Shawn Flynn  01:45

Now, George, I’m actually a really big fan of your YouTube channel and your podcast. I am very honored that you’re on this show today. And I’m actually very excited that you’ve been a fan of The Investor’s Podcast, which is the platform that this show has been on for years. So I gotta just start off by asking, could you give us a little bit of background of yourself up to this point?

George Gammon  02:04

Yeah, sure. I was an entrepreneur for many years. And I retired in 2012 at the ripe old age of 38. And my rationale for retiring was I had grown a previous business overseas. We’re doing business in Australia, in the UK, in South Africa, and the United States, Canada, and pretty much everywhere I could find that spoke English.

I was on a flight to Brisbane, if my memory serves me well, from LA, and it was just one of these horrific, like 14 hour flights. I was doing a lot of these, unfortunately. And it dawned on me that I had created this monster that I had become a slave to, that being the business. And although I was making all this money, and I can’t… Why, why is this money good? 

For me, it’s all about freedom. It’s all about having more freedom to do what you want when you want it. And when I was on this flight, I was just looking out the window and I realized that I had more freedom to do what I wanted when I was in college, when I didn’t have two nickels to rub together. So what’s the point of having all this money if it doesn’t buy you any freedom? In fact, that you have less freedom. 

That’s when I decided that I was going to take some time off and that just kind of led to my eventual retirement. I got into real estate investing because I had to do something with a little bit of money, you know, that I had saved. And then I think that’s when I started listening to Preston and Stig, so their podcast. I’m just trying to take it all in really, and I’d never taken an econ class or an investment class or a finance class in my life. I knew nothing about it. So when I got into real estate, that’s when I started to get into macro as well, and listening to all the podcasts like The Investor’s Podcast, like Macro Voices, Real Vision, all that.

Shawn Flynn  04:04

Now, can you talk a little bit more about that startup you had, kind of the growth behind it? And from start to end? I mean, it sounded pretty impressive what you’ve done in a short time.

George Gammon  04:14

Yeah, that particular business I started several. And to be clear, well, I did well enough to retire at 38. I was a self-made millionaire at 34. But that doesn’t mean that everything that I did just magically turned to gold. Quite the contrary, I had a lot of failures. It’s just that I happened to have a few more winners than losers. But that last business that I started, that was 2008 or so, is right about when the financial crisis hit, and it was actually pretty recession proof.

See, I had another business going that kind of dovetailed on that one. And I just saw this as a great opportunity. But we ended up growing that to over 100 employees part time and full time and went from zero revenue and 2009-ish to maybe what was it $24 million in annual revenue in 2010. Yeah, to be clear, that was gross revenue, our margins were maybe 10%-15%, something like that.

Shawn Flynn  05:15

Growing a company that quickly though, how did the corporate culture change over that time?

George Gammon  05:20

Yeah, that’s a really good question. And it’s something that most people don’t realize. The difference in running a company that has five employees compared to 15 employees, compared to 50 employees, compared to 100. They’re all night and day difference. And so as an entrepreneur, if you do this multiple times, you start to recognize your strengths and weaknesses from a standpoint of management. 

And for me personally, I found that when a business got up to about $10 million in annual revenues, it was time for me to check out because then you layer on like an HR department and that was always the catalyst for me. Whenever we got big enough to where we needed an HR department, that’s it. I’m done. I gotta pull the ripcord right there, because I cannot deal with bureaucracy with red tape, especially in California for heaven’s sakes. But any of that HR nonsense, and just what comes along with that, I just can’t handle it. And I know that, I know that well.

So now, if I get involved with something, although I’m “retired,” I always try to keep it small. You know, you try to make as much money as possible, but do that with the mindset and the understanding of the fewer the employees, the better. 

Shawn Flynn  06:40

In a situation like that, though, why not bring in an external CEO to run the company?

George Gammon  06:46

Now, let me be clear, that is absolutely the right thing to do. And that’s the smart thing to do. But that would imply that I’m smart, and that I do the right things, which you would be sadly mistaken right there. I’m assuming that. I can’t deal with it. Why can’t you deal with an HR department? What’s the big deal? I just don’t have the patience. And I’m one of those people that think that I am always right. That can be a good thing.

But it can also be a bad thing. And when you’re one of those people just willy nilly, let’s just bring in a CEO, and have him or her run the company, I know myself well enough to know that I’m going to butt heads with them. It’s my way or the highway. I always think I’m right. I always think that my way is the way that we should go. And I’m not saying that’s good. On the contrary, I’m saying that is bad, but it’s just the way it is. 

Shawn Flynn  07:39

Can you talk a little bit about kind of your growth plan in that, you know, year to year, how did you set quarterly milestones, yearly milestones, and actually leading up to kind of an exit? I’m guessing you didn’t just close the whole operation? Did you sell it? 

George Gammon  07:53

I basically sold it, add some partners. It gets a little murky there. But yeah, I walked away and initially the plan is kind of go back, but it just didn’t work out. And I ended up going in a different direction. And in a great direction. It was a win for I think everyone involved over the long term. But as far as the goals and the quarterly projections and whatnot, again, I’m just not that kind of guy. 

The way I operate is I just put the pedal to the metal. And every single week, every single day, I try to get better and I try to do more sales and make more money than we did the day prior, or the week prior, or whatever it is. And if we made $200,000 in profit one month, I’d say okay, what can I do to make $250,000 the next month? What can I do to make $300,000 the next month, what can I do to make $400,000 the next month? And I just push, push, push, push, push, and I would push everyone around me just as much as I would push myself, which is most likely why I didn’t jive with an HR department. You know, I grew up playing sports and I was extremely competitive, and I think that carried over into my entrepreneurial career or my entrepreneurial journey. 

Shawn Flynn  09:11

For your company, did you take outside funding to help it grow? Or was this all self-funded?

