The Burleyists - ChavaRica

An April 2005 boot camp attendee, I suspect ChavaRica is representative of the more typical Burleyist. You see, being wealthy is all about having a positive attitude, being a money attractant instead of a money repellant, and keepin' the dream alive!

This type of Burleyist “invests” all his money in boot camps, seminars, tape sets, books, etc., swallowing the dream that Burley - and his ilk - is all-too willing to feed them bait, hook, line, sinker, and pole - and doing it over and over again - even though that first deal and all that wealth just never seems to materialize.

Like all religious fanatics, the Burleyist doesn't see this as evidence against the claims of his guru, but instead as some defect in the strength of his own faith in those claims.

John Burley's eBay Store

Fascinating.

Follow that link and it'll lead you to this site. Burley seems pretty damned busy for a guy "in a position to retire"!

End Prohibition (Again)

My friend Marc Victor, a criminal defense attorney, has written a nice article on why the drug war is stupid beyond belief (unless you happen to be a drug dealer or employed by the DEA - 'cause then it's awesome!).

The Burleyists - Chris Bridgeman

From the October 2002 “Orange Platoon,” Chris Bridgeman, one of Burley’s New Zealand students, apparently stopped contributing to the Mastermind forums halfway through 2003. Could that be the point when he “left the rat race”?

Mr. Bridgeman is noteworthy because of the various organizations I’ve been able to find relating to him:

EZI Home Ltd.
Haven Property Group Ltd.
Foundation Investment Group Ltd.

A few observations:

• The EZI Home page doesn’t look like it’s been updated in 5 years.
• The Haven site is copyright 2004, but it links to another site with some additional property listings. Unfortunately, I don’t know how long they’ve been there. At the time of this writing there were 7 houses listed, 4 of those marked as “sold,” and 2 properties in Papakura, one with a “sunny aspect” (047DOM) and another described as a “weatherboard home” (016BEL). They claim to have sold over 70 houses, though.
• It seems that Chris Bridgeman is no longer affiliated with Haven, which might explain why Foundation Investments exists.
• Given the investor testimonials at Haven's site, I'd have to say that if you want real “passive income” you should consider being the investor rather than the Burleyist!
• The About Us page at Haven’s site doesn’t mention John Burley anywhere.
• The About Us page at Foundation, on the other hand, scares me a bit.
• Actually, the whole site scares me.
• My inquiry to the Foundation Investment Group several weeks ago went unanswered. Perhaps this was due to my not being in New Zealand, but still, what happened to common courtesy?

The Burleyists - Troy Mann

a.k.a. “Ka$hflow King”, “Kashflow King”

Troy Mann is interesting to me because I’ve seen him around the Rich Dad and Mastermind forums ever since I started looking at them, over 6 years ago. He seems to have gone to every seminar and purchased every course out there, making him the quintessential acolyte. Any criticism of his gurus is dismissed with a wave of the hand and an ad hominem (See, for example, here. It’s easy to find many more Troy Mann posts like that).

He’s also interesting because of the review found on this page:

…I had an experience recently that soured me on [Burley’s] organization. After investing with a individual whose testimonial is posted on his website (Troy Mann from Tulsa, Oklahoma) and having the investment go bad, I posted a message to John's forum asking if anyone else was having the same problem. Within 24 hours, the Burley group had the message pulled. I haven't heard anything from the Burley group since. It was as if they wanted to stick their head in the sand and make believe a problem doesn't exist. In the mean time, they still have Troy's testimonial posted on their website stating that his annual income for 2005 was $108K as of August 2005. The following month, I received an e-mail from Troy stating that he couldn't pay the interest and three months later, was claiming any payments of principle would force bankruptcy.

