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Are you thinking about jumping on a “once-in-a-lifetime” opportunity? Did that corner location you’ve been drooling over just go on the market? Do you have a chance to buy shares in a rising tech start-up? In this episode, we discuss the allure of certain investments, and the questions you need to ask before putting your money on the line.
Tune in for the best advice on financial planning for dentists.
Reese Harper: Hi, I’m Reese Harper here with the co-host of the DentistMoney Podcast, Ryan Isaac. I’d like you to tell us, Ryan, what we are going to be chatting about today because I don’t have any idea.
Ryan Isaac: You have no idea. You just had a good burger and now you’re fine.
Reese Harper: Off the cuff, got a burger in me—blue cheese and bacon.
Ryan Isaac: What we are going to call this podcast? The once-in-a-lifetime podcast. This is the only episode we’re ever going to publish. This is the once-in-a-lifetime podcast. It’s once in a lifetime because we’re going to talk about those opportunities that we’ve all had, that we’ve all been really excited about. You’ve had them; I’ve had them. I live in one of these currently—the once-in-a-lifetime investment or business opportunities. You’ve got to act; it’s never coming back. I first wanted to start out with some actual, real once-in-a-lifetime things, that can pretty much literally only happen once in a lifetime. Can you think of any, first of all?
Reese Harper: Some, yeah. I had my gallbladder removed in high school.
Ryan Isaac: That’s actually one of them; it’s on the list. It’s organ donation—you can only do that really probably once.
Reese Harper: I actually don’t have an appendix or a gallbladder.
Ryan Isaac: That’s episode four—we’re going to talk about your adventures in Idaho.
Serving as a second-term U.S. president, unless something gets amended or changed eventually.
Dying, not near death, not die and come back to life. You just die once.
You can only grow a new set of adult teeth once in your life. I mean think about that.
Reese Harper: You can manufacture teeth.
Ryan Isaac: But you can only grow a natural set of adult teeth once in your entire life. Unless someone is listening to this and has seen cases where they grew more. That’s probably happened. We’re not sharks; I mean, I know that I don’t have rows of these things.
Do you remember when it was Pie Day this year? 3.14.15. I mean, that’s about every century.
Reese Harper: That’s not once in a lifetime.
Ryan Isaac: If you live more than a hundred years.
Reese Harper: Well if you’re going with not absolutes then I’m going to say, on Christmas morning I could wake up and there could be 4.12 feet of powder in Solitude’s Honeycomb Canyon, for those of you who have ridden it. That’s unlikely, but let’s go with absolutes because Pie Day is going to happen again in the millennium.
Ryan Isaac: So, why do we bring this up though? Do dentists ever call you and say, “Reese, I’ve got to pull the trigger on this thing—once in a lifetime. This is it.”
Reese Harper: Oh yeah, that’s at least monthly and maybe more frequent.
Ryan Isaac: I first want to ask the question: Is it harmful to view things as once in a lifetime? I don’t want to put words in your mouth; maybe it’s not even harmful. What are the effects of viewing things as once-in-a-lifetime opportunities?
Reese Harper: The negative is obviously that it heightens people’s emotions like crazy if they think that this opportunity is never going to happen again. It makes you start to make decisions you wouldn’t otherwise make. The flipside to that is that it’s highly motivating. For me, I had a penalty shoot out in high school for state championship and I hit the crossbar, and I didn’t make the goal. It was once in a lifetime, and it made me perform better. You get to where you’re at because there’s this one shot. But from an investment and financial perspective for decisions you’re going to make, it’s really bad. It’s a high probability of you screwing up something big time when you’re looking at it once in a lifetime.
Ryan Isaac: Well I wanted to talk about the emotions of that. We’ve been talking about a couple friends lately that have had different opportunities in front of them, and you said it—it just becomes really emotional. And in all these cases when these friends are saying, “Hey, I’ve got this opportunity. I want to do this thing.” I’m always wondering, who really built that emotion up in the first place? Was it something where my friend woke up and said, “I’m so excited” or were people pumping them full of ideas? Who’s prodding this along? Where’s this coming from?
Reese Harper: Usually, someone is going to make some money if somebody does the once-in-a-lifetime deal. There’s almost always a sales person of some kind that’s going to get paid something. Unfortunately, I don’t want to throw any real estate people under the bus because they’re great people, but sometimes that can be a pressure. That the wrong real estate agent, if you’re not working with someone who’s got some level of objectivity, you can get a lot of pressure from someone who is getting paid to tell you it’s once in a lifetime.
