In this episode of Tactical Empire, hosts Shawn Rider and Jeff Smith delve into the concept of risk, exploring personal experiences, economic theories, and practical strategies for managing risk in life and investments. They discuss the importance of financial education, the role of life insurance, and challenge conventional views on risk-taking, emphasizing the need for calculated decisions in uncertain times.
In this episode of Tactical Empire, host Jeff Smith and guest Shawn Rider delve into the complexities of risk in life and investments. Sean shares an intriguing story about a college paper he wrote on economic risk, revealing insights into national economic trends during the Great Recession. The discussion then transitions to personal investment philosophies, covering topics like life insurance, real estate, and the pitfalls of traditional retirement plans. Both Jeff and Sean emphasize the importance of financial education and conservative but strategic risk-taking. They conclude by challenging conventional ideas about security and risk in financial planning.
00:00 Introduction to Tactical Empire
00:30 Meet Shawn Rider
00:48 Watch Talk
03:22 Podcast Episode Theme: Risk
03:48 Jeff's College Economics Story
10:18 Discussion on Risk and Economics
11:49 Jeff's Perspective on Risk
16:09 Shawn's Perspective on Risk
21:10 Financial Education and Risk
30:56 Conclusion and Call to Action
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[00:00:00] How do you find the will to fight back against a world that wants to keep you sedated, averaging, stuck in place? Join us for the tools and strategies you need to create a life of abundance, discipline, and high achievement. This is the Tactical Empire, with Jeff Smith.
Jeff Smith: Welcome to another episode of the Tactical Empire. I'm joined by Sean Ryder. How are you, man?
Shawn Rider: Don't say anything about the weather. Don't say anything about the weather. Don't say anything about the weather. Jeff got me. He hammered me on the last episode for, uh, bringing up the weather as I normally do.
But, uh, there we go again. I just, I just did it again. What watch do you have? Do we have the same watch now?
Jeff Smith: I have a Phoenix 5X.
Shawn Rider: Oh, I got a Phoenix. Kevin, this is a 7, baby. I think [00:01:00] it was 8 something. I'm not a watch guy, but uh, I never noticed the watch yet on, but I got this one for Christmas and I'm, I'm digging it.
I love it.
Jeff Smith: Do you, I love mine as well. Do you
Shawn Rider: take it off? So you shower with it on?
Jeff Smith: Yeah, I charge it, uh, every five days, I think is what it takes. Goes a little longer. Yeah, I've got a five, like I said. I got the 5X like when they first came out. Like, shit, I don't even, 18 or 19, can't remember which. It's old.
Um, so, I'm gonna upgrade it. I think that's gonna be my little gift to myself after we sell the storage facility.
Shawn Rider: Yes, because, uh, my watch on a full charge goes 27 plus days. Oh, be I choke 90, I charged it to 92% yesterday and it was 24 days until I have to charge it. So I got it for Christmas and I've charged it twice and it's February 18th.
Jeff Smith: Does it
Shawn Rider: tell
Jeff Smith: you that you've got 24 days till it needs charged?
Shawn Rider: Yeah, it says it right there in the [00:02:00] bottom because I, I have it on the, I, I have like eight things that I can put on the face screen, and one of them is the charge. I guess I don't really need it, but I, I like seeing it there on how long, but I even definitely
Jeff Smith: lost the whole audience at this point.
We're sure
Shawn Rider: we got some, not a lot of men that, uh, watch this episode and coming from a non watch guy, this is a really nice watch, but the thing is, is like, because I'm not a watch guy, I know that it's waterproof. Cause I've been in the pool with it, of course. And it's, it's, it's a waterproof watch. It's a Garmin.
So it's awesome. I do not shower with it on. There's something about getting in the shower with a watch that like, I'm not there mentally. And so I take it off the shower and then I put it back on. I wear it all the other times.
Jeff Smith: I think swimming and diving is like on the settings, dude. I think you're fine.
Shawn Rider: Why not? No, I was in a pool. I was in a pool every day last week and wore it the entire time. But for some reason, like getting in the shower, I take, I take it off. [00:03:00] It's just something. So maybe like 80 episodes from now, I will let the audience know that I officially shower with my Garmin Sapphire 7 watch on, and I know that they're going to be anxiously waiting for that day.
