Clay Finck (03:00):

I think all of our listeners want to know, how did you meet Kevin O’Leary? Why did you two end up deciding to launch Beanstox together?

Connor O’Brien (03:07):

The phone rang one day, years and years ago, before he was as well known as today. In fact, it was before Shark Tank even started. I said, “Yeah, I’ll talk to him.” I talked to this guy that I didn’t know, and I didn’t watch a lot of television. He talked to me about what he’s done, what he wanted to do. He wanted to get into the business of providing investment services. We already had the business and platform and team and experience to do that, so we just started working together. We created an exchange rate fund business called O’Shares ETFs, and we have a set of funds that are listed on the exchanges. We then got these inbound requests for help with investing and that led to Beanstox.

Clay Finck (03:47):

What’s it like to work with Mr. Wonderful. Or are there any funny stories you’d like to share about that?

Connor O’Brien (03:52):

It’s wonderful. I guess I’ll tell you a bit more than that. It’s actually really good. He’s a very straightforward guy. You know on Shark Tank, they’re all coached by the producer to be a certain style of personality that fits a bit who they are, but it’s cranked up a little bit; be mean when it’s time to be mean and help the Shark Tank show appeal to a broad audience, and it really does.

Connor O’Brien (04:13):

I think it’s probably created a lot of entrepreneurial spirit across a lot of young Americans of Americans of all age groups. It’s actually become a bit of a global phenomenon as well because it’s just fun watching real people trying to get things done.

Connor O’Brien (04:26):

That’s his style on TV and in real life, he is a bit like that, but very straightforward, quick first, to listen and then help with the decision process.

Connor O’Brien (04:35):

When it comes to Beanstox, the whole concept of keeping it very, very simple is all him. Before we designed it, I went and met with CEOs, a variety of other robo-advisors and wealth platforms or systems that were available either through laptop, desktop or mobile. One of the guys we met in New York City was incredibly generous. He said, “Hey, I built something. He thinks it’s successful. It’s way too complicated. It’s too complicated for the clients. It’s too complicated for my team to spend a whole bunch of time trying to sort out the complications.” That guidance was also quite simple, as well as quite helpful, just a real world experience that aligned well with what [KO 00:05:14], we call him, what KO had to say. It’s really part of the whole, what’s called pre-build design, that went into keeping Beanstox really simple.

Clay Finck (05:24):

When I listen to Kevin, that’s one thing I’ve noticed with his approach, he likes to keep things as simple as possible.

Connor O’Brien (05:31):

I tell you, we built this ETF business, I and Kevin don’t need to own 500 stocks and just own everything in a generic index. I just want to own the ones that have more of what I want, which is more profitability, dividends, dividend growth, etcetera, etcetera. I want a portfolio that’s bulletproof, as opposed to just anything and everything.

Connor O’Brien (05:50):

That sounds so simple; who doesn’t want to own companies that are more profitable, paying more dividends, growing their dividends, etcetera, etcetera? That’s a little bit of the KO investment DNA that’s in those ETFs and this is reflected in Beanstox, keep it really simple. Life does not have to be complicated. You don’t have to swing for the fences with your investing or anything. Maybe sometimes have some fun with it, swinging for the fences and in certain things. With investing, of course, it’s too risky. People work really hard every week to make X dollars. You don’t then just go play Las Vegas with your money.

Clay Finck (06:24):

Yeah. That’s one thing about investing. I think too many people take a too complicated approach and it’s good to just have that reminder to simplify and hit on those key concepts of dollar cost averaging, automate your investments, stick to ETFs for at least your base portfolio.

Connor O’Brien (06:43):

Yeah, that’s right. A lot of new investors think it’s easy or think that they’re smarter than everybody else until they learn, “Oops, it’s not easy, and maybe I’m not smarter everybody else because whatever I did, I bought something that was hot and now it’s not.” Whether it’s a stock or it’s a crypto or something else. If it’s already gone way, way up, be careful. Maybe it’s overshot the actual real value of whatever it is. I think a lot of people get burned by thinking it’s easy, and then they go back to the more consistent way of investing, hopefully, as opposed to the not investing.

Connor O’Brien (07:19):

The biggest mistake, perhaps other than losing all your money, is to never invest. Here’s some math; if somebody starts at the beginning of their career investing $100 bucks a week and gets the kind of returns the market have generated over the past many decades, that’s 6%, 7%, 8%, by the time they retire, they’d have $1.5 million. If that same person said, “Well, I’m just going to put it in the bank, it’s safe,” and earned what today’s interest levels are, close enough to zero, they’d have $208,000. What do you want? $208,000 or $1.5 million? What’s the greater risk? The risk of retiring with $200,000 bucks or risk of retiring with $1.5, it might be less, it might be more?

Connor O’Brien (07:59):

Getting some of your money growing is really, really important. For the people that think it’s really easy, I would just suggest start small; have your core portfolio invested in a way that is maybe boring. Think of rent money and grocery money versus lottery ticket money. You don’t put all of your paycheck into lottery tickets thinking you’ll pick the right one. You save enough money to make sure you can pay the rent and buy the food and whatever else are necessities of life. Then if you buy lottery tickets, all right. You have a big chance of losing some money. It might work out for you.

