We spoke to Mike Beckham in this week's episode of Moneywise.
Mike is the founder and CEO of Simple Modern, a company worth approximately $300 million that makes tumblers similar to Stanley Cups but better. The company is entirely bootstrapped and incredibly profitable.
Like all Moneywise episodes, Mike breaks down his net worth, income, portfolio, and monthly expenses and then I, your humble host, pick it all apart.
We also went deep on: how giving has impacted Mike's happiness, stopped him from mindlessly spending, and his practical advice for avoiding ineffective giving.
Below you'll find my summary of the episode along with the entire transcript.
And by the way...this podcast, the concept of it came from Hampton, a private community for business owners, CEOs, and generally high-net-worth people. I created Hampton because I was able to see all types of behind-the-scenes conversations that rarely happen in public. Hampton members range from people with newish startups doing $3M in revenue all the way up to publicly traded companies with hundreds of millions in revenue and thousands of employees. With Moneywise, I want to provide real advice by talking to people who have been through all these experiences that come with making a lot of money – the challenges and the perks. If you're a CEO, founder, or business owner, and theink you'd be a good fit-- check this out. New Moneywise episodes come out weekly.
Now, below are the notes and the full transcript.
Mike Beckham built Simple Modern with relationships at the forefront. "At this point, I had two young kids and I realized, man, when it comes to relationships outside of my family, work is such a big part of my life that I just don't have a lot of time to hang out with people. And I thought if I could somehow grow a company and be surrounded with relationships of people that I really did have friendships with, and I really did want to spend my time around, that would be kind of like the ultimate arbitrage or life hack."
This wasn't just a nice idea – it became the foundation of their incredible success. Out of the first 15 employees at Simple Modern, 14 were people Mike had known for at least a decade. He put in $200,000 to start the company, which he describes as "pushing everything in that was reasonable."
The business has grown rapidly, with revenue increasing from $10 million in year one to a projected $200-225 million this year. The company is now generating $40-50 million in annual profit. Despite the success, Mike maintains surprisingly modest personal spending habits, including driving a Honda CRV and living well below his means.
"My point being that liquid net worth, after a certain point the marginal utility is not there. There's not anything you're going to use," Mike explains. "I think that point is somewhere between 5 and $10 million. It's just like there's no way I use it."
One of the most compelling aspects of Mike's approach is his philosophy on giving. "Giving is in many ways the antidote to the cancer that we have inside of ourselves. It is a thing that naturally helps keep in check. I have a little voice in my head that is like, it's all about you. Do whatever you want. Any time I intentionally choose to not put myself first, I intentionally choose to use my resources or my time to serve other people instead of myself. I turn the volume on that voice down."
Mike believes that giving helps combat the natural human tendency toward self-centeredness and greed. He started building this "muscle" early in his career, even when he had very little money. "I remember being like, man, buying this guy a $7 lunch right now feels financially painful. But the thought that I had at the time was, you don't get a chance to go back ever, and take advantage of an opportunity to be generous."
This approach has carried through to his business. Simple Modern has committed to giving away 10% of its profits from the very beginning – even when capital was extremely tight. "Even in these early years where it's like, gosh, EBITDA is $1 million or something. It's not like we were giving a ton of money, but we were doing it. And it was, I would say, excruciatingly painful, that out of the little capital that you have, that you're giving away some of it and then the rest of it's going to inventory."
While Mike's primary motivation for giving is the impact it has on his character and happiness, he also acknowledges there are significant tax benefits. "If I give away $1 million, it's basically like tax-free. Or another way of saying it is it's almost like taking whatever, $550,000 and being able to give $1 million away."
He explained how charitable giving is incentivized in the US tax system: "If I make $1 million in income, I pay Uncle Sam $450,000. I have 550. If I make $1 million in income and I turn around and give that, Uncle Sam says, you know, you can write off that whole million dollars you owe us. Zero. I took that $450,000 that Uncle Sam was going to get, and that went to a charity."
Mike uses donor-advised funds as his preferred vehicle for giving. "It's super great because let's say I'm like, I want to give away $1 million, but I actually don't know where yet, but I want it to hit against my taxes in 24. I can write a check to my donor-advised fund and I get all the tax deductions, but then it can sit in the donor-advised fund."
Unlike many wealthy individuals who plan to give at the end of their lives, Mike believes in giving now: "You can't be generous when you're dead. Generosity is when you're giving up the ability to use something for yourself today for the benefit of somebody else."
A critical aspect of Mike's giving philosophy is ensuring the money is actually making an impact. He approaches charitable giving with the same due diligence he would apply to business investments.
"I look for people that I would invest in if they were running a business that are entrepreneurs, that I would invest in if they were running a business that are in the nonprofit world," he explains. This means finding organizations that are not just well-intentioned but effective and sustainable.
He shared an example of a common failing in charitable work: "What we do as Westerners is we come in and we're like, okay, here's some money, we're going to drill you a well, and then we're going to throw a big party, and then we're going to leave. We're going to get the street cred. And then something like 80% of wells are derelict within 18 months."
Instead, Mike supports organizations like Water4, which creates sustainable solutions: "What Waterford does is they go in, they drill the well, they give it to the community. But it's a business and it creates jobs and it creates income. And that income maintains the well and then pays for future wells."
To find these effective organizations, Mike has spoken with hundreds of charities over the years, building a network of connections to identify the most impactful giving opportunities.
At Simple Modern, giving isn't just something the company does – it's central to their identity and culture. This has created powerful benefits for the business itself.
"We don't churn people. People want to be here and people stay here," Mike explains. "Business is really a game of how many unbelievably talented people can you get together and how long can you keep them together... We are really good at attracting, I would say, A-plus A-level people, because they are very motivated by the idea that they could turn their talents into something meaningful."
This purpose-driven approach also creates stronger motivation: "When you have a purpose bigger than I just want to pad my bank account, you're always going to be a more fearsome competitor because you're going to be able to weather downturns. You're going to stick with it a lot longer."
To ensure the company's giving reflects the values of all employees, Mike created a committee structure where employees have a say in where donations go. "I'm not going to be the one that makes decisions. I'm going to create a committee and it's going to be owned by the company."
