Recently I had the privilege of being featured on the BiggerPockets Podcast, episode #169, where I talked about how to build wealth by following the model of the NBA Champion Golden State Warriors. I wanted to take a minute to dive a little deeper into this concept and share some of the ways I’ve taken what I’ve learned from sports and applied it to real estate in order to find big success.
In almost every team sport, the best coaches know how important defense is. They also know how hard it is to get the players to buy into that. Why is this? Most players want the glory that comes from offense. Scoring is what gets you noticed. Scoring is what gets your name in the newspaper. Scoring is what the casual fan will notice the most. Scoring gives you bragging rights.
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What Does This Have to Do With Real Estate?
Everyone knows the great scorers of the world. Offense is just more eye-catching. In the context of this sports analogy, scoring is how much money you make. Making more money is the equivalent of scoring more points. Defense is how much money you keep. Giving less money away (through spending it, which is essentially giving it to someone else) is the equivalent of giving away less points. Make sense so far? Good. It’s about to get exciting.
If you want to start playing better, winning games, and improving your record, the first thing you should start doing is scoring more points, right? The best teams have the best players. The best players score the most. Seems pretty simple. Score more points, and you should win every time. Case closed.
What if I told you the best executives in sports know it’s not quite that simple?
The Secret Recipe
The Golden State Warriors had the best record in the NBA last year. They went on to win the NBA championship en route to one of the best years a basketball team has ever had. This year, they finished the season with 73 wins, passing Michael Jordan’s 1995-1996 Chicago Bulls record for the most wins in a season. How did they do this?
The Warriors executives built a team that didn’t choose offense or defense. They chose both.
(As a side note, I am a huge proponent for learning how to get past “either/or” thinking and looking for creative ways to find “both/and” solutions.)
Last year, Steve Kerr took over as the head coach of the Warriors and put a huge emphasis on defense. The Warriors became the top ranked defensive team in the entire league. Why didn’t you already know this? Because nobody talks about defense. It hardly gets noticed. Not only is it much less exciting than offense, it’s also much harder to measure. When sharing information, metrics are everything. If it’s hard for someone to measure something, it’s hard for them to explain it. That’s one of the things that makes measuring defense tough. There are fewer metrics to do so.
Now, the Warriors weren’t purely a defensive team. They also were one of the top offensive teams in the NBA. Using great ball movement, a high shot percentage, awesome teamwork, a record amount of assists per game, etc., they were able to operate with an extremely high offensive consistency (I could easily write another post about how all the things that made them good offensively can also be used to improve your RE business, but I’ll stick to the topic at hand for now). When you combine their stingy defense with their high powered offense, you got a team that was not only winning, it was blowing teams out of the water.
The Warriors dominated nearly everyone they played for all of last year and this year as well.
What We Can Learn From Studying Their Success
It’s fun and easy to follow along with this team’s success and cheer them on, but why just celebrate their success when you can model it and make it your own? The wise investor looks at what life teaches him/her and applies it to his/her own model. That’s what we are going to do here.
When it comes to saving money (a crucial first step to getting started investing), the formula is really simple. Make as much as you can, and keep as much as you can. The more you make (offense) will give you the opportunity to save money. The more you keep (defense) will give you the ability to do so.
A Personal Example
I was able to save $90,000 over four years while I was in college. In addition to that money, I was also able to buy a $20,000 car (a dumb move) in cash AND pay for school. Before you assume I’m some kind of special case, I’ll tell you now — I did it waiting tables at restaurants.
How did I do this? Well, it was actually really simple. I made about $35-45k a year. I worked all my days off, stayed late to take tables when others wanted to go home, and scheduled my classes around my work schedule. For me, this was my offense. This was the best that I could do. While this isn’t amazing money, it was decent, and I was determined to take it as far as I could. Obviously, I wasn’t making a ton of money, and my offense wasn’t blowing anyone away. So how did I save that much?
Defense. I’m sure you could guess the answer by now. My goal at that time in life was to spend as little as possible. That was my game, and I wanted to win. I knew I needed to pay my car insurance, gas, taxes, and school products. Everything after that was mine to keep should I choose. I stayed at home with my parents and drove an hour to the college campus and 50 minutes the other direction to my job (I had to drive so far because the tips were better there). It wasn’t convenient, I didn’t get the “college experience,” it wasn’t always fun driving so much and sleeping so little. But it was the cheapest, so I did it. I wanted to win. I ate leftovers from their fridge. I hardly ever ate out. I didn’t buy many clothes unless they were on sale. I didn’t take vacations. Nineteen-year-olds don’t need vacations. I had a cheap cell phone bill and gym membership. That was about it.
