Why SpaceX and Bitcoin Hype Pays Everyone But You

Mike DeHaan: [0:01] What's going on, guys? Welcome to collecting keys real estate podcast. I'm Mike DeHaan here with my cohost, Dan Austin and Dylan Cook.

Dan Austin: [0:09] Hey. Dylan, thanks for showing up today.

Dylan Koch: [0:11] You you can't blame that on me. This was

Dan Austin: [0:13] I can absolutely blame you. We rescheduled. So this Mike doesn't even know about this. Mike, you probably know who I recorded with last week.

Mike DeHaan: [0:20] Did you record with Aaron?

Dan Austin: [0:21] Yeah. So last week, my Internet went out, like, nineteen minutes into the recording. It was the best show where Dylan and I were just fucking

Mike DeHaan: [0:28] We were about what?

Dylan Koch: [0:29] Fifteen minutes in, I think?

Dan Austin: [0:30] We're it was such good topics. You guys will never hear it. I mean, then my Internet just went out. So anyways, Friday, Dylan and I were we're gonna reschedule. Dylan bailed on me. Couldn't do it because

Mike DeHaan: [0:41] Hold

Dan Austin: [0:41] on. Scheduled the time.

Dylan Koch: [0:42] I scheduled the time.

Dan Austin: [0:44] And then didn't show up.

Mike DeHaan: [0:46] Nice. But to be fair

Dan Austin: [0:47] Didn't show up.

Mike DeHaan: [0:48] To be fair, I said 3PM eastern the next day. Like, we did this the day before. And it's like,

Dylan Koch: [0:52] it's like 01:30. Like, hour and a before the recording goes to Dan's like, oh, yeah. I can do it then. And like, I

Mike DeHaan: [0:57] was I was already gone.

Dan Austin: [0:58] Yeah. Didn't see your message. But anyways, so yeah, text Aaron and Greg Helbeck in a group chat and I was like, hey, can you guys either of you guys record right now. I was like, gotta swap. And in typical like real estate investor fashion, they're both kinda like midday available, but not available. Like Greg was playing hockey. And then so like, and then Aaron was just getting back into his house and he was like, right now? And I was like, yeah. He's like, give me a minute. And he, of course, Aaron's G, so he just signs signs on it. We just talked about his getting 86 from from Pace's Facebook or Instagram and all that. It was a good episode.

Mike DeHaan: [1:33] Nice. I thought it was. That's funny. I didn't know that. I I know when we logged on here, I saw the, thumbnail and I was like, is that an old thumbnail from like, a couple

Dan Austin: [1:40] weeks ago? Yeah. It was a whole debacle. Mike leaves town. We can't figure shit out.

Mike DeHaan: [1:44] I know. Max, our producer, messaged me, and he's like, these boys really can't do shit if you're not around. He's like, this is such a disaster.

Dan Austin: [1:51] I tried, dude. It was it was yeah. Just the scheduling and

Dylan Koch: [1:54] Twenty twenty six Internet problems.

Mike DeHaan: [1:56] No. Seriously. At the end of the day, all that matters is we are almost 500 episodes deep, and we still have not missed a week, Dan.

Dan Austin: [2:04] Yeah. And I know. I was like I told Dylan, I like, hey. I'll take the heat for this dog, but you fucking getting a mark on your record.

Mike DeHaan: [2:09] Oh, yeah, man. We're we're committed, dude. I remember one time when we used do three, three a week, we would do, the Friday boxes. And it was and it was my turn to do it. I was like, fuck. And I was in Africa. And I'm literally sitting at this, like, tiny ass airport in Namibia, which is this little country that's North of South Africa on the Atlantic Ocean. And I'm out, like, in the middle of desert at this tiny little airport, and we're gonna do like, we'll do, like, the scenic flight over the sand dunes. And I'm like, gotta record this right now. Like, otherwise, our producer can get together. And so I went and I, like, sat in the corner of, like, this little airport and I recorded a freaking podcast for, like, nine minutes. Dedication. Audio is trash. Send it over to Max. But, hey, it went live. Good to go. Easy enough. Yeah.

Dan Austin: [2:52] We're a full time podcaster back there.

Dylan Koch: [2:54] Celebration or special occasion planned for the 500?

Mike DeHaan: [2:57] Yeah. Oh, we should be. We're coming out, but

Dan Austin: [3:00] we should do something. We're like five away. Yeah. We're gonna do like an in person podcast, and it's gonna be this big epic party. We're gonna have some drinks, and people are gonna be able to show up and have a good time and listen to us talk.

Dylan Koch: [3:09] I can't wait for

Mike DeHaan: [3:10] like all seven of us to have a great time.

Dan Austin: [3:13] We're opening up to all the listeners that wanna show up.

Mike DeHaan: [3:16] That would actually be really funny. We should announce it like, yeah, we're gonna do it at the Barnes and Noble in Spokane Valley.

Dan Austin: [3:23] Dude, you know what's crazy is we've had some some OGs show up randomly.

Mike DeHaan: [3:27] Oh, we probably would too. Hey. We get new listeners all the time. I got a guy reach out to me today that was like, hey. I just started listening to your show. I was like, I love it. He's like, I bounced back between the the old stuff and the new stuff. It's like, because, like, he's kinda where we were years and years ago. He's like, but I also wanna know what you guys are doing now. I'm like, there we go.

Dan Austin: [3:43] That's great. Yeah. See, he wants to see the future and the past. That's great. Exactly. Welcome, new listener 182.

Mike DeHaan: [3:49] Yeah. Right. I mean, we we've had some of our especially after the whole Brandon Turner thing, we actually got a lot of new listeners from that.

Dan Austin: [3:54] Yeah. We're we're famous actually now, actually.

Mike DeHaan: [3:56] I don't know how long they're gonna stick around because I'm pretty sure the very next episode was the one where Dan opened with a retard, Maxing. So so so we we lost all of the, the people that were sensitive to that right off the bat.

Dan Austin: [4:07] Yeah. We definitely netted a few, but, yeah, I'd be I'm not the one out here making it up. I was just it's topical news. Everybody needs to know what's out there on the Internet.

Mike DeHaan: [4:16] You know? And it's already old news now because that's the way the Internet works. Mhmm. But anyways, in topical news, what we were talking about at the very start there, then hopped on to the show and said the first thing to me and, Dylan. When this is actually only posted about three hours ago, so this is very brief.

Dan Austin: [4:30] I've watched the news closely for everybody here.

Mike DeHaan: [4:33] Yeah. I know you have, like, a big screen that just plays Fox News all the time. It's a ticker. It's a Fox News ticket.

Dan Austin: [4:38] Yeah. Fox News is definitely not reporting on Trump. They're reporting on Kievi instead.

