Gary Keller Quantum Leap Transcript Excerpts

Extras

A RESOURCE FOR QL INSTRUCTORSNOT FOR DISTRIBUTION PURPOSES

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Contents

EXTRAS ............................................................................................................................................ 2

Personal Productivity .................................................................................................................. 2

Behavioral Styles ......................................................................................................................... 5

Six Thinking Hats ....................................................................................................................... 12

Q: How do I manage having requirements I have to do? ......................................................... 16

The Attributes of investment Options ...................................................................................... 20

Q: Have you ever bought stocks? .............................................................................................. 21

Q: Should I go into debt to by real estate? ............................................................................... 27

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EXTRAS

PERSONAL PRODUCTIVITY

Well the first thing I’m going to tell you, is that you live in what I call the perfect storm.

Now understand, I’m in it now because I haven’t retired so I live in it too. Your whole life is in it.

Okay? I inherited it after I had already gotten a foothold into the world. You’re not. You’re in a

different place. Okay? You have the convergence of technology, information, and population.

So this is a little hard for you.

So look at what’s happening to technology. If we go back to the stone and the bone age,

right? And you go back to that time in the era, I want you to notice the time. Notice how

they’re getting shorter? Look at the Middle Ages, how long that was, then look at the

Renaissance age. Then look at how long the industrial revolution was, and then look at the

information age. What’s happening? Absolutely. We call that a trend.

That’s not just happenstance. People are getting smarter and smarter. The world’s

getting smarter and smarter. Technology and all of the, this is all technology by the way. Right?

We think of technology as electronics but that’s not true. This is all technology and it’s building

on each other. Okay?

So what’s happening is we are in an exponential world of capability. So technology

represents capability and there’s more capability today than ever before. Now look at the

information age.

If you got to 1370, 917 documents were in the Bibliotheque National. By 1500, there

were 36,000 documents at the Vatican. In 1840 there were 240,000 documents in the British

museum. At the Library of Congress in 2012 there were 147 million items on 838 miles of

bookshelves. Plus today in addition to that, one trillion web pages on the internet. In other

All right, we’re going to switch gears. So this book, The One Thing, the reason I wrote

it is because most people do not understand productivity. So we’ve left the world of life

productivity, now we’re in the world of personal productivity. So how do you become a

productive person? I’m going to apply this to careers. It applies to anything, but I’m going to

apply it to careers. Okay? So how do you do that?

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words, you have more capability than ever before, multiple times over and look at the amount

of information that is now being pushed through that capability. It is more than you can absorb.

There’s no way, right?

It’s like, I love the DirecTV commercials. Do you know why? You can have 4000 channels.

Dude, how many TV shows you watch? I mean, be really careful what you buy into in the media,

right? Because they’re selling you all these opportunities and I’m going, dude I only watch

seven shows. I only have time for seven shows. I’m sorry, I can’t watch, you know, Orange is the

New Black. I can’t watch all these. I don’t have time. I pick my shows and that’s it. I can’t pick

them all. I start chasing them all, right? Now I got to go watch all of Mad Men, right? And then I

got to go get Game of Thrones. You don’t have time for that. You can’t do it all. Okay?

Now population. So you have more technology, faster technology pushing more

information than ever before. Now look how many people you got pushing it at you. It took all

of time to get to the Stone Age and a million people. Bronze age, 14 million, Iron Age, 50

million, Middle Ages, 190 million, Renaissance age, 360 million, industrial age. It took all of time

to get to 1804 and a billion people. So all of time to get to 1804 and a billion. 123 years later,

two billion. 42 years later, three billion. Five years later, four billion. 13 years later, five billion.

12 years later, six billion. 14 years later, seven billion. What do you think is happening? We are

freaking overpopulating the planet.

If you want to know the number one threat to the earth is population. It’s a threat. Look

at that. What do you think’s going to happen? I mean it’s a real issue. It’s a problem.

So imagine this today, you got seven billion people pushing how much information at

you through what capabilities? You’ve got it coming out every pore in your body. You got

people tracking you everywhere. And it’s no longer privacy. Anything you put on that computer,

someone can grab it, and they can track everything you’ve ever done. In fact, you’re getting

tracked now. Trust me. You got GPS. You got a phone, it has GPS in it. All you know, the

government’s tracking you right now. But that’s what’s happened.

I mean when you see all these space age movies that you think are kind of fantasy;

they’re not fantasy. Those are people that are predicting the future. They’re taking all the

current technology and they’re just plusing it by a little and making it a fantasy, but they only

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had to plus it by one to get to that nanotechnology. They didn’t have to plus it by much. Okay?

So you look at all that and you say good Lord. It adds up to what I call the perfect squeeze play.

The squeeze play is, and I use this example. If you just take North America, two years

ago 610 movies were released, 8425 TV channels existed. That was 192 shows and 5840 movies

were shown on those channels. You have 347,178 book titles in print, 500 magazines were

produced that were either monthly or quarterly or annually and you have 800 daily and weekly

newspapers.

Now I have a question for you? How many movies you watch a year? How many movies

do you go to at the theater that are released? How many movies can you watch on a weekly

basis? Can you watch 610 that are released every year? So I’ll go back to my whole point about

knowing it all, having it all and doing it all. You have the perfect squeeze play. Now look at this.

