Ep561: David Aaker – Don’t Let Tax Savings Drive Your Investment Decisions

Listen on

Apple | Google | Stitcher | Spotify | YouTube | Other

Quick take

BIO: David Aaker, sometimes called the Father of Modern Branding, is the author of 18 books on branding and related topics. He is the vice-chair of Prophet, a global branding, growth, and transformation consultancy.

STORY: David was an advisor to a software company acquired by Microsoft in the 80s. He had stock in the company but decided to sell it to save on taxes. The stock would now be worth millions of dollars.

LEARNING: Don’t let saving taxes drive your investment decisions. Keep your money in the market for as long as possible.


“Don’t sell your stocks to save on taxes.”

David Aaker


Guest profile

David Aaker, sometimes called the Father of Modern Branding, is the author of 18 books on branding and related topics. The last three are Aaker on Branding, Creating Signature Stories, and Owning Game-Changing Subcategories. He is the vice-chair of Prophet, a global branding, growth, and transformation consultancy.

Worst investment ever

David was an advisor to a software company that was a competitor to Windows in the 80s. The company was better than Windows but couldn’t get any of the big computer companies to adopt it. And so they sold to Microsoft. David had stock in this company that he wanted to keep for his daughters. He later decided to sell his stocks to avoid income tax. Had David kept the stocks, his daughter would have millions of dollars today.

Lessons learned

  • Don’t let saving taxes drive your investment decisions.

Andrew’s takeaways

  • The real long game in building a portfolio is letting time work its magic. So keep your money in the market for as long as possible.

No.1 goal for the next 12 months

David’s goal for the next 12 months is to help people understand how to build brand assets and emphasize structures and financials in their strategic thinking.

Parting words


“People should manage their charitable giving portfolio as they do their stock portfolio.”

David Aaker


Read full transcript

Andrew Stotz 00:01
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 in investing, you must take risk, but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives do reduce risk in your life, go to my worst investment ever.com today and take the risk reduction assessment I created from the lessons I've learned from more than 500 guests, fellow risk takers, this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guest, David ocher. David, are you ready to join the mission? Sure. excited to have you and also to learn from you. David is really a master in his field. And I'm going to introduce you to the audience, David ocher, sometimes called the father of modern branding, is the author of 18 books on branding and related topics, the last three being Ocker, on branding, creating signature stories and owning game changing subcategories. He is the vice chair of profit of profit, a global branding, growth and transformation consultancy. David, take a minute, and tell us a bit about the value that you bring to this wonderful world.

David Aaker 01:22
Oh, I, I basically, I'm involved with a very exciting company profit that is a global company, we just open offices in Singapore, and in Dubai. And so we're trying to help people transform their business. And my role is to is basically to write blogs, and write books and my field is, is events is branding. And I started about 30 years ago, where I wrote some of the early books on brand equity and managing brands. And, and lately, I've been trying to apply a brand new lens to basic management. theories like disruptive innovation, the use of stories, the, the idea of a higher purpose, and doing social good is part of your business. And so I, my role now is to look at those things from a branding viewpoint.

Andrew Stotz 02:25
And for the listeners out there, and for my own sake, you know, let's say that somebody wants to set up their own business or do their own thing or start their own podcast. Why is branding important? You know, I mean, many people think, wow, I gotta figure out the production. And I got to find my sales channel. And I got to find my customer. And I got to get employees and I got to make a marketing plan. But why is branding so important?

David Aaker 02:47
Well, I think that it's important because it's easily neglected, because you're kind of overwhelmed. And that's true in the nonprofit sector that I'm now working in, in my latest book, people are overwhelmed with getting the business off the ground and keeping it going. They get the usually underfunded, they're usually understaffed. And so renting is something that they don't get around to. And, and so as a result of that, they failed to have the success they really hoped for.