Ryan Isaac: Okay, so, keep in mind who you are getting advice from, how people are getting paid around you. What might their incentives be? What about a lack of information or wrong expectations of a certain opportunity or misguided assumptions of what this opportunity might be. How does that play a role?
Reese Harper: We gotta get concrete with this. If I had to say, what things are we generally talking about here?
Ryan Isaac: Let’s use an example that’s really common. What do you think is the most common, once-in-a-lifetime opportunity that dentists get?
Reese Harper: Some kind of real estate. Second would be an investment in a business of some kind.
Ryan Isaac: Here is a very common example: a dentist says, “I’ve got this chance to buy this piece of land and put a building on it—and this isn’t singling anyone out because you’ve heard this twenty times in the last few months I’m sure. It just barely came up, someone’s given him a deadline. He’s got to close next Friday—“got to have your money in because we’ve got other offers. It’s a bidding war.” If that’s the case, how does lack of information or bad assumption [affect] your expectations?
Reese Harper: It could be the case that, literally, this deal could be once in a lifetime, and I don’t want to say that that doesn’t exist because it’s possible. But the problem with that is when that’s your context, or if I believe there’s literally no other street corner with this visibility. Now if you’re in the middle of Montana out in the middle of nowhere, there could be one literal street corner and there might only be one piece of dirt for sale—I get that. But usually we’re talking about that you’re in a metropolitan area with hundreds of listings, and your time frame for searching is artificially limited. Someone’s brought you something saying you’ve got 3-6 months or 6-9 months. Or you’re at the end of a lease and you’re trying to artificially find the property of a lifetime between now and when your lease expires in four months. You’re gonna set yourself up for usually paying too much. The pressure that you feel will make you do things that you don’t need to do. You’ve got to believe that this isn’t the only option that could appear over the next several years. And that’s hard to do.
Ryan Isaac: I mean, I’m thinking about the first time I ever bought a house. I felt the same way, like—this is it. I mean how many of us in 2006 bought a house under those same emotions? All you’d hear on the news is the price and that you’re going to miss out. I think that’s another part of it, too, is this fear of missing out and it gets pretty big. Whether or not you’re actually ready to take the opportunity it’s like you’re so scared of missing out on this thing.
Reese Harper: I mean, I’m telling myself this because we all have to buy dirt and buy a building or build a building or lease a building.
Ryan Isaac: I wanted to buy a pair of pants that was on sale this week from an online store. I resisted, but it was a one sale that was happening. It’s frequent; it happens a lot.
Reese Harper: My perspective on that would be please don’t make a decision without having lots of information and lots of data. There’s a lot of ways to grow, and not all of them are going to be presented to you by one person with one deal. Be patient; evaluate lots of different opportunities. Look at different scenarios in which you could grow—staying and leasing indefinitely in a better location than where the property is being sold. Purchasing a property in a location that isn’t as expensive as the other alternative, but you’ve been around for long enough that your personal brand is going to carry any patient base anywhere you go. There’s a lot of alternatives to a transaction that you’ve got to at least not put yourself in a position where if you don’t make that you feel like you’re failing. You have to have option one, two, three, and four.
Ryan Isaac: I’m thinking of a quote; I’m going to attribute it to Warren Buffet. Maybe you said it? “Don’t just do something; stand there.” That was him, right? I think it was him. We’ll Google this later; we’ll do some fact checking. It just reminds me of a conversation I had recently with a friend that was in that situation—a big opportunity for some real estate coming up and a lot of outside pressure from lenders, agents, business partners. But he kind of also had this thought that, this came on suddenly. I don’t feel very prepared and although this seems like a really unique opportunity, something tells me that I’d probably be okay if I just sat for twelve months and saved a little bit of money—try to learn a little bit more about this and we’ll see what happens. Don’t just do something; stand there.
Reese Harper: I just had this email today actually. So, if this guy is listening he’s going to know who I’m talking about. A year ago, someone called me and said, “Should I buy this dirt?” It was an acre for $650,000. And the conversation was, you know, we’re not really sure about what the right decision was for this person. There’s a lot of variables that went into it. And he made that decision to just see. Because it felt like this was the only spot available. It turns out that twelve months later the same spot was available and it was at $500,000. It’s interesting to see that because I would not have guessed that in this market a year later with interest rates holding where they’re at and demand at its peak that this dirt would be $150,000 less and still there. I mean, he was just really balanced about it. He was unemotional; he looked at tons of options—had other alternatives if something didn’t work out. I think the key is, when you feel that emotional pressure or anxiety that “I gotta go; I gotta do this,” especially if it’s fast, like you’ve got to make the decision in a few days. If you don’t feel 100% at peace with that decision and you’re not totally calm and rational, don’t do it. If you don’t do it and it ends up being a great deal, you’ll still be able to live with yourself.
