Why You May Have Grant Cardone’s Concept of “Massive Action” Dangerously Wrong

by | dolinsksite.ru

Let me start off by saying that I am a big fan of a success guru by the name of Grant Cardone. According to our data, he is the second most popular guest by listen count of all time on the Do linsk site Podcast (second to *cough *ahem *grunt yours truly!). A self-made millionaire by the age of 30, Grant Cardone embodies the hustle, entrepreneurial spirit, and winning attitude that so many of us on Do linsk site have come to admire.

Grant Cardone is a proponent of “10X” thinking. He believes that we need to expand our thinking, increase our goals, and take the massive action needed to achieve them.

And he is damn right.

But too many followers get the wrong message when they hear Grant Cardone talk about massive action. Unable to fathom how they are going to achieve a million-dollar net worth in less than five years, they come up with plans like “buying real estate with no (and low) money down” or otherwise try to leverage their way to success with other people’s money.

They fail to see that Grant Cardone’s massive action did not come from leveraging other people’s money, but from building a rock-solid financial and personal foundation from which he was able to accumulate and then magnify his wealth.

The purpose of this post is to highlight the incredible hard work and self-development that Grant Cardone (and many successful people) put in prior to making a significant real estate investment. I intend to persuade those thinking that “massive action” is synonymous with “leveraging to the hilt to buy million-dollar pieces of real estate with other people’s money from a standing start with little to no experience, assets, or network” that they are wrong.

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Related: Sorry, But Investing in Rentals Won’t Build Massive Wealth. THIS Will.

The Parable of the Pharaoh

There’s a great example used in MJ DeMarco’s The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime. (a solid read if you haven’t picked it up yet). In this parable, a pharaoh instructs his two sons to build a pyramid and tells the two sons that upon completion, they will be rewarded with riches, kingship, and more. One son goes off to the races and starts laying bricks one by one, constructing first one layer, then another, then the next. His progress slows to a crawl as it becomes increasingly difficult to lug the heavy stones higher and higher as his pyramid rises.

The second son makes no visible progress on his pyramid for three years. Instead, he spends that time building a machine to do the work for him. While his brother laughs at his apparent lack of progress, one day he unleashes the machine. Within 40 days, he surpasses all the progress his brother had made in the preceding three years, and in just a few short years, he finishes his pyramid and enjoys a life of leisure, kingship, and success.

The first brother never finishes the pyramid.

Massive Action is as Much About the Effort as the Result

MJ DeMarco’s intent with this parable is to show how those in the “fastlane” focus on building a system to build wealth for themselves, while those in the “slowlane” use their efforts to trade time for money.

But I see this parable as being highly relevant to the discussion of the accumulation of wealth. The second brother in the parable was building a foundation from which he could explode toward massive wealth. He didn’t take off to the races without a long-term plan. He knew exactly what he was building and why.

Related: A Slow, Boring, Incredibly Awesome Strategy for Building Wealth Through Passive Real Estate Investing

And so did Cardone.

Grant Cardone did not become wealthy through real estate. He is a successful entrepreneur and businessman, and he started his career in sales. He devoted himself to self-improvement and became a best-in-class salesman. He built an enormous business and personal reputation. At 29 years old (he became a millionaire at 30), he bought a single family home as an investment, and it didn’t work out. He sold that property and didn’t re-enter real estate investing until five years later.

By that time, Grant Cardone was a multi-millionaire, and he brought $350,000 as a down payment on a $1.9M, 38-unit apartment complex in San Diego.

Massive Action vs. Stupid Action

I consider building a successful business to the point where I have so much cash that I can drop $350,000 on a $1.9M apartment complex as a “side business” to be “massive action.” Respect to Cardone.

However, I consider using other people’s money to leverage the down payment and buy that same property with less than $100K net worth, $0 down, and no outside successes or sources of income anywhere in that same ballpark to be “stupid action.” I hope that you do not confuse the two. This property was not going to make or break Grant Cardone’s career, but it can devastate the newbie. Grant Cardone had years, maybe a decade, of sales and business experience prior to his massive purchase. The newbie may have none, or they may have simply read a few books.

Don’t invest in a property when you have lower odds of success and more at stake than your competitors. That’s a fool’s game. Instead, lay your foundation first, and invest from a position of strength. 

