Episode 23: The Crowd Economy
Crowd-funding, or crowd-sourcing as it’s more commonly known, is a topic that I’ve always found fascinating. Joining me to discuss the crowd economy is a good buddy of mine and an expert in the field, Mr. Scott Picken from Wealth Migrate.
The idea of crowd-sourcing has been around forever. All that has changed is that technology has come to the table, making the crowd economy.
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Niel Malan: Hey, everybody. Welcome to the Elite Entrepreneur Show, episode number 23 where today we’ve got a very, very exciting guest, Mr. Scott Picken from Wealth Migrate. We are going to dive into a fascinating topic, which is really the crowd economy; crowdsourcing and crowdfunding specifically. It’s a topic that I’ve personally been fascinated about. Scott and I became buddies a couple of years ago when we started identifying some synergies between the kind of work that we are doing and the difference we both want to make into this world. So I thought as a little bit of a change in pace for the Elite Entrepreneurs Show I would invite Scott onto our show and to tell us everything about the world of crowdsourcing and crowdfunding and building a global business and how South Africans can invest offshore in property without buying the entire property. It’s going to be a fascinating discussion. I’m really looking forward to it. Scott, welcome on the show. Thanks for joining us.
Scott Picken: Awesome, Niel. Thanks very much for having us, and amazed by what you guys are doing and well done for all the progress. And most importantly, you know, I believe a lot in the principle of Zig Ziglar- you can have anything you want in life once you help enough other people get what they want. What I love about what you are doing is you really are empowering people to get what they want, which I think is fantastic.
Niel Malan: Awesome. Yeah, and the same goes… The same goes for me. I think we are really sort of kindred spirits when it comes to that. So, Scott, I think by means of introducing you, I think first maybe explain to us a little bit about what is the concept of crowdsourcing and crowdfunding, just for people who are not really familiar with the term. And then I’m going to ask you to kind of introduce yourself into that context, like how did you come to do what you are doing today and explain your own company. So yeah, over to you.
Scott Picken: If you don’t mind, I’m going to start with some real-life stories.
Niel Malan: Sure.
Scott Picken: Back in 99, actually I bought my first house in Cape Town. But I bought it with a friend and we got a mortgage with my uncle. So actually, I’ve got… I bought it with three partners. What most people don’t realize is that they often say they can’t get into property because they don’t have the money. The general excuse is, I don’t have the money, I don’t have to the time, I don’t have the knowledge, et cetera. Now, I was 22 years old. I hadn’t even been working for 12 months and yet I bought a property my very first year out of university. What I did was buy it through partnership, so different people could bring different things to the party. We could get a mortgage. My uncle could put the deposit in.
We basically renovated that property. Sorry, when I say renovated, we had planning permission. We didn’t renovate it. We knocked it flat and we built six townhouses. But again, I didn’t do it all on my own. I brought in a property developer. I partnered with them. Sorry to be arrogant, but we cleared 2 million Rand profit in 1999 as a 22-year-old.
Niel Malan: Wow. That’s crazy.
Scott Picken: I didn’t earn all 2 million Rand myself. My two partners earned… You know, we split it up, but some people will look at that and I go, well, you know… I believe that 10% of a watermelon is better than 100% of a grape. A better way of saying that is that 50% of something is better than a hundred percent of nothing. What I mean by that is that a lot of people go, “But I want to earn it all myself” and I go, “Really?”, because if you can’t do it all yourself, then you can do nothing whereas you can earn a piece of it. So that was really where I started back when I was 22 years old.
I did my first house in London when I was 24, exactly the same principle. Three of us bought it. I still own it to this day. It pays us more than a thousand pounds passive income every single month and has done since 2002. When I look at that a concept, back as early as the early 2000s, I went and started going to lawyers and I said, well guys, listen, this is a no brainer. We should be buying properties together because actually, you don’t want to have all your money tied up in one asset, whether it’s property or even one company in the stock market. You want to be diversified. But most of us don’t have enough money. We can’t do it.
So I went to all the lawyers, I went to the MBAs, I went to the accountants and they all basically said it’s not possible. Luckily, I had written my dissertation on this in both undergrad at UCT and my master’s in London on how technology was going to change the property and construction industry. I’m not very good at… I’m probably similar to you Niel. I’m not very good at the word no. So I just kept persevering. In simple terms, what actually happened, about a decade later, literally a decade later, was that the concept of crowdfunding started to come into asset classes.
So websites like Kickstarter and Indigo actually started in about 2008, 2009. What that was from a crowdfunding perspective was that let’s just say I want to invent this bottle of water. Sorry, I’ve got a screen here and it doesn’t bring it up so well, but I decided I’m going to invent a bottle of water and I would go on Kickstarter, this is an entrepreneurship show. I would go out and tell the world about it and if they liked drinking sparkling water, they could invest in the product and when I created the products they would get a product. That was really the start of the crowdfunding journey where people would come together and they would companies.
Then that evolved into asset courses, so you could buy properties. In 2013, without getting too technical, the Jobs Act came into place in America, which basically allowed people to now invest together in property, but using technology. In simple terms, different regulators all around the world have now rolled that out. It’s called crowdfunding. It’s called Proptech. It’s called Fintech, all these acronyms and everything else. Quite frankly, it’s no more complicated than technology is coming to the property industry or the real estate industry or whatever you want to call it.
What I think is so exciting, and I want to finish with another story, is that in 2009… I started my first company in 2004 International Property Solutions, IPS. That’s how you and I originally met. I had helped about two and a half thousand people buy houses. So single houses where they bought the house or the apartment, they owned it on their own. In 2009, we just had the crash and I met two, one was a US dollar billionaire and one was a US dollar millionaire and we were in Bondi Beach, Sydney. One of the things that fascinates me about wealthy people is, always asking, what are you doing? I said to these guys, “What are you investing in?” And they said medical buildings. And I say, “Guys, why medical buildings?” And you know, with all my degrees and everything else and I’m not being arrogant, I’m proving a point here, no one had ever taught me medical buildings. I joke Neil, but you invested in a medical building.
Niel Malan: No, I haven’t. I never thought about it.
Scott Picken: Okay. You never thought about it. No one has ever told you, no financial advisor asked you about it.
Niel Malan: Yeah, exactly. I never considered it.
Scott Picken: It’s like a little secret that it’s kept secret. On top of that, so I said, “Why?” And they said, “Well, there are three reasons. No matter what happens in the global economy, you need doctors”. Okay, perfect. Certainly, doctors never leave their premises. Like, think back to when you were a kid and I’ll virtually guarantee you that the place you went to is still a medical premises.
Niel Malan: Very true.
Scott Picken: And thirdly, doctors are bloody good at being doctors, but they are not accountants. And so you never, like, you get these guys that never leave. They are always needed and they sign good long-term leases. It’s like property 101. I mean, my bloody son who is seven years old can understand that. So I wanted to participate and I said, “Right, I’m in. How do I do it?” They said, “It’s simple. There are eight slots, 5 million Australian dollars each. I was like, “Oh, there is the catch”.
Niel Malan: Wait, there is more.
Scott Picken: That company started in 2009 in Australia. It’s now listed on the Australian stock exchange. They started with $40 million. Today it’s worth $700 million. Why is crowdfunding important or why is technology important? Is that, I was excluded and quite frankly, so was 99% of the world’s population. And now with technology, since 2014, we’ve been helping people invest in deals exactly the same as that, but from $1000. For me, that’s the power of the crowd. You know, that’s… The analogy I love to give is birds flying in a flock. I don’t know if you know this, but a bird flying in a flock can fly 70% further than a bird flying on its own. And so as investors, why do we fly on our own?
