Price Gouging Is Good: How To Succeed During Coronavirus & The Upcoming Recession

– Hey capitalists, I
hope your Facebook status is marked safe from
coronavirus ’cause if so, today we’re gonna talk
about how to profit from it. Yes, that’s right. In times like this during
times of mayhem and panic, there are always opportunities, so today, we’re gonna talk about how to protect your family’s finances
and maybe even benefit from all the chaos going on in the world due to coronavirus, and let’s dive in. (frame whooshing)
(upbeat music) To dive in, we’re gonna talk about a little controversial view
that I have on price gouging because when we’re talking about profiting during a very chaotic time
like we have right now, there is always the assumption
that we’re gonna talk about how to jack up prices and
profit from all of the scarcity, and the truth is that’s not
what we’re talking about today, but if we were talking about this, strap in, this is controversial, I would tell people price gouging is good. Price gouging is actually
a very healthy thing for the economy. It is labeled as a bad thing
because the perception is well what about those who
can’t afford the higher prices, but this is where economics
and a basic understanding of economics literally saves lives because when you have a crisis
or when you have a shortage, if the price does not go up
dramatically, you run out. You run out completely. If the price stays low, then
those greedy rich people can come in and buy all
of it and resell it, or buy all of it and hoard it, so the most loving, caring,
giving thing that you can do to ensure that very important things are distributed to those who need it most is to jack up the price. So capitalism is often labeled
as being this evil thing that jacks up the price
when there’s shortage. Yes, that’s how markets work. That’s how we ensure that
people who need things the most get it to where the price is appropriate for there to still be
it, still be on the shelf or at the pump or at
the store for the people who need it to be able
to get access to it. So you might see this
in uncompetitive markets where you have only one supplier, so the price is really high. What does that do? They say oh, that’s a greedy monopoly. Those rich, evil entrepreneurs
are trying to make a profit. Well guess what that does. That price signal signals in other people to supply the same good. You might remember Uber surge pricing. Remember that little tag they had? We’re jacking up our prices
to encourage more drivers to get on the road. When there’s an increase
in demand, price goes up which encourages more people
to come into the market and supply what is needed most. That’s a service, that’s a good thing, so if you’re an entrepreneur
who is looking at this slow-down of I’m not
able to get goods from China to sell on Amazon as quickly as I would, but you’re worried about being
labeled as a price-gouger, I say raise your prices. Don’t run out of stock. It’s the worst thing that
you can do for your business. It’s the worst thing you
can do for your customer. Having no stock is much worse
than having expensive stock, and that’s why price
gouging is a good thing. (frame whooshing) Now when it comes to the
coronavirus and the severity of it, let’s not downplay the
fact that many people are gonna be negatively affected by this. Many people are negatively
affected by every illness, every disease, and there’s
no need or positive spin on us downplaying the effect that illness and sickness has on people, but we look at the grand
landscape of things. How serious is coronavirus
compared to other illnesses? Well, let’s be real here. We know it spreads faster than most. We know that it is not fatal for the vast majority of people, and for those under 60 years old or who don’t have
compromised immune systems, the danger is very, very low, so in the grand scheme of
things, we’re gonna be just fine. What that means is that if you can be rational and logical right now, you’re in a very interesting period where everyone else is freaking out, but the 1% of us who are
gonna come into this calm and cool-headed are gonna be
open to a lot of opportunities that look very interesting right now. If you don’t believe me on
the impact of coronavirus, why don’t you listen to what
Dr. Drew had to say about it. (frame whooshing)
So Dr. Drew, are we overreacting–
– Yes, yes, yes. – [Sam] I’m hearing this
from doctors left and right. – Yes, and we are not overreacting, the press is overreacting,
and it makes me furious. The press should not be
reporting medical stories as though they know how to report it. People that are infectious
disease specialists, the CDC, the epidemiologists, need to take this very seriously. The press needs to shut up because you’re more likely to
die of influenza right now. – [Sam] That’s what doctors are saying! – However, and may, I’m not
trying to go against you, but I have a question. It has now beat SARS in
terms of fatalities, 362, and they’re saying–
– But its fatality rate is still lower.
