Patrick Donohoe: Heads I Win, Tails You Lose

Transcript

[0:00:27] Charlie Hoehn: You’re listening to Author Hour, enlightening conversations about books with the authors who wrote them. I am Charlie Hoehn. Author hour is about answering one question: How can you get the best ideas from great books without spending so much time reading? Every week, we take you behind the scenes with a new author, about the most important points in their book. So if you love to learn while you're on the go, you’re in the right place. All of our book summaries are 100% free and we do more than a hundred episodes every year. So please subscribe to and review Author Hour on iTunes. Today’s episode is with Patrick Donohoe, author of Heads I Win, Tails You Lose. Conventional financial mindsets are failing too many people. We save, we invest, and we borrow the way that Wall Street and banks in the financial media tell us to do. But, we’re left unprepared when market losses and financial hardships and retirement come along. The rules of money and financial wellbeing have changed and the people who followed them are achieving amazing results. In this conversation, I spoke with the founder and CEO of Paradigm Life and PL Wealth Advisers. Patrick is going to show you how to embrace this new way of thinking and he gives you the financial secrets that are used by the wealthy to navigate the changing economy as well as financial options that will help you win no matter what. And ultimately, reach the true American dream which is financial freedom. Patrick was recently honored by Investopedia as one of the nation’s top 100 most influential financial advisors. By the end of this episode, you will discover a new method of managing your money outside of Wall Street and the way that Patrick recommends you build your wealth is really going to surprise you. Now, here is our conversation with Patrick Donohoe.

[0:03:30] Patrick Donohoe: You know, the time business wasn’t working, the partnerships I had dissolved and really, everything was on my shoulders to figure out what to do for my family and I had no one really to rely on. During that period of time, a lot was going on in the economy, it seemed like every day came in and something new was happening, whether it was a market collapse or we had clients that were not satisfied with what was going on, they lost their jobs, we had some clients that experienced tremendous hardships and phone calls. It was more counseling with people rather than the primary business that I’m involved with. It was during those times where that pain, not just what I was going to personally but also, I was in more pain, was coming from the experiences I was having talking with people and experiencing the hardships that they were going through. All of it was just basically telling me that something’s not right that whatever brought, whether it’s those people or me to these set of circumstances, right? A lot of it was out of my control, some of it was in my control or a lot of it was out of my control, what happened, why did it happen, and how can I prevent it from happening again and that was, I believe became my mission. To figure out why the economy collapsed, why did so many people lose jobs? Why was there a bail out, why did the government step in and was involved with whether it’s General Motors or whether it’s Lehman Brothers. There was so much done that was based on a level of trust and you know, from us to whether it’s politicians or government to fix the problem and their solutions really weren’t understood by the common person including me. It became a mission to really figure out what was going on and why it happened and then also just insight and understanding of what could be done for the future to prevent personal experiences associated with some of those events.

[0:05:22] Charlie Hoehn: That brings us to your book, Heads I Win, Tails You Lose. I know a number of books have been written on this topic of trying to explain or addressing the problem that you cited. Why did you decide to publish this book, what’s your unique perspective?