Niel Malan: Yeah, exactly. It’s such an interesting point because I was thinking about, in preparation for this discussion today, about the concept of crowdfunding is basically means instead of you know… If you take a company… So companies are usually started by one or two or three founders. That would be the shareholders in the company. They would invest the capital, intellectual capital, and they would start the business and other people can’t participate in it. It’s their business. Until such time that they want to go and get external shareholders.
The only time that the public has the ability to really participate in a business is when the company is listed on the stock exchange. It has never been called crowdfunding, but crowdfunding in my mind came about when the stock exchanges came about. It says, listen, here is a company that’s big enough. It’s a blue-chip. It’s Bidvest. Individuals, private individuals can now buy shares in that company that otherwise they couldn’t afford because the barrier was simply too high. Although it’s kind of a bit of a buzzword that’s going around, you know, the idea of crowdfunding, but it has been around for a long time. It’s just packaged slightly differently.
Scott Picken: To be honest, to butt in there, it’s actually been around for a lot longer than even stock markets, because what is a stock fall?
Niel Malan: That’s true.
Scott Picken: And that’s an ancient African tradition. In China, they’ve got. In India, and ironically it’s always a woman, which is fascinating.
Niel Malan: Really? Women are better at working together than men are. That’s for sure.
Scott Picken: Well, that’s the point. It’s actually a feminine energy that works together. And what most people don’t know is that the Statue of Liberty was donated by France, but they had to build the whole base. 300 years ago or however long ago, I’m not that good with the dates, but the point is 300 years ago, a New York businessmen that owned a newspaper went out and said, “Who wants to contribute to the base?” and they basically crowdfunded the base of the Statue of Liberty.
Niel Malan: Wow, really? That’s amazing.
Scott Picken: The concept has been around forever. All that has changed now is technology is coming to the table.
Niel Malan: Technology has made it easy to connect a potential investor or a buyer with someone else that’s putting together a fund or an asset of some sort. I first heard about the concept of crowdfunding through, actually not crowdfunding. I heard about the concept of crowdsourcing first through a company called Threadless. It’s a company that basically designs t-shirts and these guys wanted… They were running out of ideas for designs for the t-shirts. And what I realized is that t-shirts that are bought are often bought by people that love designing t-shirts themselves. So what they started doing is they started saying to people in the community, “Submit your own t-shirt design. You guys will vote on the top designs and whenever someone’s design gets chosen, you earn $1000″, you know, something like that.
This community grew to like 300000 people almost overnight. You know in a very short space of time where the community, the crowdsource community started submitting the designs and buying the winning design. All that Threadless really became was a platform. The platform said, “Let’s connect designers with buyers of t-shirts”. And they just provide the technology to be able to enable that. That’s the first time I heard about that idea of crowdsourcing. Now since there are so many crowdsourcing initiatives. It’s ridiculous. I was watching a show on bill Gates the other day on Netflix, which I highly suggest you guys watch. I think it’s called Inside Bill’s Brain. It’s amazing.
Scott Picken: This is so bizarre. I watched that on Tuesday night.
Niel Malan: Yeah. The fascinating thing is it’s less about Microsoft and it’s more about the Bill and Melinda Gates Foundation. He figured out that the biggest killer of infants in the world is diarrhea and the primary cause of diarrhea is sanitation. So in short, if you are in an impoverished area, there is no sanitation, there are no sewage pipes running around, so the stuff, the sewage can go anywhere. That’s the crux of the problem. So you decided instead of him solving the problem, he is going to crowdsource. He is going to get external inventors to basically submit their ideas.
They paid since he was offering a $7 million bounty for someone that came up with the best solution, and he did crowdsourcing. He went out to the world and said, “You guys that have great ideas, that has been plugging away on this idea forever, in any case, come to the party, show us what you’ve got and we’ll fund you”. Basically, what they’ve done now is they’ve created toilets that don’t need any sewage. It’s like a self-combusting little machine. A lot of that is being prototyped in South Africa, interestingly. But the point is that crowdsourcing is becoming a widely adopted paradigm when it comes to solving problems.
Crowdfunding came as a subset of that where crowds like Indigo and Kickstarter came about and said, look, if you’ve got an idea for a product, if you don’t have enough money to take it beyond prototype stages, sell it to people who like the concept and they will be prepared to wait a couple of months until the thing gets manufactured with the money that they paid. So what they really did was they allowed people to sell a product and advance to people that then funded the manufacturing.
Scott Picken: You know Niel before that turned up, you and me would have an idea and we would go to the bank and you would turn up to Mr. bank manager and say, “Hey, I’ve got this idea, can I have a loan?” And then you would be laughed out of the room. What’s incredible now is you can have 10, 20, 50000 people buy your product. And you know what’s really good? When you put it out there, because you really selling an idea, and if people buy into your idea, well then great, you know there is a market for it. But if they don’t buy into your table, great, you’ve lost no time. You haven’t gone and borrowed money from the bank or mortgaged your house.
Niel Malan: Exactly. I mean, that’s what’s beautiful about it. Firstly, it’s not a loan. It’s not something that you’ve got to repay. You’ve got to fulfill the product that you sold, but it’s not a loan. And I mean, banks just work that way. If you want to go and get a $100000 loan, you better show up at $200000 in a suitcase that you secure and they will lend you back your own money. That’s kind of how banks work. So anyway, crowdfunding came about as the means of funding new projects. But then equity crowdfunding became almost like a subset of that where you can now buy equity in another company. So Scott mentioned the Jobs Act. So in short, what happened, when Trump came into power with all of his faults, he does have some interesting ideas on business and he said the one big problem in business is that people can’t go and solicit private shareholders.
If I’ve got a small company that’s stretched for cash and I can’t get money from the banks, I’m not allowed legally to go and solicit cash. I can only work my own inner circle. But if I’m not particularly networked, if I don’t know a lot of people with money, then my idea is doomed. So what he did is he lifted that ban, an 80-year ban on being able to solicit private shareholders. It’s an act called the Jobs Act. It’s called the Jobs Act because he wanted to stimulate the economy to create jobs. He said the only way that’s possible is if companies thrive. The one big problem we need to solve is for companies to get capital. One way to do this is to get it from external shareholders. So it was a very big fundamental shift in the US, and like Scott said, a lot of companies followed, countries followed suit. South Africa unfortunately, yet hasn’t, but who knows?
Scott Picken: I’ve got good news on that. I’ve got very good news on that because I was with the regulators last week and for the first time in four years, they have now put together, I don’t know what you call it, but like a collaborative team, where they are driving forward with Fintech and crowdfunding.
Niel Malan: Oh really. Oh, very interesting, very interesting.
Scott Picken: If we had this interview two weeks ago, I would have said it’s being… I actually set up the African Crowdfunding Association in 2015 myself and we made no progress until last week.
Niel Malan: Interesting, very, very interesting. So that’s just a little bit of a brief history in time. So where things are today is in certain jurisdictions, the crowd can invest and buy shares into an asset. Now, whether the asset is a company, whether it’s a property, whether it’s a development, whatever the case may be, it has become an incredible opportunity for private investors, private people who aren’t satisfied with the yields of traditional investments. And I mean, I have to chuckle when I talk about the yields investments, because if I look at my portfolio, my South African portfolio last year, it’s more of a non-investment. It’s more of a non-yield than a yield. Let’s face it, it’s just not looking great. If you put your money with institutions, even Unit Trust and that kind of stuff, there is a place for it, but you are not going to get great yields. You’ve got to invest in alternative asset classes and property being one of the big asset classes.
The way I see it, Scott, is that a big part of our constituents are South Africa and investing a property in South Africa has become problematic for many reasons. First of all, negative growth. It’s very risky. There is land grabs, and municipalities come to you with massive bills and say, guess what, this property owes the last 10 years arrears in taxes and all that.