Mike DeHaan: [4:42] Exactly. But Kianvi has signed an agreement to be acquired by Figure Technology. So Figure is another lending company. If you guys have, like, loan officers or brokers in your social media, you probably see them advertise these, like, three day HELOCs, which I've always found to be kind of bullshit because they, like, have all these really weird requirements, and it needs to be, like, in your personal name, but it also needs to an investment property. It's weird. But I guess they're acquiring KIAVI for $717,000,000, which is interesting because I feel like that my initial gut reaction with that was low. But in the article, we found it kinda goes into revenue and their EBITDA, and that is about seven x, which is kinda industry standard, seven to nine x. And with these these kind of companies, if they're bigger, the equity multiple will typically be a little bit smaller. And I would also imagine that that is only for probably Kiev's pipeline and, you know, brand and everything else because I know for a fact that a lot of the securitizations that they've done with their debt is like larger than that number.

Dan Austin: [5:44] Yeah. They gotta be holding at least 1,000,000,000 on the on

Mike DeHaan: [5:47] the actual debt side. At least. So yeah. Like, how that all is structured, I have no idea. But it'll be interesting to sort of see this come together. And I think that that'll be a very, very big change to the lending space because Keavi well, it's the private lending space because Keavi is by far the biggest real estate investment lender out there. Not even close

Dan Austin: [6:05] to anybody else. Yeah. They're they're massive.

Dylan Koch: [6:08] Like, is this gonna set any kind of precedent, or is this is this kinda you think par for the course based on what's been presented so far?

Mike DeHaan: [6:15] So, like, I mean, I literally heard about this ten minutes ago, so I don't know. But I will say that in around COVID and, you know, like, even, like, right before that, there was a handful of other big lenders that got acquired for pretty hefty multiples. So I think that's kind of the play. Because, like, QIAVI as, like, a brand hasn't been around that long. They were, like, lending home, like, seven or eight

Dan Austin: [6:34] years ago when they first started. Dude, yeah. Yeah. So yeah. Maybe, like, six years ago.

Mike DeHaan: [6:40] Yeah. There's, like, a lot of other lending companies that got acquired relatively quickly after they were founded. So I almost feel like the play is you can get something to critical mass, and then you exit to, like, the bigger, bigger money.

Dan Austin: [6:51] Yeah. I think that kinda And you gotta remember too, the private private lending space is not that old. Like, yes, it's old. It's been around forever, could say. But like in what we know in modern history, maybe fifteen, twenty years old, really. And less so to what it is today. Like I would even give it like, yeah, I would say ten years, like to how it looks today from what it was the ten years prior to that. Because it's of course been around longer, but it's pretty modern in how we do things in the scale at which Chiaavi it's was able to do it.

Dylan Koch: [7:21] It's probably kind of analogous to wholesaling where a lot of competition came in and drove up the, you know, the the standard of which everything was done. And then then, of course, prices rose over the past twenty years. So that just increases the volume naturally.

Dan Austin: [7:35] But Right. But are you thinking all the vendors that came to wholesaling, like you just have all the new CRMs, you have all the mail companies, all the da da da, that made it so easy. The same thing is happening with private lending.

Dylan Koch: [7:43] And the tech to do it too. Yeah.

Dan Austin: [7:45] Tech is coming in. And Kiovy, at its roots, was a tech company, which kinda uprooted and changed things. So it is kind of surprising that they're not doing acquisitions and etcetera, the ones getting acquired. But I do think for the founders and the owners of these companies like that, that really kind of is the play is like a lender, or I'll even say originator, because you don't even have

Mike DeHaan: [8:03] to be lending money like your own money. But

Dan Austin: [8:05] as an originator, building up a massive pipeline or a big pipeline, you can sell that infrastructure in that pipeline. It's not necessarily the pipeline of repeat clients. In my opinion, it's the pipeline of being able to find these clients and having a product and marketing that fits the needs of that marketplace. Because you gotta remember, this is a pretty fractionalized industry still, even though you have national lenders and you have private lenders in every market by the dozen, do you know what I mean? It's pretty fractionalized. So being able to bring that in and grow through acquisition because one thing Mike and I were talking about last night was my opinion is like, there's so much demand for growth, especially in these the top three, four companies and more in this industry that they'll they'll do almost anything to get more throughput through their pipeline, more loans, more originations through their pipeline. Because a lot of them have securitizations where you can think of it as this. You get a $100,000,000 balance sheet of loans. Right? So you bring in a $100,000,000, you loan it out. So your balance sheet has a 100,000,000 in assets. You go and sell that. You've done that debt at say 11%. Now you go and raise at four and a half to 5% in essentially a bond or securitization, and they give you that money to basically buy. You're pledging those notes.

Dan Austin: [9:16] And then you gotta keep that going. Every time $10,000,000 rolls off, you better go and roll that back on.

Dylan Koch: [9:22] Yeah.

Dan Austin: [9:22] And to top off your securitization, because otherwise they're gonna be on your ass. Also, have large bank warehouse lines that have non utilization rates where you might have to pay one or 2% of the overall. Say you got a $100,000,000 in warehouse lines, that's gonna start costing you a month. So these big players that have that, they're really incentivized to originate regardless of the quality of the debt they're originating.

Dylan Koch: [9:45] Pay those fees based on that. Right?

Dan Austin: [9:47] Yeah. They're incentivized to keep originating.

Mike DeHaan: [9:49] Yeah. And and, like, on the private side too, the buyer pool is a lot more diverse than the conventional side because, like, there's a huge number of companies, banks, family offices, you know, insurance companies that will buy this kind of debt. And so to Dan's point, they're incentivized to generate as much as possible. If something isn't sellable to one person or one securitization, you can always roll into other ones. Right? And so, like, looking at I'm just have this HousingWire article pulled up about Figure, basically talking about I don't know who they're talking to. Figure as the Figure CEO. So they're I didn't realize Figure almost their entire business has been second position liens, which is crazy. That is crazy. Their goal with buying Keavi is to majorly increase their first position. And basically, what they're gonna be doing is they're so they're blockchain based company. Whatever that really means, I don't know. I'm not that smart. I mean But basically, they're using their technology to be

Dan Austin: [10:44] able to

Mike DeHaan: [10:44] offer RTL and DSCR loans to their 380 partners. So they have 380 different companies that they can originate and sell loans to, which is crazy. Think about how much of a pain in the ass it is for us, Dan, and we have like five. I can't imagine 380.

Dan Austin: [10:59] That's very A 100 people in their their capital market side of the business is probably gonna be crazy.

Mike DeHaan: [11:04] At least, if not more. So What do think the minimum in EBIT is get acquired? Because, like, what if like, if I

Dylan Koch: [11:10] just went and got Question. An EBIT is, like, $505,100 k, and the guy who had acquired for 4,000,000? Like, that sounds kinda cool.

Mike DeHaan: [11:17] No. Because that's that's gonna be too small. Right? Like, someone might pay you, like, 1,000,000 for that.

Dan Austin: [11:21] Only because you also don't have the infrastructure in place for Right. I understand that part.