[0:05:43] Patrick Donohoe: You know, I’ve asked myself that same question for a number of years and I’ve been doing this for over our 12th year now and haven’t written a book because I felt that what was needed to be said was said. But then I realized that what we’re doing is deeper than a financial concept or a financial product and that’s where you know, a lot of the connecting the dots took place and the events that I experienced, the events of clients and their personal lives and their personal experiences made me realize something. The realization was the fact that this whole idea of the American dream, what’s being experienced today is probably the polar opposite of what the original American dream was. The connection became individuals really find tremendous meaning and fulfillment based on that, it’s kind of cliché but the pursuit of life, liberty and happiness and that wasn’t the original quote. The original quote was by the English philosopher John Lock who coined life, liberty and the pursuit of property. If you really look at why our country was founded is because people were pursuing meaning, they were pursuing fulfillment, that they weren’t getting in the locations that they were at. You know, basically, if you look at some of the original founders of our country, they were pursuing freedom, they were pursuing being able to start a business or own property. Being able to worship – there’s a number of benefits that they were seeking, right? That they weren’t getting in Europe or whatever other location. I really associate the American dream behind this pursuit that people kind of naturally have which is being able to pursue, reaping the rewards of their efforts. It might seem like it’s meaningless, but I connected these things for me personally. But for others, right? It is completely in contrast to what we’re told to do. Because today, I think the American dream is go to school, get a get a job, get benefits, put money into a retirement account and at 60 years old, you’ll be able to golf and go visit your grandkids for the rest of your life. I don’t think that’s the – in my opinion, the definition of what provides most people fulfillment. I really looked at where the educational system came from. I looked at where the retirement system came from and it was actually a lot of the ideas that people ran away from pursuing the American dream. Autobahn Bismarck, you know, he was back in Germany, created a system for not just businesses but more of a kind of an assembly line, industrial type of business but also a school system to train factory workers and train people to follow orders to do what they’re told which is perfect for an assembly line industrious type of business or for a military. Our school system, if you really look at the roots, our school system is based heavily on that original system. I realized that what had become the American dream really wasn’t the original one. The whole point of the title, Heads, I Win. Tails You Lose, right? Is to set yourself up, not just from financial standpoint but also from a mindset standpoint of your perspective, okay? Of how to always win. I think when I know, when you’re in pursuit of things that you are passionate about that provide you fulfillment. That you’re not doing to sacrifice for some distant future, when you are going to, you know, be able to love your life, that you can do it right now and it really is that, you know, entrepreneurial spirit that I think is in most people. Of finding meaning, finding fulfillment in their profession, and that pursuit, what I’ve experienced is what creates true wealth, not just from a financial standpoint but also from I guess, a psychological standpoint too.

[0:09:27] Charlie Hoehn: That’s fascinating and I’m with you. I was blown away when I learned about h ow schools came from the industrial age and that they simply just haven’t really been updated. The education system just doesn’t really serve the population in the way it needs to be served now. Really interesting, the history and the origins of the American dream. You’re encouraging people to pursue fulfillment now because that leads to this inner wealth that I take it also manifest itself as external wealth, correct?

[0:10:01] Patrick Donohoe: It does, that’s a connecting piece, you know? Once the connection is made of first providing more value to someone else and then you get not just the financial renumeration, but you also get a feeling of fulfillment. That right there, if you can connect those dots, it’s kind of like it’s contagious. At that point, it’s then connecting the dots of “Okay, well if I created value, if I was valuable to somebody else in which they paid me, now, in order to get paid more and to have more fulfillment and meaning, I need to figure out a way to create even more value for people.” Right? That’s where I think, you know, you have this pursuit of education, right? Where you’re getting educated to be valuable so that you can provide some semblance of value to somebody else, right? I think the principle of education is there. It’s just a way in which education is taking place and how it is defined, I don’t think it is education. I think education really relates to the individual, right? Because everyone’s wired differently, we all have natural skillsets, natural talents, natural tendencies and that’s really not well orchestrated, okay? We’re just told to be one of the instruments in the band and you know, just kind of blend in with everybody else. I really believe that you know, in our day and age, there’s so much information, there’s so many resources out there that you figure out ways in which you can be more valuable to people. I think if the focus was there to make more money as supposed to things outside of people’s control like in investment, in whatever capacity, there’s so much more money to be made by the former statement that I made, you know, as far as investing in yourself, pursuing things that allow you to be more valuable to others, that’s where true wealth comes from, from a psychological standpoint but also from a financial standpoint. Then that’s where you know, the other side of my business is there are certain financial vehicles out there that outperform the typical investments that are sold by Wall Street financial planners and financial advisers that provides a foundation of certainty that you’re not going to lose money, you’re going to gain money so that you’re not necessarily wasting and spending energy on fear. Fear that you’re going to lose money, fear of risk and checking that the markets up or the markets down. I think that right there prevents so much focus on really what a person can do to be tremendously wealthy which in most cases, relates to what they can contribute, what they can become, as supposed to what an investment does for them.

