A Real Estate Career: Lessons Learned (2014-2015)

In 2014, my tax business was winding down, and during the summer I was getting anxious again.

As these things tend to happen, while randomly talking to a friend, he asked me if I wanted to join his hedge fund as an analyst.

Completely putting aside the fact the position was in Hong Kong, I accepted.  And for the next 18 months, I helped them analyze real estate and Korean stocks.

This was my first real job in finance.

When you work in finance, you get spoiled – especially if you’re on the buyside, and you have all sorts of service providers working for you.

Finance draws hard-charging, intelligent, and driven types, and when you have Ivy Leaguers and graduates of Asia/Europe’s top 10 universities as your service providers – your bankers, brokers, traders, accountants, and researchers, well, I’m not sure I’ll ever have that level of service again.  Emails were written to me in clear prose.  If there was a problem, I received a phone call explanation within seconds.  Things got scheduled, presentations were efficient, full of information, and if I asked for anything, things just got done.  No one passed the buck, and if they did, it was to actually find the person who could solve the problem, and these problems got solved in hours, if not minutes.

Sigh.  Maybe this is the daily reality for many people, but for me it was new.  This meant that literally all I had to do was focus on the thing I had been hired to do, which was to stay plugged into the markets, pore through financials and industry reports, think, and analyze.

Never before in my life had I woken up so early, before 6, to catch the bus into Central to start fielding the calls and get work done before the Korean and Japanese markets opened at 8am.  Never had I had so much energy as when I was plugged into the information flow and market chatter every day, hearing from analysts, companies, and brokers spanning Tokyo to Mumbai.  The financial markets are an arena where the biggest game in the world – the exchange of capital – is played out on a daily basis, against some of the smartest people, with huge sums of money at stake.

And looking back at that time, that’s what I miss the most.  There’s no feeling or job quite like working in the financial markets – the pace, the energy.  It’s like being plugged into an IV of chatter and information and raw sentiment.  You can actually feel, around town, when the markets are up or down.

Now onto the actual job.

Our fund had a value bent, which meant that we were looking for undervalued or overvalued companies to buy or sell.  Before joining, I had a romanticized notion that it was all about digging through data and research, coming up with some sort of brilliant, deviant opinion and using that to make money.

There is that.  But I learned I was quite naive, because identifying the stock to buy/sell is only a fraction of the job.

Being good at analysis, and picking the right name, is only one leg of the stool.  It doesn’t matter if you’re good at analysis if you buy in at the wrong time or sell at the wrong time.  It also doesn’t matter if you buy/sell too much or too little of it, or if you can’t or don’t have the conviction to hold during the hard times.  Also, since you’re never going to be 100% right, 100% of the time, you have to be constantly evaluating your own decisions, your decision-making process, your own thoughts, in context with the present and history of the market.

In short, not only do you have to be brilliantly analytical, you have to have the instincts of a gambler to size and time the bet, the temperament of a stoic to not let gains or losses affect you, and the introspection of a monk.

Only by getting all four of those things right, can you succeed in the job, and it’s why investing is so hard.

It’s always been my opinion that investing is the best interdisciplinary exercise you could ever conduct, or learn.  And one of the biggest reasons is for the last point above.

Constantly evaluating your own thinking and process for making decisions will serve you well not only in investing, but in life in general, and is the foundation for success in general.

At the fund, though, I found myself teetering on the edge of this.  If you’re not careful, endless introspection can lead you to have massive self-doubt all the time, and start going down epistemological rabbit holes, like ‘how do I know I know this’, or ‘am I sure that I know this, and with what probability, and how do I know this probability is even correct’.

In my job, I found a lot of parallels to surfing.  The financial markets do not have sympathy or other human sentiments, just like the ocean.  You can’t fight them, just as you can’t fight or force a wave to do anything.  You can only react to what’s given to you.  You can’t argue about rightness or wrongness.  The markets, and the ocean alike, do not care about you.

Working in the markets is one of the most humility-inducing jobs you can have, and those who get arrogant get crushed.

In many ways, the job gave me an appreciation for knowledge in general.  When you can sit in a room with extremely intelligent people discussing a company, and everyone has extremely divergent, completely opposite viewpoints and opinions on the company’s prospects, you begin to see that it’s hard to purport to ‘know’ or declare anything with certitude.

And that states of the world are best expressed in probabilities, and the smartest people are always questioning and changing their minds.  They’re comfortable with uncertainty, and don’t let it paralyze them.

I learned a lot on the job, but that might have been the greatest lesson for me.