On the computer side just for the fun of it, internationally there are one billion

computers, 100 million tablets and six billion cell phones. Remember, there’s seven billion

people. Six billion cell phones. Right? What do you think’s happening? You’re getting inundated,

which by the way all of this adds up to one thing; you are being forced more than ever before

to make choices.

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BEHAVIORAL STYLES

If you’re really going to understand who you are, two of the biggest things that are

going to matter is how you prefer to behave and how you prefer to think. Because once you’ve

gotten your mission, your vision, your values and your beliefs, it’s going to be how you behave

and how you think.

So this is a simple little chart that was created by Dr. Tony Alessandra, and it’s been

around forever. And I say this chart is kind of like a bathing suit. What it shows you is

interesting. What it doesn’t show you is vital. But it is a great way to explain behavior real

quickly to you.

Now when I say behavior, what I’m talking about is preferred behavior. This is my five-

minute explanation of behavior. It’s a lot more complex than this but this gets you in the game

of understanding it…and that is how you deal with people and how you deal with tasks.

So the first line he’s going to call the relationship line. And what he’s going to say is that

if you’re a ten on the relationship scale, he’s going to call you very open, meaning you’ve never

met a stranger. Meaning when you walk into a room and you see people, you go “People!”

Okay?

Now on the other hand, if you’re if you charted down here, if you answered the

questions and charted down here, you’re going to be what he calls a closed or self-contained

individual.

This person (OPEN) wakes up every day and says who am I going to see and what am I

going to do with people, you know? This is someone who never has lunch alone. You’ll see him

in the office or the school environment where they’re constantly saying hey, where are you

going for lunch? Hey, where are we going to lunch? Hey, what are you having for dinner? Hey,

where are we going tonight? Hey, what are we doing this weekend? They’re always defined by

the word we.

Down here (CLOSED) they’re always defined by the word I. What am I going to do? And

if I need people, I’ll enlist them but I’m more than happy to sit here and not talk.

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So in one extreme, we seek people at every turn. Every task we do is an opportunity to

involve people. At the other extreme, every task is an opportunity to do the task alone and we

may involve others, we may not. So then we behave accordingly.

If we seek relationships we call that being open, meaning my eyes are wide open, my

face is inviting and I’m inviting you to talk to me.

See I can sit in this room and immediately start telling you who’s self-contained and

who’s not. I can tell you who’s open and who’s not. You know how I know? Because some of

you haven’t cracked a damn smile in four hours and some of you won’t stop smiling. And some

of you decide when you’ll smile and when you won’t. At a very simplistic level, that tells me

who you are right off the bat. That means you’re very self-contained or you’re very open, okay?

Think of it this way. An open person talks to other people first. A self-contained person

talks to themselves first and then decides if they’re going to talk to other people. Remember,

everybody talks. Some people talk to themselves first, some people talk to others first.

Now if you’re really smart and you talk to others first, that means you’re smart and fast

enough to talk to yourself at the same time so you don’t embarrass yourself. But we’ve seen

some really dumb open people who talk to others first and are so slow mentally that they’re

always saying stupid things. You know that person? Yes. Think about it. You know the person.

You may be the person. It’s okay. This isn’t right or wrong.

By the way, there is no success behavior. Be very clear about this. I’m not telling you this

to tell you who succeeds and fails, who has a happy life or doesn’t. This is about knowing who

you are and recognizing when your preferred behavior is not the proper behavior in the

moment. Did you hear that?

And don’t seek tasks that you’re going to put in four hours a day to master that don’t

match your preferred behavioral style. You’ll be very unhappy. Does that make sense? Okay. So

you want to know your preferred behavioral style.

Interestingly enough, at your age it hasn’t been totally decided yet. Behavior usually

isn’t decided until your mid-20s. By your late 20s it’s about 99% done. The rest of your life, no

matter how hard you may think and how much therapy you go into, you will not change it. That

is a scientific proven fact. So you have time to change if you want. If you want to redo a little of

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this, that’s up to you. There’s no such thing as success behavior, okay? But it is self-knowledge

to know how you like to behave, okay?

So, so a person who doesn’t seek relationships every second of the day naturally

behaves by putting their eyes down. Or if they walk into a room, instead of going hey, how is

everybody? They just walk and take their seat and they sit down and they start doing stuff. Are

they friendly or unfriendly? It’s a trick question. Has nothing to do with friendliness. Has

nothing to do with it.

By the way, just so you know, I’m off the chart down here (CLOSED). When I was 21

years old and they gave me a behavioral profile at New York Life, I rated way down here. That’s

why they didn’t give me a job. Because their track record says the most successful sales people

for New York Life at that time had that behavior (OPEN), and I rated down here at the lowest

scale.

Now you’re getting me, the teacher, so I appear pretty open to you. I leave this room

and I go down the hall, you’ll notice something about me. I will pass you up. I will walk right by

you. Now I’m 57 so I’ll be nice to you. I won’t run you over. But I’ll keep going. If you try to talk

to me I’ll just keep going. If you want to follow me, that’s fine. If you don’t’ want to follow me,

the conversation’s over because I’m not highly social, meaning I don’t wake up in the morning

and seek relationships. I’m purposeful about my relationships. If I don’t need them, I don’t have

them. That’s just who I am. I don’t know how I became that way. By the time I understood all of

this my behavior was already set.

So what you’ll notice is you’ll have friends…usually they’re the opposite and we tend to

marry our opposite, just so you know. We tend to date and marry our opposites. That’s how

you get the yin and yang in a relationship. When you get two people who are exactly the same,

they both drown together. No, seriously.