Connor O’Brien (08:34):

When it comes to investing, just guessing at one or two stocks or one or two something or other, is very, very risky. We would just suggest start off building a foundation, a platform, a very steady, solid base of investing. The Kevin O’Leary method; keep it really simple, which means find a simple way to own a lot of stocks, ETFs, a diversified set of ETFs. Don’t just go buy the hottest ETF of yesterday or last year or something, a diversified set of ETFs, get a lot of diversified stocks, and then do whatever else you want to do on the side, if it’s lottery tickets or Vegas or betting on sports or betting on crypto, but build your foundation, build your platform. Don’t blow your paycheck on the wild idea.

Clay Finck (09:15):

It reminds me of a chart I saw just this week; it showed the S&P 500 and its growth. It’s grown probably over 10% over the last decade. It showed a chart of the S&P 500 if it was equally weighted between each company, and that chart was essentially flat. What that was showing was how just a select few names have driven the majority of the returns of the index. Over the last decade, that’s been the big tech like Apple, Amazon, Facebook.

Clay Finck (09:46):

I think it’s important for people to realize just how few companies will actually beat the market. Some people might think it’s half of the companies beat the market and half of them don’t, but really it’s skewed just towards a few names is what we’ve seen over the last decade.

Connor O’Brien (10:01):

Yeah. Every decade’s different. If you look back a really long time, you’ll see that small cap and midcap stocks did better than large cap stocks and conglomerates. What’s happened recently is that technology, and let’s call it, concentration of market position, some of these mega caps have done exceptionally well.

Connor O’Brien (10:20):

I think the whole COVID thing has driven a little bit more in their favor. It’s also created some innovative companies that went from not very much to pretty significant. I think that it was a decade of the mega caps doing better than the rest, but it’s not like that every day.

Connor O’Brien (10:36):

More important that though, is invest in the diversified whether you equal weight or you just go with market cap weight, owning more of the bigger companies, and whether your wealth grows over time at 6% or 7% or 8%, steady wealth growth is a fantastic benefit generated by the investment markets.

Connor O’Brien (10:53):

If one looks at history and whether you got 7% or 6% or 8%, you end up at a much better place than if you did zero. People dreaming of getting it perfect are probably going to, for the most part, miss a point. You can’t be perfect. It doesn’t work. It’s better to average it out, get involved, get some growth, try to do better, but worrying about perfect is a bit of a mistake.

Connor O’Brien (11:15):

Diversify. Yeah, you might have some of your money in a market cap weighted ETF. You might have some in an equal ETF. You might have some in a technology ETF. Diversify in so many different ways and learn and grow. I think for young investors who start now, they’ll just gradually learn over time, the benefits of investing and learn through their own experience. It’s not a short term. It’s not a lottery ticket outcome that, “Wow, I just bought the hot something and now I’m a billionaire.” It doesn’t work that way. For most people, it’s a steady, steady growth compounding type of type situation.

Connor O’Brien (11:51):

That’s why we created Beanstox so that people can actually understand it a bit, as much as they want, and then let the system do it for them. Before we get to the end of that question, I should mention; one thing about Beanstox, people can look at the podcast or if they’re looking at it soon enough, they can go check out this crowdfunding that we’re doing and learn about the business model we have, they don’t have to invest in the crowdfund, but they’ll learn about it and why we did it the way we did it. They can also go to the app store and just download the app and play with it. If they like what they see, they can use it and get started with building their own personal portfolio.

Connor O’Brien (12:24):

The crowdfunding, I’ll just mention, I think the address is above me, it’s startengine.com/beanstox, if they’d like to see everything that they’d like to about it there. Maybe later the chat here, we’ll talk a bit about what that crowdfunding is for those aspiring entrepreneurs.

Clay Finck (12:42):

Yeah. Let’s talk about crowdfunding. For those in our audience, not familiar, could you give them a brief overview of what crowdfunding is exactly and how it applies to Beanstox?

Connor O’Brien (12:52):

Yeah. Long ago, years ago, crowdfunding started as just a, GoFundMe, “I need some money for whatever personal or family need,” and people would just donate. That’s very different, but just it’s what most people are used to; Kickstarter and GoFundMe and whatever else. If you want to become an athlete and get to the Olympics, or it whatever it might be, and you need some money, and people who are sympathetic to your goal or your cause might just donate.

Connor O’Brien (13:19):

Then laws that were created part as part of the Jobs Act and the SEC, created a framework that made this legal, functional and regulated that essentially the equity crowdfunding portals were able to use and basically make it possible for you, for me, for anyone who’s an aspiring entrepreneur, to actually create a prospectus that’s part of a fully regulated process, that then becomes available on the crowdfunding portal that is designed specifically for small, early stage growth companies to use to raise capital that permits smaller investors to actually invest in private companies. Whether the company is a new microbrewery or a new drone or some new technology or a FinTech investment service like Beanstox, the people who know the company and like the company and maybe use the product, can actually invest in and own a piece of the company through the crowdfunding.

