TIP689: My journey into financial independence w/ Stig Brodersen
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You're listening to TIP. I've always been a daydreamer. And one thing I always dreamed of, no, one thing I was naively sure of was that I wanted to be financially independent, but I just wasn't sure how. And on my 29th birthday, I just started teaching at a local college and my wife was finishing up her PhD in economics at the time. So now seemed to be the time to make moves.

Or so I thought. So decision number one, we wanted to keep our expenses low. So I fired up Excel, created a budget for how much money we could save every month, made assumptions on investment returns, and figured out that on two salaries, we could likely be financially independent by the time we were 45. Today, we are 40. Everything has changed multiple times.

And I want to share my key takeaways in our journey to financial freedom. Now, this episode is far from a step-by-step guide. It's my naive journey into financial independence. It's about the successes and even more about the failures. It's a story about what I learned that perhaps some of it would be useful for you, and perhaps it won't. We all shape our experiences, upbringing, and environment. So here we go. This is my story. Nothing more and nothing less.

Since 2014 and through more than 180 million downloads, we've studied the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Stig Brodersen. Stig Brodersen

You're listening to The Ambassador's Podcast. I'm your host, Dick Brodersen, and I'm very excited about telling you about my journey into financial independence. And to give you structure in this episode, I divided it up into 13 sections. Now, these are not chronological, but they're aimed to be somewhat in that order to allow me to deviate into various stories. And it goes directly into the first point, which is about

how most people overestimate what they can do in a year and underestimate what they can do in a decade. Now, I started The Investor's Podcast Network, and I might be calling that just TIP the rest of the episode, so please bear with me. And I did that together with my co-founder, Preston Piss, back in 2014. At the time, we were very much influenced by online businesses. And what the main focus was to talk about Warren Buffett and his investment strategy.

The people who looked toward the industry were not stock investors, but those who set up online businesses. We even bought and still own the URL, createpassiveincome.com, and we never used it, but it says something about where our head was at at the time that we started the company. Now, we made the conscious decision that we didn't want to make any money in the first year and completely focus on growing our audience.

My wife and I had two full-time salaries, no kids, and we were both teaching. So the strategy made financial sense, or at least it did to us. So well, off we went. Stig Brodersen : Now, Preston and my podcast quickly changed his name from The Investor's Podcast to We Study Billionaires because we, after three episodes about Warren Buffett, thought we should talk about something new, preferably study the success of billionaires.

Our downloads were in the thousands per month after the first year, and we were very excited about starting monetization. Now, this might sound laughable, but I thought we could likely make $100,000 per month eventually, though I would be happy to start with a lot less. And I was dreaming of making, I don't know, 10,000-ish revenue per month. So you can probably imagine my excitement when we, after a year, quote unquote, turn monetization on. And the

Well, I'm going to say that we turned it on. We didn't turn anything on. And I honestly don't remember exactly how much money we made whenever we made a conscious decision to make money. But aside from minor book revenue we already had before we started TIP, I want to say it was something along the lines of $100 combined per month. And thinking more about it, I realized it could have been even less.

The second year with TIP was hard. And when we in the third year still made money in the range of, I want to say $0 and change, it certainly felt like we were not getting rewarded for the hard work. Now, my point of this is not saying that the rest is history. We're still very much in the middle of history. I think what I learned from the first few years of running TIP is that you have to love the journey.

all begins hard and you always have more costs than you expect, and you also have low revenue than what you expect. And what worked for us was that we wanted to make money, but we were perfectly fine working for a long time for no money because we love talking about investing, especially about Warren Buffett. But as I alluded to before, like so many entrepreneurs, we had to work a lot longer for no money than we thought. But such is the base rate of starting your own business. Stig Brodersen :

Now, the second thing I wanted to talk to you about here today is I really felt that we reached a tipping point in 2019. And I wish I could tell you a riveting story about how one big thing we did before the Investors Podcast Network took off. And if I had to point to a single event, it could have been whenever we hired Bianca Alessera, who's our first employee and now our COO. But for our business, I would say that success results for...

thousands of small things working in your favor. It doesn't just come from one big thing. And of course, I can only speak for myself. I'm talking about accumulating millions, perhaps tens of millions of dollars. I certainly don't have the muscle level type wealth, or nor do I expect to reach anything like that level. Maybe for some billionaires, the success can be attributed to big moves, but running a small private business

and investing the proceeds in public markets is very much about unglamorous hard work and being obsessed with all the small details. If there's one moment I reflect on, it's a conversation I had with a Canadian friend back in early 2019 when we were traveling around the beautiful and I should say challenging landscape of Morocco. It had been a trip like no other, and I have to say that not all experiences were good.

From plain weird experience like seeing goats in trees. Yes, there was literally an attraction where someone put living goats in trees and you could pay two euros for a photo. But also through a series of attempted money scam, we certainly needed a breather from the hustle and bustle from the dusty streets in Morocco. And my friend asked me about financial independence. By no means was it there, but I later realized that this was where the tipping point was for me.