Usually if the guy is highly open, they tend to be attracted to someone who’s not. And if

the girl is highly open, she tends to be attracted to the opposite of that long term. You rarely

see relationships where they’re both the same and that lasts forever. That make sense? It’s odd

but it’s that yin and yang thing. It’s kind of cool, actually but it works that way. We tend to see

friends the same way. Think about it. Look hard in your friendships. You’ll notice that.

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By the way, it goes back to why no one succeeds alone, no one fails alone. It’s always in

pairs or more. Have you noticed? It’s your era. You’re living in the Internet era. Have you

noticed all of these amazing new technologies? Of course they’re not changing the world. All

about communications, right? Snap Chat, Facebook, blah, blah, blah, blah, blah. They don’t do

anything other than change communication but they’ve become the richest people on the

planet. Can’t solve cancer but you can sure send a nude picture of yourself that will go away in

30 seconds. That’s life altering isn’t it? Exactly, exactly, exactly. Anyway, that tells you where

society places value.

But the interesting thing though is, at the end of the day, you will usually notice that

those guys come in pairs. Have you noticed that? Remember, it wasn’t just even Jobs it was also

who? Wozniak. Sure. It wasn’t just Bill Gates. It was Paul Allen. Yeah, it wasn’t just Sam Walton,

it was his brother, Bud. It wasn’t just Walt Disney, it was his brother Roy. They come in pairs;

trust me. They’re brothers and sisters or whatever; they come in pairs. They just do. It’s the

most amazing thing. Right? Look deep. You’ll see it. You will see it. It is there.

And usually you’ll notice, they’re opposites. One is the engineer; one is the salesperson.

You’ll just notice that they just come off that way. It’s fascinating. Okay? It might be fun for

everybody to take it and figure out who you are today. There’s no success formula, right? Just

want you to understand that. Warren Buffet the most successful investor on the planet has the

exact opposite of the profile of a top salesman. Why? Because he has a profile of an analyst. He

has a profile. And Bill Gates has the profile of an analyst. That’s why, that’s why they both, they

ended up being best friends which is interesting, you know. But they’re best friends around

playing bridge. That says all we need to know about the way they like to behave.

The other one is how we approach tasks. And there we have the simple language of

direct and indirect. So when you’re way over here (INDIRECT), it’s let’s do it, we should have

done it yesterday. In other words, time’s wasting, let’s go. Why are you still here? Let’s get it

done, let’s go. Indirect. In other words, this (DIRECT) says causalities are acceptable; mistakes

are okay. Over here, this (INDIRECT) says we need to do it right.

So the dialogue that you had going on between these two people is look, let’s go. No, I

need to make sure the timer’s on for the sprinkler or whatever. Look, dag gone it, you should

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have done that yesterday. Let’s get out of here. Oh, oh, oh, oh, I got to check to make sure the

oven’s off. Look man, we got to go. No, did you feed the dog? It’s this whole dialogue back and

forth. Look, we need to go. We need to measure to make sure it’s right. Look, just cut it. Well

I’m going to measure twice.

So I want you to imagine this. The best pilots are going to be which behavior style? Who

do you want flying the plane tomorrow? Who? You want that guy. Why? That’s why surgeons

don’t have good bedside manners. Why? Your best surgeons tend to be whom? The people in

this behavioral style. Slow it down and do it right and do it alone.

The people that have this behavioral style that got a medical degree, end up running the

hospital. Let’s organize everybody and get things done. Does that make sense? Takes both,

doesn’t it?

So if you got an accounting degree, but oh by the way, you have that behavioral style,

most likely you’re going to gravitate to being the managing partner. Doesn’t mean you make

more money, it just means that you’re going to gravitate to that because you naturally are

organizing everybody. Do you see what I’m saying?

You naturally say, hey, let’s get everybody together and have a meeting and get things

done. Whereas this person over here says here shut up, I need to study a little more, make sure

I know how to cut that surgery exactly right and sew up exactly right and I’m over here in my

dorm room practicing. Leave me alone. Dude, you never come out of your room. Dude, shut up

and leave me alone in my room. You see it? Yeah you’ll see it. Yeah.

Is there a success behavioral style? No there is not. I can’t reiterate that enough to you.

Be very careful about that. What you got to recognize is that at some point the dude’s got to

come out of his room. And at some point, the dude’s got to go into the room and shut the door

and master something. In other words, your preferred behavioral style, if you’re always using it,

is going to be your worst enemy. Does that make sense?

But when you pick your profession, it’s going to naturally do what? It’s going to fit your

behavioral style. Because if it doesn’t you’re going to have a big problem. You with me on that?

Yeah, because you’re not going to enjoy it.

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Again, if you study banking or accounting, at the end of the day you have that

behavioral style, are you going to have fun sitting in an office from eight to five every day

counting numbers? I’ve got people back in my office, they love doing that. This is their

behavioral style. I have one lady who…I probably talk to this individual probably five minutes a

month and she’s very happy with that five minutes. Most of the time she goes in her office,

shuts the door, takes off her sweater, gets her tea or coffee, whatever it is she’s enjoying and

sets everything up perfectly and then manages the world. You got it? And we need those

people, yes?

Do you think the people that do the wiring on your cell phone, do you think they’re that

behavioral style or that behavioral style? Do you think they are how many we can get done and

how fast or how many can we do right? There you go. There it is. So self-knowledge is

important isn’t it? Yeah.