Mike DeHaan: [11:26] Yeah. There's kind of a minimum side to be able to get like a real multiple on it. I don't know what that amount would be. But I mean, we know a guy that sold his company to what, Longhorn Investments. Don't know what he

Dan Austin: [11:38] actually was. Merged. Yeah. Merged was

Mike DeHaan: [11:41] fun with So I think that'd be more common if you were smaller, right, as you wouldn't necessarily get like a buyout, but you could like jump in with them and get some kind of incentive.

Dylan Koch: [11:50] I had one buyer use Longhorn once and it was an awful process. Really?

Mike DeHaan: [11:55] For the very expensive two, just twelve and three across the board.

Dylan Koch: [11:58] Yeah. Which is crazy.

Mike DeHaan: [12:00] Yeah. An interesting Five times.

Dan Austin: [12:02] They're an interesting model because like, by all accounts, like they're, so they're a balance sheet lender, right? Like they, that's why they won't lend in certain states. There's certain states that they just won't lend in because of foreclosure issues, right? Yeah. But yeah, they're like, they're probably $2.50, 200, they were 200,000,000 before they merged with the guy Mike was talking about. So they're probably close to 300,000,000 now, which is a decent sized balance sheet lender for some, like it's just a, it's just a couple of guys, kind of like Mike and I, that started it. But, there, we've talked to another couple friends of ours that own a company down in Phoenix. What is their fund, like a 100?

Mike DeHaan: [12:36] A 150, I think they said.

Dan Austin: [12:37] Yeah. And they're the same thing. They lend in a few states and they're twelve and three across the board. Like, nah, we like the dirty, we don't even pull credit. Like, like, we want want it to be a good asset. They're really asset heavy on their underwriting. And they want the guy to have a track record or the person who a track record, they're just twelve and three and they freaking kill it.

Mike DeHaan: [12:53] And they do lower LTV. Right? Mhmm. Especially they're based out of Arizona and they do a lot of stuff in Arizona and Texas. So they'll do a lot of like foreign nationals or, you know, non social security number sort of people.

Dan Austin: [13:05] Which is why like, for me, there's not really a lot of scarcity because you have on the flip side, doing a 100% lending, right? So you think you've got to compete with that, like a 100% LTC. Oh, I gotta be down around 10%, one point. Yeah, sure. That there's a market for that. But there's also a market for 12380% LTV or LTC. Absolutely.

Dylan Koch: [13:23] Yeah. See, that's wild to me. Because I know, like, the people around me that I know, if you told them that they had to go

Mike DeHaan: [13:29] twelve and three at 80% LT like LTC, they'd be like, no. Like, they wouldn't even consider it.

Dylan Koch: [13:33] Yeah. I know. Like

Dan Austin: [13:34] I bet you there's some folks in Cincy and, you know, around that area that would do that eventually. Right. Just gotta don't know them.

Dylan Koch: [13:41] Yeah. I just don't know them. You're right.

Dan Austin: [13:42] Yeah. The higher quality borrowers, they're the higher quality borrowers have options. Right? And by lower quality on these guys doing the twelve and three, that's not necessarily lower quality. They just can't go to the high quality because the lower quality, that's all balance sheet lenders. Right? Those, the guy, the two people we just talked about, Longhorn and this other company, they have a fund, so they get to pick and choose, which is actually a really, really profitable strategy. When you're selling the debt, you're basically having to have a conforming loan at this point. Right? They want the borrowers to have a 700 plus credit score. They want this, they want that. So it's a totally different it's just a totally different business model for a totally different borrower.

Mike DeHaan: [14:18] Yeah. And I will say there's a lot of, lower quality borrowers that should go to those twelve and three guys, but they don't because they're entitled and they think they want a 100% with

Dan Austin: [14:26] like Yeah. Yeah. Totally. You have like, six, we we just actually reviewed and borrowed. This isn't this is a different one, but it had like six acts of public lewd conduct or something like that.

Mike DeHaan: [14:39] Nice. Whatever that means. Whatever that means.

Dan Austin: [14:42] Or another credit report or the background report. But you get, yeah, you get some of these people that are like, yeah, sorry, 2023, it was so long ago I beat my wife and got arrested. Jesus. I feel like that. Like you see some of the those are borrowers that are trying to get the 10 in one and you're like, dude, you don't get 10 in one when you're like beating people and getting DUIs.

Mike DeHaan: [14:58] Yeah. Or it's tough too because what'll happen is you'll have some of these people that are like new or they do have bad credit and they happen to meet a local hard money lender, whether that's like a rich guy or that's like a couple of rich guys that just have some money. And they will do like super low due diligence loans. They'll be like, oh, yeah. We'll do eleven and two. You're completely green. We'll give you a 100% perks, 100% reno. We don't care. And a, they're kinda careless. The lender is also part of their business plan is they're like, hey, I'll happily take that property back from you if you screw it up. And they're happy to do that, which like most lending companies aren't that way. And the challenge is you'll get people that work with lenders like that, and then they come to shop around, go somewhere else because that lender runs out of money. They don't wanna pay that much, whatever. And but now they're kind of tainted. Right? Like, their mentality around what to expect from a lending company doesn't make sense because they had this first interaction with a company that's not the norm. It's like the lending equivalent of a, like, a wholesaler who goes and, like, locks up a contract for way too high and then can't close. But now that seller is, like, clinging on to 300,000, and every other person they talk to, they're like, well, Jimmy offered me 300,000 three months ago. I'm like, yeah, but Jimmy didn't buy your fucking property, Greg. Yeah.

Mike DeHaan: [16:12] I don't know what to tell you.

Dylan Koch: [16:13] That's a good analogy.

Mike DeHaan: [16:14] So so we see the exact same thing all the time. And like, we we have one of these companies here in town. They recently ran out of money, and all of their borrowers are coming to us. And their borrowers are like the most unqualified people. Yeah. Like like no money, no credit, no experience, but they all came out of like a

Dan Austin: [16:31] They think they're cool, so they're assholes.

Mike DeHaan: [16:33] Yeah. Because they all came out of like a flipping mastermind. So they're like, I know a lot about everything even though they've like never done a house before. Know, we we had one guy reach out. He has six loans with this other company. And I know this guy's committed fraud, because he reached out to us in the past. And I looked him up and he has charges against him for I think it was, like not paying his employees. And it was like a whole thing. So he's already stolen money from people Mhmm. As far as I'm concerned. He reached out. He's like he's like, hey. I have six loans with this other company. I'd love to bring some of these to you guys. We know they're out of money and you're desperate. And then the first question he asked, he goes, do you guys ever refinance existing fix and flip loans? So you're cooked?

Dan Austin: [17:13] I do or you don't.

Mike DeHaan: [17:13] Yeah. It means you're screwed then, dude. I know you're about to default on a bunch of those and you're looking for the next person to kick the can and get out of here.

Dan Austin: [17:20] Yeah. You don't wanna deal with those companies.

Dylan Koch: [17:21] Reminds me of, not someone similar, but we're trying to make a, to rent a unit right now. And I got an application the other day. And the credit score is 486, I think.

Mike DeHaan: [17:31] That's pretty good.

