0:08

Welcome to ditch the suits podcast , where

0:10

we share insights nobody in the financial

0:12

services industry wants you to know about

0:14

. We're here to help you get the most from

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your money in life , so buckle up and welcome

0:19

to ditch the suits . Welcome back

0:21

to ditch the suits podcast , steve Campbell , here with Travis

0:23

Moss . If you are brand new to ditch the suits , hope it's

0:25

not your last stop . But for those that have been with

0:27

us on this journey , you know that Travis

0:29

and I like to bring to you high level financial

0:32

concepts but break them down into series

0:34

and episodes . So we usually take anywhere

0:37

from three to four different episodes , pile them together

0:39

so that we can raise a question or thought

0:41

and then , in each episode , build the foundation

0:44

, help add context to it and really culminate

0:46

with what should you do with this information

0:48

? And we always try to mix up the different topics

0:51

. So we'll talk about financial planning . Sometimes we'll

0:53

talk about investments in the series we just finished

0:55

up on bonds . Well , we always like to bring

0:57

back around full circle this idea around current events

0:59

and what's happening in the world . And how do you apply

1:02

what you're hearing on the news when you go home at night

1:04

and what's real to you in your life

1:06

. One of the big ones right now , especially

1:08

being in a political season , is around this idea

1:10

of corporate profits and

1:12

, you know , kind of demonizing these companies

1:14

that are out there , but , like , how do you make sense of that ? And so

1:16

, travis , I want to open it up . This is going to be an entire

1:18

series talking around profits , corporate

1:21

profits , like how can you make sense

1:23

of this ? So let's open it right up For those that are getting

1:25

caught up . What is the dialogue

1:27

kind of currently going around right now when it comes

1:29

to corporate profits ?