What they didn’t count on with me from a sales standpoint was in the world of real

estate, the person who makes the most amount of money in sales is the one in this quadrant

right there and that’s me. Yeah. The reason is because I’m task oriented to get things done fast

and I don’t waste time. I focus and get it done. What happens to a person makes a sales call

that has this behavioral style, when it could have been done in 30 minutes, they take three

hours. Because they have coffee, they have breakfast and they have lunch with the customer.

By the time they’re done, I’ve sold five more customers. That was the difference. Because I just

did it and moved on.

The other thing the behavior test doesn’t measure is intelligence. Intelligence meaning

you know when to alter your behavior in order for things to happen. So it’s not a success or

failure thing. It’s an understanding what you love to do and don’t like to do. Does that make

sense? Yeah.

So the individual who runs our investment business oddly enough…and this is the really

interesting thing. His behavioral style is this and this. And yet what he loves to do all day is call

on people and then analyze. And his ability to analyze is off the charts and it’s so

counterintuitive to his behavioral style. And he didn’t even realize it himself until his 30s. He

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woke up one day and realized he was actually an analyst with a sales behavioral style. It’s really

fascinating. It’s how you behave and how you think. Remember, inside to the outside?

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SIX THINKING HATS

The gentleman that wrote the book really is genius. He identified that there are

essentially five ways that you can think. And he called it hats because the old saying put on your

thinking hat. Yeah.

So the first one was he calls the white hat thinker which always deals in facts, figures

and objective information. So an individual says well what’s the facts, I just want the facts. Tell

me. Okay, tell me what happened. Very white hat oriented, okay?

The red hat always comes from emotion. So if I asked Lance and let’s say he’s a red hat

and I say Lance, what do you think about this? Listen to what he tells me. He’s going to come

back and say, what I feel is this. He didn’t even realize he used the word feel and if you don’t

understand how people think, you won’t catch up on the fact that you ask him what he thinks

and he tells you what he feels. Because he thinks with emotion.

So he gets a little hyper about it and he starts getting excited about it and he starts kind

of telling you how he feels about it as much as what he thinks. It’s neither right or wrong by the

way.

A black hat says I can live with the upside, what’s the downside? If you’re a yellow hat

you’re trying to sell the upside. Yellow hat’s in there saying look at all the positives. The black

hat says I get the positives. Tell me the three things that can go wrong.

Now if you don’t understand yellow hat and black hat, you’ll think the black hat is a

negative person. The black hat is not a negative person. But watch, you know how you’ll know

it? Watch a sporting event where the yellow hat and a black hat. With five minutes left in the

game, the yellow hat’s going boy, I think we can win this. Black hat says well we’re up by five,

but I’ll tell you, we’re probably going to lose. Now, they could be a negative person but if

they’re a black hat, what they’re saying is, oh you know what? I’ve counted the minutes and the

times of possessions in the basketball game and I’m telling you, there’s 30 seconds left and

there’s just enough time that if that goes wrong and that goes wrong, they can win the game.

Now the interesting thing there is, there’s a great book written called the Six Thinking

Hats and it’s a very short read. So if you buy it, it’ll cost you, I don’t know, 15 bucks on Amazon

and you can read it in one afternoon. A couple hours and you’re done. I highly recommend it.

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In fact, I watched that happen the other night where the, oh gosh, who was the team?

My team was up by ten points and lost in overtime. Oh it was against Golden State. And all of a

sudden which is an amazing team this year, right? And if you know anything about basketball…

And bam, just like that, they hit three 3 point shots. Bam, bam. They had a turnover and the guy

got the ball, hit the three point. The famous play where Bird stole the ball. If you know Boston

Celtics. Bird stole, Larry Bird stole the ball, made the layup. Won the game in like seconds,

right? It’s that kind of a thing. Yeah. The black hat.

Okay, here’s a good example. UT basketball team, the score was tied with seven

seconds left against Iowa State who won the big 12, right? The big 12 tournament, right? And

seven seconds. Well let’s back up. With four minutes left, UT was winning by 12 points or 11

points, whatever. It was a lost the game, completely lost the game. Most likely the coach played

to not lose and ended up losing every single time. That’s what happens.

But there it was with like seven seconds left and the game’s tied and you’re thinking this

is going to go to overtime, right? The yellow hat is sitting there going let’s go into overtime. The

black hat saying there’s still seven seconds left. The dude can hit the shot. Well sure enough the

guy did hit the shot. It’s the buzzer to win the game. But it’s not being negative. The black hat is

simply saying I get the upside, quit selling me. The yellow hat says but can’t you see all the

benefits? So the yellow hat’s always pushing the benefits. The black hat’s always saying, I could

kill it. Okay? The green hat says hey, but have you thought about this? Hey, have you looked at

it this way? Hey, how about this idea? Right?

So ignore the blue hat for a second. So there’s essentially five ways you can think and

every one of you have already begun to determine. And usually we have two hats, not one. So

what you’ll typically you’ll see is someone is a white hat, yellow hat. They’re very positive but

they always want to get the facts. Or they’re a black hat, white hat where they say, look, give

me the facts and tell me the downside. I get the upside. I can see it. Tell me the downside. Or

they’re a red hat, green hat. That is they’re always excited and telling you with emotion what

they think and they’re always coming up with no ideas. Right? That person who just can’t stop

it. Well have you tried this? Well have you tried this? Well have you tried this? How come you

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haven’t tried that? Well hey, did you ever read that? Did you think that could work? Let’s do

that. Let’s do that. Let’s do that. You with me?

