Rick Sapio & Teresa Kuhn: Episode 1168

Transcript

[0:00:36] HA: Have you ever made a bad investment decision at the spur of the moment? If so, you’re not alone. My next guest developed a hundred-year savings solution to help individual investors avoid financial traps and make solid long-term focus financial choices. Welcome to the Author Hour Podcast. I’m your host Hussein Al-Baiaty and I’m joined by author, Rick Sapio and Teresa Kuhn. We’re here to talk about their new book called, The 100-Year Saving Solution: How to Create the Financial Foundation for Yourself, your Family, and Your Legacy. Let’s flip through it. Hello friends and authors and welcome back to the show. I’m here with my friend Rick Sapio and Teresa Kuhn today. Really excited because they just launched an amazing book, it’s already the number one bestseller on Amazon. It is called, The 100-Year Saving Solution, but before I get into the book, I just want to welcome Rick and Teresa. Welcome to the show, thank you for coming on today.

[0:01:34] RS: Hey, you’re very welcome.

[0:01:36] TK: Happy to be here.

[0:01:36] HA: Yeah, this is great, this is so great. So before we get into the book and all the juiciness of it because you guys have a lot of gems to share, I want to go back in time a little bit and share with our audience a little bit about your personal backgrounds, perhaps where you grew up as someone or some event that kind of shaped the path that you are on today. Teresa, we’ll start with you.

[0:01:57] TK: Oh, thank you. I grew up in Miami, I have a degree in finance. I have a law degree, I worked with money at a Wall Street Firm before I went to law school, and then after I practice for a period of time and I was looking for strategies that could help my clients in ways that the traditional financial planning model could not and that search, that curiosity, that wanting something more for my clients, I think is what put me on the path to look for other strategies and what is now, we’re calling the hundred years savings solution.

[0:02:37] HA: What about you, Rick?

[0:02:39] RS: Yeah. So one thing that everybody has to know that’s listening is that we live in a hyper, short-term world. Decisions are made in microseconds. They say that children today have an average attention span of seven seconds and it’s horrible and so this book is the antidote to that. My entire life, I’ve been a very long-term focused person. An example of that is when I got married, my wife and I said, “What does our family going to look like in a hundred years?” and so before we had any children, we wrote down what we called the Sapio family placemat. It’s referenced in the book and it’s a placemat that describes all of our family’s values or rituals. It has our family crest, what it means, what we do on Sundays, what we do on vacations when we vacation, all the rules of being in the family and you have to have that long-term, I believe, focus, because if you don’t know where you're going to be in a hundred years, how do you know what you’re going to do today? So if I want to live to be a hundred as an example, I wouldn’t, today in this moment, I would not drink a bottle of Scotch, most likely, and so my whole life on the day I was born was about I don’t know why long-term thinking, maybe because I had a very, very difficult childhood. When I was 13, my dad died. I was the 7th of 10 kids and it was a lot of chaos in the family. So ever since I was a young kid, I always looked at the future and tried to describe it as clearly as I can and this book is really that manifestation of what it would be like to have a long-term orientation on all the decisions that you make and Teresa is great because she’s a former attorney. She’s been in financial services for almost 30 years and her and I together have this vision of life is a hell of a lot easier if you take care of both the long-term and the short-term. There’s a quote I say to my kids all the time, if you want an easy life, do hard things today. If you want a hard life, do easy things today.

[0:04:54] HA: Man, that’s so powerful and I’m glad you say those kinds of things to your kids because those are the kinds of things I heard from my dad and it really reminds me of him. So kudos to you man for thinking such long-term. I think that’s a – as you said, it’s a vision that has been slowly, I feel like been tampered with in thinking about right now and thinking about the future. Just in society’s norms today, things have shifted a lot for that attention span and how short it is. This is exciting for me because this kind of book really helps me think about, of course, my future, where do I see myself, my family, and all those good things. So I’m glad you titled it that because it’s really powerful but also, you go into the nitty-gritty and talk about how to actually execute on these ideas and I love that you also just live by this idea, which is really powerful, Rick. Teresa and Rick, how did you two meet? How did you come to this working together?