Sometime in December. Watch this segway, watch this segway. That is a risk that I somehow am not willing. Today, today's podcast episode. Hopefully you made it three minutes into the intro. I know a lot of popular podcasts that have like 15 minute intros, so people can get past three minutes, especially if they, and we don't have commercials.
Commercials in the first 10 minutes of a podcast. Like the fact that I have to like fast forward and hit 30 seconds, fast forward eight times before I hear the. The actual intro? Ridiculous. Today's podcast episode is about risk, and you don't know this about me, but I got a minor in economics in college.
So my [00:04:00] major was business and marketing education, and I got a minor in economics, which means I took like 15 credits worth of economics classes. Uh, and When I was a senior, even though I wasn't a pure business major or economics major, they, they had a writing competition in the economics department. So you could win awards and win money and win a scholarship.
And in my international economics class, we had to write a paper anyways. So this lined up real perfectly. We had to write a paper all semester long. We had to pick the topic early on and submit it at the end. When I submitted my topic, my professor told me That I should submit it for the competition because it was well written.
And that's one thing. That's why I'm into organic social media. Like I, I, I like to write, I like presenting on stage in front of big audience and I like to write, um, what I'm not so great at is like pure one on one conversation randomly with [00:05:00] people. I don't view myself as conversationalist. That was an aside.
Let me get back to the topic. So I submitted it. I submitted it. And lo and behold, this is when people think. I'm going to say that I won the competition. I did not win the competition. Okay, but I got third place. So, it was a whole thing. It was this, like, I thought it was just a little writing competition, but it was like this whole, like, uh, event where they dressed, all the professors showed up and there was a dinner.
I think I probably walked in in jeans because I wasn't taking it serious because I wasn't a business major. Lo and behold, I got third place, which the, it was 50 bucks. I got 50 bucks for third place, which back in 2011 was for a college kid. That was, that was a weekend. Uh, so my, my weekend was paid for, but I was jacked up.
What I didn't know, Jeff, was that my paper was going up against all the other economic major senior thesis writings. [00:06:00] And, and so like they, these were papers that they were writing for, for like two and a half years. Right. And I, I wrote mine over a weekend. I was in, I was in the library for like three or four days, like over the course of the semester.
And then I remember I, I, I have the image in my head. I remember sitting at the tall kitchen table in the house that I lived in and I wrote that over one day. It was like eight hours straight and I got third place. The topic, this is what I'm getting to. Thanks for sticking along another three minutes y'all.
I have not talked about this in, what, 2011? So, 14 years, I haven't talked about this. The topic I wrote about was, So, I was in college 2008 to 2000, 2007 to 2011. So, it was during the Great Recession, right? The housing bubble, all that shit. My topic was, Have you ever heard of Geert Hofstede? Geert Hofstede was some sort of scientist, economist.[00:07:00]
Psychologist, I should have studied this before I got on the call. Um, but he did a lot of studies. So he had, he created five indexes based on certain criteria. One of those index, and he would study countries based on these criteria. One of his indexes is called the Hofstede Uncertainty Avoidance Index.
Okay, so Uncertainty Avoidance. And the index was a reflection on the culture of countries and if the people were risk taking or risk averse. So he created an index based on societal norms and the psychology of people from different countries on how, how risky is, are the people in a country or how risk averse are they and how that plays into the political scope.
So in 2011, my thought was, my thought was if I take his index and [00:08:00] I did the data point where if you had a high uncertainty avoidance, that means you didn't like risk. So you had high avoidance of, of uncertainty. So you, you liked societal things and, and laws and regulations that made things consistent.
And if you had a low uncertainty avoidance. You're, you were more entrepreneurial of a country. Your society allowed flexibility. You liked change and promoted change. So my thought was if he had this index and we were just coming out of a global recession, right. This was 2011. So like some countries were on the uptick.
My thing was, was. Were the countries that were more risk averse safer during the global recession and were the companies that took more risk, did they see greater decreases in or negative GDP growth? And so I like sat at a computer and plotted [00:09:00] out 50 something countries. On their economic growth during 2008, nine and 10.