1:31

That's pretty negative because you have this

1:34

concern about record profits and you

1:36

hear this , you see this in the news all the time about

1:38

record corporate profits . And then of course you get inflation

1:40

news that comes out and says inflation is

1:42

higher than expected and

1:44

there's more

1:46

personal debt than expected out there

1:49

. They're not going to maybe drop interest rates

1:51

. Of course people are waiting to buy houses or waiting for interest

1:53

rates to come down to the Kyrgyz and Fort houses and stuff

1:55

like that . So there's

1:57

kind of a domino of bad

2:00

information out there , or not bad

2:02

information , negative information about what's actually

2:04

going on . And then that turns into a political

2:06

football and we're in an election year

2:08

and of course that

2:11

triggers a lot of the hot button

2:13

issues of basically

2:15

how people are doing right , because the idea of

2:17

more inflation means

2:20

your money's not going as far as it used to

2:22

and so it's start . You can't have

2:24

as much as maybe you want to have in

2:27

those types of things . And I

2:30

keep hearing through I

2:33

think Biden did a speech

2:35

on it and I've heard through different news channels

2:38

and things this kind

2:40

of assault incorporations and they say that the reason

2:42

why we have inflation right now is

2:45

primarily driven by record corporate profits

2:47

. And so they're saying , when you go to the grocery

2:50

store and actually this is almost verbatim but when

2:52

you go to the grocery store and

2:54

your groceries are more expensive , it's because of those

2:56

greedy corporations gouging

2:59

you . Basically , that's the overall

3:02

message that we're getting about what's

3:04

going on in the economy right now , and

3:07

I think that that's got a lot

3:09

of issues , part of it being

3:11

we

3:15

focus on investments , we look to focus on financial

3:18

health and profits are part

3:20

of a business , and

3:23

we look at statistics , we look at numbers all the time

3:26

, and statistics and numbers can essentially

3:29

be misapplied or used

3:31

in a way to paint pictures that necessarily aren't

3:33

always true . And when

3:36

you start to throw around some of these concepts

3:38

and you misapply them , I think

3:40

you can break confidence . I think people can get

3:42

the wrong ideas about things and then , really

3:45

, when trust breaks down

3:47

or when people aren't confident about things , then we start

3:50

to make decisions that aren't

3:52

very good decisions . For instance , we could say , well

3:54

, the economy is not really good because

3:56

the corporations are pre-scadging people

3:58

and therefore

4:01

there's going to be a breaking point where people actually

4:03

there's a collapse and you hear that there's

4:06

record levels of consumer

4:08

debt out there . Well , consumer debt actually did

4:11

reach a record level , but

4:14

there's 2 million more households

4:16

included in there and

4:19

the average amount of

4:21

consumer debt per household went up like $500

4:23

and went from $5,500 to $6,000

4:26

. And people also are making , on

4:28

average , like 7% more than they were making . So

4:31

what do people do , steve , when

4:33

they have more money ? They tend to they go okay

4:35

, I got a raise , now I can afford the hot

4:39

tub that I wanted or the jet skis that I wanted , or

4:41

I can afford to go out to dinner a little bit

4:43

more often , or I'm more comfortable with

4:45

a $6,000 balance on my credit card rather

4:47

than $5,500 . And the problem

4:49

when we look at some of these issues

4:53

is that we tend to think in an idealistic

4:55

world like , okay , there's people out there and they have credit

4:58

card debt and it's horrible to have credit card debts , they must be

5:00

suffering or struggling . I know lots

5:02

of people who aren't suffering , aren't struggling at all to have credit

5:04

card debt and it

5:07

going up by $500 isn't

5:10

extenuating the circumstances at all for

5:12

them . And it's going

5:15

up because they have more means , they're more

5:17

comfortable with paying for it , because they're making more money

5:19

than they've ever made in their life , type of thing . So what

5:21

I wanted to do with this particular

5:24

series is to

5:26

take the concept of profit

5:28

all by itself as

5:31

an economic term and

5:34

relate it to people that we

5:36

work with . Like , what does profit do for

5:38

you financially ? So

5:40

you as an investor or you as somebody

5:42

with a pension ? What does profit

5:44

actually mean to you ? And

5:47

I want to help put it in perspective . And

5:49

so there's terminology

5:52

, that there's a thing that's actually more

5:54

important to profit , and we're going to talk about that

5:56

in our next episode . But

5:58

I really want to get behind some of the

6:00

numbers . So when we think about inflation

6:02

and we think about the relationship

6:05

of profit in the equation of inflation

6:07

, what else is actually

6:09

in there ? So we can see if inflation

6:12

is actually well , if

6:14

profit in inflation , so if the

6:16

part of inflation that is due

6:18

to profit , if profit is

6:20

playing an outsized role

6:22

in hurting people

6:25

financially , or

6:28

is it maybe contributing

6:30

in a certain way in a positive way ? And

6:33

I think that that's just . I

6:35

want to broaden the discussion

6:37

from a good guy and a bad guy and I want to

6:39

talk more in

6:42

terms of the place of

6:44

profit and the statistics behind everything

6:46

that's going on , so that

6:48

if we have a better understanding

6:50

of this stuff . It's not going to bother us nearly as

6:52

much . Right , we can put in

6:54

a perspective . We know how to react to it . We

6:56

know how to kind of handle our business

6:58

when people say these things . And I think we're

7:00

gonna go through there's . There's a lot of technical stuff

7:02

we're gonna go through , but some

7:05

fun kind of a day allergies and stuff

7:07

. I think that we're going to get

7:09

into Some really good

7:11

brain food . I think this

7:14

is a particularly interesting series

7:16

for us and we did a lot of research

7:18

to put it together and

7:21

we're gonna finish with a

7:23

discussion about corporate greed . So

7:26

that will be . This will actually be a four Part

7:29

series for us and I think this

7:31

is a fun one , folks .

7:32

I get the pleasure of working next to Travis

7:35

every day in an office and so when he's putting together

7:37

show notes and concepts , I can tell

7:39

when he gets excited about a certain concept

7:41

, and when he started to raise this one to

7:43

me , I said look , I'm gonna trust you

7:45

, and if you turn on your nightly news , it's getting

7:47

to the point that it's gonna start become sickening in

7:49

a political season . So much slander there's so

7:51

much bashing , it's really trying to put blame

7:53

on somebody , and so I think what's exciting

7:56

about this From leading up to this conversation

7:58

, is it's not pointing out one side of an

8:00

aisle versus another In having

8:02

slander go on , as much as trying to educate

8:05

you , for when you hear certain things on the news to have

8:07

enough information to say , hey , that that's true

8:09

. What they just said Because you can find a

8:11

whole lot of people shaking their fist at the nightly

8:14

news , not really understanding what's being said

8:16

With the news we've talked about this in

8:18

several series before is so sensational

8:20

, package so well that it creates an emotion

8:22

out of you . So if somebody every night is

8:24

on the news saying that corporate profits

8:26

, corporate greed are destroying your life , your

8:29

family , like , how do you make sense of that

8:31

? How do you step back ? And so we have to

8:33

come into current events to talk about your

8:35

money in life , because you have to understand Things

8:37

like profits , how they work . So when you're choosing

8:39

investments , like , how do you make sense of profits

8:42

and how the effect bottom line of a company ? And

8:44

so maybe that's a great place to start . We're really big on

8:46

financial literacy . We're not just gonna jump into

8:48

the last part of this series Trying

8:51

to convince you of something that you

8:53

don't have enough information on . A great place to

8:55

start is just kind of this idea around really what

8:57

are profits ? You know , for people that have

8:59

never owned a business or don't really

9:01

understand it's kind of one of those words you hear . So , travis

9:03

, like if we just threw that question out to

9:05

you what are profits ? What's the easiest

9:07

way to explain it ?