At this point in time, I had quit my job teaching, so the company income was what I was living off. And for sure, no one would call me financially independent at the time, but that was the tipping point. I loved running TIP, and I wanted to spend as much time running the company as possible. But I also realized at the time that I wasn't much needed for much of the operations. I figured I could likely spend 10, 15 hours per week, making that $10,000 per month,

but any additional time could be spent on growing that engine. And of course, I could tell you the story of how thousands of dollars turned into tens of thousands of dollars that turned into a hundred thousand dollars, and then eventually into millions of dollars. I could tell you about the day we got a $30 million offer on our company, but the tipping point was not about reaching a certain number. The tipping point for me was that day in Morocco. I realized that we had set up a business.

Yes, at the moment, there was certainly a huge element of self-employment, but the blueprint was there to run it as a business. Now, whenever I refer to something as a business, it's something that can run well and perhaps even grow if you're not there. So it was about hitting your number in an indirect way where you learn to focus on cash flows rather than a big number where you felt you could put that into, say, low-yield bonds and gradually spend through retirement. Stig Brodersen :

That takes me to the third thing I learned about financial independence, and that is most people don't want to be financially independent. I am provoking a bit whenever I'm making that statement. I know how ridiculous it sounds, but please bear with me for a second. So let's take one step back. When we started TIP back in 2014, I read both about stock investing in online businesses. Over the course of a year, I would have gone through hundreds of interviews with successful people.

One that still stood out to me was an interview with Tim Ferriss. I likely don't do him justice, but the essence was something along the lines of, he outlined that he could teach anyone to be a New York Times bestselling author. And then he said, no one wanted to do that, even if he outlined step-by-step how to achieve it. And I remember almost being provoked by the interview.

If anyone would get the chance to be successful and rich and would even be told step by step how to do it.

Who wouldn't sign up for that? Now, ironically, today, I think he's right. And I've experienced it multiple times. With my passion for teaching, I have in the past offered to fly people in, and it should be noted, offered to pay for flights and hotels to get free counseling on how to be successful in podcasting and investing. But I've gotten very few takers.

And I've since stopped offering free counseling, free plane tickets, free hotel nights. I've learned that it's not the best way to help the world to achieve financial independence, nor does it bring you a good balance in life to set yourself up for that type of disappointment. But I think I learned that I was looking at financial freedom differently than most people. To me, and this is probably going to sound odd to you out there, but to me, financial freedom was as important as the air that I breathe.

I could not imagine a life without wanting to achieve feelings of freedom. And I gave myself no other choice than to get there.

When I cut back on my savings or read a 10K to find a potential investment, it wasn't and today is not a chore. It's life and it's fun. And to me, there was just no other way. And I realized for others to get a free ticket to Denmark, a free hotel, a free guidance, step-by-step guide to financial dependence, that's just a bit inconvenient. Financial freedom was great as a concept, but

The person would never get there because choosing financial freedom is a way of living your life and immersing yourself in that journey. And that's just not how the vast majority of people are wired. And I'm not talking about the listeners of this show. There's a clear selection bias to those who listen to a show and who are financially dependent or want to be financially dependent. They say that you can have anything, but not everything in life.

And when you observe what other people choose, not what they say, but what they do, they don't want financial independence. Okay, you can likely hear that I'm stepping into Tim Ferriss' shoes here. And yes, I am provoking a bit here on purpose. But I truly mean that if you ask people if they want financial freedom without making any sacrifice, everyone, including me, would of course say yes. But when you ask if they would be willing to step up to the plate and do it, they just don't want to do it.

Most people don't prioritize financial independence, and that is perfectly fine. Different strokes for different folks. There is no secret to getting rich fast. The not so well-kept secret is that no one wants to get rich slowly. And here's the interesting thing. Whenever you start talking to people about money, sometimes they would say, well, money can't buy you happiness. Or they would say, oh, if only I had more money, then I would be happy. So

That takes me to the fourth point I learned about financial freedom. Money can sort of buy you happiness.

And I should first note that it's not a popular statement to say that money can buy you happiness. After all, if you have money and others don't, and you say that it buys you happiness, you're just a bit of a jerk. And the media is very happy displaying billionaires and say, well, he might be a billionaire, but he does not have a happy family life. And that shows that money can't buy happiness. And there was just something about that that I don't like. Partly speaks to the idea that we

all have this sense of justice. And it can't be fair that billionaires have all of that money and are happier than the rest of us. We have to point to something hard to quantify, such as family relations, and then start judging the other people based on that to find that cosmic justice.

