Well, I say most of the time, but it used to be maybe a few years ago most people had computers in their home. I think we're getting to a point today where computers are a lot more accessible and easier to carry around that you see that maybe not everyone has a desktop computer anymore. But, still, most of the time people are accessing their computers from someplace where they have some type of wifi connection or some type of data or cable connection. And most of the time what people do on their computer is not open for public view and they absolutely have a reasonable expectation of privacy on their computers. And to get a warrant to search the contents of the computer, the government would have to have some reason. Some reason to provide to the court, a judge, "I'd like to search Mr Smith's computer. Please let me do it." Well, the judge doesn't just say, "Well, do you want to? I'll give you the warrant." The judge says, "I'll let you do it but you've got to provide me some reasons why you should search the computer. And the reasons like we talked about last week are probable cause. The individual who is going to be searched has to be shown, well the officer, I should say, has to explain that there is a  fair probability that evidence of a crime is going to be found on that computer. And the only way the officer is able to do that is to provide details, facts. Here's the most important thing when it comes to any type of search and a search warrant: The facts that are provided to the judge that give him the basis to execute a search on a computer have to be legally gained. Meaning, you can't perform an illegal search on a person's computer and then go to a judge and try to cure it by saying, "hey judge, I found these images on a person's computer. They are illegal and I'd like to search his computer to seize these images." Because if the initial search was illegal, you can't justify or cure an illegal search by getting a warrant. So the way that becomes very interesting is with computers, in particular types of cases where there might be images downloaded onto a computer that are absolutely illegal. That comes up most often in cases involving child pornography. Where individuals will download images that are out there on the internet of folks who obviously have children and it's absolutely illegal. The hard part for law enforcement in knowing who has these images on their computers and how they can get warrants to search these people's computers. Because, obviously most people don't have conversations in a public park about what they have on their computer. And they certainly don't advertise what they have on their computer, especially things of this nature. So the government has found a way, at least in my jurisdiction, has found a way to find out what people have in their computer on certain occasions without it being considered a search. Because that's kind of the catch 22 we have. You can't get into the computer unless you have probable cause and you can't provide probable cause unless you get into the computer to show the judge what the guy has in his computer. So you kind of have a tough situation for law enforcement on occasion. But what has developed in the internet these days and has been developing for a while are these websites called file sharing websites. I may be dating myself a little bit but I remember when I was much younger there was a file sharing website called Napster. Napster was this thing that developed and the music industry was very upset and everyone got upset about it and it was where people would have songs on their computers and you would sign up for this Napster file sharing website where it would allow people to open up the contents of their computer to folks all throughout the internet. You'd type in a search for a song. You'd type in whatever song you were looking for and the search would find a computer that was open and was out there. And it would say, "I found a computer that has it" and it would begin to download or copy the song from another person's computer. That's in a nutshell what file sharing is. People are sharing certain files and they are allowing their computer to be open to the world - to the internet. Well, that same idea of file sharing also occurs in this child pornography world where folks who are looking for these illegal images type in specific searches and they go to these file sharing sites and they search the internet for other computers that have it on their computer and they share these files. They download these files. So what the government has begin to catch onto is that these file sharing sites for a period of time open up their computers and images, believe it or not, can be caught in the transmission between computers over the internet. So what the government has done is through these specific searches, it's kind of like just casting a net out into the internet, and they cast this net out and they look for these specific data components that kind of set an alert. They have a - in the State of Florida there's a specific system designed that looks for specific known images of child pornography. It has become one of these unfortunate stories that some of these images are used time and time and time again and they become known. They become known to law enforcement. Law enforcement even has names of the individuals who are pictured. And what happens is they law enforcement does this search on the internet and it captures these images being transferred from one computer to another computer. And then this computer that the law enforcement officers are using or this program, I should say, alerts them that they have found a known image of child pornography. And they then determine where it is coming from or where it is going to - what the IP address is, which is what every single computer has when they are downloading images. So the question that you have is, well how can they do that? They're basically going into your computer and searching it. And that brings us back to the first major question, "Is that a search?" Because the fact of the matter is if it is a search, it is absolutely illegal. The government can't do it. It can't be supported and anything they find can't be used. But the unique thing about this particular