WEBVTT - Contracts and Taxes 0:00:00.200 --> 0:00:03.440 Welcome the Money and Wealth with John O'Briant, a production 0:00:03.680 --> 0:00:14.840 of the Black Effect Podcast Network and iHeartRadio. Hey, Hey, 0:00:14.920 --> 0:00:17.840 this is John Hope Brian and this is Money and Wealth. 0:00:18.840 --> 0:00:23.000 I am honored to bring to you a special segment 0:00:24.120 --> 0:00:28.400 breaking down contracts and taxes. This is something that is 0:00:28.480 --> 0:00:35.240 fundamental to your success in business, in life, even your 0:00:35.280 --> 0:00:39.720 personal life. I'll cover all of this over the next 0:00:39.720 --> 0:00:43.760 forty five minutes or so. This was inspired in part 0:00:43.880 --> 0:00:48.559 by the artist Jailly Roll and a clip that he 0:00:48.600 --> 0:00:54.520 did on social media, which I then turned into a 0:00:54.560 --> 0:00:59.400 piece of my straight Talk Live series on my platforms 0:00:59.440 --> 0:01:03.760 where he talked about contracts in the music business and 0:01:04.200 --> 0:01:09.000 he broke down how artists get in a bad spot. 0:01:09.600 --> 0:01:11.759 I'm not going to say taken advantage of, because as 0:01:11.800 --> 0:01:15.960 I will describe here, in most cases, they're not being 0:01:16.120 --> 0:01:20.560 actively taken advantage of. They're just not actively paying attention 0:01:21.480 --> 0:01:24.800 to the thing that matters most. It's the music business. 0:01:24.800 --> 0:01:28.320 In that example, it's the business of music, and to 0:01:29.080 --> 0:01:32.440 think about it in any other ways is not to 0:01:32.520 --> 0:01:36.759 understand what you're doing. Or to quote my dear friend, 0:01:36.840 --> 0:01:40.640 my duty departed friend, Quincy Jones, he says, if you 0:01:40.640 --> 0:01:43.679 think you're in the music business, and you don't own 0:01:43.760 --> 0:01:48.400 music rights, publishing rights, licensing rights, some kind of rights, 0:01:48.520 --> 0:01:52.720 writing rights. You're actually not in the music business. You're 0:01:52.760 --> 0:01:58.520 a temporary performer. Drop the mic. Statement by Quincy Jones. 0:02:00.080 --> 0:02:01.840 Jelly Row goes into this thing, and you can look 0:02:01.880 --> 0:02:06.880 at the foot clip on mind, social media platforms, at 0:02:06.960 --> 0:02:12.680 John Brian everywhere wherever you platform you Tuesday to focus 0:02:12.680 --> 0:02:16.400 on Instagram is probably easier. I break this down in 0:02:16.400 --> 0:02:19.679 great detail, but the key part of this is he 0:02:19.800 --> 0:02:23.280 explains that when you owe a million dollars, you've been 0:02:23.320 --> 0:02:25.560 given in advance. Make this clear. You've been given an 0:02:25.600 --> 0:02:28.120 advance for a million dollars. You don't realize that you 0:02:28.280 --> 0:02:36.160 owe that money back. It's not a payment and you know, oh, 0:02:36.560 --> 0:02:43.760 that's all good. Next item. It is an advance against revenue. 0:02:44.639 --> 0:02:47.800 And the way that works is you you extract things 0:02:47.880 --> 0:02:49.560 that give it a million dollars. It's supposed to pay 0:02:49.560 --> 0:02:52.520 for productions of your albums and your videos and your 0:02:53.120 --> 0:02:57.000 business expenses. Oftentimes people go start raving mad and start 0:02:57.960 --> 0:03:03.240 spending money on stuff, you know, cars for their friends 0:03:03.280 --> 0:03:10.480 and jewelry and travel and all of that, and then 0:03:10.760 --> 0:03:14.119 they run out of money. And they go back and 0:03:14.160 --> 0:03:17.040 they may ask for some more and that's you know, 0:03:17.320 --> 0:03:19.880 they think they're getting some more money in payment. Really 0:03:20.040 --> 0:03:23.840 you really just increasing your internal credit line. And the 0:03:23.880 --> 0:03:28.080 way that the record company gets a back is they've 0:03:28.080 --> 0:03:30.760 got a contract with you in this example and in 0:03:30.800 --> 0:03:35.000 his example was seventy thirty. He thought that was a 0:03:35.000 --> 0:03:38.280 really great deal. Some artists are eighty twenty. Some artists 0:03:38.320 --> 0:03:41.920 are ninety five to five mean meaning the record company 0:03:41.920 --> 0:03:44.360 in this example. And don't get mad. Then business as 0:03:44.360 --> 0:03:49.680 a capitalist is just a it's just not emotional. Business 0:03:50.480 --> 0:03:54.760 is a gladiator sport. It's a non emotional situation. It's 0:03:54.760 --> 0:03:58.040 not meant for it to be personal. They just it 0:03:58.120 --> 0:04:01.240 is what it is. So again, be careful of the 0:04:01.240 --> 0:04:03.480 contracts that you signed. But and this is in fair 0:04:03.520 --> 0:04:06.000 exchange is no robbery. So in this example, he owned 0:04:06.360 --> 0:04:09.080 thirty percent of his revenue. They owned seventy percent of 0:04:09.080 --> 0:04:12.120 every dollar that was made until he paid the advance back. 0:04:12.200 --> 0:04:15.200 Let's use a million dollars as an easy number. So 0:04:15.720 --> 0:04:20.640 until so they got for every dollar of new album sales. 0:04:20.680 --> 0:04:24.120 To make this easy, the record company got seventy cents 0:04:24.720 --> 0:04:28.880 and he got thirty cents. Are paid back at the 0:04:28.960 --> 0:04:30.960 rate of the deal, which means that out of his 0:04:31.040 --> 0:04:34.440 thirty cents, the million dollars he was advanced gets paid back, 0:04:36.080 --> 0:04:39.520 and he keeps paying that million dollars back from his 0:04:39.600 --> 0:04:43.279 thirty percent while the record company is getting there seventy 0:04:43.320 --> 0:04:47.440 percent until he repays the million dollars in total, in 0:04:47.440 --> 0:04:51.200 which case he then starts recouping thirty percent to his 0:04:51.360 --> 0:04:55.559 pocket paid back at the rate of the deal, which 0:04:55.600 --> 0:04:58.640 means that the record company, the fancier, the venture capitalist, 0:04:58.720 --> 0:05:01.240 the one who's backing you here, the one who's taking 0:05:01.320 --> 0:05:05.040 the most risk, may earn a million dollars before you 0:05:05.240 --> 0:05:09.360 even get your first cens of your thirty cents. In fact, 0:05:09.360 --> 0:05:10.920 they will make earn a million dollars the're gonna earn. 0:05:11.080 --> 0:05:13.800 They're gonn get their million dollars back, but they may 0:05:13.800 --> 0:05:16.839 own it, earn another million dollars or seven hundred thousand 0:05:16.839 --> 0:05:20.880 dollars or you know, it depends on how this gets calculated. 0:05:20.920 --> 0:05:26.320 But they may earn a million dollars back on top 0:05:26.360 --> 0:05:29.960 of your on top of your your million that you 0:05:30.120 --> 0:05:35.280 re imburse them before you make a dime, because they're 0:05:35.279 --> 0:05:38.679 making a seventy thirty split. It's actually they can actually 0:05:38.720 --> 0:05:42.240 do better than that in an example, and fair exchange 0:05:42.240 --> 0:05:45.360 is no robbery. So just just watch the contracts you signed, 0:05:45.400 --> 0:05:49.359 because if it's a ninety five to five contract, which 0:05:49.640 --> 0:05:53.000 some artists do sign, I mean, that's really painful. They 0:05:53.000 --> 0:05:55.360 make ninety five cents of every dollar that comes in, 0:05:55.440 --> 0:06:00.720 you make five cents, and you're going to pay them 0:06:00.760 --> 0:06:04.280 out of your five cents the million dollars back, right, 0:06:05.279 --> 0:06:09.719 And yeah, we don't want to do that calculation. So 0:06:09.800 --> 0:06:14.920 let's get into the positives here, because these contracts don't 0:06:14.920 --> 0:06:19.440 have to be ankles around your weights, around your angle 0:06:19.520 --> 0:06:23.000 or and you know, some kind of a negative situation 0:06:23.080 --> 0:06:26.040 that can be quite empowering. They've been for me in 0:06:26.440 --> 0:06:29.359 most of my business experience. But actually I've had some 0:06:29.480 --> 0:06:32.320 bad experiences too. I've written some bad countures, I've had 0:06:32.320 --> 0:06:34.839 some bad agreements. I've had run ins with the irs 0:06:35.279 --> 0:06:37.680 and franchise tax board in California. We'll get into that. 0:06:39.560 --> 0:06:43.080 But let's let's talk about