Ep323: Dave Kerpen – Doing Thorough Research Will Save You From Losing Money

Andrew Stotz 00:03
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community we know that to win an investing you must take risks but to win big, you've got to reduce it. This episode is sponsored by a Stotz Academy's online course how to start building your wealth investing in the stock market. I wrote this course for those who want to go from feeling frustrated, intimidated and overwhelmed by the stock market to becoming confident and in control of their financial future. Go to my worst investment ever.com slash deals to claim your discount now. Fellow risk takers This is your worst podcast host Andrew Stotz and I'm here with featured guest, Dave Kirpan. Dave, are you ready to rock?

00:49
I'm ready.

Andrew Stotz 00:51
I am really excited to get you on and, and to learn more about you know what you've learned in your life. And I want to introduce you to the audience. So let me do that. Right now. Dave is a serial entrepreneur, New York Times best seller, selling author, and global keynote speaker. Dave is the co founder and co CEO of apprentice, a platform that connects entrepreneurs with the brightest college students, as well as the co founder and CEO of remembering live a virtual memorial service comedy. Dave is also the founder and chairman of likeable local, a social media software company serving 1000s of small businesses, and the co founder and chairman of likeable media, and award winning social media and content marketing agency for big brands. Dave's newest book is the art of people 11, simple people skills that will get you everything you want. Take a minute in Philly, for their tidbits about your life.

Dave Kerpen 01:55
Well, I guess most important I dad, and have three wonderful children and live in New York and husband to my love of my life and my business partner, Carrie. And, you know, I'm an investor, of course, as well and been fortunate enough to be around lots of great entrepreneurs, I love entrepreneurship. and supporting entrepreneurs. I love mentoring younger entrepreneurs. And I'm actually the president of entrepreneurs organization in New York. It's a global network of co founders across the world in New York, one of the larger chapters. So thanks for having me. And I'm excited to chat.

Andrew Stotz 02:42
Yeah, I have a couple quick ones. And that is, you know, sometimes I look at entrepreneurs. I mean, I'm a finance guy. So I know the probability of an entrepreneur really getting success is very low when I mean, like real success, building a big company and all that. But yet every entrepreneur thinks they're gonna make it. And that's the magic. And that's the tragedy or the madness, let's say of the entrepreneur, what is it you like, about working with young people and people who are entrepreneurs? When on some level, you could say these guys are crazy. But yet some of the breakthrough?

Dave Kerpen 03:20
Yeah, I like crazy, I think crazy, crazy. It's crazy can be good. And I also think, you know, you talked about lowering your risk, I think a lot of for what great entrepreneurs do is mitigate risk and think about, you know, what they want, and there's different kinds of entrepreneurs, right. So, so yeah, the Mark Zuckerberg and Elon Musk's are one in 1,000,001 in 10 million, but there's, you know, many, many millions of of great entrepreneurs, they build in a nice, fairly small businesses, and then there's a huge, huge gap in between, right, Where, where, you know, one day when we sell our, one of our businesses, you know, will, will will, will be set for life. And, and that's and, you know, you can't have that sort of reward from working as a regular person that's not an entrepreneur. So, you know, it's there's risk and reward and, and there's a, it's a huge roller coaster, but in many ways, it's very similar to investing. Being aware, the greater the risk, the greater the reward. And

Andrew Stotz 04:36
so yeah, you know, but I love it. You said about, you know, you said something that kind of odd and a lot of people say that entrepreneurs are risk takers, but you said you started off by saying they mitigate risk. And I think about, you know, 25 years, I came to Thailand 30 years ago, my best friend Dale came to Thailand 25 years ago, and we started a coffee factory. And we've now run that coffee factory for 25 He's really run it, but we've co invested in it. And many times, you know, particularly when we came, we knew we weren't going to get any, any money from banks. Because, you know, we were to foreigners in this country and all that. And we knew that we didn't have limitless funds. And so our risk management was critical. One little mistake, you know, as I often tell young students, like, you know, just don't make the wrong mistake, but you just won't know which one is the wrong thing until after you've made it. But, you know, it's I think it's, it's underrated, how important risk management is for the entrepreneur in such real scarce resources?

