A Real Estate Career: Lessons Learned (2010-2012)

The optics of business school are great because being a student gives you a halo – you appear to be “studying”, hard at work, transforming yourself.

Whereas if you took two years off to just actively look for, recruit, and interview for jobs in a new industry it would raise eyebrows, if you instead pay vast sums for the privilege of doing so, while paying even more in opportunity cost / lost income, it is more professionally accepted.  Ironic and backwards, but that is the imprimatur of business school.  That’s what people pay for.

Also, it’s a good two year break that looks good on a resume.

I entered Haas because I wanted a break.  I also wanted to be close to home, and the counties where Property Tax Advisors was appealing cases.  I wanted to be on the West Coast, because most of my consulting clients were in Asia – and I would have to fly there from time to time.  In case it wasn’t obvious, I still wanted to work part-time.  And also, to seal the deal, Haas gave me a scholarship, which combined with what Gary still owed me, made it an all-expenses paid, tax-free, two year vacation.

But I don’t want to make it seem like I didn’t take the whole experience seriously.  I did want to learn.  I wanted time to read books again.

The first thing I did when I arrived on campus was sign up for Mandarin classes, which I took with undergrads.  And then I signed up for some advanced real estate classes to try to figure out WTH had just happened in the world.

I took real estate classes every quarter.  And I read books on real estate history outside of it, outside of the classes.  At the end of it, I’m not sure I came very much closer to understanding the mechanics of what had happened, but I did gain an appreciation of how fragile things are in the world.

For our final project in a real estate financing class, we had to analyze a CMBS prospectus (commercial mortgage-based security), you know, those products that had helped bring down the global financial system.

I remember little about the product except that its supporting document was about two hundred pages.  Five of us pored through it for weeks.  All of us had come from real estate development, banking, or brokerage backgrounds.  One of us actually had a real estate lawyer for a father so we ended up asking him about the finer points.

But the prospectus was written so as not to be comprehended.  It was written in legalese, even though it was describing what should have been a fairly straightforward series of waterfalls in Excel.

And in the end, it couldn’t be modeled, because it was worded so ambiguously.  It was another lesson in what I had long suspected, which was that in business, maybe a small fraction of people know what they’re talking about, and the rest are just pretending.

I guarantee the bankers selling the junk we tried to model were in the latter camp.  Some of them were probably in business school at the same time as me.

Business school was also an opportunity to experiment.  I tried out different careers.  I interned for a hedge fund manager in San Francisco.  The first time I had a conversation with him, my mind almost exploded.

We began talking about a gold mining company, and his process of thinking out loud led the discussion into energy consumption requirements of the world, and caloric intake of Africans.  It all had a logic, but it was just beyond my grasp.  Just like, say, a college lecture that is beyond your head will make you fall asleep, this conversation had all the trails of making sense, but it was beyond my comprehension.  Struggling under the mental strain of it, I had to go home afterwards and just lay down for a few hours.

They say investing is the last liberal art.  It is the best cross-disciplinary, systems thinking training that anyone can get, I truly believe that.

In the summer, I interned for GE Capital Real Estate, the first big company I had ever worked for.  It also turned out to be a mistake.  Not the company or job itself.  As part of the Global Valuations Team, for the first time, I worked with people who were all exceedingly kind, competent, and able to regulate their emotions.  I had never worked with such nice people before.  I also had a boss that summer who was the best boss I had ever had up to then, and since.  She was patient and a great communicator.  I saw in all the ways what I had been missing by working only at small shops and with extreme people.

But at the same time, in order to take the job, I turned down offers from a resort development company (US-based), and a Mongolian conglomerate that wanted me to help them create a business plan for yurts, in Ulaanbataar.  There is no way I would have that kind of opportunity again.  It was a mistake to turn down adventure when I was still single and should have taken those kinds of “risks”.  It remains one of my regrets.

But the job was a revelation to me in other ways.  I came away from the internship and my classes at school with a more profound realization about the world.  Mostly, about the fragility of it.

You could see this clearly because GE Capital was such a high-level investor and manager.  By high-level, I mean that they invested in properties that were worth hundreds of millions of dollars, and purchased portfolios that were in the billions of dollars.  When scale gets that large, numbers become abstract.  When you’re evaluating a portfolio of hundreds of properties, the individual properties themselves also just become pieces of paper holding different lease terms and cash flow logic, encumbered by loan contracts that are themselves just other pieces of paper.

I looked at the stack of hundreds of pages we were poring through, which represented the several billion dollar portfolio we were buying.  And that was it.  Although we weren’t buying the pieces of paper, the pieces of paper held the agreements that held this entire thing together, all the terms and clauses and logic that would be transferred, on other pieces of paper, from a different owner to us, moved like you would a large boulder, carefully, so that at the end, someone could print out another, similar stack of papers with our name on them instead, and magically all the obligations and claims would belong to someone else.

Yet what was contained on these stacks of paper allowed us to borrow more money against it, allowed us to engage service providers and managers to service it, and served as the basis for the valuation of our company.  All around the world, balance sheets were being rearranged, title was being rewritten, people were moving, getting hired, fired.

You might note that this is just a larger scale, of the same type of transaction you would undertake when buying a car or getting a loan.  It’s true, but just think about those transactions too.  Do you ever read every word in a contract?  Do you really know every implication of every clause in a contract?  I doubt 99% of the world does.  Similarly, there were things in the contracts of our portfolios, and the leases, that if you read them carefully were questionable, or ambiguous at best.