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Laying the Foundation

Grant Cardone laid a foundation and built a system for producing wealth prior to buying enormous multi-unit apartment complexes. And I believe that this is the best approach for most of us out there who aspire to build personal wealth. I, while not an entrepreneur, am certainly a salesman, and have worked hard to lay my own foundation by saving hard, focusing on building my reputation and network, and doing what I can to self-educate and lay the foundation for a successful career.

I choose to crawl, then walk, and then run. You won’t see the multi-million dollar purchase until I am financially capable of doing so with ease—and with only a small proportion of my liquid net worth.

Can one become successful without this in place? Of course! Mark Zuckerberg and Bill Gates jumped out of the gate before even graduating college and built some of the world’s biggest companies. Closer to home, guys like Brian Adams built large syndications with little direct real estate experience (but a huge network and strong financial background). Still, I believe that it is important for me—and likely you as well—to focus on building that foundation prior to making large investments, especially with other people’s money.

Conclusion

Understand that pouring a foundation, even over a period of a decade, and saving and earning money is taking massive action. Remember, Cardone checked out of rehab for a drug addiction at the age of 25 and didn’t make that purchase until nine years later. Of course you can lay a $350,000 foundation in nine years! A dedicated saver and savvy businessman or salesperson can lay that foundation and create that kind of liquidity in five years or less.

That is massive action.

Building your first $25,000 in liquidity, parlaying that into your first $100,000, and exploiting that wealth to pursue opportunities to grow to your first $500,000, then $1,000,000, over the next 5-10 years? That is massive action.

But ignoring the core concepts of wealth creation, failing to invest in self-education, neglecting to save, declining to accumulate liquidity and build passive cash flow, and attempting to leverage to the hilt with hundreds or thousands of dollars of other people’s money? That’s stupid action.

You leave too much to chance and are too dependent on a highly leveraged investment working out. The stakes are too high, and your odds are too low.

What kind of action are you going to take?

Leave your comments—agreements, disagreements, or questions—below, and let’s talk!

About Author

Scott Trench

VP of Operations at dolinsksite.ru, Scott is also a licensed real estate broker/agent, real estate investor managing 8 units in Denver, CO with a partner, a house-hacker, and personal finance nerd. His book, "Set for Life" (published through Do linsk site Publishing) thoroughly details a step-by-step journey to early financial freedom for full-time workers earning median incomes and starting with little or negative net worth. When he's not helping full-time workers move toward early financial freedom, the 26-year-old can be found playing rugby, biking, or skiing.

28 Comments

  1. Christopher Smith

    Very interesting article with some interesting observations. I’m also of a similar opinion from having read a number of articles that many of the folks involved in real estate investing today (especially those jumping in most recently) are missing the essence of what it takes to really be profitable long term in this game. They seem to be totally mesmerized by the hype and the atmospherics of being perceived of as a player.

    I read headline after headline after headline about how some one has acquired so many units by such an age, which likely appeals very strongly to the Wanna Be Yahoos in the crowd, but means little to nothing in reality. Even the Village Idiot can likely go out and make large acquisitions as long as he can find someone equally lacking to loan the money (remarkably something that is apparently not too difficult to find these days).

    The real measure is what will be the results 5 or 10 or 20 years down the road, perhaps after a bump or two in the economy and after the reality of really having to make a large operation consistently profitable has sunk in. I hope we don’t have a lot of folks out there way over paying for property and being leveraged to the hilt, because if / when we do hit any meaningful bumps these folks will likely crash and burn and the rest of us may be called upon to bail them out as the institution that they borrowed from are potentially rendered insolvent.

    Now I have no objection to the intelligent use of debt and attempting to achieve solid economies of scale, but from some of the articles that I have read I am really beginning to wonder if some of these folks even have the first clue about what they are really getting themselves into, and equally important what that may mean for the rest of us. I’ve very done well, but its been a very carefully measured approach factoring into the calculus good times and bad times (the latter being by far more important than the former), so I can assure myself long term sustainability as well as that can be possibly managed.

    Only time will reveal the answer to these questions.

    • Scott Trench

      Christopher,

      I agree very much with this post. “The real measure is what will be the results 5 or 10 or 20 years down the road…” – yes, this is it. Too many people get fixated on the idea of taking short-cuts to achieve financial freedom, but leave themselves open for getting crushed by the market down the line.