[0:05:46] TK: Well, Rick was referred to me as a client probably about 12 years ago and we felt that we had a lot of similarities in our philosophies and our way of thinking. I was also a very long-term thinker, I was very intentional in the decisions that I made for myself personally at a very young age, and about 20 years ago, I met somebody by the name of Nelson Nash, who had received education and training and actually worked as a forester. So if you think about forestry, you have to be a long-term thinker because you don’t plant seeds, waiting for a tree to sprout in three months, right? And you’re certainly not going to monetize on that tree in the next year. It takes sometimes decades and he introduced me to this concept of long-term thinking and it so resonated with me because I was a long-term thinker. I just had never articulated or put thought and consciousness around my process and then about 12 years ago, Rick and I met, he was referred to me as a client and we found, we have so much in common in terms of our way of thinking and how we work with different financial concepts and just decided to work together.

[0:07:15] HA: That’s so powerful. I love that because I feel like in the world, there are definitely those people that come in and out of our – I guess you call our theater show, and there are, of course, the few that really stick around because as you share in similarities and vision and seeing yourself identify with certain skills and certain and just this idea of living life with consciously knowing that other people relate to the concepts and how you see your vision. I think it’s really powerful. Can you share a little bit more about the hundred-year mindset? What does that mean to you, Rick?

[0:07:52] RS: Well, it means that all the juice in life comes when we struggle and we strain and we focus on things long-term and as an example of that, a friend of mine, I bumped into, this several years ago now — I bumped into him in the gym and I said, he looked really happy, he was beaming and he had lost a hundred pounds. And it was early in the morning and I said, “Hey Carl, man, you look great. You must love coming here, you must love the fact that you lost a hundred pounds.” He goes, “I hate it, I hate coming here, I hate getting up in the morning but I love the result” and unfortunately, society has trained all of us. If we don’t like doing something, we quit. So we’ve got a culture of quitters and it comes from so many parents over so many generations saying to their kids, “Do what you love” and I tell my kids, “Do what you’re committed to because it’s going to be really hard and if you don’t go through their hard stuff, you’re not going to have the juice at the end.” So it’s a completely different message that Carol Dweck talks about in her book about grit, and how it’s vanished in America. So why is a hundred-year thinking important? If you want to have a fulfilling life, it comes from decades of work, oftentimes. So you know, I’m going to be married while only 20 years but when you bump into couples that are married 50 years, you ask what it was like and they’ll say, “It was hard but we’re really fulfilled now, we love the grandchildren coming around, we love each other more than we ever have” and so our culture was upside down, it is not oriented towards long-term thinking and so Theresa and I are trying to shift the mindset of a small group of Americans, actually, people globally, maybe the book will be in different languages, I don’t know. The last book I did was converted to seven languages, which is great but we wanted to change the culture.

[0:09:48] HA: Yeah, it’s very powerful. I mean, you keep going back to that mindset of you know, grit and resilience and you know, pushing through hardships and you know, I got to attest to that. You know, I’ve lived my whole life. Look, I‘m a Middle Eastern kid that got out of a war situation, ended up being a refugee coming to America and you know, learning and growing and educating myself and you know, all the trials and tribulations of learning a new language and all those kind of things and you know, with all that, it’s like there is a satisfaction in that it’s like, the more you work on yourself, the more you see yourself become whatever enriched version you want to see. And I think that’s powerful and if you stretch that across a hundred years, what does that look like and I love, sort of like, where you are now but where is, where are you going, that aspect of thinking, that added layer of thinking really helps make the decision for now if you will and I like those two points connecting. So how does the hundred years saving solution helps an individual investor avoid those financial traps, there are so many, and make a solid financial choice in the long term? Teresa, what do you express about that? You know, this idea of I think about my financials long-term of course, but how does one think about a hundred years from now?

[0:11:09] TK: Well, I’ll address that last part of your question with this concept of, you know, we live in a – we don’t even use the term microwave society anymore. We used to, maybe 30 years ago but it’s like we want it now, right? When we click on our phones and order something from Amazon, we’re disappointed that it’s going to get there tomorrow. We want it immediately and in another society, another time, that would have been magic, right? If you clicked on something and it just appeared, even the next day.

[0:11:40] HA: Day, yeah.