That’s not a positive or negative. What de Bono’s going to tell you when he wrote the

book was you should learn to function as soon as possible as a blue hat. That you should always

be a controlled thinker when it matters. Meaning, always go to blue. Code blue. Always go to

blue.

What that means is when things matter, don’t go to your natural way of thinking.

Because the best way to think is to incorporate all five. So imagine we have a business meeting.

We’re sitting in a room. We’re fixing to make a product or service decision that’s going to

determine the history of the company, right? Do you want just one of these? Say no. Good, you

get an A. You do not want one of them.

So what you do as the leader is, regardless of the fact that you have a preferred thinking

style, what you want to do is you want to engineer it by saying look, first let’s get all the facts.

Let’s do the research; let’s make sure we know what’s going on. Okay?

Now secondly, I want you to give me all the different ideas. I want to go from white hat

to green hat. Now give me all the different ways we could do this. What would be the choices?

Okay?

Now I want you to give me the yellow hat, tell me all the pros. Now I want you to give

me the black hat. Tell me all the cons. Now I want you to sit back and tell me how you feel

about all this. Okay?

Now based on all the research, based on all the choices, based on the pros and the cons

and how you feel about it, what should we do? Now did you just hear that? Did you see I

engineered a great meeting?

So you’re sitting back in in your dorm or you’re sitting in your apartment with your

roommates and a decision needs to be made. This is one of the sheets that you stick up there

until you have it memorized. This is a model. I didn’t invent it. It’s actually a researched fact.

This is the way you do it when a decision is being made that matters. And if it doesn’t matter,

you go with the green guy. That idea will work. Who cares?

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She likes it, do it, you know. Or you know what? You can’t live with the upside, we’ll go

with your downside. Let’s do that. Fine. Because it doesn’t matter. Right? What are we having

tonight? Okay, great. Let’s eat it. I don’t care. Okay?

On the flipside, if it matters, what hat do we go to? We go to blue hat. So what are our

choices? Have you researched it? What’s the pro and the con? Are you in touch with your

feelings? How do you feel about it? Okay, let’s make a decision. And what you’ll notice is when

you do that, great decisions get made. So remember again, perfection’s overrated. We’re not

trying to make great decisions on everything we do, are we? What are we trying to do? Trying

to be situational. We’re trying to ask the question, when things matter, get in control. That’s all

we’re saying. It takes practice to do that, by the way.

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Q: HOW DO I MANAGE HAVING REQUIREMENTS I HAVE TO DO?

MALE: So my question is how to be able to manage having requirements that you have to do?

GARY KELLER: Well the most important thing. Unless you’re a genius and you, and you’ve

invented the next whatever….and at your age, how many people actually did that? Five. I mean,

they’re celebrated but I say five. It could be ten. Out of a gazillion people. It just doesn’t

happen. So in school, your number one thing is to learn how to achieve. Getting grades is a

measure of that. And again, I’m not saying As, I’m just saying putting in the time to learn how to

learn, is important. So in my book, you take the classes and you still try to do the best. You

don’t blow them off.

MALE: A lot of times I feel like I’m learning more when I’m doing outside workshops.

GARY KELLER: You will, but you got to realize that, and I say this with all respect for higher

education. It’s not really preparing you. If you’re a general business person, it’s not preparing

you at all. If you’re accounting, if you’re finance, if you’re going to law school or whatever,

medical. Those are very finely tuned, very specific classes. My experience in business for

instance. The statistics class really didn’t help. Learning how to program Fortran did not really

help me in the ‘70s. Well because it’s not real world.

GARY KELLER: I don’t have a guy who just launched ten campaigns that were hit homeruns

coming in and teaching me how to do it. Instead I have someone who studied it teaching me.

And that’s like someone who reads about parenting teaching me versus someone who

parented. It’s not the same thing. Because what you’ll find is that practitioners go to the heart

of what it takes. They don’t mess around. Look, it takes these five things to do it. Go do that.

Okay. In college, it’s not designed that way.

MALE: Yeah. I guess I just feel frustrated.

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GARY KELLER: You’re going to be frustrated. And that’s okay. College is awesome. Stay there

and try to get the best grades you can and learn. And remember, you’re there to learn how to

learn, build the right habits for focus, right? And to build relationships. That’s what you’re there

for. Okay? I mean I could send you to nonsensical things for four years and if you’ve tried, and if

you’ve figured out how to get to study, to learn that material and you came out of college and

couldn’t apply anything you learned, but you apply the amazing ability to learn, we’re good. I’m

going to eat you up. I’m going to take you into my life as a professional. What grades you make

in general business don’t really matter. No one cares.

GARY KELLER: The trick is you’re going to come out of college and immediately realize man, I’ve

now got to assemble a different world. I now have to live in this world and I have to learn to be

productive. It’s having success. Well in school, the grade represented success. Yeah. So trying to

not fail is a good thing, okay. And trying to learn the most that you can about how to learn,

golden. That’s what you want. Because you’re going to come out and go wow, I’m this age. I

now need to learn how to do things. I know how to learn. Wow. I can apply that, right?