But the whole thing was wrapped together by a system of trust.  Trust that people down the channel, the title officers, the lenders, the managers, the agents, the lawyers, everyone, was doing their jobs correctly.  No one at GE Capital was going to have time to review every single line.  Internally we all had to depend on each other, and us as an organization also depended on our service providers, suppliers, the governments and cities in which the real estate was, etc, to do their jobs.

At a scale that enormous, no one person has the whole complete picture.  And if you telescope out to the national economy, the world, it’s the same thing.  No one person has the complete picture.  It’s held together by trust.  And when that trust breaks, the system breaks.

And that, I think, was the main lesson I learned at GE Capital, and probably the main lesson of the financial crisis for me.

After my summer in Connecticut, I moved again.  Business school offered a semester abroad.  And I was going to study abroad in Hong Kong.

Living and studying abroad has been the source of some of my deepest relationships and experiences.  After studying abroad in Hong Kong, I decided I would have to live there.

Also, one night while eating hot wings at a place that prided itself on the scoville (spiciness) levels of its food, I found myself dry heaving, tingling, and in tears after half a bite of their vaunted apocalypse wings.

I began rubbing my eyes, which was a mistake because for some reason the XXL-killer-apocalypse-suicide hot oil had spread to the back of my hand, and now I couldn’t feel my face anymore.

It was at that moment, with fluids draining out of my face, that a girl in a white and black dress walked in smelling of spring, and sat down with me and my friends.

A few years later, she would become my wife.

Things Korea Does Well

Underappreciated things about an already underappreciated country.

  • Korea is a textiles manufacturing powerhouse.  In most places in Asia, markets will sell a lot of cheap clothing.  But here, the off-price stuff sold for $3 or $5 in the subway stations comes from manufacturers who, on the other side, are making stuff for Patagonia, Zara, Nike, etc.  The Dongdaemun night market (wholesale clothing market, open to everyone) is literally the definition of a fast fashion nerve center, stocking retailers around the country every night (literally, retailers from all over Korea come to shop here starting at midnight to stock inventory for the next day), with production runs and test clothing that run in the single digits.  In common terms, this just means – bring an empty suitcase and load up on quality, off-brand, no brand outerwear – and innerwear.  Every subway station usually has a ‘sock store’ selling nothing more than socks for less than a dollar.
  • A lot of underappreciated and unknown ‘health’ food.  Korean traditional cuisine stems from a philosophy that food is medicine and vice versa.  While meat (Korean BBQ, fried chicken) gets all the attention, herbs, vegetables, and roots, usually served pickled, are staples of every meal.  Things like bean sprouts, Korean thistle, burdock, sesame leaves, pepper leaves, thorny ash, mallow, bellflower roots, not to mention mountain herbs for which there is no proper common translation, like Korean pimpinella, ainsliaea, ragwort, bog rhubarb, Korean angelica, sedum, etc. etc.  The list goes on and on; Koreans pickle anything that can be picked.  Not to say that all food in Korea is healthy, that’s far from the case, but a typical traditional meal is fairly well-balanced.  Some sort of fermented stew, served with a variety of pickled vegetables and herbs, carbs in the form of rice or noodles, and meat in the form of fish or pork.
  • An unbelievable cafe culture.  Koreans binge drink coffee the same way they binge drink alcohol, which if you think about it, might be a yin and yang phenomenon, with one not possible without the other.  The multitude of, and staggering variety of cafes and coffeeshops on every corner is mind-blowing.  Cafes and coffeeshops that serve alcohol alongside their coffee, dessert-specialty coffeeshops, coffeeshops that specialize only in giant portions, coffeeshops and cafes of every imaginable theme and configuration possible.  They say to show, not tell, and to do that, I suggest you just Google “Korean cafes” or “coffeeshops” on Google or Youtube.
  • This one is an element of Korea that I don’t think Koreans realize yet.  If Koreans didn’t spend all their time just studying, and their early to mid 20s in an insane cycle of work & drinking all-nighters, there would be more world-class athletes in every field from here.  I was part of two different gyms here, and having trained extensively in both the US and Asia, I will say that the number of physical specimens and giants in Korea is surprisingly high.  But years of study and atrophying behind a desk means that they don’t know it yet.  Also, the terrible diet and drinking doesn’t help.  This might be the only country I’ve trained where guys regularly smoke before and after workouts, and come in smashed from the night before.  And for the latter, I don’t mean young guys in youthful partying mode.  I mean salarymen in their 30s and 40s.
  • Lastly, Korea is a convenient country.  Things are efficient, quick, available.  Convenience, and a culture of service stems from its homogeneous society.  I’ll just point back to an earlier article I wrote about this.

Neighborhood Guide: Jamsil, Seoul

This is where we’ve been living for the last year and a half.  Jamsil is a great neighborhood, semi-suburban and somewhat under the radar.  If it wasn’t for the tendency of Seoul real estate prices to move in inexplicable step-wise functions, as it did in the past six months, we would have bought a place here, especially next to the amazing Olympic Park.

But we’re saying farewell to it this week, and in commemoration, I’d like to present some of my favorite places.

As some background, Jamsil (蚕室) is, for those who read Chinese characters, derived from the characters meaning mulberry tree + hall.  Silkworms feast exclusively on mulberry trees, which Jamsil used to be filled with, which made the area one of the two main silk farms for the royal court during the Joseon dynasty.

But, because of frequent flooding, the area became disused.  Over the past century, land has been gradually reclaimed but random sinkholes often appear in the district.

There’s even more history to it than that.  The Baekje dynasty (ca. 18 BCE to 660 AD) made this area the seat of their kingdom.