Dave Kerpen 05:41
Yeah, yeah, it's totally true. And it's one of the things I've learned along the way, I thought entrepreneurs were big risk takers, and to a certain extent we are, but to another extent, we're big risk evaluators. And, and risk mitigators as well, I think in order to be successful, you have to be right there. So there's the sort of brazen, foolish entrepreneur which will, perhaps be good foreshadowing for my investment story. And then there's, and then there's sort of more seasoned, more disciplined entrepreneurs. And I like to put myself in that category there. By the way, before I forget, I didn't mention this in the pre show. But, you know, I was reminded of it when you mentioned that where you are. And also when I overheard my own bio being read, you know, one of my favorite keynote speaking moments was, was when I spoke in Bangkok, and just like the song, because I really don't like to, I like to be with my family as much as possible and not not not leave them for long. So just like a song I did one night in Bangkok, I flew, I flew 23 hours to Bangkok, and did a speaking gig and then flew right back home to New York A few years ago, which is quite a crazy, but fun experience.

Andrew Stotz 06:59
So you truly lived one night in Bangkok, just not like that song implies. And one last thing, the art of people, which I have on my Audible, and you know, I recommend everybody, get it, download it and listen to it and or read it however you prefer. But maybe you can just give one of these I know you talked about 11 simple people skill, but maybe you could just give my audience one little tip of something that they could, you know, they could apply in their life today, this week, this month, this year.

Dave Kerpen 07:30
Sure. Thanks for the shout out, I think I had to choose to have just one thing, it would be listening. Listening is probably the most underrated skill and the skill that the most people think they're good at when maybe they're not so good at it. And if we increase our capacity to listen and listen, and most people listen, to reply, not listen to understand. And if we can focus on listening to understand, and not to reply, and just really making sure we're hearing the other person better and repeating back to them mirroring and validating what they're saying, instead of trying to respond or solve their problems. It actually sets us up to be in a much, much better place in terms of getting what we want and building a authentic, genuine, valuable relationship with people.

Andrew Stotz 08:23
That's a beautiful tip for the audience. Listen to understand, don't necessarily listen to just reply. So great tip. All right. Now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it then tell us your story.

Dave Kerpen 08:44
Sure, so this is some years ago, it was one of my earlier investments I guess. I'll give a close runner up to an invest investment a couple years prior when I was in college, I did some day trading. And I don't necessarily recommend day trading. But I there was a one particular stock that somehow I got caught up in penny stock and that was a pretty bad investment. But the reason I didn't make that my number one, even though it literally went to zero is that I don't I don't think I put that much into it. So it wasn't as wasn't as painful. Some years later, I got very caught up. I was a young, young, younger, slash young entrepreneur and I got caught up in an opportunity to invest with a venture capital firm and think I was really drawn in by the allure of feeling like a venture capitalists and the what seemed really exciting to be on investing in great deals and alongside some really terrific People and didn't really vet it, I didn't really understand it. In hindsight, that that particular that feels particularly embarrassing, but but true, and, and so we put a pretty, what was this pretty substantial for us amount of money and I think it was $30,000 at the time, it was, you know, again, that was real money, it was it was definitely real money, it's still real money to be clear, but it was really real money back back then. And, and then we just, you know, sort of, like, moved on. And, and, and the, the, the, there was a real communication gap between the, between the, you know, folks running the firm and, and, and us and I would assume their, their, their, or their investors, and to the point where I actually felt really uncomfortable after a while. And I think they reached out to one of the other investors and said, what's the deal, like, why, and they had had a similar experience, and pick the fund was eventually, essentially shut down. And I never saw I never saw a dime, but worse yet, I never really got much insight into what the heck happened into my money. And so it felt really out of control and stupid. And, and I didn't know any better, because it was my first sort of experience like that. But, you know, years later, it's funny. I, I've invested in other now, I'm a limited partner and another venture capital firm, where I've done like, remarkably well, you know, they email me every quarter. And, you know, our return has been unbelievable, and it's just been a, it I, I, it's hard to imagine a more different experience, a 180 degree experience, from the, from the experience that I've shared. So it was a it was definitely my worst investment. But you know, you live and you learn, right,

Andrew Stotz 12:16
exactly. Well, can you remember, like the day when you had to look at your, your wife or yourself and say, I think it's all gone? It's never coming? Yeah,

Dave Kerpen 12:26
yeah, I remember very well, you know, because I was in a position where it was my idea to do this investment. And so, you know, I had convinced my wife and she, she had really been the word nag is such a negative word. Because and she's the best truly she's, she's not a nag at all. But she's been really, you know, kind of like, nagging me about what was going on and

Andrew Stotz 12:50
China's nanny call it following up.

