Billionaire Explains Why He Does NOT "Diversify" | Richard Baker

Do you believe in diversification or do you think that most fortunes come from concentration? >> That's a great great question. So intellectually I would say uh uh diversification is very smart and intelligent and I have very smart friends who are well diversified. I can't seem to ever get myself there because I'm so, you know, when you're a real estate person, you're illquid and um uh uh and you have to keep uh in order for me to get bonus depreciation, I have to buy more real estate. And uh so I just keep getting more and more concentrated in real estate. And when I had a large real estate portfolio, what did I do? I went out and bought operating companies that owned real estate. So, I guess I tend to do what I know and I wish I knew more about, you know, uh AI companies and uh uh uh and that type of thing and diversify my interest that way, but I don't. >> How are you currently investing then? If you were to divide up your portfolio, what does it look like? You have like, you know, this in, you know, department stores, retail stores. You have this in like stocks, bonds, treasuries. I would say uh uh you know uh 80 to 90% of my net worth is in real estate and you know 1020 in liquid assets. >> What is a liquid asset to you? >> You know liquid assets stocks. >> So stocks and is it like real estate based stocks or like >> I'm curious realy >> group how how dumb would I be to be buying real estate stocks? I know. [laughter] That's what I But that's my thought. Having said that, my brothers having said that, my my my very clever son uh uh recently put some of my stock into Vornnado stock cuz there you go. So, how dumb. So, that's back to your point, you know, now, of course, we have uh all Elon stocks and SpaceX and all those kinds of things, and that's been great. But, um yeah, occasionally we're, you know, we have a lot of respect for a guy like Steve Roth, who runs Fortnado. By the way, it's up 30% since we bought it. So, it's just fine. So, it's concentration. >> It seems like everything you touch is doing well. >> That's not That's not true. >> What's What's the biggest loss? >> Oh my god, I've had so many I've had so many failures and so many losses. And I hope the people that are listening don't for a minute think that me or any of the other people that are on that come on and talk win because that's not the reality of the world. The reality is that life is one miserable failure after another. And what you have to do is try to make your failures small. And you need to be resilient and able to bounce back up and go do something else. And um I'm very uh entrepreneurial, energetic, and I do a lot of different things and a lot of them don't work. And I fail small. And I've had all kinds of failures. And um uh and when I win, I try to put myself in a position where I can win big. What's the largest amount of money you've ever lost? >> I've lost uh $200 million in a uh in a company called Guilt. We bought Guilt and um it didn't go the way we wanted it to go. >> What happened? Where did you go wrong? >> So, we bought it because they had good technology or so we thought and we thought that the good technology would be good for our bigger business and maybe we got some benefit out of it. But in the end, the culture of the folks that worked at Guilt didn't work well with the folks that worked at Sachs. And so it was not a successful uh acquisition. >> How did you lose the money? Was it a sale? >> We bought it for 200 million and then over time it became worth very little. We sold and then we sold it off. I sold it to Michael Rubin at Fanatics. >> Um, >> what did that feel like losing 200 million? >> It sucked really bad. that I still wake up in the middle of the night and go, uh, what did I do? How dumb was I? And by the way, I've made billions and billions of dollars, but I it keeps me up at night and I've lost 100 million here and 100 million there. It's not my only bad thing. I've lost plenty of money inside of some of these operating companies. And um, you second guess yourself and you try to rethink what you did. But as a general rule, I'm really a smalltime uh entrepreneur where I put a little bit of money and and create value and I do everything in a separate company. This uh Sachs Global thing, I invested $6 million which I had taken out of a refinancing that I had done the year before and the $6 million turned into a $10 billion company. And I sat there on top of this $10 billion company. Oh my god, what am I doing here? I like my little deals where I could, you know, not put a deposit down or figure out my little deals and I was trapped in this monster and um but we accomplished a lot and I I don't regret it. So, a question that I asked Michael Sailor uh was, you know, back when we filmed the podcast with him, I think his net worth was publicly like $4 billion. And Micro Strategy and Bitcoin would fluctuate 1 5% you know, like quite a bit per day. And so his net worth would swing like if he just checked, you know, his Schwab portfolio, Robin Hood