Dylan Koch: [17:32] Yeah. And then like on the application, says, something along the lines of

Mike DeHaan: [17:38] COVID ruined my credit. Like, I was like,

Dan Austin: [17:41] that was six years ago. That was a long

Mike DeHaan: [17:43] time ago.

Dan Austin: [17:43] Feel like Yeah.

Dylan Koch: [17:44] I was just like, decline.

Mike DeHaan: [17:46] You've had a long time to figure that out. But yeah. So I'll be interested to see if, like, the Chiavee name still sticks around if they keep it or if all of a sudden we're getting all these terms she's compete with from Figure. That'll be interesting. So either way, these kind of purchases I mean, it was just announced today. So I would imagine they're a little ways along, but it could always fall out or change or whatever.

Dylan Koch: [18:07] Kiave should have went public. They would have made more money.

Mike DeHaan: [18:10] Yeah. They could have. So I guess figures publicly traded, which

Dylan Koch: [18:12] is interesting

Mike DeHaan: [18:13] to know that.

Dylan Koch: [18:13] Oh, okay. I didn't know that either. Yeah. But speaking of public companies, you guys gonna buy the SpaceX IPO that's gonna happen on Friday?

Mike DeHaan: [18:20] Well, I can't buy it, like, now. I don't wanna buy it afterwards. Exactly. You don't wanna buy

Dylan Koch: [18:25] it when it's open to the masses.

Dan Austin: [18:26] So a friend of the show, I won't say his name, because he's a humble man, might stand to make a shit ton of money on this IPO because he was invested in it.

Mike DeHaan: [18:34] Oh, I know who you're

Dylan Koch: [18:35] talking about.

Mike DeHaan: [18:36] Yeah. I mean, that's good for but how did how did he get

Dylan Koch: [18:38] access to that?

Mike DeHaan: [18:38] Who knows?

Dan Austin: [18:39] Because he's awesome. I don't know.

Mike DeHaan: [18:41] Like Yeah.

Dan Austin: [18:42] He's just better than us at life.

Dylan Koch: [18:43] Yeah. I was reading some, like, some stuff on it. It's supposed to go live on Friday and at, a $135 a share. But, like, that with how many shares there are, it's like a $1,770,000,000,000 valuation. Valuation.

Dan Austin: [18:57] I'm just crazy.

Dylan Koch: [18:58] Which breaks the IPO record for like the starting valuation on an IPO day. And it's all for a company that has like 18,700,000,000 in revenue, and an operating loss of 4,200,000,000. I mean, any metric that I follow from like price earnings, price to book, like all these things that I've been learned to look at make zero sense with this.

Mike DeHaan: [19:20] Yeah. Who decides like the valuation and like

Dan Austin: [19:23] I guess there there's the Elon effect here. Right? And I think that there's a lot of people a lot of people that are hyping it, and then there's a lot of people that are unhyping it. Right? So there's like I feel like the truth is hard to find. Like, what is the fact? What is what actually matters?

Mike DeHaan: [19:38] Like, I don't know where, like, the dollar per share and the like, all that stuff comes from the with

Dan Austin: [19:43] all that. Right? Like, they

Dylan Koch: [19:44] probably investment bank stuff. Who which I read is, like, earning 400,000,000 just on this IPO for just doing their IPO.

Mike DeHaan: [19:50] Yeah. But like, what is it based on? They come up with it, but like, why don't they just price it at what they wanna do and sell it to all the schmucks?

Dan Austin: [19:57] Like, Dylan's like, well, historically, whatever. Here's kind of, I guess, my opinion on it. I'm not gonna buy the IPO because I just the way I invest is usually I buy high and sell low. I just when when I don't understand it, to your point, Dylan, like, you know more about this stuff than I do, and you're like, this doesn't make any sense. When there's all the media hype around something like this, like that gives you conflicting points of views based on personal biases or personal benefit. But I'll give you what I kind of think about it, is that the big difference here is that the NASDAQ is going to what is allow how many days after the IPO is gonna allow retail traders?

Mike DeHaan: [20:36] I think I think it's only thirty.

Dan Austin: [20:38] It's used to be like eight months or whatever. So this is gonna happen. Is this gonna IPO? There's a ton of hype around it. There's a lot of Elon followers that just wanna invest in Elon. People have been wanting to buy into SpaceX for years. I think long term, there's probably a huge upside. Right? Like, they are so far and above the rest of the world in space, and he's basically building an alternative Internet or has already built it, which is wild, right? Like, you think about stuff like that, it's pretty crazy. And then with like xAI, when he was spending all that money to build out the servers, or whatever you call them, the AI cricket buildings, and people were like, wow, he's investing a shit ton of money. And then people are giving him shit about that. And then he went and turned around and did like a, I don't know, was it a $20,000,000,000 contract with Anthropic that then made Anthropic the most valuable AI company? Like just that like simple stuff alone, I think long term makes a lot of sense. Here's why I don't think it'll just completely wipe out and crash right away, is because I think a couple of pods ago we talked about how like $40.01 ks money is like 30 something percent of all retail trading.

Dan Austin: [21:42] Like that is gonna come in and swoop and be forced to buy it. And I think that will prop up the actual price, so that retail people that wanna come in and buy, in a normal IPO, say you're saying $135 a share, and the valuation doesn't make any sense, and all the hype goes away, and then all of a sudden the private guys get cashed out, and they're freaking rich now. All the employees are rich, they wanna start dumping shares. You know what I mean?

Dylan Koch: [22:06] Yeah. There's supposed to be 4,000 millionaires that's like, that are employees.

Dan Austin: [22:10] Right. And guess what? This is my theory anyways. Where there would typically be a gap in buyers, $40.01 k money is gonna come up and grab that because they have to because they're buying indexes.

Mike DeHaan: [22:20] So I just saw this, like, the other day that they changed the rules or, like, they're not allowing SpaceX to be put on one of those indexes. So the 401Ks won't be buying it up like they originally They're not gonna

Dylan Koch: [22:34] but so trade on the Nasdaq's, but they're not allowed

Dan Austin: [22:36] to That's like a very recent trade change then.

Mike DeHaan: [22:39] This is like in the last day. I saw it yesterday, I think.

Dylan Koch: [22:41] Well, they weren't gonna expedite it. It'll be there eventually, but they weren't gonna expedite it.

Mike DeHaan: [22:45] Is that what it was? Yeah.

Dylan Koch: [22:46] Right. Right.

Dan Austin: [22:47] Okay. So they're going back to their normal rules, which was you had to wait eight months?

Dylan Koch: [22:50] I don't know the timeline, but that sounds about

Mike DeHaan: [22:52] twelve months. Twelve months. Okay.

Dan Austin: [22:54] Okay. So my theory kind of goes away then if $40.01 ks money doesn't get forced to go and buy it. Cause a lot of people are like, oh man, this- and this is the- the pundit, like, oh, they're gonna wipe out everybody's retirements, everybody's gonna be poor again. I'm like, yeah, but people in their retirements don't really touch their 401ks for a long time. And so if you're long on it, which I would be long on SpaceX because there is a lot of value there, then why wouldn't it just help them? Right? But

Dylan Koch: [23:19] I'm taking the under. Here's my my hot take that Internet can cook me on in five years. I bet it's under $1.35 a share five years from the IPO. Possibly.