George Gammon  09:16

That company was all self-funded. I did take outside funding for another company that I set up, oh boy probably 2006 or so. And that was actually kind of an interesting story. And again, I don’t advise people following this path, because a lot of what I did is or still do really is quite crazy. But back then I needed about 500 grand to start this company. I had 100 saved up and this is the really the first company that I started that did well. I shouldn’t say that. It did really well financially. I had a lot of confidence that I knew how to make this work. 

So I went to a gentleman, the only guy that I could find that would you know, that believed in me and believed in the concept. He said, “Okay, I’ll give you $400,000, but I need you to pay me $20,000 a month for that $400,000.” And I said, “Cool. Let’s do it. Let’s rock and roll, buddy.” And I look back now on those terms then I’m like, what? That’s like a mob loan or something, like that you’re borrowing money from Al Capone.

But it goes back to just me having a lot of confidence in what I could do, and probably too much confidence, but I did it. I pulled the trigger. And it turned out to be a huge moneymaker. And it really launched me, not just the next level, but the next level after that, and the next level after that, because if I wouldn’t have done that, there’s no way I would have been able to retire at age 38.

Shawn Flynn  10:48

Before talking about your retirement, I also gotta ask, how did you build your team or recruit your team? That’s one of the problems that a lot of entrepreneurs have. They have an idea for a startup, and then they’re trying to convince people to quit Google to join their team and go from these huge salaries to nothing. And then they’re trying to recruit everything. What was your secret to getting everyone together?

George Gammon  11:07

Well, you touched on a very important point. And regardless of what your widget is, or what you’re doing in business, even when I retired, and I started doing real estate or now with YouTube… Your success will be predicated at the end of the day on two things. And that is your ability to manage people and your ability to solve problems, period.

I don’t care what the business is. I don’t care if you’re running Google, or you’re doing some sort of online blog that sells a digital product. That’s what your success or failure is going to boil down to. So I’m really glad that you pointed that out, that it’s all about team and it’s all about not only recruiting but then managing those people. 

So what was my secret? First and foremost, I think you have to be able to read people and if you don’t know how to read people, you need to be honest with yourself. Again, you know, what are my strengths and weaknesses and be okay with that. And if you can’t read people, find someone that can and team up with them or partner with them, or work on your own skill set. But assuming you do know how to read people, that’s where it starts.

If I want to hire, if I’ve got my eye on a specific person, let’s call them Mike Smith, I’m going to go meet Mike Smith. I’m going to do everything I can to try to understand who Mike Smith is and what motivates him. Then I’m going to come up with a game plan on how I can motivate Mike Smith to come work for me, but it’s got to be tailored to each individual. It’s not a one size fits all. 

As an example with the last business I started, I had a lot of women working for me, a lot of guys and a lot of people with very different interests. As an example, if I had like a young guy that I wanted to recruit that was maybe 25 years old, and no kids single, something like that. I’d have them fly in to where the headquarters was and this sounds bad to say, but it’s just the honest truth. And I’m sure we’ll get some hate mail for this, but I would make sure that if someone picked them up from the airport, I’d have like a limousine, pick them up from the airport, right? 

This isn’t like Silicon Valley that for that to happen, you’re like, wow, that would be a big deal for someone in this line of work. And then maybe they’d spend a weekend there. And I put them up at my place. I take them to dinner. We take, you know, a super fancy sports car. I’m a car guy.

So I’ve had the Lamborghinis and the Ferraris and stuff like this. So you take this 25 year old guy to a really fancy steak house, really expensive. You got the drinks come and you go there in the Lamborghini, you park the valet, you get picked up in a limo. I promise you that at the end of that weekend you say, “So what do you think, you want to come work for me?” “Yeah, Yeah, Yeah, I do. I do want to come work for you.” Because they want that life. So you’re painting a picture for them of what their life could be. 

Now that said, that does not work with everyone. If you’re trying to hire a 55 year old lady, you probably want to go a different direction, depending on what her interests are. So another example, I had a key employee who was this gal, just incredibly, incredibly sharp. She was married at the time. So she wanted a place that was right next to the office where her husband could work on what he was doing. 

So what we did that weekend, and knowing that in advance, you pick her up sure you pick her up in the limo, but you leave the Italian sports car at home, and you share all of the new up and coming things downtown that are around the office and how amazing their life would be as a young couple where they could raise a kid and do all these things within walking distance of the office. You see what I’m doing.

So you’re painting that picture of how they want their life to be, and that’s how you’re selling them on working for you. At the end of the day, it is all sales. It really is, whether you’re selling a product or you’re selling someone on leaving their company and coming to work for you.

Shawn Flynn  15:09

I can imagine an HR person having problems with you. I just can.

George Gammon  15:15

Exactly. So now you know my problem. Now, you know the core of it.

Shawn Flynn  15:21

This whole time, though. I mean, you’re young, you’re in your late 20s, early 30s. How did you portray confidence? How do you sell that to everyone?

George Gammon  15:30

Yeah, that was luck. I think, from the standpoint of I’ve never had an issue with that. In fact, I’ve had probably the opposite issue. But growing up, it’s just the way I was raised. I really need to thank my father and my mother for that. And also playing sports my entire life from the age of five. I mean, play ice hockey, football, basketball, baseball, anything that you can imagine. I played it. I actually went to college on a golf scholarship, but it was more so the way I was raised with my father. It was a very unique upbringing from the standpoint of when I was young. 

I remember vividly my father no matter what I did, it doesn’t matter whether I’d get an F on a test, or whether I was last place in a golf tournament or something. As soon as I got done, my father would come to me and say, “Yeah, that’s fine.” Even if I was down and out, I was eight years old, and you just didn’t make the hockey team or whatever, he always say, “You know what, Georgie boy? It doesn’t matter. You’re the best. You’re the best one out there.” I’d be like, “Well, yeah, not really, because I didn’t make the team or if I was the best, I probably would have made the team.” And he’s like, “Yeah, Yeah, I know. I was standing in the stands. And those coaches, they just don’t know what they’re talking about. You are the best one out there.” 