Connor O’Brien (14:15):

There are quite a number of them out there. The one that we’re working with is one of the largest in terms of dollars raised, investors participating in it, companies using it, all that kind of thing. For entrepreneurs, it’s interesting. Instead of asking mom and dad and friends and family for all of the money you might need to start your business, you can actually a bit of the help from them through the crowdfunding, but also expand the network to your clients, your email distribution list, your social media presence and so on, and just reach thousands and thousands of people as you’re raising capital to build your business. That’s what that’s all about.

Connor O’Brien (14:54):

It works best, we think, for business to consumer type of initiatives, because the consumers are the ones who look at what you’re offering and say, “Okay, yeah, I can see using that. That’s me. I like it. Maybe I’ll use a service and maybe I’ll also invest in the business that provides the service.” It’s a little bit less obvious that it’s going to work fantastically well for business to business type of companies, because the very big businesses that might be the clients, in that case, they’re not going to go through a crowdfunding. If you’re a big company A trying to sell your stuff to big company B, C, D, etcetera, those other big companies aren’t going to go look at a crowdfunding and say, “Hey, maybe I can invest $250 bucks or $500 bucks.” That’s not what they’re going to do.

Connor O’Brien (15:34):

It’s really much more of a great platform, a great way, we think, for consumer facing businesses to expand their audience of consumers, get some brand ambassadors who like what you’re doing to invest, spread the word, help you with your marketing, reduce your marketing costs by basically being spokespeople for what us, Beanstox, or whoever you would like to be in your business, and help you get it growing.

Connor O’Brien (15:58):

I think it’s really interesting. It’s actually very disciplined, by the way. It’s not just a wing it. You have to do a lot of work to create the right documentation. You have to get the accountants to sign off on financial statements. You have legal due diligence reviews and so on. There’s a real process to it that makes it very, very similar to the stock offering process that people might have seen in the public markets.

Clay Finck (16:22):

Why did you choose to go with crowdfunding over alternative ways to raise capital?

Connor O’Brien (16:28):

We really like the idea of having thousands of people who own a bit of the business to tell us what they think of the product and what they’d like to see coming down the road as upgrades to the product, etcetera. We have brand ambassadors, product feedback from those brand ambassadors and a fan club. We think that’s a win-win. It’s great for them and great for us. It gives us a team of thousands of people that know who we are, want to see us succeed and will give us their input to help us succeed.

Clay Finck (16:57):

How is the valuation determined in a crowdfunding project?

Connor O’Brien (17:03):

It’s basically determined through a two step process, let’s call it. Te company that’s raising the money does a lot of work to figure out what they think is a reasonable valuation and then has to document it, defend it, propose it to the crowdfunding platform, in this case, and have that crowdfunding platform review it and decide yes or no, “It is fair,” or, “No, go back to the drawing board and redo your work.”

Connor O’Brien (17:28):

It’s a process where the company that is raising the money drives the process, but ultimate answer of what’s acceptable is based on real homework, documented work, that is also reviewed by the crowdfunding platform, internal due diligence review people, committee, etcetera, and then the information’s provided online. The valuation behind Beanstox is available online, and people would have to go look at it. I’m not allowed to speak in public about a fraction of what is in the prospectus. They have to go look at the whole prospectus. I encourage people who are interested even just to learn, go take a look at it and see what we did.

Clay Finck (18:06):

Do you have any tips for entrepreneurs or new startups on how they can successfully raise capital to grow their business?

Connor O’Brien (18:14):

Well, if they’re interested in crowdfunding, then go look at the YouTube video that we put out there. It’s basically me telling people a five to six minute story of what we did, how we prepared, some lessons learned. We succeeded twice in crowdfunding in raising over $1 billion dollars both times. A of lot of it’s preparation. I suggest to people to go check out that video. They can go check out our information on that startengine.com/beanstox page. It’s one page, but probably, if you scroll down and count the screens just scrolling down, it’s probably 30 or 40 screens and then links to more information.

Connor O’Brien (18:46):

I would just say couple things to summarize it; preparation first, second is expect most of the work to get it done is going to be on you, not the crowdfunding platform. They will not run around looking for investors for you. That’s not what they do. They create the space within which you can follow the regulated permitted process. They’ll give you tips. They’ll be great sources of advice on new ideas, how to accelerate your crowdfunding process, etcetera.

Connor O’Brien (19:14):

Then the other thing I would say is be fair. You want to be fair to investors. It’s a way better approach. When it comes to valuation information, etcetera, everything you’re doing, it’s a long term process. A startup doesn’t all of a sudden, like the lottery ticket, become a whole pile of money in a few days. Building a startup is a long term project. You want to be able to talk to those investors, and someday when you need to do another crowdfunding, make sure that you’ve done a good job for them in the first or preceding rounds so you can do more later.

Connor O’Brien (19:45):

I would also suggest to people that at some point in the business progress, you can actually think about talking to other source of capital. You can talk to venture capital firms. You can talk to established companies that might want to own a piece of the business for commercial reasons that suit what they’re doing as well, and be open to that. Talk to those different sources of capital.

Connor O’Brien (20:04):

The crowdfunding is a great way to get started. It just is because the crowdfunding platforms are quite helpful. The structured process really helps fill in a lot of blanks that companies might actually have, or entrepreneurs might have in their whole game plan before they go to market. The crowdfunding process is structured well enough that you, as an entrepreneur, would quite likely discover and fix whatever gaps you have before you get into the crowdfunding marketing process.