9:09

Well , first , really quick , just a very

9:11

quick point . News does not educate

9:14

, news provokes . Right

9:16

, the idea of news is to provoke a reaction . That's

9:18

that's modern news . Maybe it's not the historical

9:20

context of it , but the modern News

9:23

is designed to provoke a reaction

9:25

because that's how it's monetized . So

9:28

it's not to educate . What we want to do is educate

9:30

. So when you watch the news , you

9:32

can take the information that's within the news

9:34

and contextualize . You

9:36

could . You could put it in the right context yeah so

9:39

you can . You can get away from the

9:41

provocative . How do you say that

9:43

you can get away from being provoked

9:46

?

9:47

provocative . We're just gonna say thanks in advance

9:49

for education .

9:49

Yeah alright , so anyway . So so

9:51

profits , profits

9:54

, what they

9:56

really are , there they are the return on

9:58

risk and ideas . So

10:02

what I mean by that ? Somebody friends

10:05

money to start a business . Businesses don't just

10:07

like , appear at a thin air , so somebody

10:09

has to actually start it . And

10:11

when you drive down the street and your way to work

10:13

, all the little businesses

10:15

, somebody put some money up for those . All

10:18

the big businesses originally

10:21

started as one of those little businesses . So

10:23

somebody Took some

10:25

money and said I'm gonna start business . Now

10:27

, a lot of times that money is borrowed

10:29

and

10:31

when

10:33

the business fails and lots

10:35

and lots and lots of businesses fails that

10:39

money is then lost . So if

10:41

you borrowed money and put it into

10:43

a business and the business fails , you still

10:45

normally have to pay back the loan . Yes

10:48

, bankruptcy can help , but a lot of small businesses

10:50

actually , when you start a business , have

10:55

to have personal guarantees . You

10:57

know so , a lot of times somebody's house pledged against

10:59

the loan or something like that . But

11:03

there's always a potential that the business is going to fail

11:05

and there's a cost

11:08

to using money too . So let's say that the business

11:10

doesn't fail , but it takes a long time to get it going , because

11:12

most businesses take a long time to actually

11:14

get to the point where they're profitable . Well

11:16

, if I took $100,000 out of the bank

11:18

and put it in a business and the business isn't profitable

11:20

for five years , how much interest

11:23

would I have made on that money over the five

11:25

years if I had left it in the bank ? Or if I had left it

11:27

in my mutual funds or whatever investing

11:29

program you've got going on right

11:31

, so you're losing on the opportunity

11:34

to make money . And then , even worse than that , if you had to borrow

11:36

, not only are you not making money

11:38

on it , but now you're paying interest on

11:40

the money that you're using to start the business . So the

11:42

business isn't just costing the money

11:44

that you took out of savings or

11:47

the money from the loan , but it's costing the interest

11:49

on it too . So

11:52

somebody is actually foregoing

11:55

financial

11:57

stability essentially to

11:59

start a business .

12:02

Let's take a quick break to hear a word from your sponsor

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their fee-only planners and their process are

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right for you . Well

12:41

, travis , I think that's a super helpful explanation of

12:43

just kind of companies , and I guess it

12:45

poses the question what is the success

12:48

rate for somebody who's starting a business today

12:50

?

12:51

Yeah , depending on what study you read and I've read

12:53

I've seen lots of different numbers , but somewhere between

12:55

80 and 90% of all business startups

12:58

fail within their first five years .

13:01

That's a lot of risk , Like what

13:03

goes into all of that .

13:05

Well , somebody comes up with an idea . They

13:08

quit their job , they use either

13:10

their own savings or they pledge their personal property

13:12

to get a loan , or maybe they do a combination

13:15

of both . They start a business , they

13:17

hire people . They have to pay

13:19

the people , regardless of whether

13:22

or not the

13:24

business makes any money , regardless of whether or not

13:26

the owner gets any income

13:28

. And even if a business is profitable let's pretend the

13:30

business is profitable in the first year profitable

13:33

doesn't mean lucrative

13:36

. So the business could have a $20,000

13:39

profit because it doesn't pay the business

13:41

owner . And potentially

13:43

and in a lot of situations , the business owner is

13:45

actually operating within the business . So

13:48

they not only are fronting the capital , but they

13:50

a lot of times are going without an income

13:53

for a while as they're starting or building

13:55

this business . So

13:57

80 , 90% of the time

13:59

the person took the risk , they're failing and

14:03

they're losing a lot .

14:07

Yeah , that entrepreneurial journey is fascinating

14:09

. So you're talking about return on risk

14:12

getting started . Many times you're having to wear multiple

14:14

hats because you also can't go out and afford

14:16

to hire people . So

14:18

what are the other areas that profit can

14:21

make a difference or kind of lead into

14:23

this ?