No matter what I did my entire life, for my father, I was always the best, always the best. And I think that’s pretty dramatically different from the way most people, especially those that were brought up in the 70s and 80s. So I think that played a big part of it.

The bottom line is, that’s just something that I’ve never really struggled with. So to portray that confidence to someone, even at a young age and even at with people who are much older than I was, and had made a lot of money in their lives, to convince them to still come work for this young guy that was in his late 20s or early 30s, I was still able to do that.

Shawn Flynn  17:20

And George with everything you’ve told me, I gotta ask, I mean, entrepreneurship is in your blood, how did you prepare mentally for transitioning from an 80-hour work week to being retired in your mid 30s?

George Gammon  17:33

Initially, the game plan was to go play golf because I didn’t play in so long. And also, I want to point out that it’s all about managing people and solving problems. It’s also all about working an 80-hour work week, and putting in the hustle and being just hyper focused on a specific goal. 

But I think that more people have the ability to work hard then to manage people and solve problems. That’s kind of why I started there, but so that was the way I had led my life up until that point. I mean, just pedal to the metal. So I didn’t have a lot of opportunity for family. That’s the bottom line. And my mom was living in Vegas at the time, she still lives there. So I’m like, I’m gonna take some time off, go hang out with my mom, take her to dinner every single night and just really enjoy some time with my family and I’ll move out to the golf course. Get a place, play golf every day, and just relax. 

That lasted about two weeks. And I was bored out of my mind, I couldn’t take it. I was like, “Ah, what am I going to do?” So that’s ironically, what really got me into macro, is prior to retiring I was in Singapore. I was at the Marina Bay Sands. I remember it well, I stumbled across some videos of Milton Friedman. And that just totally took me down the rabbit hole.

I went from Milton Friedman to Thomas Sewell to Jim Rogers to Jim Grant, to all these guys who are not only economists but investment legends really, that are more leaning toward the Austrian side of things, as far as the Austrian School of Economics, and I just absolutely loved it. So I dove right into that night pretty much went from me working 80-hours a week, to me studying economics and investing 80 hours a week. So to answer your question, that was kind of the transition.

Shawn Flynn  19:20

Okay, so there was no transition then?

George Gammon  19:23

Not really. Just a different title. 

Shawn Flynn  19:27

So you have invested then became a house flipper. Why? Why do that?

George Gammon  19:31

That story originated with me, looking at a chart of the Japanese housing market after its crash, low country crash basically in 1991. And this was 2012, if i remember. So this was right at the bottom of our housing crash. Of course, at the time, no one knew it was the bottom. People thought that it was still going to go down forever. No one wanted to touch real estate with a 10 foot pole. I mean, that was the last thing you ever wanted to invest in back in 2012. So I was looking at that chart and I saw that Japanese housing went down by about 60%.

 And I saw that in the United States, it had gone down by about 50%. So I said, “Okay, well, I like Jim Rogers’ theory of buying things when they’re cheap, and selling them when they’re expensive. It’s pretty much what you learn in first grade, you want to buy low, sell high.” So I thought why real estate in the United States is very cheap right now, especially if I’m just buying the income, meaning that you buy a rental property. So you’re just buying an income stream, you’re not really buying a house.

The income stream was also extraordinarily cheap on a relative basis. In fact, the income stream was a lot cheaper than the housing prices back then. And because everyone thinks that housing prices back in 2012 were incredibly cheap. They actually weren’t. 

They just went down to their historic trend line when you adjust for inflation, but they weren’t expensive either. But again, it was that cash flow. That’s the important part. So I was fortunate to have a bit of money saved up, but definitely not enough to where I could just live the rest of my life and still maintain my lifestyle. And so in order to do that, I needed to make a bit of a return on my money. 

So I thought real estate would be a good way to do this. I knew nothing about real estate, I’d never owned property in my life, I’d always just rented and at the time, I was dating a gal in Kansas City, and her whole family was in construction. And I was there one night I remember we were having some beers or doing whatever. Her family says, “Yeah, you know, you can go to these tax auctions where the county forecloses on the homeowner for not paying their property taxes, and you can get houses for like five grand.” 

And I said to myself, “Yeah, okay, what’s the catch here?” That doesn’t sound right, because I understand free market economics. If it’s five grand, there should be people flooding in there to drive up the price. So I did a lot of homework. Then I started to understand why because you couldn’t see the property.

a million things that could go wrong. But I thought this would be a good entry point into real estate. So I told the family, I said, “Listen, you guys remodel the house, I’ll put up all the money, and then we’ll just split the profits.” So they said, “Fantastic.” 

So we went there, the first day of the auction on the courthouse steps, and I bought six houses. Bam, first day, that was the start of it. They remodeled those and I kept a couple as rental properties. And once I saw that, number one, I really, really liked it. And it was about 1000 times easier than what I was doing before. And it was a neat way for me to make a return on my money in a way that was very relaxed.

I wasn’t building a monster that I would become a slave to because I’d always just sell the asset or I could just pawn it off on a property management company and then travel or do whatever I wanted to do, and I’d still have that income coming in. So that was really the start of it. 

You know, a funny story around that is the tax auction people, the county, they say you have to go and kind of go through this little bit of process of filling out paperwork, which I did. And in that process, they said, “Well, you got to pay cash for these properties.” And I said, “Okay, that sounds kind of weird. But all right, you know, I kind of get it, you guys don’t want a bounced check or something like that.”

So I was going to allocate like $150,000 to buying these houses, because I had to pay for all the rehab. But anyway, $150,000, so I put that in a backpack, cash. I just put it on my shoulder. I took it down to the tax auction, right. 

