JF2529: 5 Investor Takeaways from The Ralph Lauren Story | Actively Passive Investing Show

In today’s episode of the Actively Passive Investing Show, Travis Watts discusses the parallels between real estate investing and Ralph Lauren’s story of building his empire. We take a look into leveraging other people, thinking alternatively in your investments, and how to design a life on your terms by taking action today (no matter how small).

 

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TRANSCRIPTION

Travis Watts: Hello, Best Ever listeners. Travis Watts, with the Actively Passive Show. I have a really exciting episode, a short episode here today. And you may be wondering from the title, what the heck does Ralph Lauren have to do with real estate? Is he a real estate investor? Did he write a real estate book? No, no, no, no. The purpose of this episode, I thought it’d be kind of a creative twist to do… I personally have just been reading a lot of biographies lately. I read Greenlights by Matthew McConaughey, I read Can’t Hurt Me by David Goggins, an ex-navy SEAL, and I’ve been reading the story of Ralph Lauren, Genuine Authentic, I think is the name of it. There’s some documentaries too if you’re more into that and want to tune in, but you know, guys, I just saw a lot of parallels between Ralph Lauren’s story and the story of him building up the business to investing in real estate. And I thought, I want to highlight those parallels, I want to share those with people, because I think they’re impactful, I think they’re inspirational and I think they have a lot of value.

So it’s simply that, and the high-level here is that when I think about long-term investing, I’m usually thinking about building something generational. Some people use the word generational wealth, or you could just relate it to what does it all mean? Ask yourself the question, if a billion dollars was put in your bank account tomorrow, what does it mean? What are you going to do with it? What are you going to convert that into? Are you going to travel more, and more time with family? Are you just going to go out and buy the Lamborghinis and the mansions? Everybody’s different, but what is it mean? Hopefully, it’s not the latter and the materialism of that. But I’m not here to judge; maybe that’s your thing. So anyway, that’s kind of what this is all about, is thinking higher level, thinking generational, thinking long term and building your real estate portfolio.

So I think the process too, by the way, between building a business and investing in real estate, they’re often already in parallel in a lot of different ways. So we’re going to highlight those, we’re going to dive in, I’m going to share with you some really cool highlights from Ralph Lauren’s story, and we’re going to talk real estate, as we always do.

So the first parallel that I want to point out in the Ralph Lauren story is leveraging other people, aka building a team. Ralph Lauren is so good at this, and this is something I didn’t know, and you may not know either, but Ralph Lauren, he never went to design school. He didn’t go to college to be a fabric designer or a clothing designer. He doesn’t do his own sketches for concepts; not that every designer does that, but a lot of them do, the main people who’ve built the companies… So basically, what’s the lesson here? He leverages a team of experts that are working in their highest and best capacity to obviously run the company, do the designs, etc. He’s just the judge of this. “I like this. I don’t like that.”

And of course, I’m not underplaying his talent. He has a tremendous eye for design, obviously, as we all know, but the key is that he’s built a team. So he’s found his highest and best potential, and then he’s leveraged out the rest to make that a little more passive on him.

You can do the same thing in real estate. So we take investing in apartment syndication, for example – if you, yourself, are not the expert in all areas of real estate, you can partner with teams who are experts in underwriting and finding off-market deals and acquisitions and the technical analysis and finding high caliber property management. Maybe they manage the properties themselves so that you don’t have to. So that you and I, we can focus on our highest and best potential. That’s the parallel, that’s the takeaway. I love that, and I truly believe this is a key to success, both in real estate and business. It is a team sport; it doesn’t really matter how you go about it. You can try doing it all on your own like I did; you might burn yourself out like I did, or you might not be as competitive as you thought you were in the industry, because quite frankly, those building massive teams in the industry are probably going to outdo you. I’m just being frank.