Dan Austin: [23:27] Yeah. Five years is short term, though.

Mike DeHaan: [23:29] Well, you gotta account for inflation with that, Dylan. It's how much the dollar today gonna be worth in five years. Yeah.

Dan Austin: [23:34] It's very fair.

Mike DeHaan: [23:34] You're well. Let's do this. What's Bitcoin gonna be in five years, Dylan? Better hopefully, it's more than fucking 58 or whatever it is

Dylan Koch: [23:40] right now. Over $2.50. Over $2.50? That's it?

Dan Austin: [23:45] 250 k. Yeah. Do you think that the recent dip in Bitcoin is to for for people who are stupid investors that that just buy the hype are selling their Bitcoin and going to getting liquid for SpaceX?

Dylan Koch: [23:56] There was speculation.

Dan Austin: [23:57] It seems like most Bitcoin investors are they buy hype.

Dylan Koch: [24:00] Yeah. And there was a pretty good chart out how Bitcoin's price has followed a lot of the software companies, like a software index pretty much. So to answer your question, like, maybe, but at the same time, like, to me, there's not the same trade. But I think that's my own, like, mind and not maybe the general public's mind.

Dan Austin: [24:19] Yeah, good point. Yeah, I think there's a lot of bros out there that are like, SpaceX,

Mike DeHaan: [24:24] we gotta buy it, man. This is the next

Dan Austin: [24:25] big lift. And they don't actually, you know, listen to the the other side of the argument of where maybe it won't be like a huge ups. Because the people that are winning are the guys cashing out.

Dylan Koch: [24:34] Yeah. My default position, if I know that everyone else is doing it, it's probably not gonna work

Mike DeHaan: [24:38] in the near you

Dan Austin: [24:40] know? Yeah. Yeah.

Mike DeHaan: [24:41] Very short time. Totally.

Dan Austin: [24:42] Yeah. I think there's definitely a lot to be said about that.

Mike DeHaan: [24:45] There's always that old saying, you know, buy the hype, sell the news. Mhmm. Like, that's super true when it comes to all this kind of stuff, especially these days where it's so easy to manipulate things. You just gotta, like, not get your I don't know. Yeah. Like, emotionally tied to stuff. Right? And you have

Dan Austin: [25:02] to understand that you are buying

Mike DeHaan: [25:03] the hype. And if you I think if you take that hype and you make that fact for yourself is where you're gonna get burned these days.

Dan Austin: [25:08] Well, there

Dylan Koch: [25:09] are plenty of people that probably have the opinion like, oh, go public at 01:35. I'm gonna try as much as I can, and I'm gonna buy the open and sell the close, like hoping that it just goes up on the same day. Right? And make a quick, you know, call it couple thousand, $10,000. But that that could easily go the other way. So I

Mike DeHaan: [25:25] Oh, totally do.

Dylan Koch: [25:26] I don't know.

Mike DeHaan: [25:27] I don't know. It's called gambling, Dylan.

Dylan Koch: [25:29] Yeah. Might as well just go play blackjack at the casino.

Mike DeHaan: [25:32] Yeah. People like to gamble. You know, it's never been easier, especially like Robinhood and all these like free trades where they can like do it instantly and they don't charge you anything. But then what you should be doing is, if you wanna like make much better odds, you should be going on like Polymarket and like place a bet for like where it's gonna finish in at day one. Because there's probably like some huge spreads you get on that like nine x that it's, you know, above like one fifty or something.

Dylan Koch: [25:54] Mike, what's your Polymarket account? What's your plus minus?

Mike DeHaan: [25:57] On what? It's gonna finish that?

Dylan Koch: [25:58] No. Like, just in general. Doesn't you do a bunch of Polymarket or something?

Mike DeHaan: [26:01] No. Did that like one time with $250. Okay. I I think it's all gone. I was up for a little while, but then I started betting on, like, dumb stuff. And yeah. Just I don't care. Like, the problem is is in order to, like, really get into that, you either have to be a real degenerate gambler or you have to care about stuff. Yeah. Like, like, what's actually going on, and I really don't. You know? I'm not gonna sit there and, like, see what fucking Kristi Noem says on a speech to, like, see what she's gonna say. Like, like, people think that's fun. I don't know. I got other stuff to do. I just forget.

Dylan Koch: [26:33] Other people who bet, like, on

Mike DeHaan: [26:35] ping pong at three in the morning on what the next point's

Dylan Koch: [26:37] gonna be. Like, it's some obscure, insane stuff.

Dan Austin: [26:39] If I wasn't doing anything at that point in time, yeah, sure. I would do it. I'd have fun. But it's a in the moment thing. Like, I don't I don't like to pursue random things like that. Because like, yeah, don't have the time. I'm I have way better interests. But-

Dylan Koch: [26:50] Yeah.

Dan Austin: [26:50] You know, if I'm sitting there bored and I have nothing else to do and you wanna gamble on some shit, let's do it.

Mike DeHaan: [26:54] Like, if I'm gonna gamble something, I'm assuming that's, like, right in front of me. Right? That I can, like, I can, like, perceive. I don't, like, care about, like, just, numbers on a screen where, oh, man, is the Japanese ping ponger or the American ping ponger gonna win? But I I don't care.

Dan Austin: [27:07] Oh, you want it in person in person. Yeah. Like a wrestling challenge, someone to wrestling match and gamble on it.

Mike DeHaan: [27:12] Or even something like dumb. Like, there's this Instagram account that, I follow, and they'll just like bet on like stupid stuff. They'll be like sitting on like a hotel balcony and there will be like some people, like, shooting hoops, like, down at the beach, and they'll be like, alright. I'll bet you $5 that this guy misses three shots in a row. Like, that's entertaining to me because it's funny. That's funny. Yeah.

Dan Austin: [27:31] So I can bet.

Mike DeHaan: [27:32] It's not real money.

Dylan Koch: [27:33] More related news that came out yesterday, maybe this morning. The CPI, which is a consumer price index inflation for lack of a better term, came four increased 4.2 year over year, which was much higher than expectations.

Mike DeHaan: [27:47] Is it really higher than expectations? Or is it higher than they're telling us the expectations should be?

Dylan Koch: [27:52] Well, probably that. But, you know, that's what the news media came up. But I mean, couple tidbits out of this was like, their core CPI number, which is, I guess, why a lot of the economists use to actually gauge where interest rates should go came in at 2.9% year over year, but that excludes food and energy costs, which like, okay, that's dumb in my opinion, because obviously, are two staple things that people need in their life.

Dan Austin: [28:17] Correct.