If you look closely at those dates, you’ll note that the Baekje dynasty goes back even further than the Joseon dynasty, whose palaces are in central Seoul, and are far more publicized and famous.  I don’t know if what I’m about to share below even get mentioned in guidebooks.

Now, Baekje was founded by princes from the Goguryeo kingdom, and both are descended from the horseback archers/nomadic tribes of Northeastern Asia, or Manchuria if you will.

What’s relevant here is that the Baekje capital was located right here and you can still see the tops of its walls, in Pungnaptoseong.

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Decades ago, they didn’t realize what this wall really was, and built a village in it.  You can see the tops of its buildings on the right side of the above picture.  After discovering they had literally built the new village on the top of an ancient capital, new development has been restricted, leading to consternation on the part of the residents.

At Olympic Park, not too far away, you can see the reserve palace, where the royal family retreated when Pungnaptoseong was under attack.  This one is called Mongchontoseong, and is directly in the middle of the park.

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These are earthen ramparts, and not natural hills.  It’s hard to grasp exactly how high they appear, but to get an idea of how high these walls were:

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Jamsil is probably most famous among tourists for being the location of Lotte World, the indoor theme park, and the Lotte World Tower, Korea’s tallest building.  Lotte basically owns two city blocks filled with three shopping malls, an office tower, a department store, a few hypermarkets, and an underground shopping center connecting it all.

Lotte World Mall is actually a complex of two different malls; one the mall itself, and the other the super luxe Avenue L.  Right now, along with the Starfield malls by Shinsegae, these are probably among the best malls in Asia.  Best, meaning, largest, with the best tenant mix, best amenities & concierge service, top of the line facilities.

Right next to the Lotte World Mall is an entire city block dedicated to nightlife.  In the picture below, you can see the shaded area in the red circle reading “방이동 먹자골목”: Bangi-dong Tasty Alley.  

In my experience though, the tasty street actually starts closer to the main road, at the right/east edge of the red circle – and is a larger area than the lake, Lotte World Tower, Lotte World Mall, and Avenue L just west of it, combined.

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This is the thing about Korea: all the tasty stuff, all the round-the-clock entertainment, is secluded kind of like the inner courtyard of a riad, a street or two removed from the main street.

This is why some people say Korea is boring.  It’s either because they’re looking in the wrong places or because they don’t have people taking them to these places.

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“Alley” doesn’t begin to describe the magnitude of this district.  Restaurants, cafes, arcades, karaoke rooms, bars, saloons, and clubs.  Some of these shops are open for lunch.  Very few though.  The main operating hours are from dusk to dawn.

Lastly, my favorite place, which was next to our apartment, is the Jangmi Shopping Center Underground.  This is an underground market that’s been around for over 40 years, and a treasure that will probably be razed, redeveloped, and erased in the next decade.  That’s just what Korea tends to do.

Part food market, part restaurant hall, the B1 floor is a time capsule into Korea of the 1970s-1980s.  I remember shopping at places like this with my grandmother about 25-30 years ago, until the place like this by my grandma’s house was razed, redeveloped, erased, and turned into something far more shiny.

The food merchants here are a hybrid of retail and wholesale.  They sell in bulk, to restaurants and other merchants, but offer their wares to walk-ins too.  You can pick up enough banchan for a feast for less than $10-20.  The restaurants here are standard Korean fare – lots of typical comfort food in the form of rice rolls, spicy pork-topped rice, hangover stews, fish cakes, chicken ginseng soup, donkatsu, shaved ice, and ubiquitous coffeeshops.

This is where the good stuff is.  Don’t be intimidated, and don’t miss it.  You can get good meals here for $5-7.

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Elements: The Best Theme Park in the World?

DisneySea is the gold standard of theme parks.  Most people in the industry who I ask will nominate it as their favorite, and as the best theme park ever constructed.  Just a few of the examples are here and here.

There are better guides and writeups on DisneySea out there, but this is my personal note of appreciation for it.

DisneySea is my favorite park too, although I think if you’re talking about the best park in the world, it depends on who you’re asking.

You’ll notice that the people declaring this is the best park in the world, are adults.  Most kids would probably not say DisneySea is their favorite theme park.  It has less rides and attractions than Disneyland and is a more subtle experience.

As way of background, Tokyo DisneySea is the second theme park at Tokyo Disney Resort.  It opened in 2001 on land reclaimed by the Oriental Land Company in the 1960s, and while Disneyland got the better, more stable land, DisneySea had to be built with as much attention to the subsurface because it was over a deeper area.

All sorts of fancy engineering was applied to the land to avoid problems of differential settlement, and the inevitable result was cost overruns.

All this is to say that in my opinion, Tokyo DisneySea is the theme park version of the Steve Jobs standard of crafting things to perfection, even the parts unseen.

First, this is perhaps the most beautifully themed amusement park in the world.  Parts of it do not resemble a traditional theme park.  They resemble an art installation, or a museum.

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This is Ariel’s Grotto, a visually spectacular masterpiece.

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This East Coast waterfront area is visually one of the most intricately themed experiences I’ve ever seen anywhere.  They put that much work into this ship floating in the water, and it cannot even be boarded or accessed.  Only appreciated from afar.

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Most things, when they are simulacra of another, suffer in comparison.  They can’t pass the authenticity test.

This is because too many details are missing.  Here, Tokyo DisneySea has the opposite issue.  It has MORE details and more features, I’m sure, than the originals.

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Gorgeous theming.  Not a brick out of place or corner cut.