  2. Andrew Syrios

    I do think it’s very important to differentiate “massive” action from “reckless” action. Massive action doesn’t mean you drop a few million on the next project to come along.

    I also think Grant focuses too much on goals and not enough on systems. But that’s just me.

  3. Nichole Stohler

    Scott, agreed 100%. A few months ago, I was talking with someone who wants to invest and buy their first multifamily. He stated to me that “Grant Cardone says don’t buy anything less than 12 units to start”. For someone that has never invested and doesn’t understand the ins & outs of real estate investing, this seems to be an unrealistic expectation that is being created. This potential investor’s feeling is that nothing smaller would even be worth looking at.

    Having massively failed the first time my husband and I invested, I can definitely understand the unrealistic expectations that come from a lack of experience…. for us, this was in 2000 before Do linsk site and other resources that are now available. I appreciate the amazing value of this community, the blogs and the podcast in helping spread the word and ideas on realistic ways to invest and grow in real estate.

    Thank you for the excellent post sharing how critical fundamentals and a solid foundation are to get started.

  4. Bryan Trelegan

    Scott, as usual you inject wisdom into Real Estate strategy. And sharpening your skills before jumping in the game is valid advice.
    It all starts with a good deal and it does take some practice to be able to find one.
    Let me just say that grant paid $50K per unit for a San Diego complex. That would have been a life changing deal no matter how leveraged the buyer was going in.

    • Scott Trench

      Thanks Bryan! And, while I get that $50,000 per unit seems like a great deal, understand that that purchase was made 25 years ago in the early 90s. Many investments might have been cheaper at that time than they are today!

  5. Josh Waggoner

    Thank you for this article. I’m a huge doubter of my achievements and tend to belittle progress. I needed to read this today. Especially the line where you stated saving $25,000 to buy a $100,000 home and then build it until you have $500k, and then $1 mil. That’s massive action. Whew, I’m on the right track then!

  6. John Murray

    Massive action and more importantly skilled massive action. Massive skilled action is the key to success in any financial endeavor. I pulled in my driveway last night at 4AM, my pickup loaded with the final scrap from a project I completed. Tenants moved in at 8AM. I increased the value of the 4 bed 2 bath ranch by about $70K. The last day consisted of finish carpentry, wire hot water heater, last electrical changes and cleaned up. October will bring $200K of refinance of 3 houses. This is an example of skilled massive action. This is what makes of millionaires about 11% of the US population.

  7. Jeff Johnson

    Great post! Great point. Grant Cardone and his books seem more motivational – inspiring people to have confidence and take action. His other big points seem to be “aim higher!” I agree with both as well as your post. 20 years ago I laid out detailed 5,10,20 year goals for what I would achieve, how much money I would make, etc… I have kept them. Ironically I achieved each major milestone. While I am doing very well, I wish I would have 10X’d them! I now try to see my life in 5 years not thru my lenses of today, but thru the lenses of 10 years from now, looking back where I was 5 years ago, which is really 5 years ahead of now! It seems much more realistic that way.

    • Scott Trench

      Thanks Jeff! I love your inspiration here, and hope that you go on to set more appropriately higher goals now. 10X your progress, but do it by outworking the competition and building systems, not by gambling with crazy leverage!

  8. Ernest D.

    Scott, nice article. GC does recommend saving at least $100k before making your first investment. I believe the reason behind that is to learn how to discipline yourself and learn what it really takes to manage money.

  9. christian funicelli

    Scott, I currently have 65k liquid and am trying to find the best way to multiply that. My plan is to become a commercial broker (I am currently in residential) so I can surround myself with other brokers who look at deals constantly and can tell which are good; as well as gain relationships with owners in order to hear their stories and get acquainted with their networks. When the right deal(s) come along, get my money as well as others together and syndicate cash flowing multifamily. Is this all crazy or strategic, planned massive action?

    PS Great article and this is a very short version of what I am working towards.

    -Thanks for any feedback!

  10. Christy Browning

    Thank you for the excellent article, Scott. I particularly appreciated how you focus on strategy and logic while illustrating the risks of hasty and over leveraged deals. Having my first investment property going successfully I certainly have the increased motivation to do a bigger deal now, and your article is an excellent reminder to not let my judgement be clouded with a sense of needing to rush. Great advice, thank you again!

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