[0:11:41] TK: It’s still magic. We can go all the way back to you know, let’s say, a thousand years ago when in Europe, there were communities that were committed to building a structure, a physical structure like a cathedral that would be enjoyed by people, hundreds, if not thousands of years into the future. They were very, very intentional about the materials, the design, where the building was going to go, what it was going to look like, and who was going to enjoy it. They we thinking way out into the future. Well, if you apply that cathedral thinking or that concept of long-term thinking to finances, people make decisions regarding their finances from either a spending perspective or an investing perspective based on the right now. Like, “What do I want to do right now in terms of spending and how do I want to invest my money?” I want to invest my money because I want to double it or triple it or you know, the whole crypto phase, right? Take a Lambo to the moon, right? If I invest in this Alt Coin and how has that turned out for a lot of people? Not well. And so the framework, the filter of a hundred-year savings solution begins with the intention of, what is the vision, what is it you want to create in terms of your finances a hundred years from now and the decisions that you make regarding your finances, need a rule book, a playbook in order to get you to that vision and maybe the rules include, “You know, these are my rules for investing.” “I’m going to do a certain amount of research, there’s got to be a certain type of, you know, the asset that I’m going to invest in” or I’m going to you know, master, right? Really understand a certain asset class before I invest and I’ll actually have Rick explain the hundred-year savings solution strategy and how that plays a part in the filter in making decisions for the long term.

[0:14:10] RS: Yeah, what we offer here is very counter to the normal way of managing money, whether people have accounts at Schwab or whatever and they say, “You know, make your own decisions.” The problem is for the vast majority of people, making your own decisions have been a horrible idea and you could see, people are emotional about that but you can see the results if you look at Dell Bar, who tracks the results of the average person and their investment results over six decades. It’s been horrible, nothing short of horrible. The average investor account yields about 3% annually, which is about the same as owning treasuries. So they go through all those heartaches with their 401(k)s and their IRAs and their accounts and they’re barely beating the rate of inflation, which is crazy. We take more of an endowment approach. If you look at how these massive pools of assets or managed in university endowments like Yale, Harvard, et cetera, they put a very small amount of money and stocks and bonds and huge amounts of money in alternative investments and cash. They want to have liquidity and so our model is to put half of your investible assets in cash, in cash-like instruments and one of those instruments is a whole life insurance policy. The other half of your investible assets in long-term oriented, high yielding, over the long-term, but illiquid investments, things like real estate and private equity funds and private companies and alternative investments and you save a small portion of your money for the stock market because most IRAs and 401(k)s, you have to invest in the stock market but that’s the smallest piece and if you think about your wealth in those three buckets, half of your – roughly half. Let’s say 45% in cash-like instruments, 45% in long-term-oriented illiquid investments, and then the rest in stocks and bonds in your tax-free account like your IRAs and your 401(k)s. If you do it that way, you’ll be modeling what endowments do and your yield will be much higher, three times as high for example based on our research.

[0:16:31] HA: So powerful. Yeah, it’s a very interesting approach to how you see this and how you see it play out. How does this barbell investment strategy differ? I mean, I guess in a way, you sort of explained it but can you go a little bit deeper on this barbell investment strategy that you talk about in your book?

[0:16:49] RS: Yes, so imagine the barbell. When you are holding a heavy barbell, it’s got a skinny bar, right? And on the sides are the heavyweights and those heavyweights are represented by cash on one end and illiquid investments on the other, which is just what I was explaining, and the bar, the skinniest part of the barbell strategy, is your IRAs and 401(k)s and stocks and bonds. But unfortunately and sadly, most people put stocks, bonds, crypto, and short-term investing tips and tricks as the majority of their investments as opposed to just the bar but the majority of your investments should be what I mentioned, the private companies, things that you’re familiar with. Maybe if you are a dentist, you can buy dental practices. It’s the long-term oriented and illiquid, things that you know.

[0:17:43] HA: Now, I really like this idea, you know things that you know. As you said, if you are a dentist, you know that better than – especially probably someone that you are investing with that may not know your field, to begin with. So that’s really powerful, I like that. Do you have anything to add to that Teresa?

[0:17:58] TK: No, I think Rick explained it really well from that, the barbell strategy. Another analogy I use is I have my clients look at their balance sheet and we’re taught, there is so much misinformation out there that every dollar on a balance sheet must chase risk to create wealth and I think that’s really not the case, especially if you’re putting the filter with the barbell strategy. If every dollar in your balance sheet is there to chase risk, right? To create wealth, then what dollars are going to be available in reserve to take advantage of opportunities when they come up, what dollars are going to be in reserves to take care of the risky investments when they need an infusion of capital when your business needs cash when you want to increase marketing when you got to fix a roof on one of your investment properties. If every single dollar is committed to turning a return, right? Chasing a return, there are no dollars in reserves to protect the empire and I think the barbell strategy is just another great analogy, something that people can easily visualize, “Hey, I need to be balanced.” You know, the barbell has to be balanced in order for someone to be able to lift it up. So on one side, I’ve got assets that are chasing risk, investments, long-term, et cetera, and on the other side, I’ve got cash and a specific strategy that’s available that balances everything out.