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The park is filled with areas like this, in areas you can’t even access.  Here’s a dhow in the middle of the water, and it’s full of stuff – cargo, utensils, equipment – and the fact that it has this stuff in it deepens the mystery.  You want to go see it, but you can’t.

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Exquisite rockwork.  Bubbling water.  The water doesn’t have to foam and bubble.  But it does, because this is Disney.

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At DisneySea, they’ve recognized that food is an important part of the experience, and for many people, maybe the primary part of the experience.  Why other theme parks haven’t yet adopted this philosophy is beyond comprehension.

At DisneySea, you get multiple popcorn flavors spread out in different areas of the park.  It is a game to either find/taste them all, or find the one you want.  Here’s blueberry popcorn.

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Here’s milk chocolate popcorn.

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Here’s the line for the caramel popcorn.

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You have a food court that has a line of more than 30 minutes to enter:

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Operationally, it excels.  Every cast member has been impeccably trained.  On the kids’ rides, the cast members wave to you the entire time you’re riding.  Bonus points if you can catch them not smiling.

I can’t tell how much of this part is cultural; i.e., would you get the same frenzy and crowds in say, Orlando?  But in DisneySea, there are queues everywhere.  When I mean everywhere, I mean – at food kiosks.

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To take pictures next to a themed stall.

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And ride-equivalent wait times to take pictures with the characters.  Some of this is undoubtedly Instagram culture, which is worldwide, but I can’t shake the feeling that I’m not sure you would get a neat, impromptu lines like the above at Disney World.

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Then you get the Easter Eggs and minute details that are completely extraneous, but are the differentiator between a Disney park, and everyone else.

Plaque reads: “They That Go Down to the Sea in Ships, 1623-1912”.  This is taken from the Gloucester’s Fisherman’s Memorial; the original has the dates 1623-1923, but I will bet that the difference of the latter year has some meaning to it and is not an error.

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There are theme parks developed for a fraction of a Disney park.  You can have great theming, good hardware (roller coasters) that rival the best in the world, you can have rockwork and incredible landscapes, but there’ll always be something missing.

That something is internal consistency, but internal consistency wrought with a level of attention to details that would confound a rocket scientist.

Part of this internal consistency that most theme parks ignore is music.  Music in a Disney or Universal park is central to the experience.  Hidden speakers take you on a cinematic journey and evoke emotions appropriate to that land.  The audio quality is superb and makes it seem like you’re in a theater the whole way.  The transitions between the lands are seamless.

Instead, in most parks, what do you get?  Non-immersive, dim audio, sometimes tinny, and lots of areas that are just completely silent.  Soundtracks that are nonexistent, and instead, playing pop music unrelated to the park.

Here are some speakers hidden in a bamboo grove.

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And some others disguised into a building facade, all designed to create that seamless experience.

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Paying attention to the parts unseen, indeed.

If you decide to do something, to do it all the way, and to completely commit to the conceit that you’ve set up. 

This is DisneySea’s major accomplishment.  This is something worth considering and learning from.

A Real Estate Career: Lessons Learned (2010)

Almost exactly when The Year of Reflection had ended, I received a call from an old contact, Tim.

He wanted to know what I was up to these days, and whether I might be interested in helping him out.  Over the phone, I couldn’t really process what he was saying.  He spoke of taxes and property values excitedly.  I know how that sounds.  But yes, he was excited.

From what I could make out, it was evident that this was an opportunity that had risen because property values had crashed.

One thing did stand out, though, and that was the word “ridiculous”.  Tim was using the word “ridiculous” quite liberally to describe the situation, the money, and the job itself.

If there was anything I had learned about myself in my career so far, it was that I was a ridiculousness hunter.  Intrigued, I accepted his invitation to come in and check out their operation.

Indeed, when I arrived at their “offices” in Manhattan Beach, I found the situation a little ridiculous.  The office was a two bedroom apartment off Manhattan Beach Boulevard with no natural lighting, and seven people were working in it.  Files were scattered everywhere, like debris from a bomb explosion.  I met Jason, who worked with Tim in the master bedroom.  Gary, the owner, worked in the second bedroom.  Everyone else worked in the living room.  Files were stored everywhere, including in the kitchen cabinets and in the oven, which no one used.

The operation was one that appealed property taxes.  This meant going down to the assessors’ office of the California counties and argu-, demonstrating that our clients’ properties were not worth the inflated prices they had purchased them for.

Jason, Tim, and Gary explained this to me as I surveyed the wreckage of an office, and asked me when I could start.

That weekend, I moved to Manhattan Beach and came into the office the following Monday.

Bureaucracy causes pain, and pain causes opportunities.  This whole operation was there, because dealing with the county assessors’ offices was a bureaucratic and logistical nightmare.  If my experience at ERA was like being in a time capsule from the 1970s, the assessor’s offices were dated at least a few decades earlier.  They communicated only by phone, mail, or through in-person hearings, the latter of which gave it the flavor of judicial and legal proceedings.

All this is to say the following.

Challenging the roll value of a property in California, in most of the counties, [was] free.  Free.

But like most things taxes, people hired us to do the job for them because they couldn’t understand the process.  Or even if they did, the psychic pain of having to be put on hold and transferred through the various departments of the assessor’s office, having to search for information on values retroactively to the assessment date, or attend hearings in the middle of the day scheduled months in the future, caused them to hire us.

The business was unglamorous, taxing, under the radar, and operated out of a master bedroom with soiled carpets.  And at Property Tax Advisors, we were discreetly generating ~six digit sums in fees, per week.