contracts in taxes as a 0:06:43.080 --> 0:06:48.880 foundation for your financial success. Let's now start with my 0:06:49.000 --> 0:06:53.080 own personal story, and I described this in my book 0:06:53.120 --> 0:06:56.000 Financial Literacy for All, which is a bestseller, been a 0:06:56.000 --> 0:06:58.799 bestseller for the last year encourage you to go get 0:06:58.880 --> 0:07:04.160 your copy. And when I was in business, I wasn't 0:07:04.160 --> 0:07:09.200 paying attention to paying taxes because my view was the 0:07:09.240 --> 0:07:12.760 company wasn't making money, so why should I worry about it? 0:07:13.880 --> 0:07:16.760 And I worry about it when I become profitable. I 0:07:16.760 --> 0:07:19.240 actually made two mistakes. I hadn't paid I hadn't filed 0:07:19.240 --> 0:07:22.880 personal tax returns for about six years in a row. Yes, me, 0:07:23.480 --> 0:07:26.200 this is one of my teens. I was homeless during 0:07:26.200 --> 0:07:27.760 the time. I was homeless six months of my life, 0:07:27.800 --> 0:07:31.280 So I guess you'll understand some of that. I was 0:07:31.320 --> 0:07:34.080 just rolling really fast, trying to hustle. You can all 0:07:34.120 --> 0:07:36.840 relate to that. But no excuses I should have filed 0:07:36.880 --> 0:07:41.480 my taxes. Well, that wasn't the worst part, the fact 0:07:41.520 --> 0:07:43.160 that I hadn't paid my taxes, because that was not 0:07:43.960 --> 0:07:45.720 I didn't filed taxes or I didn't know any taxes, 0:07:45.720 --> 0:07:50.120 but I hadn't filed them. So once I did file them, 0:07:50.720 --> 0:07:56.520 I owe penalties. And the IRS is an extraordinarily punitive lender, 0:07:56.720 --> 0:07:58.800 so you don't you want to owe money to anybody 0:07:59.040 --> 0:08:03.720 but the IRS. And they didn't come after me, they 0:08:03.840 --> 0:08:07.120 didn't threaten me. I was a small fish not making 0:08:07.200 --> 0:08:11.080 a lot of money at the time. But I finally 0:08:11.360 --> 0:08:13.240 filed them all at one time before they came up 0:08:13.240 --> 0:08:15.760 to me. I came to them, which I'm encouraging you 0:08:15.800 --> 0:08:18.640 to do, and I just paid the penalty through a 0:08:18.640 --> 0:08:22.800 payment agreement over time. That way they hit me was 0:08:23.320 --> 0:08:25.840 later on, when I was making a little money through 0:08:25.880 --> 0:08:30.440 the business. Well, the business was not profitable. I had 0:08:30.480 --> 0:08:32.280 a lot of cash flowing through the business. I had 0:08:32.280 --> 0:08:35.360 employees I was paying. I was not paying with holdings 0:08:35.840 --> 0:08:40.000 out of the employees paycheck. So you when your employees 0:08:40.040 --> 0:08:44.520 are a W two employee, they're a salary or hourly employee, 0:08:44.720 --> 0:08:47.600 You've got to pay with holdings out of that. Well, again, 0:08:47.640 --> 0:08:50.720 I figured the business wasn't profitable. I wasn't profitable. Why 0:08:50.760 --> 0:08:52.480 should I do that. I just write them a straight 0:08:52.559 --> 0:08:58.080 check for what I owe them. The Franchise Tax Board 0:08:58.600 --> 0:09:02.600 the State of California out a wind of that, and 0:09:02.640 --> 0:09:07.160 they literally put up a cash register in my lobby 0:09:07.840 --> 0:09:09.920 and they wanted their pound of flesh. They would take 0:09:10.000 --> 0:09:13.559 every receipt, every check that came in that front door 0:09:14.120 --> 0:09:18.439 until they got their paid paid back the taxes plus 0:09:18.440 --> 0:09:21.920 the penalties and interest that I owed them from the 0:09:22.120 --> 0:09:27.800 from the employee with holdings that I stole from them. 0:09:28.720 --> 0:09:33.600 I didn't steal it, but I I burrowed it. And 0:09:33.600 --> 0:09:35.959 and it was very painful. We're talking about you know, 0:09:36.240 --> 0:09:39.120 it was, as I recalled, bout forty thousand dollars in total. 