12:53
Yeah, following up.

Dave Kerpen 12:54
I mean, you know, and honestly, in hindsight, rightfully so, of course, and but, but, but because of the cognitive look, we all have this cognitive dissonance, right? And so when we make a decision, a bad decision, it takes a while to realize that was a bad decision. We keep trying to convince ourselves it was a good decision because of cognitive dissonance, until that point where we finally realized, right, so during that whole time, where she's nagging me, I'm like, you know, I'm sure it'll be fine. I'm sure it's this, it's that. And in on that day, where I finally realized that we weren't going to get any money, I felt deeply, deeply ashamed. Embarrassed, but really, I would say even even worse, I felt ashamed. I felt really guilty for having misled, obviously, unintentionally, on my wife into, essentially for throwing out $30,000 down the toilet. I mean, my goodness. You know, the good news is we've been able to build a wonderful life for ourselves, financially and otherwise, but, but boy, I mean, certainly on the basis of this investment alone, we'd be, you know, absolutely a complete disaster in that area. And, you know, the single biggest cause for divorce is financial issues. So, I mean, honestly, it could have gone, I feel like it could have gone really horribly wrong, just on the basis of this really bad investment decision, right. Um, you know, that was a really that was a really difficult moment for me because I really had to come to terms with with reality and sort of stop trying to justify the decision to myself and to stop into her and stop trying to imagine a scenario where it was going to work because

Andrew Stotz 14:48
it wasn't gonna work. It wasn't gonna work. So tell me, how would you summarize the lessons that you learned from this?

Dave Kerpen 14:55
Yeah, I think the biggest lesson is, is is to kind of do the Work do the do the do the homework and, and, and to try I learned, I learned to not get as caught up about into the, into the sort of glitz and glamour and, and and shiny new object and and to sort of feel feel more comfortable but you need to sort of do the homework until I feel more comfortable. I think the other lesson is to, we talked about risk and reward is to is to really to invest different amounts based on the capability, the ability to you know, sort of stomach the loss, right. So for us back then $30,000 was it, you know, it was enough of a chunk of money that it should not have gone to what in hindsight was a completely completely speculative could go to nothing and type type investment. It should, it should have gone to, you know, a, you know, a blue chip stock or something, you know, and so, you know, that's gonna perform, it's not going to perform a you know, 100 x, but it's gonna, but it's, it's gonna, it's gonna give a virtually guaranteed return over time. And so, you know, yeah, that I wish, of course, going back, I could change that. But it was that was a very important lesson to learn. Yep.

Andrew Stotz 16:38
So let me summarize a couple of things I take away, you know, the first thing is that, you know, there are scams and their investments. And there are plenty of scams out there, not saying this was a scam, but I'm just saying to the audience, there are plenty of scams that come across extremely legitimate. In fact, that's what they're really good at. So for the listeners out there, be aware that scams come in a form that is, you know, looks really great. That's the first thing. The second thing is let's talk about legitimate investments like this, what we're really talking about is the concept of liquidity. Because if you had put your money into a listed company in the stock market as an example, and there was no communication and things weren't going well, you do have the option of exiting. But when you go into private equity, or venture capital, or those types of things, it's much harder, even, you know, investing in a startup, when someone's just saying, Hey, I'm going to start a restaurant, you do not have liquidity. And that's not a bad thing. I mean, liquidity you get paid for liquidity, you can put your money into places that it takes them a while, and eventually they come out, there's a premium for liquidity. But that then brings me to kind of the the final lesson from my perspective is, you know, the idea of sizing your position. Now, if you had $300,000, in 30,000, went into this. And he said, this is our bet we're swinging for the fences with this one, then, you know, it's, it's not, it may not be that painful. But if you're young, and you've got only a small amount, or whatever that is, and you don't size, your position, then you just run the risk of being wiped out. So for those listening, if you find an opportunity that you really are excited about, put a small amount of money in Now, of course, good, you know, either scams or you know, plenty of people that are pitching legitimate ideas that say, No, we don't want to take a minimum of 330 1000, then it may be your time to walk away. So those are some of my takeaways, anything you'd add to that?