A Real Estate Career: Lessons Learned (2012-2015)

It’s weird the things that stick with you.  For the next few years, I worked three full-time jobs at a time.  I was in full execution mode as a property tax agent, international theme park consultant, and commercial property agent – and I don’t remember much about the period.

When I look back, I think it’s because I wasn’t growing.

There was little new to the jobs.  I was just executing on processes I had put in place years earlier.  I had become proficient, an ‘expert’.  And so the result was that financially, they were some of my peak earning years, but overall I’m not sure it was that fulfilling.

If you can find jobs where you get paid handsomely for personal growth, now that’s the holy grail.

But there were a few things that stuck with me.

I had a client who was an ex-Drexel Burnham Lambert banker.  He predated Michael Milken give/take by a decade, and had apparently made so much money that there was nothing else to do with it but plow it into real estate.

He worked out of one of his apartment properties in Brentwood, in a ground floor office strewn with papers and newspaper clippings.  He was in his 70s and his main tactic in any negotiation or even discussion was to immediately pretend he was slow.

Whenever you began speaking, he would tilt his head and look at you curiously before responding with a set of ‘is that right’s and ‘you don’t say’s.  He didn’t say much, but you could tell he was processing everything.  With so much office space all around LA, he offered free space to young brokers as a way of being plugged into deal flow.  Essentially, to listen.  He was always listening.  Sometimes his ‘you don’t say’s were sarcastic, as if he couldn’t keep listening to our stupidity anymore, but he was always listening.

We had another client who was a movie mogul.  Over a few decades, he had opened a regional chain of movie theaters and plowed the proceeds into real estate.  And about a mile down from our office, he owned 25 condos in the heart of Redondo Beach.  We brought him multiple offers on the property.  $18 million.  $20.  $22.  But he wouldn’t budge for less than his number, which was a million dollars per unit.

And although we had clients who probably would have bit at $22, he didn’t.  Something about his patience struck me, sitting in his office modeled after a miniature theater, cracking a grin at each new offer we brought him, and sitting back, a picture of consummate contentment, and telling us, if we could please try to get a higher number.

Years later, he was proved right.  Actually, the value of his condos probably exceeded a million dollars a unit.

The thing that both these clients had in common were that both owned and controlled more than $100 million in properties, each, both were well into retirement age, and both arrived at their offices at the crack of dawn.

This is just a sample.  There are people like this all over the country, all over the world.  It was just another lesson about wealth.  In so many ways, wealth is not the goal.

I wanted to be like them.  It would be nice to have the level of wealth they did, but I’m talking about their working for the purpose of their work itself.  And having a purpose that made them work harder than people half their age.

No doubt, it’s what made them great.

Then we had another client.  She had emerged as a buyer for another client’s property in Hermosa.

She made us work.

Among other things we had to do to close the deal, we had to chase down people to get them to sign estoppels.  The existing owner didn’t want to do it, because he preferred to be liked more than he preferred to sell the building.

This meant we had to camp out in front of all 12 units and try to get the tenants to sign a document verifying that they were paying, exactly what the rent rolls said they were paying.

Naturally, a lot of them were suspicious.  Was the new owner going to kick them out?  Was she going to convert the apartment into condos?  They were nervous.

No, no, I answered confidently.  I reassured them there was nothing to worry about, that the new owner had no intention of redeveloping.

But there was something else I had forgotten about.

After dragging the deal across the finish line, I felt a sense of relief as we pulled up to the new owner’s $10 million house in Palos Verdes, with a tennis court in the back.  In the living room, she proudly showed us a rent roll of the $80 million portfolio she managed, from her living room.

And later, she even more triumphantly emailed us to say that she had doubled rents, because the previous owner had been undercharging.

It left me with a bad taste for these kinds of deals and people in general.  All part of the industry, but I couldn’t help but think that while knocking on doors to get those estoppels, I had led some of those people astray.  Some of them, kids younger than I was.

It turned out to be my last deal there.  That, combined with the diminishing fortunes of the property tax appeal business, a countercyclical business if there ever was one, led me to other things.

One last reflection about wealth.  I spent half this time period in Hong Kong.

And in Hong Kong, a summer rite is the boat trip.  On the weekends the waters around Hong Kong and its myriad islands teem with junks and yachts that anchor off a secluded beach, then descend into drunken orgy-level partying.

One of our friends was dating a guy who was as close as you could get to Hong Kong royalty.  He was the scion of a billionaire tycoon, which made him one himself, but you wouldn’t know it to meet him.  Well-educated, low-key, soft-spoken, there is no way you could pick him out in a lineup, as is often the case with billionaires.