14:24

Well , profit is the first

14:27

and foremost . It's a return on risk . So

14:31

this is where the term entrepreneur comes in , because entrepreneurship

14:34

is really about taking risk , taking

14:36

a disproportionate amount of risk to other people , and

14:38

I know that we're going to bridge into

14:40

corporate . When you think corporate

14:42

, you think Amazon and Apple and

14:44

Kroger and the

14:47

Wegmans and the big stores

14:49

, publix right , you're thinking that

14:52

in this context . But let's

14:54

talk about where it starts , because somebody

14:56

before those stores became big enough so

14:58

that you knew about them . Somebody took this risk

15:00

, and if that person

15:03

, who's an entrepreneur , doesn't take the risk , there

15:05

are no jobs to be complaining about

15:07

, there are no nice

15:09

buildings in your town , there

15:11

are no taxes to collect . So this

15:13

person who takes the risk , who

15:16

risked their own financial

15:19

stability and , a lot of times , their own

15:21

personal health because of the stress , their family

15:23

relationships , those types of things they

15:26

are also the catalyst for

15:29

your community . Think about , when

15:31

you think about wherever you live

15:33

, what are the prettiest buildings ? What makes it

15:35

exciting ? Who funds the parks , right

15:39

? Who's sponsoring the corporate events ? Who's

15:41

names on the football field to make sure that the football

15:43

team is in your town ?

15:46

Yeah , well , and you're talking

15:48

about too , with profit . I

15:50

would imagine that most people start a small

15:52

business or a company because they have an idea

15:55

or they have something that they think can

15:59

be different . How does that work

16:01

into this whole idea between

16:03

entrepreneurship ?

16:05

Well , profits also . You get it for

16:07

taking risk . But you're also getting rewarded

16:09

for your idea . And not

16:13

all ideas pan out right , because

16:15

you can have a great idea but it doesn't make a difference to anybody

16:18

, nobody cares , you don't make any money

16:20

on it . So it

16:23

is quite random actually . Which ideas

16:25

take off Well ? I think a lot of it's

16:27

happenstance . You're

16:29

the right person with the right idea in the right

16:31

place at the right time . It can be

16:33

extremely random , because you can have great ideas

16:35

and history is full

16:38

of great ideas Because they say we're going to change

16:40

the world and then a year later they're obsolete

16:42

. But

16:46

every idea that an entrepreneur has , they

16:48

take the risk , they borrow the money , they use

16:50

their own money , they start a company to go out of paycheck

16:52

. So

16:54

they have the risk component . But they also have

16:56

the fact that they were the ones . If that idea comes

16:58

through . They are the ones who had the idea , they

17:00

are the ones who actually made something happen

17:03

. It's

17:07

normally something new or

17:09

disrupting the status quo . The product might not

17:12

always be new , but maybe the way of building the

17:14

product or delivering the product is new or something

17:16

like that . So they're actually , if you think about

17:18

it advancing society or

17:21

advancing our

17:24

experience in the world , and

17:27

it can be on the other side of the coin too , though . So

17:29

somebody can create , and therefore they get

17:31

profit because they create it . Well , people

17:33

also make profit by protecting , and

17:38

I'm not just saying that there's a right side or

17:41

a wrong side to this , because

17:43

it's easy to say that a corporation

17:45

that goes to war with another corporation

17:48

or corporation that goes to DC and lobbies

17:50

to protect their business is bad , but

17:52

what is that business actually doing ? It's protecting

17:55

their way of doing things

17:57

. It's protecting their business . It's protecting their

17:59

profits . So , corporations

18:03

, it's like there's two sides of a coin . One

18:05

is I create something new and I'm making money

18:07

, and the other one is is that idea that was new is

18:09

not so new anymore , and I'm trying to

18:11

get to make as much money as I can before it becomes

18:13

obsolete ? So it's

18:16

the conundrum between being

18:18

new and kind of holding

18:20

on as long as you can .

18:23

Well , so you just talked about a little while ago

18:25

that 80 , 90% of most business

18:27

startups fail within the first five years . There's

18:29

a ton of risk involved , so it almost

18:31

sounds like then profits are

18:34

the reward for being able

18:36

to hang in there and stick it out and actually

18:38

make a difference . So if profits

18:40

are the reward , then I guess the question would

18:42

be used as so what are the uses

18:45

then of profit ? You've done what you're supposed to do . You're

18:47

making a difference Like what are the uses of profit then

18:49

? Hey guys , steve Campbell

18:51

with Ditch the Suits Want to take one quick moment

18:53

to make a big ask . If you haven't already

18:55

, travis and I would love for you to subscribe to this podcast

18:58

, and if you haven't , also we would love for you

19:00

to leave a five star rating and review . Your

19:02

rating and review will let other podcasters know

19:04

that the show is worth their time . So let's get right

19:07

back to the episode , and thanks for listening to Ditch

19:09

the Suits podcast .