Connor O’Brien (20:30):

Venture capital firms probably won’t do that for you. You try to get the meeting and you got these gaps. It’s going to be a no meeting or a short meeting, and you don’t necessarily learn as much. A lot of benefits to the crowdfunding.

Clay Finck (20:41):

How do investors typically cash out or get their money back in a crowdfunding type scenario?

Connor O’Brien (20:48):

It’s early days for the crowdfunding process. There are stories out there of successes where the companies grew quickly and sold to a corporate buyer or sold the business to some other buyer. You can just imagine. I think one of them I read about was a brewery and it went from nothing to a success, to being, I think, acquired by a different, much bigger brewery. That is one example. I think that’s maybe even the more typical example.

Connor O’Brien (21:16):

Some go on to basically get recapitalized, I guess, by bigger sources of capital. It could even be a venture capital from that says, “Okay, you’ve moved your company from zero to X to 5X to, to 10X. We will put capital into the business, plus we will buy out or offer to buy out the earlier investors.” That does happen in the venture capital world.

Connor O’Brien (21:37):

Then the longer term thing that I haven’t seen any examples of, is crowdfunding companies getting so big so quickly that they’ve already gone public. I have not seen any of that yet. It’s of course, possible, but a company’s going from zero to becoming public is often a 10 year type of process. You can just think of many of the companies that are big public companies today. They probably spent many years as private companies first.

Clay Finck (22:02):

As someone who works in the financial services industry, you have a good idea of general things that are happening in today’s market. We’ve seen supply chain issues in the economy, high inflation, sustained low interest rates and talks of a new COVID variant spreading in the US. What are your thoughts on the current market conditions and what we might see in 2022?

Connor O’Brien (22:28):

Predictions of are easy to make, but hard to do right. I think on the supply chain disruptions, we’re going to just keep on living through the gradual unblocking of the supply chain bottlenecks that have been created all around the world over the past, let’s call it, two years now. It’s shut down the microchip and manufacturing plants in some locations and the shipping process could be bottlenecked in other places and so on. The world used to be running relatively steady day after day, month and year after year and it just got completely disrupted by COVID.

Connor O’Brien (23:02):

I think all the different pieces of the supply chain are finding solutions, and each step of the supply chain is going to find a solution at a different pace than the next step in the supply chain. The milk producer is going to find a solution at a different time than the bread producer at a different time than the trucking company that’s moving all that stuff to the grocery store, and so on.

Connor O’Brien (23:21):

Simplifying it, to just make the point, it’s quite likely the supply chain disruption is just going to gradually work its way out. It’s not going to a magic day where it’s all done. It will gradually work its way out to a new normal over the course of the next, let’s call it, 12 months, which prediction could get interrupted and busted by COVID ’22, very hard to predict even whether this Omnicom variant is as big a deal as Delta or not. They don’t know yet. The early stuff I’ve read is, eh, it’s probably not as bad, but I don’t know. I just read stuff, looking for someone better informed to tell me what might be happening.

Connor O’Brien (23:58):

Let’s talk about interest rates and so on. You basically have the central banks who are running all the different currencies for the US dollar and the rest, throwing money at the problem, and it’s probably a good thing that they did so the people who couldn’t go to work still had money and asset values didn’t collapse, and you didn’t have everybody chasing the limited pool of liquidity. There’s a massive amount of liquidity so nobody really was forced to sell stocks, houses, anything in general terms. Individuals, for sure, have each their own situation. That was probably very, very good at the time.

Connor O’Brien (24:29):

Now the question is, what are the consequences? Do we really have inflation here that’s going to be out of control and last for quite a long time? We determined we don’t really think so because the manufacturing capacity that existed before COVID still exists. It didn’t disappear, but just some of it has become less productive temporarily because people don’t go to work when the factory is shut down in whatever company they’re in.

Connor O’Brien (24:51):

I think once there’s enough vaccine around the world, not just in the United States, but around the world, at all the different places where things are produced, and more or less get back to normal, I think we’re going to see production capacity normal and price trends back to normal.

Connor O’Brien (25:06):

There’s one thing that could disrupt that; people have learned different work habits in the last two years. You’re working today, I’m working today. Some people aren’t. There’s enough money around that, “You know what? I’m going to go for a new lifestyle. I don’t need to go back to work. I don’t need four fancy cars and all this stuff.” They’ve changed their own work habits. The workforce participation level may never come back and that could be inflationary.

Connor O’Brien (25:32):

That’s the one thing that I would say is maybe the most interesting indicator of what kind of a trend we’re on towards, let’s call it, inflation settling down. Is the workforce, labor force participation rate trending back up to where it was or does it look like it’s going to flatten off at a new lower level? That could be inflationary.

Connor O’Brien (25:52):

However, the counterpoint is this; technology keeps marching on, getting better, creating efficiencies and essentially replacing work or doing work that used to be done manually by people. You roll back to the conversation two or three years and people were panicked, “Hey, the robots are going to take all my jobs.” You’re going to have self-driving cars, so you’re not going to need people to drive cars or trucks or whatever. I think it’s all going to balance out. Technology is going to basically create efficiencies. People won’t need to do some of those things. They can do other things.