With a little focused Googling, you find, among other things, his now defunct web page for his atrociously named company: http://www.cashflowrealty.net/. That link doesn’t work, but thanks to Google’s cache of the site, we can read what was on their “About Us” page:

Troy D. Mann began investing in real estate October 10, 2001. With no job, his life savings, and a burning desire to create a profitable business he became a full-time real estate investor. Starting out with four properties, Troy has increased the real estate portfolio of Mann & Associates dramatically. Due to hard work and financial competence Troy found himself in a position to retire at age 32.

Troy is the former vice president of Vision Investment Properties Real Estate Investment Association, the first nationally recognized real estate investment club in Oklahoma.

Before his investment career started Troy was a web developer. He worked for a dot com company, an electric company, a healthcare organization, and Dollar Rent A Car.
Troy has many friends from John Burley's real estate boot camp and is an active member on its popular discussion forum. He is a returning boot camp student instructor and has an honorable mention in the book “Powerful Changes”.

Note that the Burley Boot Camp testimonial mentioned by the reviewer above is not the one that I've linked to (which, curiously, doesn't actually have Troy's last name associated with it, unlike the majority of the other testimonials on the page!). It turns out that the review in question was removed from Burley’s web page. Sadly, I can’t find it in Google’s cache any more, either. However, I did manage to save it. Here it is:

September 2005

Anyone who is even thinking about Boot Camp should carefully consider the consequences of taking control of their career. After all the jobs in my degree field left the area due to globalization I was forced to work in the IT field for 50k and 60k a year. Getting laid off three times in a row, always during Christmas made me look for something better. Lets see what that looks like:

BS degree in Chemistry and Chemical Engineering
Cost: $40,000
Time to complete: 6 years (including graduate courses for an unfinished MS)
Entry Level Yearly Income: $50,000
Yearly Income with 5 years of experience: $85,000
Hours worked per week: 50
Wage per hour: approx $35.42
Return on investment: 50,000/40,000 = 125%

Burley Boot Camp
Cost: $5,000
Time to complete: 5 days
2005 Aug YTD retained earnings: $108,000
Hours worked per week: 20 to 50 at my choice
Wage per hour: approx $96.43
Return on investment = 108,000/5,000 = 2160%

The idea is to leverage your income by learning new skills. Although I am working less and making more than those lousy IT jobs paid there is a lot of improvement to be made. I am now redesigning my "job" to triple the income while working fewer hours. Getting leverage on your income is a fantastic skill. They dont teach this in the university environment. Without John Burley I would still be looking for another crummy position involving ridiculous schedules for some jerk who demanded me to put work before family.

Burley Boot Camp, just go.

Troy and Lori Mann
Tulsa, Oklahoma

I leave it to you to decide whether Troy Mann is a successful real estate investor or not.

Nihilist Assault Group

Last night I went with my friend Steve and his friend Chris to the 9:30 Club to see Stereolab. It was an enjoyable show.

I've been a big fan of theirs for years, in spite of their overt Marxism. Lately, though, their leftism hasn't bothered me as much. George Bush has done a lot to enable me to embrace my own inner leftist.

There's another aspect to this, too. Take a look at these lyrics:

What's morals after all?
Set of rules from above

Moral panic calls for more censorship
While annihilating le perdure sens critique
Critique, Moral panic calls for more censorship

Morals are for the blind, not the critical mind

Morals which don't even tackle the real issues
Morals which seek intervention and control
Morals which don't even address the real problems
Morals that just seek control over our lives

If you're familiar with the words of Max Stirner then I think you'll have to agree that this seems to be more than just a distant echo. On the other hand, I doubt seriously if Stereolab are even aware of Stirner. So what are we to make of this?

In my own humble opinion it's a small confirmation of the controversial thesis that, as David Leopold says in his introduction to the Cambridge edition of The Ego and Its Own, Stirner was "central to the formation of Marxism," because he "[forced] Karl Marx to break with left Hegelian modes of thought" - in other words, to abandon his Feuerbachian humanism and develop his own "historical materialism."