Anyway, this weekend we had use of his dad’s yacht.  For seven of us, a uniformed staff perhaps double that number helped us board, navigated, helpfully pointed out the amenities, cooked us a hot lunch, and generally gave us the kind of five-star service you would expect from what was basically a floating villa, way larger than my childhood homes, combined.

After anchoring, there are only a few things you can do.  We rode jet-skis.  We bounced off of inflatables.  Some of us read a book on the upper deck.  Some of us just floated in the water.

Which is what I did.  Bobbing, I could see all the other boats around us.  Some of them were like us.

Splendid, sleek yachts.  Barely any people on them, though.  There were kids on some of the nicer yachts, towards the front, and they looked bored out of their minds.

And, the people on the nice yachts were all looking in the same direction I was, which was towards the bacchanal boats, the ones thumping music that could be heard hundreds of feet away, with the people backflipping off the upper rails, doing keg stands, sliding headfirst and belly up down makeshift slides into the water, floating around the boat suspiciously in pairs.

Of course sometimes it’s nice to be alone.  But also sometimes I think that with great wealth comes great isolation.

I noticed this during my brokerage days in LA.  Sometimes it seemed like our richest clients called…just to talk.  Or when we went out in Hollywood – there is type of person, usually male, who buys drinks for everyone, is exceedingly generous, talks a lot, is best friends with everyone at the bar, is also exceedingly rich, and then at some point during the night…leaves alone in a nice car.

In the summers in LA, you can ride a bike from Venice Beach down to Redondo.  Over the course of 15 miles, the crowd changes.  Rowdy and larger up around Venice and El Segundo, Playa del Rey, huge barbeques with organized beach football games.  Then you reach the $10 million houses (at least) in the South Bay, along the Strand.  Nice organized picnics going on, some beach volleyball games, more individual, more rich, smaller.  Sometimes just a guy on the upper balcony of his home sipping coffee and looking out over the ocean.  Of course in some of the houses in between were always some frat antics going on, but still.  Richer, more individual.  In many ways, more alone, although there’s nothing wrong with alone.

But, now why is that?

True Hustlers

There’s no leisurely setting to the pace and speed of life in Hong Kong.  You can feel it the moment you land at the airport.  Suddenly, everything is fast and you are too slow.

From the subways and trains that arrive at sub-1 minute intervals, to the buses that will run you over, or at least off, the road – because they, and not pedestrians, have the right of way, or the taxis will take off before you shut the door, because they’re Japanese cars where the driver can close the door with a button, or even the people, who will not just graze elbows, which might be common in major cities, but actually smash their shoulders into you without apology.

Hong Kong is a city made for work, and by work.

It was literally created by a trade treaty in which one party got to sell drugs in exchange for gold, on a barren rock in the middle of the ocean with so little flat land that half the downtown area is built on artificially created land.

It was made so people could go there, trade freely, and then leave with the fruits of their labor.

While people settle in Hong Kong, many also have ancestral ties, homes, and families on the mainland, where they retreat during vacations or during retirement.  And for an entire class of expats employed in the financial services industry, well, Hong Kong allows you to make 1%-er money, pay some of the lowest taxes in the world, generate wealth, and move back home.

Everyone is a hustler in Hong Kong.

But the realest hustlers?  They’re not the investment bankers working all-nighters deep in the recesses of the IFC, Cheung Kong, or ICC.  They hustle too, but they party just as hard.

The real hustlers don’t get to party.  The real hustlers are almost invisible except on the weekends, when they come out on their one day off and congregate in Wan Chai and Causeway Bay.  And you could make the case that Hong Kong is run by them.  The city wouldn’t be as productive, as operationally leveraged, or as able to work, if they didn’t exist.

The maids.

In Hong Kong, the Indonesian and Filipina “domestic helpers” (maids) have standard working hours of between 12 to 15 hours a day, 6 days a week.  Often, their only space to themselves is a small closet that is as long as the length of a single bed, and just as wide – and sometimes if their households employ two maids, well, the bed is a bunk.

Working from 6am to 10pm is not uncommon, with household duties that include cleaning, cooking, taking care of the elderly and babies alike, and being the first point of call when the baby wakes up in the middle of the night.  Also, household shopping, miscellaneous chores.  Six days a week.  At least 10 hours a day.

Also, they do it without having basic rights or representation in the cities where they literally raise the next generation.  Sometimes they get kidnapped, their passports taken away, funds due to them not paid.

This is a note of gratitude to them.

Working and living in this part of the world, you come face to face with an entire class of manual laborers who are invisible.

Sometimes, working hard is no guarantee of success.  Sometimes it’s just a guarantee that you’ll survive.

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.

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.