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The Growing Problem With Personal Finance YouTuber "Influencers" - YouTube
Channel: How Money Works
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I have some bad news for youâŠ
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You are probably not going to be rich.
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Not a particularly positive message to start
a video on but its something that people need
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to hear from time to time.
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Unfortunately, this is not something that
most people want to hear, so there is no shortage
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of people out there that will tell you exactly
the opposite, normally as a way to pitch you
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some kind of product.
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Now of course most of you watching know that
the YouTube ads saying that you can earn 6
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figures in a month by selling on Amazon, Forex
trading, or flipping real estate are full
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of shit.
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But they still all follow a pretty similar
routine,
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hey, you can get rich
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as long as you are willing to do XYZ
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while listening to the advice I give you!
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Again when it turns out that this advice is
something that you have to pay for, most people
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get wise to the fact that itâs all just
a massive scam.
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Of course some donât, which is tragic and
there really genuinely should be more done
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about this, but thatâs a story for another
time⊠or a coffeezilla video.
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Instead the focus of this video will be on
a group of internet guruâs with much more
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influence, a much larger following, and much
more credibility, the personal finance personalities.
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So itâs time to learn how money works and
find out why you probably shouldnât be learning
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to work your money like these popular youtubers
might suggest.
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Now I want to preface this by saying that
I personally enjoy watching people like Graham
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Stephan, Andre Jink, and from time to time
even dave ramsey (as a guilty pleasure).
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None of these guys are outright nefarious
scammers like the hustle bros you will see
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pitching an amazon automation course and this
automatically makes them a million times better
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than this other group.
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Whatâs more is that they are genuinely entertaining,
they give people a sneak peek into their own
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success while presenting relatively dry content
in a way that is funny and easy to understand.
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The problem is though.
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Personal Finance should be boring.
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There is a common saying that everything you
need to know about personal finance should
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be able to fit on a postcard, some authors
have actually done it.
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But when you are committing to an upload schedule
of a 15 minute video every single day of every
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single week you are going to run out of things
on that post card to talk about.
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Now this is no good, because as these people
will show you, they make millions of dollars
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a year from their daily videoâs so they
are not exactly going to turn around and say
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âoh well I have taught you everything you
need to know now⊠so long and thanks for
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all the fishâ
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Of course not that would be silly⊠and I
am sure any one of us that is in there position
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would do the same thing that they are, which
is riding that damn gravy train for as long
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as they can.
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But to do this they need to create more content
than what this posted note can provide so
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they branch out into a few different broad
categories.
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Personal Stories About Their Success
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Reactions
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Predictions
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And making up new lessons
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Now to start off with lets look at the least
problematic of these formats, reaction videoâs.
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Reaction videos are everywhere on youtube,
and they they get a bit of a bad rap.
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But when you think about it this video format
can range from absolutely terrible all the
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way to genuinely value adding and informative.
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The videoâs that people like Graham or Kevin
make are normally towards the good end.
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They will normally react to personal finance
by watching video series like millennial money
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or they talk about high end real estate which
is obviously an area of extensive expertise
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for these guys.
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There are otherâs like Dave Ramsey who will
do live reactions to people that call into
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the show and despite these being a bit repetitive
they arenât really doing any harm (apart
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from the egoâs of the callers)
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If you want to argue that these live interviews
are not really reaction videoâs just think
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to yourself, âam I watching this to see
the solution to the persons problem, oooorrrrr
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am I watching this to smugly partake in Daveâs
reaction to this persons situation?â
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Even still this is just a bit of light entertainment
and who knows, maybe you will pick up a nugget
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of information along the way.
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No problems there, apart from when these reactions
turn into predictionsâŠ
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Financial predictions are almost impossible
to make⊠even the largest financial firms
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in the world filled with teams of PHD Quantitative
Analysts struggle to outperform regular market
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returns consistently, if at all.
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Itâs therefore frustrating to see someone
like Meet Kevin, make predictions about the
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future of a highly volatile stock like Tesla
before his audienceâŠ
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and yes I know⊠he gives the standard disclaimer
âthat this is not financial adviceâ, but
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when a supposably reputable figure that positions
themselves as a personal finance expert brings
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up an official looking spreadsheet and predicts
100% within the next 12 months⊠well itâs
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not unrealistic to see how some of his impressionable
audience would follow his not advice.
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Now this is just one of the most blatant examples,
but all of these personal finance personalities
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is guilty of giving these ânot adviceâ
pieces of advice throughout their content.
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This can range anywhere from invest into dividend
stocks, all the way up to only buy a duplex
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and rent out the other side.
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Both pieces of advice that are not necessarily
bad, but are just grossly overgeneralised
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and make no accommodations for the financial
situations of their viewers.
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Now my friend Richard over at the plain bagel
actually made a video earlier this week that
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explored the issue of picking stocks from
the perspective of an actual financial professional
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whoâs job it is to pick stock for clients.
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I was actually considering not making this
video at all after seeing that one because
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I thought Mr Bagel made a pretty fair and
well rounded argument against this allâŠ
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but thenâŠ.
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I saw thisâŠ
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Alright, this is where the serious issues
start.
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Making up new rules for people to follow.