What happens is they sit there and you know, the highest bidder, it’s just like an auction that you see on TV very similar to that. And whoever the highest bidder is, you walk up to the little desk that they have set up and you give them your cash and they basically give you the title or little receipt for the title. And that’s it. If you don’t go pay right there, it goes to whomever the second place bidder was. 

Well, so the first guy gets up there buys the house, and I go there and see what he’s taken out of his bag. And sure enough, he’s taken cashier’s checks. And I’m like, “Oh, I get it. I was supposed to bring cashier’s checks.” So the first house I bought was like $30,000 or something like that. And I go to my backpack and I put it on the table, and I just whip out this wad of hundreds. I’m like, “Whoo, whoo, whoo.” I’m like, I flow right in like a strip club or something like that. 

Everyone’s looking at me like I’m completely insane, out of my mind. Fortunately, they had a security guard right there. But then I just put it back in and then sure enough, you know, I get the second house like a half hour later. Get up there. Boom. Break out the backpack. Flow right out of there. Bam, bam, bam, bam, bam, making it rain. And everyone just thought I was a complete idiot, but a lot of fun.

Shawn Flynn  24:47

I’m sure everyone remembered you after that event. 

George Gammon  24:50

Yeah, yeah, exactly. 

Shawn Flynn  24:53

With that, I mean, I’m just thinking with your history. How did you not go from residential to apartments, to these huge mega complexes with you once again working 80 hours a week? How did you create your boundaries?

George Gammon  25:08

Yeah, again, a great question. Back in 2012, when I did that, a month into it, I knew it’s something I wanted to do. So I was allocating more capital to it. I bought a commercial building. And it went well initially, but I found that I really didn’t like the commercial side of it. I liked residential much more. And it didn’t fit my objective for my portfolio, meaning more liquidity and there’s a lot more flexibility. So I stuck with that. 

Now, what I did do, which was more like what I did as an entrepreneur, is before I retired, I made a lot of money overseas. So I was very comfortable setting up businesses and doing business overseas. So once I kind of learned the real estate game in the United States, I thought, well, I like traveling. Let’s go overseas and see if I can get a higher margin doing this maybe in South America or in Europe or anywhere. So I kind of laid out the map. 

And that’s when I started investing in South America. From there, that was Ecuador, I met a husband and wife team. And this is on the coast of Ecuador, in this little fishing village of like, 700 people. It’s right next to this big surfing, a big surfing area. It’s only maybe 1000 people, but it’s a very, very popular surf place because of this beach and their waves. It’s called Montanita.

I just happened to meet them there. And they did a project for me. And they were fantastic. I mean, again, it goes back to reading people and I had a huge edge because of my years as an entrepreneur. Hiring and firing and working with literally thousands of employees, you hone those skills very quickly, which translated directly into real estate.

So when we are remodeling or whatever we were doing or even managing a property manager, that was a huge edge that I had, because I had all that people management skills for being an entrepreneur. But anyway, I met them and I could just tell instantly that they were just top shelf people. And these are two people that I need working for me forever, because I knew that I could make a ton of money, regardless of what I had them do, because I could trust them. They’re just those people that you tell within 30 seconds of meeting them. They’re just quality, quality people hard working, again, trustworthy. I mean, I could trust Angie with a million dollars in cash, no problem, no sweat.

It’s hard to find people like that. When you do find people like that you need to find a way to leverage their skill set to make you money. And so what I did is I then came up to Colombia because there wasn’t much opportunity in Ecuador. And I started investing here, but I brought them here with me in 2015. And I built an entire infrastructure and team around them.

We started flipping properties in Medellin. To answer your question more specifically, is because I found Angie and Joaquin, I knew I needed to build a business around them. And I knew that they were limited. They can’t come to the United States, they’d have to get a visa to do all these things. So I had to figure out what kind of business model that I can build to plug them in and leverage that skill set. 

So I brought them to Medellin and started doing flips here, and we’ve done them ever since. And now I’ve built them up. And I’ve trained them to a point where with that flipping business or real estate business, rental business, whatever you want to call it, it’s kind of all that combined into one, I don’t have to be here. I can be gone for 2, 3, 4 months and it doesn’t skip a beat, which is the opposite of how I used to set up businesses.

I used to set them up to where I was the key person and everything had to revolve around me. And if I wasn’t working 80 hours a week, we’re done. And I learned from that, thank goodness. So now I set it up with much more self sufficient so I can still maintain that freedom.

Shawn Flynn  28:56

A company like that in Silicon Valley, you’d have that founder given a ton of equity to other people to make sure they’re always involved. How did you kind of arrange an agreement to make sure that these two valuable people aren’t going to someday say, “Hey, we’re going to go back to Ecuador. Leave you behind. Bye, George”?

George Gammon  29:15

Now we’re at the point where I don’t worry about that at all, because we’re like family. And going back to how strong their character is, they are two people that have tremendous amounts of loyalty. And when I first brought them here, they had nothing here. I mean, Colombia. They were in their mid 20s, just didn’t have two nickels to rub together. 

Let me back up a little bit. When I started the real estate thing here in Colombia, I use them… She’s a designer, Joaquin is an architect or general contractor, and back then no one was doing that. Nobody. And since then, a lot of gringos have come down are people from all over and not necessarily do it as a business but they buy properties to rent. And innovate for themselves.

Well, since I was the only guy doing it back then, every single person that came in here, every foreigner would want to pick my brain and said, “George, let me take you to dinner because what should I look out for? What mistakes can I make?” 

Everyone’s worried about getting ripped off, but rightfully so. I go out with them. But obviously, I’d always refer them to Angie and Joaquin. So as a result, Angie and Joaquin’s business has just completely blown up. I mean, now they’ve got probably 10-15 employees of their own. They’ve got two kids they didn’t have before, and they’ve got a great life.