This is when I learned that a real business eases pain.  A real business is not the storefront, or the colleagues, or business cards, or a website.  A real business is where someone pays you to do something they can’t or won’t do themselves.  At real scale.  And sometimes you can create a profitable business out of something that is already free.

Don’t be afraid of boring businesses.  I’m sold on boring businesses.

The substance of the work was scouring through reams of data, photos, and assembling a case.  The actual analysis didn’t take long, but it was time-consuming, carpal-tunnel inducing, and after working out of the cave of a master bedroom for about a month, I noticed another something.

I was losing a lot of weight quickly.  People have a misconception about Southern California.  They think if you live by the beach, it’s balmy and tropical.  It’s not, especially in the South Bay.  Most of the time it’s under cloud cover, and if you’re not under the direct sun, there’s a sea-cold to it.  I lost 10 pounds the first month I worked there, just from the ambient bone chill.

The cold and the enormous workload brought something out of me that had lain dormant for a few years.  It was time to dust off my Excel macro skills.

Over a few weeks, I made a program that automatically valued our cases at the rate of one every two minutes, which was a vast improvement over the 45 minutes it took to do it manually.

Because in order to win a case, we had to present a preponderance of evidence that proved the house was overvalued.  “Preponderance” meant that often we pulled together hundreds of pages of evidence for a single property, replete with pages of full color photos.  We took this burden of preponderance seriously, and made sure that our cases were also preponderantly heavier, in actual weight, than the appraisers we faced.

Sometimes I could see a visible sigh from the appraisers when they saw the buckets of paper we hauled in during hearing days.  It was a psychological tactic.  Because when I saw those sighs, I knew that we were winning.

And you might think that it’s weird I use the word ‘winning’ in conjunction with something like a valuation.  But I discussed this before; the concept of value is a vague one.

What is value, really?  Value is a consensus arrived at by subjective opinions.  Everyone starts with the same facts.  Your value is what you choose to emphasize and omit out of those facts.

The assessor’s office was biased towards preserving the roll value.  We were biased towards lowering the roll value, to alleviate taxes for our clients.  And it was a clash of opinions and wills.

But whatever side you’re on, bias takes its toll.  For instance, when you believe that values are too low and are going to go higher forever, like a broker does, you’ll start making yourself susceptible yourself to frauds and bubbles.

This is just as true on the other side.  Exhibit A was our owner, Gary.

There are people you’ll encounter who seem absolutely suited for the work they do.  Sometimes this is because when you do something every day, it can’t help but influence the person you become.  And sometimes it’s the other way around.

For Gary, I couldn’t tell if he was always the way he was, or it was the 20+ years in the tax appeals business that had shaped his entire worldview.

To back up, our work involved looking for direct evidence that our clients had overpaid.  Every case needed to be presented as, “our clients made a mistake and bought at the top of the market and everything is worth about 30-50% less.”

And repeating this story thousands of times over a few decades, I can’t help but think it influenced Gary a little.  Because Gary categorically believed that everyone in the world was overpaying for everything.

From $20 million megamansions in Bel-Air to gym memberships at Equinox, Gary opined endlessly on the ways not to get f**’ed, how to not buy at the top of the cycle, and how to save money.

To him, any debt of any kind was idiotic, even mortgages, and he railed against buying any car new.  One summer when I dropped by to say hi, riding a rented Audi (a free upgrade from the Chevy I had reserved, which was out of stock), he had some choice words.

He was the type of person who, as a Manhattan Beach millionaire, thought nothing of sometimes walking across the street to the motel and helping himself to the free continental breakfast, with a wink and a nod to the staff.

Or walking into the gym with free passes and registering multiple times under different names to extend free trials for months.

Or on Tuesdays, skipping a place for lunch because on Fridays, that’s when they had a promotion and it was 15% cheaper.

Or expounding on the exact depreciation schedule of items like sofas, automobiles, cutlery, and researching gas stations miles away, where prices were pennies cheaper than our local one.

At the time, Gary was going through a lot.  The financial crisis had halved his net worth from $20 million to less than $10 million (I know).  And he was in the middle of a bitter divorce.  All this, I’m sure, conspired to make him feel poorer than he really was, but part of it was probably also in his makeup.  The son of a mailman in Hawthorne, he had always looked at the society people in the towns around him like Palos Verdes, and wanted to be them.

But now he was them, but I don’t think he ever felt like them, nor wanted to be them.

He always had some words about the overpriced nature of the houses around us, and the fallacy of the dual-income homeowners who had taken out million+ dollar loans for them.  How can it be worth it to live like that, and slave for decades just to pay off the mortgage on a property, he would rail.  Why would he buy that car when he’s a [enter profession here] and making [enter salary here], he would exclaim.  Why do people feel like they have to keep up?  He would rant for the entire 40 minutes it took to drive to downtown LA for a hearing.

And slowly, I began to take on his mentality too.  I couldn’t help it.

This was in the ashes of the financial crisis, and still shell-shocked from the previous year, I began making it a game to see how frugally I could live.

For a time, I slept on the carpeted floor of my apartment on a sleeping bag because I didn’t want to buy a bed.  I proudly clipped coupons and returned to my old trick of asking people in restaurants if they were going to finish their meals.  I needed to regain those 10 pounds, after all.

The irony, again, is that the year was turning out to be my best yet, financially.  Again.  I was drawing on two sources of income, and making consulting calls to clients in Russia and Arizona alike, stepping outside on the patio.