"I had so many happy memories as a 20-something where we didn't have any money. Like our first year of being married, it was like a great date night was us getting off of work and buying a $5 hot and ready pizza and watching, you know, something that's on like ABC, that's free."
"I drive a Honda CRV. This is my car. It's like a two, 1 or 2 year old car, but it's a CRV and this is perplexing to people. But here's how I make it make sense for them... In terms of how it might impact how approachable I feel as a person, it might make me feel even less approachable."
"For every one of those that you hear, I bet there's five more that you never get to hear. And this is the cool thing about generosity, right? Is that you're making an impact on people's lives that you never get to meet, but it doesn't mean you didn't make an impact."
"My wife and I's kind of goal would probably be that if my net worth is 200 million, it would be that, I don't know, 190 million of that gets given away."
"I have a few heuristics of like how I evaluate how I'm doing as a person, and one of them is when I'm 75 and kind of all this is in the falling action, how am I going to feel about how I use my time? And another one is I die tomorrow. What is the funeral look like and what are people saying?"
[00:00:02] Mike Beckham: Giving is in many ways the antidote to the cancer that we have inside of ourselves. It is a thing that naturally helps keep in check. I have a little voice in my head that is like, it's all about you. Do whatever you want. Any time I intentionally choose to not put myself first, I intentionally choose to use my resources or my time to serve other people instead of myself. I turn the volume on that voice down.
[00:00:27] Sam Parr: All right, so I've recorded roughly 600 podcasts between money wise and some of my other things. And after this episode, I think it left me more hyped up, more inspired, and might change my life more so than any other episode I've ever recorded. You see, before this conversation with Mike Beckham, I was convinced that the best thing I could do with my money in terms of charity was basically let it compound forever and then donate a substantial amount of money at the end of my life. But I kid you not, speaking with Mike has been life changing. He made me rethink my whole philosophy, not just on charity and charitable giving, which is what this episode is about, but on so many other things. Mike is the founder and CEO of Simple Modern, a company that is worth something like $300 million, and the company is entirely bootstrapped. It makes over $100 million a year, is incredibly profitable, and that would peg his personal net worth around $200 million. However, Mike is not doing what I thought a lot of people do. Instead, he's been giving money to charity along the way as he's been going the entire time.
[00:01:34] Mike Beckham: I remember being like, man, buying this guy a $7 lunch right now feels financially painful, but the thought that I had at the time was, you don't get a chance to go back ever, and take advantage of an opportunity to be generous. And so I just built the muscle really early on.
[00:01:49] Sam Parr: In this episode of Money Wise, Mike's gonna break down how giving has impacted his happiness and how it stopped him from mindlessly spending on things that do not move his happiness needle. Of course, like all money wise episodes, he's gonna break down his net worth, his company's revenue, his profit, his monthly expenses, all of his personal financial details, which is rare. And that's why people love this podcast. And also the most important thing, probably, which is how to avoid the wrong ways to give. And by the way, there's a ton of wrong ways.
[00:02:16] Mike Beckham: What we do as Westerners is we come in and we're like, okay, here's some money, we're going to drill you a well, and then we're going to throw a big party, and then we're going to leave. We're going to get the street cred. And then something like 80% of wells are derelict within 18 months.
[00:02:37] Sam Parr: I'm Sam Parr, and this is Moneywise. There are a ton of podcasts and resources out there that teach you how to become wealthy, but there's very few resources and podcasts out there that teach you how to handle the wealth. And all the life changes that wealth brings. You see, I'm the founder of Hampton, a private community for business owners, CEOs and generally high net worth people, and I'm able to see all types of behind the scenes conversations that rarely happen in public. And because of that, I thought we could bring a lot of these conversations that happened behind closed doors out into the public. So you guys can learn with money wise. We want to provide real advice by talking to people who have been through all of these experiences, things that come with making a lot of money, some of the challenges, and also some of the perks. And a money wise, all of our guests, when they come on, they're radically transparent about their monthly expenses, their portfolios, all the finance stuff that's rarely discussed, but also, and more importantly, all the personal issues, the problems, the benefits, these things that are never talked about. That is what this podcast is all about. All right. So Mike actually had a bit of a leg up when it comes to understanding how to give Impactfully, and that's because he actually started his professional life in the nonprofit world.
[00:03:50] Mike Beckham: My first job was this nonprofit job. I made $18,000 a year and I raised it. I didn't even get paid it. I went out and I fundraised it.
[00:03:59] Sam Parr: But even before that, his parents instilled the value in him, that helping people was the most important thing that you could do with your life.
[00:04:05] Mike Beckham: My parents were both in mental health, my dad's a psychologist, my mom's was a social worker. And so I grew up in a house where, like, very decidedly middle class. There's things your parents tell you when you're growing up that you remember that stick in your head out of the who knows thousands of things they said to you. And one of those things with my parents was they told me many times we didn't pick the professions we did because we wanted to make money. I mean, this is the worst place to try and make money. We did it because we wanted to help people, and that was how we thought about success with our lives. And that really stuck with me.
[00:04:39] Sam Parr: And even though it seems like it, Mike's nonprofit career actually wasn't something that he planned to do.
[00:04:46] Mike Beckham: When I took my first finance class, I was like, man, this is just I'd always done pretty well in school. But it was like, yes, this is it. This is just naturally coming to me. So I thought when I was graduating like, oh, you know, I'll go work in finance and I'll probably make a bunch of money and hopefully I'll do some interesting things with it and be generous with it. And then, as fate would have it, for a number of different reasons, I ended up working in the nonprofit world.
[00:05:09] Sam Parr: During this time of his life. Like Mike said, he was making very little money, and obviously that means he wasn't spending a lot either.
[00:05:16] Mike Beckham: During that phase. Like, my income is very modest and I'm running everything through a Mastercard. It's got to be $1,500 a month or less.
[00:05:24] Sam Parr: This is also the time that Mike started building a foundation for his life with his wife.
[00:05:29] Mike Beckham: I got this gift in my 20s of kind of establishing a dream for my life and kind of a purpose for my life that wasn't centered around getting more stuff. I got married pretty young, so this was not just true for me, but it was true for my wife and I. And I had so many happy memories as a 20 something where we didn't have any money. Like our first year of being married, it was like a great date night was us getting off of work and buying a $5 hot and ready pizza and watching, you know, something that's on like ABC, that's free.