Of Stirner's book, Engels himself said, in a letter to Marx, "...this work is important...the first point we find true is that, before doing whatever we will on behalf of some idea, we have first to make our cause personal, egoistic..." Marx, on some level, must have agreed with him, because the two of them wrote a refutation of Der Einzige that was longer than Stirner's own book!

There's no way we'll ever know for sure, but for my part, I like to think that Laetitia is channeling Stirner, even if Marx is playing a bit of an intermediary.

The Burleyists - Mike Hay

Of all the Burleyists I've looked into so far, Mike Hay is perhaps the most interesting. Mostly because there's actual evidence that he is actively involved in the business of buying and selling residential property.

Take a look at what Mr. Hay has to say about John Burley on the Mastermind forum, in this post from November 26th, 2003:

I first was introduced to John Burley's methods when my partner went to the April 2002 bootcamp. At that time, we had 6 properties. Almost all were poor investments and learning experiences.... no money down, taking poor credit people out of foreclosure and re-selling to them, junky properties, and so on. Now, after one and a half years of listening, learning, working hard and believing in the system, we have 37 properties with a handful of others that have either been flipped or cashed out. And in five minutes, just a couple weeks after turning 30, I will be leaving my bene-filled corporate job that my parents and society have always taught me to aspire for. True financial freedom is probably a couple years out, but this day has been something that I have been working for for a long time. Thanks to all that have taught and supported me and I look forward to continuing to grow with this community.

Now, there are a number of things in that post that I'd like to highlight. Note first the not trivial fact that he was already a fairly experienced real estate investor prior to his exposure to Burley.

He, like all Burleyists, makes a big deal about leaving the corporate world. But what is he leaving it to do, really? Burley and Kiyosaki give the impression that "leaving the rat race" means being able to jet off to Hawaii to sip Mai Tais while you're dozing in a lounge chair on the beach. That's the dream they sell (hinted at in the quote above where Mr. Hay says "true financial freedom"). The reality is, however - and this is also true for John Burley - that Mike Hay has become a business owner and entrepreneur. He may love the business of real estate and so consider that an improvement over being a wage slave, but that doesn't mean he's not going to encounter long work weeks, sleepless nights, and uncertainty. He has ended his responsibility to an employer and replaced it with new responsibilities - to his employees, partners, investors, and homebuyers. There is unquestionably an upside potential - but that's true in any entrepreneurial venture, not just real estate.

And what about the "true financial freedom" that, in 2003, Mr. Hay guessed was "probably a couple years out"? Well, I note he is still a fairly regular participant on the Burley forums, so my guess is he hasn't quite made it, yet. Another hint - and a sobering one, at that - is one I found by keeping tabs on the list of properties displayed at Easy Way Homes. For about 6 weeks, now, 20 properties - basically the entire inventory of houses they've had for sale while I've been watching - have sat unsold. I was beginning to think that the web site was defunct until yesterday I noticed a "SOLD" sign go up on one of them. Ouch. I guess Mr. Hay and his business partner need to go back and review that section of Burley's teachings where he shows "How To Build A Database of Eager Qualified Buyers Who Will Be Anxious To Move Into Your Properties." Print up some more door hangers, guys!

The Burleyists

John R. Burley’s printed “Advanced Investing Boot Camp” promotional brochure, which he will send to you if you enter your mailing information at his web site, makes a number of unbelievable claims. For example, he calls this $5000 boot camp—for which he undoubtedly grosses a minimum $350K per year—an “act of love.” Riiiiight. He also says:

Once upon a time (actually a few years ago) I ran the number one Real Estate training in America. Each month thousands of people would pay $5-7,500 to take my training. Our success rate (based on the number of students making money) was the greatest in the history of the industry.

All I can say is, “Whew!” There is an awful lot to parse in those three compact sentences!