file sharing scenario is that they are opening up their computer to the world and as we talked about last week, when you open up something for the whole world to see or the whole world to come in and view what you have, you do not have a reasonable expectation of privacy. That is not an expectation that society is prepared to recognize as reasonable. If you open up your computer for the whole world to see. Now you might have a subjective expectation of privacy wherein the guy on the computer might not even have a clue what file sharing really is. He might not even know that when he's downloading these images, that he's opening up his computer for other folks to download what he has on his computer. But that doesn't matter because the standard is a reasonable expectation of privacy, meaning both you have to have the expectation and it has to be objectively reasonable to the reasonably prudent individual. And in this situation, file sharing is not recognized as something that is private because you open everything up. So because there is no reasonable expectation of privacy, you cross out that word search and it is not considered a search. And what does that mean? If it's not considered a search, the 4th Amendment is not implicated and you don't need probable cause. And the reason why that is so important is because these officers who are making these searches don't know who they are looking for. They don't know who they're looking for until they get the images. And that's when we start to walk into the actual search warrant for the particular computer. So step one, the officers do this net search for all of these known images of child pornography. And they determine what IP addresses are sharing these images or uploading these images. And when they get that, they then identify the IP address, they look for how many times images have gone to that computer on a particular time period. And after they get that information, they then send a subpoena to the internet service provider. When they send a seeping to the internet service provider, the service provider provides the name of whoever's name is on the account. And when they provide that name, the officers now have enough in their estimation their the number of searches that have been done the number or images that have been downloaded that they can find, to go to a judge to get a warrant to search that person's home. What the officer would have to be able to provide to the judge is the facts that I just articulated, that is "we did this internet search. We found a lot of known images of child pornography going to this particular IP address. We subpoenaed bright house networks. Bright house networks told us who the account holder was and we want to search Jon Smith's home because we've seen on these three months or this many days this many images of child pornography have been downloaded to that computer." At this point, so far they still don't know the identity of the person downloading the images. And why is that? Well, because a lot of people do, in a home, have access to a single computer. All they really know is that this person is an account holder with this IP address. At that point, they go to the judge and they provide that information. All of the information has been obtained legally and the judge makes a determination whether to issue a warrant. And if the judge issues the warrant, then the person must comply when the officers come to the house to search the home. And the warrants are pretty encapsulating when they talk about a search for these types of images. They talk about searching the home, computer, any computer equipment in the home, any data equipment in the home, and the officers execute the warrant and they begin to search all of the data files. And if at that time they find actual images of child pornography on the computer, then that's where the possession of child pornography charge comes and the person gets arrested at that point.  B: Does that also include smart phones?  M: It would. The warrant is to search the location the officer believes the evidence is going to be. So most of the time it is  a home, because most of the time people keep computers - even if they're a laptop - they usually keep them with them or somewhere close to them. And the IP addresses goes to a particular address so the search warrant would authorize whatever the officer has asked for, whatever they can have a reasonable expectation to find evidence on. So that would cover computers, and generally that covers phones, ipads, it even covers playstations and things like that. The important thing to remember about a search warrant is the search warrant is super specific and if something is searched that isn't mentioned in the warrant, that could be a violation of the 4th Amendment and that particular item of evidence might be suppressed if anything is found. So I would say law enforcement, in my experience, is very good at making it as broad as they can while still making it conform with the 4th Amendment.  B:Alright, you want to kind of just give us a recap? M: Sure, so what we were talking about for this period of time is search warrants when it comes to computers. Obviously, the contents on a person's computer are private. Everyone is prepared to recognize that individuals have a reasonable expectation of privacy on the contents of their computer. So how do officers get these images? How do officers find evidence of crime where people are downloading these types of images on their computers if they can't even get into their computer? The one unique scenario that has come up that is used quite a lot in cases that I have had experience with are where people go to these file sharing sites and they open up their harddrive essentially and search other people's hard drives for particular images that they're looking for. And once you open up your hard drive, that expectation of privacy is gone. And if you don't have that expectation of privacy, you don't have a search. If you don't have a search, you don't have a 4th Amendment implication, which means the officers can do it. There's no rule to stop it and the officers then get the information that they need to provide to a judge to get a warrant issued to search an actual computer.