Dylan Koch: [28:17] And that a report indicated that much of the inflation surge came from a 3.9% jump in energy prices, which the twelve month increase was 23.5% in energy, which a lot of that I think is like the street being closed still. So I don't know if there will be a transitory effect with that or not. But It's interesting

Dan Austin: [28:36] that energy costs that you're saying the energy costs in The US jumped that much 23%?

Dylan Koch: [28:40] Year over year.

Mike DeHaan: [28:41] And is that just just related to gas and oil, I guess? Because

Dylan Koch: [28:44] Well, like your gas and yeah. Like your electric and gas bills, that's kind of stuff too.

Dan Austin: [28:48] Like your never mind. Your electric and gas bill shouldn't change.

Mike DeHaan: [28:51] What's gonna happen to energy with all these data centers? So this is a big thing up here right now. Our, utility you know, we have, like, the one main utility here locally. They got an application from a new customer that is basically going to be 30% of their potential power generation 60. Full capacity? Is it sixty percent? Sixteen. 16%. When it starts. Total. When it starts. Total. And then it by they're saying by 2030 something, it should be at 30%. It's like 500 megawatts or whatever. That's their energy generation capacity. I don't know what what it is of like their their daily generation or what percentage is. But it's like it's in a massive amount. It's gonna be like the equivalent of like half the city is gonna be going to this one customer.

Dylan Koch: [29:35] So I think it's definitely a problem because you got to think no major city is designed for the fact to use that much energy. No. Right? So you have to redo a lot of the infrastructure.

Dan Austin: [29:45] I think it's a big fat nothing sandwich. Aaron and I actually talked about this a little bit last week. Yeah. Because, okay, so if you, which is easy to do, here's a good example. Washington State's actually a really good example of this because we have a pretty liberal, utilities commission and we're regulated, which as are most states. There's only a handful of states like Texas that aren't regulated. But especially when you have a pretty liberal utilities commission, they are very much so for the people. They're like to the point to where they'll raise the rates on average people to give poor people free power, right? So they're not gonna people that can't afford their ability to be adversely affected is what I'm saying. That'll be across the board in most states because there's enough media on it. But think about this, it's, in my opinion, better for the electric grid because you're going to have this data center that comes in and say they want five- need 500 megawatts of usage. They're going to come in and they're going to be forced to build out all of the infrastructure, right? So say they build this thing, they're not going to build it right in the city because they can't. The real estate values don't make sense. And honestly, wherever they're putting it in Spokane, it's actually not gonna be in Spokane.

Dan Austin: [30:47] It's gonna be somewhere out near like Othello, which is also in our utilities area. So it doesn't really affect anybody in our town. So the way these public announcements are are somewhat deceiving. But my point being is, they're gonna build out all the infrastructure outside of town, which means now, if you want to develop property all the way between town and that data center, you now have paid for infrastructure, which would normally cost like a million bucks a mile to just build out, right? So if you're 10 miles out of town, and you wanted to build a house 10 miles out of town, now you have $10,000,000 of infrastructure built out, so you don't have to pay for it, paid for by the data center. On top of that, they're gonna bring their own generation. So if they bring their own generation, what does that do? There's no way they're gonna be peaking their generation all the time. So now they'll have the ability to sell back into the system. And now you have additional resiliency and additional generation capacity that did not exist near the load.

Mike DeHaan: [31:39] So the data center is gonna bring their own generation? How they

Dan Austin: [31:42] Generally speaking, they will have And their own they want to. They need to. Because it's like, they need to have massive uptime. So say if you're gonna add 500 megawatts, right? You know this Mike, because you're electrical engineer. You have to have the exact amount of generation at the exact second that you're using it. So your power system has to be completely balanced. So for them just to add 500 megawatts, you can't do that without a generator. Yeah. And so if the data center has to have generation to support it, they're gonna have to pay and build it. And oftentimes they're going to be bringing generation, like where we're at, probably like solar will be a lot of it with a bunch of battery backup and probably like natural gas speakers, which are like an ideal generation source for like resiliency. So to me, I think it's big fat nothing sandwich.

Mike DeHaan: [32:26] Interesting.

Dylan Koch: [32:27] There's still a lot of political backlash, especially when they buy up like the rural areas for, you know, the prices per acre are ab- Totally. Astronomical higher to what they used to be.

Dan Austin: [32:36] Yeah. My thought about that is is like you Redneck Hillbillies weren't using that shit for anything anyways. Yeah. I'm not like pro AI data center. I just think the power grid and then they've already debunked the water issue. Like, all

Dylan Koch: [32:47] the tech people

Dan Austin: [32:48] on the water. Right?

Mike DeHaan: [32:49] Yeah.

Dan Austin: [32:49] So they've debunked that, and I'm just coming here from the energy standpoint to debunk it because like, it just doesn't make any sense that you would have a data center come in and they'd allow you to just suck the lifeblood out of the city using all of their electricity. It's just not possible, especially in most regulated states. But to me, there's a whole another argument if you want those in your town or in your city or near it, it's just the arguments being played out in the public right now are not the ones you should be arguing because those get debunked right away. Because the data centers like Elon Musk would be like, cool, I don't wanna be hooked to your grid anyways, you guys

Mike DeHaan: [33:20] Yeah. Right.

Dan Austin: [33:20] And just build this whole generation and whatever. And then it won't be connected to the grid. Therefore, you won't be getting the additional benefits of somebody who's bringing 500 megawatts of generation, which is hard to build.

Mike DeHaan: [33:32] Interesting. So the what's the water debunk? I haven't heard this.

Dylan Koch: [33:35] Basically, that that it's kind of the same thing to energy is that water will like, it will use the surrounding area's natural water supply.

Mike DeHaan: [33:42] I understand that. But saying that that's not the case. They're just gonna break

Dan Austin: [33:45] the I think the I think the thing about it is, and I haven't gone down the total rabbit hole in this, is that they use water. The theory is, is that they suck out of the water out of like, say you're on an aquifer or river to cool those data centers. But that's, I guess, not true. They actually don't consume very much water.

Dylan Koch: [34:01] Or they re- I think something about they recycle a lot of the water that they do use.

Dan Austin: [34:06] Like a cooling. Yeah.

Mike DeHaan: [34:07] You should just hook them up to like a wastewater treatment plant. So like

Dan Austin: [34:10] So when they when the when it gets a leak, it just gets poop all over their sink.

Mike DeHaan: [34:13] Oh, so that was

Dan Austin: [34:14] sewage water? So like

Mike DeHaan: [34:15] my my first job was in wastewater treatment. And there's like huge amounts of water that sit between, like, after the poopy water, but before it's fully cleaned. That's good work. It's probably usable. Like Oh, yeah. That that, like, an animal could drink. Like, if a human drank it, it might get kinda ill.

Dan Austin: [34:30] Throw me in. Like, your your sewer water, like, I don't know if you ever looked down a sewer pipe. You only see, like, a turd, like, every few minutes. There's not that much. A lot of the water is wasted on, you know, wash showers, washing your hands, pee.

Mike DeHaan: [34:42] How much time have you spent sitting there looking down the sewer?