So, Burley was training “thousands” each month? Does that sound even remotely realistic to you? What exactly does that mean? Let’s call it 2000/mo. at $5K a head. That brings gross receipts to $120 million per year. I suppose that would definitely qualify it for “number one” status (an otherwise completely vacuous statement—by what standard were these trainings “number one”?). Clearly, though, this claim is entirely bullshit. How many people—let alone real estate gurus—made $100 million a year in the US in the early ‘90s? Not many. Why isn’t Burley as famous as Kiyosaki (who I’m sure has never made that kind of money), or Trump, or Howard Stern?

And where are these 24,000+ students now? Do you think it likely that a person who teaches 24,000 people to become wealthy would remain almost unknown? What is their “success rate,” anyway? How does Burley know how many students are “making money”? Does he look at their tax returns? How does Burley also know the success rate of the students of all the other gurus? He doesn’t, because it’s not even likely that any of the other gurus know what it is for their own students. Another bullshit claim.

But really, who are John Burley’s students? What are they like? Are they really successful? For obvious reasons this is a very difficult question to answer definitively. However, a little time spent on the Mastermind forums yields interesting results, especially if followed up with some Googling.

The first thing you’ll note is that many claim to have had their “lives changed” after attending a boot camp, and on those rare occasions where someone posts something skeptical or negative at the Burley forums, many will immediately defend Burley with an enthusiasm on a par with a religious fervor. You might notice that the resemblance to religion doesn’t stop there. A lot of the phraseology and arguments also strike a religious chord, which is why I’ve chosen to call these acolytes “Burleyists.”

I’ll take a close look at some of them individually in upcoming posts.

It's funny 'cause it's true!

Thanks, Solan!

John Burley's Investment Returns

…or: Why Economists Make Poor Entrepreneurs

John Burley declares, at every opportunity, that he routinely gets investment returns of 40%, 50%, or more on his wrapped properties, and “with little risk.” Specifically, he tells his investor partners that he is aiming for (but of course doesn’t guarantee) a minimum first year return on investment for them of 50%—or that’s what he was telling them when he recorded Blue Print for Success back in the mid-90s. I can’t be sure what he is saying now.

However, given that the average return on investment (ROI) in the stock market has historically been around 11%, I don’t believe Burley’s claims are credible—over the longer term, anyway. An explanation of why requires delving into a little economic theory known as the efficient markets hypothesis—or, as Burley might call it, “Psychobabble.”

Of Grocery Store Lines and Freeways

It’s an early Saturday afternoon, and you—and everyone else, it seems—are at the grocery store. When your basket is full and you’re ready to leave, which line should you pick? The fastest, right? Which one is that? As you take the time to figure it out, you notice that other people keep getting into the lines ahead of you, and they all seem to be roughly the same length.

After you finally make it out of the store and you’re driving home on the multi-lane freeway in stop-and-go traffic, you notice the next lane over seems to be moving faster than yours. As soon as you see an opening, you take it. Your victory is short-lived, though. Soon your new lane comes to a stop. You watch in dismay as the car that was behind you in the other lane now zips past you.

Economics 101

The above over-simplified examples serve as intuitive and familiar illustrations of the concept of the “efficiency” of competitive markets (for a more detailed discussion of the above examples, go here to read their source). Stated less colorfully, but in a way that is more relevant to discussing John Burley, the basic idea is this: In a competitive marketplace, where all economic actors have basically the same goals and roughly the same information, excessive profits will be very unlikely.

That’s a bold statement (pun intended), and also rather abstract. Let’s define some of the terms and hopefully make it clearer.

Competitive Marketplace – In this case, I mean Maricopa County’s residential property market, and specifically the market for home buyers who have a poor credit history. Is this market competitive? I can’t speak for what it was like in the early 1990s, but a quick search through the real estate classifieds at http://www.azcentral.com/, using keywords such as “low down,” “ez qual,” “no bank qual,” “bad cred,” etc., ought to at least give you pause. If he ever was, Burley is clearly no longer the only game in town.