Scott Picken: And on top of that, whether you like it or not, there is Rand devaluation, which statistically is 6% a year. So, you know, if you are getting 8% in US dollars and you are getting 14% in Rand, you are arriving at neutral.
Niel Malan: Exactly. So this poses a massive problem for South Africans that were investment-minded, that used to invest in property, but property became precarious, let’s just call it that. But now how do you go as a South African and go and invest in a UK property? You needed a mountain of cash to be able to do that, historically. So this is a problem that Scott is solving. Scott is basically telling the public and saying, listen here, for a very small amount of money, you can participate in an offshore property investment that otherwise would be, that you would be restricted from. And not only as an offshore investment but usually the currency hedge, it’s also something that provides good yields and that provides a lot of stability and safety.
I’m now going to switch on over. Tell us about the types of properties. Tell us a little bit more about the medical suite and the fundamentals behind that. What sort of yields are people getting? Just tell us a little bit more and maybe give us one or two examples of medical suites that you guys have funded and what sort of yields are the guys getting on their investments.
Scott Picken: So Niel, before we go to the yields, do you mind if I just explain how it works just so people…
Niel Malan: Of course, go ahead, yeah.
Scott Picken: Let’s take a simple concept. You and me want to buy a house. It doesn’t matter where it is. It can be in Johannesburg. It can be in London. It can be in Sydney. It doesn’t make any difference. The traditional way it would work is if you and I were going to buy a house, we would set up an SPV, which is a Special Purpose Vehicle and that SPV would own the asset 100%. If you put in 70% of the cash and I put in 30% of the cash, you would expect to be a 70% owner and I would be at 30% owner. We would have to agree who is going to get the mortgage. We would have to agree who is going to manage the property and we would have to agree where we are going to sell the property. Are we going to own it for three years, four years, five years?
Most importantly, traditionally, you and I would have to know, like, or trust each other. You know, we would have to have gone to school together or university or something, family, whatever. And that’s the way it has worked for decades and quite frankly, centuries. All that we’ve done is take that exact same concept and overlay technology on top. So the only difference is that it’s the exact same principle, yet you and I don’t have to know each other anymore because the technology allows us to invest together, but without having to know each other. It basically allows like-minded people to come together.
Let’s go to the deals. As an example, we bought our first big medical portfolio in Atlanta or in America in 2014. It was a portfolio of, I’m just going to get the number, seven buildings. It was a $16 million deal. We needed to raise $6 million in equity and we’ve just sold that building. It was a five year time and we’ve just sold the building. So the investors got in, myself included, and we’ve earned on average, just over 8% cash on cash every single year for five years. So what that means is that every quarter we’ve earned over 2%. So let’s just keep it simple. If I invested $100, that means I got $8 a year or $2 a quarter. Are you with me? If I invested $1,000, a million dollars, it’s the same percentage. Now, because we’ve exited the building, you actually get the capital growth on top of that. You obviously, only get the capital growth when you exit.
Niel Malan: Of course, yeah.
Scott Picken: What gets really exciting here is that you are earning 8% and remember it’s an 8% net return. It’s not a yield. It’s not taking account of capital growth. It’s not taking account Rand evaluation. It’s a net 8% return in your pockets per year. And then once you take capital growth into account, it makes it about between, depending on the different projects, between 13% and 15% per year on return in dollars that you invested. We’ve done over $600 million worth of deals. And so I’m not sort of telling you the track record of one building, you know…
Niel Malan: Yeah, of course.
Scott Picken: Consistently in multiple markets with multiple partners. I think what excites me is that at the moment our re-investment rate is currently at 78%. What that means most importantly is that if Niel comes along and says, I want to invest, I want to test you guys, I want to dip my toe, I’m going to invest $1000 or $10000, you know, dip my toe, when they see it’s working, they actually reinvest.
Niel Malan: Of course.
Scott Picken: The best testament to the actual results people are getting is that reinvestment run.
Niel Malan: Okay, cool. So let’s take it back and let’s dumb it down for Niel. I always say it’s such a good filter because if I get it, everybody else will get it. Math is not my strong suit. So what you are telling me is if I, for some reason have $1,000, $5,000, $10,000 lying around, I want to try it out. So I come to Wealth Migrate, your firm and I say, right, I’ve got this thousand dollars, let’s say 10 grand, let’s say $10,000 and I want to invest it into something. You guys basically can tell me, we’ve got a portfolio of investments coming up. I can take my pick and say I want to invest in your new development in London. I then buy the $10,000 worth, and I own my share of that building. I can get the rental yield paid to me directly every quarter.
So there is still a cash flow benefit in it, which is also something quite interesting because what happened with South Africa property is we started facing a situation where we were in negative cash flow for three or four years. The guys that used to buy all these townhouses and gear them and that kind of stuff, you know it’s a negative cash flow environment. So what you are saying is that you’ve got positive cash flow from day one. It gets paid out every quarter. So it’s yielding and I can either withdraw those yields or I can reinvest it into future projects. And then if your view on the project is five years when you sell it, I will get a further capital appreciation on that that also gets paid back to me. So I get my initial capital back, I get the capital growth back as well as the yields on the investment that I got for that five-year term. Am I understanding it more or less correctly?
Scott Picken: That’s exactly it, yeah.
Niel Malan: Okay. That’s amazing. I mean, that’s pretty dang good yield. You said 600 million, so obviously not all the yields you’ve exited from, but what would you say is the median? What’s the bell curve in terms of your yields as well as your capital gains?
Scott Picken: The median, I would say, again, it depends, per country, but based on our previous track record you are looking at sort of 7% to 8%. I would say closer to 8 than 7, what I call cash on cash, which is the cash flow you are talking about, and you are looking at including capital. When you include capital growth, you are looking at 14%, 15%. Let’s take what that means in actual money. So you put in $10000, like you just said, 4 to 5 years, you are going to $800 per year. So I 800 times 5 is another $4000. So you’ve now got your $10000 investment, plus you’ve been paid $4000 in cash flow, okay?
Niel Malan: Sure.
Scott Picken: If you take the remaining 7%, that takes into account the capital growth and you times that by 5, you are looking at about sort of 35, call it 35%, 40% in capital growth. I’m using simple interest. I’m not using compounded and getting complicated. I’m keeping it simple.
Niel Malan: Yeah, sure.
Scott Picken: That means that your $10000 is now going to be worth about $14000. You are now, you’ve been paid the $4000 income, you are getting back your $10000, plus you are getting a $4000 capital growth. So all in, you put in $10000 and you are getting out $18000 at the end.
Niel Malan: So I made 80% on my money in five years, and that’s a pretty risk-free investment because the medical suites themselves lend themselves to stable tenants and lend themselves to no fluctuations in revenue and all that kind of stuff. So you still get the security that always traditionally comes with property. But I’m getting a couple of things that I don’t get if I personally buy the property. I’m getting monthly cash flow from the beginning. I don’t have the hassle of management of the property management.
Scott Picken: I’m always joking around; there is management, no broken toilets, no maintenance.
Niel Malan: Exactly. I’m not going to get the phone call the geysers burst, right? Let’s get clear on that. Okay, cool. So this is no WhatsApp group saying, guys, you know, there is a problem with the geyser. Okay, awesome. I’m getting a monthly yield. So I’m getting cash flow. I’m cash positive. I’m getting my money back in the end, the full capital that I invest. I get it back returned to me. Plus I’m getting the capital appreciation on it. So for a period of five years, I got $800 a year, broken down into monthly income, that’s $400, sorry, $200 every quarter.