And dude, it was like a perfectly straight line. The countries that hated risk saw minimal to no negative GDP growth. And the countries that were risk taking saw drastic GDP decline. During the global recession. Then the next question was, well, is the inverse true? And the inverse was true during good times, the countries that had negative GDP growth saw greater growth than the other ones.
So the question is like, as a society and individuals within the society, do you want to be risk adverse, you avoid risk, or do you want to take risks? Well, based on my research, lo and behold, a senior in college at App State in 2011, if you take more risk. You [00:10:00] have more upside. That's not rocket science.
But it wasn't from an individual basis. It was really interesting, Jeff, to see that from a country's, a macroeconomic perspective. I tell that story because I think that's something probably no one knows about me, that I wrote that paper. But, my question is, like, how do you, how do you view risk in a nutshell?
It's such a broad question, but when, when you think of risk, when you think you might be doing something risky, like what do you, how do you work through that? How do you strategically take risks, so to speak, or what do you think about,
Jeff Smith: man, first of all. Interesting that you did that because like they, they have sociology and psychology experiments on how to drive more and more countries into like socialism and communism. And that's the exact levers that they use to pull that. So like the, the, the countries that you're talking about that had zero upside, but [00:11:00] not a lot of negative gain, they have more and more government programs.
So what that does is it limits the individual's ability to thrive. It like puts everybody in kind of a caste system. Um, and, and here in America, well, up until recently, uh, and hopefully more so in the future, we are a meritocracy, if you will. And, uh, you are, you, you're awarded for the work in the production that you put out.
And, and your upside is only limited to how much you are willing to. Risk, if you will, and, uh, and the risks you're willing to take and the effort you're willing to put in and the results and the value that you deliver to other people in our society and what they're willing to pay you, right? And so, um, excuse me.
Uh, I, uh, how do I evaluate risk? I, people think that I'm a big risk taker. I don't think that I'm very risky. I [00:12:00] just do calculated things over and over again. And so like, I have always been, and to be fair, I mean, even my wife thinks that I'm not risk averse at all. Um, my personality has me. Investing money frequently so I, I sweep it away from myself to invest it into other things that are, some are good and some have backfired.
I mean, we've lost a few times. I mean, that's how you learn or more, more likely we have broke even or not made the upside that we were looking to do. Right. And so sometimes just like business, like there's a saying in business that it's either going to cost twice as much or take three times as long to get to where you want to get to.
And so like when you're all wide eyed entrepreneur and you're like by Q2, this is the profit we're going to be making, like it, [00:13:00] it's. Your projections are likely going to be off. And so for me, I'm just. I don't think it's risky. I'm just more pragmatic in my estimations where I build in conservative estimates to say, like, I mean, we, we do pro formas on builds that we're doing on value ads that we're doing, things like that.
And, and I have done so many that I do like worst case scenarios on my pro forma. And then best case scenario is that we're fucking like. Todd Herman does that, right? Todd Herman's like, he, he uses it with his goal setting, but I use it with like deals and opportunities that we're taking on, like he's got a good, better best and best is like fucking it's the grand slam, like you're done, done outcome.
And so we, we build our pro formas and stuff like that on that same kind of [00:14:00] model. Like good is kind of. We made some money, let's call it like you made a 20 percent gain, like better is what we actually expect to make, but we don't wouldn't show that to our investors because I don't want to miss by that margin.
Right. So maybe that's 50 percent gain. And then best is like 100 percent like you're going to actually double your money on this situation. Um, and I just evaluate like that. I think it's more. Reasonable at this point in my career to really like be ultra ultra conservative to the point where like, I I'm super happy if we beat our estimations, um, as opposed to like going into it with.
Like these thoughts of grandeur that like, if every star aligns, we'll actually hit this number because that's not realistic. Right? So like you go in thinking you're going to [00:15:00] make that, that 50 percent gain, but you can bet your ass that you're going to have a hurricane hit or like stuff's going to go wrong or expenses are going to creep by 20%.
And so like, generally, if you, if you err on the side of like. And, and most of the business that I do is like buying assets, right? And so like, if you buy them right on the way in, that's why that's like a saying in real estate, buying it right on the way in gives you enough cushion so that you have the good, better, best options.