19:10

Well , let's make profit a little bit

19:12

easier for the typical person to understand

19:14

, because I think that we think you know when you go and

19:17

you buy a product from somebody or

19:19

you're at service from somebody let's say you go and you pay them $600

19:22

or something that $600 doesn't profit

19:24

, right ? So

19:27

a portion of the $600 is

19:29

profit . And people get this wrong

19:31

all the time . Well , you know why

19:33

does it ? You know cost this for that

19:35

? Well , because there's costs

19:38

beyond just what you see that have to come out

19:40

of that , right , and so profit

19:42

is the portion of the price that

19:45

doesn't have to go that isn't already claimed

19:47

before the service is already delivered

19:49

to the products already sold . So an easy way to think about

19:51

this is think about you personally

19:54

in your household , your personal

19:56

money , business . Every

19:59

two weeks you get a paycheck , or

20:01

whenever you get your paycheck , and

20:05

let's say , each month , after you get your paychecks

20:08

and pay all your bills , you have between $500

20:10

and $1,000 extra left over . So

20:13

you take your $500 , $1,000 , $502,000

20:17

and you put it in your savings account and

20:19

you do that every month for the course of a year . At

20:22

the end of the year it's averaged out , you got $9,000

20:25

more than when you started . That

20:27

$9,000 is your profit . You

20:31

might have made a hundred grand , but

20:34

all that hundred grand , where did it go ? You

20:36

had to pay income taxes on it , right

20:38

? You had to pay your union dues , if you're

20:40

in a union . You had to pay for your benefits

20:42

. You had to pay for your mortgage , your car payment

20:45

, your utilities , your kids' expenses

20:47

, all that kind of stuff , and you ended up with $9,000

20:50

left over to run your

20:52

life . It cost you $91,000

20:55

. You made a hundred , so

20:58

you have a $9,000 profit at

21:00

the end of the year . That's your money . Business profit

21:03

for the year .

21:05

Well , that even just what you said . Again

21:08

, we all have different backgrounds of financial literacy

21:11

, whether it's talking with clients

21:13

or even newer staff , just

21:15

people in general and culture . They think

21:18

sometimes that their annual income is

21:20

almost like take home right . So that can cause

21:22

a lot of marital strife because it's

21:24

like , hey , I thought we were making good money , how

21:26

come we can't pay our bills ? And it's like , well , you

21:28

are paying your bills along the way through benefits

21:30

and what you talked about , but what you're netting out at the end

21:32

. I think that's where a lot of people get lost . So

21:35

, okay , even let's simplify

21:37

talking about profits , you have this extra $9,000

21:40

. Then what typically do

21:42

people do with those kind of profits ?

21:45

Well , think about what you would do . You might work

21:47

on your house , right ? Maybe there's

21:49

a kitchen counters that you want

21:51

, or new kitchen cabinets or something like

21:53

that . Or maybe you want new appliances

21:55

you want to get a new refrigerator

21:57

, new washer and dryer . So you go on

21:59

, you buy new appliances . Or you take the family on

22:01

a nice vacation I

22:04

got $9,000 . We can finally go on that

22:06

vacation to the beach

22:08

. Or maybe you hire somebody to mow your lawn . Maybe

22:11

, now that you have this extra money , you feel a little

22:13

bit better , spending a little bit of it , having somebody come

22:15

in and making your life easier , and

22:18

that lets you maybe get to do other things that you want to

22:20

do . Or maybe you can work more

22:22

, or something like that , if somebody comes in and helps you

22:24

. Or maybe you put the money in the

22:26

bank for rainy day

22:28

, in case you have an emergency , which you might

22:30

say that , look , I need to have some

22:32

emergency funds here . I don't have enough , so I'm

22:34

going to put that $9,000 profit . I'm not

22:37

going to spend that , I'm going to put it in the bank . Or

22:39

maybe you have a debt or two , right

22:42

? Maybe you got

22:44

that credit card debt , that $6,000 credit card debt

22:46

and you go . Okay , I got $9,000 leftover at

22:48

the end of the year after I made all my payments and everything

22:51

. Let's put an extra . Let's pay that

22:53

off or pay it down . At least let's

22:55

put a bunch on there . Or

22:58

maybe you're saving to buy a house , like

23:00

a vacation house someday I want

23:02

to get a house on the beach and that part of that $9,000

23:05

you're going to score all the way . Now , if

23:09

you were to break down your money like that

23:12

, you probably wouldn't say you know what , travis

23:14

, I got too much profit this year . There's

23:17

almost never enough things

23:20

. You know . You can almost never stretch the money far

23:22

enough , right ? There's always things that you'd like to do

23:24

or want to do or could do or dreaming

23:27

of doing . You very

23:29

rarely go I got too much profit . You

23:31

know . Sometimes people do , and then they might

23:33

say , okay , I have too much profit , I'm going to donate some

23:35

of that to charity , right ? Or

23:37

cause that I believe in . Or maybe

23:40

I'm going to , you know , give some bonuses to the kids

23:42

, but very rarely are you actually looking at

23:44

it going got too much profit . This is a problem

23:46

.