portfolio or whatever, like he could see maybe $50 million just on a given morning, $100 million gone like this. And I asked him, how does that put into perspective other problems that you exist outside of finances on a daily basis? Like I asked him, for example, if your house floods, it's like, does this not even bother you at this point? Because your tolerance has gotten so high for what you have to deal with on a daily basis. If you, you know, if if you freaked out every time you lost $50 million, you'd be freaking out or gained $50 million. You'd probably be freaking out 10 times a day. And so I'm curious, how has this affected your overall problem solving tolerance or just things that you encounter on a daily basis? Having these huge financial swings, $6 million to 10 billion, losing $und00 million because of a phone call, you know, stuff like this. >> Okay? So, uh, you have to keep life in perspective. So, uh, when it all boils down, you have your spouse, you have your kids, you have your family, you have your friends. And I recently lost two friends who and uh that so trumps uh uh whether your net worth goes up 5%, 10%, 20%. Um and I think you get to a point in life where you have to really keep things in perspective. My my grandfather uh was a great entrepreneur, great real estate guy and was very successful. And I remember going to his funeral and to me he was like a king. And uh I went to his funeral and uh in this horrible ugly cemetery in Brooklyn on the side of a mountain, side of a hill with the highway there and you know at the end of the game the king and the queen go back in the same box with the pawns. So don't over uh you know don't over imagine all this stuff. In the end we all and it doesn't mean anything. So um keep it all in perspective. Try to have fun. Try to work with good people. Uh take care of your family and your friends. take care of yourself. That's way more important. >> You've always been good at spotting opportunities. Do you think that's something that you learned growing up or something that you're just intrinsically good at? Like you're born with this like way to see >> I think it's I think it's uh I think it's both uh honestly, but um uh I've identified a key uh factor. So uh I was very blessed as an entrepreneur to be able to have my father to talk to and I have my son to talk to now. My son talks to me. We talk all the time and what I recently set up was this uh conference we call it uh office hours where anybody can come on the office hours and ask questions. What's happening in this country is there's all these entrepreneurs and they're sitting at home on their computer and they're looking and they're thinking and they're watching this or other things. They don't have anyone to talk to or ask questions, simple questions. And these lawyers and consultants cost a fortune. So, I'm doing these office hours. I'm doing these boot camps and these kids and these folks are asking great but pretty basic kind of questions and I give them the answer in two seconds because to me it's like nothing and that's really valuable. So, um living uh uh living uh in a box by yourself, not having someone to be able to communicate with and ask questions is a big disadvantage. trying to figure out how to get these folks who are working on real estate deals to be able to have groups to talk to and ask questions is a huge advantage. >> And really quick, I got to say something that Jack and I have been trying to do a lot more lately is just to remove the annoyances that quietly waste time and energy because those things add up fast. The thing is, we're always on the go. We're always trying to get to the next thing. So, having a cleaner setup and a little more control in your day really goes a long way. And that is exactly why we absolutely love Magack. The Mag Elite case is so much more than just a case. It has the finger loop for a secure grip, side grips that feel great, a pinky pillow for comfort, and a built-in kickstand when you need it. That is all built to make everyday use way better. And it also just comes with a screen protector, so that's one less thing that you have to worry about. Then they also have their Magack 3in-1 home multi-charger that keeps everything clean and ready to go. You drop your phone, AirPods, and Apple Watch on it at night, and by morning, everything is charged in one place. What I really like about this is that it's not just like a mess of wires that looks awful. I don't have to like try to plug and play and which one does what. It's all in one place and it looks incredibly clean and it just makes it easy. I kid you not, Graham and I are genuinely huge fans of Magack. I use their wallet. I use their phone case. And also on the side of my Tesla screen, I put my phone up there. It is so so helpful. Check it out with this footage. I can guarantee if you're on Apple or Android, they have something for you. So, if you want to make your setup cleaner and way more efficient, definitely check them out with the link down below. And don't forget to use our code which is also down below.