Ryan Isaac: I was going to ask, what if this was flipped and a year later it was gone? I really doubt that he’d be sitting here now thinking, “my life took a completely different course because I didn’t take that property.”
Reese Harper: No, there’s a lot of options that can still happen today even if the thing doesn’t go through. There’s a lot of alternatives that would have just been fine. I can live with making a decision to pass up on a good opportunity if it is because I maintained my composure and made a good decision and was rational and didn’t get emotional about it. Even if it’s just that I lost out on something big. I can respect myself for that. But if I make that decision rushed and I’m wrong, all I can do is look back and regret it. By waiting and being patient and being sure of yourself, you’re going to be happy either way. If you’re wrong, then it’s hard to recover from and you’re mad at your decision. You lose confidence in yourself and your ability to make choices.
Ryan Isaac: Good, I like that. Thank you.
So what I was going to ask then: what are the most common things that we hear about that dentists feel like are once-in-a-lifetime opportunities? Real estate is number one. That’s hands down the one that we hear about the most.
Reese Harper: And then number two would be an investment in a business that a friend, patient, neighbor has approached you about. I think it’s really tempting to get in on the ground floor of a business, especially in today’s world where everything is like—this is going to be the next Uber; that’s going to be the next What’s App or the next Twitter. I mean literally in the last year I’ve probably had ten people tell me that they believe that his social media app that their buddy is launching is the next Facebook. And I can’t remember any of the names of the ones that I’ve been told. I know they’ve raised tens of millions of dollars for these projects, and I can’t even remember all of the names. And maybe one of them will overtake it. That’s a pressure people feel—if I can just throw fifty grand at something, and what if it was the next Uber?
Ryan Isaac: Which I think is an interesting topic for another day though—the pressure that people feel. Interestingly it seems like the there’s more pressure for the wealthier people to look for those homerun, once-in-a-lifetime opportunities. You feel like you can afford to speculate a little.
Reese Harper: You feel like you can, and often at their own expense as we say.
Ryan Isaac: Okay, so we’ve got real estate, buildings, business opportunities, those would probably be the most common ones.
Reese Harper: Yeah, for me I think property, construction of property. There’s a scarcity around land and buildings, and so I think that’s why it heightens the pressure. And there’s a really heightened scarcity around how many shares are available in a business or how much capital is being raised, and if you’re not in on it then you are out of the picture. Other things don’t have that kind of scarcity; you can always buy shared of a mutual fund. It’s an open-ended index; there’s no closed door, and they can sell hype when there’s scarcity.
Ryan Isaac: Well and there’s a lot of good data and studies on just the emotional effects of opportunities like that. It’s shown that the strength of our fear in losing out is greater than the strength of our excitement when we win something. Losing hurts more than winning feels good. So, it plays on that really easily.
As I was having conversations this week with some friends in situations like this that are facing deadlines for huge projects that they were presented with ideas out of the blue—a lot of emotion, a lot of hype, and it got built up really quickly. It got me thinking, is it a really good opportunity just because by nature it just happens to be? Or is it a good opportunity because the person was ready for it when it was presented? You had time, you had money, you had expertise, you had thought about it, this is something you wanted. This wasn’t someone else’s agenda. In other words, can you ruin a great opportunity because you’re not ready? And conversely, can you make an average opportunity really great because you were super prepared for it?
Reese Harper: Yeah, if I think about my own experience, I think back of the opportunities I took advantage of or missed out on. Specifically the opportunities I’ve missed out on. If I look back and I’m honest about them, I couldn’t really have taken advantage of those opportunities because I didn’t have the knowledge or the skillset. I think that’s the thing about opportunity is that, if you invest in a business as a passive investor, and I put $50,000 into something. I’m not the operator, I have no control over management; it’s my buddy’s business. If something goes wrong with that, I have no ability to help out a fledgling tech start up—finish developing their app because they ran out of money. I don’t have that ability. So for me, passing up on an opportunity for anyone as a passive viewer, if you don’t have the knowledge or even skill or mental ability or experience to help that business grow, I don’t think that’s the same as if you’re a dentist and you’ve got three practices and you understand the nature of dental operation.