23:47

Well , because you're talking about the difference , too , between guilt-free

23:49

money and something you actually worked hard for . When

23:52

you're in a grind season of life and

23:54

you need a break , right , you can take a vacation

23:56

, but you put it on a credit card so you're

23:58

able to get away time-wise , but there's still guilt

24:00

in the back of your head that you really don't have the

24:02

money to pay for this . When you have a $9,000

24:05

profit , as we're calling it , it's guilt-free

24:07

, you've earned it . It has a different feeling

24:09

connected to it because you've worked hard for

24:12

that year to save money . So then

24:14

, if we've talked about that profits are

24:16

really the reward for somebody starting

24:18

a business as an entrepreneur , it's their guilt-free

24:20

money . If that's what we would

24:22

do as individuals with profit , then what do

24:25

businesses do when they have profit ?

24:27

But you said it perfect . You said money that you worked

24:29

hard for . So when we look at the money that we're

24:31

getting paid , we don't say you know what I'm getting paid

24:33

too much . You know , employer , I

24:35

think you should pay me less . In fact , no , we

24:37

walk in and we say we're worth more , you need to pay

24:39

us more . Right , what

24:42

I do is more valuable than what you're paying

24:44

me . You need to pay me more and

24:46

we advocate for more . And then we get more . We

24:48

get more money . So we're essentially more profitable

24:51

for ourselves , but we believe that

24:53

we're working hard for it . We're earning it . There's

24:56

not a business out there that doesn't work hard

24:58

for its money . So

25:01

the business is working for their money . And just think

25:03

about what you you were just thinking what would you do

25:06

if you had extra money ? This is what

25:08

a business does with profits . They

25:10

repair their buildings , like

25:12

you , making home renovations . They

25:15

buy equipment , like you buying new

25:17

appliances . They

25:20

attract and retain employees through benefits programs

25:22

, like you

25:25

taking the kids on vacation . They

25:28

hire people to help be more productive , like you hiring

25:30

somebody to mow lawn . They

25:32

build reserve funds for emergencies , because not

25:34

every year is profitable . Not every year is a great year

25:37

. Some years something breaks right . Some

25:39

years there's a bad economy or something . They

25:41

put some money away . I could

25:43

make a billion dollars today . Well , if it cost me $10

25:45

billion to run my business , that's only a 10th . That's

25:47

not going to get me very long if I have a really bad

25:49

year . Sounds like a lot to you

25:52

, but in the grand scheme of things , it's not that much

25:54

. Municipalities have this problem all the time

25:56

, right , municipalities who

25:59

accumulate extra money

26:01

. The local

26:03

taxpayers get really mad and they're like you need

26:05

to lower the taxes if you're accumulating

26:07

money and then an emergency hits and they're

26:09

like why don't we have any money ? Where's all the money

26:11

? It's bad management . It's like because you never

26:13

allowed a slush fund to be built up . But

26:17

you would do that for yourself . You would build

26:19

your personal savings . Businesses

26:21

pay off debts . When

26:24

you look at debt payments , that

26:26

comes out after-profit . When

26:29

you're talking about profit , you're talking about money that you made and

26:31

the interest payments maybe will come out

26:33

of that , sometimes depending on how the accounting

26:35

is , but the

26:37

principal payback of that debt that's

26:39

coming out of the profits . So

26:43

if I had a really bad year or if I started a

26:45

business and I have debt from when I started the business

26:48

or I went out and bought another

26:50

business or something like that or expanded my business

26:52

and I pay off debts that's going to come out of future profits

26:55

, so I can have lots of profits

26:57

that are actually earmarked for things

26:59

Like . I

27:01

can also put it towards future

27:03

acquisitions and expansions , the

27:05

same way that you would put it towards that lake house

27:07

that you want when you retire . A business could say you

27:10

know what Like . Take FedEx

27:12

, for example . Fedex has an aging fleet

27:14

. Their trucks and airplanes are

27:16

getting old . They're going to need new ones . You

27:19

better believe they got to be saving their money ahead

27:21

of time so that , as

27:23

those vehicles need to be replaced , they have the money

27:25

to replace those vehicles . They're

27:27

saving it for a future expense

27:30

that they're probably

27:32

going to have in the future and I you know whether

27:36

or not they're doing that . That's just an example

27:38

. But you know businesses

27:41

are operating the same way that you would run your

27:43

household when we're talking about

27:45

profit , versus you having extra money

27:47

left over from your paycheck .

