E155: How You Can Accomplish Financial Synergy Bliss Like Warren Buffet

Nate: In this episode, we discuss how Warren Buffet is essentially practicing the Infinite Banking Concept on steroids and how you can mimic what he’s doing on your own level through what we will call financial synergy. She’s Holly and she helps people find financial freedom.

Holly: He’s Nate, he makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: All right, well, everyone, welcome back to this week’s episode. We’re so glad you could join us. As always, man, we appreciate you. We hope we’re producing valuable content and if you’re getting things out of this, really the best thing you could do for us and as a show would be to rate and review the podcast wherever it is that you’re consuming the podcast at. That’s the number one way that podcasts get noticed and the word gets out there, so if you haven’t yet left us a review or a rating of any kind, man, we’d really appreciate it. But let’s go and dive in today, Holly. We have some real fun, I think, and real fun conversation. Something that actually came up when I was meeting with somebody and we were just talking about it and I was thinking to myself, this really sums up what we’re doing really well in a way I hadn’t recognized before.

So I called it synergy, financial synergy and really where we’ll go with this is really how infinite banking is all about synergy, but if we take a step back, that’s actually what business is all about. So I thought we could dive in a little bit and talk about how essentially a guy like Warren Buffet is doing what we’re doing on, of course, on a bigger scale with a little bit different dynamics than what we can do. But nonetheless, we’re really… I guess things like this, Holly, are things I like to bring up to say infinite banking is not all that unusual in the world, if that makes sense. The reasons why it works are also the reasons why other things also work. It’s the same ideas promoting and that are good business practices that people would adopt anywhere. They can also adopt while practicing infinite banking and that’s why infinite banking works the way it does, if that makes sense.

Holly: It does make sense and I think, Nate, the reason you call it financial synergy is, a lot of us don’t think we have the ability to create that financial synergy we’re going to discuss today when actually it’s not that hard to create it. You just have to have the right product and the right process in order to be able to do it.

Nate: That’s a really good point. You’re exactly right. And I guess one of the reasons why I think it’s going to be a cool thing to talk about, which we need to dive in, but why it’s going to be a cool thing to talk about is exactly because people who aren’t in business or even those who do, we rarely think in terms like this. So I think it’s a good perspective to have. I think it will help in life in general, but certainly as you practice infinite banking or are learning about this process of infinite banking and how it works and why it would make sense for you, I think this does a really good job nailing it down. It sums it up in a really great way. So should I dive in, Holly? Let’s talk about it.

So financial synergy. What do I mean by that? And I could use some examples, but essentially business is always about some sort of synergy involved, or as people are growing businesses, a lot of times there’s some sort of, this thing called synergy where two parts when added together can make a brand new thing that’s way better than either part by themselves. I guess that would be a good definition of synergy, I guess. Adding something can make both of the things better. That’s pretty cool.

And businesses always deep down is trying to figure that out. So it’s one of those things like if you are a commercial real estate investor, and you’re looking for deals, you’re trying to find deals and that’s your business, you’re a real estate investor, it is not very uncommon and it’s very logical for that real estate investor to decide, you know what? It would make sense for me to actually just go get my commercial real estate license and become a real estate agent. I’m already doing all these deals, I’m already buying lots of properties, I’m already selling lots of properties, there’s a lot of movement going on in my life as a commercial real estate investor. So many of them would say, you know what? It can make sense for me to just go get my real estate license and then it’s called synergy.

I’m already going through all the work to find all the deals, do the deals, and I’m hiring someone to be a part of it, but I can go ahead and do it. And then on top of that, some people will even say, well, you know what? Me and my colleague here, and we jumped into deals together at various times. You know what? What if we actually started a real estate agency together? We got enough deal flow coming in, we could bring a team in and really make this bigger than what we could. So in other words, they wouldn’t just have a real estate agency, they wouldn’t just have a commercial real estate investing business, but add them both together and each one can be more profitable than without the other piece, if that makes sense. And that’s synergy.