Now, I don't intimately know any billionaires. I can't tell you how happy they truly are. But when fingers are pointed at successful people in general, and it's mentioned that that billionaire XYZ got divorced, I feel that it's been hinted that the person must have been so obsessed with money that it cost him his marriage. And please forgive me, I could not help myself but revert the problem and instead looking at divorce rates for rich people. But before I do, I

I can just anecdotally say that I certainly know a lot of people who have gotten divorced, who have never been obsessed with money or careers. It's not a one-way street. Just like you can't say that a person with a lot of money must be unhappy if you got a divorce, you can't say that not having money automatically means that you will never get divorced. But I found this one statistic I wanted to share with you. This is not for billionaires per se, but this is the divorce rates for people with college degrees in the US.

That is 30% compared to 4% overall. And then, of course, I can't help myself but say, I don't buy into the notion of zero divorces. In many countries, divorce rates are much lower than in the States, but a lot of those places you probably don't want to live. Now, my point isn't to debate divorce rates, but rather to say that I don't find any data showing that rich people are unhappier or have worse family relationships.

Yes, that is what we see whenever we watch successions and billions and narrative that Hollywood presents. But think about it in this way. Would you watch the show if they were better looking, richer, and happier than you? We probably wouldn't. So what can we say about money and happiness? Personally, having had no money and now having a bit more and having relationships with people without money and some with more money than you can ever dream of, I've concluded that money

sort of can buy you happiness. And yes, this is a good reason why you likely want to be financially free if you're not already. But there is a saying that a healthy man has a hundred problems and a sick man only has one. It's not entirely how I see money, but I would rather look at it like this. You might have 10 problems if you have no money. And if you do have money, you might have nine problems. And some of those nine problems might be smaller than they otherwise would if you didn't have money. And

And no, money can't buy you good health, but it can buy better treatment and increase your odds of getting healthy. And money cannot buy good family relationships, but money can allow you to see your family more often. And no, money can buy you true friends, but it can give you experiences together with your friends and buy you time to listen to each other's problems and feel heard, feel understood. Money can't ensure that you're happy all the time and that you're never unhappy.

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All right, back to the show. But then you might ask, how much is enough? And I wanted to ponder that question as the fifth section here for this episode. We live in a world of inequality. And if you put me on the spot, I would argue that we always have and always will. It's inherent in who we are as people. Now, the French economist Thomas Piquet found that throughout recorded history, the richest 10% always had

between 60% and 90% of all wealth. When it neared the 90%, there would be revolts, and it would go down towards 60% again, but never towards full equality. I often speak with people who say, "It's crazy to have money and not spend it." And so I think to myself, "It's crazy to spend your money so you have to work for it afterwards." There is nonetheless a selection bias. Self-made rich people spend less than they make and invest the difference. It's that simple. And

and it's that hard. Spending less money than what you make is half the battle, but it's a battle that most people never survive. But if you manage to spend less than what you make and invest the difference, how much is enough? Financial literature will give you different formulas for best estimating that based on historical data. They would typically factor in things like your age, income, but one of the simplest and still very useful formulas I've seen is the 4% rule. Now,

Now, it's far from perfect, but it goes like this. Based on historical data, you would be able to take out 4% of your principal every year and live off that, assuming that you invested in a passive-balanced index such as the global stock market. So let's say that you need $100,000 to live on. You need 2.5 million as your principal, as 4% of 2.5 million is $100,000.

This implies that the 4% number should be enough to withstand inflation and short-term volatility. And you can, of course, fill in the numbers that work for you. If you need $200,000, you would have to make it to 5 million in investable assets. As mentioned, this is far from a perfect system. And I have previously mentioned in other episodes that I will link to in the show notes that I have some concerns about having a portfolio that's invested only in stocks. I do

I do, however, think that the 4% rule is good to give you a ballpark number of how much money you need to achieve financial freedom. Also highlights that inflation is a real tax and what it can do for your odds of achieving financial freedom if you learn how to invest and do it better than the market. Now, at this point in time, I can already hear your head spinning. And you're probably thinking, well, Stig, that 4% rule is all good and well, but

Are you saying that we need to get to 2.5 million or 5 million? And how do we get there in the first place? And that sort of takes me to point six here in this episode. How do we get there? If you want to hit your financial independence number in your 30s, it's very hard to do if you don't have equity and can only rely on a salary. And it's a bit counterintuitive.

Growing up, I always thought that you would make the big bucks. You would have to get a corporate job, but then get promoted a ton of times. And then you would sit in that fancy office that I saw in the movies.

And sure, you can still do that, but it's not a very efficient way of getting to financial independence. Now, it is possible to retire based on salary, but you typically need to climb the corporate ladder for a long time before doing so. But while you do that, it's very hard not to be susceptible to lifestyle creeps that won't allow you to set money aside and invest wisely. Stig Brodersen : One of the things that I was surprised to learn as I was on this journey to financial independence was that

You can make considerably more as a small business owner in an industrial company with 100% equity than you would if you climbed the corporate ladder for two decades in a prestigious law firm. Even so, running your own company comes with its own challenges. One of them is that you typically also have most of your wealth tied into an liquid asset. So please allow me to speak for myself first and then speak more generally about it. I have looked at my number very conservatively, put the number of TIP to be 6%.

zero dollars, whenever I estimated, whenever I could in theory retire. And I'm likely way too conservative. You can perhaps set it at 25% or 50%. The point I want to make is that the way you have to think about financial independence is through cash flows. And if you don't have any, or your net worth is very liquid, the lack of cash flows can still wipe you out.