– But they’re saying it spreads faster.
– It’s a mild illness. It spreads all over the place, and it’s only out of the
17,000 documented infected. I bet there’s hundreds of
thousands of cases, 300 deaths, and always in immunocompromised people, always in people that are at
risk for these sorts of things if they get a severe, viral
respiratory infection, whether it’s flu or corona or whatever. All of these can hurt people
who are compromised, they can. The rest of us need to
wash our hands carefully, get our influenza vaccines,
listen to the CDC. If there’s a problem,
they will let us know. – The CDC made it very
clear that 5,000 people just in the last two weeks
have died from the flu – Thank you.
– here in America alone. – Why aren’t we panicked about that? No one is!
– Three people died on the streets of Los Angeles this morning from homelessness. If that were coronavirus,
people would freak the hell out. – You’re right.
– Why aren’t we putting our priorities in the right place? It’s the press. The press does not know how
to report on medical issues. It’s where I first
learned about fake news. (frame whooshing) – Now what is really
serious about coronavirus is the impact that it could
have and is already having on the overall economy. In fact, I’ll be as bold
as to say it seems kind of obvious that this is
the prick of the bubble to the next economic recession. When you have production
slow down and you have people not going to the grocery stores often. I was at Whole Foods yesterday. There was nobody in the store. I asked the checkout guy, I’m like has it been slow
the last couple of days? He’s like, ‘Yeah, there’s
been hardly anybody in here.” When people don’t shop
in stores and they don’t go on vacation and they don’t go to work, you have an economic slow-down. It’s just the natural course of things. Now, I actually think
that this is gonna be a really good thing long-term, and I’ll give you my bold predictions for coronavirus here in a minute. What’s important to know for your finances is that we’re probably
on the beginning of a decent recession which
means that we’re gonna have a slow-down for a couple quarters. We’re gonna have a lot of
hurt in the stock market, and when companies start
releasing their earnings reports, they’re gonna be ugly for
the next couple quarters if coronavirus has the
impact that I think it will, just based on the economic
response in the short-term. Now when we look at the economic response, it has more more possible
harm than the disease itself. I was recently sitting
down with Scott Adams. He’s the author of the book “Loser Think,” and he talked about how
individuals’ response to this crisis is gonna cause more harm than the disease itself.
(frame whooshing) We’re hearing a lot of
analysis about coronavirus and its effect on the economy, and I would say that it seems to me like there’s a lot of loser-think being applied when it comes to really
any economic analysis, but certainly right now
when you have coronavirus being the thing that makes
the stock market swing 5,000 points up or down, and
I would like your analysis. Are we using loser-think in our analysis, or is something else going
on in the overall effect of coronavirus on the economy? – Well by way of context, I
have a degree in economics and an MBA from a top business school, so I tell people this because
they see me as an economist, or they see me as a cartoonist and would lose all credibility (laughs) for what I’m gonna say next. Economics is a psychology engine, so the only thing that drives the economy is what we think will happen tomorrow. So the coronavirus broke
it, just broke the economy. We don’t see it yet ’cause
there’s some inertia, you know things carry on, but the economy is 100%
broken at the moment ’cause the psychology’s all wrong. (frame whooshing) – Now what does this all mean for you? What does this mean for your
finances and your future? Well, if you are calm and
cool-headed going into this, it means that if we go
into an economic recession that prices are going to come down. Prices are gonna come down on labor. Prices are gonna come down on materials. This is gonna be a good time for you to renegotiate contracts, for you to go to your
manufacturers and renegotiate because when production
picks up in China again, there is going to be a
surge to try and appease the buyers again, and so it’s
gonna be a really good time for you to open up negotiations
to get better prices for your company and for your customers. This is also a good time
for you to start looking at what is my next hire
going to be because labor is going to come down if
there’s an economic recession. There’s gonna be more people
entering into the workforce that are looking for jobs, and