Dave Kerpen 18:41
Yeah, I think those are great takeaways. The only thing I would add to that, again, is go in knowing what you're going, what go and knowing what your communication needs are. So to your point, if I invest in, in when when I invested in zoom stock, which was probably the opposite of my worst investment, I go, I go, I went in knowing I was going to have access to the publicly available data, but I wasn't going to get any personal communication from the company. And I was okay with that. But my expectation going into this was that I was going to get much more regular communication and access to communication. And so I think really making sure that with, you know, whoever is the holder of the investment, right, that I have a mutually agreed upon cadence of communication and availability and access. As long as that's sort of known by both parties and agreed to by both parties going, going, going forward, then it can work.

Andrew Stotz 19:44
Yeah. One last thing on my side, after interviewing 300 people and also getting 500 written stories of laws, being the analysts that I am, I tried to analyze them and I grouped them into six common mistakes. Number one failed to do that. Research, that's the most common mistake number two, failed to properly assess and manage risk. That's the second most common number three, driven by emotion or flawed thinking that was the third most common. Number four is misplaced trust. And the reason why I'm telling this list is because of number five, and that is failed to monitor their investment. Now here, it's a little different, where you fail to get communication from them. But the idea too, is that this does fall to some extent in this category that, you know, when you put your money into anything, you have a right to demand some form of consistent communication. And I think this, this podcast, this story of yours, and the lesson, one lesson is, you have a right to ask for that and, and demand them. And so that is number five. And of course, number six is invested in a startup company where most people lose all their money. So those are the six common ones. And I'd say that one lines up for you. Now, let me ask you, based on what you learn from this story, and what you continue to learn, what one action, would you recommend our listeners, think of the people who are faced with an opportunity in front of them somewhat similar to what you are faced with? What would you recommend our listeners action? Would should they take to avoid suffering the same fate?

Dave Kerpen 21:18
I'd say probably that first. That first, you know, sort of bucket of failures and do the research and do the homework. I mean, at the end of the day, I don't know how much that really makes a difference, or would make a difference on this. But, um, I think I would have felt much more justified in the mistake had I at least sort of done a little bit more research.

Andrew Stotz 21:39
I did everything I could. All right. Last question. What's your number one goal for the next 12 months?

Dave Kerpen 21:46
Yeah, so my number one goal is my focus on my health and to be I'm at such a wonderful, blessed place with respect to my career and businesses and whatnot. And so I can be so fortunate to say, you know, I let me just really focus on my health, getting it getting a fit, eating well, exercising, getting a little bit more sleep, not too much more, but a little bit more. And, and really focusing on that area.

Andrew Stotz 22:15
Well, we look forward to following up 12 months from now and seeing and hearing from your tremendous success. And since we're at the beginning of the year, for all of us, we're setting our goal. So that's exciting. All right, listeners, there you have it another story of laws to keep you winning, remember to go to my worst investment ever.com slash deals, to claim your discount on my how to start building your wealth investing in the stock market course. As we conclude, Dave, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Dave Kerpen 22:59
Um, no.

Andrew Stotz 23:02
You set it all up.

Dave Kerpen 23:03
I I've said it all, and I'm excited to be to be a graduate of

23:13
the program.

Andrew Stotz 23:15
Yeah. Oh, man. He's got it. He's got his graduate cabin cap on we'll get him his gown.

Dave Kerpen 23:22
I bet you that's a first on your show. That

Andrew Stotz 23:24
is definitely a first and I think I better just remember memorialize that. So don't move. Let me just grab a shot of that. He's got his cap and gown on. Fantastic. For the listeners out there. He's got a great cap a graduation cap on. So I appreciate that. And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. This is your worst podcast host saying I'll see you on the upside.