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I hate to be the one to break it to you, and
I truly do mean this in the nicest possible
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way.
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But Graham Stephan is a ex real estate agent
and social media influencer, HE DOES NOT KNOW
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the 5 best investments to make you rich.
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For that matter, nobody knows any investments
that will make you rich, and if they did they
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sure wouldnât be sharing them on a YouTube
video.
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Despite popular opinions these days, good
investments should not double overnight, they
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âshould insteadâ continually provide value
over many years or decades and return that
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value back to the investor steadily over the
same time period.
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The generally accepted rate of return for
a well-diversified portfolio is anywhere between
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6% all the way up to 12% if your doing really
well.
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The bad news here is that this is not going
to make you rich, just like we said at the
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beginning of the vide.
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Well actually itâs not going to make you
rich unless you have a decent income already
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and are very disciplined about consistently
contributing to this portfolio over a long
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enough time period for compound interest to
do itâs thing.
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Even then it will make you old and rich, which
is not what the people wantâŠ
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What they want is to hear about how the people
talking to them got so rich.
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Which is where we get to the last type of
concerning contentâŠ
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Personal Stories about their success.
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Now who doesnât love a good success story,
especially when itâs the tale of a scrappy
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underdog proving all the naysayers wrong.
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Which is something most of these guys have.
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Graham didnât get into university, Meet
Kevin started from less than a thousand dollars,
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Dave Ramsey went totally bankrupt and the
same is true for the rest of them, none are
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turning around and saying I studied like crazy
through high school, got into a good university
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then became a doctor or an investment banker.
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Why?
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Well because itâs much more entertaining,
and it sounds much more attainable to the
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average viewer.
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And whether we like to admit it to ourselves
or not, there is an element of; âIf I watch
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these videoâs I will learn to do what he
didâ
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Now thatâs not to say these back stories
are all a lie, but more so they are just the
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product of survivorship bias.
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For every Dave, Graham and Kevin, there are
thousands of people that didnât have the
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unique set of skills and the luck to break
into the incredibly lucrative roles they found
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themselves in.
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Sure graham didnât go to university, but
he did work his way into an incredibly prestigious
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real estate firm, so what he lacked in book
smarts were obviously more than made up for
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with personal branding and good old fashioned
sales ability.
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If you are a fantastic salesman then sure
go ahead.
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There is actually a widely accepted array
of high paying jobs with varying levels of
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effort to certainty.
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Sales sits somewhere towards the riskier side
of this array.
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Something that is very high effort would be
becoming a surgeon or a dentist, it takes
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years and years in medical school, but once
you are practicing you are all but garunteed
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a high income and standard of living for the
rest of your life.
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Of course at the other end of the spectrum
is something like âbecoming a Rockstar,
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or famous actor, or yeah even a youtuberâŠ.â
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It doesnât take too much effort when compared
to years in med school, or 100 hour weeks
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in an investment bank but itâs also incredibly
unlikely to pay off.
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Whether they do it intentionally or not the
âpersonal finance personalitiesâ perpetuate
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the narrative of dropping out of school and
building your own destiny, which has worked
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for them, but will not work for most people.
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It also sounds eerily familiar to the promises
made by the more despicable side of the financial
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gurusâŠ
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Now there is one last problem with these personal
back stories, and that is that they are used
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to justify all of these other pieces of content.
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To demonstrate this we are once again going
to pick on Meet Kevin.
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One of his most popular videoâs is the tale
of how he built up his property portfolio
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from $0 to 5.5 million dollars by the age
of 27.
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You are welcome to go and watch the video
but the TLDR is that through a series of flips
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and equity releases he built up a highly leveraged
position of real estate assets that were cash
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flow positive.
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Sounds great, but it is ridiculously risky.
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Take out 5:1 leveraged position in the stock
market and most people will think you lost
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your mind, but take out a 10:1 leveraged position
on a house, and you are an investment genius.
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Most people donât realise how risky real
estate can be.
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Now of course Kevin was lucky, he started
investing at the start of one of the longest
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real estate bull runs in history and in his
defence he has deleveraged his position significantly
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since, but this is the DEFINITION of survivorship
bias.
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Nobody is making a video about how they lost
their life savings trying to flip homes.
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Had Kevin started his investment journey in
2004, he certainly wouldnât be telling stories
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of financial success on youtube, if anything
he would be lucky to be an extra on the Big
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Short.
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(play scene of stripper with 5 houses and
a condo)
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Now if I sound overly cinical let me follow
this all up by saying given the opportunity
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to make as much money as these guys are by
uploading videos to the internet I would sell
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out so damn fastâŠ
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But they are still selling something, it might
not be a course, or an AI that can trade forex
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for you or even a book, but they are selling
you into keep on watching.
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Bleak realities about the tough road to reliably
create wealth doesnât quiet grab attention
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like an open mouth and a flashy headline but
in a world where attention is the new currency,
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you should spend yours wisely.
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Anyway, if you do happen to get rich by following
in their footsteps you should follow that
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all up by commenting how dumb I am on this
video and then watching our video on what
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to do next after making millions of dollars.
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If you did enjoy this video please consider
liking and subscribing to keep on learning
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how money works.
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