And you see it happen all the time. You see it happen when a bookstore opens a coffee shop. You see it happen. Because people love to drink coffee while they read books. Okay, let’s do that. They could go open a coffee shop and they could go open a bookstore all by themselves, but if they bring them together, they have this whole new thing, much more easy to manage. There’s some synergy available and we could keep going Holly. But big business is buying other businesses. It happens all the time. You have these business conglomerates where you’ll have one group owning many other businesses and a lot of times there’s some synergy involved in the businesses where they’ll expand. You’ll see Facebook buying some software company. Why would they do that? They’re a social media company. Well, of course, they use software and, of course, someone’s got to design it and that company’s already profitable and has customers and we need to also design software all the time. So let’s go buy them.

We’ll get access to their software. They’ll have a huge client in us, Facebook or Meta or whatever. And so we’ll be able to pour money into that company and make it profit just with us on top of the fact that they’ve already got customers. So it’s called synergy. It’s when forces are joined together to create a new thing that is better than each individual piece by itself. And essentially, Holly, where I’m going with all of that is that we were talking about Warren Buffet with a client. He gets brought up every now and then. He is pretty cool dude. Essentially his whole business is based on this idea of financial synergy. She goes out and buys whole businesses. He buys businesses that are, of course, valuable in of themselves. They can get for a good price. But then he also, he loves businesses that if you own one side of a coin and you can buy the other side of the coin, things are going to work out really well.:

And that’s one of the reasons why he talks about how much he loves owning GEICO, the insurance company. So Warren Buffet or Berkshire Hathaway owns GEICO. They talk about how much they love owning an insurance company. They talk about it all the time, because they say, well, the insurance company itself is profitable, but it also is just this big gigantic pool of money. That’s what an insurance company is. They have a lot of money. That’s all they are. They’re just big banks. They’re selling financial products. In other words, an insurance company’s product is money. Just like a bank’s product is money, insurance company products are money. They’re not selling gadgets and software or more tangible things. They’re selling money products, selling contracts, so forth. All that to say, it’s just big business. He says, well, the business itself is profitable, but by us owning the insurance business, we now have an automatic way to finance things our other businesses need. So we can own the bank that’s going to finance these other businesses.

So the GEICO has all this capital, they have to put money to work mainly through loans like most insurance companies. And he’s saying, well, we have a whole bunch of businesses that could use money. So why don’t we have GEICO lend money to our businesses? They’ll pay GEICO back the interest and we will become a bank through this insurance model. And so this is what it is. He bought GEICO because it’s a good business, and it opens up some opportunities to create some financing opportunities for his other businesses, which is really cool. And lo and behold, Holly, this is exactly what we’ve been saying infinite banking really is all about. Infinite banking is all about this idea of synergy. The idea is the policies themselves are valuable assets just like GEICO was.

The valuable asset is going to grow, but the concept is not exactly just, hey, you should buy an insurance policy, or it’s not like Warren Buffet, hey, I just want to buy an insurance company. It’s what the policy or the insurance company, if you’re Warren Buffet, what it allows you to do, how working with the policy in other areas of your life can create a profitable scenario that you can’t really find elsewhere. So that’s really what it is. IBC is all about synergy. Why we say Warren Buffet’s doing it on steroids is mainly because he doesn’t have to buy life insurance policies. He can just go buy the insurance company. So good for him. Okay. So I won’t be able to buy the insurance company, but what’s the next best thing? That’s what we can do.

Holly: Yeah. And the next best thing that we’re talking about is most of us would never be able, Nate, to buy a bank, to buy an insurance company. We couldn’t do it. But what can you do? You can buy a whole life insurance policy with a mutual company, because then now you own a share of that company, that’s the getting started. That’s allowing yourself to create this financial synergy to do other things with your money other than to just park it in the bank somewhere, wait to be able to use it.

Nate: That’s exactly right. So really what we’re saying is, and Nelson Nash said this beautifully in his book 2 book, everyone should be in two businesses. You should be in the business that you operate in, that you make money, and then you should be in the business of financing your operating business. We’ve always said that, but that’s essentially what we’re talking about. That’s financial synergy. That’s exactly what Warren Buffet is doing. That’s the whole reason that he bought GEICO and loves insurance. And now he owns other insurance companies as well, but GEICO’s the household name. I think he owns like American General and some other, I think he owns a re-insurance company, which is a whole next level craziness, financial wizardry can go on there. But all that to be said, Nelson Nash was the one who said this 21 years ago. He said this before Warren Buffet even bought GEICO.