I also firmly believe that running your own business isn't more risky than having a job. Yes, your company will also become your cash engine and things can go wrong, but you can also get laid off in any job. In any case, it speaks even more to the point about having investable assets that generate cash flows, and then putting a conservative number of your human capital and the business that you might be running. But what about the return on your investable assets? And how does that relate to the 4% rule I spoke about just before?

I started my track record back in 2014, and since then, it's been a bull market. I've managed slightly above 20% CAGR, but I don't think I can sustain that. Partly, I'm quite sure that I've been quite lucky in outperforming the market, but even if it's not, it is much easier to generate a 20% return when the S&P 500 is up 13% over the same time than if the market went sideways for years. So to be conservative, I use 5%.

5%, which is something I feel comfortable about generating in perpetuity. And please remember that whenever I refer to 5%, it's after inflation. So I would need to do better than 5% on nominal numbers. And also remember that a rising tide lifts all boats. So the other side of the equation is that my investment would likely rise with inflation. And so in any case, identifying financial independence is whether my family can live off 5% adjusted for inflation on my investable portfolio.

So if you're with me on this premise here that you would need to have unlisted assets as a way to generate wealth to achieve financial independence, it also raises the question about how do you adjust for the value of your illiquid equity? And I'm going a bit out on a tangent here because this is a segment that would not resonate with every listener, but it's something I still want to discuss.

We know that we have many business owners and self-employed listeners, and it might be interesting to hear the process of valuing illiquid assets. I've certainly been surprised both on the positive and negative sides in the process, and I would like to elaborate more using DMS's podcast network as an example. So in 2024, TAP roughly made 1.5 million profit before tax, and you can apply any multiple you want to this number. So typically for smaller businesses, unless they're

have a solid growth rate, or they have something with a motor around them, or perhaps there's something new and exciting in the tech world, you would typically get a single digit multiple, perhaps five to eight times, sometimes a little less, sometimes a little more. But it depends on a lot of different factors. For example, if you look at a company like the Investors Podcast Network, you can argue that it relies on cyclical advertising

which typically implies a lower multiple. The key man risk is certainly also there because it's very host-driven, that also speaks to a lower multiple. However, we also own multiple communities with our recurring revenue, which typically command a much higher multiple. Stig Brodersen :

If you look at the public markets at the moment, it's not uncommon for recurring revenue businesses with margins like TIP that are in excess of 50% to be, let's say, 25 times earnings, sometimes even higher than that. So you might wonder why the multiples are so different in private and public markets. And one thing is that public markets really like recurring revenue and stability because the opportunity cost are very often treasuries.

that are similar, but typically have a lower coupon. So public equity is just perceived in another way than private equity is because you come with different opportunity costs. Private businesses typically also sell for lower multiples because the risk profile is different and it's so illiquid. Of course, the situation can be different if a buyer comes to you. We regularly get asked by various companies if we're interested in being acquired. We're not, but it's also a fun conversation to have.

What you experience as a small business owner, especially if interest rate is low, is that you get approached by private equity funds. And they're not so interested in your business. And to be frank, they are more curating different target lists and exploring whether or not you are a motivated seller. And they do that because it gives them a chance to potentially acquire you at a good multiple or to pass you on to another buyer. These are typically not the leads you want to pursue, at least not if you want to get the best valuation.

You want to speak with buyers who specifically want your company because it's your company and not because it's on some random list. We recently got approached by a potential buyer who was promising in many ways. It was a multi-billion dollar company with a highly respected brand and products, and they were quite informed about us and competitors in our space. As they approached us, the conversation is a little bit different. So for example, I emphasized that I wasn't interested in the multiple on the free cash flow.

So let's say that I've used a multiple of 10 for a pre-tax profit, 1.5, that would give you a $15 million valuation. Now, I am well aware that we are under-earning, which is something whenever you're the seller, you're supposed to say, so please take it with a grain of salt. But we know that many of our competitors raise money through the podcast show and typically make significant more money from that part of the business than from advertising and memberships. And so I came from a place that would consider the 1.5 million pre-tax profits, and then I

I also wanted to take into account the management performance fees of raising, say, $100 million fund where some of that would drop to the bottom line. And I don't know where you would land on that valuation, let's say anywhere from 15 to $40 million. So I told you that story partly because it's a fun experience I wanted to share with you, partly because I've learned so much about valuations that I really wish I knew whenever I started on this journey towards financial independence. But

It's also because it illustrates how arbitrary a discussion about financial independence can be whenever it's tied to owning equity in a small private business, which is how most people achieve that. And luck plays a big role when you're exiting your business. The stars align and the right buyer comes to you. It's a completely different story than you being a motivated seller due to life circumstances. Even more so, you can't control the interest rate and whether it quickly goes up

You get widely different valuations for a business that is fundamentally the same. In any case, as arbitrary as valuation can be a private equity, once you hit your number or once you hit that target cash flows, it ironically matters. And in a way, it doesn't. And that takes me to the eighth thing I learned about financial independence. It's really about the why once you reach a number.