I don’t know, it’s not that I dwell on this. But the bottom line is, they would not have that business if it wasn’t bringing them here and helping them, helping them achieve 100% of their potential. 

I’m not going to take any of the credit other than just putting them in an environment that is conducive to them and fulfilling 100% of their potential. I think that’s the best way I can say it. And to that point, that’s why I don’t really want to worry too much about them leaving but that said, I make sure that I give them a steady flow of projects.

So they’re always working on my projects, they’re always making a lot of money from me, and they’re making a lot more money off of me, than they’re making off of any other of their clients. And so I know that as long as they’re making more money off me, than they make on anyone else, that we’re like family, and that they’re extremely loyal not just because of how good their character is, but also because of our history and the opportunity that they had. That’s why I don’t worry about it too much.

Shawn Flynn  31:41

Can you give some advice, some suggestions for people in the US or anywhere else in the world that want to set up operations in a new country?

George Gammon  31:50

First thing is get over your fear, because there’s nothing to worry about. Everything that you’re scared of whether it’s private property rights, personal safety, that’s… Listen, you’re far more in danger by going to Chicago, or Baltimore, or Washington, DC, or any of these places, than you are coming to Colombia. I can promise you that and don’t take my word on it. Look at the statistics. I mean, look at the stats on that. And you’ll see that as far as city to city comparison, you’re much safer here. So that would be my first piece of advice. 

Then I would just get out… So many, not only investors, but Americans are just very US centric. They think that the whole entire world revolves around the US. And there’s no other place for opportunity. I mean, just go down a list of things that just all your friends and family tell you. If you just get outside of the US and experience that, all of a sudden your eyes will open up and you’ll be like, wait a minute here. This place isn’t scary.

Technically it’s not scary, but I actually like it a lot better than I like Baltimore. And there are some amazing opportunities here, because the market is so untapped. It’s just looking at the glass half full, and seeing it as an opportunity and not something that’s scary, but going there first to experience it, and seeing if you like it. 

And that’s not to say that there aren’t places that are very dangerous in the world that you wouldn’t want to go. And there aren’t places in the world that don’t have any opportunity. And you definitely would not want to invest there. But my point is that there’s several places outside the United States where I think there’s an even greater opportunity, especially for young entrepreneurs. 

Now, because assuming that they’re doing stuff online, where they don’t have a brick and mortar location that ties them down, what better opportunity to make dollars, but have your expenses in pesos, right. So when you’re just bootstrapping it, you’ve got to take every single dime you have and reinvest it back into the business. Say you’re doing that in the United States and making 10 grand a month, and your expenses are nine grand a month. So that leaves you with 1000 to invest back in the business. 

If you had that same game plan in Colombia, let’s say your standard of living wouldn’t improve dramatically, but your cost of living, let’s say, on a monthly basis would drop to like $2,000. So now you’ve got $8,000 a month to invest back into that business and build as opposed to 1000. I mean, it’s a no brainer, total no brainer. So I can’t encourage young people and young entrepreneurs enough that are in that space that have that flexibility to consider working somewhere where your expenses are a lot lower so you can invest more of your monthly revenue into growing your business.

Shawn Flynn  34:50

And now you’re this rising social media star. You have your own TV show in Medellin, Columbia, your YouTube, everything’s blowing up. Why reach this area now, going from real estate to social media? And in this whole process, what kind of knowledge or discoveries did you uncover that were very fascinating to you?

George Gammon  35:10

Yeah. So it goes back to my experience and what I learned as an entrepreneur. So I think it’s applicable to the people listening to this podcast, hopefully. And that is we did the TV show at the beginning of the year. And all the entrepreneurs listening can totally relate to this. I’m sure that I had no experience in producing TV. I mean, zero. I didn’t know the first thing about it. But we were doing all these remodeling projects. And I thought to myself, man, we’re doing all these things. 

These shows are so popular back in the United States, why don’t I just do my own show? And like an idiot You have no idea how huge that undertaking is, but I pitched it to the local TV station, and they liked it. So they said, “Listen, if you produce it. We will put it on air. In order to produce it, you gotta hire the editors, the camera people. It takes a big team to produce a TV show. At the end of the first season, we had a great time, the show was hugely popular. Everyone loved it. 

But I didn’t really like working with the TV station. shocker, right? It goes back to you know, why don’t you hire a CEO, George? Same reason I did not like working with the TV station. So I thought, well, I don’t want to do that again. But I’ve got an awesome team. I’ve got some great people with amazing skill sets, just like I look at Angie and Joaquin back in 2014, and just like I used to look at potential employees. 

George Gammon  36:31

Going back to your first question in 2006, 2007, 2008, 2009. And so I said, Okay, so I’ve got these amazing people, how can I leverage them to do something amazing, because as an entrepreneur, or as a leader, that’s my job. That is my job. So I said, well, YouTube makes sense. When we first uploaded videos, I was just literally uploading them because I didn’t even know how to.. I didn’t even know what buttons to push. And I was completely clueless. 

So we just uploaded 10 or 15 while we were doing the TV show. When we got done with the show, I said, “Okay, let’s rotate our attention to YouTube because I have more control over that.” And I said, most people would probably like watching real estate videos, that makes sense kind of transitioning from the TV show. So we tried to do a bunch of like real estate investing videos, and we’re trying to edit it like the show and play around with it, and just throwing everything up against the wall just to try to see what sticks. 

I found that there were some things we did that people loved and some things we did that people hated. And you just try to do more of the things that people love. Ironically, I like talking about macro a lot more than I like talking about real estate investing. I like real estate investing, but I like talking about macro much, much more. So during one of the videos I’m like, boy, I really want to talk about this macro subject. I forgot what it was maybe the repo market or something like that. 