He says, the idea is you can use insurance to finance other things and you can be in two businesses at the same time. You can be in the business of operating a business, and that business can receive all of its money from your banking business, your financing business, which happens to be on the you and me level. The best way to do that, that we know of, is to open up a whole life insurance policy. That’s the honest truth. You could go open up an actual bank or an actual finance company and raise money and get a banking charter and do all sorts of things like that, or try to open an insurance company. That would be very difficult. And what’s funny, Holly, is he actually goes through all of that in his book if you remember. He goes through the whole thing.

And his book’s not long, it’s 80 pages. And so he’s wasting three or four pages describing all the painful process you’d have to go through if you wanted to open up an actual bank. And he is like, you could do that. You could try to raise $20 million, you could get a banking charter. You go through the years, you can go through all the regulations and fees and so forth, and you could make it a full-time job saying, I want to get in the banking business, it’s very profitable. I’m going to go open up a bank. And it would be more profitable for you to open a bank than it would be just to use dividend bank, whole life insurance policies as a bank. At the end of the day there would be small risk involved, but there would obviously be possibility for more return.

But he is saying, man, for you and me, it is so much easier just to simply plug in to a system that already exists and lo and behold, anything you would want in a banking system essentially exists inside dividend paying whole life insurance policies. And so he is saying, you should be in the banking business as well as in whatever it is you’re doing for a living, whether you’re in business or not, you should be financing the things of life. Someone is going to fulfill that role. A bank is going to fulfill that role or you can through a policy. And what I mean by that is that doesn’t mean you have to borrow money, but money has to be spent, cash has to be stored, capital has to be accumulated. Some entity, something’s going to fulfill that role for you. The most proper way to do it is to own the insurance company that you’re borrowing from and through a life insurance policy, just like a Warren Buffet’s able to do on a grander scale.

He owns the insurance company that his other entities are borrowing money from. So he gets to win- win in both scenarios. And that’s all we’re saying. We’re trying to do the same thing. We can own an insurance company through dividend paying whole life because as soon as you buy a policy, you become an owner of the company. Now we can’t own the entire company, but we can own essentially the cash values of that contract. We can own the rights to those. Maybe we don’t have the rights to the entire company, but maybe one day you will. Although, the aspiring Warren Buffets. But for you and me, this is truly the next best thing, at least in my opinion.

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Holly: Well, and, Nate, I think too what the reality is, is that most of us cannot own something like a bank. We can’t own it or the insurance company, but to be able to control your own money instead of parking it in a bank for them to use. The ability to own your own policy and to be able to use that to finance things you need in your life, or even that you don’t need in your life, versus giving that money over to a bank and financing it through them all the time where they’re making all the profit is much more freeing to have this policy, the system in place that allows you the freedom to decide when and how you want to borrow your money and how you want to use it. And you don’t have to ask permission to use it. You just get to.

Just think about the ability to make money by going on vacation and creating memories versus I have to go to a bank maybe to borrow that money because I don’t have the money to go on vacation, or I’ve got to take it out of my bank account and then it’s gone. I just think it gives the power back to people to create their own financial freedom and their own financial synergy by adding this component to things we’re already doing. Most of us are already investing money, we’re already putting money aside maybe for retirement or saving for something. This just allows you the ability and freedom to have even more access to that money and to make it do more than one thing versus taking it out of your bank account and it’s gone.

Nate: One of the big reasons, and I’ve always had this hard time putting it in words. One of the big reasons I haven’t loved retirement programs, there’s many, but I think because it violates this law of synergy in a lot of ways. The biggest problem with your conventional retirement programs is that by owning your assets through a government sponsored retirement program where money is locked away, we can’t really use it to produce synergy anywhere else. So we can’t access the funds very easily, obviously without taxes and penalties and it creates this lack of synergy. Whereas in the world of business, that’s really what you want. If we go back to a bookstore example, the bookstore opening a coffee shop, the idea is that the coffee shop will hopefully be profitable, but that more people will want to come to the bookstore because it has a coffee shop. It’s quite a common phenomenon.