Economic Actors – By this I mean all the buyers and sellers of single-family homes in Maricopa County—and mostly I mean the Investors.

Same Goals – Investors are interested in getting the highest ROI. Sellers are interested in getting the highest price for their property. Buyers are interested in buying the nicest house that they can afford.

Same Information – All the economic actors know (or should have at least a basic understanding of) what home prices, rents, interest rates, etc., are doing. None of the economic actors can see the future. None has secret knowledge that is unavailable to the rest—at least not on a consistent basis.

Excessive Profits – I am not using the word “excessive” in a normative sense, here. In a free market, high profits serve an extremely useful social function: They are a signal or a guide to entrepreneurs about where there exists unmet consumer demand. Profits attract investment dollars to where they are needed most, as defined by the consuming public. In a very real sense, consumers vote for the best entrepreneurs with the dollars they spend. So here I am defining the word “excessive” as simply “higher than around 11%,” since that has been the long-term historical average ROI of the stock market.

The Hypothesis Expanded

So, now we’re in a better position to explore why it is that John Burley is almost certainly, um, let’s say, “stretching the truth” when he claims he regularly gets 50%, or higher, ROI with his wraps.

Burley would like to buy an investment property for as cheaply as he can get it. Unfortunately for him, the state isn't going to give him a monopoly on the Phoenix housing market, so he can't just name his price and expect all sellers to just roll over and take it. He is competing with all other homebuyers in the market. That includes other investors, out for a bargain purchase, and “retail” homebuyers, who aren’t necessarily looking for a bargain so much as looking for a home that they will enjoy living in. Thus, the retail purchaser will usually be in a position to outbid the investors for a given home, assuming 1) that the home doesn’t have some hidden serious defect, or 2) the investor(s) didn’t find out about the property before the retail buyer even had a chance to bid.

Unless Burley can come up with some ingenious ways around the above problems—ways that he can keep secret from all the other buyers, so that they can’t also use them—he is going to have to deal with buying homes usually at a higher price than he would want, and expend time and money searching for longer than he would want, both of which negatively affect his ROI. On Blue Print for Success, his only advice is to “make lots of lowball offers” until you get lucky and some dumb/desperate seller accepts. Is this a “costless” strategy, do you think?

Once Burley finally gets lucky and buys an investment property he’s up against a different set of problems. He’d like to sell his place for as much as possible, but he can’t ask too much, because then his house will sit vacant as buyers go elsewhere. Other investors are as motivated as he is to attract the finite set of homebuyers, and this process of attraction costs money—either in terms of advertising costs, repair, maintenance, or upgrade costs, or an attractive purchase price or terms—all of which, again, negatively affects Burley’s ROI.

As the number of investors rises in a given market, the competition for the same resources (meaning properties and buyers) increases. John Burley, just like the rest of the investors, then faces a choice: lower your expected ROI, to compete, or suffer losses from properties sitting unsold. Over time, this forces the average ROI of all investors down to a level where they are basically doing something a little better than 11%. Those investors who don’t meet that ROI either go broke or decide (wisely) that their money would serve them better if, instead of using it to wrap houses, they put it in, e.g., an index mutual fund.

Now, admittedly, this analysis is still a bit simplistic, but the burden of proof is on John Burley to show that he really is getting consistently “excessive” returns (and then to show how he’s doing it, since he claims to be providing “the highest quality real estate investment, wealth-building, and debt-free lifestyle information”). Of course the irony is that as soon as he’s revealed it, nothing precludes his competition from adopting his techniques and putting them to use against him. That might go a long way toward explaining why he’s so fond of yelling “Psychobabble!” when people ask him “How?”

As you probably know, I’ve been looking at Burley's public record. I hope, therefore, that I’ll be able, in an upcoming post, to take a close look at one or two of Burley’s investment properties and get at least some rough approximation of their actual ROIs. Stay tuned.