Meaning like, okay, if shit goes completely haywire, where do we make it out of this thing? We've held it too long. We spent too much money. Our investors have doubled our rates. Where are we at still? And you're still at 20%. Okay, like that's where we want to be on, like, that's kind of your worst case scenario.
So, I mean, from a risk standpoint, I don't know. I mean, like, that, I evaluate things ultra conservative just to [00:16:00] make sure that, plus it's better to celebrate that way. Because then you're like, well, I thought I was going to hit 20%. We've done better than that.
Shawn Rider: It's interesting. I've had to think about this because, you know, I came from a family that had to work their ass off just to get by, and so I've been very cognizant about money, and to me, seeing money in a bank account was very safe.
And so even though I've grown, I'm 36 now, I, I've owned businesses in real estate. Like I really had to force myself to get past the idea of, uh, spending money to make money. I do not like cliche quotes, but like to me sending checks off, uh, in my twenties was, was really hard, which is why I did a lot of the work in my businesses.
Right. And I think that's why some people do that. They want to hold on to the money. And so for me, I view risk from that standpoint. Is like, I wanted to keep everything in house for as long as possible from a financial perspective. I don't think I'm completely past that. [00:17:00] But what I've gotten good at is that there's different layers to it now and the game I'm playing is bigger, so the numbers are bigger.
So my My risk tolerance has had to adjust and taking in those licks, uh, if you would have told me five years ago, seven years ago that I'd have to shell out 65, 000 for a retaining wall at an Airbnb because a hurricane came through, I would have told you, I will not be buying real estate because I don't want to deal with that shit.
And of course I didn't enjoy dealing with that six months ago, but we just dealt with it. And I, you know, I give a presentation tomorrow to the inner circle guys on stoicism and like, that's part of it is like. That was out of my control. So I just move on, do what I need to do to make the numbers, to pay the bill, and I move on with my life and I continue to build things.
And so to me now, my strategic risk taking is built on these two premises that I have different layers of safety built in. Because the left side of my portfolio, as you [00:18:00] guys know that follow Jeff and I, the left side of my portfolio is literally the most conservative thing that you could put your money on.
It is life insurance, right? And life insurance companies invest in government bonds, okay? Those are super, super conservative, guaranteed payments, etc. forever, right? So, if you think of, uh, Nassim Tlaib's anti barbell, uh, or anti fragile book, his Barbell Investing Strategy. Have something super conservative on the left, and then have something that is more risk taking on the right.
Do not play in the middle, right? And so, that's how I view it. I have my super conservative stuff on the left. But my risky stuff, the reason why it's hard to say that they're risky is, one, it's real estate. So, it's backed by something that's real, tangible, physical, I can see it, I can sell it. Two, and there's value there.
I can add value to these things as well. I'm in control of that values to a certain extent. The other thing is business. So business would [00:19:00] be the most risky thing that I own, but I'm investing in businesses that I have skill sets for and my mind minimizes the risk as long as, you know, I do the right things.
I'm a good person. We service people. People get results. And so for me, I don't, I haven't put more than like 5 percent of our money in anything that I was ignorant on or deemed risky. And the few times I do do that, I do not fucking win. I will tell you that much. When I was speculative buying stocks, I fucking lost.
When I was speculative in buying crypto, I fucking lost. And it's because one, I was ignorant to it. Two, it was speculative in short term thinking, not long term investing, which is a completely different mindset. So you, you stock market people that are like, well you bought stocks, that was stupid, you should have done index funds.
That's a different type, I'm not talking about that. Right? I know my wife's [00:20:00] 401k is in a retirement date fund. Like, I get that. That's a long term investing. That's not to take a risk that I'm talking about. That's not risky at all in my opinion. For me, like, I'm not just out there closing my eyes, shooting bullets at random shit.
Um, I think some of the things I'm investing in, I, I, I can learn to do a little bit more due diligence. But because I really didn't want to do some of that or educate myself, that's why I'm partnering with people that are doing it. So I can just be the financial guy. So I've just had to become really in tune with my, my investment, my DNA, my investor DNA, my, my risk profile psychologically, and not force things that I'm not comfortable with.