0:09:39.120 --> 0:09:42.000 And and back then that was a that was a 0:09:42.160 --> 0:09:43.880 that was a death nail for me. And I had 0:09:43.920 --> 0:09:45.520 to hustle and take care of them and take care 0:09:45.520 --> 0:09:47.760 of my responsibility at the same time. And I learned 0:09:47.800 --> 0:09:51.960 a very valuable lesson from that experience. Uh, those two experiences, 0:09:52.240 --> 0:09:54.920 which is just just treat the irs as your business 0:09:55.000 --> 0:10:00.160 partner and file your tax returns. Look, you cannot on 0:10:00.720 --> 0:10:04.080 your life without you know, this whole country runs on 0:10:05.679 --> 0:10:09.439 taxes being paid. Your police are being paid by taxes, 0:10:09.440 --> 0:10:15.360 Your schools are being paid by taxes. Your the roads 0:10:15.360 --> 0:10:21.360 and gutters and the maintenance, the building of bridges, uh lights, 0:10:21.360 --> 0:10:28.040 street lights, sanitation services. I mean, all the infrastructure for 0:10:28.600 --> 0:10:30.600 the city you live in and the country you live 0:10:30.640 --> 0:10:35.280 in is paid through taxes or as a to pay 0:10:35.360 --> 0:10:39.400 this really plane, even if you want to distribute money 0:10:39.440 --> 0:10:41.959 like a socialist, you have to first collect it like 0:10:42.000 --> 0:10:47.600 a capitalist. All this is connected and folks as well 0:10:47.640 --> 0:10:49.400 I don't you know, I don't want to be a capitalist. 0:10:49.400 --> 0:10:52.800 I want to work for nonprofit. Where nonprofits money comes from, 0:10:53.200 --> 0:10:55.640 and it's in this case the government in the government 0:10:57.600 --> 0:11:00.839 gets that money and money from taxes or if you 0:11:01.080 --> 0:11:04.520 get in your money from charitable contributions from wealthy individuals, 0:11:05.840 --> 0:11:08.400 those individuals are getting a tax break because of making 0:11:08.400 --> 0:11:12.920 a charitable contribution to you, which affects Hello, they're taxes. 0:11:15.679 --> 0:11:23.680 Al Capone, the famed gangster, did not get taken into prison, arrested, 0:11:23.720 --> 0:11:28.200 and then put ultimately into prison because of great murder mayhem, 0:11:28.520 --> 0:11:30.679 all of which he on some level was guilty of 0:11:30.840 --> 0:11:34.280 but was never convicted and dieded but never convicted. He 0:11:34.480 --> 0:11:38.160 just got away with it all. But when the IRS 0:11:38.280 --> 0:11:40.040 came up to him for tech, when the federal government 0:11:40.080 --> 0:11:43.760 came up to him for tax evasion, boom like. They're 0:11:43.840 --> 0:11:47.160 like the government was gangster. They're like, you can make 0:11:47.360 --> 0:11:49.880 all this money illegally if you want to, and we 0:11:49.960 --> 0:11:52.400 can't prove you made it illegally, but your lifestyle and 0:11:52.480 --> 0:11:55.959 such that you can't do that without making X kind 0:11:55.960 --> 0:11:57.640 of money and you didn't pay taxes on that, so 0:11:57.679 --> 0:12:00.160 it's ill gotten gains. We want to share, and they 0:12:00.160 --> 0:12:03.600 put him and they locked him up and he died 0:12:05.200 --> 0:12:09.880 a very painful death. After that, it was over. So 0:12:10.280 --> 0:12:14.560 pay your taxes. So you're going to understand the basis 0:12:14.600 --> 0:12:16.920 of contracts. In taxes, you're going to learn how to 0:12:16.920 --> 0:12:21.319 protect themselves, yourselves from unscrupulous people, and protect your businesses. 0:12:21.720 --> 0:12:26.960 You're going to get best practices for wealth safety and 0:12:27.040 --> 0:12:31.360 well building wealth safely and legally and sustaining it retaining it. Okay, 0:12:31.640 --> 0:12:35.199 So a contract is just simply an agreement, right to 0:12:35.280 --> 0:12:40.080 start with the basics. A contract is simply in agreement. 0:12:40.720 --> 0:12:44.880 But it's only as good as as it's enforceability, and 0:12:44.920 --> 0:12:48.120 it's only as good as a people. I might also 0:12:48.240 --> 0:12:50.640 add who are signing the contracts. If you have two 0:12:51.400 --> 0:12:55.240 unethical people on two sides of a signing of a contract, 0:12:56.080 --> 0:12:58.640 the contract is useless because it's only as good as 0:12:58.640 --> 0:13:02.480 a full faith and ability of the people signing it. 0:13:03.480 --> 0:13:08.440 But let's assume that people are honorable. So every major deal, partnership, 0:13:08.520 --> 0:13:14.079 or investment should have a contract. I love limited liability contracts. 