Ryan Isaac: I get that argument. When people say, “You know I really feel like another location is going to be beneficial.”
Reese Harper: That’s different, right? And there might be a once-in-a-lifetime opportunity in that situation that someone could take advantage of. A dentist is in need of selling his practice; he’s not in a great financial situation; he needs cash and he wants to close quickly. You have the cash and the expertise, and you live in the area. It’s your realm. You could get a great discount on that and end up doubling your money in a year because you could implement the skills that you brought to the table to take advantage of the opportunity.
For me, I try to look at things like that—if it’s within my wheelhouse; if it’s something I have experience in. If I understand it, and if it went bad, could I step in and help? Those are kind of opportunities I would take advantage of. But man, a lot of times people try to get into real estate development or real estate ownership and they just don’t have any professional experience or any history in that space and the rate of return they’re pursuing for the risk they’re taking is really not that great. Especially with small business interest, too when you’re trying to invest in a buddy’s company. Same thing.
Ryan Isaac: I think back to people we’ve been able to work with for years now and you see people who just consistently save money to work on their businesses. And then when something comes up, an opportunity or whatever it is, if they’ve got money, they’ve got time, they’re not rushed, no one is trying to sell them on it. They’ve just been in a lot better circumstance to be able to take advantage of and actually turn it into something. And conversely we’ve seen people that it was rushed, they weren’t liquid enough; they couldn’t afford to take any financial losses at all. And no matter how good that opportunity was in reality it just kind of blew up because they just can’t capitalize in it. You have no mental bandwidth, you’re frazzled, there’s no time, no money.
Reese Harper: Or you need to be bailed out at some point and then someone else gets that opportunity.
Ryan Isaac: Yeah, someone who is ready for it.
So, the last point we will make here is: what are some actual steps a dentist could take to not find himself in that situation? Not feel pressure or at least be able to better analyze an opportunity that comes up.
Reese Harper: Yeah, I don’t want this to be an anti-risk taking podcast necessarily because that’s what the country has been built on. Same token. I see too many dentists putting themselves in jeopardy because they’re trying to be entrepreneurs. And not just dentists, it happens to a lot of people. Don’t feel pointed out, but this is the DentistMoney Podcast. And that’s our primary experience. I do think you need to pursue education around things that you’re going to invest in. And you need to feel confident in your ability to be able to analyze the data and the information on your own and not be dependent entirely on someone else’s tip or recommendation. If you don’t have the ability analyze something on your own with a little bit of help from other people you trust and feel confident on your own, you haven’t learned enough yet to be taking that kind of risk. And I feel like that’s one way to keep you safe. Get educated around things that you’re trying to do. And don’t just be like, “I don’t know; it’s going to work out” or “I’m going to leave it up to Mother Nature” or “the cosmos are going to take care of me.” Because it doesn’t work that way.
Ryan Isaac: Well you’re kind of touching on one of my points I had here, which is: know your data. I’m just thinking of a conversation I had recently about that and if you had a few years of actual tracking. If you actually knew what you spent and how much income came in and how much really went to taxes and how much debt you’ve really paid down and you really knew what your savings rate was. You knew how your net worth grew and how your debts went down. If you actually knew those things, you could probably look back and analyze them. Maybe you have been thinking of a second location and the real estate guy says, “I’ve got a piece of land that you’ve kind of been looking at, and I think it might be a good fit.” You’ll actually know how to quantify that in your own real life situation. You can say, “Yeah I can see myself needing to spend an extra whatever it is because this is how much I’ve put away.” Knowing your data is really, really powerful.
Reese Harper: I think you’ve got to know your personal net worth. Know what you are worth and know how it’s broken up right now. How much of your total wealth is liquid cash and investments you can just get tomorrow if you had to? How much is in retirement plans? How much is in real estate equity? How much do you have in your practice, and what’s the value of your practice? What’s your total wealth, and how is that broken up? Sometimes you shouldn’t be taking on opportunities that are way bigger than who you are at the time you take them on. Doing things in a more moderate way I think is the right approach. And just know your information.