So we did a video on that and I just uploaded it just because I just wanted to. I just thought it would just be a complete flop. Sure enough, it just takes off. And every single macro video that I did, it did extremely well while the real estate videos just tanked. I said okay, well, this works well, it’s what I like. And it seems to be what everyone wants to see.

So that’s why I just kept doing the macro videos and also, I think, an important lesson not only just throwing everything up against a wall and seeing what sticks and then trying to leverage the skill set of the people that you have as long as they’re good people. That’s not to say that if you have someone that needs to be fired, you shouldn’t fire them immediately. It’s to say that if you’ve got someone good that you know you want to keep around for a long time, then it’s up to you to leverage that skill set. 

But another thing is it’s just necessity is the mother of all invention. And now people really like the whiteboard videos that I do, but the only reason I started doing those whiteboard videos is because I was horrible at trying to portray messages or try to talk into a camera without a crutch.

So I try to do a video as an example, unlike the housing bubble or something like that, or you know, the fed quantitative easing, and I try to do it just right into the camera, just like we’re talking right now to Skype. But we just try to mix it up with the surroundings to do some cuts to keep people engaged, and I just couldn’t do it. I was terrible. So I’m like, I gotta cheat. I’ve got to figure out a way to cheat. 

So I had my assistant, Sebastian, go down, get a whiteboard, and I’m like, “Okay, if I draw everything up on a whiteboard, then I can just explain what I’ve already drawn up on the whiteboard. And because I suck so bad at everything else, maybe this will make it so I’m just decent.” And sure enough, that’s what everyone likes.

Shawn Flynn  39:44

And just for all the listeners, macro or macro economics, when we say that term over and over again, and I gotta ask you, this is why the reasons I was really excited to get you on this show, is, in a lot of your videos, you talked about how the companies in Silicon Valley just don’t make sense.

George Gammon  39:59

So when I say they don’t make sense, most of the time, I’m talking about their share price. So it’s not that they don’t make sense. Like, let’s use Tesla as an example. That’s a lightning rod, of course. So I’m not going to say I love Tesla, but I’m just pretty much agnostic to it. I think they’re neat cars, I don’t really pay too much attention to Elon Musk. 

But if you look at the share price, it could be the most amazing company on earth, and you could love the cars. But that doesn’t mean the share price is cheap, or it’s fairly valued. The same goes with Uber. Uber lost $4.5 billion, I think in the second quarter of last year. I mean, come on, that’s not a good company. Now, that’s not to say that’s not to say that they won’t be wildly successful in the future. 

But from my standpoint, when I look at a stock or when I look at investing period, I first and foremost, look at well, I define an investment by something that’s going to pay me to own it, like a rental property that pays me to own it. So I consider that an investment. If I look at something strictly, because I think the price is going up, to me, that’s a total speculation. And so I would put Tesla and Uber into that speculative category.

But then you have to ask yourself, even if you’re betting on the share price going up, is it cheap right now? Or is it expensive? Because again, I want to buy low and sell high. I’m not interested in buying high and selling higher. And that’s not to say that that won’t work. But for me, that’s not the way that I invest because it always goes back to probabilities. 

One thing we didn’t touch on is before I even started as an entrepreneur, or at any success, I used to count cards and blackjack. So it really got my mind trained to look at the world around me from a standpoint of probabilities.

So I know that if I buy things cheap and sell them when they’re expensive, I’m not going to get it right all the time. I probably will barely get it right 50% of the time. But if I do that, and I manage my downside well, at the end of the day, I’m gonna have an edge, and I’m going to be just like the house, it’s just a numbers game, I’m going to win in the end. 

But if I keep trying to speculate with a large portion of my portfolio on what I think is going up or down, I’m not good enough to do that. And therefore the probabilities are against me. And I know that it’s just a numbers game before I go bust. So I think what I’m trying to say is, it’s not necessarily that I hate every Silicon Valley company. It’s just from my personal worldview, and the way I invest my own money, it’s not a good fit for me.

Shawn Flynn  42:39

And also, I’d like to ask right now investment funds, people keep raising bigger, bigger, bigger funds. I mean, we hear SoftBank, we hear all these groups, why do you think that they’re able to keep raising bigger and bigger funds?

George Gammon  42:51

Yeah, that’s easy, artificially low interest rates. So when you’ve got negative rates in Japan, you’ve got negative rates in Europe, you’ve got negative real rates in the United States. They see our tenure, let’s say 2%. And they’re like, “Oh my gosh, we’re so much better than Europe or Japan.” But you gotta look at it in relation to inflation. So my point, especially with money in the bank, right, that’s just a tenure. 

But if you’ve got money in a bank account right now, and you’re getting paid zero, and inflation is at 2%, you’re losing 2% of your purchasing power every single year, there might as well be negative interest rates for your bank account because you’re paying in the form of purchasing power to have your money in that account. So that’s your alternative.

What’s your alternative, to do that or put it into SoftBank? You might as well take a flier if interest rates were at 5%, where you could get five or 6% interest on let’s say, a two year note. Okay, that changes the dynamic completely. 

And going back to Tesla. Going back to Uber going back to all those companies. I would be shocked if they would be where they are today, or would have even been funded if the tenure never would have gotten below its historic norm at, let’s say 7%. Because and then it goes back to the pension funds as well, right, the pension funds have to have a 7% return in order to match up or to meet their liabilities. So if the Fed drops interest rates down to zero percent for 10 years, almost, if you’re a pension fund manager, how the hell are you going to get that 7% return? 

Keep in mind, they need to achieve that and that needs to compound. So if there is a year that you get zero or one, you are really, really behind the eight ball, let alone 10 years. So that makes, especially pension funds, which are huge, huge pools of money that makes them go further and further out the risk curve, and it makes them go so far out the risk curve, that pretty soon you get to Uber, or you get to SoftBank or you get to We Work, that’s the end game for artificially low interest rates.