0:13:14.760 --> 0:13:18.319 LLC's are simple or elegant, and they're easy for anybody 0:13:18.360 --> 0:13:21.000 to understand. I have a ton of LLC agreements. When 0:13:21.040 --> 0:13:24.280 I had the Promise Homes company, I since sold most 0:13:24.320 --> 0:13:26.480 of the company, But when I had that company, we 0:13:26.520 --> 0:13:30.520 had just I mean, I think it was hundreds of 0:13:31.240 --> 0:13:35.280 LLC agreements. The ideal situation, we owned seven hundred homes. 0:13:35.280 --> 0:13:37.560 Just under that, the ideal situation, which would have been 0:13:37.600 --> 0:13:39.320 to have each one of the seven hundred homes in 0:13:39.360 --> 0:13:43.160 its own limited liability corporation, its own LLC. I think 0:13:43.160 --> 0:13:45.320 we bought the homes in bunches, so we would have 0:13:45.720 --> 0:13:49.480 a group of homes in one limited liability corporation. So 0:13:49.480 --> 0:13:54.440 if somebody tripped fail of fake injury or whatever on 0:13:54.520 --> 0:13:57.200 a house, or wanted to sue because they realized I 0:13:57.240 --> 0:14:01.520 owned it, or whatever, you could only sue the asset 0:14:01.679 --> 0:14:04.360 or assets that are in that bucket of assets in 0:14:04.440 --> 0:14:08.280 that LLC Limited about ability corporation. You couldn't punch through 0:14:08.280 --> 0:14:11.840 the LLC and get to me or my family or 0:14:12.280 --> 0:14:14.280 you know, my other companies are all that kind of stuff, 0:14:14.480 --> 0:14:19.160 because you're greedy and unethical in that situation, not suggesting 0:14:19.160 --> 0:14:24.440 somebody's greedy and unethical, but limited liability for alcs really 0:14:24.680 --> 0:14:28.880 help in that regard. So key contract clauses in what 0:14:28.920 --> 0:14:33.640 they mean payment terms avoid getting paid late or being 0:14:33.640 --> 0:14:36.760 paid not at all by having payment terms. What's the 0:14:36.760 --> 0:14:41.960 scope of work? It prevents misunderstandings about the responsibilities that 0:14:42.040 --> 0:14:45.280 you have in a contract or someone else. What's a 0:14:45.360 --> 0:14:50.680 termination clause is what happens if things don't work out 0:14:50.880 --> 0:14:52.520 in an agreement. So so how do you basically how 0:14:52.520 --> 0:14:54.240 you get out of the agreement? By the way, I 0:14:54.320 --> 0:14:57.640 must just throw one in here. In perpetuity, right, that 0:14:57.800 --> 0:15:00.280 means that I just I love that frame. I was 0:15:00.280 --> 0:15:07.840 with Cam and Cam Newton, the NFL star, We did 0:15:07.840 --> 0:15:11.760 a podcast together on his show Funky Fridays. You'll be 0:15:11.800 --> 0:15:14.440 hearing that soon and it's a great, great interview with him. 0:15:14.480 --> 0:15:20.360 He's a great guy. And he learned the phrase in 0:15:20.440 --> 0:15:25.160 his contract negotiations in perpetuity in negotiating on his media 0:15:25.200 --> 0:15:28.920 company after his football crew career. He learned that lesson 0:15:28.960 --> 0:15:30.960 and it's stuck in his head. That means it goes 0:15:31.000 --> 0:15:34.600 on forever. Right, Whatever you're signing in perpetuity means you're 0:15:34.600 --> 0:15:50.200 giving rights forever in perpetuity. These things really matter. What's 0:15:50.200 --> 0:15:54.160 a non compete and confidentiality it's protecting your ideas and 0:15:54.200 --> 0:16:00.600 your businesses. Essentially, noncompete agreement and accomplished reality. Agree. Let 0:16:00.640 --> 0:16:03.520 me talk to you about a lesson I learned in 0:16:03.560 --> 0:16:08.200 a contract I had done a deal with. Well, let 0:16:08.240 --> 0:16:10.480 me tell you a bad situation first, and I'll take 0:16:10.480 --> 0:16:13.320 you a good one. So when I was coming up 0:16:13.560 --> 0:16:18.560 in business, Brian Group Companies, I believe it was w 0:16:18.760 --> 0:16:20.000 You know, if you got the name of the end 0:16:20.040 --> 0:16:21.880 