so over the last few years, we’ve seen job numbers were insane We might see that pull
back which is gonna be an opportunity for
entrepreneurs and capitalists. In the short-term, we
have some very interesting investment options because
stocks that were not affordable as recently as six to 12
months ago are all of a sudden getting very interesting right now. I was having a conversation
with See Money, the guy who makes all of this happen, and he was eying the stock 3M. Just so you know, this is
not a stock recommendation. Don’t listen to anything
I say about investing. I’m just some dude on the Internet, but we were looking at the stock 3M, and the reason we were
looking at it was because it has a really healthy
dividend that has gone up every year for 60 years, so 3M is one of those blue chip companies that has always paid and
increased its dividends. Well I made the comment to See Money, I said 3M will never hit $150 again. This is a really good buy sign ’cause it has just pulled back in price. Well that was two weeks ago,
and then coronavirus hit, and it dropped below $150 a share, so the dividend yield was really high. When companies are paying
the same amount of dividend, but the price comes down, that means that the dividend
yield is really high. There are companies now
with dividend yields of six, eight, nine, 10%, a few that are even higher than that. I never thought that I
would see the day in which Chevron, Exxon-Mobil are now
paying six and 8% dividends. That’s absolutely absurd. Now the risk of course
is that this slow-down could put those companies out of business. These companies have
been around for 50 years could be completely put out of business because of one recession. Is that likely? There’s a low likelihood,
but it could happen, but we don’t know. That’s why the price’s come down so low. Now for the sake of timeliness, I would prefer not to give
you specific stock picks in this video. I’m not even licensed
or qualified to do that, but I do wanna give you some sectors that’ll be interesting
to watch over the next couple of weeks and months. Energy like oil is a big one. Oil prices have absolutely collapsed in this overall chaos that’s going on. It’ll be really interesting
to see how they respond. Airline stocks, oh my
goodness, airline stocks. Delta Airlines, I told you I wasn’t give you specific companies,
but Delta Airlines. Oh my goodness, are you kidding me? It’s fallen so much and
the dividend is so juicy. Banking stocks are really
interesting, for me anyway because I’m sitting here thinking are banks really gonna be affected by coronavirus and an oil shut-down? I can’t see any reason why they would. I could be wrong. Maybe they’ll go to zero, and all the banks’ll get erased, and we’ll all go to Bitcoin, but it seems to me like
banks should be okay going through this, so I’m really interested in that sector. Vacation travel companies like
some of the cruise companies are really interesting
’cause they’re getting absolutely beaten up right
now, but in the long-term, are we gonna be okay? Is this an overcorrection? That’s how I’m looking at this. How much are we overreacting to this? So those are the sectors
that I’m looking at. Now that’s from an investment standpoint. From a business standpoint,
it would be wise if you sell any physical
product to start thinking about what essentials are people buying that are not luxury goods? So this is the time
right now that it is okay to be opportunistic because
you’re actually doing a good thing as a
capitalist by capitalizing on where there is scarcity. So we’re seeing rushes
on cleaning supplies, on toilet paper, on these essential goods. Well, is there an
opportunity for you to add in some essential products
into your existing line, and if so, it would actually help people for you to be opportunistic right now. See, that’s the thing
that most people don’t get about entrepreneurship and capitalism. Being opportunistic just means
that you are giving people the goods and services that
they’re demanding right now that there’s a short supply of, so thank you for being an entrepreneur. Second, if you sell information
products or you blog or you run Facebook ads, right now, the message is going to change from a more opportunistic message to a
more problem-centered message, so you’re gonna get better
results in your advertising and from your sales presentations
if you are looking at specific problems that you are solving rather than the opportunity
that you’re pursuing. Reason for that is during boom economies, people become optimistic looking
for the next opportunity, but during down cycles, they’re looking at problems to solve, and the problems that
we solve end up being the next opportunities