Dan Austin: [34:45] I used to work when I was like 18, I had a road construction job where we'd have to like connect sewer lines. So I've seen it before. I was

Mike DeHaan: [34:51] They're just looking for turds? Yeah. Just You could make polymarket bets on how many turds per ten minutes you're gonna see.

Dan Austin: [34:56] A polymarket was a round bet, but I certainly would have.

Mike DeHaan: [34:58] Yeah. There we go.

Dan Austin: [34:59] To round out or cap it off, my whole belief on the the data center stuff is it's happening. So you might as well make it to where it benefits you locally, and don't miss it. Because another thing that was huge for like the local economy here that is all the data centers we do have in the Central Washington area, it's like deserty area, Like that's actually been really good. It's not like a long term jobs thing, but it was really good because it brought all- it expanded all of like the electric utilities out to these areas, and put in really, really big infrastructure paid for by Microsoft and Amazon. So it actually ended up being a net positive. And it still does bring jobs because you still always need maintenance people and that sort of stuff. You don't need the 5,000 jobs that they quote in the beginning forever, but you might need that for five years and then you still net some jobs.

Dylan Koch: [35:45] Well, the devil's advocate argument to that is that the AI that it helps create will get rid of more jobs than it adds. But I'm not saying that's true or false. I'm just saying that's the other side of it.

Dan Austin: [35:56] To me, that's a doomer argument. It's happening no matter what. So there's no it's like, get on, dude. We're going streaking. Let's go.

Dylan Koch: [36:02] Yeah. Well, mean, and then tying this back to the inflation thing that we just talked about is so Kevin Walsh, the new Fed chair, his first meeting is on, I think, the fifteenth or sixteenth, sixteenth or seventeenth. And with this inflation, Brent Edwards, like, he can't, like, you can't lower rates, which is what he was Trump wants him to do. Yeah. Right. And so this it's kind of the higher for longer narrative when it comes to interest rates still is what the market is

Dan Austin: [36:25] I remember, I think it was like last year you quoted Dylan, you said this is a decade of inflation. And I believe that, honestly. I don't I don't see inflation breaking until '20 and I'm not saying at 2030, before 2030, should say. I don't see the inflation changing in a meaningful way that people see an impact in their day to day lives before 2030. It just doesn't make any sense. We've printed too much money between 2008 and 2020. There's just too much money

Dylan Koch: [36:52] out Out 2022, like post COVID a lot of it too. Like

Dan Austin: [36:55] Yeah. We kept yeah. Quit kept printing. So it just doesn't make any sense that it would just go away.

Dylan Koch: [37:01] Yeah. And that's an investable time horizon. And people say, you know, I invest for thirty. Like, you don't know what thirty years gonna be like. Five years or less is an investable time horizon where you can make some calculated decisions. Mhmm. And then like the whole inflation metrics piss me off anyway, which I know most people probably know this, but like, because it's a year over year, like rate of change number, it's like saying you weighed a hundred pounds, the next year you're a hundred and five pounds. So the the inflation number quote unquote was 5%. But the following year, you're a hundred and five pounds again. They report that as zero even though you're still five pounds heavier.

Dan Austin: [37:32] Yeah.

Dylan Koch: [37:32] Right. So, like, it's just kind of annoying. Like, if you do that year over year over year, like, the total number is probably 20 plus percent. Right?

Dan Austin: [37:38] Right. So there's some commentary I was listening from Jay Scott about really go- what's going on with like the strain of Hormuz in Iran and his kind of thought about things breaking here in like a month or two, and really causing more of a global recession. And he was to kind of talk about it a little bit about inflation. It's pretty, it's interesting commentary whether you believe, you know, believe in what he's saying or not, you know, it's easy to believe in what he's saying, because he has a pretty articulated point of view. The thing that I go back to kind of on where we're at in the world is, in America, it's pretty awesome right now compared to everybody else in the world. Like people talk about like K shaped economy and all this sort of stuff. It sucks way worse everywhere else. And the Strait Of Hermus is not really affecting us as adversely as it is the rest of the world. So like they're under pressure. Like I think Jay Scott even said like Vietnam is on a four day manufacturing week right now because they don't have enough goods to manufacture. Mhmm. Right? Which is that's Vietnam. That's crazy. Right?

Dylan Koch: [38:37] Cairo and Egypt, they have, a lot of their nightlife, I guess, is in the evening and night, like, to, like, the cultural thing there. And they have because

Mike DeHaan: [38:44] it's hot as fuck.

Dylan Koch: [38:45] Yeah. Right. But they have, like, blackouts right now.

Mike DeHaan: [38:48] Like they're, hey, like, we're cutting

Dylan Koch: [38:49] off the electric from this time at night because they don't have the- I

Dan Austin: [38:52] think that's normal, but like, Yeah. Just that's probably more They- I think it's

Dylan Koch: [38:57] more intense than normal. Like, I think

Dan Austin: [38:58] it may I would have say during the nighttime, they probably wouldn't have it as often. They so we used to have a team of Egyptians working for us. They had every part of the city had a four hour rolling blackout every day.

Mike DeHaan: [39:08] Yeah. They have like, it's called load load shedding. It's pretty common in, like, the rural countries. When I went to South Africa, was the same thing. In Cape Town's wild. It's like Seattle. It's a modern, like, huge city. And then for like four hours randomly every day,

Dan Austin: [39:19] the power would just go out.

Mike DeHaan: [39:21] That's wild. So we'd like sitting like in our freaking hotel room and like the power would just go out. And the hotels have generators. So like five minutes later, it would kick back on. But then like the entire city would be dark. It was nuts.

Dan Austin: [39:31] Which to your point, Dylan, at nighttime it's not as common because they don't have as big of a load at night. Right. So why they're they're doing load shedding maybe in extended periods. But yeah, there's I guess the point I was bringing up is it's like it's more affected, you the rest of the world. And so, you know, potentially this global recession, then it maybe bleeds more into The US, right? As far as what happens, but even then, I think like we're better off, it just still sucks.

Dylan Koch: [39:53] Yeah. Well, yeah, I wanna say this and make you up the subject. This is the US Bureau of Labor Statistics, their own CPI inflation calculator. If you go type in a $100,000 in January 2020 up until May 2026. So what is the equivalent of a $100,000 in January 2020? Any guesses?

Dan Austin: [40:11] 136,000 would be today's dollars.

Mike DeHaan: [40:16] So that's like six years? Six years.

Dylan Koch: [40:18] Yeah.

Mike DeHaan: [40:19] I'd say I'm gonna say a 145.

Dylan Koch: [40:21] Okay. Overshot a little bit. It's $129.09. So $1.30.

Dan Austin: [40:24] $1.30. Close dog.

Dylan Koch: [40:26] Still, I mean, that six years out of if you're not getting a $5,000 annual increase in your wages, you are a net negative over those six years, which I don't think many people have got.

Dan Austin: [40:36] That's hard to get. Because the do the companies have that money to give? That'd be the other question.

Mike DeHaan: [40:41] That's the other thing.