[00:06:01] Sam Parr: Hey, that's still my date night.
[00:06:02] Mike Beckham: Yeah, absolutely. I mean, it's one of the things that's really like, fascinating to me is how things can be converted into money, and money can be converted into things, but the exchange rates and the ability to convert it back and forth is not as straightforward as you might think. And so I learned in my 20s that just like I was able to have really high fulfillment and really high happiness independent of resources. So when the money scaled up in a pretty big way, I think I was a little bit more prepared with how to deal with that and not let it turn my life upside down. And then I also had some pretty specific ideas of like, okay, how can I actually use this in a meaningful way and in a way that actually drives quality of life for me.
[00:06:48] Sam Parr: So let's talk about what it means when he says the money was scaling up. How did he go from raising his own $18,000 salary in the nonprofit space to being worth 200 million bucks? Mike had never actually lost a passion for finance and business, so when the opportunity came to him, he took it.
[00:07:05] Mike Beckham: So my brother is really an entrepreneur and has been, I would say, his entire adult life. When I was in the nonprofit world, he was doing some kind of solopreneur stuff and had a couple of businesses that I think by the time he was 25, he was probably a millionaire. And when he was 26 or 27, he approached me and said, hey, I would really love to start a business, but I haven't started a company, you know, more than like a single person company. Would you be willing to help me recruit people and help me do this? Probably be nights and weekends. I was still in the nonprofit world, which is very like qualitative. I wasn't getting to use the quantitative part of my brain, so I was like, hey, that sounds great. It was called Quibids. I was the oldest person that worked at the company. I was 30 and I wasn't even, you know, it wasn't even my job. It was supposed to be like this nights and weekends thing, which it quickly turned into kind of a second full time job. Eventually. That led to me going and working full time with my brother. It was kind of like, right when I got to the point where I was totally okay with having no money and not doing something in the business world that from my perspective, God kind of changed things quite a bit on me. And then all of a sudden I was in the business world. So from 30 to I'm 44 now out of the last 14 years, through a crazy set of events, I would say I've probably spent at least 12 of those growing a company at 75% or more year over year.
[00:08:27] Sam Parr: As these ventures continued to grow, Mike's time was devoted more and more to work. But as we've learned about Mike, his priorities have never really been about money. So he shifted his focus and committed to creating more opportunities to maintain and build what he believes matters most. Relationships. Ironically, this commitment to relationships is what led to his most successful company to date, the one where the vast majority of his wealth has come from.
[00:08:53] Mike Beckham: At this point, I had two young kids and I realized, like, man, when it comes to relationships outside of my family, work is such a big part of my life that I just don't have a lot of time to hang out with people. And I thought if I could somehow grow a company and be surrounded with relationships of people that I really did have friendships with, and I really did want to spend my time around, that would be kind of like the ultimate arbitrage or life hack. And so that was actually an intent of the company, like, I'm going to build a company, but I'm going to intentionally go after people that I actually want to spend my time around because I'm going to be doing it 40, 60 hours, 80 hours a week, whatever. So out of the first 15 employees at Simple Modern, 14 out of the 15 I'd known for a decade or more.
[00:09:38] Sam Parr: You had 200 K when you started.
[00:09:41] Mike Beckham: Yeah, we started with 200 K, so the reality.
[00:09:43] Sam Parr: Is that all your savings is that.
[00:09:45] Mike Beckham: All? No, but it was. It was enough that I didn't have a lot of liquidity left. You know, I had no debt, and it was kind of the equivalent of pushing everything in. That was reasonable.
[00:09:55] Sam Parr: And that money came from you and your brothers?
[00:09:57] Mike Beckham: Yeah, it came from the previous thing.
[00:09:59] Sam Parr: Now, Mike has always been a self-admitted finance nerd. He was investing in the stock market long before he made the switch into business. In fact, there's a story that Mike said, and I had to share it, which is that before he made any money in the business world through starting his own companies, he almost made himself a multi-millionaire. Key word? Almost.
[00:10:20] Mike Beckham: I graduated with $20,000. I'd been a finance guy. So even though I'm doing ministry, I'm, like, kind of active in investing. I'm on Motley Fool, and I decide I'm going to just concentrate all this in one stock because, you know, I'm young. If I lose it, whatever. But if I'm going to make a dent, I need to concentrate it. So I pick a stock. I put all of it in this stock. And this is like 2003. Over the next nine months, the stock triples. That's great. It's now like $60,000. My wife and I want to buy a house, but my credit profile is so like unlivable basically because I've got an $18,000 income. My wife is graduating with her master's. She still doesn't have an income. We find this house that's $105,000 for sale by owner house, right? So, like, very modest. We go to the bank. The bank says the only way that we are going to loan you money is if you put 40 or 50% down, which is just absurd. But it's like I didn't have any options. So I always tell people that the most expensive house that I will ever buy is my first house, because I sold what is today the equivalent of $40 million of Netflix stock to put the down payment on my first house.
[00:11:27] Sam Parr: Oh man, that's absolutely insane. That is crazy. But don't be too sad because it did all work out for him. Obviously.
[00:11:35] Mike Beckham: When I get into my 30s and I'm now in the business world, I'm probably taking a salary of 130 5KA year.
[00:11:43] Sam Parr: And then simple modern started taking off big time. And by the way, simple modern. You can find it at simple Modern. They sell a ton of products, but the biggest product that they sell is their tumblers. Think Stanley Cups, but better. The business is now nine years old.
[00:11:59] Mike Beckham: The build curve probably goes something like ten, 20, 40, 60, 80, 95, 180. And then this year is going to be in the somewhere between 2 and 225, depending on how the year goes. Something like that.
[00:12:18] Sam Parr: That's insane. That's insane. Totally insane. What what's so your one revenue? 10 million a year. Two 20,000,040 6080, 95 one 8225. Insane. What was the profit on it? So on 10 million in profit.
[00:12:30] Mike Beckham: Gosh, in the first few years there was some EBITDA, but it didn't matter because we were so undercapitalized that the business was just anybody who's listening to this that's grown an inventory business. It sucks.