of the evening, it was Brian New Companies and WCC 0:16:22.000 --> 0:16:26.960 Funding Corporation. I was like nineteen twenty one years old, 0:16:26.960 --> 0:16:31.080 and I ran this business in La Los Angeles, and 0:16:31.280 --> 0:16:34.400 we were in an office building, the Westwood gave Way 0:16:34.480 --> 0:16:39.520 Complex at Santa Monica in Los Yenaga, and my assistant 0:16:39.720 --> 0:16:42.080 now my chief of staff, Rachel daff I'd ask her 0:16:42.120 --> 0:16:45.160 to go downstairs every day pretty much and get myself 0:16:45.160 --> 0:16:48.240 a sandwich or whatever, and I would just work through lunch. 0:16:49.160 --> 0:16:51.960 And I was so focused on working and hustling whatever 0:16:52.720 --> 0:16:55.280 that I created my own terms for how I was 0:16:55.320 --> 0:16:57.520 going to pay that bill, I guess, and I had 0:16:57.840 --> 0:17:02.400 failed to pay the cafe bill downstairs. It wasn't much, 0:17:02.440 --> 0:17:06.200 it was eight hundred bucks or something, but even work, 0:17:06.240 --> 0:17:08.680 and that guy sued me. I have never been sued 0:17:08.720 --> 0:17:13.320 by anything important like no, no, anything important. I've taken 0:17:13.359 --> 0:17:16.800 care of all my big deals, all mortgages, contracts. My 0:17:16.840 --> 0:17:19.840 credit score is like cool, it's all. But this one situation, 0:17:20.960 --> 0:17:23.520 these small ones, I let these things slip. I didn't sign, 0:17:23.680 --> 0:17:27.040 I didn't have a contract with the cafe owner. They 0:17:27.119 --> 0:17:31.360 let me slide basically on you know, having an informal situation, 0:17:32.080 --> 0:17:34.639 and they took me to court, small claims court, and 0:17:34.680 --> 0:17:36.159 it was very easy for them to get a judgment 0:17:36.160 --> 0:17:40.679 against me. In that case, I didn't show up, so 0:17:40.720 --> 0:17:43.680 the judge hit me with a default judgment. It was 0:17:43.720 --> 0:17:46.080 a default judgment because you I didn't show up, So 0:17:46.119 --> 0:17:47.640 if you don't show up for court, you will get 0:17:47.680 --> 0:17:51.080 a default judgment against you. And it's very painful because 0:17:51.080 --> 0:17:53.720 there's a one sided conversation and you can't argue about it. 0:17:54.680 --> 0:17:56.359 And I ended up owing this guy. It wasn't a 0:17:56.359 --> 0:17:58.600 lot much with eight hundred thousand dollars, but back then 0:17:58.600 --> 0:18:01.199 there was a lot of money for me and the 0:18:01.200 --> 0:18:04.240 more painful ones. I had a guy, Jimmy was his name, 0:18:04.720 --> 0:18:07.600 and it was Jimmy's car detailing. I remember Jimmy and 0:18:07.640 --> 0:18:11.080 Jimmy would wash my car and it was a Mercedes. 0:18:11.160 --> 0:18:15.600 I think four to twenty sl Sel and I love 0:18:15.640 --> 0:18:18.160 the car, and he would have washed the car once 0:18:18.160 --> 0:18:22.080 a week. And Jimmy had a contract. Jimmy didn't have 0:18:22.240 --> 0:18:25.080 have a high school education, right, Jimmy didn't have good 0:18:25.080 --> 0:18:28.800 teach but Jimmy had a good sense. And Jimmy on 0:18:28.880 --> 0:18:31.840 his bill that I or my assistant would sign every 0:18:31.880 --> 0:18:36.000 time he finished the washing a car, we'd sign an 0:18:36.040 --> 0:18:42.119 invoice it said at the bottom ten percent fee compounded 0:18:43.480 --> 0:18:46.520 with penalties for all unpaid balances, where this whole thing 0:18:46.600 --> 0:18:50.000 was an unpaid balance. And this dude ultimately took me 0:18:50.040 --> 0:18:53.320 to court. I thought he was a friend. He was like, no, 0:18:53.440 --> 0:18:59.280 I'm I'm a businessman, or as as jay Z would say, 0:18:59.320 --> 0:19:03.640 I'm not a business man. I'm a business man. And 0:19:03.880 --> 0:19:08.760 Homeboy took Homeboy with no teeth oldofsiss who I thought 0:19:08.800 --> 0:19:12.000 was my buddy who was washing my car, oh and 0:19:13.000 --> 0:19:15.720 returning back to the hood while I was at Westwood 0:19:15.720 --> 0:19:18.959 Gateway Complex in West la and that marble office building 0:19:19.680 --> 0:19:22.679 trying to be important. He