[0:19:41] RS: You know, here is a really interesting phenomenon I want to share. So the SCC and FINRA and the regulatory organizations will not allow smaller investors to invest in private companies for the most part. You have to fill out all of these sophisticated investor documents, okay? Let’s just think about the absurdity of this, where are the highest returns, if you look at going back 100 years and you put all the different investment categories into a chart showing which had the highest returns, what category do you think is number one?

[0:20:15] HA: I don’t know, man, you tell me.

[0:20:16] RS: Private venture investing. So small companies, small companies that are private. They are not publically traded, they’re illiquid. So the best investment I’ve ever made in my life is something that I probably will not be able to get my hands on for 40 years. It’s the company I started 30 years ago, it’s illiquid. I can’t get my money until I sell the business at some point. That’s going to provide the highest return of anything I’ve ever done but imagine if I could get my hands on it every year. Well, my wife and I would probably have some use for that money. So my point is, the very thing that provides the highest return with the lowest amount of risk is the thing that people are locked out from investing into and that’s why we make it a very important part of the barbell strategy because although they’re locked out from buying private equity funds for the most part, they’re not locked out from investing themselves into private companies that they’re very familiar with.

[0:21:20] HA: So I got to ask, I mean, writing a book is no easy feat and I know you two have worked on this for quite some time. So can you tell me about maybe your favorite part of pulling this book together and what did you two learn from that journey? Teresa, we’ll start with you.

[0:21:34] TK: My favorite part of this journey is probably now that it’s completed and it’s done, looking back and saying, “You know what? I’ve got so many ideas for new books that you know, I could do this again.” So that’s probably been my favorite part. You know in the middle, it wasn’t necessarily that fun. I had a lot of concepts and ideas and a lot of words. Rick is actually a great editor and he was very instrumental in most of that heavy lifting as far as the editing is concerned. We had a project manager, I’ve got team members that contributed in terms of you know, some of the technical language and case studies, so it really was a team effort but the whole process of writing a book and memorializing what’s in the brain and putting it out there for people to read I think is super cool. I’ve read books forever, I was a huge, huge reader for a long, long time and I used to tell my son it’s so cool that you could spend USD 20 on a book and that author just poured so much into that book, nonfiction of course and even fiction. You get to spend time with this author for 20 bucks, where can you do that? I mean, and today, of course, there are books, many books that are much less than that. So I love books.

[0:23:00] HA: Or free at the local library even to check it out, you know?

[0:23:03] TK: Exactly, totally.

[0:23:04] HA: Yeah, my father instilled that seek knowledge spread peace idea in me long ago and it’s just like whatever you’re interested in, go read books about it and he grew up teaching me art and all those beautiful things of course but he knew he also had limits. He’s like, “There are things” – I mean again, you are talking about a person that came from Iraq and was a refugee and artist and so he was just like, “I got you here man, there are so many more places you could go if you open up your mind and get further. So, I love this idea from you two because I resonate with it in the sense of the knowledge, the reading, the books, if you don’t know the financial world go learn it like literally my dad had the hardest – I’m like, “Dad, what is credit?” I was like 12 or 13 and my dad didn’t know it. He didn’t understand it either, he was a refugee, right? He just came here and he’s just, “Man, I am just getting by. I am trying to figure out this on my own.” He's like, “Why don’t we go to the library and maybe you can get a book about it and you can learn about it and then teach me” and that really changed my world you know and that look, I might not have the answers but you got to go figure out where you can get those answers and I’m so grateful for that but in a lot of ways, I feel like this is what you two have been embedding in your kids to see that sort of hundred-year sort of plan pan out for them is to really get them to see the value in that way. So that’s really powerful. Rick, what did you want to add to what Teresa was saying?