[0:12:21] Charlie Hoehn: Okay, I’m with you I think. But I want to make this more concrete. Can you illustrate how pursuing fulfillment in the present moment eventually leads to financial wealth. Like let’s say, let’s pretend we’re talking to – and is your book for every age group or is it for a specific –

[0:12:43] Patrick Donohoe: Yeah, for all age groups.

[0:12:45] Charlie Hoehn: Okay, let’s say we’re talking to a fresh out of college graduate and they’ve spent the last 17 years in school, doing homework assignments, taking tests and don’t really have a full understanding of what work does bring them fulfillment. How can they start generating wealth?

[0:13:06] Patrick Donohoe: Well, it’s one of those things where I don’t know if there’s anyone out there that doesn’t have something that they like to do, right? Whatever, it could be playing video games, it could be designing clothes, it could be drawing. I think people have discovered things that they enjoy doing and also have received feedback, whether it’s from an employer or whether it’s from a friend or an acquaintance or whatever of things that they’re good at. I think that’s the first step because if you look at our day and age, the different types of employment that’s out there is so far – you know, the spectrum is massive and also, the problems and challenges that this society is facing are massive too. It’s one of those things where you know, you want to find some level of employment that relates to you to something that you are good at but also, that you know that you’re good at and you enjoy doing. You know, something to look forward this week and then start doing next week and it’s an ongoing pursuit. I think that ongoing pursuit, because it could be something that you’re good at and you like to do that it becomes obsolete, right? Continuing to do it is not going to create that outcome that you want but it’s the constant pursuit of doing things not because you have to but doing things because you know, it’s not just the financial reward that you get but it’s that meaning that comes with it as well.

[0:14:21] Charlie Hoehn: It’s the intrinsic paycheck or the internal paycheck. I’m a full believer in that philosophy and in the book, you talk about breaking away from Wall Street, avoiding the investing and lending trap. I know some very wealthy people who’ve made the vast majority of their money from investing. Tell me about why you call this strategy – not necessarily for the people reading your book, that you want them to break away and avoid it?

[0:14:56] Patrick Donohoe: Well there are many ways to make money with investment banks and in the stock market and I’m more referring to the passive investor, right? Because those that become a truly wealthy Wall Streeter is not the passive investor that gives their money to a financial adviser, puts money into an ETF or a mutual fund, okay? In the book, that was one of the breakthroughs I had going through what I did in 2008 and 2009 that I would say, provided a shield of armor if you will, was a software program that my mentor who I mentioned before was one of the original advisors for Robert Kiyosaki, her husband developed it and it basically is a software that will prove or disprove any financial concept, right? Whatever said and how this investment works or who gains or the outcome, is specified. This software allows you to really see if what is being said is actual mathematical reality. There’s a lot of different calculations in the book that disprove a lot of the financial rhetoric that’s out there and that’s where I would say, the wealth people may or may not have achieved as a passive investor, okay? Given the returns that you can historically map out. The money that goes in is probably where the wealth is, not necessarily the gain that came from dividends and earnings. Part of the strategy that I think is kind of the latter half of that book is how to secure a foundation that will actually outperform in most cases, how the passive investors are doing with their investments. It’s not pretty what’s happening in Wall Street but again, as I said before, there are those that are very educated, they form a business, they really pursue how to figure out how markets were kind of read the financial statement, how to determine the significance of different patents or international property the companies have, I’m not talking about them. That’s how I would say, goes to what I mentioned before which is pursuing something that is interesting, that is intriguing, right? That you like doing. That, I would say, that most likely has more to do with positive outcomes on Wall Street than any passive investment will do.

[0:17:04] Charlie Hoehn: You talk about building a solid foundation and also being like the wealthy. What is the foundation and how do I be like the wealthy?

[0:17:15] Patrick Donohoe: I would say, in the book, the foundation is twofold. First part of the foundation is education, it’s understanding what you’re doing. Not to say that you don’t want to trust somebody else to give you the right advice but it’s understanding, you know, what a financial statement is, how your money is working, what it’s doing, how just taxes and income statement and a balance sheet. I think that those fundamentals of financial education aren’t really taught that often.