Dan Austin: [40:41] I mean, probably do, but, like, small business probably doesn't.

Mike DeHaan: [40:45] Are they going to do that? I mean, like, really small business, like, the low profit margin businesses, definitely not. Right? Like, honestly.

Dan Austin: [40:53] Right. Walmart probably can't do it. Roll back those prices.

Mike DeHaan: [40:56] You you expect the Walmart family to to give up some of their

Dan Austin: [41:00] Well, so the family now that's different, but the business itself. I mean, they were I think Walmart actually what is their what are their margins doing? You probably noticed this.

Dylan Koch: [41:06] Isn't something stupid low, like 4%, like

Dan Austin: [41:09] I think it's 4%. Four it was 4% was the number I wanted to say that I was quoted. So they yeah. They've been rolling back those phrases.

Mike DeHaan: [41:15] Point one to 4.3% operating Net profit margin, 3%.

Dylan Koch: [41:20] So 3%. This reminds

Dan Austin: [41:22] me actually, this is a good point. It's a little bit of a rabbit hole, but hear me out here. Because I've, you know, this idea of like incentives and where incentives lie for things when you look at like the macroeconomics. So I was listening to this, I think it was on the All In podcast recently. They're talking about, so you have a really good, say, size, like the size of your fund means you will operate at a lower, profitability, right? So the bigger you are, the harder it is. Put this into context in a real estate business or for like Mike and I in a lending business, right? The bigger our debt fund is, or say you go to a big syndication like Brandon Turner's, a billion dollar syndication or however big his was, like, naturally, because the numbers are bigger, it's just too much. You can't manage it as well. A bigger company is hard to manage, you know, hundreds of employees, all that. Where a smaller company, say a $100,000,000 fund comes in and they can make 19% pro margins. This $1,000,000,000 fund makes half of that. Well, the challenge is, especially when it comes in like the private equity acquisitions, is a company will come in and say, Hey, we're gonna give you $20,000,000 for 5% of your company. You're gonna be valued at this amount. And this big company comes in and says, Well, we need to give you $2.50 to make this worth it.

Dan Austin: [42:31] Now we're gonna we're gonna basically say your company's worth more. We're gonna give you $250,000,000 at double the valuation, half the return. Because the billion dollar fund is giving their investors say 5% return. The $100,000,000 fund is giving their investors a 10% return. Naturally, we would want to invest in that $100,000,000 fund, but there's a lot more people investing in the billion dollar fund. So they're basically falsely inflating because through acquisition, falsely inflating the values of a lot of these private companies or these assets, we'll just say assets in general, because they have so much wealth concentrated. It's like the Warren Buffett issue. Like Warren Buffett says like, and this is why I think he was lauded for his discipline is he's like, I can't just go and invest in random companies because I need to deploy a $100,000,000,000 at a time or however big his minimum deployment was. Right? And so these big funds, what they do is they come in and you see these private tech companies, the founders are gonna make double going with the big poorly managed fund. Well, if they go with the smaller private equity fund who would actually help them be a better company and would return way more value to their investors, there's just the incentives aren't there. They're like, dude, I wanna make double the money going with the big guys. So they go with the big guys, all the investors make half the returns that they should. And the big guys are incentivized more because who gives a shit if you're getting a 11% management fee on a billion dollars? That's way better than 1% management fee on a $100,000,000.

Dan Austin: [43:49] So they can take half of the returns anyways, they don't really give a shit because the size is where they're getting all their money from, right? The size of the fund.

Dylan Koch: [43:57] The bigger ones, they're also worried about competition. So if they're like, you actually have a chance to compete with us, how about we just buy you?

Mike DeHaan: [44:03] And like, we'll overpay for

Dylan Koch: [44:05] that because we just want you out of the marketplace.

Dan Austin: [44:07] Right. Yeah. But again, the investors themselves are actually making way less returns. Because the fund manager is making double what the guy who's getting good returns, a really well managed fund. Yeah. It's just not I don't know. It's an interesting conversation when you talk about like, how like we're talking about SpaceX IPO and all these like private companies getting bought up by private equity and why they're doing that at these high multiples. And as the investors in these funds, you're just kinda getting punished with really shitty returns because the manager's making a shit ton more money on a larger fund.

Mike DeHaan: [44:37] Man, I went away for three days. You guys are fucking economics nerds now. But Dan took advantage just as right at everything. Got a PhD while I was gone.

Dylan Koch: [44:45] Dan actually and I talked an hour a day every day.

Dan Austin: [44:47] Yeah. You did while you were gone.

Mike DeHaan: [44:49] I can tell. It's like, I think you guys linked up your Neuralinks or whatever

Dan Austin: [44:52] you did. Yeah, have. Yeah. Did you get yours turned on though?

Dylan Koch: [44:56] Yeah. That's why Dan's bald.

Mike DeHaan: [44:57] Yeah. Yeah,

Dan Austin: [44:58] exactly. I lost my hair. But anyways, I'll just leave that at what it is. I think that good conversation is around incentives. And we talked about this with employees. We talked about this with like investors out there, like where incentives lie. It's just wherever the incentives are is where things go. I've seen it so many times again. So many, so many times.

Mike DeHaan: [45:17] I think that's a great lesson to wrap up here is before you make any investment or you give anyone your money, just figure out what the incentives are for the people that are involved, how they're getting paid, and does it actually make sense for whatever that investment is to perform or not. And if they have no incentive for it to actually perform, then you probably shouldn't do it.

Dan Austin: [45:37] So Agree. Cool.

Mike DeHaan: [45:39] Alright. Thanks, guys. Well, go and relisten to that if you need to because goddamn, they threw a lot of numbers, a lot of, like, smart stuff around way way beyond me. But, you guys are are well read these days, so good for you. But, thanks for listening, everybody. And we'll talk to you guys next week.

Dylan Koch: [45:55] See you.

Mike DeHaan: [45:56] This episode is sponsored by Sir Lenzelot LLC, also known as SLA Capital, which if you didn't know, is Dan and I's private lending company. So, yes, we are sponsoring our own show, but what you're do about it? It is our private lending company that offers hard money and DSCR loans to real estate investors of all types. So you can be a new investor, an experienced investor. You can be buying flips. You can be buying rentals, whatever. We can do everything. And not only that, but the rates that we offer are just as competitive, if not cheaper, than pretty much every other company out there. Whatever big company you've been working with, bring us their term sheets, I guarantee that we can probably beat it. We have the same connections they do. We just don't have all the overhead and middlemen. So if you wanna come and check us out, go to slacapital.com/keys, and I will know that you came from the show. And by seeing that you came from here, when you get the closing, you will save $500 on your first loan with us. So slacapital.com/keys, we would love to fund your next deal. Thanks for listening, everyone. If you want more from us, you can shoot us a follow on Instagram. I am at Mike underscore Invest. Dan is at investor man. Dan and Dylan is at Dylan underscore does underscore deals. Choose to follow and send us a DM to let us know what you think of the show.