GARY KELLER: That’s why I go back to high school. The number one thing is we want to get as

good of grades are necessary to get to a college we’d want to get into. But secondly, we want

to learn how to learn. Right? So the harder the high school, the better you’re prepared. Even

though, how much of your high school are you applying? How much? How much are you

applying? You went to, you did 12 years of education, right? First through 12th grade. You got

to college. How much of it applied? Not much.

GARY KELLER: It’ll be the same with college. It’ll just be the same. But, if you learn how to

learn. See again, if in high school, say you learned how to study. You learned good habits on

how to study and you got to college, wow. That would be the most important thing you could

have learned to be honest with you, other than some math and writing skills and stuff like that,

that would apply. It’d be the most important thing. Because now bring on anything, bring on

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any topic and you know how to sit down and make that work for you, and learn how to do that,

or learn that. It’s the same when you get out. You’re going to go out into the working world and

you’re going to want to be effective, right? Okay. And you’re going to have to learn skills that

you weren’t taught.

GARY KELLER: The problem with higher education, the challenge that they have is they don’t

know what you want to do. Because if you knew exactly you were going to go out and work for

that firm and you knew that four years in advance, well they would put you through courses for

four years that would prepare you to work for exactly that firm. But if you go in and you say, I

don’t know what I want to do, I don’t know where I’m going. I don’t know what’s going to

happen. Well they’d look at you and say to heck with you. We’re going to put you into these

classes. Right? So you can’t, you can’t blame higher education for it being general because you

don’t know and you’re not even willing to commit. You’re not willing to sign onto the firm

today, right? There you go. Then what are we going to teach you? It’s going to be more general.

It’s going to give you a general background, right?

GARY KELLER: My son, I may have told this story earlier, but you know, he had to write in his

landscape architect class, he had to write a business plan. And they’d given him all the business

formulas. Internal rates of return, blah, blah, blah, return on capital investment. He had this

whole sheet that he texted to me of all these formulas and then he had to write a business

plan. So over two nights he and I by the phone. We’re long distance. I walked him through that.

And I remember, what’s funny is after the first hour of just working him on those formulas is

that dad, I learned more with you than I learned the entire semester. I said, well and there’s a

reason why and that’s because I’m being practical. I’m not giving you a test. We’re just talking

about how this applies in the real world. And I kept giving him examples about businesses that

he knew about.

GARY KELLER: I said let’s compare that to the grocery store. Now here’s why they would want

to know their inventory turnover rate. Here’s why that would apply and you shop there all the

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time. Can you understand that? And let’s talk about what that would look like. And he says well,

that makes total sense. The problem is again you’ve got 40 or 50 kids in a class or whatever and

none of them have made a decision about what they want to do, and so we’re stuck with

generalizations. Not bad, good foundation, good foundation. If you’re general business, good

foundation. But trust me again, you won’t apply ten percent of it when you get out. However, if

you learn to learn and you have that ten percent, you’re golden. You’re good to go.

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THE ATTRIBUTES OF INVESTMENT OPTIONS

There’s one last page in here that’s a good page and this is the page that says, this is the

third page I want you to keep out. It’s called the attributes of investment options.

So it’s just a fun little read because what it shows you is notice it’s derived, it’s divided

into income, high level or security. Right? So US treasuries, are they high level of return or

security income? Yeah. Growth potential, short term, long term, neither one. There’s no growth

potential in a treasury, okay? Is there security or principle or is it risk? No it’s absolutely

guaranteed. You’re fine. Okay?

Other advantages. Is it liquid? Absolutely. And does it have tax advantages? Yes. It can

have tax advantages. So there you go. So you can literally go through here and you can mix and

match your money. So yeah, to answer your question, yeah I’d probably do that.

On the other hand, I might go put it in a savings account recognizing I’m not getting spit

and it doesn’t matter anyway and try to get a couple thousand dollars together and then find

someone in this room who has a genius idea and give them $3000 for one percent of their

company. You could lose your money. On the other hand, you’ll outperform. Yeah. So you kind

of play a game a little bit, you know.

Remember, at your age I will do two things. I probably would set aside some money as

security. I’m saving it or I’m putting it in a mutual fund. And that’s what I did. And you do it

because you don’t want to go backwards. You don’t want to have nothing.

Oh by the way though, now as much as fast as you can, get the other money and go.

Sorry, but people that get married young have a huge investment advantage over people that

don’t. I’m not talking you into getting married, but I’m just pointing out that tomorrow morning

two can leave cheaper than one. You get married at 25 or 24 or 26, all of a sudden you got

double income and you don’t need it. And all of a sudden you wake up and in two or three

years you could have $30,000, $40,000 sitting in the bank, sitting somewhere to invest. At 29

you could be on your second or third property or you could be on your second or third juice

franchise. And I’m just kidding about that. But they’re all over the place. That make sense?

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Q: HAVE YOU EVER BOUGHT STOCKS?

MALE: Have you ever bought stocks?

GARY KELLER: Bought stocks? Oh yeah, yeah, yeah. From day one. I was in mutual funds from

day one. But yeah, I did. I actually played the stock market twice. The first time I made over

$700,000 on my first purchase. The second time I lost $25,000 and I didn’t…all of a sudden I

realized I didn’t know what I was doing and I never did it again. The reason I made over

$700,000…it’s a long story, but the short story is that it was an insider deal. Not an illegal

insider deal, but it was a company that was going…that they offered they wanted…they needed

the capital. I loaned them the money and if they converted it to stock, I got X amount. And

there were a whole group of us that were offered.

GARY KELLER: I had a six-month lockout from the time they went public where I couldn’t sell it.