Now, you may be thinking that is all fine and dandy for me, but you could never do it. I know, I hear this all the time. We don’t all have parents we can live with, and we don’t all have someone else’s leftovers we can eat. I get it. That may just be a very convenient excuse for you. If you had parent’s to stay with, would you? BiggerPockets has tons of articles written on ways to cut down on your expenses through “house hacking” and other means. How many of these techniques are you taking advantage of? If you just thought, “I need my space, that’s not an option for me,” I would reply to you, “That’s fine, but that means you aren’t willing to play the defense you would need to in order to be a champion. You don’t really want to win.”
Custom Built for the Purpose of Winning
The Golden State Warriors constructed their entire roster of players who complement each other on defense. Nearly every player other than their center can switch on screens and guard any other player. It makes it very difficult to score on them. They have acquired players that are long, lengthy, athletic, and move their feet well. This makes them a nightmare for opposing teams. Why is this relevant?
They constructed their team to be completely conducive — to the player, to their goals of being great defensively.
Have you constructed your life to be completely conducive to your goals of being a real estate investor/wealth builder?
Some players (James Harden, cough cough) are amazing scorers, but terrible defensively. He is such a tempting player to have on your team because of how many points he can get you, but he really hurts you on defense. The four other players on the court can be giving their full effort — and Harden can give up a bucket, making it all worthless. Is this how you’re living your life? Are you doing so well on so many things, but blowing it all on one expense? Are you making more money, working for that promotion, working that side hustle, but blowing money by eating out too much? Flushing it down the toilet on rent? Driving a car with a $600 payment that is worth less every day than the day before?
If you want to achieve your goals, your life should be constructed to make that happen. The Warriors found players who can score but demand they also be able to play defense. If you’re focusing all your effort on making more money but not thinking about where it’s going, what are you really doing? Do you want to be that hamster on the wheel running faster than all the other hamsters but not getting anywhere? Do you want to be that team scoring all the points, only to lose time and time again when the other team scored just a little bit more?
If you want to dominate in your financial life, learn to mimic winners like the Warriors. Lock down your spending first. Learn to get by on less. Learn to look forward to the wealth you will be building in the future rather than the immediate gratification of spending that money now. Learn to set a savings goal and live by it. Then, look for ways to make more money. Chase that promotion, get that bonus, work that overtime, make that sale, change that job.
When you improve your income and start bringing in more money and decrease your bills to start saving money, that’s when you will see real progress. That’s when it gets exciting. That’s when you start blowing out that debt opponent by double digits every night. That’s when your future really starts to take shape. That’s when you start to feel like a champion.
Every single one of you reading this can do it. There is a champion in all of us, as corny as that sounds. How did the Warriors do it? The same way a good real estate investor does.
How They Did It (And How You Can, Too)
They drafted their all-defensive power forward, Draymond Green, in the second round of the draft. They found a hidden gem other teams missed.
Think that only applies to sports? How many times do you read stories of good investors finding deals others missed because they saw a value that wasn’t obvious? Drayman Green isn’t super athletic. He doesn’t jump out of the gym. A lot of teams missed his value because it wasn’t obvious. Not the Warriors. They looked deeper and found the hidden potential. You can do that, too. The best investors look for value others don’t see and act on it. That’s how massive equity gets built.
The Warriors signed Stephen Curry, the best player in the NBA, to an extremely cheap contract because he was dealing with ankle injuries at the time. Teams were concerned he may not be durable enough to last in the NBA. The Warriors took advantage of this and signed the best player in the NBA to an extremely affordable contract and locked him up for years, leaving them more money to sign other talented players. The Warriors assigned their medical staff to help teach Curry how to play and avoid turning his ankles — they rehabbed him.
Think that doesn’t apply to you as an investor? Think again. How many deals have been locked up for a great price because the house needed a little rehab and others didn’t want to do the work. Some of the best deals are houses found in a great location that need some work done to make them really stand out. This is what investors should be looking for! The Warriors understood this same concept, and totally scored signing Curry to the best contract in the league.