27:49

Yeah , because I think maybe we sometimes misdiagnose

27:52

or misthink that when we hear profit in a

27:54

company , it's that they're all lining their pockets

27:56

with what they've made , right . But what you're talking

27:59

about is just because they may have made a profit

28:01

doesn't mean that they necessarily took

28:03

that home , but they reinvested it in their people

28:05

and technology . So , yeah , they might have had

28:07

a booming year where they made all this

28:09

money , but maybe they paid off debt . So it's

28:11

not that they're just , you know , writing a big check to themselves

28:14

, walking out the front door and making it . And

28:16

I guess that's maybe where it starts to frame

28:18

like how we can begin to think profits

28:20

are bad , because someone told us

28:22

there's greedy people out there . So I guess

28:24

it kind of begs the question are profits

28:26

good or bad then ? Right , because it's kind of sounding

28:28

like profits could be a good thing with context

28:31

Profits are not .

28:33

I don't think not . They're neither good or bad

28:35

. Profits are necessary . If

28:38

you do not have the potential for profits

28:40

, people are not going to take risk

28:42

. They're and they're not going to try

28:44

to fight to preserve things . So

28:47

if you can't get

28:49

a return that

28:52

is better than your nine to five job

28:54

, why would you risk

28:57

what you have ? You

28:59

wouldn't . So

29:01

without profits companies they can't

29:03

pay people more , they

29:06

can't expand , they

29:08

can't make new products , they can't innovate

29:10

, they

29:13

can't get through turbulent financial times

29:15

. Think about your

29:17

situation . What

29:20

if your paycheck got cut in half and you don't have

29:22

any extra money ? You can't go on vacation , you

29:24

can't buy new appliances Right . You

29:27

can't put your kids through the best schools . There's

29:30

all these things that you can't do , but

29:32

for some reason , because it's somebody else's profit

29:34

, it's not our profit , it's somebody else's profit . Some

29:37

other corporation is making this money , not our

29:39

family . It's bad

29:41

, and the argument is and

29:43

the big argument is , which we're going to really

29:45

get into is Travis . It's not

29:47

that profits are

29:50

bad , it's

29:53

that company . There's companies

29:56

out there that are really gouging

29:58

the profits . They're making far more profits

30:01

than they need to to be able to do all these things

30:03

that you're talking about and

30:05

that's we're going to dig into that pretty deep . But

30:09

if you own an investment , the

30:12

entire value of the investment is based

30:14

on profit . The

30:18

price is based on a knee-jerk reaction

30:20

, right , that's what you see in the stock market . But

30:23

how that price , the elasticity of that price

30:25

, how it bounces back , you

30:27

know how high up it can go and how far

30:29

down it'll go before it snaps into the other

30:31

direction . That's based on the underlying

30:33

value and that is all based

30:36

on current profit and expectations

30:38

of future profit .

30:41

And I think you have a pretty interesting kind

30:43

of word association here . That might be

30:45

a good ending

30:47

to this first episode for how we kind of

30:49

look at profit right . So we've been leading up to this

30:52

dialogue around the idea of profit . Is

30:54

it good , is it bad ? It's neither . It's necessary

30:56

. Why don't you kind of walk us

30:58

through , then , some of these statements

31:00

to kind of reveal the mixed

31:02

teeter-totter

31:04

emotions that we can sometimes be battling

31:06

?