Anyway, Gary was shameless in a way with his frugality.  And Jason, who handled sales and collections, was just…shameless.  And shameless about his shamelessness.

Shameless people are an object of fascination in our society.  They have their role.  And in our office, Jason was the id.  He was the walking manifestation of the things we wanted to say and do, because he had no filter.

If you’ve ever worked with real good salesmen, you’ll understand they’re a different breed of person.  Until I worked at the Harris Group, I’d never met real good salesmen, even at Wharton.

Jason had more energy than anyone I’d ever met.  This wasn’t drug-addled energy.  This was just raw male energy, like he was a wind-up toy that was just always…on.  If you stood next to him it became uncomfortable from waves of enormous body heat, like some sort of constant metabolism of targets was taking place.

This extreme energy had him going through a hundred phone calls a day, with no let up in pace.

Like all good salesmen, he didn’t care about rejection.  And unlike other good salesmen, he was completely honest.  He was almost honest about everything he believed and felt, and that made him good on the phone.

Being honest and tireless also made him good with girls.  Bear with me through this section because there is a point.

Every weekend he went out and found himself another girlfriend.  He hooked up with a girl who was going door to door selling magazines, who he invited in to his apartment.  He hooked up with a girl who was selling hats on 3rd Street Promenade.  He had hooked up with the woman who he had purchased his used car from, offering a lower price and a steak dinner.

When he was at bars, he was completely straightforward about what he wanted.  If a girl he was pursuing had a boyfriend or a husband, he didn’t hesitate to say the conversation was over.  He didn’t want a relationship, and every Monday, the endless stream of text messages from his weekend romances bounced in, letting up only around Wednesday.

You may or may not condone this.  I regarded this then with a mixture of wonder and grudging respect.  If nothing else, he was honest.

That honesty extended to the office.  He was not above hanging up violently on clients after calling them dishonorable scumbags for not paying, or calling out people within the office for not working hard enough – and he was right.

For him, what was right was right, what was wrong was wrong, and he knew exactly what he wanted and did not want.  And it always struck me, seeing someone so honest, that people do not really respond well to honesty.

Clients who had been through the Jason treatment didn’t pay until Gary called them back and apologized, assuring them that they were not dishonorable but just “forgetful”.

People in the office who were slacking did not step up their game when called out.  They shut down, and resisted the idea that they were fallible.

And the endless stream of girls (I’m using girls instead of women deliberately) who he had warned in advance and made clear all throughout the duration of their 36 hour romance, that he was not interested in anything longer than a weekend, texted him endlessly.

It’s just a point to consider.  People don’t listen to the ‘what’, they listen to the ‘how’.  Jason knew the effect of never filtering himself, but he accepted the consequences and lived as he did.

Also, back to the energy point.  It’s hard to win against or resist someone who has higher energy.  10 pounds lighter and feeling lightheaded from my endless working, I found it hard to ever win an argument against Jason, no matter how hard I tried.  He kept coming.  And I would definitely never even have a chance after lunch, when I was soporific and for some reason he was going the same speed as at 10 in the morning.

It was then I realized that energy levels are an underrated part of success, especially when you’re working for yourself, and need to be cultivated as carefully as other resources like money or time.

The work was interesting, the growth in revenues was inspiring, the money was lucrative.  But midway through the year, I decided it was time for me to go back to business school.  Reasons to be discussed in a later post.

If I had stayed, I would have earned my way into a relatively easy few million dollars over the next few years.  I knew that.  And I still gave up my equity.  To be clear, I did stay involved with the business over the next few years.  It was one income stream.  But I gave up ownership in order to be free, and have time to do my own things.

People ask me all the time why I did it.  And for a long time I found it hard to articulate.  It just never felt like my thing, or my destiny.  It was Gary’s thing.  It was Tim’s thing.  It was not my trade.  Does that make sense?

Also, maybe it was just hubris again.  Still, I believed that I would find that few million dollars somewhere else, in the future.

Finally, maybe because I just wanted more…adventure?

De-Retiring

My wife and I fully bought into the philosophy of early retirement.  Amass enough financial assets that generate income, calibrate spending so it’s under that, and you’ll be free.

But, we knew we couldn’t be completely idle.  Two years ago, we quit our existing jobs and built/acquired a few online businesses, so that we could each work maybe ~10 hours a week and keep our minds fresh.

In the rest of the time, we’d spend time with our daughter, read, exercise, and do things that were fulfilling.

It sounded great at the time.

But it wasn’t.

What happened is that by going into “early” retirement, my mindset shifted from that of a striver, to that of a maintainer (of the status quo).

The shift is subtle but insidious.  After all, when you’ve reached the supposed finish line, how can the mind or body not help but let up a bit?

I’ve found myself approaching things with less rigor, less intense concentration than before.  I’ve found myself waking up later, making all sorts of excuses for myself – after all, I’m retired!  What does it matter?

Your standards slip because they can.  Your work ethic frays because it can.

Simultaneously, because I’m time rich, I’ve been assaulted by Parkinson’s Law, the principle that things take just as long as the time allotted to it.

With so much time, I procrastinate.  I write down three things on my calendar for the day, and sometimes I have one or two things crawl across the page from Monday, to Tuesday, Wednesday…then to Friday without crossing it off.

And sometimes those things are like, ‘mail a letter’.

The good thing is that with so much time now, I spend almost all my free time with my daughter.  So much so, that even despite all the time (mornings, afternoons, and evenings) I spend with her, I still feel like I’m not spending enough.  Because when I have so much time, why not just spend it all on her?