The Warriors also had a chance to trade Klay Thompson, their All-Star shooting guard, along with several other players for Kevin Love. This was pushed for by most NBA pundits and was considered league-wide to be a good move. Thank God they didn’t go through with the deal. Klay Thompson had his best year ever as he matured into the top two-way guard in the NBA. He found amazing chemistry with Curry, became the second best three-point shooter in the league (behind only Curry), and helps free Steph up for more shots than he would normally get. Klay provides a synergistic effect with Steph, where the two together are better than either would be alone.
Looking for the connection with real estate? Every investor has to make decisions about what to do with their portfolio. Should they sell? Trade? Hold? The Warriors knew what they believed Klay could become when they drafted him, and they chose to wait and let him develop rather than trading him for the “sure thing.” It ended up being a great move. Someday you will own a property in an area you think has great long-term potential. You know jobs are moving there, people are moving there, and prices are bound to go up. Should you sell before that happens for a nice, cash-flow, turnkey property — or should you hold on? I can tell you the Warriors understand that trusting their own research can pay off. We can learn from this.
The Warriors also traded a very flashy but ineffective player (Monte Ellis) for a boring but very solid beast of a player (Andrew Bogut) that helped make them the best defensive team in the NBA. I know you LOVE your beautiful condo that looks great but costs you tons of money every month. What if you learned from the Warriors and traded it for a boring 4-plex that cash flows like a beast and needs very little maintenance? Think that might have a big effect on your personal finances? I can tell you right now, that’s the kind of move champions make.
I can go on like this forever. The Warriors were able to sign great bench players for cheap contracts because players wanted to come play for them and win. In the same way, the more success you have, the easier success becomes as you start to attract more successful people. People like this often come with perks and can make your business run much more easily. Wealth attracts wealth. That’s just how it works.
The Warriors also attract more fans to every game because they keep winning. More fans=louder games=stronger home court advantage. Success leads to more success. The Warriors are typically winning by so much in the fourth quarter that they can rest all their starters. This keeps them fresh and more effective throughout the season as the competition wears down. They are much more likely to have a healthy roster at the end of the season, when it really counts (playoffs!).
As you build up your portfolio with better and better acquisitions, you start to gain equity and cash flow much faster than you need. This gives you tons of extra capital to put back into your properties to keep them in tip top condition, avoid differed maintenance issues, and help you command top dollar for rent. All this puts you in a great position for the end of your life, when it really counts (retirement!).
Why It’s Important to Study Success in All Its Forms
Success in one area of life can usually be translated to another. It should not surprise you that what makes a good real estate investor is the same thing that makes a good basketball executive. The same traits that allowed Josh Dorkin to build this amazing site are the traits that will allow you to build a killer rental portfolio. The work ethic that allowed Stephen Curry to be the best shooter ever is the same work ethic you can copy to become the best version of you possible.
And no, it’s not just sports.
Take something you are passionate about. It can be anything. In this example, I used sports, but it really applies to everything. Think about what makes something you enjoy so great. Do you have a TV show that you just love? Are you captivated and waiting all week for that new episode to come out? Think about what the writers do to make it so compelling, then copy that tactic in the marketing for you business. Do you have a restaurant you just love because the food is so great? Think about what makes that food so great, dissect it, then copy it. Mimic the chemistry of the recipe in your own personal business.
If you want success in your investing life, you need each aspect of your life working in unison to help make that possible. A team can’t be a team if four players are on one page and the fifth is on another. A team is several players acting in unison for one purpose. The best teams do this the most effectively. Look at your life and ask yourself which areas are not in unison with your investing goals. Which areas are working against you and negating much of the hard work you are doing everywhere else?
If you want to be a champion, you need to act how champions act. Strive for excellence on both offense and defense. Arrange the different areas of your life to all work in unison. Look for value in properties others can’t see. When you see the opportunity to snag a deal, move on it. Trust your research when tempted to second guess yourself. Learn to attract more successful people to your life to make things easier for you. Model the behavior of a champion, and you’ll soon find out you’ve had that capability all along.
Consistent good decisions lead to a champion’s life.
Play the game the right way, and you’ll find yourself holding that trophy someday.
Investors: What team/business/other element of your life do you emulate for success? What’s the most important lesson we can take from the amazing rise of the Golden State Warriors?
Let me know what you think with a comment!