At the sixth month, on the day, I sold it all. And I was the second highest earner. The company

tanked. They ended up being worth nothing and the CEO cheated and went to jail or five years

and the CFO went to jail for two years. Yeah. But I made over $700,000 in the stock market

which immediately means somebody lost $700,000 somewhere, right? Yeah. Because it’s not

additional money. It’s a, you made it, you lost it. You lost it; they made it.

GARY KELLER: In the stock market, not everybody wins. In order for you to win, somebody lost.

Somebody sold it, right? Someone bought it for you to sell it. Now if it doesn’t hold its value,

they’re going to lose. If it doesn’t keep going up, they lose. So somebody’s going to lose. There

are guaranteed losers in the stock market. That’s why it’s risky because you can’t predict it.

GARY KELLER: Let’s end on this note about the stock market, because I want to educate you

about it. That’s why Warren Buffet won’t do it, people like me won’t do it. And the reason is

because you’re just…it’s gambling. It’s legalized gambling. Okay? If you do it, God bless you but

it’s gambling.

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GARY KELLER: If you invest money, you expect a rate of return, right? So if I give you $100 and I

get ten percent then I get ten dollars a year on the $100 I gave you. Correct? So we can value it.

I can say look, you’re making $100.

GARY KELLER: Another example. You’re making $100 on your business. I’ll give you ten times

earnings. I’ll give you $1,000 and I’m going to make ten percent. We can value that. The stock

market doesn’t pay dividends. So if I give the stock market $1,000, there’s only one way for me

to make money. How is that?

GARY KELLER: Yes, but the stock has to go up in value. Now why does it go up in value?

MALE: in value or maybe there’s speculation

GARY KELLER: Those are all B.S. answers. What do you mean? It doesn’t. It’s already valued at

20 times earnings. What would you pay a company 100 times earnings for 50 times earnings.

GARY KELLER: Well it’s all funny money. It’s a joke. It’s not worth it. When you bought it, it

wasn’t worth it.

GARY KELLER: Let me play the stock market game with you real quick. Here’s your lesson.

Here’s a pen. I need some money. I’ll sell you this pen for a dollar. Say yes. Take it. We’ll play a

game.

GARY KELLER: Okay, so I now have a dollar, you have a pen. But you know what? I think pens

are going up. There’s intrinsic value in those pens. I mean I’m BS on the ultimate earnings and

we’ve set a higher rate for earnings on that pen. I’ll give you two dollars for that pen. Say yes.

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GARY KELLER: Dude, you’re a genius. You just made 100% on your money. The stock market’s

amazing. I’ve got a pen. It’s worth two bucks because that’s what I paid for, right? But you now

realized pens are going up. There’s a run on pens so you’re going to give me four dollars and I’m

going to give you the pen back because you want it. I made four dollars. I’m a winner.

GARY KELLER: You now have a $4 pen, dude. Okay? I can buy that pen for a dollar down the

street, but it is four dollars. For what reason? Because we think it’s worth that. We all claim. For

what? Why is it worth it? Okay so let’s keep going.

GARY KELLER: I actually think it’s actually going up. I’ll give you ten bucks for that. You

recognize a sucker when you see one so you take your ten bucks and you’re bragging to your

buddies you have made a killing in the stock market on pens. Okay?

GARY KELLER: But I’m sitting here going man, he just told you a tip, there was going to be a run

on pens or a shortage. You’re willing to give me $20. And I go, take it, $20. Now all of a sudden

you need money. You got a pen, you pay $20. What’s it worth?

MALE: That’s not all valuing the pen, though. That’s all speculation.

GARY KELLER: That’s the stock market.

MALE: There’s no way to value a company.

GARY KELLER: Why not?

GARY KELLER: I just told you. What’s rate of return? No, no, no. He’s taking your money. He’s

not buying. He’s not in the stock market. You’re buying his stock. He’s taking your money to

make more money for himself.

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MALE: Okay. But he’s still earning a rate of return on that money.

GARY KELLER: Right. Listen. It’s going to make less than ten percent. How can you not get rich

doing that? The answer is you can’t. I’m not trying to argue with you. But take it from someone

who knows. You can’t get rich doing that. Now you could be rich being the guy selling me the

B.S. You sound pretty good at it. I mean you act like you believe it, so that’d be good. You can

sell all these guys. She’ll give you her money right now because she’s bought into that. Okay?

GARY KELLER: Understand this. You can go to New York and you can be a stock broker and you

can make millions in fees. You can. All you have to do is go out to Maine and look along the

coast and you’ll see all the money from the guys who make it in hedge funds.

GARY KELLER: But understand they didn’t invest their money. That’s not how they made

money. The money in the stock market is made from the guy that invests it for you or the guy

that took it public. It’s the only money that’s made. Study it. Trust me. Just study it. And then go

be the guy that brokers it. Go set up a hedge fund. You’ll be one of the richest guys on the

planet. But you didn’t make it because you invested in the stock market. You made it because

you made her eight percent. It’s a fact.

GARY KELLER: I’m not trying to make the stock market out to be a bad guy, what I’m trying to

tell you is it’s going to be luck whether you get rich doing it. You’d be much better off going to

this guy and saying what business do you want to start? And he says I’m going to start that.

Great, I’m going to take her money and I’m going to invest it in that. And you’re going to put

your money alongside it. Now dude, you’re going to get rich. You’re going to get rich. You’re

going to get richer in your wildest dreams. There’s a lot of people that have money that made

money investing.