Connor O’Brien (26:21):

Inflation is likely to, if you look at what the US Fed said most recently, it’s likely it’ll last a little bit longer than they had been thinking, but I still think they’re looking to manage inflation back down to target levels, call it 2%, 3%.

Clay Finck (26:34):

What a complex situation we are currently in with the younger generations looking at work much differently than generations of the past. Now Beanstox operates in the FinTech industry, which is a very fast growing space. What are the biggest trends in FinTech in terms of technology adoption and business valuation that you’ve seen?

Connor O’Brien (26:56):

I’ll put FinTech in a few buckets; there are some that are consumer facing services like Beanstox. We’re looking to help individuals with their financial goals. Then there are some that don’t want to deal with consumers. They just want to deal with other businesses. They might want to deal with us and provide us technology platforms and payment systems and a whole bunch of other things. Then there are some that just pure technology providers and literally, they’re picks and shovels and so on. There are these different categories. I would say that’s the first thing to look at.

Connor O’Brien (27:30):

There are some venture capital firms that don’t want to invest in consumer facing businesses and some that only want to invest in consumer facing businesses. That’s one thing, just to categorize it that way.

Connor O’Brien (27:41):

Geographically, there’s a difference as well. It’s odd, but in Europe, the digital banking fintechs got way ahead of the US, and that technology is now in the US. There are some digital only banks. They don’t have a single branch, not a single branch that you could walk into, and they’re growing pretty fast. I’m going to tie them all together in a second, but you’ve got wealth. You’ve got wealth services that allow people to create an account using an app and then trade stocks, trade crypto, trade whatever, or like, Beanstox, have the system do it for you because you’re a busy person. You don’t want to be chasing stocks. You’ve been burned with chasing stocks. You have other stuff to do with your life, whatever the reason. Or you do both; you can have an automated system like Beanstox, and then you might do some separate trading on your own through whatever app you like.

Connor O’Brien (28:31):

That whole wealth side of things, whether it’s self-directed trading or automated advisor driven investing like Beanstox does for people, is a really important category. There’s a forecast out there on the web of 470 million people globally, a lot of US, but a lot of the rest of the world, is the expected number of people that will be using an app for investing their money in 2025, so call it four years from now.

Connor O’Brien (28:59):

The digital only banking that I was talking about, the banks that have no branch and they just have technology and services that you can get through your phones or your desktop, is expected to grow to 50 million accounts by 2025, which is bigger than the total of the two biggest banks in the US. Digital only banks with no branches, will in the aggregate, be bigger than the number of accounts that are currently today at the two biggest banks in the US. The whole point is these things are growing.

Connor O’Brien (29:29):

The next thing is payment systems and debit cards. A lot of people are used to paying for stuff now with whatever they’ve got on their phone. You’ve got a credit card on your phone, you’ve got your Starbucks app account payment on their phone and a bunch of other things. There’s more and more payment systems that are going to be just giving people an easier way to use their money.

Connor O’Brien (29:48):

On top of it, budgeting; with all this data that now is going to be consolidated by whichever app that customer chooses to use, allows that app, that service, that data to be used in a way that helps the customer, gives them better information and says, “Hey Clay, wait a minute. This is your eighth Starbucks of the day. Are you sure you need that eighth double espresso,” or whatever it is. Or other information on what you’re doing with your money and your budgeting. It might give you tips and help you just stay from drifting out of bounds and spending too much.

Connor O’Brien (30:20):

It’s wealth, it’s banking, meaning checking, meaning savings, meaning debit cards, credit cards, ultimately borrowing and lending from the bank’s point of view, borrowing for whatever purpose, mortgage, etcetera, to buy a condo, let’s say, and budgeting and more. I think you’re going to see these things gradually bundled because the client is going to find it very convenient to have more of the service in one place.

Connor O’Brien (30:46):

Just think of investing money. If your bank is not connected with your investment account, you’re going to see time wasted as you manually shift your money from your bank account to your investment account, and then from your investment account to whatever you’re going to own. Money doesn’t sleep and the markets don’t sleep. If you basically have your money sitting there not invested when the market’s going up, well, guess what? That day is over. You’re not going to get whatever the market did that day. Having your money fairly rapidly moved to where you want it to be is assisted by FinTech and assisted by combining a set of services within one FinTech platform.

Clay Finck (31:23):

Now there are a number of investible asset classes, call it, stocks, bonds, and now newer asset classes such as crypto and NFTs. I’m curious, what do you believe is a sensible asset allocation for newer investors?

Connor O’Brien (31:39):

Newer and let’s also assume they’re younger, just so I can answer the question with a hopefully helpful answer. I think equities, we think equities, stocks of companies, should be the foundation of a new younger investor’s portfolio. They should be extremely diversified. They own lots and lots of stocks, but own them through exchange traded funds because those are low cost and very tax effective. That really should be the foundation.

Connor O’Brien (32:06):

Fixed income used to be talked about as something really important, and you should have your money split evenly or 60% stocks, 40% fixed income. But these days fixed income is, in some ways, riskier as a long term investment, riskier of failing than equities, because if you buy fixed income, for the people that aren’t sure what it is, and you’re buying basically the ownership of a loan. You’re lending your money to a company and the company’s supposed to pay you interest every six months is typically how they work. At the end of the life of the loan, and it could be two years, 10 years, 20 years, 30 years, they’re supposed to give you your money back.