I feel myself making excuses, because I live in an abundance of time and resources.  I feel myself becoming a dabbler in things, like the active management of our financial assets.

But the one thing I have not become a dabbler in, is in physical training with weights and martial arts, six days a week, sometimes twice a day.  This, ironically, even though I’m at the age where I cannot become world class in either.  I find myself being bested in both by kids half my age (sigh) and I tell myself that it is a natural process of aging.

Again, more excuses.

But what I’ve realized from the physical training?  I return to it every day because I long to see progress.

Progress and personal growth are what I miss.  I miss intensity.  I miss (at least some) pressure to perform.  I miss setting crazy goals and hitting them.  I miss doing more than I thought possible.

All these things associated with work – pressure, intensity, rigor, discipline, etc., etc., are things that bring out the best in you.  And why would you not want to be the best version of yourself, always?

I’ve been looking for all of these things in physical activity, which does not seem like the best goal for a man on the wrong side of 35.

Effectively I’ve shifted from a win mode, to a don’t-lose mode.  In jiu-jitsu, you cannot win in a don’t-lose mode.  You will actually eventually lose.

In life I think it’s the same way.  Shifting into this mode has deep effects.  You become dull by just trying not to lose, or by trying just to float on the cushion created by your passive income over your expenses.  It causes you to think and act differently than when you have a livelihood, reputation, and the service of others at stake.

This mindset shift causes a sliding in your standards.  It engenders fear.  Because now you’re waiting for things to happen, instead of being proactive.

While obsessing over not losing is the primary rule for professional investors, as a general principle I am not sure it is well suited to anything else besides a life of mediocrity.

When you’re in a passive mindset, your standards change.  You’re not looking actively for opportunities.  You’re waiting.  This is lethal for a young person.

This philosophy is not for everyone, obviously.  But I don’t think early retirement is for strivers.  And ironically, I think most people who read about early retirement are strivers.

There’s not much I admire about my younger self, but I look back at the kid that was striving and hustling and willing to do what others didn’t or couldn’t do, and I admire that about him.  Now I wonder what he would think about me.  Because in the fog of the last two years, I have definitely not been doing that.

I did it wrong.  What I should have done, and what anyone else should do, is to reframe this concept of early retirement, which we Americans imbue with quasi-religious undertones: a future imagined state where you’re free of toil.

The reality is that many people die when they retire.  And people suffer from anxiety and FOMO when they feel they’re no longer relevant.

The question is not how to retire, it is about finding something that will lead to personal growth and fulfillment, at all stages of your life.

What you should strive for is not to be “free”, or to stop working/retire.  Again, as with many things, the avoidance of a thing is a subpar solution compared to the active pursuit of a some thing.  I.e., not losing versus trying to win (not working versus trying to find fulfillment).

Always strive for something.

What I should have done was to think just as hard about what I was going to do afterwards and whether I’d truly like it, as I did thinking about the financial schemery that retirement would require.

It’s trendy to bash that old chestnut, do what you love.  This has turned into a favorite straw man among self-improvement gurus and Gladwellian pivoters and unsolicited advice-givers.  Instead, “do what you’re good at”, the correctors say.  “Love what you do”, the inversionists say.  “Follow your effort,” Mark Cuban says.  But the underlying sentiment of it all is the same: find work or activities full of purpose and meaning.

The simple fact is that retirement is boring, especially when you do it when you can and should still work.  And you might not like the person you become when you do it early.  People were meant to strive and struggle against something.

Don’t retire, find fulfillment and joy in your work.  Whatever that work means.  And yes, again, I think people were meant to strive for something.

Strive.

I was foolish.  I’m de-retiring.

A Real Estate Career: Lessons Learned (2009)

I started my own boutique, real-estate focused consultancy, in the first week of September 2008.  You’ll notice that’s about the time the global real estate market – and everything else, by the way – came crashing down with it.

A lot of people have described that period as feeling like the world was ending.  It didn’t quite feel like the apocalypse, I never felt in physical danger.  But it did feel like the world order was shifting, that something fundamental was gone.

You can debate all day long whether or not that’s actually true, but for the end of 2008 and during 2009, I was in a state of confusion and loss.

You might think that given what I wrote about my previous job, I was crazy to branch out and start my own consulting company based on it.  Optically it is so.

But I had a lot of good reasons too.  I had cultivated some good relationships with who I thought were solid clients.  One of them, a savings bank that was running itself like a hedge fund, had promised me and my partners a retainer and guaranteed contract over the next two years, worth a few million dollars.

As it turns out, this particular client then went to jail.  I didn’t know yet that savings banks shouldn’t be running themselves like hedge funds.

Another good client of mine, an entrepreneur-turned-developer, wanted me to help them actually project manage the construction of their theme park.  Moving into an actual implementation and development role sounded exciting to me, after being in the world of theory for years.  I believed in this client, because they were one of the only ones that seemed savvy about the whole game – I was and eye-witness to them wrangling about $600 million in concessions for their project from the government.

It turns out a global financial crisis cuts off funding a little bit.  $600 million in savings means nothing when you’ve lost $1 billion in other commitments, I guess.

The third reason was that I felt that being an independent consultant meant I would be my own boss.  Meaning I could work on other projects on the side.  Because simultaneously with some other friends, I was arranging another partnership focused on real estate acquisitions and development deals in LA.

With my consultancy, I thought I would be making millions.  And with my private equity group, I thought I would be also making millions.  Pretty soon, in a few years, I would retire.  It was a neat little plan.