took me to court in 0:19:22.800 --> 0:19:27.159 one because he had contract agreement with me and I 0:19:27.160 --> 0:19:30.919 didn't pay attention, and he was right. He had me 0:19:31.359 --> 0:19:34.280 my signature and all these invoices, and it said clear 0:19:34.320 --> 0:19:38.440 as day that I would pay a ten percent feet 0:19:38.560 --> 0:19:40.919 on the unpaid balance. It was all an unpaid balance, 0:19:40.920 --> 0:19:43.920 and I'd paid penalties and interest on the top of that. 0:19:45.320 --> 0:19:48.280 I had no choice but to pay him, and I 0:19:48.400 --> 0:19:50.680 was honored to do it. He earned it all that, 0:19:50.760 --> 0:19:54.800 and I actually felt very bad about it. Lesson learned 0:19:55.440 --> 0:20:00.520 later on and later on, meaning like recently I signed. Recently, 0:20:01.359 --> 0:20:06.199 last ten years, I signed a major contract with a 0:20:06.240 --> 0:20:10.000 couple of friends to start a business. And it was 0:20:10.400 --> 0:20:16.320 a general partnership, and I had a majority of ownership, 0:20:16.640 --> 0:20:21.120 and my two partners investors had They owned forty percent 0:20:21.160 --> 0:20:24.640 and I owned sixty percent. And there was different kinds 0:20:24.680 --> 0:20:28.040 of shares. I had essentially common shares, and they had 0:20:28.080 --> 0:20:31.480 preferred shares. And it is what it sounds like. Their 0:20:31.520 --> 0:20:35.119 shares were preferred at a preferred position and a preferred 0:20:35.240 --> 0:20:39.160 in rights right than my shares, my common shares were 0:20:39.320 --> 0:20:43.240 as it sounds common and like I didn't have common 0:20:43.320 --> 0:20:46.400 sense to pay attention to this. It turned out just fine, 0:20:46.440 --> 0:20:49.960 by the way, there were great guys. But I thought 0:20:50.119 --> 0:20:53.200 I assumed because I owned sixty percent of the company 0:20:53.240 --> 0:20:55.119 that that just meant I had a majority vote, a 0:20:55.119 --> 0:20:56.920 majority of view, I'd run in the way I wanted 0:20:57.359 --> 0:21:00.480 want to. And I was naive because these were the 0:21:00.520 --> 0:21:02.480 money guys, and they knew what the heck they were 0:21:02.520 --> 0:21:05.080 talking about. I was a thousand there, but they were 0:21:05.119 --> 0:21:10.800 billionaires at least one hundred millionaires. And well I wasn't 0:21:10.840 --> 0:21:14.000 a thousand aire, but you get the point. I was 0:21:14.000 --> 0:21:22.040 outmatched on the finance understanding side of this equation. These 0:21:22.080 --> 0:21:28.160 guys were geniuses and in what they do. And even 0:21:28.160 --> 0:21:30.800 though I own a majority, their attorney explained to me 0:21:31.080 --> 0:21:33.560 one day when I was pushing a narrative, pushing what 0:21:33.600 --> 0:21:37.280 I wanted to do, John, you don't you own a 0:21:37.520 --> 0:21:41.199 majority of the ownership, but they control a majority of 0:21:41.200 --> 0:21:46.280 the company through their preferred shares. I'm gonna go off 0:21:46.280 --> 0:21:48.400 with a tangent here just time. I tell you. There 0:21:48.440 --> 0:21:51.800 are things like there's poison pills you can put in 0:21:51.800 --> 0:21:54.800 a stock agreement. Like I believe Mark Zuckerberg, who I 0:21:54.840 --> 0:21:57.600 know at Facebook now Meta, has a poison pill that 0:21:57.680 --> 0:22:00.800 no matter how much the stock gets deluded, he controls 0:22:01.480 --> 0:22:04.240 the company. There are there are founders who put these 0:22:04.240 --> 0:22:06.400 poison pills in there. I don't know that to be 0:22:06.440 --> 0:22:09.080 the absl case from that met up, but I'm pretty 0:22:09.080 --> 0:22:12.520 sure it is these contracts where they found a company 0:22:12.560 --> 0:22:16.720 and they will structure it through the goverferance agreement and 0:22:16.760 --> 0:22:20.920 the rights where their their shock their stock has outside 0:22:21.000 --> 0:22:24.359 weight to other shareholders irrespective of how much they get diluted. 0:22:24.440 --> 0:22:28.680 De looted means uh as deluted is the opposite of concentrated. 