31:07

Yeah , and this is , I think , where some of the politics

31:09

and stuff comes in and the current event component

31:11

of this , because I think that it's

31:15

really easy to want to be an activist and

31:17

help people . It's really easy to say , yes , those

31:19

bad corporations , those are hurting

31:22

mom and pop , right , those are hurting

31:24

grandma and grandpa , those are

31:26

hurting people with lesser incomes Like

31:29

, we

31:31

need to do something about this . We need these corporations

31:34

to get under control . We're going

31:36

to talk about how there's a lot of misleading

31:38

angst built into

31:41

that . We're going to actually get into the statistics

31:43

and the numbers a little bit . But

31:45

here's the oxymoron component

31:48

of this . This is a walking

31:50

contradiction People

31:53

who are concerned about the fact

31:55

that profits

31:59

are too high , but also

32:01

want people to get higher wages and

32:06

better benefits . That's an oxymoron

32:08

Because in order for the company

32:11

, profits are met . When

32:13

you see what the company profited , you

32:15

see what they did last year . That's

32:18

not what they're doing next year . So if you want

32:20

to raise next year , the

32:22

company has to have been profitable last

32:25

year and

32:27

people want raises every year . Last eye

32:29

check . People want more benefits . I want more retirement

32:31

, I want better health care . I want more vacation

32:34

time right , I want less hours . I

32:36

want all this stuff . If

32:38

you're going to have more this

32:41

year , the profit has

32:43

to have been there last year , because somehow

32:45

they got to pay for it . They

32:48

got to have a pile of money to pay for it . So if they

32:50

don't have the pile of money to pay for it , you

32:52

don't get it . We

32:55

have people who you know . I

32:58

want job stability . I

33:00

want really good jobs . I don't want to have to

33:02

come into work and worry about layoffs . Do

33:06

you better worry about profits ? You

33:08

better worry about the money

33:10

that the people who risked their

33:12

own personal money to

33:14

have this company , to create

33:16

the job that you have , who

33:19

could be making other money with their

33:21

money right , Because if they left it in the bank , left

33:23

it in their other investments , if they put

33:25

it in a CD or whatever , they'd be able

33:27

to make X amount of money . Instead , they

33:29

took that money and they started

33:31

your company or they invested in your company

33:33

and they want to make sure that they

33:35

get return

33:38

on that risk and

33:40

they're saying , hey , I got to get X amount of money

33:43

for the return on that risk that created your job

33:45

. If you want to keep your job , you

33:47

got to make sure I get taken care of . Also

33:49

, I'll take care of you , you take care of me . One

33:55

of the arguments that you hear is

33:58

I want my

34:00

investment accounts to go up . I

34:04

guess this is the opposite . If

34:07

you're against corporate profit , you're saying

34:09

I think corporate profits need to come down and in the same

34:11

breath you say I'd like my investments to go up . That's

34:14

a contradiction . Your investments cannot

34:16

go up in value if profits do

34:18

not go up Period

34:20

. It cannot happen because

34:24

the reason why people buy an investment

34:26

is because they can make more money than they're

34:28

investing . That is

34:31

, from profits and

34:33

the growth of profits . If the profits

34:35

aren't there and if there's no growth to the profits , or

34:37

if the profits are threatened because the company

34:40

is running itself

34:42

like a municipal government basically , where

34:44

it's got no reserves . What

34:47

you got there , You've got a bad investment . Nobody

34:49

wants to buy that investment . So if you want to

34:51

make money in your investments , you

34:54

have to be pro corporate profit

34:56

. Now

34:59

again , we can talk about corruption

35:01

corporate corruption , political corruption

35:03

, personal , ethical issues

35:05

, that type of thing but on its

35:08

own phase , we cannot be anti-profit

35:10

and still say , hey

35:13

, I want my investments to go up . And

35:15

the reason why would you want your investments to go up ? If

35:18

you have a pension or a 401K and

35:20

you want to retire someday , you

35:22

better hope that corporations are profitable

35:25

, because that's what funds those things . You

35:27

think it's a mutual fund . The mutual fund owns

35:29

companies . You think it's a pension and

35:31

the government maybe you work for the state and they

35:33

back the pension or the federal government . They back the pension

35:35

. Inside that pension they are

35:37

buying stocks and they are hoping to

35:40

. You know they

35:42

are praying as much as they can possibly pray the

35:44

people who are managing those portfolios that those companies

35:47

are as profitable as they possibly can be

35:49

, because that means they don't have to

35:51

put extra money in that pension fund

35:53

through raising taxes or anything to make

35:55

sure that you get your pension . So

35:58

if you want to be able to retire one

36:00

day and be

36:02

comfortable in retirement and not have to work till

36:04

you're 80 , you have to

36:07

be pro-profit .

36:09

Well , I think you just did a really nice job at the end

36:11

of its semantics

36:14

but really separating kind of what we're talking about . Profits

36:16

in general are not bad , they're necessary . But

36:19

if you want to talk about corruption and

36:21

political corrupt , those are two very different

36:23

things . But if you are just working all day

36:25

at whatever you do for a job , you

36:27

come home , you turn on the nightly news and you have somebody

36:30

screaming at you corporate greed

36:32

, corporate profits are derailing your future . So

36:34

vote this way or feel this way

36:36

. If you don't have any context for what's

36:38

being talked about , you could again just be mad

36:41

. But you're not really sure what you're mad at . So

36:43

I think for a good first episode , we'll pause

36:45

here for today , laying the groundwork . But

36:47

I think it's going to be exciting , because what if we told

36:50

you that there's actually something that's more valuable

36:52

or matters more than profit ? So

36:54

stay around for episode number two of this series

36:57

as we talk through corporate profits .