Shawn Flynn  44:54

What about also in your videos you talk about the everything bubble? What do you mean by the everything bubble?

George Gammon  45:00

Every asset class is in a bubble. So where do you go? It makes investing so difficult. What we talked about earlier was if the interest rate on the 10 year as an example was at six or 7%, well, you’d have alternatives. Historically speaking, that would not be in a bubble. But if you have interest rates at, let’s just call them zero, you know, going back to 2008, or if you have them…

People have to understand that the price of a bond, there’s an inverse relationship between the price of a bond and the interest rate. So if interest rates are at zero, that means the price of the bond is almost infinite. What is the price of a bond? And also, there’s a lot of duration or I don’t want to talk about that. 

But the bottom line on the duration risk, as the interest rate on a bond gets lower, your risk increases exponentially as far as the price. So you’ve got all of these bonds that are yielding such a low rate of interest. That means that if the interest rates are at an all time low, which they are going back 5000 years. 5000 years interest rates are to historic lows, not necessarily just in the United States. But when you look at global debt, so that means that bond prices are at 5000 year highs. To me, that would be a bubble. 

So then what’s next? Okay, well, you got equities. Well, fantastic. That’s at all time highs. And mind you it’s not just at all time highs, the cape ratio, is at 30 points, which means that the next 10 years, if the cape ratio is at 30, that means your projected returns are not even 1%. And that’s not a tinfoil hat guy talking or an Austrian economist. That’s just mainstream knowledge. So you’ve got that going against you. Also with the stock market. 

I’d like to add and most people don’t understand this, that if you look at a chart of the net buyers in the stock market since 2010, almost 100% of the gains in the stock market since 2010 have been a result of corporate buybacks, which is a result of excess liquidity. In other words, the Fed printing money. So you’re at 30, as far as the cape ratio, and it has nothing whatsoever to do with the fundamentals of the company or earnings. 

So if 100% of the game from 2010 to now is based on funny money, and has nothing to do with fundamentals, to me, that’s a bubble. I want no part of it, right. So now stocks are out. Okay, you go to corporate debt, that’s in an all time high. That’s probably even in a bigger bubble. And then you say, “Okay, well, I can go into real estate,” that’s in a bubble. And so why do I say that because if you can agree that real estate in 2006 was a bubble, well, then we have to be in a bubble now because prices are even higher than they were in 2006. It’s not that they’ve recovered, it’s that they’ve gone back to being in a bubble. 

Now that said, I need to be very clear on this point, because I do suggest real estate, I still own quite a bit of real estate in the United States, but it’s in these very linear markets like Kansas City, like the South where the price income ratio is far more in line. So it is on a local basis.

But for a lot of these markets, especially on the coasts, well, you know that I mean, being in Palo Alto and Silicon Valley and San Francisco, my goodness. The prices are just as high so that to a certain degree is a bubble. So you say, “Okay, well, I’ll just go into cash.” Alright, well, do you really want to be in cash when you got negative real rates, meaning that you’re guaranteed to lose money if you keep your money in cash because the rate of inflation is higher than interest rate on that cash? And that’s where we are right now, as far as inflation. 

Keep in mind, the Fed is increasing their balance sheet right now to paper over the repo market by $100 billion a month. That was more than they expanded their balance sheet for QE three. So the Fed’s balance sheet, meaning how much money that they print, it was at 4.5. Who knows where that goes. So that goes to $5 million that goes to $10 million.

 I just had an interview with Luke Grommen the other day, where he saw the Fed’s balance sheet getting up to $10 trillion. And that’s base money. So and what I mean by that is there’s different ways to measure the money supply. And the base money is just what the Fed creates. And then there’s a multiplier effect from there.

Once the banking system takes those reserves, then they don’t lend out the reserves, but they loan money based on the amount of reserves that they have access to if there’s a reserve requirement of the banking system. So that means that if you’ve got a trillion dollars of base money at the Fed, that could turn into $10 trillion out in the real economy. 

So then how do you get inflation? Well, inflation is a combination of the money supply, combined with the velocity, that that money travels throughout the economy. So if we have the money supply, and let’s say M2, what they call it broad money. So that’s after it’s gone to the banking system and out in the real economy.

If that’s increasing by a trillion dollars a year, and we know that inflation is just more money chasing the same amount of goods and services, do you really want to hold cash? Sure, you’re losing 2% right now. But you could very easily that could bam, go to the 70s, where you’re losing 10-15% a year by holding cash and I could go on forever. But that’s basically the everything bubble. You can tell I get really, I get really fired up about it.

Shawn Flynn  50:35

I don’t think you took a breath that whole time. So with that, I’ve also noticed on your show, you’ll have people come on and talk about Bitcoin and digital currency. What’s your opinion of that, especially here in Silicon Valley? I mean, that’s a huge thing a couple years ago, the ICOs, the initial coin offerings, and then token offerings and it keeps popping up. What’s your opinion on digital currency, FinTech, and that anything that really interests you?

George Gammon  51:01

From a philosophical standpoint, I love it. I absolutely love it. Because I’m a really, I’m a libertarian type of guy where I’m all about personal freedom and decentralization and making decisions really from a bottoms up approach, instead of a top down. So any type of currency that is produced by the free market that competes with other currencies, I’m all about it. I think it’s fantastic.

As far as let’s start with Bitcoin, because that’s the one that I know most about. And I’m by no means a professional. I’ve just interviewed some guys that know a lot about it. I don’t see Bitcoin in its current iteration as being a replacement for the dollar, or for another fiat currency. 

And that’s just because from what I understand, it’s great to do one transaction per minute. And these aren’t exact numbers, but just to give you kind of the broad strokes, but it’s not real great to do a million transactions per second, and that’s when it becomes cumbersome. So that’s what you would need, currently. I’m not saying that in future iterations, they can’t solve that problem. I hope they do.