[0:24:31] RS: My favorite part I would say chasing Teresa to get some editing comments and her never being available for four years. No, I did want to add something, I like teasing her. Her and I, we’re almost the same age. We’re three months apart, which is very ironic but we did write another book, which is kind of a corollary to this book, which was the story of her son who – it is called, The 100-Year Education. So again, we’re taking that long-term perspective and applying it directly to family and he was a great student at a great private school in Austin and her and her husband decided, “You know what? Rather than send you to college to be a business major, why don’t you be a businessman?” and they helped him start a company when he was 21 years old. He never went to college and now, five or six years later, he’s very, very successful. The whole concept of the book is if you’re really thinking long-term, do you really need college? So it’s called, The 100-Year Education. I am not here to sell books but I did want to tell you that part of the reason why we coauthored this book is that — we’re so passionate about this 100-year mindset.

[0:25:44] HA: That totally resonated with me and I love that and I love how you applied it to education and thinking about family and that’s just really powerful. What’s the one thing –

[0:25:54] TK: If I may add something to that.

[0:25:56] HA: Oh, please go ahead Teresa.

[0:25:57] TK: So we used the hundred-year saving solution to fund my son’s business. So you know it’s all part of the same conversation and the 100-Year Education was when he was 18 years old ready to go to Colorado State University to study entrepreneurship, it was like, “Wait-wait-wait, there are other options. You don’t have to go to the college route. If you want to be a doctor, a lawyer, or a CPA engineer, yeah maybe.” But look, we have money sitting in these, you know, the hundred-year saving solution that we set up for ourselves, for our son that was going to be used for college, we could do something different. You want to be an entrepreneur, we can use that money for entrepreneurship and so his requirement was to do an apprenticeship for two years, and at the end of the two years, he was about 20, 21, then we took the money that was in reserve, in cash, in the saving solution to start the business and it’s going very, very well. Thank God and the product. The product, who he is today as a man, as a businessman, what he knows, what he understands about business, you know you don’t learn academically and the vision was, “Who do I want my son to be a hundred years from now? What opportunities do I want to give him today that will impact the trajectory of that path? Is sending him to college and spending 200, USD 250,000 on the college the best path for that?” Or, “Hey, we can take that money, he can learn the business and even if the business fails, he will have learned practical knowledge application on every aspect of the business since we were starting it from the ground floor. So that’s what I would add to that.

[0:27:57] HA: It’s very powerful. I love that. You two did just write the book, obviously, you live this work and this is your life’s mission, life’s work and I’m glad you brought all that knowledge and wisdom to the book because now people like me can kind of share, and expand on it in our own ways and take it upon ourselves to build our own sort of version of the hundred-year strategy, so that’s powerful. So, Rick and Teresa, it’s been amazing. It’s such a pleasure having you today. Thank you for sharing your stories and your experience of course, with not only me but also the audience. The book is called, The 100-Year Savings Solution: How to Create the Financial Foundation for Yourself, Your Family, and Your Legacy. So besides checking out the book, where can people find you two?

[0:28:41] RS: T, you want to go?

[0:28:42] TK: Sure, teresakuhn.com.

[0:28:48] RS: For me, mutualcapitalalliance.com and what I focus on, I started my company 30 years ago, I focus on giving private company owners liquidity. We sell private companies and we have intellectual property around that whole process and so part of why Teresa and I got together is we help company owners liquidate and go through a really rigorous process but ultimately have success on the backend since everyone knows, most private company exits fail. Teresa helps manage the money and manage those resources in an effective way post-transaction. So anyway, they can find me at mutualcapitalalliance.com and her at teresakuhn.com.

[0:29:31] HA: I love that. Thank you two so much for joining me today, I appreciate it. Congratulations on your book and becoming a number-one bestseller, that’s so fantastic. I hope you guys can get to continue celebrating and I hope to see you around for another book possibly. I feel like this hundred-year strategy applies to everything in life. So again, thanks you two, I appreciate you.

[0:29:51] TK: You got that right, thank you so much. I appreciate the time today.

[0:29:55] RS: You’re welcome.

[0:29:59] HA: Thanks for joining us for this episode of Author Hour. You can find, The 100-Year Savings Solution: How to Create the Financial Foundation for Yourself, Your Family, and Your Legacy, right now on Amazon. For more Author Hour episodes, subscribe to this podcast on your favorite subscription service. Thanks for joining us, we’ll see you next time. Same place, different author.