I just find people that are better at other things if I want to play in an asset class. So maybe that's a non answer answer, but You know, I don't think I'm doing anything that's risky because I protect myself first. So protection for me comes before investing. And I think if you protect first [00:21:00] via life insurance specifically.
It really, really, really protects you from the downside risk of anything else that you do with your money.
Jeff Smith: Well, I mean, I think from a perspective, I think the reason I struggle with the question, almost, is because, like, my philosophy about things is, like, the risk is staying the fucking same. Like, and, that, that is the risk.
The risk is living life, like, My mom did and everybody else like, and I love my mom to death, right? She taught school for whatever, 37, 38 years, something like that. And, and she followed the exact path and structure that she was told to do. Boom, boom, boom, went down there and did all that. And like, that's fine.
Um, for me, that just wasn't it. And like, for the people aspiring to do something else, for the people that are aspi I mean, [00:22:00] philosophically, I feel like the entire thing that I teach and preach within the tactical empire is like, fucking retire when you're 40 so that you can do every single thing you want to do now while you're physically capable.
And like, fuck 65 years old, or 62 and a half, and getting some pentence of a paycheck out of your 401k. Like, that's not what we're put on this earth to do. That is more risky to me. We're consuming fucking pounds of plastic every year at this point in our lives. Do we believe that we'll be around at 62?
I'm fucking busting my ass trying to, but like, I don't know. I don't know. So for me. What I did, and this is probably unconventional to people, I saved a fuck ton of money and invested it in life insurance because I wanted my family to be taken care of. So they have a big ass death benefit if I don't show up tomorrow.
Okay? And so once [00:23:00] that happened Then I started saying, okay, now I'm looking for cashflow. How can I turn this into cashflow, buy back some of my time? So if I'm over here making 5, 000 a month with my active income, how do I take the money from my active income and make it make me another 5, 000 a month so I have now replicated myself?
I have built myself a little, a little worker that goes out and works the same amount of time I do and makes the same amount of money. And from there, then, this is why financial education is the crux of everybody's fucking problem. Like, to your point about, like, you are learning about things so that you can go out and invest in more things.
You are learning about how other people are doing this. You are trying to model other people. Or, you're saying, hey, you're really skilled at this. Would you like to partner? I think I can bring something to the table that is beneficial to you. And they're [00:24:00] like, yeah, hell yeah, let's do it. I like doing this.
You like giving me money, and I like making you double your money and giving some of it back to you. There you go. So, like, the, the thing that I struggle with risk is like, cause people talk to me about this all the time, and I'm like, your life is risky to me. Like, your, your uncertainty, your, your reliance on your boss to pay you next Friday is risky to me.
Like, that's, that's, so, I can't even conceptualize in my mind because we don't view risk as the same type of thing. Like, the, the end. The end output is not the same thing. So we're discussing different things.
Shawn Rider: I think that's interesting because it goes back to, um, this is why people don't like listening to Jordan Peterson, because in order to talk about a word, you need to define a word.
And so that is why like talking about [00:25:00] risk is hard because we have two fundamentally different definitions of risk. And I agree with you. I mean, going to the same place. Eight to nine hours a day for years on end and shelling your money away in an account that has your name on it, but you can't touch it and the government can change the walls on it and penalize you if you touch it like that.
I don't know if there's anything more risky than that. I mean, I can see the allure. I, I, my wife loved it, right? Like, and, and she's in the transition now of like feeling and figuring out what that non traditional non normal structure feels like. And I think the, the outcome is going to be super positive.
When she starts seeing the results via a different avenue than what she's used to.
Jeff Smith: Let me, let me add something on top of that though. That particular little thing is, like, that's, that qualified program, that 401k, let's use that as an example. That is a bullet being loaded into a revolver. And [00:26:00] then you're playing Russian roulette with it.
And saying, based on the timing, when I retire, are things in the stock market going to be good for that particular period of time to, and we have just experienced that and seen it real time, the people that retired in the last four years, five years, got Absolutely obliterated. That chamber was loaded when they pulled the trigger, and it was not good.