You go to Barnes and Noble, how often do most people go there and they don’t end up getting a cup of coffee while they’re shopping around or whatever it is. Maybe that’s just me, I don’t know. But all that to say, we appreciate it as customers, this type of synergy, we like it. It’s a win-win situation for most people to have synergy, and that’s what infinite banking is supposed to provide for people. That’s the whole reason in a nutshell why we’re doing this, is to create financial synergy. It’s by saying, because I have this policy and I have chosen to build wealth in this way, all of these other opportunities can now be funded because of this initial decision I made to become my own banker. That’s the whole idea. And then on top of that, if I’m going to finance commercial real estate, let’s use that guy.

So you have a real estate investor who decided to become a commercial real estate agent because he is already doing all these deals, he might as well be involved fully in it. Well, why don’t you also own the bank that’s going to finance all your real estate deals? Now you have three pieces and you didn’t even have to put in any work to establish a bank. The work is done for you. You can just simply plug in to the existing system through dividend paying whole life insurance policies. And now you’re in the banking business, you’re in the commercial real estate business and as an investor and you’re also the real estate agent. That’s all we’re trying to say this whole thing’s about. And Nelson Nash did a great job in his little book that started this whole thing, Becoming Your Own Banker. If you don’t have it, you should go get it.

He did an amazing job simply describing this fact that banking exists. You are plugged into it already. You have to be. You’re left with two options, you can either start your own bank to start making money out of it, or you can just be a customer of someone else’s bank, and they’re going to make money off of you. And so since most people are not going to go through the crazy amount of difficulty it would take to start a real bank, we have a third solution now that he created or that he thought of, which is this idea of banking through an existing, essentially banking system in the same way that Warren Buffet is doing it, but on our level. I know that sounds markety or something. I’m just saying that’s exactly what he’s doing. He’s simply bought the insurance company to finances other operations.

The GEICO is profitable and is a big pool of money that he can now pull to go do other things as well. That’s pretty cool. And that’s exactly what infinite banking’s all about. The policy is profitable in and of itself, and we’re going to leverage that policy to go do other things that are profitable in and of themselves. And by the fact that we have both of these working at the same time, we’ll be more profitable than if we just had one piece or the other, hence financial synergy. And that’s technically why the entire book was written by Nelson Nash.

Holly: And I think really the reality, Nate, is that also this financial synergy allows you to do the same thing rich people are doing, or Warren Buffet’s doing, just like you said, but it’s on our level. So we actually are able to control our money, but we’re able to create and do more things than if we never implement the system. If we never implement financial synergy in our own lives, then all we’re doing is giving over that power to a bank or somebody else to create it. And we’re never creating that freedom for ourselves. It works hand in hand and it allows you the ability to do what you love and also to be actually profitable in what you want to do later on in life and create passive income and have the ability to just invest in something you want to invest in, but not having to go into that business per se.

I just think that if you want to be where Warren Buffet is, you got to start somewhere. And somewhere is on that rung of, hey, let me at least get a whole life insurance policy so I can create financial synergy in my life versus never doing it. And you never understand why it doesn’t work out the way you planned, even with retirement or this or that.

Nate: Yeah, that’s right. And I think as I brought this up, I’ve mentioned this in the past, that infinite banking oftentimes acts as the gateway drug for other types of active financial endeavors that in other words, if you’re in the herd mentality, which we’re all in when we start our financial life, we save money in bank accounts, put money in our company 401K match program and whatnot, and we’re just in the herd. We’re just going by, we’re just living life. Everything done for me and don’t really put much thought into it. Oftentimes infinite banking shakes that up. It starts to rattle that up. So you start on this process of infinite banking, you say, oh, okay, I want to do that. Suddenly I think it’s just an automatic thing, you start looking for other synergistic opportunities. So you’re starting to look, okay, well I have cash value now. I can use this cash value. No one is telling me I can’t use this cash value.