Niel Malan: Every quarter. Exactly. And then I’m getting an additional $4,000 capital growth on the 10 grand that I initially put in, which I can either withdraw or I can just reinvest, which obviously, the smart money would be would reinvesting. So now let me ask you a question, Scott. Let’s just say for argument’s sake, I decide before the time I had an emergency. I need to get my 10 grand out before the thing sells. Is there a way to do it? Is there like some kind of arbitrage or an exchange where I can sell it to other shareholders or…
Scott Picken: We do have a secondary, what we call off-market, so where people have immigrated or whatever and they’ve said, look, I would like to remove myself from this position. The only thing I do say to people is that it’s not… It’s willing buyer willing seller.
Niel Malan: Yeah, of course. It’s not a guarantee.
Scott Picken: There is no buyer. It’s just not guaranteed. You know, we don’t guarantee buyback or anything like that. All that’s important is that investors, you know I always say to people as investors, they need to look into this. It’s no different to again, you and me buying a house. If I turn up and say, hey dude, I need my money now, you are going to go, well how are we going to do that? We are going to have to sell the household. Am I prepared to buy your share et cetera.
Niel Malan: This fascinating. So one of the things that as a born South African I’ve had my eye on for a very long time, is risk gauging. No, I’m not about to go into a let’s slate South African mission at all. I love this country. Don’t get me wrong. I don’t love the economics of this country. If I just put on a financially sensible person hat on for a second, let’s just take emotion out of it, I’m looking at hedging, right? So one way to hedge is you hedge different asset classes. You are not only in property. You are not only in equities. You are not only in cash, gold, silver or whatever, but you’ve got a portfolio. So that has been around for a long time. But the next thing is you hedge yourself by jurisdictions, by countries and by parts of the world. So this I find quite attractive. So it sounds to me that you’ve got options to invest in the UK, US. Where do you have projects and what are my options as a private investor?
Scott Picken: We only focus on the three primary markets, and that is England, Australia, and America.
Niel Malan: Okay.
Scott Picken: And the reason being is that I’ve personally been investing in those markets for more than a decade, in all three of those markets. And they speak English. The laws protect you.
Niel Malan: It’s stable. I mean…
Scott Picken: Yeah, and it’s stable. Our philosophy is that people can make great returns. You know I make great returns in Africa or in emerging markets and whatever. But when they invest overseas, they want wealth preservation. It’s about the protection of wealth.
Niel Malan: Yes, exactly.
Scott Picken: So for us, it’s more being… It’s more risk-averse. It’s protection of capital. I tend to say it’s three things. It’s wealth preservation, it’s a plan B and it gives people peace of mind because no matter what happens in London, they are not going to take your property away or anything like that, so…
Niel Malan: Exactly. Yeah, and especially the fact that you can just spread your risk across continents. I mean, I just like that idea. Given the world has become quite a sort of a tumultuous place. Every day there is another scandal happening in another country or there is a big issue. So I think it’s just… It’s always good to have the opportunity to hedge. Do you find you are getting the same returns and the same yields across all three of those marketplaces? Are they very similar?
Scott Picken: Yes and no. So you use the word diversification. I always say to people, you should diversify across countries, asset classes, currencies, and even partners as well. There are two parts to this that I think are very important. You tend to find that the returns are different in America, in England and in Australia. Traditionally in London and England, they have been slightly lower because they are lower risk than other markets. Although saying that, we’ve got an amazing partner, which I want to tell you about that’s coming out next week with great returns. So that’s… The first thing is that. The second thing is that traditionally the very wealthy people would go out and they would invest in England, Australia, and America, but they have a whole arrange of people a part of their team that would be setting up structures and bank accounts and lawyers and accountants and everything else. They’ve got to pay tax in all the different countries. And quite frankly, it’s very expensive and very time-consuming.
For the likes of the majority of people watching this video, it quite frankly was impossible. Now, with technology that is possible because whether you invest in England, Australia, America, everything is on our platform. All your returns get paid back into a wallet. And so you have the ability to be able to manage everything in one place. You don’t have to set up any tax. You don’t have to set up any structures. You don’t have to set up any bank accounts. It’s all in one place. And so it allows you to do what you are looking to achieve in terms of your diversification, but without a lot of hassle. I always say to people, you know, it allows people to do it in a safe and simple way.
Niel Malan: Sure. Nice. So this is really interesting. I want to talk to you… I don’t want to spend a lot of time on it, but I’m pretty sure it’s a question you get asked all the time. Do I pay at capital gains tax? Where do I pay tax if it’s offshore? My assumption is if you are a South African citizen, you still are bind by the South African tax laws irrespective of where you are getting returns from. Is that the case or do you have a different answer to that question?
Scott Picken: My initial response to that is I’m no tax expert. I’m not going to sit here and try and sound like a tax expert. It is a little bit more complicated than just saying yes or no. And I’ll tell you why. It depends on the country. So in terms of, you know, America, England, Australia are different, but in simple terms, the way it works is that every company, remember they bought our service. Every asset we are buying, every property we are buying is owned by a company, an SPV, Special Purpose Vehicle and in that country you will pay the tax on the income observed. So remember I said you are getting a net return.
Niel Malan: Yes.
Scott Picken: So you get that net return. You as a South African citizen, if you earn it in your own name, you need to declare your worldwide earnings. If you earn it in an offshore structure that depends on how your structure is set up.
Niel Malan: I’ve got a trust in Mauritius that’s doing the investments. I’ll be paying the taxation that’s in place for trust in Mauritius. If it’s in my own personal name, I’m going to pay tax in South Africa based on earnings. I would assume that the yield on the sale of the property, CGT, that’s not considered income, right?
Scott Picken: No, because it’s a dividend. It’s set up as a dividend.
Niel Malan: Oh, of course. So it’s paid out as a dividend. Okay, cool. So I’m actually going to be paying dividend tax.
Scott Picken: Which is a lot better than CGT tax.
Niel Malan: Yeah. Wow, that’s great. Wow, that’s incredible. So you said there is a wallet, so the yields get paid out into a wallet. How do I get the money back into my account?
Scott Picken: This way is super exciting. This is one of our biggest innovations, our game-changers. So in the next… Well, certainly in the month of November. If my CTO heard me say in the next week he would cut my head off. Literally, this month, we’ve actually integrated with a global digital wallet that is backed up. It’s out of Europe and it’s backed up by Barclays bank. And what that’s going to allow is that up until now we’ve had wallets where your money is there and you can sit on the platform and everything else, but it was quite hard to interact and actually get your money or whatever.
We are now integrated with a digital wallet provider, one of the biggest in the world. You will basically have access to money. You’ll be able to move your money. If you want to pay for a holiday, that’s your choice. I mean, we are even going to go as far as actually wanting to get cards for people so they can actually get access to the wallet.
Niel Malan: Can I get the money back into my account? Is it like PayPal, for example where the money is sitting there?
Scott Picken: You are in charge of your wallet so you can move your money around, basically. And what’s really exciting for me, Neil, is that it all comes back into one place. So you can manage everything in one place. You know because… I’ve usually got bank accounts in England, Australia, American, and South Africa. It is such a nightmare to keep them all together.
Niel Malan: It’s a mission, yeah. I’ve got the same thing. So this is really interesting. The money gets paid out into this wallet, all the yields, and then I can decide, I want to reinvest, I want to take some money out. I just want to let it hang around there for a bit until an opportunity comes along that I find interesting. Basically, what you’ve done is you’ve taken the hassle factor out of it for people as well, the mission of finding a project and getting involved in the due diligence and the management and the brokering of the transaction. Anybody here that’s a property investor you know exactly what I’m talking about. Property investment was always made out to be this really cool thing, and it is, but the hassle factor, I mean my God and the expenses, they just flow one after the other, you know, transfer duties and the state duties and taxes and this and this and that. It’s hectic.