Break: [04:31] to [06:32]

Travis Watts: Second parallel that I want to talk about from the Ralph Lauren story is thinking alternatively. So Ralph Lauren – he went against the grain in terms of the fashion industry. He took a look around at what everyone else was doing and he said, “I’m going the other direction with it. I’ve got a whole new innovative idea.” But this concept couldn’t be more true to investing as well. Quite frankly, people are investing based on their parents’ advice, based on marketing and ads and billboards, and TV advertisements, which mostly suggest, “Turn your money over to Wall Street. We’ll take care of you. Put money in your 401(k), put money in your IRA, buy these annuities and CDs and stocks, bonds, mutual funds.” And there’s nothing inherently wrong with that stuff. As many of you know, I actually went to work for a very large, well-known brokerage firm so that I could learn that business from the inside out. It’s just maybe sometimes in the alternative space there’s equivalent, sometimes superior investment options. And unfortunately, it’s called the alternative investing space, which kind of kills me. But in layman’s terms, that’s what it’s called.

So to think alternatively in terms of investing – what I’m talking about is investing in private real estate, private businesses, precious metals, maybe oil and gas, master-limited partnerships… There’s so many things that are outside the world of Wall Street. It’s a huge, huge world. If you’re just diving into it or just discovering it for the first time, like I was six or seven years ago when I went into the syndication path of investing, it will blow your mind. Every day, I continue learning about more and more ways to invest, and ATM machines, and creative ways to lend money, and making money off credit card transaction swipes… There’s so many crazy ways to make money out there. Don’t limit yourself in your contacts to only the Wall Street investment options.

And last thing just to bring this point home, Ralph Lauren, he never set out to be a grand designer. He didn’t say to himself in an early age, “I’m going to launch a mega fashion clothing line.” In fact, through these books I’m reading, he refers to himself and his company as “anti-fashion,” going against the grain, thinking alternatively, and it was really just his own vision and his own approach, his own path, and sometimes that’s the right path. As famous poet Robert Frost might suggest, he’s the poet who said something to the effect of, “I took the path less traveled and it has made all the difference.”

Alright. The next parallel that I want to talk about is start simple and then build from that foundation. But the key is to start. So Ralph Lauren started with a simple concept. He was thinking about men’s fashion. In the 1960s everybody’s basically conforming into gray suit, black suit, black tie, gray tie, everyone basically wore the same outfits. They all shopped at the same big box stores and there wasn’t a lot of designer creativity in that space. And Ralph Lauren simply started with a men’s necktie. I’m not a designer or fashion expert, but I think men’s ties were 2.5 inch wide so they kind of wore those skinny ties. You might think — what’s that show, Mad Men era? White shirt, black tie, black suit, that kind of stuff.

So he went with a four inch tie, something almost twice as thick, with vibrant colors and patterns and designs, and this is the first time that a designer touch had come into the men’s fashion industry. And it took off. Bloomingdale’s partnered up with them, the necktie sold, and then people started realizing, “Hey, if I have this necktie that’s really different and vibrant and colorful and unique, well, I need a new shirt that goes with it.” So they started making men’s shirts, suit and tie shirts, button-downs. Then it was, “Well, since I got this new shirt and this new tie, I need a new suit to complement this stuff and to kind of mesh with it.” So then they got into the suit business. So it began; they’ve branched into women’s clothing and home decor and perfumes, colognes, and on and on. Accessories and watches… So it’s become a mega, mega company over time. But the lesson is that it started with just taking action, it started with just simply one thing.

So on this show, we’ve talked a lot about if you have $10 to your name, you could start potentially – I’m not telling you what to do, I’m not a financial advisor or financial planner, so seek licensed advice, but you could start with just buying one share of a publicly-traded REIT, a Real Estate Investment Trust, that owns some real estate perhaps; multifamily, self-storage, mobile home parks, there’s all kinds of REITs out there for $10 per share. I’m just making up that number. Some might be $20 a share, some might be $5 a share. It just depends. That’s what my nephews are doing to start their passive income journey, and they’re starting in their teenage years, which is incredible. Hopefully, they keep that up.