Connor O’Brien (32:41):

What happens is people buy and sell these loans or bonds as they’re often called, and sometimes it’s the government that issues it and the investors buy it from essentially the government, they’re currently paying such a low level of income and they, generally speaking, don’t go up in value because getting your money back is an amount of money that is typically 1005 of what the price was on day one. That doesn’t change; 100% after 10 years is that same 100 cents per dollar and it doesn’t grow. If interest rates actually go up driven by inflation, the value of the bond you bought today goes down because someone’s going to say, “Wait a minute, I can get higher level of interest on some other bond that just got created today than the one you bought yesterday. You bought one paying you 1%. I can buy one today paying me 2%. I want that one. I’ll pay fair value for that. I’ll pay you a lot less for yours.” You just lost money.

Connor O’Brien (33:28):

That’s the risk with bonds in today’s environment. If inflation actually causes interest rates to go up or anything causes interest rates go up, the value the bond goes down, whereas the long term potential is that you’re just going to get your money back. You don’t make a growth related investment return out of it.

Connor O’Brien (33:43):

Whereas on stocks, companies, think of any company that you just use the services of, whether it’s for coffee or for internet or anything else, the good companies keep on growing. If you own a diversified portfolio of stocks, meaning ownership of companies, history has shown that the value of your investment will keep on growing as these companies expand. The economy helps them grow, population growth helps them grow and just good business strategy helps them grow.

Connor O’Brien (34:09):

I’ll use Starbucks, everybody knows it. Who would’ve thought they’d go from one or six coffee shops in Seattle to thousands around the world now, and as profitable as it is and so on.

Connor O’Brien (34:19):

Good companies can grow if you own lots and lots of them. You don’t have to buy them when they’re six coffee shops, you can buy them in ETF when they’re already a multi-billion dollar successes and cheer them on as they get to be even bigger.

Connor O’Brien (34:29):

That, we think, is really the reason equity is for the next many, many years, a much better foundation for your portfolio as a new investor. The tiniest bit in fixed income, we would say the kind of fixed income investments that pay you a little bit of interest, keep the risk down, but don’t own ETFs for fixed income. That’s very long dated because you’ll get extremely frustrated and then want to sell when that interest rate pops up from 1% to 2% and the value of your investment drops by 4%, 5% or 6%. You say, “What the heck? I just gave up five years worth of expected return in a day or a month because of interest rates.” There are ETFs you can own that actually have a portfolio of very short term investments and they might only return 1% or so, but they’re relatively stable.

Connor O’Brien (35:15):

In Beanstox, we do use some fixed income ETFs of the type I just described for the clients where appropriate based on their personal financial information. If they’re a lower risk type client or a not as young client, they’re likely to have a little bit more of the fixed income of the type I described.

Connor O’Brien (35:35):

Then are the other categories you mentioned, right? What else? We can’t just not talk about crypto. We do not invest in crypto for clients with Beanstox. People can do that outside the Beanstox environment. It’s a bit too harsh to say crypto is a lottery ticket, but the easy money has been made.

Connor O’Brien (35:53):

I’ll give you another asset class that I think is really interesting for people to consider and it’s not news to anybody, but it’s just own some real estate because whether it’s a condo or something else, it’s just an interesting thing to do with your money. You can actually use it, live in it and just force yourself to save by paying down your mortgage. It’s just automatic, it’s going to be requirement. Just look at the history of real estate. There are bumps in the road.

Connor O’Brien (36:14):

It doesn’t always go up, but it’s a pretty good way to put some of your money into an asset class that historically has done quite well with bumps in the road. You can expect a disappointing moment for months every five to 10 years as something goes wrong with the real estate market. Post-COVID, everybody who owned a condo in any big city was not very happy with their investment. When COVID hit, the value of condos got crushed, crushed. The same thing for stocks, etcetera. Nothing’s perfect, back to diversify.

Connor O’Brien (36:48):

On the crypto side of things, one of the latest things I’ve heard out of O’Leary is he’s gone from no crypto to a little bit of crypto and now he talks about having a 5%, 6%, 7% or whatever percent allocation there. That’s his answer to it. I thought might be helpful. He is not all in crypto, that’s for sure. I just encourage people to be careful not to be all in on anything investment-wise.

Clay Finck (37:13):

And one great thing about real estate with the low interest rate environment is that if inflation’s stays higher than the interest rate on the loan, it ends up being a great inflation hedge since you’re short the dollar and long in an asset that people will always need.

Connor O’Brien (37:29):

That’s right. You can scare yourself out of it and say, “Well geez, real estate is so expensive now. If you go back in history, it’s always looked expensive, except for those weird moments of panic when everyone’s a seller and nobody’s a buyer, but through normal times it always looks expensive.