[00:12:41] Sam Parr: Yeah. You got to keep buying more. You got to keep buying more.
[00:12:43] Mike Beckham: And you can imagine going 10 to 20 million. It's like you've got to buy double the cash.
[00:12:49] Sam Parr: Poor. The whole.
[00:12:49] Mike Beckham: Time. Man, it was totally hand to mouth. It was crazy.
[00:12:53] Sam Parr: What do you think it will be this year?
[00:12:54] Mike Beckham: It'll be in the 40 to 50 range this year.
[00:12:57] Sam Parr: What's your ownership.
[00:12:58] Mike Beckham: At? I'm at 45 or 43 on profits interest.
[00:13:02] Sam Parr: That means that your business is worth something like $500 million. If you own a little, less than half your net worth is around 2 to 250. Something like that, give or take, which is a huge amount of money. I mean, you're building up a substantial net worth. Are you actually paying yourself a significant amount or are you just paper rich?
[00:13:24] Mike Beckham: I think in the last year we hit the turning point of we can't reinvest all the money. My attitude was always like, when we invest in inventory, kind of roughly, we generally have a return profile of about a 400 to 500% return on invested capital over a year. So when you're hitting numbers like that, it's like, man, let's invest as much as possible inside the business.
[00:13:47] Sam Parr: If you have a machine that turns one dollars into $4, get a dump truck full of money and dump it in there.
[00:13:51] Mike Beckham: That's exactly right. Keep it going, baby. And last year was the first year where it's like, okay, we don't have that enough good investment ideas to get all this free cash flow back in, which was awesome because as you said, we were cash poor the entire way last year. Maybe the last 18 months is when I started to get significantly more liquid.
[00:14:14] Sam Parr: So Mike's doing quite well for himself. But even as he's become more liquid, spending on himself isn't something that he's really interested in.
[00:14:25] Mike Beckham: Here's the thing that I've observed that surely you've observed as well. After a certain point of liquid net worth, it's basically a kind of hypothetical exercise, like the marginal utility of another million dollars. If you have $20 million, liquid is basically zero. It's not like you're like, man, when I get to 21, then I can go, do you know X, right? My point being that like liquid net worth, after a certain point the marginal utility is not there. There's not anything you're going to use.
[00:14:53] Sam Parr: Well what was that point for you?
[00:14:54] Mike Beckham: I think that point is somewhere between 5 and $10 million. It's just like there's no way I use it like it could be.
[00:15:01] Sam Parr: Is that where you are?
[00:15:01] Mike Beckham: Is yeah. I think I'm carrying about five right now and we're building a house. We're in a really unique season where it's like, okay, maybe five, maybe I really can plot out how we could use a big chunk, big chunks of that five, like my church is doing a building program, whatever. But in general, I also and this is another thing, it's like I have fairly modest tastes, and I even have really atypical ways that I spend money. So an example of this, I'll try and make it make sense. I drive a CRV, I drive a Honda CRV. This is my car. It's like a two, 1 or 2 year old car, but it's a CRV and this is perplexing to people. But here's how I make it make sense for them.
[00:15:39] Sam Parr: At least get a Tahoe.
[00:15:41] Mike Beckham: Exactly. My wife's in a minivan right now, and she's like, okay, I'm finally gonna let you talk me into a nicer car. But the thought process I have is what I'm really after, what brings me quality of life. And I think kind of the purpose of your show is like, how do you make money turn into quality of life? That's what we're all trying to do. For me, relationships are such a big part of quality of life. Like, if I am isolated, I do not have quality of life. If I've got people in my life that I really enjoy that I really feel connected to, if I feel approachable, then I feel like I have a much higher quality of life. And so it's like, man, the difference between me driving a Tahoe or a plaid Tesla or something and a CRV in terms of like the marginal enjoyment I'm going to get. It's pretty small. But in terms of how it might impact how approachable I feel as a person, it might make me feel even less approachable. Like the way that I'm situated is different than most of the people around me, and I don't want to use my money to heighten the sense that I am like that. I'm unapproachable or I'm different, if anything. I want to kind of decrease that because I want to be connected to people, and I'm happiest when I'm connected to people. I think I live an exceptionally high quality of life, and I think this is the crazy thing. I think I could live an exceptionally, you know, high quality life at $10,000 in expenditure a month, I know I could.
[00:16:57] Sam Parr: How much is it now?
[00:16:59] Mike Beckham: I probably spend there's probably a different bucket, so I spend maybe 25,000 a month on like living my in terms of extended family and some things I do to support extended family. There's another chunk and then there's our giving. And that's last year that was over a million for our personal giving. We do a bunch more with no shit. Yeah, it really does connect to this quality of life thing. Like it's giving is one of those few things where it's like it increases your quality of life and it improves the world if you do it right.
[00:17:29] Sam Parr: That's crazy wealth growth. And it's all because he wanted to build a company with people that he enjoyed being around. Mike mentioned in the last year alone, he's donated around $1 million of his own money. That's personally. But he also does a substantial amount of donating through his company. We're going to get more into that and how he's optimized, the way that he gives to have the most amount of impact and be also financially beneficial for himself. But before we get to that, I want to dig a bit deeper into the motivation for his giving and how it adds value to his life. Before we get to that, we've got to take a really quick sponsor break. Be back in a minute.
[00:18:03] Sam Parr: And we're back. And we were just getting into how giving adds value to Mike's life.
[00:18:08] Mike Beckham: Let me give you the case for generosity. All right.
[00:18:10] Sam Parr: You're just trying to buy your way into heaven. Just say that.
[00:18:12] Mike Beckham: Well, what's great, you know, here's what's great about.
[00:18:14] Sam Parr: And pay my entry fee, too.
[00:18:16] Mike Beckham: That's right, that's right.
[00:18:17] Sam Parr: Let's do a two for one ladies night, baby.
[00:18:18] Mike Beckham: Here's the awesome thing about what I believe. Actually, what I believe spiritually is that I can't that like, I basically can't earn my way in, which is actually pretty freeing because I'm like you, I'm an achiever. You know, if I did think I could like through effort or like, you know, I would I'd be like, tell me what to do and I'll go do it.
[00:18:34] Sam Parr: Hey, if you say you had to make money in the name of God, I would say, I don't want to compete against this guy, you know? Well, with that.