So what do you do whenever you reach your number? I was conversing with the members of our mastermind community about it. And one member said it so well. He reached his number and said, now it's about the why.

Now that you can do whatever you want to do, what do you do next? It likely doesn't surprise anyone that Buffett has profoundly impacted my life. When I started my journey into financial independence, I remember that he said that his life wasn't too different from the rest of us. And I remember thinking, that cannot be true. It must be very different to be in his shoes than in mine. What he highlighted was different than what I would have expected. So he said,

His wealth allowed him to speak with more interesting people. That was the real difference. And that is something that always stuck with me. Today, that's a big part of my why. BMS's podcast network is the perfect vehicle to connect with interesting people I otherwise wouldn't have access to. And I should say for the record, I don't necessarily talk about our guests on the show. That is one component, but that is not what I mean refer to.

The company is a business card to meet interesting people with interesting stories from all walks of life, whether they're billionaires, college students who listen to our show. And that is why I conservatively have set the value of TAP as zero in my portfolio. I can't imagine a life where it wouldn't be interesting to speak with interesting people. Another why for me is empowering the team. I'm a bit ashamed that helping and being kind to others

didn't sink in until I realized that I could seriously gain a lot from empowering the team. TIP is so much my life, and my life is TIP, and I seriously wanted to be as happy as possible. And I get happy when people around me are happy. So I realized that if I focused most on empowering the TIP team, I didn't have to look out for myself. The team did that for me. And guess what? Life is just more fun that way.

It's not too different from when I met my wife and I realized that instead of always thinking about myself,

I focused on getting her the best possible life and being the best version of herself. And guess what? She would do the same for me. And I guess in short, what you give is what you get. And if you don't, it's probably not a relationship you want to continue to build on, whether it's professionally or romantically. I learned that everything good in life comes from compounding, whether it's capital or relationships with wonderful people.

As some of you know, I'm currently looking into buying multiple private businesses. I do it because I think I can get a better return than in the public markets, but I also do it because it allows me to put the best people in the best position in those companies. When you only have one company, especially if it's a small company like TAP with only 20 team members, it can be hard to find the perfect role for everyone. I'm one of the ones being worked with amazing talent that just couldn't flourish in our setup.

And having a portfolio of companies can get the best of both worlds when you empower the people around you, who in turn will empower you. And empowering wonderful people today is a big part of my why. And I'd like to think that it makes me a good person saying so, but that would certainly be too generous towards myself. I sometimes hear how people start a business or take a job to help others. That was unfortunately not the case for me.

I started the Investors Podcast Network because I love talking about investing. And when I realized that I couldn't make money from doing so, my mind wasn't providing for my family more than making the world a better place. And today, whenever I think about my why, yes, it's about empowering good people, but it didn't happen in that order. I selflessly wanted to take care of my family first before anything else. The ninth thing I learned about financial independence is that

Whenever you reach a number, it's about finding your negotiables and your non-negotiables. I used to have a job trading in the energy markets from 11 p.m. to 7 a.m. in the morning. It was a time right out of college when I had very little morning, but I had time and I had energy. Also, believe it or not, it was a job I volunteered to do. Not so much because it paid more, although it most certainly did.

But I could not be a good version of myself if I worked in an open office environment during the day. In other words, working nights were certainly negotiable for me because of the opportunity cost I had back then. And I would not have chosen differently with what I know today. I learned so much from that time that benefited me today. I'm a slow learner and I sometimes need to experience things for myself for them to really sink in. And having had no money and today having a bit more,

has made me reflect on what is negotiable for me and what is not. So today, my opportunity costs have changed. I won't work from 11:00 PM to 7:00 AM five days a week like I used to, regardless of how much you paid me. On the contrary, I run a business where many things are negotiable, which is perfectly fine. I like to stop having calls after 5:00 PM

Still, sometimes when family life permits or an outstanding opportunity could significantly impact your earnings power, I would take a later call. And money does that to you. It allows you to decide that you have some things in your life that are just non-negotiable and some that you are willing to compromise on at the right price. And you don't want to have non-negotiables because you want to be difficult, but simply because there are some things in life that you no longer feel you need to compromise on and you can afford not to.

but it can also be too much of a good thing. I've also seen very wealthy people who have too many of those, and it can have a limited effect on their lives. And it might sound ironic, but I think you can lose your resilience and you can damage your character if you have too many things you do not want to compromise on in life. And it's certainly more art and science to strike that balance because you want to reward yourself for having done good, but it has to be done correctly. Let's take a quick break and hear from today's sponsors.