Nate and Holly have a podcast. They’re telling me maybe I should look into some things to put this cash value to work in. Okay. So I can go borrow against my policy and buy X asset, and that asset’s producing cash flow and I can roll the cash flow back into my policy, and I can borrow back out again to do it again. And I can create this rhythm of life that has synergy involved where your banking system is profiting and your investing side’s profiting, and they’re working together in tandem. It’s like an automatic thing. And it’s one of those things you can’t put on a spreadsheet that well, Holly. In other words, we can show you, of course, what it would look like to invest in something or fund your business or pay taxes or we can lay things out as an idea of what it would look like if you did do it.

So, you can do that, but what I’m saying is so many people would get caught up maybe in the rate of return of a policy or is it going to grow by X amount, or they get caught up in all these things. And what we’re trying to say is, well, what are you going to do because you have it that you wouldn’t have done if you didn’t. That’s the real idea and people don’t give it enough consideration, this idea of financial synergy and what we can do because we are in a certain position in life, what we can do because we have decided to become our own banker can open up doors that we would never have even walked through. And I know I can say that for myself in many ways. And now that I’m thinking on this light in very technical terms, I’m adding verbiage to it.

I’m just doing it more and more, Holly, I’m thinking more and more how can I add synergy to our insurance business right now as agents in the life insurance world? How can I add synergy in my banking world? How can I add synergy in my real estate world? How can I make things work together? How can I open up other businesses that maybe I’m using my policies to fund and maybe other people are running that will create some synergy to what I’m already doing? So anyway, I think it’s a cool way to consider your endeavors, trying to add things that produce synergy based on what you’re already doing. What’s nice, Holly, and I’ll be quiet, I’ve been talking for a lot, but what’s nice is that everyone’s already been doing banking. If we can buy the banking enterprise it automatically, it’s going to create synergy because everything you’re doing requires banking to exist to do anyway. So you might as well be profiting from it.

Holly: I say this a lot, Nate, even to clients is, the worst thing they can do is try it. The worst thing they can do is never to try it. But the best thing they can do, not the worst thing. The worst thing is just that, okay, it’s not for me, fine, and we will not convince you to do it, but the best thing you can do is to try it because of what it opens up in your life, of what it allows you to be able to continue to do that you never thought you could do, Nate. I think you and I are the same and we have done a lot of different things we never dreamed were possible of doing because we had the infinite banking policies and we have this system in place to be able to do it.

And if we never had it in place, then we never would’ve had some of the opportunities we’ve been able to invest in, or not even invest in, in giving to more organizations or your church or whatever it may be. It allows so many other doors to open to allow you to go in and experience things you never would’ve experienced because of the synergy it creates. And so the worst thing you can do is not listen to anything we’ve said. The best thing you can do is just start with one policy and see how it impacts and can change your life and transform it.

Nate: Yeah, I think that’s very good way to end it. And as I’ve mentioned the very beginning, I guess I can wrap up with that, is that what I’ve been coming to find out is that infinite banking, well, I think it’s really special. It’s not actually unusual, or the things that make infinite banking special are not unusual. They’re not magic. You can always find examples of similar things working in similar ways. And what I’m saying is the fundamental reasons why we love infinite banking, why it works well, are the same fundamental reasons why lots of other things work well. The fundamental reason why infinite banking exists and why it works well and why people are gravitating towards it, is the same reason that Warren Buffet gravitates towards buying GEICO and having insurance company inside of his huge conglomerative companies. He thinks that not only is it a valuable thing in and of itself, but it’s also a valuable tool to use amongst my other companies.

And that’s exactly what Nelson Nash wrote his book to describe, that a policy is a valuable tool in and of itself, but it unlocks so many other things in your life by producing this idea of financial synergy that it can make everything else you do, every investment you make, every business you start more profitable if you own the banking piece as well. That’s why we love it, Holly, but any last words? Should we close it down?

Holly: No, let’s close it down.

Nate: Let’s close it. Okay. Well, everyone thank you guys so much for showing up. Once again, if you wouldn’t mind rating and reviewing the show, we’d really appreciate it. That’s certainly the best way to get the news out about IBC and our podcast specifically. With that being said, this has been Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e155.

Announcer: Listeners, one last thing before you go, start your journey towards financial security and wealth today, visit livingwealth.com/beatinflation. You’ll gain instant free access to the beginner’s course Ray, Nate, and Holly made just for you. Again, that’s livingwealth.com/beatinflation.