Connor O’Brien (37:43):

Then you buy something anyhow, you hold your nose, you write the check, you sign a mortgage, and in five years they say, “Wow, that was pretty good thing, a pretty smart thing I did. That property is now worth, whatever, 50% more than what I paid for it,” or something. You’re right. You borrow the money from the bank, let’s call it, and you own 100% of the property, but you only put in, let’s say, 20% of the price. If the property doubles from, let’s say, 100 to 200 and you had 20% of your money in and 80% from the bank, your 20% now worth 120% because it’s 200 minus you’ve got to pay the bank. That’s pretty good.

Connor O’Brien (38:19):

If you’re doing that instead of paying rent, you’ve got another win, but I’d be careful about flipping real estate. If you move very often, what you’re basically doing is paying real estate brokers every time you move. The broker gets paid from the buyer and a broker gets paid from the seller and there’s all the moving costs and all that. You see that stuff on TV, I Flipped My House, and all that kind of thing, and it might work for some people, but nothing’s as easy it looks like it is made to look on TV.

Clay Finck (38:42):

Now, Robert Leonard had an episode with Kevin O’Leary back in September of 2020 here on the Millennial Investing Podcast. I wasn’t around at the time. I just started a couple months ago. What’s new in the world of Beanstox since then in terms of the technology and the team?

Connor O’Brien (38:58):

We brought out a new platform, so a new app, that actually has given us about double the efficiency in terms of people going from downloading the app to becoming clients. That’s got the look that you see behind me on the screen. It’s the look that’s in the app store and we are working on, let’s call it, the next platform that’s going to maybe look very similar, but in the backend, it’s going to be very scalable.

Connor O’Brien (39:22):

For a business like Beanstox, today, we’re relatively small. Getting to scale is, of course, a very important business goal. We want to reach more people of the 100 million American adults that don’t have an investment account, we want to reach as many of them as possible and help them get started building their wealth, following the math I was talking about earlier. We’re building a more scalable platform.

Connor O’Brien (39:45):

The second part of how we’re doing that is different than where we were a year ago, we have hired in some of the people on the technology side and operational side, people that have experience building digital platforms and digital banking platforms. A couple of the senior members of that team come from a company that’s now publicly traded, and I won’t mention names, but it’s now valued into billions of dollars and they had leadership roles there. They’re now with Beanstox. It’s a really a stronger team than it was a year ago and two years ago and so on.

Connor O’Brien (40:16):

We’re really looking forward to what we will be bringing out in the months ahead that is going to have their experience built into the platform that will be much more scalable and designed for the kind of client growth that we think we drive. Those are two really exciting things.

Clay Finck (40:34):

The robo-advisory aspect is probably my favorite part of Beanstox, since you help investors select what they should be invested in. I think that so many people just have no idea what they should invest in so they just don’t invest at all. That obviously isn’t anywhere near an optimal approach when it comes to saving for retirement. The robo-advisory aspect of helping consumers select their investments is really powerful, in my opinion.

Connor O’Brien (41:03):

The number one best strategy for somebody who’s not investing yet is get started. Whether you end up starting with these 10 ETFs as a diversified portfolio or some other blend of some other 10, getting started is actually still the most important aspect of it. Then if they’re investing with Beanstox, they’ll have more equities in their portfolio, more stocks, through the ETFs than they might get elsewhere.

Connor O’Brien (41:30):

That was part of my answer to the question before there, how should people invest? What should be the biggest part of their portfolio? It really is ETFs that owns stocks of good quality companies, midsize, bigger sized, mega cap companies. That’s really where we think we are different as well from an investment point of view.

Connor O’Brien (41:50):

Another is that we think stocks that are more growth oriented and technology oriented and so on are better for longer term wealth building than stocks that are in the value bucket. The value bucket, for people who don’t know it, includes a lot of bank stocks and oil stocks and things like that. Big companies that used to be great that end up not so great, and I’ll pick on someone like Kmart and Sears and so on because they’re gone, end up in value before they go to zero. Not all value stocks are going to go to zero.

Clay Finck (42:17):

That seems like nowadays, if you’re not a technology company, then you won’t be in business at some point in the future. A lot of these value companies are getting disrupted by the tech companies, which is why they’re something that is quote-unquote “less expensive” in terms of the price to earnings ratio.

Clay Finck (42:34):

At the end of some Millennial Investing episodes, I like to include a segment called the Action Plan. Since you’re a CEO of a couple different companies, I think you’ll be a fantastic guest for this section. We ask the guest three questions that can create an action plan for listeners to do when they’re done with this episode. The first question is which habit or principle do you follow in your life that’s had a big impact on your success that not enough people do, but should?

Connor O’Brien (43:03):

A somewhat disciplined work ethic with the expectation of not everything is going to be perfect, from a career point of view, has helped me through career business and business building. Just always try to do something a little bit better than you did it yesterday. It’s not always good enough and maybe it can be a little bit better. That’s a criticism as well because people I work with probably think that sometimes they just want myself and everybody else to try a little bit harder when maybe for some people it is good enough.

Connor O’Brien (43:32):

I think from leading the process of building a business, you have to constantly try to make things better. Ultimately, the goal is to make it better for your clients. I think that’s a really important thing in business building.

Connor O’Brien (43:42):

I think it also spills over into personal health. Health isn’t given to you, you have to earn it. Yeah, there’s a bit of a DNA thing and you could get a bad lottery ticket, but you’ve got to have some discipline with what you do with your exercise regimen and your food and all that stuff to don’t blow it. You basically need to do some exercise almost every day.