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All right, back to the show. And that takes me to the next point, and that is point 10. And this is a big one, lifestyle creeps. Because perhaps the most challenging aspect of having financial independence is the lifestyle creeps. When I started on my journey and first learned about financial freedom, it was from a friend of mine who told me about a book he read about creating passive income and how that could lead to a life of abundance. And

I should say that the idea of passive income certainly appealed to me. And I started reading everything I could to find how to achieve that. And I'm not going to say anything new here when I say that keeping your expenses low is at the very core of financial independence. And even if you do manage to create passive income, that money can quickly be spent on your new lifestyle. And at the time, I just started in my first job.

And in the household, we were spending just in excess of $4,000 net of taxes every month. And so my wife and I went through every expense every month in Excel spreadsheet to discuss our spending. It was a great exercise, but as you can imagine, it wasn't too much fun. And whenever you come home after a long workday, especially if that workday ends at 7 a.m. in the morning, this is not what you want to do. It's a bit like eating veggies. You know you're supposed to do it.

but it's not what you want to do. And you think, can I just skip it this one time? But whether it's your diet or your budget, when you have skipped that, or you're supposed to do enough times, you realize then whenever you're easy on your habits, life will be hard on you. And when you're hard on your habits, life will be easy on you. And one thing I noticed from traveling around third world countries, and also what I learned from speaking with the wealthiest people on the planet,

is that no one really feels they're big spenders. If you spend $1 million or $500 a month, you compare yourself to someone who spends more than you. Even if you spend less money than your peers, because you have different values and goals, other people's consumption habits still look silly to you. Some people would fly business class and happily pay $3,000 for a six-hour flight, which

which looks silly to some, after all, it's only six hours of your life. However, the same people who would never buy a business class ticket might be paying $3,000 for a watch, whereas the business traveler might argue that a watch is just a silly death thing. Now, spending is a game of relativity and not absolutes. You can think about it like this. When you are on the seventh floor and look outside the window, the 11th floor looks tall to you, and the 40th floor is just another world.

But similarly, whenever you're on the 14th floor of a building and then you look down, there seems to be no difference between the seventh and 11th floor. It is certainly not easy to avoid increasing your expenses as you accumulate wealth. And I can't say that I've succeeded. Quite the contrary, perhaps. Like everyone else, I want to spend away, but I'm very cautious about doing things in the right order. Now, so what do I mean about the right order? Well,

You want to build an engine generating cash first, and then you want to pay yourself first. And I set my limit to 50%, which should go towards my investments. As your engine grows, whether it's your job or your business, you increase your earnings power and you generate more investment income. So you can keep it at 50%. And as time passes, thereby also increasing your spending and the amount you set aside for further investments. Stig Brodersen

So some of you might rightfully say that you can't save 50% of your income now. And I can completely understand where you're coming from when you say that. This is another angle I refer to whenever I say that things have to be done in the right order. I just started my first job when I systematized my approach to financial independence. And my wife and I married while we were still students. So we had real salaries, but spent like students. And that, of course, made the transition a bit easier. And I should also say that all of this

is much easier said than done. We've certainly had years where we spent more than 50% of our income, and we failed time and time again to be patient with our lifestyle creeps. Like everyone else in life, we are flawed. No, I should say my wife is not flawed, but I certainly am. And I sometimes feel that life and personal finances have knocked you down. And when that happens, and it will happen to all of us, all we can do is to keep fighting the good fight, all the bruises you've gotten,

and we are definitely no different in our household. And I think what I've learned is that a journey towards financial independence can be surprisingly lonely. And that takes me to the next point. Point number 11 is that it's hard to find people you can speak to about your journey into financial independence. I know zero people outside of the universe of The Investor's Podcast Network that I could go on this journey with.

Now, please don't get me wrong. I've certainly tried. I have friends I've talked to multiple times, but most people just want to talk about financial independence. They don't really want to do anything about it. Like I alluded to previously in this episode, most people come from a place where they would like to become multimillionaires if they can do it relatively quickly and without too much inconvenience. But I met no one outside of the

TIP universe and the value investing community that have taken their journey seriously. And why should they?

So this is what happened to me. And perhaps some of the listeners can resonate with what I'm saying here, because my friends, they bought a house in the suburbs, they got a mortgage, bought two cars, had kids, had lifestyle creeps, and the paychecks we just spent. And I should stress, there's nothing wrong with any of this. Life just happens. And I'm well aware that I'm an outlier. And I thought about financial independence since I was a child. I know that's not how the rest of the world is.