[00:18:40] Mike Beckham: I will say this. Listen, you know, people ask like, how do you have such a successful company? And there's a lot of people that have written about this, like, you know, in the business world, you get missionaries and mercenaries and missionaries doesn't necessarily mean spiritual, but it's just people that are in it for a cause bigger than themselves.
[00:18:54] Sam Parr: Yeah. I mean, this is what John Rockefeller did. He believed that he was a Baptist, and he believed that his gift was at the age of nine. He was like, my gift is I know how to make money. Therefore, I need to exploit my gift as much as possible, because I owe it to God and the world to give away as much money and use my gift to do good.
[00:19:12] Mike Beckham: He's a man. That guy is an interesting and complex character for sure, but it's a good illustration of what you're saying is that when you have a purpose bigger than I just. I want to pad my bank account. You're always going to be a more fearsome competitor because you're going to be able to weather downturns. You're going to stick with it a lot longer. So I do think it's part of the business being successful. But here's basically the case for generosity. I'm going to give you 2 or 3. The first is our biggest enemy is internal. Like our biggest enemy is managing self, and specifically our own tendency towards self-centeredness. And greed is one of the things that is the most likely to undo us. And we've seen this. You and I have both had friends where this happened to them, and you don't have to look.
[00:19:55] Sam Parr: I mean, I feel like it happens to me on a daily basis in a small way, like it's never gotten the best of me entirely, but it's just like envy.
[00:20:02] Mike Beckham: Absolutely. And you've been really successful. But it's then you see somebody else that had another exit.
[00:20:06] Sam Parr: I'm nothing.
[00:20:07] Mike Beckham: Yeah, exactly. Comparison. And it's an incredible thief of joy. And it really it can really damage our relationships. I mean, obviously you're a guy that reads a lot of these biographies, and to me, reading the biographies is so insightful because I basically get the learning from somebody's life, and you get to look at all these business people. And for a lot of them, they dedicate their life to the pursuit of money. And then everything else kind of burns down, right?
[00:20:33] Sam Parr: Yeah. And and some of them give. But I don't know many of them other than John Rockefeller who gave from the beginning, like you're giving.
[00:20:40] Mike Beckham: Yeah. So here's the first idea. The first idea is giving is in many ways, the antidote to the cancer that we have inside of ourselves. It is a thing that naturally helps keep in check. And I have a little voice in my head that is like, it's all about you. Do whatever you want. And any time I intentionally choose to not put myself first, I intentionally choose to use my resources or my time to serve other people instead of myself. I turn the volume on that voice down, and I win the war a little bit that day. And I think these little decisions compound, and you wake up and you're 45 like I am, or you're 60, and you realize that who you are has been a bunch of these little decisions. So I think in terms of like who I become, I think it's had a really important impact. One of the stories I'll share sometimes when I was in the nonprofit world doing ministry stuff, there were a lot of times where I would take college guys out to lunch, and I, I mean, as we've talked about, I didn't have any money, but I would always feel like I should buy this guy lunch. And I remember being like, man, buying this guy a $7 lunch right now feels financially painful. But the thought that I had at the time was, you don't get a chance to go back ever, and take advantage of an opportunity to be generous. And I just realized, like, hey, there'll be a point in the future where I'll probably have enough money that $7 won't matter to me, but I can't come back and have this opportunity again. And so I just built the muscle really early on of leaning into being sacrificial and being generous. And as the money has scaled up, that muscle has been there and has been able to kind of bear the weight of it.
[00:22:21] Sam Parr: As I mentioned, Mike's giving isn't just exclusive to his own personal finances. Mike built donating right to the foundation of Simple Modern. From the very beginning, they committed to giving away around 10% of the company's profits.
[00:22:34] Mike Beckham: We made this decision really early on that we're going to give 10% of our profits away. And there was this debate of like, oh, do we do this once we get to a certain level, or do we do this all the way through? And my perspective was, if we don't do it early on, it'll just be easy to talk ourselves out of it later. Even in these early years where it's like, gosh, EBITDA is $1 million or something. It's not like we were giving a ton of money, but we were doing it. And it was, I would say, excruciatingly painful, that out of the little capital that you have, that you're giving away some of it and then the rest of it's going to inventory. But at the same time, there's this kind of principle that I think is pretty powerful, that people talk about values all the time. And I think that the most dangerous lies are the ones we tell ourselves where we say, oh, I really value this. But our actions, you know, our words aren't really consistent with that. You can learn a lot about somebody's values or an organization's values, not just by like what they have in the plaque on the wall, but like, do they have stories of what they've made sacrifices for?
[00:23:29] Sam Parr: Those sacrifices made have paid off in a huge way. And in just a moment, we're going to hear Mike talk about the giving model and how it's benefited the company. And by the way, the total amount that simple model has given away so far, it's around $7 million. And as of today, Mike has personally given away around $5 million. But he wants to go even higher.
[00:23:50] Mike Beckham: But my wife and I is kind of goal would probably be that if my Wentworth is 200 million, it would be that, I don't know, 190 million of that gets given away. No shit for sure.
[00:24:00] Sam Parr: That's wild.
[00:24:00] Mike Beckham: For sure.
[00:24:05] Sam Parr: Now, in my opinion, this happiness factor and being able to use your skills to add value to the world and to help others, that's a huge selling point for me on why I should give. And I think it should be for you too. But if that's not getting you there, then I have to admit there is a financial case. Mike isn't just writing checks and moving on. There's a lot of strategy behind it. Let's start with some of the specifics about his personal donating. Then we're going to get into what the company does.
[00:24:32] Mike Beckham: If I give away $1 million, it's basically like tax free. Or another way of saying it is it's almost like taking whatever, $550,000 and being able to give $1 million away. So it's almost like this. The way it works in this country, depending on how your income comes in and stuff, is, if you give away money to a charity, the government matches it like $0.80 on the dollar.
[00:24:52] Sam Parr: In terms of what?
[00:24:53] Mike Beckham: Okay, if I make $1 million in income, I pay Uncle Sam $450,000. I have 550. If I make $1 million in income and I turn around and give that. Uncle Sam says, you know, you can write off that whole million dollars you owe us. Zero. I took that $450,000 that Uncle Sam was going to get, and that went to a charity. And so you're basically able to create quite a bit of utility in our country, like charitable donations are really incentivized.