[0:17:43] Charlie Hoehn: Yeah, do you talk about that in the book because I’ve had, I mean, I’m 32 and I still learn new things about taxes every year. There’s all these loop holes that wealthy people have. I mean, a friend of mine just shared a tip today, he was able to save $500,000 in his business by finding a loophole in taxes with RND. Basically research and development. Anyway. My point being –

[0:18:11] Patrick Donohoe: Well, they’re not even really loopholes and so that’s the important thing to distinguish, that’s why the tax laws is written, they want to – the individual who did the forward to the book, Tom Millwright. He wrote a book called Tax Free Wealth and states you know, the tax code is setup to provide a map, to not pay taxes, right? It takes a few pages in the tax code to define what income is and how income is taxed. Then the rest of the tax code which is like the majority of it is basically here are the things that we want you to do to stimulate different aspects of the economy and we’re going to give you a tax benefit because of it. It comes down to education and it’s personal education, not knowing that the tax code front words to front to back but it’s understanding how to bring on the right advisors, to give you that advice, to teach you and show you different opportunities depending on what the outcome is that you want. That’s what I mean, that’s more the going back to the original question, that’s a foundation, right? It’s not just necessarily understanding everything about money but it’s also finding the right advisors that play specific roles. The other aspect of it, as far as the foundation is concerned, is what we do, it’s a foundation of savings, long term savings, that’s earning interest, that’s not going to lose any money. I think right now, people set their foundation with certain financial vehicles, whether it’s a 401(k) or an IRA that have the likelihood of losing money. It’s not a secure foundation and I think there’s an economic value to certainty, right? That when you understand that, when you understand your money is going to grow and it’s going to do this, now you’re not worrying there and you can dedicate your energy and efforts to things that are actually going to make you a lot of money.

[0:20:01] Charlie Hoehn: With the retirement accounts for instance, why do you say it’s likely to lose your money. I mean, if you start in your 20’s and they compound interest, isn’t there a high likelihood it’s going to earn you money?

[0:20:14] Patrick Donohoe: That’s a big part of the book is really looking into the future, also looking into the past and understanding what the math is associated with those type of investments, this is not the 401(k) or the IRA, it’s the investments that are typically used inside of those vehicles. Like an ETF, like a mutual fund.

[0:20:31] Charlie Hoehn: Yes. You have to know what the top 10 holdings are in your IRA for instance, right? It can’t just be whatever you were recommended based on when you’re going to retire, you have to know what the investment vehicle is within that IRA or 401(k).

[0:20:50] Patrick Donohoe: Maybe, I think that’s part of it, right? It’s understanding how those funds are taxed, what fees are associated with it and you know, right now, there’s I think well over 10,000 mutual funds, I think there’s actually a lot, actually, there’s more than 20,000. I actually state that in the book. There’s over 20,000 funds, right? Some of those funds are made up of other funds. It’s dissecting that but in the end, if you really look at performance, this is my main point. The major indexes, whether it’s the Dow or the SMP 500. If you track those which hardly any money manager ever outperforms, when you really add in inflation, you add in fees and then you add in taxes. The gains, there are not what people are expecting and it’s not what’s typically proclaimed by the financial services industry.

[0:21:40] Charlie Hoehn: Wow, low cost index funds which Warren Buffett recommends to invest in, are you saying don’t do those?

[0:21:49] Patrick Donohoe: Yeah.

[0:21:50] Charlie Hoehn: Wow, okay.

[0:21:52] Patrick Donohoe: Because if you really look at how those track the market, yeah, you’re not going to have fees associated with it but if you look at really how they perform over time and you take into consideration volatility, it’s going to be a lot less than people think. I mean, SMP 500, the Dow, a lot of these tracked index funds, you know, it’s better than what exists, okay? As far as highly loaded, very complex and highly feed mutual funds. However, it still is an investment that you can outperform somewhere else with a lot more certainty and a lot more control.