You could step up to single-family investing, and you might put $25,000 to $50,000 as a down payment on a single-family home, you might house hack it, you might flip it, you might have a buy-and-hold rental, things like that. Or you might step up to real estate syndications, which is really what I invest heavily in, and maybe you have to come up with $50,000 or $100,000 to be able to invest in there. So everybody’s different. Everybody has a different risk tolerance.

So you do you, start with what makes sense to you, start with what you’re comfortable with, evaluate your risk tolerance, leverage licensed experts if need be to help you make these decisions. I’m not one of those, unfortunately. I’m just pointing out some options that are available to people that you might be able to invest in.

The key here and the parallel and the takeaway is that investing and building a business is not an overnight success. Sometimes it takes decades and decades to get where you’re going. But again, the key is to start; build a foundation and then scale off of that foundation.

Alright, so the next thing that I want to talk about is not so pleasant, but it’s worth reiterating, and that’s that setbacks are a part of life. There’s a point in the 1970s where Ralph Lauren – he almost lost the business, he almost went bankrupt. It was at a point of rapid expansion, you would think he was doing great. But what happened is inventory, overhead, payroll – they all exceeded the cash flow of the business, because they were trying to get into all these stores so fast… And what a shame that would have been to go bankrupt. And hopefully, you and I, if we’re investing in real estate, for example, cash flowing real estate, specifically, hopefully we’re not taking on that much risk, that of a venture capitalist starting a brand new concept company, especially in New York City in the ’70s, where people are exiting the city; it was really a rough time.

But the point is, there’s always going to be hurdles, there’s always going to be setbacks, there’s always going to be recessions. And not every deal you do is going to be a home run. In fact, you might lose money in some of your deals; that gets back to diversification. But just be a realist. Don’t just say, “I’m going to make 10% to 15% a year. For the next 50 years, I’m going to have this much money,” it’s not going to work that way. I promise you, it won’t work that way. You will have setbacks. So plan for them, be prepared for them.

As Warren Buffett’s business partner Charlie Munger might say, “Prepare for the worst, hope for the best.” He refers to himself as a “cheerful pessimist,” which I love.

The final takeaway that I want to share with you is design your own path and live it. This is one of the coolest takeaways from the book, and from the Ralph Lauren story, in my opinion. What he actually did is he created this lifestyle, almost like a Hollywood film; this vision of what this clothing is and what it represents. This is a lifestyle of romance, of freedom, of class… And it was his version of the American dream, and he sold that vision to people.

But the coolest part is that after decades of creating and envisioning what this would be like, he began living that lifestyle. As you know, if you’ve ever seen Ralph Lauren, he wears Ralph Lauren clothing, he lives in the houses that they do the photoshoots in, he became Ralph Lauren, this whole lifestyle and his whole American dream. And that’s the beauty, you guys. That’s why I’m so passionate about teaching you and others on the benefits of investing for passive income.

You and everybody listening, the point is not money. The point is to start designing the life that you want, to start thinking about, back to the beginning of this episode, what would you do if money wasn’t a factor? What would you do if you had, what I sometimes refer to as “time freedom”? You can free up your time to do as you please, by having enough passive income rolling in month to month to make that a reality. I encourage you guys to think about these three questions. Just take a minute, play along with me right here. Just think about these three questions. Number one is, what would you do with your time if money wasn’t the focus?

Break: [15:48] to [18:51]

Travis Watts: Number two is, what reality or lifestyle would you create for yourself, your family and/or your spouse? Number three is, how would you live differently if you didn’t have a career or a job to attend to?

I encourage all of you to get started if you haven’t already; not get started with building income streams, not get started with saving money, but designing your life, a life on your terms.

Thank you guys so much for tuning in this week. I told you this would be a short episode and it really was; it was probably only about 10 minutes or so. But those were the parallels that I felt were inspirational, impactful and had to do with real estate. So hopefully, you’ve found some value in that; hopefully, you took a few notes. Thank you guys for tuning in. This is Travis watts with the Actively Passive Show. Until next time.

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