Ryan Isaac: Or know how easy is it to get half way through the credit and underwriting process with a lender, and you’re finding out for the first time as the bankers are that you really don’t have any money liquid except for your kids’ college accounts and there’s like ten grand. It’s a cognitive bias where you don’t want to cut your losses. You’re already so far in the process—you’ve already signed so much stuff you think, “I’m just gonna buy that building; I don’t even care anymore. I’ll take my kids college money; they can have it.”
So another thing I wrote down here, and this is probably a bigger conversation to have another time, but I think it’s really important to understand the incentives that the people around you have to give you the advice you do. And this isn’t to say we don’t have certain incentives. Everyone’s incentivized whether it’s your attorney, your CPA, your real estate guy, or lender, financial advisor, or your insurance guy. We’re all incentivized differently to make you take certain action. Do you have any comments on that? We kind of touched on it a little bit. But just understanding who is involved, and just because someone is going to make a commission on a sale there’s nothing wrong with that.
Reese Harper: You have to understand people’s incentives around you. That’s the way the world works— people get paid to do something for you. And to say it’s a bad system would be the wrong way to put it, but if you are taking advice from someone that gets paid on a transaction you have to be cautious of that because in a lot of cases, some professionals don’t have the composure or restraint or internal controls to shut her down and say, “you know what, this is totally gonna hose him. Dr. Jim Givitis is going to get put in the hurt locker because I’m going to sell him this space or this dirt.” So keep an eye on that, but it’s the same token. It doesn’t necessarily mean everyone you’re working with is not thinking about you.
Ryan Isaac: I always like to think, would you pay that person to tell you what you don’t want to hear? I feel like we end up doing for a living sometimes.
Reese Harper: Well yeah, from my perspective I feel like I make similar mental mistakes over time. We all have these habits of certain patterns of how we feel or how we feel about purchases, how we feel about our own businesses, the way we talk and treat people, how anxious we get about certain pressures. I think it’s important to have someone in your life who knows you really well, who when they see you going through these patterns because we all have them and they can say, “Hey bro, you kind of did this six months ago. Remember when this happened and you were saying this?” I have friends that do that for me all the time. “Seriously, didn’t we talk about this two weeks ago and you were saying that?” There are just these patterns that we get in with our money and our decision-making and the business strategy that we try to take. I just think they repeat themselves, and if you have people that are getting paid on transaction, they can take advantage of those emotions because they know, man he really wants this thing. And you need to have someone who is getting paid or not getting paid the same regardless of the decision you make. Would you pay them to tell you something that makes you upset and feel kind of burned that you don’t get your stuff that you want?
Ryan Isaac: Okay, we’ll wrap up here. If I’m Dr. Jim Givitis, and I’m saying “Reese, I’ve got this once-in-a-lifetime thing. I’m really excited about it; give me three tips to navigate this decision in a smart way.” Recap it.
Reese Harper: Ask three people. And all three of those people need to not be getting paid either way. They’ve got to either be paid to tell you what they think or not getting paid to tell you what you think, but just incentivize neutrally. Pay someone for one hour or call a friend, another dentist, someone who has done it before. Ask multiple people, and if the consensus is against you—if two out of three are against you don’t be so stubborn about it. Take a night and sleep on this thing. Take a week or a month. Because 66% of these guys are telling you that you’re wrong. Just be open to that.
Two: the slow, boring course is generally the one that ends up with the most money on average. My wealthiest clients were very boring. They’re awesome people. I mean, they’re guys I want to hang out with, but their financial strategy was a little simpler than their peers. And that I think is really important. Slow and steady.
Ryan Isaac: Let’s say know your own data; let’s end with that. Know your own data, and if you’re getting into a situation where you’re about to pull the trigger on a massive or life-changing financial decision, and you realize you don’t even know your own history, you’re probably not ready. Has your wealth grown over the last few years? What’s your profitability on your own business? If when the lender is asking you about your net worth and that’s the first time you’ve ever thought about those questions, just stop the credit interview. Tell them thanks, but that you’re going to have to wait.
Reese Harper: That’s great, man. I think data is really important.
Ryan Isaac: Well let’s end with this then.
Reese Harper: Tough love podcast. You’re telling me I can’t do anything I want to do?
Ryan Isaac: The other once-in-a-lifetime thing I thought was interesting is that you can only run for Miss Universe once in your life. It’s all or nothing. So if you’re in Miss Universe, you’re done. In the summer of ’87 when you were in that pageant, and if you don’t win you’re done. It’s gone. Uncle Rico. It’s gone.Behavioral Finance