Just like most people can't seriously imagine a world of financial independence, I've never been able to imagine a life without it. It might sound odd, but I don't think financial independence is for everyone. I compare the pursuit of financial independence to the pursuit of being a professional footballer. Everyone likes the good things about it. If you're a footballer, it sounds fantastic. You get a lot of attention, money, there's lifestyle. But few people are willing to make the sacrifice to become a professional footballer.

When you truly live that life with the attention, the downside of the money, and whenever you get used to that lifestyle, well, then life as a professional footballer is likely not as appealing as it looks at first glance. And that really takes me to the next point I want to talk about here, what I learned about financial independence. It's about sacrifice. I wish I could give you a song and a dance about how much sacrifice I've made to become financially independent over the years.

But I honestly don't think I made any meaningful sacrifice. I don't have an emotional story about how financial success cost me health and marriage and how I had to sell my soul to capitalism to succeed. And so I can't give you a wonderful story from rags to riches and tell you about all the hardship that I experienced. It's a very boring story like so many others about

a lot of hard work and then keeping my spending in check to get wealthy very slowly. And yes, it doesn't make a good Hollywood movie. But knowing many financially independent people today, I realized the recipe is more or less the same. They found something they were passionate about and perhaps just good at, and they were lucky that they were passionate about what was rewarded in a capitalistic world. A financially successful friend told me the other day that he made so and so much money.

And his brother, who was a doctor, made significantly less. And then we mused about why allocating capital should pay more than saving lives. But that's just the world that we live in. And I'm certainly not saying it's fair. But it is what it is. And you must make the best of it.

Many who listen to this podcast have been immensely lucky. They were likely born in the country where they had access to capital markets and social mobility. Like everyone else, they needed luck to get ahead. But some people's circumstances just make luck easier to attract. Working 12 hours a day, seven days a week is a sacrifice to some. For others, it's what they need to do to barely survive. And for others, again, it's their passion. And to others, again, it's just the way that they're wired.

Luck is sometimes a chicken and egg thing. But if there's something I would like to pass on, I would like for you to think about it like this. Only way to surely become wealthy is to do it slowly. Time passes by anyway. And if you think about it like that, you would likely do some things differently. It takes me to the 13th and last part. And I title it, The Journey is the Best Part. I said to my wife the other day that I felt that I was

always and never working. And she turned her head and said, it feels like you always work. And this is going to sound like a cliche, but I feel that I don't work. And please don't get me wrong. This is not a story of rainbows and unicorns and everything being perfect. If you tell me that that is your job, I would not believe you. But it's about seeing your journey to financial independence as that. A journey where you can be the best version of yourself despite the bruises, the

that life and business will eventually bring. I stopped working at 8 o'clock in the morning and I stopped reading at 11 or 11.30 p.m.

I do that for seven days a week. And I want to clarify that this is not 15, 16 hours a day for seven days a week. I used to work at a dairy farm whenever I was a teenager. It was one of the best jobs a kid from the countryside could dream of. And I worked there for years until I unfortunately discovered you can make more money playing online poker than working with dairy. But

I could not work at a dairy farm for, say, seven times 15 hours. I would die of exhaustion. But my point is that I've changed my mindset about work. First, work is not a negative word for me. And it's also not binary. So let me explain. My steady state is what many would refer to as working. It's what I do whenever I don't do other things. So if I watch a football match or go for a run,

It's not what I'm doing whenever I'm done working. It's what I do in between work. And taking time off is not something I do when I'm done working. It's the first thing I think about when I wake up and the last thing I think about when I go to bed. When I say that work is not binary, it's because I do many things that, well, it's not work. I would read a 10K about a company.

I would never invest in, and certainly never talk about here on the show, but reading a 10K is like reading a good book that may or may not be about investing or watching a show about nothing on Netflix. However, whereas most people would say that Netflix show doesn't seem like work, reading a 10K is the same for me. It's just, well, fun and interesting. I read because I love learning. And whether it's an investment book or a book about salt and sand, yes, at the time of writing, I'm reading a book about sand and salt.

My point is, it's more about the process. I was recently on a call with members of a mastermind community. One member said he didn't believe in retirement, and I completely agree. I don't ever want to retire. And the funny thing is that the people who never want to retire becomes financially independent in their 30s, 40s, perhaps their 50s, whereas those who work so they can retire typically have to wait a lot longer.

Now, I can't tell you what the right path is for you. It most certainly is not my path. If I can give you a piece of advice, it's to design a system where you can be the best version of yourself and where becoming financially independent is not the goal, but the simple proceed of your process. At the end of the day, the journey is the best part.

I want to conclude this episode with a reflection about risk. You have now heard my story and heard how naive and ignorant I've been, and I probably still am both of those things. We all have our strengths and weaknesses. If I had done exactly the same as Michael Jordan, I would never have achieved the same as him. I said at the top of the episode that it wasn't a step-by-step guide to financial independence, and I'm sure you agree after listening to the episode.