[0:22:27] Charlie Hoehn: Let’s talk about that. What are the alternatives that I mean, Warren Buffett’s number one rule, don’t lose money. Where do we go to not lose our money and where do we put our money?

[0:22:42] Patrick Donohoe: This is where you know, the strategy that we outline in the book is a specific type of insurance policy. Now, insurance is interesting because you know, insurance typically indemnifies a loss, right? If you look at who owns different types of insurance, it kind of gives you some clues as to you know, where to learn about what type of insurance you should have. Especially when it comes to using it as supposed to a 401(k) or an IRA or a set of ETF’s or mutual funds. The first clue, you know, that really set me off on this business because I never knew about any of this stuff growing up, was the holdings of banks and big corporations and how they use insurance to meet not only their liquidity requirements but also from a tax perspective, a lot of different tax strategy that they have in relation to having insurance on their key people, even insurance on their none key people. I think there was – this was in I think 2010 which changed a lot of regulation but Walmart, you know, they owned insurance on every single one of their employees. They didn’t own it, right? To capitalize on their employees dying, right? They owned it based on how those policies were set up and how it allowed them to meet certain liquidity requirements and have gain associated with that as opposed to where most business keep liquidity which is you know, in low earning treasuries or bonds, et cetera. Those are the first clues that kind of gave me an idea of how people use insurance because I was always taught, you know, you want to use insurance to protect yourself. But rarely do you see insurance being used to build wealth. Other than extremely wealthy individuals and banks, corporations. I mean, that’s who really has figured out how to stack their capital in a way that gives more benefits than just the protection element off it.

[0:24:42] Charlie Hoehn: I’m the dumb cave man in this conversation Patrick. Bear with me as I try to make sense of this, okay? You dug into where big corporations and banks were holding their money. And how did you do that?

[0:25:01] Patrick Donohoe: Just books that I had read. This is again, during this period of time where I was learning a lot about finance. I was learning from my mentors. A lot of those book recommendations came at her recommendation.

[0:25:11] Charlie Hoehn: Got it, okay and how common was this? I mean it was Walmart but were you looking at all the companies in the S&P 500? All of these major banks, did all of them have holdings primarily in insurance or was it just a fraction of them?

[0:25:29] Patrick Donohoe: Well you could go on to, it’s a good question. Yeah, not all banks do it but the majority do. So FDIC, you can look at the financials of any bank that is insured by FDIC and I believe once a year they post financials there. So you can go pull it all up and you can see what their holdings are and they basically have different requirements associated with where their capital is. You know the primary capital is called Tier One Capital, their core capital. And it’s typically how they’re assessed by FDIC as far as their health is concerned and so Tier One Capital is the safest money. It can’t be acquired using leverage and also you obviously can’t lose and so that’s where there’s a lot of this type of insurance is used to meet their Tier One Capital requirements.

[0:26:21] Charlie Hoehn: You say “can’t lose,” what do you mean?

[0:26:25] Patrick Donohoe: So the insurance company guarantees you that there are certain provisions associated with the policy in question and so those guarantees are a paper guarantee by these companies but one of those is that you won’t lose your money.

[0:26:40] Charlie Hoehn: I mean I am going to keep diving down this track but I’m curious, why is this the first time I am hearing this? Why is this not more common knowledge? Is it just because we’ve had it marketed to us so hard by Wall Street and all the financial machines that, “Hey, the way you make money is through these other vehicles,” in which they’re actually making the money?