GARY KELLER: Look at technology stocks as an example. Do you really think that Apple is worth

the valuation? No freaking way. So here’s the problem. How do you know what anything is

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worth? And you’re going to say there’s a calculation to do intrinsic value and tell me the long

term projected growth rate of that business and all that.

MALE: Well it’s the same way that you go about looking at a real estate property right? You

may use whatever information.

GARY KELLER: It’s not the same thing.

MALE: To try.

GARY KELLER: It’s not the same thing.

MALE: Estimate what it’s going to be worth in the future.

GARY KELLER: Not the same way. I wish it were. Study it and you come tell me.

MALE: Okay.

GARY KELLER: It’s not the same thing. It’s not. It won’t happen. Now, by the way you can get

rich in the real estate business, but the truth is real estate is just a hedge. I didn’t get rich in the

real estate business. I got rich owning businesses.

GARY KELLER: Here’s the test. Go study the thousand richest people in America. This is your

test project. I want to see how many of those are in there that invested in the stock market

where they did what you said and they invested money in the stock market.

MALE: I must be thinking differently because there’s a huge portion in that one thousand that

are the capital allocators that go and throw money around.

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GARY KELLER: That’s right. They make their money on the fees. Because they’re making it on

the fees. They’re not making it on that.

MALE: A lot of those hedge fund guys, a lot of their money is 20 percent of the profit.

GARY KELLER: Go see where it came from. Just track it. I didn’t say it’s evil. I don’t want you to

walk out and go oh man, that guy’s an idiot. He said it was evil. I didn’t say it. It’s unpredictable.

It’s unpredictable and it was risky.

MALE: Sure.

GARY KELLER: That’s the issue. If you enjoy it, go do it. There’s definitely a place in it. At the

end of the day, here’s the flip side on that is. The world needs the stock market. Why? To fund

capital growth, yeah. But it actually needs it for a more fundamental reason.

She needs a place to put her money and she’s not going to study business. And if you look at it,

the safest place to go make eight percent is the stock market over any ten year period. It is the

safest place for her. And that’s actually a fact. But remember, this class wasn’t about that. Yeah.

This class wasn’t about that. This class was how are we going to get rich? And by the way, at the

end of the day, you only want to follow the richest guys. You got that?

MALE: Yeah.

GARY KELLER: Now I’m not saying I’m going to be the richest guy. Actually I may be one of

those guys. But you know. Yeah. If you find someone richer than me that will spend as much

time with you, call me. I want to meet that guy.

27

Q: SHOULD I GO INTO DEBT TO BY REAL ESTATE?

FEMALE: So if you’re looking into real estate, is it ever a bad idea to take out a loan or get into

debt to buy real estate?

GARY KELLER: No. Real estate would be one of the places that if you want to put debt on it, it’s

okay because at the end of it you have an asset. But you don’t want to go put a 95% loan on an

investment piece of real estate if you can avoid it. You would rather do it with a lot more down

payment, maybe 20% or 30%. And that’s why the banks for investment real estate are not going

to loan you 95%. They’re only going to loan you 70% to 80% anyway.

GARY KELLER: A piece of real estate is a business. For arguments sake, I’m going to buy a

$100,000 piece of real estate. I’m going to put $20,000 down. I’m going to run the business by

renting it and that rent is going to pay off the $80,000 loan that I have. So in 15 or 10 years I’m

going to end up owning what is now a $200,000 piece of property that I paid how much for?

FEMALE: $100,000.

GARY KELLER: No. $20,000. That’s why you put debt. That’s why. But it has to be smart debt. It

has to be the right piece of real estate and you have to be able to afford it. This is the only time.

FEMALE: Are you talking this by savings?

GARY KELLER: No I’m talking about the economy.

FEMALE: Oh.

GARY KELLER: See the thing about real estate you need to remember is real estate is nothing

more than a storehouse of goods and services. The value of a piece of real estate is determined

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by its replacement value. And the replacement value is determined by the cost of bricks and

cement and stone and wood and refrigerators in today’s market. So that’s going to set the

price. Does that make sense?

GARY KELLER: Inflation goes up at what, two to four percent a year. Inflation rate in America

anywhere from two percent to four.

FEMALE: Yeah. Because inflation?

GARY KELLER: No. What happens is that a house on average is going to go up between two to

four percent a year because why? Because of all the goods and services it takes to build the

house are going to go up by two to four percent a year. Does that make sense?

FEMALE: So you’re talking about investing in a secondary. I was talking about one for my own.

So I was talking about like instead of maybe like renting in the future, going to actually buy that.

But you’re talking.

GARY KELLER: No that’s a really smart idea. Absolutely. Tomorrow morning if you have a stable

job and you think you’re going to be gainfully employed, go borrow money from your parents

for a down payment, buy the property and then go get four girls to live with you, or four guys if

you want. But go get four girls to live with you, charge them a bargain rate and you live free and

there you go.

GARY KELLER: And you could do that and then all of a sudden in two years you just rent the

place out and go do it again. I did it like three times. That’s what I, early on, I didn’t have cash

but I refinanced my car believe it or not, used it as a down payment, bought a condo, got a

roommate who basically covered my payments and then moved out a year later, rented it,

bought another one, did the same thing. I did it three times and didn’t use any money. Never

had any money. I just bought them and ultimately just sold the portfolio.