Perhaps my story is the product of survivorship bias. And perhaps if you'd done the same thing as me, you'd have made 10x the money and had better relationships than I have today. And I should say, I sincerely hope that that would be the case. But I want to address one thing before I let you go, because I'm sure some of you would say that I took a lot of risk in my journey, but it never felt risky to me. Perhaps that speaks to my ignorance more than the reality. Perhaps it just speaks to how we're different.

So what is risk? Well, whenever you address such a question, quoting some of the greats is tempting. So for example, Buffett would say that risk is the probability of permanent loss of capital. He would also talk about opportunity costs. And then others would say that risk is what's left whenever you consider all variables. Others, again, would use all kinds of Greek letters to give you a mathematical explanation of what it is and what it is not. I think I want to go into the discussion of risk from a different angle.

There are some objective risk factors like permanent loss of capital, but I want to discuss some subjective risk factors. For example, I put myself through school playing poker, and I think many would say that it's risky. I certainly remember my parents being very uncomfortable with that. I'm pretty sure that for good reason, many who listen to this wouldn't like to learn their kids are playing semi-professional poker.

To me, poker just never felt risky. Poker is like stock investing. It's about understanding math and psychology. And if you do that right, over time, you can't avoid but make money. Now, the stock market has, of course, a leg up on poker because it's not a zero-sum game. And if you want to achieve financial independence, it's likely much better to learn how to invest in stocks than playing poker. So I hope it doesn't come across the wrong way whenever I'm saying this.

But the point is this, to some people, and I would imagine for many listening to this, poker sounds risky, whereas stock investing does not.

And I would ironically also imagine that many of your friends thinks that you're a risk taker because you invest in the stock market and they have their savings in a safe money market fund. And that is not the risky part. But a money market fund probably to you sounds risky because you know stocks and you know that over the long run, they perform better and they won't be diluted by inflation and taxes the same way as a money market fund.

So risk can be quite subjective to who you are, to your skillset, and to your personality. I've seen people at the poker tables losing their shirt and great poker players who made money as if it was their office job and they could stop at any time they wanted. Similar, I've seen people enjoy beer and I met people who had terrible addictions to alcohol. And I can't tell you why some people have addictions and others do not. I can only share my observations.

What is risky to one person might not be to another. We all shape our experiences. I recently read this book called The Wealthy Elite, which was a series of interviews with ultra-high net worth individuals in Germany. They all said they felt they took less risk than what others say that they did. And I don't think it's only true for rich people. I think that's true for all of us.

Now, let me shift gears here. Schools are teaching us to be employees. They don't teach us to be business owners, and they don't teach us to become financially independent through owning private equity, and they certainly do not teach us to take any of that profit from operating businesses and invest in public markets. A friend of mine said to me the other day that nothing is as addictive as cocaine and a salary. He never tried cocaine, but he had a salary for many years, and it was very addictive, so he could only speculate on the cocaine part.

Now, whenever I started my journey into financial independence, I quickly saw the risk of getting a stable job if I were to reach my goal. Collecting a conventional salary just seemed risky because I looked around and saw my friends get married, buy a house, buy cars, have kids, and I quickly saw where their paycheck went. It seemed very risky because of the probability of getting that addiction to a salary and the probability of lifestyle creep seemed to be close to 100%.

So yes, I know how ironic it sounds that getting a safe, secure job seems risky to me. Now, Munger tells us that we should invest the same way Senghauser plays bridge. So the question is, how does Senghauser play bridge? Well, he thinks in probabilities and decision trees, and he knows that risk and investing go hand in hand. And the way that I'm wired, starting my own company, and again, funding all of that proceeds into public markets seem to be as close as risk-free as anything I can think of.

and perhaps you just wired differently. I don't think I'm easy to work with for a boss. Actually, I have a good accord from a previous boss that I'm not. So I would have to assign a relatively high probability of getting laid off by my employer. You are hopefully more easygoing than me, and your probability of becoming financially independent from your salary in a corporation is likely much higher than mine. We all wired differently. We all had different personality. We all had different experience, and we all live in different realities.

The path to financial independence are different for all of us. And for many of us, it's not the right pursuit. Doing what I want with who I want for as long as I want is at the very core of who I am and what I want to be.

It's never been about seeing a number in a bank account go up, but about the independence and autonomy money brings. It's about being empowered to be the best version of yourself, with all the flaws and shortcomings that you may have. And others would rightfully see the pursuit of financial freedom as maniacal and missing out on what is most beautiful in life, whatever that is for them. But just like beauty, risk lies in the eyes of the beholder. I hope you found this episode inspiring, perhaps even a bit provoked.

You may be on your path to financial independence. Perhaps you already achieved it, and perhaps you have deliberately chosen not to go there. Regardless of where you're coming from, I hope you choose the path for you where the journey is the best part.

Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.