[0:27:10] Patrick Donohoe: I mean it’s a good question as to why you are not hearing about this but I would say, you know you hit on a good point which is marketing but if you go back in history and you look at what existed before I would say the 70’s and 80’s, where Wall Street really started to thrive, all savings, most savings was in insurance. This was the traditional way in which people saved. I found these over a number of years where I found these little banks. They were in these tiny little book, these metal books where when the person opened up one of these policies to save, obviously they didn’t have the internet, they had these little books where people would put money in every single month and then the insurance company would come around and collect that and then that was their savings. So, this dates back well before the 401(k) was invented, well before the IRA was invented. I mean this was the original savings. And then as you could imagine, there was chaos during 1970’s and 1980’s plus you had this huge generation of people, The Baby Boomers, they were getting into the work force. You had some bankruptcies and pensions and companies were bankrupted because of pension obligations. So, pensions were no longer feasible but then there were solutions presented through some legislation starting with ERISA that allowed companies to provide benefits to people. Without having to strain their financial statement and their future obligations with the pension and that’s where ERISA, the IRA came from and then Ted Benna, one of the first financial advisers to use a section of the tax code called the 401(k) to develop plans around that. That’s where it all took off and so really it came at this serendipitous moment where pensions were no longer working. There was tremendous growth. Because it was high inflation and markets started taking off because businesses were using 401(k) that are in qualified plans as opposed to pensions and then that’s when mutual funds were used as the primary investment vehicles inside of 401(k) and IRA’s, Then from there, I mean if you have tens of trillions of dollars that you are charging fees on that’s going to give you a lot of money to market off of and that is primarily what we know as retirement planning today. That’s where it came from.

[0:29:27] Charlie Hoehn: So paint the picture of the retirement planner of the future. The one who can actually help people achieve the American dream. Give a quick walk through of what the individual seeing this retirement planner who doesn’t tell them to invest in a 401(k) or an IRA but tells them to put their money in insurance and build a business to build their financial future. Walk me through what that looks like.

[0:29:57] Patrick Donohoe: I’ll take one step back. I think if you look at the advent of financial technology that has been trying to solve a problem that really hasn’t been defined that well, you know robo-advisers have come on the scenes, ETF’s robo-advisers that will balance a portfolio based on risk tolerance. It’s basically trying to get rid of fees but still use the same vehicle and although I think that it helps the situation based on what it was, it also is still contingent on a market that is always going to be volatile. I think in our day and age, it is incredibly volatile now but based on the fiscal situation that we’re in right now as a country it prevents an even greater amount of potential volatility in the future. So, I would say going to your question, the future of the financial adviser the first thing I call in the question is the nature of the financial planning. What is the person trying to accomplish? I think the dream that sold the people is this idea of sacrificing yourself for 30 years, saving money and then retiring for 20 to 30 years after that. I don’t know if that – personally that doesn’t make much sense to me because of my experience but I have also seen that in the lives of a lot of people. Number one, the actual math and how to retire these days, I don’t think people realize how much money they’re going to need but then from the other stance, it’s why do people want to retire? And if you really get to the core of that question because that –

[0:31:32] Charlie Hoehn: Right, it shortens your life.

[0:31:35] Patrick Donohoe: It could. Some people it doesn’t. I have been challenged on this because I would say, “You’re right. That’s how I felt,” and I still feel that way to a large extent but people want to retire because they want to live then. They want to do the charitable work, they want to do those things that provide them meaning and fulfillment then but they sacrifice today to do it and so I would say that yeah, you’re right. In retirement people are meant to contribute. They’re meant to provide value to others and I think that is the way the world works and discovering ways in which you can do that today will allow you that meaning and fulfillment today as opposed to sacrificing an unhealthy work culture or all the other stresses that come along with employment, right? It is sacrificing yourself today for a hope of getting those feelings in the future. And that’s where I would say there’s so much opportunity to work in things to make a tremendous amount of money by simply having that paradigm shift, right? That retirement in my opinion is a losing strategy just because the odds are not stacked in a person’s favor, right? That is the first thing. The second is there are ways in which you can use money today to improve your ability to make more money but also pursue a more meaningful career. But the money is put in an ETF, it’s put into the market, it’s put in there for the long run where you don’t have the opportunity to use it for those purposes today.

[0:33:07] Charlie Hoehn: So let’s get crystal clear for people listening, how do we put our money into insurance? Like I am not super technically proficient. I don’t even know where to start based on this conversation. Do you have a resource that you recommend looking into? I mean assuming people read your book?