The guys welcome franchise owner Michael Davis to discuss his Cartridge World franchise and his experience as a franchise owner. They also answer the question, "How worried should I be about the arbitration clause in my employee agreement and does this force me to only arbitration?" Full Podcast Transcript NASIR: Welcome to Legally Sound Smart Business. This is Nasir Pasha. MATT: And this is Matt Staub. NASIR: And thank you for joining us. This is our business legal podcast where we cover business in the news and also answer some of your business legal questions that you, the listener, can submit to ask@legallysoundsmartbusiness.com. Here we go! Mid-week, I wonder is US won their game yesterday. I predict not, unfortunately. MATT: Wow. What a terrible way to start off the episode. NASIR: I know, it’s a downer. Well, hopefully, I’m just proven wrong. MATT: Yeah, I hope so. Our audience is going to stop listening too, unless we have a lot of audience listeners in Belgium. NASIR: Yeah, they’ll be depressed and won’t want to listen to our show. MATT: That’s fine. NASIR: I think our show is uplifting. Anyway, I think we have a good topic today because we have franchise owners as clients and we cover franchises all the time on our podcast. We get questions like this but today we actually brought in a franchise owner, Michael Davis. He’s the owner of a Cartridge World franchise in Atlanta, Georgia. Michael, welcome to the program. MICHAEL: Thank you, gentlemen. Glad to be here! NASIR: Yeah, absolutely. You know, we’ve talked about in the past how other franchise owners can have an effect on the franchise itself. It comes with the good and the bad, right? I mean, there was this one case we covered in New York where there was a Domino’s franchisee who stupidly fired all his employees for an illegal reason and, of course, had to bring them back and so forth. But those kind of things can have a negative effect but, at the same time, your successes also have a positive effect as well. Michael, why don’t you tell us a little bit about the franchise world in general and this little kind of secret family that I think a lot of people aren’t aware of? MICHAEL: Sure! Again, my name’s Michael Davis and I’m the owner of Cartridge World. We’re the world’s largest remanufacturer of ink cartridges – up to 30 percent less than the national big buck stores. There’s 1,400 of us globally. We’ve been around for six or seven years. Now, the beauty of franchises, much like you said, is you’ve got a known brand entity which you don’t have to build over time. It’s already there. You already have a support system from corporate in terms of marketing, operational, and other experience sets. The other parts you also have which you alluded to a few moments ago were business partners rather than franchisers who are going through the exact same experience you are that perhaps have different experience set that you. Really, you’re business partners. So, if you’ve got a situation like the pizza franchise you talked about, that’s a business partner of yours even if they’re across town because they’re damaging your brand. One wrong customer experience, they’ll tell ten people. One great customer experience, they might tell one person. You really can’t put a cost on that because, in the franchise business, the cost of new customer acquisition is huge but a damage control that you have to do from a bad experience from a franchise partner across town is priceless in a negative way. I’m a big advocate of franchisers because you have much of it already done. What you have to do as a franchise or within that structure, you have all that support and experience to figure out what is your unique brand going to be in your community. How are you going to differentiate yourselves in your ten miles of your graphic area? Are you going to partner with schools? Are you going to partner with non-profits and churches and do fundraising?