Andrew Stotz 03:25
And what is it about? I mean, if someone says, Okay, that makes sense. I've been busy and you know, doing all those things, but now, I need to do some branding. You know, I'm thinking about, first of all, I the creating signature stories is fascinating about how stories tie in to branding, but one of my questions is really like, what's the first step for them, you know, for a person like myself, small, medium sized business, you know, trying to stand out in this busy world?

David Aaker 03:53
Well, you have to figure out what you want to do what you want to stand for going forward, that will support the business strategy and your goals. And and you have to find something that's that's unique, something that's differentiated, we, in fact, in in business strategy and marketing, of all the research that's done in the last 100 years, the most robust the most definitive sort of finding is that success really comes from those that have something different, that have differentiated themselves. So you, you have to stand for something that's meaningful, that's inspiring, but it has to be differentiated, it has to be something that you do, and you do well, that, that others don't, there's got to be a reason for people to have a relationship with your brand.

Andrew Stotz 04:43
And that when I think about kind of the marketing books that I read, and all that they talk about the unique selling proposition, and that that word unique is kind of interesting, because everybody in business was like, what we're unique. We do this, we do that and it's unique. It means that only you do it. I'm just curious when it comes to branding, and that, you know, story about you and your brand and what you're doing, how unique does it have to be?

David Aaker 05:10
Well, when I started defining what brand equity was and how to manage it, I was motivated by a real intense dislike of the concept of a unique selling proposition. Because it was all it was done by advertising agencies who just wanted to find a platform, they could run a whole bunch of ads around. And so they wanted the brand does stand for a single two word phrase. Well, and I argued that brands are more multi dimensional, more complex in that they're eight dimensions, 10 dimensions, 12 dimensions, especially a b2b or a service brand. And this unique selling proposition was, as I thought, real damaging to anybody that wanted to create a brand.

Andrew Stotz 06:04
And so how, so let's go, let's take a look at let's say, my my podcast as a minute, for a minute as kind of a case study, my worst investment ever, I'm on a mission to help you know, a million people reduce risk in their lives, I interview people for their stories. Where am I going wrong? Where am I going? Right? From a branding perspective, what could I do as a case study?

David Aaker 06:29
Well, I think you're really blessed with the fact that you have a name that really says what an important part of who you are and how you're different. And that makes the branding and brand building and communication a lot easier. Because every time you say your name and your logo, you're really communicating something of real substance. And if you if you didn't have that, if you were calling Amazon, for example, then you have a, you know, a real hard road to hoe. And, of course, the other side of the coin is if Amazon was called books.com, they wouldn't be where they are today. So you don't have a lot of fences around what you can do with that brand. So there's a trade off. But the upside of it is that if you're happy with a little box you're in, you have a big advantage.

Andrew Stotz 07:30
And maybe you could just talk What do you mean by let's say, subcategories, I know you, you mentioned that in your book and your book and in your, you know, your posts and things. I've seen that. What does it mean? Am I in a sub category? Or am I on a sub sub sub sub sub category?

David Aaker 07:47
Yeah, probably yes. Answer. But the reality is it comes out of disruptive innovation, which is now happening more frequently and more impactful than it's ever had. Because the digital revolution. And what disruptive innovation means is that you develop some idea with a must have and and, and people avoid other alternatives. And they are drawn to you because it's attracted to them. And when Randy comes in, is that if you want to be successful in my way, in my thinking, you got to position, the new subcategory, you've got to scale it. And you got to build barriers. And all those are branding issues. And

Andrew Stotz 08:33
I was reading something that you wrote about the you went through four critical elements. And one of them was, you know, you've got to scale. And I think that people, including myself, when I started my business, and for a lot of people, it's like, well, we'll take it slow, got things set up and stuff. But what you realize is that scale is everything. Because, as I say, from a financial perspective, you got to get to $5 million in revenue, because that's the amount of money that you need just to have a professional business with a management team and the operating systems and being able to pay for the software, the you know, all the different things that you need. But I'm just curious, maybe you can just give us some guidance about why you think scaling is important.