[0:33:26] Patrick Donohoe: They may read the book and we also developed a study guide associated with the book that walks through some of those nuances but for the last 10, 11 years we’ve had online courses, free online courses that basically walk through all of those steps. The courses are just as much philosophical as this podcast has been but then also we’ve used some technology to teach people about it and all of those are accessible for free.

[0:33:55] Charlie Hoehn: Awesome and that’s at paradigmlife.net right?

[0:34:00] Patrick Donohoe: Yeah and the book website is headsortailsiwin.com.

[0:34:05] Charlie Hoehn: Awesome, yeah I mean you’ve got so many resources on here. Is there one in particular on your site that you really love or provides significant transformation to people who view it?

[0:34:17] Patrick Donohoe: Yeah, so there is the Perpetual Wealth 101 is that entry course and then we have a few others as well but that is where I would start.

[0:34:26] Charlie Hoehn: Excellent, cool. Now talk to me briefly about some of your client’s transformations, what have you seen with them? Maybe your favorite one.

[0:34:37] Patrick Donohoe: Well the thing for me is looking at what clients are looking for. It’s a long process to get across the philosophy that I’m kind of basing my life around and because if you look at the sheer number of years, people have been conditioned to think a certain way in regard to their investments and in regard to their employment. So the thing that I love is to see when that paradigm shift takes hold, right? Where people realize that they don’t have to be doing exactly what they are doing today. They have options and so I have some clients in particular that are in tech for a really long time and they were really successful, one was at VP level or is that a director level, they were married couple and they thought that they had to spend another 10 years doing that and there’s health issues, there’s challenges but then they started to realize that this wasn’t providing them that. You know we had been talking about this for the entire time, which was that fulfillment that meaning. And as they started to look at opportunities based on what they can do outside. How they could take what they liked doing as part of their jobs. It’s not like they didn’t like their job. There were aspects they like, aspects they didn’t. They took some of the things they liked to do and found some consulting opportunities. One of them purchased a gaming business that he had been passionate about for his entire life and he was able to use some of the skills he had acquired at various big-name tech companies. And use those skills to turn this business around and that was one of the big wins I would say a few years ago is when they had those shifts and it went really quick because they’d figured out what to do in less than a year and they were able to move away from their business and make more money than they were making previously. But a lot of it had to do with the mindset there but then it’s also calling in to question the typical investments. It may have actually started there. They started realizing they weren’t getting returns, they weren’t getting the amount of money that they thought they were going to need for their retirement and once they realized that, they started to search for other ways. That’s where they found us, that’s when they found some other groups as well with specifically a real estate investment company and they went down that path and then they started to realize that it was still going to require a lot of investments. And they still would have to be making money and sacrificing their time and their energy right to their specific positions and that’s when they started to listen to the podcast I do and a few other resources mainly on our site, that gave them this insight into ways in which they could take the skills that they had acquired and use that in other capacities outside of the actual company that they were at.

[0:37:33] Charlie Hoehn: That’s excellent. Now I’ve got a couple more quick questions for you Patrick and I wanted to just hammer the listener over the head one more time and make this clear. Can you do a numeric comparison of if you invest in a traditional retirement vehicle, like a Roth IRA or a 401(k), versus if you put your money in the strategy outlined in my book, you will end up with this on path A and this on path B. I know there’s plenty of different factors and variables that can alter it and so we can’t have a definitive answer, but ballpark.