[00:25:19] Sam Parr: And does that reduce your income?
[00:25:21] Mike Beckham: Yes, there's some limitations on it based on how much. And there are certain types of income, but generally, yes, it reduces your income.
[00:25:29] Sam Parr: So I'm really ignorant. So let's just say that my income is $2 million. I give away $1 million. So my other million. What's that going to be taxed at?
[00:25:38] Mike Beckham: You'd pay probably 450,000in taxes that year instead of 900,000.
[00:25:42] Sam Parr: And is your giving from like, the Beckham Charitable Trust?
[00:25:47] Mike Beckham: Yeah. So we have a couple of donor advised funds. That's kind of the preferred vehicle before you go to a foundation. It's a hop up when you go to the foundation level. And there's some reasons to do that. That's probably where we'll eventually gravitate. But the donor advised fund is for anybody who's not familiar. It's super great because let's say I'm like, I want to give away $1 million, but I actually don't know where yet, but I want it to hit against my taxes. In 24. I can write a check to my donor advised fund and I get all the tax deductions, but then it can sit in the donor advised fund. They can even be invested in stocks and grow over there while I figure out what to do with it. And then I come to the donor advised fund at some point in the future and say, hey, I want you to give it to these places.
[00:26:26] Sam Parr: And a lot of people do that when they sell a company, and they typically give that money out over a lifetime if they have enough money. Right. But it sounds like you're emptying the account every year.
[00:26:35] Mike Beckham: So yeah, we're definitely taking the approach of, you know, I mean, it's like, I don't know how long I live. I mean, my actuarial says I'm going to be 90 something, but I could die in a car wreck tomorrow. And there's a really interesting book. It's written from a, I'd say, a pretty different kind of worldview than mine called Die With zero, I love it. Yeah. And one of the things he says in there that I think is a really good thought is you can't be generous when you're dead. Generosity is when you're giving up the ability to use something for yourself today for the benefit of somebody else when you're dead. You can't use your money. I like that idea. You can't be generous when you're dead when I die. There may be a bunch of money that goes into some kind of account somewhere, but that's not really generosity. And generosity is when today I could use that money and go buy a Lambo or a place in Malibu or whatever. Or I could give it towards them having clean drinking water in Uganda or some other thing. And that's a pretty different exercise.
[00:27:29] Sam Parr: Mike also has a ton of tips on how to give through your business. We're going to get to that right after this super short ad break. All right, so here's where we are. As promised, Mike's advice on how to give to your company in a financially beneficial way.
[00:27:45] Mike Beckham: So we are a C Corp at this point. This is actually just a really interesting aside. We were an LLC and a big part of being an LLC. That's advantageous. Two things happened. A big part of LLCs being a decent way to be organized is something called Qbi Qualified Business Income Deduction. And that is set to phase out in a year. If that actually phases out, you're going to want to be a C Corp. You're not going to want to be an LLC or an S Corp. If they end up extending that, then it really depends on what your business is doing. If your business is not doing a lot of reinvestment and you're just trying to get almost everything out, then being an S Corp or an LLC and just doing distributions makes sense. But if you're, let's say, wanting to get 30 or 40 or 50% of your net income out than being a C Corp is quite a bit better than being an S Corp or an LLC.
[00:28:38] Sam Parr: How do you decide who to give to?
[00:28:40] Mike Beckham: So you really have to. The practical advice is you've just got to set areas of focus.
[00:28:45] Sam Parr: Because that's a job. John Rockefeller when he retired from standard, he hired his buddy, who was a pastor, and he said, man, help me figure this out. I've got so many letters coming in, I don't know who to give to.
[00:28:56] Mike Beckham: Yeah. And some of the philanthropy, just to use that example, John Rockefeller was basically single handedly responsible for the eradication of hookworm. Massive.
[00:29:05] Sam Parr: He created the modern hospital.
[00:29:06] Mike Beckham: Yeah, absolutely. I didn't realize this, but University of Chicago, he built it. I think he's a great example that we can look at and say in his business career, he did some things that earned him a reputation as being a pretty hardcore, cutthroat businessman, but he also probably radically improved the lives of, I don't know, hundreds of thousands, millions of people with how he chose to use his money. And we could probably chart that out against other people that have made really large amounts of money and didn't really necessarily positively improve that many lives at all. So I do think that part of his story is pretty inspiring. But I would say in the company, we have five areas of focus that we're like, okay, we make water bottles, we're going to do clean drinking water. That seems like that's on brand. We're going to do education, human trafficking, marginalized communities. We're going to focus on some of these areas and really try and move the ball and make a difference.
[00:29:59] Sam Parr: And is Mike the decision maker? Like, for example, let's just say that you have a bunch of atheists who work for you, but you're a Christian and they say, Mike, I'm not feeling the Christian stuff. I don't want to give to a religious organization. Is your opinion on that hypothetical situation? Okay. Whatever we vote for.
[00:30:15] Mike Beckham: Yeah. So it's a great question because there's a lot of guys that work with me, a lot of people on the team that are Christians. And there was this thought early on of, hey, do we give to explicitly Christian stuff? And I made the qualitative decision of, no, we're not actually going to do that type of giving in the company. It's okay if that's kind of a secondary piece of who the organization is. But we serve a lot of different people, like we have 20 million customers or something. So what we're going to try and do is pick causes that all of our customers could get behind. And then I made an intentional decision that I'm not going to be the one that makes decisions. I'm going to create a committee and it's going to be owned by the company. So some of our giving. We have a whole bunch of people come in and present, and we have a committee that kind of represents the entire company makes decisions, and then we have a whole nother chunk of the budget that I equally allocate to every employee in the entire company, and they get to decide who it goes to. The only thing I ask is that you don't pick something, you know, some kind of divisive organization or really highly politicized Organization. And really the giving inside of the company, I think, is it's less spiritual in nature and it's more kind of cause driven with my personal giving, a lot of my personal giving goes to things that I would put in the spiritual bucket, but I try to create some separation, a little bit of a firewall between those two things.