So you’ve taken away all of that stuff. I basically can sit in my lounge chair here on Camps Bay and I can say, cool, what have you got. I’ve got some extra cash. I can look at your six or seven opportunities coming up. I like the one in Brisbane. I say, cool. Here is $10000. Take care of the rest. Pay me my money every quarter and when the thing gets sold it gets sold. It sounds to me like a very hassle-free situation.
Scott Picken: Well, you are right. You made a very good comment there. What was interesting for me is that I’ve been buying property, and I’ve told you already, since 1999 and I own a number of properties around South Africa, quite a few actually. As I got more and more involved in investing overseas and even more so investing in commercial buildings through the platform, I started to realize like, the first thing is I looked at my returns and I was making a better return in foreign currency than I was making in Rand. That wasn’t even Rand devaluation. There was a lot for a lot. I was making better returns.
The second thing was my overseas properties would cause like, no hassle, nothing. Like literally, “What do I do with my money?” type thing, whereas my South African properties, like you said, the flipping geyser breaks, the managing agent doesn’t pay me, the tenant doesn’t pay me. I’ve had everything.
Niel Malan: You can’t evict people.
Scott Picken: People who invest in South African property has an armful of stories, whereas I don’t have a story. Do you know that I’ve never had, that property I told you about in 2002, I’ve never had one month, not one month, in 18 years where I haven’t been paid.
Niel Malan: Wow, that’s incredible.
Niel Malan: It’s a different market.
Scott Picken: Is that eventually, I sat down with my wife in like 2015, I think it was, and said this is ridiculous. And so we have sold off all our South African properties. Not in a fire sale. Just when we got good offers. I’m now down to my house that I live in here in Knysna, in Thesen, and one in Joburg. When I sell that one in Joburg, that’s it. I’m not saying it’s right or wrong to buy in South Africa. I’ve got no opinion if people want to do that. I’m not emotional. I love South Africa. I’m a passionate South African. But I want my money to be where it’s working for me and quite frankly, I don’t want the hassle.
Niel Malan: Well, dude, that’s my view. My wife and I made the exact same decision. We are not buying anything more in South Africa. Not that we… We love this country, but, you know, we pay our taxes and we do everything. We’ve done our bit for God and country in South Africa, but to create wealth and to protect our money we need to be in a… It needs to be in a jurisdiction where the money’s safe and it needs to be in asset classes that make sense, where I’m still getting yields. This is the hardest thing that’s always been for entrepreneurs. So I’m going to address entrepreneurs real quick seeing that this is an elite entrepreneur show.
The one thing that’s really difficult for entrepreneurs is that the mechanics of wealth creation when it comes to your business is very different to investment. As an entrepreneur, you are hustling and you are grinding, and you are selling. You make money through selling, through building an asset and through putting deals together and that kind of stuff. When it works, you make a lot of money. You can make a lot of money in a relatively short space of time, seven to 10 years, usually, I think is a fairly realistic time frame. What happens when an entrepreneur makes a lot of money and then they will say, what am I going to do with that money?
Now they start facing this crisis called low yields. So you don’t want to risk it, so you start looking at the banks and you start saying that’s laughable. And you start saying, what’s next in the pecking order that’s safe-ish. And you started looking at your Satrix 40 or your Unit Trust and that kind of stuff. And that’s okay, but it’s not great. You just can’t find something that really grows, but you also can’t… The safer it is, the lower the yield. I find it’s very hard for entrepreneurs to find satisfaction to find, cool, I’m actually putting my money into something where there is the right balance between growth and safety. There is a right balance between protection and safety.
I think those kinds of thing is attractive, anything that’s hard currency where you are getting yours over 10%, even if it’s advertised. I mean, it’s great, because you’ve got the currency hedge and you’ve got the safety and protection of property, but at least you are getting yields and if you compound that over time, obviously those sort of numbers really add up, which is very exciting.
Scott Picken: On top of that, Neil, and again, you and I are exactly the same. I make money in business and I’ve parked money in property. Well, that’s what I do. You know what I mean?
Niel Malan: Yeah.
Scott Picken: The thing that’s important is that we are so involved in our businesses, I don’t have time to run around and be watching the stock markets and should I be buying or selling or even cryptocurrency, should I be buying? I like… I don’t have time for that. I’m focused 100% on my business.
Niel Malan: Exactly, yeah.
Scott Picken: When putting my money into an asset I need it just to look after itself. And that’s what I like about the balance of the two, basically.
Niel Malan: Yeah. I always had this fun giggle with the idea of passive income, because I’ve always said that property is the furthest thing of passive income that you can find. There is nothing passive about it. There is the maintenance and there is the ongoing hassles and so forth. You are not working for it. It’s not earned income from a perspective that it’s a yield that pays you, but it’s damn well not passive for the most part. What you’ve done is you’ve gone and made it passive. You say, listen, we’ll take care of the whole thing. We’ll source it. We’ll buy it. We’ll maintain it. We’ll collect the rent. We’ll take care of the whole thing and all you do is collect the check every month, which is really what…
Scott Picken: You are nearly 100% accurate. Just one thing I would…
Niel Malan: Every quarter, sorry. Apologies.
Scott Picken: You are 100% accurate on the passive income side. The only difference is, it’s not me running around the world doing everything myself. What we are doing is we are finding a trusted partner. So as an example, in England, we go to England, we find a partner. They have been doing this for a decade or more. They put their own money in the deal. And then what we do is we put together the partner and the investor. So they run around. They are managing the asset, et cetera. So yes, 100% on the passive side that you spoke about, but it’s not me and my team running around trying to do everything all over the world, because the one thing I will say, property is always a localized game. So I always say to people, you don’t invest in property, you actually invest in people. And our job is bringing quality partners in England, Australia and America.
Niel Malan: Yeah. But you find them. I’m saying as an investor, I don’t have to worry about it. You bring the deals to the table and you basically are saying to me, Neil, here the buffet. Take your pick. Here are the details around each deal. Choose the one you like. Choose how much money you want to put it into and here is what you can expect from it. But then from there, the whole thing, you guys effectively take care of. I don’t have to go and do that sourcing.
Scott Picken: Exactly.
Niel Malan: I don’t have to do that management of the whole thing, which is really interesting. So I want to segue a little bit and I want to come back to property. Another really interesting thing for the viewers now and listeners that Scott exposed me to was equity crowdfunding for a business, not for a property scheme. As an investor, I started checking out AngelList and these kinds of things, because I believe personally, every single investor must have their own philosophy about money, about investment. It’s a personalized thing. Nobody can tell you this should be your formula. They are formulas, but which one is right for you is your baby. So what I’m about to tell you is my ideal. Don’t take it to the bank. So for me…
Scott Picken: This is not financial advice.
Niel Malan: Exactly. This is not financial advice. For me, I’ve got an investment philosophy of 30, 30, 30, 10. So 30% of my money, I want safe. I either want it in cash or gold or silver or on things that just… It doesn’t even grow. It just is preserved. It’s a much more conservative view than what a lot of people take. I just love cash, because I’ve seen how valuable cash is when you need it. If there is a crisis or if there is a deal that comes up that you can’t say no to, whatever the case may be. I just don’t believe that you want to have all of your money tied into illiquid assets. That’s just personally. So this is me. Like I said, it’s not financial advice. It’s me.