But just right now, so then the question becomes, okay, is it digital gold? So what do I mean by that? Is it a digital store of value? For me right now, it’s not because it’s so volatile. If I’m holding a store of value to me, that’s the portion of my portfolio that I allocate to insurance. I don’t care if it goes up, I just want it to maintain its purchasing power, because that’s how I define insurance and a store of value. 

To me, Bitcoin would not fit that category for the portion of my portfolio that I allocate to speculation, meaning I’m buying it just because I think the price is going up. I think Bitcoin is a very interesting opportunity. Because what’s your downside? Say it goes down to 500 bucks. Okay, well, that’s your downside. But what’s your upside on that? It goes to a million. 

I mean, there’s only 21 million other things in the whole entire world. So say in three or four years, someone does figure out a way to make it a currency. And let’s say that pans out, okay, well, what’s the price of a coin then? So then you’ve got to attach probabilities on it going down to 500, or up to a million. You calculate your downside, your upside. And then when you do that, to me, it becomes a very interesting type of speculative play. So that’s my, those are my thoughts on Bitcoin. 

Now, as far as digital currency, that’s a lot different than crypto. I’m sure a lot of the people, your audience in Silicon Valley, they really know the difference there. And I think that in the future, you will definitely see government backed digital currencies, which are the opposite of crypto. The crypto is decentralized, it’s anonymous, and the digital currency would be they would use that to, I think, control the supply side of money, but I unfortunately think they use it to control the demand side as well. 

My buddy Eric, I think probably has been on with Stig and Preston, he runs the Macro Voices Podcast. He refers to this new digital currency, as far as the US version of it, as the Orwell. And I think that’s a perfect name for it, because that’s the direction we’re going. And the reason I’m confident… I don’t like to make too many predictions, but that is one thing that I’m pretty darn confident on. 

The reason is because it gives the government so much control that I just don’t think they’re going to be able to resist it. And the only reason I think they haven’t gone that direction now, because politicians as a whole are so ignorant that they just don’t get it. But as soon as they start to get it, I think that they’re going to try to take control over it, and use it to further expand the power of the government and unfortunately do the opposite of what cryptocurrency was intended to do.

Shawn Flynn  54:53

Are there any opportunities or happy thoughts on the horizon that you can share with us?

George Gammon  54:58

First and foremost is the young people, or any people that are listening to this need to understand that there is more opportunity in the world for them to start a business and to make a lot of money right now in 2020, than there ever has been. And take that from an entrepreneur that has been doing this since the late 90s. I mean, let’s just go back to that story that I told you about. 

When I had to borrow $400,000 at $20,000 a month. I mean, no one in the right mind would do that. But I had to do that because although you could have done the internet business back then, it was more in its infancy. That wasn’t on the forefront of everyone’s mind. At least not mine. I was probably behind the curve. And then let’s think about that.

Okay, so I had to take on that immense amount of risk in order to build a business through having hundreds of employees and all this, our monthly nut was like a million bucks. I mean, that’s a tough nut to handle. Especially when I don’t have the SoftBank fund just raining money down on me like We Work. It’s all pretty much other than you know what I took up front coming out of the cash flow the business. 

So you’ve got all that against you and for what? What you’re making, let’s say you make $100,000 a month $200,000 a month in profit, but you had to take all that risk upfront where now you see a lot of these guys and girls that are doing like a travel vlog. They’ve got all these sponsors, and they’re pulling down to $100,000 a month, and how much capital did they have to put into the business to do that? 

Zero and they go to GoDaddy and secure a URL and build a WordPress site and buy a selfie stick? I’m not trying to downplay that. I understand how challenging it is, trust me, you know, with my YouTube channel, I get it.

But my point is that you’re taking on so little risk in order to do that and the barrier of entry is so low, yet upside is just unbelievable what you can make online. It’s just so exciting. It might be even more exciting for me, because I can compare and contrast the two where someone like Graham, Stephan. You know, a little kid that’s just crushing it on YouTube, but he’s 26 years old, I think, you know, something like that. 

He probably doesn’t remember the days when you had to have $500,000 just to set up a crappy business that’s going to completely control your life, where you’re gonna have to babysit hundreds of employees, just to make the exact same amount of money that that kid makes just from the YouTube ads, not even lifting a finger. So I think you get my point. There’s just an amazing amount of opportunity. 

And then also going back to what we said before with people not having to be in a specific location. Like that didn’t exist back in the day. It might have but not to the extent that it does now, when I was first an entrepreneur, you didn’t even think about that stuff. And now you can make 100 grand a month from Medellin, from Cape Town, South Africa from, you know, Singapore, Thailand, wherever. And it’s just so neat. It’s so incredible. And I think every single young person or not just young person, every single entrepreneur out there, especially if they’re in that space, should just be incredibly excited.

Shawn Flynn  58:17

And George, if anyone wants to find out more about yourself, what’s the best way to either contact you or to go about learning about everything you’re doing?

George Gammon  58:24

Sure you can look me up on Twitter is my name George, typical spelling. Last name is Gammon, GAMMON, or on YouTube. And the same thing, channel name is George, last name, Gammon.

Shawn Flynn  58:38

And for our listeners, George is offering an amazing gift. He doesn’t do consulting or he might do some in the future. We’re not really sure but for our listeners, if you write a review, iTunes, whatever podcast platform you are, your name will be put into a hat and we’re going to raffle off a half hour consultation with George which his knowledge as you could tell, it’s invaluable. So George, I want to thank you for your time today on Silicon Valley and all his contact information will be in our show notes at theinvestorspodcast.com.

George Gammon  59:08

Thank you for having me as a pleasure, I really look forward to doing it again.

Outro  59:12

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