David Aaker 09:15
Well, it's because of the digital world. It used to be that if you had a new idea, you'd have to find retailers to carry it or you have to create retailers you had to find an agency to run ads and fun that campaign. And now you got ecommerce, you've got social media, you've got websites. So all that can be done overnight, virtually overnight. And if you try to take a slow and steady post, it's going to end you have a good idea. There's going to be others that will pounce and and they were the ones that will get the most attractive customers not you.

Andrew Stotz 09:58
Well that's a great challenge for my Self and for the audience. Last thing I just wanted to ask is, where's the best place for the audience to, you know, follow you to learn what you're doing?

David Aaker 10:10
Well, I had so many books and so many pay, I had 22,500 pages nice to tell the people a profit, well read so many pages in this book, and so many pages for that book and find that and then I wrote Ocker on branding, which is kind of a digest of all the work I've done. To that point. And since then, I've written the story book in the disruptive innovation book, but But until then, that captures everything I did,

Andrew Stotz 10:41
okay, aka on branding, we'll have a link to that as well as to your LinkedIn and other places in the show notes. Well, now it's time to share your worst investment ever. And since no one goes into their worst investment, thinking it will be tell us a bit about the circumstances leading up to it, and then tell us your story.

David Aaker 10:59
Well, it was a long time ago. Back in the 80s, I was an advisor to a software company that made a competitor to Windows that was much better than Windows, and they couldn't get anybody to any of the big computer companies to adopt it. Because they would the safe course was to go to Microsoft. And so they sold to Microsoft. And, and I had a stock in this company. And I very cleverly I thought that the time gave the stock to my daughters and sold it so I would avoid all income tax on that. And that stock today my daughters would be worth Millie many millions if I would have instead kept it.

Andrew Stotz 11:45
And tell us about the lessons that you learn from them?

David Aaker 11:50
Well, you have to not let stock or saving taxes drive your investment decisions.

Andrew Stotz 12:00
That's a great lesson. And I think what I would say is also if I was to summarize what I took away from that, too, is that people get caught up in things like saving taxes, or also kind of short term gains, or even short term losses that they get scared about. But the real long game in building a portfolio is ultimately letting time work. Its magic. I think if that's the lesson that we learned from Warren Buffett, 57 years invested in Warren in Berkshire Hathaway, basically is, you know, the key thing. So I think that concept of keeping your money in the market for as long as possible is a critical thing. Of course, it gets difficult when it's just one particular stock. So obviously, you want to have a portfolio of more than one. But let's say you have a portfolio of five or 10 stocks, or you have an index fund, and then let it grow. And I would say I remember seeing some research about how the average investor in America destroys about 3% per year in value, because of bad timing of their entries and exits. And if you think that the stock market may had have a 10%, average annual return, you're already talking about 3% being knocked off because of getting in and out and panicking at the wrong time. Then you add in costs related to that. And related to you know, having that portfolio, you may talk about another one or 2%. So you're really reducing the performance of your portfolio by doing that. Anything else that you would add to that?

David Aaker 13:40
No. So you advocate this writing out this current downturn? Right?