One third, I want to have in the market. So I want to have in a spread of blue-chip stocks and something like a Satrix 40 or Alan Gray Fund or something like that. If you are investing in South Africa, it’s a pretty good option. In the US, you’ve got a crowd called Wealthfront, which is very cool. They are also like diversify. The fees are almost nothing and that kind of thing. It’s a fairly good sort of investment asset class. One third in property, but one third in property can only be done either if one third is one third of a large amount of money, because you can afford to buy your own properties, or if it’s one third through a Wealth Migrate which makes it easy for me with smaller amounts of money to store, put one third.
But then there is 10% which just speculative. I want to talk to you a little bit about that. A lot of people say to me, Neil, should I buy Bitcoin? You know, should I do this or should I do that? And I say to them, my answer is always the same, I said, “Do whatever you feel like doing as long as it’s money if you lose it, you are not going to miss it”. So I made a lot of money with Bitcoin, but I knew I was only prepared to put the amount of money in that if it goes away, if it disappears, I’m not going to miss it. It’s 10% of my portfolio. I’ll never ever put more than 10% into Bitcoin.
I’ve got the market timing right and I used to buy and sell at the right time, but I never really advised people to do that. That’s speculative. That’s just gambling money. One aspect that’s less of a speculation, but it’s still risky is equity crowdfunding. So on platforms like AngelList and, and there are quite a few equity crowdfunding platforms where I can buy shares in other companies. Imagine you were able to buy shares in Facebook before Facebook was Facebook. When Facebook was still the Zuck, sitting with a big fat pimple in his college dorm and he just wrote the software and it looks promising, but nobody knows about it. Imagine you could buy like a little sliver of Facebook, wouldn’t that be sexy?
With the Jobs Act and with equity crowdfunding platforms, you are now able to do that. You are now able to go and buy small bits of equity into companies that show high promise for high growth. I want to give you guys a dramatic example to illustrate to you how important this is. When Google did their first round of funding, when they did the angel round or the seed round, actually, they were just looking for enough money to just get some momentum. They put out 20 blocks of $200,000 each. I need 20 shareholders who could put in $20,000, $200,000 each. It’s either 20 or 200,000. I think it’s $200,000. And they sold out and then Jeff Bezos from Amazon heard about this. He started making phone calls and says, put out a 21st block. I want in. And they said, sorry, we only have 20 blocks available. And basically, he used his industry connections to buy the 21st block, which didn’t exist. He created it.
$200,000 went in. That is worth today over $1 billion, from that tiny little investment in Google. There aren’t many Facebooks. There aren’t many Googles. So I just want to make it very, very clear. But there are companies, in tech companies you get hockey stick growth. If the thing hits it goes from here-to-there in a very short space of the time, so…
Niel Malan: Crowdfunding is a very exciting opportunity to take that 10%, that a little bit of money that’s more speculative where you are playing the game on very high potential rewards and what that does for private investors, it allows them to invest in private companies and for private companies looking for investment, it allows them to connect with people like that that can work with them. And that’s how it happened, Scott that you figured that out as well. So maybe tell us a little bit about your equity crowdfunding part of your world because that’s also fascinating and that’s something that you’ve actually advised us to do, which we are very excited about. Just give the guys… I don’t know how much of that you can disclose, but whatever you can.
Scott Picken: It’s quite interesting because you spoke about Jeff Bezos. What people don’t know is when Amazon listed, and maybe it’s even too far down the value chain, but even if you are bought shares when Amazon listed and you put in $10,000 on Amazon, today it’s worth $12 million.
Niel Malan: Wow.
Scott Picken: Let’s take that back. So look, in our company, we were like most tech companies where it takes time for the revenues to grow and yet your expenses are quite high, you know, paying programmers and everything else. And I funded the whole thing to get going based on my first company I started, but I was getting… I was pretty cash hungry, basically. Anyway, three things happened for me in 2014. One is I read a book by Marc Benioff called Behind the Cloud.
Niel Malan: Yes, brilliant book. Awesome.
Scott Picken: In 99, he went out to all the venture capitalists around the world and the institutions and said, “Hey, I want money for my business. We are going to put CRM”, which hopefully everyone on this call knows what that is, “in the cloud”. And they laughed at him. They said it’s never going to happen. And so he went to his clients and he said, “Well, hey, clients, why don’t you invest in it? You obviously believe in it”. And they did. Today it’s a $50, $60 billion business and they have done slightly well. I love that concept. The second thing was we had our clients coming to us and saying, “Listen, we love the medical building, but how do we actually invest in the platform?” The third thing, as I’ve already mentioned, we want to build our cash reserves so we could build and grow the company.
So we launched a concept in 2014 called our wealth partners, which is our shareholders and people actually were able to invest in our company. I would say it’s the greatest asset in our company because we’ve now got this global group of people that are committed to seeing the company succeed, which is fantastic. And then last year we did something quite unique. We went to Seedrs, which is the largest equity crowdfunding platform in Europe, a regulated body by British regulation and everything else. The reason we did that was our minimum investment up until that point had been $10,000, which is not a lot of money, but it’s also a lot of money for some people.
Niel Malan: Yeah.
Scott Picken: Seeders allow people to participate from 10 pounds. Call it $10, 10 pounds, it doesn’t matter. It’s the same amount of money. That for us was really interesting because what that allowed us to do was now extrapolate that base dramatically. And so we raised about two and a half million dollars from, I need to get the number out. It’s about 683 people in 43 countries, which is really amazing. What it basically means is you’ve now got this army, this community of like tribe or whatever words you want to use, of people that are really committed to success.
Also, I mean, we obviously have quite a strong base in South Africa, but now we’ve got people all over the world, which is really, really exciting. One of the reasons I advised, as a friend, sort of wanted to give you advice on the crowdfunding thing is that it’s all good and well to go out and raise equity, you know, go to a venture capitalist, raise equity, but then you’ve really got one person sitting on your board and they are pretty much telling you to go left or go right or whatever.
Niel Malan: Yeah, exactly.
Scott Picken: And most importantly, they’ve got their best interests at heart. They just want to make money in an exit as quickly as possible, whereas if you get people through crowdfunding to participate, they want to make money. Don’t get me wrong, people want to make money, but they also want to be part of a journey. What tends to happen is that people get excited in being part of that community and being able to learn in a like-minded community. So I tend to find there are three reasons people joined us. One is they want to make a profit, two is they want to be part of a global community, a global like-minded community, and three is they want to have a purposeful impact on the planet. The people that have invested tend to tick all three boxes so that they are winning even if they are not making money.
Niel Malan: Yeah. You know, it’s incredible. So for the viewers, after that discussion with Scott, I thought about it. I’ve never had to raise money for any of my companies. I’ve always self-funded. I’m pretty good at managing cash and cash flow, but we are starting in a software development arm to our company. Our vision is we want to reach 1% of the world’s entrepreneurs and help them to run the most successful companies, because with Elite Inc. the problem we trying to solve in the world is, there is a very small growth in entrepreneurship. Let me give you guys an example. In 2016 they were just shy of 700,000 new businesses that started in the United States, but 660,000 closed their doors at the same time.
I’m probably getting my numbers wrong a little bit, but I think the net growth in entrepreneurs was 70,000. I always thought to myself, it’s so inefficient. 700,000 people start businesses, take a bond. You are going to go through a divorce. You are going to probably feel close to getting a heart attack. Running a business is bloody difficult. 700,000 people are about to embark on a journey when 640,000 later say hang up the towel. So the net growth is 60,000 businesses. That’s not even the worst part of the problem. Only 19% of those businesses that survive will employ people. The rest are solopreneurs. So you are talking about 20,000 businesses that actually even employ people.
Our goal with Elite Inc. is we want to move the needle on global entrepreneurship. So our goal is to reach 1% of the Globe’s entrepreneurs with high leverage tools to help them to succeed. We’ve got this massive vision and we’ve got some incredible stuff that we are busy launching. And I just decided, you know, let’s go for gold. Our stuff works. Our clients have got a 93% success rate with our flagship solution. We know how to scale. We know how to fulfill. Now is the time to go for gold.