[0:38:17] Patrick Donohoe: I do a lot of those comparisons on the book. Doing actual numerical comparison over the air will probably just confuse people but also, you are dealing with two different uses. So, the use of a retirement cause, you are deferring for a long period of time and at that point you are going to take income and you are using a set of assumptions and those assumptions typically relate to what the index, an index is done. Let’s say the SMP 500. But here is the challenge, with that, the assumption that is made is typically using an average return and how people come up with averages is very interesting. I will do a simple example with you which hopefully hits the point home, right? So a 25% average return would be pretty good if you were to get that over the course of time, okay? So let’s say you started with a $100,000 and that year, you made a 100% on the money. So that 100% gives you now $200,000. Let’s say that next year you lost 50%, so now you are back to a 100 but let’s say the year after that you got another 100% gain and now you are at 200 again but then the next year, you get a negative 50% loss and you’re back to a 100. Well if you add up a 100, negative 50, 100, negative 50 the average return is 25% but the actual return is zero. You are back to where you started and so if you look at how the market works, if you lose 10% in an investment. Let’s say you lose 10% on $100,000, you’re down to 90. If you gain 10% that next year you are not back to a $100,000. You’re only at $99,000. So how you look at how projections are made using indexed average returns it is very misleading. I go through a number of examples in the book and then you load in fees, then you load in taxes, then you load in inflation because again, we are taught to invest for the long run. The money is not accessible right now. So therefore, the use of that type of passive investment is I would say it is different than the use that we project because right now, if we look at how we project the accumulation of an insurance vehicle it is based on what is being paid today. It is not being based on what has been paid in the past and the average of what’s being paid over the last 30 years. It’s based on what’s being paid today, okay? And then the liquidity associated with it. The tax benefits associated with it, now you open yourself up to more options at the same time because you have a level of certainty that your money is not going to lose anything. It is going to gain. You have a contractual guarantee of gain. Now it opens up your mind to pursue things that will actually make you money, not give you the hope of making money and that is where there is a provision with insurance specifically the ones that we specialize in that comes with a line of credit is the best way to explain it. So, it’s a guaranteed private line of credit where your money is in that account. It is still earning, it’s growing. There’s tax benefits associated with it, but the insurance company will lend other money that they have and they will lend it against the money that is growing and you can use that money – whether it is pursuing a business, whether it is pursuing personal development. Now there’s interest associated with that right now. Rates are around 5% for that line of credit. But using that and your money continues to grow inside the account, it allows you to invest in yourself but also you continue to have the account growing as well. Now you are going to have to pay back the loan. There are various ways to do that. We discussed some of them in the book. At the same time, it gives you some liquidity that the typical investments don’t give you. Those typical investments serve one purpose as far as the insurance is concerned there’s multiple purposes. So if you are doing a side by side comparison, you are comparing feature to feature. You are not comparing everything to everything but when you do, there is vastly more benefits to the insurance than the typical investments.

[0:42:28] Charlie Hoehn: Two more quick questions, one is how can our listeners follow you on your journey and maybe get in touch with you. Again, the site is paradigmlife.net. Is there anything else?

[0:42:40] Patrick Donohoe: Yeah, I mean I have 230 podcasts I have numbered over the years. So I mean all of it, the philosophy is in there, a lot of the tactics are in there I mean we have everything that we have taught over the years is available in our digital courses. We have YouTube videos as well that have a lot of those elements in there. So yeah, there is a number of places you could go learn about it.

[0:43:05] Charlie Hoehn: Awesome, now let’s wrap with a challenge for our listeners. What is one thing they can do this week from your book that would have a positive impact on their life?

[0:43:17] Patrick Donohoe: I would say the one thing that you can have the biggest short term benefit is I would just say ask yourself, “Where did the information come from that has given you the perspective you do as far as what you want for your career, what you want for your life?” And then just ask yourself the question of, “If all of that didn’t end up being the right information when would you actually want to know and then what would you do about it?”

[0:43:42] Charlie Hoehn: The book is Heads I Win, Tails You Lose: A Financial Strategy To Reignite The American Dream. Patrick, thank you so much for being on the show.

[0:43:53] Patrick Donohoe: It’s been my pleasure, thanks for having me.

[0:43:56] Charlie Hoehn: Many thanks to Patrick Donohoe for being on the show. You can buy his book, Heads I Win, Tails You Lose, on amazon.com. Thanks for tuning in on today’s show. If you liked what you heard, here is what I want you to do next. Open up the podcast app on your phone or iTunes on your computer and search for “Author Hour with Charlie Hoehn” and then click “ratings and reviews.” Take 10 seconds to rate this show or leave a review. It is a small favor but it’s really the best way to show your support and give me feedback and if you know someone else who’d love Author Hour, take another three seconds to text them a link to this episode. We’ll see you next time.