By Wayne Patton
Be honest. What would be your initial impression of a person who overtly claims “I Will Teach You To Be Rich”? Fraudster, right? If a client called me and said he or she was reading a book by that title or taking a class taught by the author, my instinct would be to advise, “Run for your life. The guy’s a two bit hustler” . . . unless I had more information. In this case, rather than telling people to run away screaming, my suggestion is that you watch and learn.
Unbelievably, Ramit Sethi is the author of the New York Time Bestselling book and website I Will Teach You To Be Rich. So why am I writing about this guy, and what does it have to do with asset protection? I’ll answer that in just one second, after I take this opportunity to complain for a little while.
Diversity Isn’t Easy
It’s not easy writing content for you – my clients – because you are a diverse group. Your net worths range from $250k to well over $20 million. Included among the ranks are bestselling authors, entrepreneurs, people who have sold lucrative businesses, professors, doctors, lawyers, chiropractors, dentists, hedge fund owners, and retirees. Given the diversity of this group, it’s tough to find a common thread that appeals to everyone.
This is where Ramit Sethi enters the picture. His most recent endeavor has provided me with the common thread for this post. Even though I’ve never met the guy, I like Ramit because he once sent me two pints of Jeni’s Splendid Ice Cream in the mail (you should all follow his lead on that one – and no, begging for ice cream is not the main point of this post). Ramit teaches a number of courses through his website. His sales strategy for those courses is compelling, and if you take the time to study it, you can see how it’s deeply rooted in the theory of persuasive psychology, as are most of the courses themselves.
I’ve personally checked with one of Ramit’s mentors, and what is publicly proclaimed over at IWillTeachYouToBeRich.com is in fact true. Ramit’s method is teach, teach, teach and then sell, after your credibility is beyond established in the eyes of most people. What’s amazing about the process is that there are no secrets. In one breath Ramit is openly discussing his favorite books and strategies, and in the next breath he executes on the same information and automagically turns readers into buyers.
Most of you won’t need any of Ramit’s publicly available courses (though I KNOW some of your offspring could benefit from learning how to make their first $1,000 or how to find a dream job – please call Ramit and not me with those complaints going forward), but you can still learn a whole hell of a lot from watching this guy.
Drumroll For The Main Point
Ramit’s latest (soon to be offered) course is in the fact the main point. Up to now, I’ve curiously watched Ramit sell knowledge that is practical and applicable in the real world – things like entrepreneurship and social skills. It’s been a breath of fresh air from all the real fraudsters out there who have never been successful at anything other than unsuccessfully telling people how to be successful (isn’t that some sort of universe-ending paradox?).
No, I’m sold on the fact that Ramit knows what he’s talking about and, more importantly, knows what he’s doing. I want to focus on the latter.
Ramit, a proven talent, is scheduled to launch a new course – one that shows students how to be successful online. That set my wheels a’turning, but not because any of you would be interested in the course.
Here’s why Ramit’s online course about creating online courses fascninates me (read between the lines here): Assume for a second that Ramit is a brilliant investor. What can we learn from the fact that Ramit is launching a course like this? Don’t think about the course content (though in a circular way, it is also the answer). Think about what Ramit is doing for himself in launching this course.
(Sidebar: Maybe I’m way too jaded, but I almost always ask myself what authors are doing for themselves with their writing, rather than what they are trying to give me. Try it . . . .)
The Real IP Man
Ramit is actually teaching folks how to create intellectual property. In the process, he is creating intellectual property for himself. Very simple.
Even though most of Ramit’s potential clients probably think they just want passive income, what they really want – and what you should want – is intellectual property that can spin off money like kids flying off a merry-go-round. Those of us who are lawyers, doctors, dentists, and in any other service industry won’t likely have anything other than cash, equities, bonds, and maybe some real estate to pass on to our children – those of you who are authors and creators of other types of IP, you inspire me!
Ramit has created a nice little catalogue of IP for himself.
I can just imagine the year 2120. Ramit’s great grandchildren trot out some classic courses taught by “Old Timer Ramit” and inject their own personality into selling the timeless information, just as Ramit does now. It’s somehow reminiscent of Tony Stark – yes, Iron Man – showing videos of his dad at the Stark Expo. More aptly, it reminds me of a scene from Wall Street: Money Never Sleeps, the one where the Chinese investor says something to the effect of “I’m interested in 100 years from now, when my grandchildren can spend the money.”
Asset protection is about having a vision for tomorrow. That includes protective mechanisms, sure, but it also includes the most important aspect of investing: Asset allocation. Intellectual property should be somewhere in your portfolio alongside commercial real estate (or notes), stocks, bonds, cash, and commodities.
The point is this: In my opinion, if you want to create massive wealth that can be protected and preserved, intellectual property is a pretty good bet, assuming you have the skill and talent to create something that is in demand and timeless. If you don’t have the skill and talent, invest in someone who does. Of course, there are issues. IP isn’t legally protected forever. But you can personally protect it. E.g. Coca Cola will keep it’s formulas a trade secret until infinity happens.
Exponential Growth With No Estate Tax
At current rates, a married couple can pass $10.5 million to their heirs free of estate tax ($5.25 million for a single person). Right now, today – before a single subscription has been sold – what is the value of Ramit’s upcoming course? I would argue the tax basis, or the cost of creating the course. After all, it could end up being a total flop, so I don’t advocate for a valuation based on his past success (though I would bet on his past success if given the opportunity to invest). This disconnect between past success and current valuation creates an opportunity.
So, the course could be valued modestly and contributed to a structure that would allow any appreciation in value to accrue to his heirs estate tax free (e.g. a dynasty trust of some sort). What if that course had been created inside of a structure that had already been gifted to his heirs (or in some creative ways using other family members, if he doesn’t already have children)? The answer is that he could potentially pass on massive wealth while still retaining a lot of the present day benefits of his work.
Here’s the beautiful part: What other asset class has the ability to appreciate from virtually zero one day (think of Emminem writing a song on a scrap of paper while riding the train) to millions of dollars the next day (think of Emminem driving his Bentley)? Sure, there are some investments that can do that. Most are incredibly speculative, and I don’t recommend them. I would, however, invest in Ramit Sethi’s business of creating and selling IP.
Allowing for exponential growth inside a protected and tax free structure is how generational wealth is created and preserved. It’s how visionaries happily make money today that their grandchildren can spend in a hundred years.
Watch Ramit Sethi, guys. You can learn a lot from that two bit hustler, if you read between the lines.