So I started turning to Scott and then Scott basically, I’ll just to put the whole thing together. So we just after three months of getting valuations on our company, we just finished a $39 million valuation, which sounds like a crazy number, but that’s really driven because we’ve grown 400% year on year the last four years in a row and we are profitable. Our growth is just is looking insane. So we’ve heard it for a long time. People have said, “Can we buy shares in your company?” I’ve never needed the money and I’ve never had an opportunity for them to do it. But now that we decided to go and launch a software division and to raise cash, next year, early next year, we are doing a $3 million raise from private individuals.
I think it’s so exciting because the people that love what we do, that want to make an impact in entrepreneurship, that love us and that’s part of our tribe in any case, it gives them an opportunity to become involved in the movement. You know what I mean? It’s not just a shareholder. It’s not just a passive left-brain investment. This is our tribe. These are people that want to play a role in making a difference in the world and participate in this initiative. So I think it’s so exciting Scott, for private shareholders, private individuals to be able to do that now, to go and invest in a Wealth Migrate and or an Elite Inc. or any company that they find exciting.
The other cool thing is our companies are both offshore companies. Elite Inc. is a Delaware company. So South Africans take money out of South Africa. You can invest it in a Delaware co. You’ve got that currency hedge and you are investing in a company that’s growing. So with that 10% of the money that you want to invest in something other than a safe asset class, in something that really… You are betting on a firm that you believe in, that you believe is going to grow massively in value. That’s a very exciting opportunity for sure. So you must have had like also very excited constituents. They had the opportunity to be able to participate in your movement that they obviously believe in, hey Scott. What was the sort of uptake?
Scott Picken: That’s the point. No, no, look, I mean we’ve, as I said to you, I think it has been one of our greatest assets and that’s why I highly recommend it. I think the world is changing wherein the old days you went out to a venture capitalist or an institution or something and I don’t believe that’s the way forward anymore. I think that… It’s basically, in simple terms, you started off earlier talking about stock markets and it’s no different to a stock market. It’s just happening a lot earlier in the cycle of your business and people being able to participate. Ironically, because that’s happening, I have a hunch that less businesses will fail because the ones that are getting funded already have passionate tribes that want to see it succeed.
Niel Malan: These people buy your product as well. I mean, they help. What I love about the idea is that they become your consumers. They are the people that invest in Wealth Migrate. Your shareholders also invest in your property schemes and they say, hey guys, let’s bring across this feature on the platform. Let’s make this better, because they’ve got a vested interest and there is alignment in the vision, isn’t it? So it’s… I love the idea and I think one of the reasons why it’s hard for people to buy stock is because it’s such a left brain thing. It’s a completely non-emotional thing. You are basically looking at stock portfolios and should I invest in IRB or should I invest in Bidvest or whatever the case?
There is nothing that connect you to that brand, whereas if there is a company that you can see it’s going for gold and so there is a bunch of Saffers who is really going for it and they are building cool stuff and you want to help them to achieve that goal and you can do it with small amounts of money, I just think it’s very exciting. I think whether it’s either of our firms or you find companies to invest in or AngelList or any of these equity crowdfunding platforms. I think it’s something that every single South Africans should start considering and start small. Start with tiny amounts of money. Start with $100, $1,000 and invest it in something. It’s so fun. It’s so much fun. It’s so interesting to learn about this world. I just think it’s incredible and what a service to the world to help companies get capitalized in a way that makes sense and that allows them to go and make their difference in the world time.
Scott Picken: And ironically in property, it’s not too dissimilar. If you invest in a property fund or a real estate investment trust, you know, again, it’s that left brain. You have no idea where the money is. I always joke with people, if you go to anyone of the big stadiums, be it Kings Park, Newlands, Ellis Park, whatever they are, they all used to have brand names that everyone recognized. Now they are like Bidvest Park or something. The point being is that when you go and sit there even if it’s redefined park, re-defined as a property fund or growth point, you go to big shopping centers, you go to Sandton square and it’s owned by Liberty. Even if you own Liberty shares, you don’t walk around there going, “Hey, this is my shopping center”
Niel Malan: Exactly.
Scott Picken: There is no emotional connection between your share. Whereas if you literally owned a piece of Sandton shopping center, every time you went for dinner or took your mates there, or your wife or your girlfriend or your husband or your boyfriend, whatever, you would go, “Hey this is my shopping center. I actually own this shopping center”.
Niel Malan: Yeah, exactly.
Scott Picken: You could own the doorknob or the door or maybe a pillar or whatever, okay.
Niel Malan: The screw in the doorknob.
Scott Picken: Exactly, and that emotional connection. And people love it. I know for a fact. I go and see my buildings overseas and I always joke with people, I probably own the street pole and the doorknob. But I’ll tell you what, I don’t feel like that. I’ll take a picture of it. It’s this beautiful building and I’m like, wow.
Niel Malan: Exactly. Like selfie with my building. Yeah. And the thing is you own it with your people, with your tribe, your community because you are quite good at connecting everybody with one another. I know you’ve got an inner circle. You’ve got some events coming up which also want to talk to you about. I see we are running out of time here. In fact, let’s maybe start closing off here. So you’ve got some… So I love this idea. I think what you’ve done is incredible.
I think it’s a… I was just so surprised when I heard about this. I kind of heard about Wealth Migrate, but I never knew what you did. My head is stuck into growing my own companies. So I think it’s such a fascinating world and I think what you do for companies is incredible. For the people that have been watching the show and listening to the show on podcast and want more, I believe you’ve got some events coming up. Tell us a little bit about what’s about to happen and those events. How do you participate? How do you get in?
Scott Picken: I find this very interesting when I’m talking to Elite Entrepreneur and you guys are all digital marketing experts and you don’t go to live events anymore and all that sorts of stuff. But do you know what’s interesting is I’ve sort of been through a pendulum. I’ve gone from… I started a company where I only ran the company by doing live events and then we’ve tried to go completely digital and now we are sort of probably somewhere in the middle where we have a balanced between digital products and live events, because what I’ve learned is that people still love people and they still want to meet partners and shake their hands and everything else.
So long story short, it was actually your idea a couple of years ago with the whole inner circle where people can participate in the inner circle and that’s a digital product. That’s a separate thing and wherever they are in the world they can participate. We’ve got live webinars and all that sort of stuff. But next week we’ve actually got live events around South Africa. So in Durban, it is on Tuesday morning. In Cape Town, it is Wednesday morning. In Johannesburg, it is Thursday morning. In Victoria, it is Friday morning and…
Niel Malan: When you say next week, just give the guys the date because I’m sure people will be consuming this…
Scott Picken: Thursday is, sorry, let me just get the dates in front of me here quickly.
Scott Picken: This is 2019.
Niel Malan: For those of you guys that may be watching or listening to the show afterwards. So Tuesday is the 12th.
Scott Picken: Durban is the 12th. Durban is the 12th.
Niel Malan: The 12th of November.
Scott Picken: 12th of November at The Capital Pearls. Cape Town is the 13th of November at The River Club. Johannesburg is on the 14th of November at Bryanston Country Club and Pretoria is on the 15th of November at Centurion Country Club. I’m going to come and throw stones at your house.
Niel Malan: Oh really, destroy country club. Oh, wow. That’s a… It’s in my belly. I’m going to tell you guys a text to get in there. I’m just kidding.