0:22:28.800 --> 0:22:33.000 Concentrated a strong and rigid and intense, and diluted is 0:22:33.040 --> 0:22:35.600 what it sounds like. You delute a drink at a club. 0:22:35.640 --> 0:22:37.159 You know what that means, right, they gave you some 0:22:37.440 --> 0:22:40.760 cheap drinks. You dilute your interests, You have less power. 0:22:42.080 --> 0:22:44.760 So so that's an aside. If you want me to 0:22:44.840 --> 0:22:46.680 go into that, put that in comments when you see 0:22:46.680 --> 0:22:51.119 this online. I'm happy to go into greater detail and 0:22:51.160 --> 0:22:53.879 explain what the poison pills and all that kind of 0:22:53.920 --> 0:22:56.359 stanf some means means and stands for. But I want 0:22:56.400 --> 0:22:57.399 to get through a lot of content here in a 0:22:57.480 --> 0:22:59.919 very short period of time. So back to the basic 0:23:00.040 --> 0:23:07.360 premise that I had basically synthetic equity at common shares, 0:23:07.400 --> 0:23:10.840 and they had preferred shares with rights and privileges that 0:23:10.880 --> 0:23:14.440 were brilliantly crafted and they didn't do me no wrong. 0:23:14.800 --> 0:23:17.879 It was all there for me to view. I was 0:23:17.960 --> 0:23:23.040 casual about it because I knew them, and although probably 0:23:23.040 --> 0:23:26.159 would have changed much. Actually they but the attorney explained 0:23:26.160 --> 0:23:27.840 to me, because they put up the money, they had 0:23:27.880 --> 0:23:31.840 more rights and they were right, and so I could 0:23:31.840 --> 0:23:34.639 not just do as I like. We ended up working 0:23:34.680 --> 0:23:37.240 it out where I did as I preferred, but I 0:23:37.280 --> 0:23:41.080 had to consult with my partners. I did not have 0:23:41.080 --> 0:23:43.800 the contractual right to do that. They had to give 0:23:43.840 --> 0:23:46.600 me the right to do that, and over time, as 0:23:46.640 --> 0:23:52.320 I proved myself, they loosened the grip on the contractual rights, 0:23:52.600 --> 0:23:54.080 and at the end of the term, at the end 0:23:54.080 --> 0:23:56.040 of the day, I was actually running exactly the way 0:23:56.080 --> 0:24:00.000 I wanted to. But I honored my agreement with my partners, 0:24:00.040 --> 0:24:03.480 and they left that deal very happy. We tell you 0:24:03.520 --> 0:24:07.120 about negotiations, which is not part of a contract per se. 0:24:07.240 --> 0:24:11.400 But if you leave a slight every good negotiation means 0:24:11.400 --> 0:24:16.960 you leave the negotiation, but everybody in it leaves slightly irritated. Okay, 0:24:17.160 --> 0:24:19.840 if you have a good negotiation, you leave the table. 0:24:20.000 --> 0:24:24.600 Everybody slightly irritated, slightly annoyed because no one got everything. 0:24:24.640 --> 0:24:28.159 They wanted, but you got what you needed. Let me 0:24:28.200 --> 0:24:30.760 tell you some high profile entertainers and athletes who signed 0:24:30.800 --> 0:24:35.119 bad contracts. Some examples. There's a group TLC love their music, 0:24:35.600 --> 0:24:38.200 they sign an unfair deal or some people some people 0:24:38.280 --> 0:24:42.040 might call an unfair deal with the Face Records. Now, 0:24:42.240 --> 0:24:44.119 I'm saying this in particular because there's a lot of 0:24:44.119 --> 0:24:46.680 people running around talking about my Jewish brothers and sisters 0:24:46.720 --> 0:24:49.480 and how somehow they've ruined the music business. And I 0:24:49.480 --> 0:24:51.760 don't know why people are picking on Jews. There are 0:24:51.800 --> 0:24:53.600 black people. This is in the Face Records, there's with 0:24:53.600 --> 0:24:55.640 Motown Records. There's a bunch of black people in music. 0:24:55.640 --> 0:24:57.200 There's a bunch of white people in music. There's a 0:24:57.240 --> 0:24:59.520 bunch of Asian people in music, a bunch of you know, 0:24:59.560 --> 0:25:02.600 everybody in music. I don't know either picking on one group. 0:25:02.640 --> 0:25:06.879 But it's just wrong to point out that, oh, this 0:25:07.080 --> 0:25:10.679 contract is unethical. No, the contract is a legal contract. 0:25:10.720 --> 0:25:12.080