And 35 percent of their wealth went down the drain. So imagine that. Working 40 years. Squirreling away your 15 percent of your paycheck or whatever the fuck they'll let you. And then, because of timing, you lost half of what you fucking saved or thought you were gonna have. So
Shawn Rider: like the, the three big things that, that I tell people when it comes to those and we're, let's get on qualified plans.
Here we go. One, time it to these little stupid Bonnie Carlo simulations. Like [00:27:00] if they're off by a quarter percent, the number you think you're going to have, you're not going to have three. And this is the biggest thing is people think that they are delaying the tax. So these are pre tax let's say 401ks or traditional IRAs like, yeah, uh, I saved taxes.
They, they may, some people probably don't know, but most people know that they're going to pay tax on that money in the future. That's not inherently the biggest problem. The bigger problem is you've not only delayed the tax, you've delayed the tax equation. So Jeff just hammered you on the timie. God forbid it's an economic downturn.
You're pretty much fucked. Too. If your percentage return is off, you're not going to be close to what you think, or you could be very slightly off. Three, you have no idea what the tax rate's going to be when you retire. [00:28:00] If you're 61, you might have a decent idea, but if you're 35 You think in the next 30 years, they're not going to change the tax code.
Okay. Now we're really hopeful that they're going to get rid of it. That would be really nice. Um, but for me, like, I don't, I don't want to play that game. And so I'm no longer playing that game. And so what does that do? That's protecting. One, it does two things, short term and long term. In the short term, it protects me because it puts the money back in my system.
Now, what do I do with that money when it's in my system? I protect it in life insurance, just like you do, which protects my family in perpetuity, because it's got a death benefit to it, alright? And so, I'm not only going to get that money back in my control now, and I'm, I'm, I'm making it less risky in the short term, I'm certainly making it way less risky.
In the long term and I just am not a fan of the traditional game and that is why I've said this before that is [00:29:00] why when I was a teacher, the quote that I had at the bottom of my email signature was observe the masses do the opposite and the masses right now, truly, they think that they are not taking any risk.
But they may arguably be taking the biggest risk out of anyone.
Jeff Smith: They're risking their lives.
Shawn Rider: Revolver? You're a revolver analogy. That was good.
Jeff Smith: Well, I mean, like, ugh, we got a lot of problems. Financial education solves a lot of them, so pick up a
Shawn Rider: They're the one putting the money in these accounts, so we could say, like, theoretically they're putting the bullet in the chamber, but they're not the one holding the gun.
Like the government, these big businesses, people working behind the seams and all these credit, they're the ones holding the gun. You don't know when that trigger is going to go off and if it's going to be pointed at you or someone else. And that's, that's certainly. That's certainly not a risk I'm going to be [00:30:00] doing and taking with my money.
Jeff Smith: And, and there's, there's age limits where they make you start drawing the money. So if we're in an economic collapse, but you're in great health. And have other means of providing for yourself, you still have to start drawing down your money. So like, I can't imagine being someone that's very likely to live to 95 years old and being told at 62 or whatever the rules are, that you have to start taking the minimum withdrawals on that 30 years before you suppose you need it.
Or like, so yeah, I mean, I don't know. I think I went way off topic because I was just, I don't know what I think about risk, man. I think everybody else out there is living risky, risky lives and I'm just over here, safe as can be. Safe and sound.
Shawn Rider: I love it, man. All right, brother. Well, hey, strong episode. Good job for not knowing the [00:31:00] topic, especially if it's a topic that you find tough to talk about because we view it differently than a lot of people.
So I appreciate your insights, Jeff. Send the people out.
Jeff Smith: Thank you, sir. Thank you. Like and subscribe to, uh, the Tactical Empire YouTube channel. You can follow us on Facebook, Instagram. We're the Tactical Empire on all platforms. You can send Sean and I DMs on Instagram, in our personal account, on the Tactical Empire account, we check them all.
So you guys have questions about this. If this was helpful, send it to a friend to help us grow the audience. We would appreciate it because we bust our ass producing these episodes and we want. You guys to listen to them, get value, give us feedback so we can give you what you need. Thank you. Have a great week.
Keep kicking ass.