You might notice that even though I believed the world had gone insane in terms of real estate development, I was still fully committed to the field.

This might sound like a paradox, but it was a true blind spot.  I thought that for sure, the projects that the ‘other’ clients were working on were crazy and wouldn’t work, but for sure ‘my’ clients and projects would work.

This is classic bubble thinking, and you could also call it heavy commitment bias, youthful arrogance, delusion, maybe even a form of insanity.

Needless to say, things didn’t work out that way.

2008 closed out with weekly kicks to the face of bad news after bad news.  I learned all the verbal commitments had been worth nothing.  All the projects I had planned became mirages.  My romantic relationships were blowing up.  At one point, I was earning nothing, and it got so bad that I had to move home with my parents.  Back to the San Gabriel Valley where it all began.

At one point, I became so depressed that I decided to write myself a mantra.  It was about a paragraph long, and I wrote it every day for about two months until I felt like I could actually get up in the morning.  I wish I could find it now, which is another reason to keep a journal.

If you talk to people in my generation in the finance or real estate industries, the ones who were a few years into their career when 2008 happened, we are all a little shell-shocked, still.  It was a defining moment, when suddenly the rug got pulled out from under us.

Everyone still daydreams about another financial crisis.  We still think it might be around the corner.  And we have a huge portion of our assets stashed in cash, not equities, just in case something like this happens again.

This is also probably deluded thinking.

But, there are a lot of ironic things that happen in a complete meltdown.  Things reverse in more ways than one.

I gave up on the RE fund.  My partners there, were less serious, than my consulting partners.  And I needed to focus.

But what happened, ironically, was that 2009 turned out to be my best year financially, up to that point.  This, despite working far less.  This is just what happens when you remove overhead.

Despite all that, I didn’t feel any triumph or joy at the end of 2009.  It still felt unstable.  Besides, I was still working and living at home with my parents, and therefore what I was doing seemed illegitimate.

In the years since, I would reverse my opinion on that, but I was still insecure.  What I’ve realized in the years since, is that companies and structure fulfill many needs for people, but one of them is a feeling of legitimacy.  For me too, for a long time.

Being your own boss is not for everyone.  For some people, being able to go into an office, being surrounded by a corporate structure and procedures, and a predictable routine, just feels more stable.  Seeing all the people around you engaged in the same mission drives you.  And the office, the people, and the purpose, give you the sense that you are part of something stable.  Whether it’s true or not.

But all that is what I missed the most when I first quit to become an entrepreneur.  Being your own boss is hard.  You take ultimate responsibility for everything.  You are responsible for the sales, the marketing, the production.  You determine your own working hours, your work-life balance.  All this usually fills you with anxiety.

And the only thing I can recommend for anyone who is thinking about going independent is to install routines and protocols as soon as possible.  Carve out space for the work, away from your personal life, especially your bed.  Create a workplace, whether it’s real or virtual.  That way you will “go to work” and do professional things as a routine or habit, and not just when you feel like it.

Because you’ll only build a business with the accumulated, compound interest of putting in work every day.  This self-regulation was the single hardest hurdle for me.

With more time on my hands and the funds to do so, I started traveling more.

It’s true what they say about memory and learning.  You don’t know what will stick.  In an International Finance course, I had a professor who left us with some words of wisdom during the last day of classes.

I don’t remember much else about the class, except going to him during office hours with a newspaper of exchange rates, interest rates, and other financial news.  My question was that why was the exchange rate moving in the other direction than as predicted by the models we were learning about?

He smiled and just said it was price movement from trading, and that’s when I learned about how there was a force of human nature called trading that helped violate all neat theories.

Anyway, at the end of this class, he wished us well, and recommended that we should visit two places in the world before we died: Machu Picchu, and Angkor Wat.

And so during my consulting jobs, I went to Angkor Wat.  And as he recommended it to me, I will recommend it to you.  Archaeological sites are fascinating for many reasons, but I love them – and love Angkor Wat the most – because of its Ozymandias and memento mori themes.

An ancient kingdom in the middle of the jungle, rich beyond imagination as attested to by the sheer volume and intricacy of its stone buildings, moats, and storehouses.  Grandeur and glory, extravagance, reverence, arrogance, fear, and ultimately, life – you can feel all of these things in the ancient city, where humans once lived under a kingdom that believed it would last forever.  Built by people whose names we no longer know.

Anyway, so you’ll see that the year was a lot of soul searching for me.

And the last lesson I learned is that, whether it’s with yourself individually, or the world around you, in your darkest and deepest times is when the seeds are being planted for future growth.

You should rejoice and celebrate when you feel like you’ve hit bottom.  The journey down to the bottom is the demoralizing, hard part.

The good part – although it’s not easy – is when you’ve actually hit bottom, because that’s when you’re free.  Freer than you’ve ever been.

And likely, when you make it out again, you’ll be a different person.  You’ll be proud of who you became in the process because you’ll have learned how to fight.  And much, much later, you’ll look back at this young, hungry version of yourself in admiration and wonder what happened.  At least that’s how it was for me.

When I think back on this time, I realize that during that year, when I felt like I had no options left, I actually had the most options ever, since graduating.  I could have literally done anything, studied anything, become anything.  A world order had collapsed, and no one would have said anything to me about a career shift or transition into a totally new field.

I could have, but I didn’t.  I was too fearful – what would my resume look like, what would I do to survive, etc.  In hindsight, these were trivial worries.

I did know I wanted something new, something different.  And I would indeed find it in the years to come.

But at the same time, I was also scared to walk away from what I already knew.