[00:31:26] Sam Parr: How do you have a cutthroat sense in business when you also are this giving? For example, let's say you have an employee who works there. They make 100 grand a year. And they said, Mike, I want 150. You're giving money to all these people, give money to me, care about me more than these other people. And you got to be like, look, that's not the pay band. How do you be cutthroat about things you need to be cutthroat about while also having this very transparent, giving policy?
[00:31:53] Mike Beckham: Totally. So two thoughts here. The first thought is Walmart. When they train buyers, they teach buyers. When you're in a negotiation that the first thing you need to do is you need to mentally visualize all of the customers you serve, that you serve tens of millions of people that are every day getting up and going to their job and grinding it out and making money. And when you go to bat and when you're willing to go to the mattresses with a vendor over that $0.03 of price reduction or cost reduction, what you're doing is you're functionally taking those $0.03 and putting it into all these millions of people's accounts, because you're representing all these people and you're negotiating on their behalf. And it's a pretty powerful thing to explain that to the buyer. You can do the same thing with an organization. When you have really clear values and mission with an organization, it's pretty easy to motivate people. It's like, hey, you know what? When we go to the sixth iteration of this lid, the fifth one's good, but it's not quite good enough for us. We're going to go to the sixth one, because if we get to the sixth one, we think it'll be that much more successful and we're going to be able to not do three wells in Africa this year. We can do six, right?
[00:33:01] Sam Parr: That's such a better way to motivate people, I think, because, you know, selfishly, it takes pressure off you a little bit. You're like.
[00:33:07] Mike Beckham: Absolutely.
[00:33:08] Sam Parr: We're not doing I'm not.
[00:33:09] Mike Beckham: Don't do it for me.
[00:33:10] Sam Parr: Don't do it for my third house. You know, do it well.
[00:33:13] Mike Beckham: And I think I think this goes back to the car thing. It's like if I'm rolling up in a Lambo, that message doesn't land. If I'm rolling up in a CRV and I'm like, hey, I'm living a normal, a decently normal person life like you. And that's not to say that I don't have nice things or I'm against it. Like, I have courtside tickets at the Thunder and I'm not averse to nice things, but it's more like you're trying to create a culture where it's like, hey, we're actually about something that matters and something that's bigger than ourselves. And when we do awesome work here, you can draw a straight line from the work you're doing and somebody else's life being better. And they've done a lot of research on this. This is what motivates people and gives them high sense of quality of life and high satisfaction with their job.
[00:33:54] Sam Parr: Have you made more money because of this, both in terms of customers wanting to because like you're telling me this, this is like an infomercial for simple modern. I'm like, dude, I'm getting my screw, Stanley. I'm going to simple modern. I'm getting my mug there. And I imagine on the employees side too. It's a lot easier to motivate a team to get a lower crack or something like that when you're when you're doing it for others.
[00:34:14] Mike Beckham: And what's interesting is you would assume it's on the customer side. And I'm sure there are people that's part of why they buy us. But actually where it's more powerful is on the team side. We don't churn people. People want to be here and people stay here. And I'm a big believer that mostly business is about the organizing of human capital for all that people focus on. It's about financial capital and it's about ideas. Business is really a game of how many unbelievably talented people can you get together and how long can you keep them together. And there's some kind of an equation where like that output is your success level. And we are really good at attracting, I would say, a plus a level people, because they are very motivated by the idea that they could turn their talents into something meaningful and that they could draw a line between those two things, and then those people don't leave because they're excited about what we're doing, and we do a lot of other things when it comes to, like the community that we build and relational connectedness. But all of that stuff matters and comes together to create an environment where the giving has this really powerful effect towards driving us forward as a company and making us successful.
[00:35:25] Sam Parr: Now, when we're talking about giving away hundreds of thousands of dollars or millions, or eventually I think Mike's going to give away tens of millions just starting that. Just like starting a business, honestly, it feels overwhelming. That's a substantial amount of money to give away, and there's so many different ways to do it, and I'm afraid of screwing it up. And I don't know how you guys feel, but I don't even know where to start. And so I asked Mike about that. And my takeaway is, just because you have a lot of money or things are going well for you, and you want to get into donating and giving away money, that doesn't mean that you have to start giving away a lot right off the bat. You can start small. And Mike actually said it's actually way better to start small.
[00:36:04] Mike Beckham: The first challenge I would have to you is to just say, like I'd reframe how you're looking at it. It's really the challenge is how can it be involved in more areas of your life? What are the things that you tend to be more close handed with, and what would it look like to start to take steps? Just a really simple entrepreneurship idea. It's just bias to action that going 0 to 1 is always the hardest part. The first 2 or 3 donations are going to be the hardest part because it's going to be figuring out, hey, what am I passionate about? Even if it's like, hey, I'm going to find something at $50 to and I can feel great about it.
[00:36:34] Sam Parr: He also says that your benchmark for giving shouldn't even have to be monetary.
[00:36:38] Mike Beckham: Here's where you get the personal benefit out of it, I would say, is that when it costs you something, you know, like giving is the most powerful in terms of the way that it transforms us when we feel some sense of sacrifice. And I think for people that have net worths like us, that's the challenging part is it's like, well, some sense of sacrifice is a big number for me. That's always my litmus test is in some way, do I feel like I am sacrificing for the benefit of somebody else here? And it's one of the reasons why I want to be really particular, that it's not just about money. Because honestly, it is way more expensive for me to be generous with my time now than my money. Are you? I try to be like, so example of this is like I do a lot of mentoring people and I do a lot of speaking with minority and, you know, female founders. Like I try and find a bunch of different situations. I've got the money for like a hundred lifetimes. I've got the time for one lifetime. So when I give away my time, that is way more costly and way more sacrificial often. And so I just think about it as it's comprehensive and all these different areas of my life, am I finding ways to be sacrificial? Am I finding ways to use what I have not just for my benefit, for the benefit of other people?
[00:37:52] Sam Parr: Now, if you're like me, you've been inspired by Mike to give more. I know that's exactly how I felt, but it can be difficult to know where to give. And not just because you've got to figure out your values and what you stand for and what you're really passionate about when it comes to giving, but also because you want to make sure that the organizations that you're donating to are actually making a real difference and that you're getting a real ROI and the money's actually changing someone's life and finding all of these effective organizations. Mike says, actually comes down to the skills that founders and investors actually typically already have.