Connor O’Brien (44:05):

There’s a book I give around every friend of mine who turns over a big number, whether they just turned 30 or 40 or 50, whatever, I give them a book that’s titled, Younger Next Year, but it’s not the answer to the book that’s had the most influence on me from a career point of view, but it’s a book that I think a lot of people need to read because it will shake them up and say, “Holy crap. Yeah, I don’t actually need to be a little bit unhealthy, a little bit overweight, a little bit this, a little bit that.” It’s a matter of staying healthy by doing a sufficient amount of exercise and be somewhat careful, and you don’t have to be a religious freak about what you eat.

Clay Finck (44:37):

I’m a huge fan of everything you just said. You mentioned a little bit about my next question; what has been the most influential book in your life? It doesn’t have to be your favorite, just one that’s had a big impact on you.

Connor O’Brien (44:49):

So the book that surprised me was book on the Ted Talks. The thing about it that was really interesting is that the Ted Talks is not about the speaker, it’s not about the person who’s presenting showing how smart they are or anything like that. They don’t actually accept people who have that style. It’s not a sales pitch, etcetera.

Connor O’Brien (45:10):

They basically the design around this concept that the best speakers are the people who are actually giving the audience something valuable. It’s not really so much about speaking of the takeaways. The takeaways are really related to business. If you want your business to work well, make sure you’re giving people something valuable. If you want your team to work well, give them something valuable. It’s shifted my to managing teams and business and so on.

Connor O’Brien (45:35):

Think of yourself last, because you’ve got so much other stuff you’ve got to take care of before your own success, is what’s called, bubble up; take care of your team, take care of your clients. Do what the Ted Talks book talks about; give people something that is useful and valuable to them. Anyway, that was the book that I found was really, really interesting. I think the message in it just broadly applies to friends, family, life, work, etcetera.

Clay Finck (46:01):

Final question now. When this episode is over, before the listener quickly jumps to the next podcast episode, what is one action they should take to help improve their life career, business or investment accounts?

Connor O’Brien (46:15):

I think your personal health is probably the most important thing to pay attention to. If you aren’t doing it already, you’ve really got to pay attention to that. Don’t expect a doctor to give you a magic pill that’s going to turn you into Superman. It doesn’t exist. I think that’s pretty important.

Connor O’Brien (46:27):

Then when it comes to personal wealth, it’s related to health. If you’re stressed out about paying the rent, it’s hard to stay unstressed and healthy if you don’t have the rent money or if you’re burning too much cash and you’re getting into debt and you know it, but when you take care of the rent money and you make sure you’re not building up debt, the next thing is to build up wealth.

Connor O’Brien (46:44):

This is not a plug for Beanstox but for any way you want to build up your wealth, whether it’s one sensible way or a different sensible way, but be sensible with it. You work too hard to make your money, get it in a steady place that it’s growing, that’s not just a bank account getting zero and it’s probably not 100% in any one asset class or category, but diversified.

Connor O’Brien (47:03):

I guess the third thing I would say to takeaway is try and do something better than you did this year for friends, for family, for whatever it is, for work, wherever you are. Read the Ted Talks book and see if your takeaway is what mine was. It was pretty meaningful.

Clay Finck (47:16):

Yeah. That long term mindset and that compounding effect is so powerful. It doesn’t only apply to building your wealth. It also applies to building your health, building your business, building your career, whatever it may be.

Clay Finck (47:28):

Now, Connor, thank you so much for taking the time to teach and spread your knowledge to our audience. I really appreciate it. Before we close out the episode, can you share where the audience can go to learn more about yourself, Beanstox and the crowdfunding project?

Connor O’Brien (47:45):

Beanstox.com, B-E-A-N-S-T-O-X.com is our website and will be for years and years to come. There’s always info there. The crowdfunding, that’s live now as of the time of this conversation is at startengine.com/B-E-A-N-S-T-O-X. People would learn a lot about the business, a lot about crowdfunding. Whether or not they ever want to invest in the business, it’s probably interesting for people to read.

Connor O’Brien (48:13):

You can learn about me on LinkedIn or Wikipedia. I was a ski racer. That’s the first thing you’re going to see in Wikipedia. I competed in the Olympics for two different countries in downhill skiing. That was tons of fun. I don’t do that anymore. My daughter is now doing it. That’s little bit on the personal side. That’s why I was in Alaska skiing, not for the entering the Olympics. They didn’t have any Olympics in Alaska yet. That’s my, I guess, top of the list in terms of sports is big mountain skiing. I love to do that.

Clay Finck (48:41):

Incredible story and background. Thanks a lot for sharing your time with us today. Connor.

Connor O’Brien (48:46):

Thank you, Clay. Thanks everyone.

Clay Finck (48:48):

All right, everybody. I hope you enjoyed today’s episode. Please go ahead and follow us on your favorite podcast app so you can get these episodes delivered automatically. If you haven’t already done so, be sure to check out our website, theinvestorspodcast.com. There, you’ll find all of our episodes, some educational resources we have, as well as some tools you can use as an investor. With that, we’ll see you again next time.

Outro (49:11):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investors Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com.

Outro (49:32):

This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.