Scott Picken: What we’ll be doing Niel is I’ll be taking people… It’s a breakfast. So we tend to find the people that are serious about their money, their wealth. They are investing and want to invest some time. So it’s a breakfast. We don’t make money out of events. We’ve got no intention of doing that. People just pay. The cost we charge people is to pay for the breakfast. And I take them for about a two-hour session on everything they need to know about investing offshore. I’ve helped 4,000 South Africans do it. It’s everything about how you get the right information, how do you find the right partners, tax, structuring which country to invest in, which sector, what are the fundamentals, teaching you everything, everything you need to know about investing offshore.
And then we are going to have a tea break. After the tea break, we’ve actually got to Hilda Lunderstedt that is one of the most successful South African female entrepreneurs. She sold her business for nine figures. She has invested in global businesses and property. She has actually immigrated to America now. She is for me what epitomizes a global citizen. And so between her and her wealth advisor, a guy called Garth Wellman, who advises 85 of the wealthiest families in South Africa, I’m going to run a Q and A session with them around portfolio structuring, which countries to invest in, how do you immigrate, what is the mindset, how do you become a global citizen, you know, et cetera.
But what I love about it is it’s not opinion-based, it’s people that have actually done it. It’s not rote learning. It’s Q and A, so people can participate and get action. And then the last part about it, which for me is always the important part, is that we are going to have our partners out. So we’ve got a partner coming on from the UK. They are actually in aged care. So I talk about medical. They are in aged care. They are in old age homes. And I can tell you one thing about Brexit, no matter what happens with Brexit, they are not going to kick old people onto the streets.
Niel Malan: Yeah, Exactly.
Scott Picken: That’s actually paying a 10% cash on cash, by the way. It’s a government lease, so it’s really, really exciting. So they are coming out. They are going to do the roadshow with us to be able to meet our investors and our partners and people will be able to meet them and talk to them. We’ve got an Australian immigration option. We’ve got an American immigration option. We’ve got an option for people that want to invest in Europe, so lots of different options. We’ve got medical buildings. We’ve got two fantastic medical buildings in America right now. We’ve got a London residential opportunity for people who want to get into residential in London from $1000. I mean it’s unheard of, but they can now participate. These events are happening around the country next week.
And then on the weekend, we’ve got an elite, to use your word, weekend, where sort of our VIPs and our wealth partners and everyone will come together and then Hilda, is actually going to run a wealth master class, which is where… You know a lot of people, and I know you’ve said you’ve got 93% of people actually go through your entire course. A lot of people get the theory, but they don’t actually implement. And so the breakfasts during the week are going to be all about the theory and the knowledge and people can take action. But the weekend will be actually where people if they want to go deep and actually leave with a plan, they can do that.
Niel Malan: That sounds exciting. So those of you guys who are interested in going to these events, which I highly encourage you to do, I mean I excited with this stuff. So go to Eliteinc.com/23 and then just below the videos you’ll see that there is a link that you can click on and Scott has got a special deal for you guys. Go and check it out there and go and check out the events. I think even if it’s just for pure education, learn about offshore investments. Learn about how to hedge yourself. Learn about this opportunity to participate in all sorts of exciting investment opportunities outside of South Africa. And just give yourself the advantage of knowledge.
I think all results in life are preceded by knowledge. I’m a firm believer in that. No results in the world can change until my knowledge changes. I can’t achieve a different result and unless I take a different action and I’ve got to get educated. So yeah, Scott, it has been great having you online, man. Well done again on your success. I’m looking forward to your events. I’ll see on Friday because it’s just around the corner from me. It works better for me that way. Yeah, good luck. Best of luck with your shows, man. I think it’s going to be absolutely phenomenal.
Scott Picken: Just two things from me. One is, we’ve got a… There is a discount code for anyone from Elite. And the reason being is that I’m really excited about what you guys are doing. You are helping our business and we want to help your community. So people can click on that link below and that’s a special discount code for you guys. I want to finish with a story, Niel. I think it’s a really important story. A lot of people have heard of rich dad, poor dad and ironically, I have a similar personal story where my father did what everyone was taught to do. You know, he went to school and he went to university, he worked hard, he got a great job. I mean, in fact, he was the financial director of Rainbow Chickens. That’s a big company in South Africa. Yet when my father died on the 1st of August, 2005, he died broke. What’s really worrying is that 94% of people watching this video will follow my father statistically. They will either be dead, they will be broke, or they will be reliant on the government by the age of 65, which quite frankly is pretty much broke.
Niel Malan: That’s a terrifying thought.
Scott Picken: 5% of people statistically, at 65 will be what’s called according to the financial industry, financially independent. What that means is you are going to earn 25% less than your last paycheck, which quite frankly just means you are 25% poorer and only 1% of people are literally going to be wealthy at 65. And I know you are passionate about making people wealthy and so are we. So whatever I do, I decided many, many years ago, I’m not following my father’s footsteps in terms of trusting the financial industry and just doing what everyone else has done and doing what we are told to do.
Someone different was my uncle from Zimbabwe. In 1980 he started investing offshore. He was 30 years old. So he built his business in Zimbabwe, but he invested offshore. Again, call your bucket thing where you had a third, a third, a third and 10%. In 2003, he finally decided he wanted to move to Australia, for whatever reason. Don’t judge him. It’s not about that. He wanted the freedom to be able to do it. And at the age of 53, he bought his way into Australia. It’s very hard to get into Australia when you are 53, but he bought his way in. He bought a house for cash. He put his kids through a private school, and I always joke with everyone, that he never had to work for an Australian.
For me, those two real-life stories for me epitomize what you are talking about Niel because my uncle didn’t do it because he went to a show today and he immigrated in January. It was a 23-year journey. What I’ve learned from wealthy and successful people is they are prepared to take that first step to get to where they want to get to. And so I just want to… I’m really excited working with you guys on Elite and I just want to invite people on that journey and whether they are ready to get started now or they want to get started in five years, I quite frankly don’t care, but I’ll invite them to take the first step on that journey.
Niel Malan: Get the education. There is nothing to lose. It’s dirt cheap and it’s great sessions. You can only benefit from it. So, Scott, I’m looking forward to seeing you doing your shows. Thanks again for your time. Normally these Elite Entrepreneurs shows are like half an hour max, but we’ve been yakking away for an hour. It has been absolutely brilliant. I hope our viewers and our listeners have enjoyed it just as much. Remember to go to www.eliteinc.com/23. Just below the video, you will see that there is a link where you can join the opportunity for the events coming up next week or this week. I think you’ll be watching this actually on Monday.
If you are watching this or listening to this after the events have gone by, go and check out Wealth Migrate and get involved. They’ve got quite a few sorts of educational options. And also let us know what you think about the show. We’ve got a comments box right at the bottom below the transcripts. So you can go to www.eliteinc.com/23, scroll right to the bottom and let us know what you think. Let us know what your questions are for Scott. Let us know what you think. What’s your take on investing offshore? What’s your take an offshore property investment? What are some of your concerns? Join the conversation. We love hearing from you.
Finally, those of you guys who also want to take a step forward running your own digital business, please remember, you can have a free chat with one of my coaches for 15 minutes. You simply scroll, go to www.eliteinc.com/23, scroll down. You can book a complimentary 15-minute call with one of my coaches to see if and how we can help you. Finally, I want to tell you, I thank you for your time. Time is your most valuable and precious commodity and the fact that you’ve tuned in and the fact that you are watching or listening to these words right now means that you invest an hour of your life and I don’t take it for granted and I thank you for it. Scott, thanks again. It has been absolutely wonderful. I look forward to seeing you at your shows.
Scott Picken: Awesome, Neil. Thanks for inviting your whole community. I love what you guys are doing and hopefully, we’ve added value to you. Cheers.
Niel Malan: Awesome, brilliant. God bless. Thanks, Scott. Cheers.