[00:38:20] Mike Beckham: I look for people that I would invest in if they were running a business that are entrepreneurs, that I would invest in if they were running a business that are in the nonprofit world. And there is some super compelling stuff out there, Sam, where people are mixing the two examples of guys that could easily run 50 or $100 million companies, but instead they just feel like, hey, I'm supposed to, you know, address the lack of housing in South America or the fact that there's no clean drinking water in this part of Africa. One of the more compelling ones we work for, we work with, as an example, is called water for. It's a water charity. People know that water insecurity has been a big deal in Africa for a long time. Here's what people don't know. Part of the reason why it's still such a big issue is that what we do as Westerners is we come in and we're like, okay, here's some money. We're going to drill you a well, and then we're going to throw a big party, and then we're going to leave.
[00:39:13] Sam Parr: And take a bunch of Instagram pictures.
[00:39:15] Mike Beckham: Yes, exactly. We're going to get the, you know, the street cred. And then something like 80% of wells are derelict within 18 months because nobody takes care of them. There's no incentive structure for people to take care of them. They're not trained. There weren't resources raised for the maintenance of the well. And so we do this thing that kind of looks good but wasn't actually effective. I'm a very pragmatic person, and I don't want to invest in stuff like that.
[00:39:39] Sam Parr: But are you just googling like good, well, charity. And then do you review their financials or do you talk to other donors?
[00:39:46] Mike Beckham: I think what it looks like is I talk to a lot of people I've probably talked to over the last 3 or 4 years. I've probably talked to a few hundred charities and it's 30 minute phone calls or whatever, and then you find founders that are doing things that are really interesting, and then they connect you to other people. So like in this case, what Waterford does is they go in, they drill the well, they give it to the community. But it's a business and it creates jobs and it creates income. And that income maintains the well and then pays for future wells. And so it's like this interesting hybrid where there's, you know, I can give towards it. But what I'm really doing is kicking off this kind of virtuous cycle of capitalism in these communities. I have a fundamental belief that entrepreneurship and capitalism has been a really positive force in the world, and some of the most generous stuff I can do is I've been front row in growing companies, and you and I both have, and we've experienced things that other people have not. When we can take that and give that away, give that knowledge away, just like we do on Twitter or wherever else, like that's insanely valuable. Right?
[00:40:45] Sam Parr: I agree. Mike's mindset towards giving. I find it incredibly admirable, and I bet a lot of you guys listening are going to feel the exact same way. And it may seem overwhelming and like a big shift in your own mindset, because it does for me to think about how would I even start to give away like he does? But it's actually pretty simple. And at the core of it, it comes down to two driving thoughts.
[00:41:11] Mike Beckham: I have a few heuristics of like how I evaluate how I'm doing as a person, and one of them is when I'm 75 and kind of all this is in the falling action, how am I going to feel about how I use my time? And another one is I die tomorrow. What is the funeral look like and what are people saying? And those are really helpful for evaluating how I feel about how I'm using my time. I want to be the type of person that it's like, hey, when I'm 75 or when I'm in the casket, there's a bunch of people I don't even know that are like, hey, actually, that person was a part of impacting my life in a positive way. I'd love it if that was the way that my my life made an impact. And that's a hell of a lot more interesting to me than me having my name on a building. Honestly, let me ask you a question like this. Have you ever had somebody that you'd never met before come up to you and say, hey, I heard this thing that you said on a pod and made a huge impact in my life.
[00:41:59] Sam Parr: Yeah, it makes my week.
[00:42:01] Mike Beckham: Absolutely. And you know what? For every one of those that you hear, I bet there's five more that you never get to hear. And this is the cool thing about generosity, right? Is that you're making an impact on people's lives that you never get to meet, but it doesn't mean you didn't make an impact.
[00:42:20] Sam Parr: So Mike's an incredibly inspiring guy. And like I said, I left this podcast. I left it fired up I went and like, interrupted my wife. And I was like, man, I just talked to this guy. Mike, I've got to tell you all about it. I basically sat down with my wife and I'm like, look, I want to start giving. I want to be charitable. Like Mike. I think the way that he's doing things is the right way. Let's list out our values and our causes that we're really passionate about. And then we're going to try and do a little bit of research and figure out where can we actually make an impact. And thankfully, Mike's been a friend of mine now, and I'm able to ask him all these questions. But this episode, it really has changed my life and I hope it has changed your life too. Or at least inspired you a little bit. I said in the beginning, my opinion on giving was, I'm just going to let this compound and eventually I'll give it away. But Mike has really inspired me to start giving now. And so I want to know a. Did this inspire you? And B if it did, what steps are you going to take.
[00:43:11] Sam Parr: So you can reach me at the Sampah on Twitter and let me know what you guys think about this episode. And if you're going to make any changes, you can also listen to the show on Amazon Music. Or just ask Alexa by saying, Alexa, play money wise on Amazon Music. And by the way, if you are a high net worth person or you're the CEO or owner of a business, you guys, I want you to check out Hampton. It's at Join Hampton. I review 100% of the applications. We've had thousands of people apply, and we're very selective about who we let in because we want our community to be intimate and awesome and a really safe place to share some of these really scary and intimidating conversations. And so we've got people who run companies that are doing as low as 1 million or 2 million a year in revenue all the way up to publicly traded companies doing hundreds of millions. And the conversations that we have are life changing. It's been incredibly influential to me. So check it out. Join Hamptons.com.
[00:44:01] Speaker3: I swear you're the gold. I've been running for it like I woke up in one the top brow.
[00:44:08] Sam Parr: We're gonna be back soon with more money wise episodes. And I have to remind you guys, if you guys like this podcast, you have to check out my production team. It's called Lower Street. Lower Street. Moneywise is actually the page that you can check out. They have made my life so easy when it comes to making this podcast. And so if you're a company that wants to create podcasts like this, check it out. I work with Jackie over there and Harry, and they've made my life so easy when it comes to producing this thing, editing it, finding guests. It's been so much simpler than I thought it was going to be. So check them out. Lower Street and if you're a business owner, check out Hampton. Join Hampton. All right, I'll see you guys soon.