Andrew Stotz 13:48
Well, I think that that's where you first of all, you got to set your long term goals, right. And I say for most people, particularly a young person, let's say you're 20, you know, you're going to retire when let's say you're 60. If that's your goal, you got 40 years. So you need to be thinking in a 40 year context. And what I would then say is that for someone that doesn't own that doesn't know anything, let's just start with someone who doesn't know anything about the stock market. In my opinion, I wrote about this in one of my books called How to start building your wealth investing in the stock market, we now have an amazing instrument and a couple of different mutual funds, whether that's Vanguard or fidelity, or Schwab, that owns every stock in the world. And that means more than 8000 stocks are owned in for instance, the Vanguard VT fund, and if you didn't know anything about investing, and you just put your money in there on a consistent basis, over time, you're going to build up a huge portfolio. Now I also say that you should look at about 110 minus your age. So if that person's 20 110 minus 20 gives us 90 Meaning 90% should be in the equity market, and maybe 10% in the bond market and as we get older, we have to protect our debt. downside, because we may not have as much time to rebuild it. So I guess that's what I would say set a long term goal, and then set a strategy such as what I've just described, it couldn't have been done when I started in the industry, you know, you had to build a portfolio of stocks and who had the ability to do that. So that would be my advice. Good. So based upon what you learned from this experience, and what you continue to learn, what action would you recommend our listeners take to avoid suffering the same fate?

David Aaker 15:27
Well, I would recommend that not listen to me. I mean, I feel this brandy. And they should listen to you instead of me.

Andrew Stotz 15:36
Well, they should listen to you when it comes to branding, and listen to me when it comes to investing. So what is the resource that you'd recommend? I mean, I'm looking for instance, right now on Amazon, aka on branding 20 principles that drive success. Is that the place that is the resource that you think that the person listening should go to to start really understanding your thinking? I think so. Yes. Okay. Fantastic. I'll have that in the show notes. All right. Last question. What is your number one goal for the next 12 months?

David Aaker 16:08
Well, my goal for the last several last couple of decades has been to try to help people understand how to build brand assets, and, and to de emphasize short term financials in their strategy thinking.

Andrew Stotz 16:24
Well, you know, the interesting thing about brand assets, and I teach this in one of my courses, is the idea that you don't, you do not actually get to realize a brand's value until you sell it. So in accounting principles, you may have developed the most amazing brand, but it's not going to be on your balance sheet. As an asset, like a fixed asset, or an intangible asset that you bought, such as you bought, you bought software to run your business. And you know, that type of thing. But with brand value, what's interesting is it comes when you're acquired, and then it comes in as Goodwill for the acquiring company when they pay more than what would be considered fair value. And a lot of that's attributed to the brand. So that's, I think one of the things from an accounting and finance perspective, as an analyst that explains why stocks trade at a price to book multiple, that is considerably higher than the book value may pay two times the financial or accounting book value, or three times or five times. And much of that additional amount that you're paying comes from two things future growth and the value of the brand. So I think it's a critical thing that you build in your company and you don't realize it until you finally sell your company. What do you maybe I'll just tell the listeners Well, there you have it another story of loss to keep you winning. If you haven't yet taken the risk reduction assessment, I challenge you to go to my worst investment ever.com right now and start building wealth the easy way, by reducing risk. As we conclude, David, I want to thank you again, for joining our mission. 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?

David Aaker 18:22
No, I'm good except that one thing I've been advocating with little success for a long time is that people ought to manage their charitable giving portfolio as they do their stock portfolio and look at sectors and then within sectors and and and so on. And I tried to get my kids and to do that and I've had little success but anyway I think that seems logical I'm really think that when you when you decide to give to a charity on the basis, your friend is running an auction or you you get there and get drunk and you get generous is is is kind of the thing is the recipe if you're in the investment world for a disaster.

Andrew Stotz 19:15
Good advice, indeed. Well, that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast shows Andrew Stotz saying I'll see you on the upside.


Connect with David Aaker

Andrew’s books

Andrew’s online programs

Connect with Andrew Stotz:

About the show & host, Andrew Stotz

Welcome to My Worst Investment Ever podcast hosted by Your Worst Podcast Host, Andrew Stotz, where you will hear stories of loss to keep you winning. In our community, we know that to win in investing you must take the risk, but to win big, you’ve got to reduce it.

Your Worst Podcast Host, Andrew Stotz, Ph.D., CFA, is also the CEO of A. Stotz Investment Research and A. Stotz Academy, which helps people create, grow, measure, and protect their wealth.

Leave a Comment