that lead us forward. If you want to understand our methodology for how we invest and
how entrepreneurs invest, you can come join us inside The 1%. We have a class in there
called the millionaire class, which is a course about
how millionaires invest. Entrepreneurs tend to be
a little bit risk-tolerant compared to the rest of the world. We like high returns and fast results, and so balancing that
entrepreneurial mindset with good long-term investment requires a different type of psychology, and we go through that
in the investment portion of the millionaire class which
is inside of our membership called The 1%. You can click this link right
here to go check that out. (frame whooshing) There’s one other kind of cool ninja thing that I like to do when
markets are coming way down, and it’s something called
selling naked puts. Once again, please do
not take my crazy ideas as investment advice. Please talk to people that
actually know this stuff and are licensed to talk
about this because I’m not. I’m just a nerd who reads books about this and has since he was
literally nine years old, but there’s this cool strategy that I like which is called selling naked puts. Now I’ve done a whole video
about selling naked puts. You can find that somewhere
around this magical video, but here is the overview. A put is a bet on a stock
going down in value, and you can sell a put even
if you don’t own a stock, so you could say I’m gonna
sell a put on Apple stock, and somebody would pay you for that put. What that enters into is an agreement that you will buy Apple stock at a lower price in the future. Stick with me. What that means is that
if you’ve got some stocks that you wanna buy, but you
don’t wanna buy ’em right now because you still think that
they’re too high in price, and you wanna buy them at a lower price, you can sell the right to sell
them to you at a lower price. So it’s kind of like
you’re selling insurance on the stock coming down in value. Basically, just a way to
get paid to be patient. That’s how I view it anyway. So I do this strategy on stocks that I want to hold for a long time that I wanna buy anyway, but I’m getting paid to be patient. Spoiler alert, we just, oh my goodness. We did this Facebook post
inside The 1% Facebook group about one stock in
particular that had a 15% ROI on a 30-day put which
means that you had to agree to buy a stock at a lower
price in the next 30 days, and it was a 15%. I’ve never seen anything like that. That’s just absolutely absurd. Now of course, the risk
is it goes to zero, and you still have to buy the stock at the agreed-upon price, but
if you’re gonna buy it anyway, this is a way to be paid to be patient. All right, we’re talking way
too much about naked puts. You can watch this video
if you wanna study it more, but it’s one way that we
add in some extra sexiness to invest when markets are going down, and if you want more about this, we have a full training
about it inside The 1%. (frame whooshing) Beyond just investment opportunities, there’s more good news that
could happen out of coronavirus and even an economic recession. So to kick this off, I
wanna show you a clip, a discussion between Scott
Adams and Naval Ravikant. Naval Ravikant is the
founder of AngelList. He is sometimes referred to as the smartest person on the planet. He’s a brother of my buddy Kamal Ravikant, the author of “Love Yourself
Like Your Life Depends On It.” It’s a must-read, you
should go pick that up, but this discussion
between Scott and Naval is about what the overall
impact of the response to coronavirus could be and
what that means moving forward. Let’s watch.
(frame whooshing) – Yeah, one of the big
fears is that the economy will get crushed worldwide,
big depression, et cetera, and I’m a optimist on this. Obviously, there’ll be a big disruption, so there’s no question about that, but how bad it becomes,
I’m gonna add this context, and I can do this because
I’m the creator of Dilbert. You can take 20% of any workforce and remove them from reality,
and nothing would happen. – I think it’s more than 20, but yeah. – Yeah, nothing would happen,
and the reason I know that is not just experience,
but it’s called summer. – Right.
– It’s called Christmas. We routinely have 20% of people gone. – You also see this when
the people go on strikes or there’s a government shut-down. – When I worked for the phone company, the local phone company,
I was a salaried employee, and when the non-salaried
people went on strike, which happened a few times,
we so-called managers or salaried people would have to fill in, so there’s a very small
number of salaried people compared to all the union people. Didn’t make any difference. 20% of us did the job of 80, we just didn’t do the big
projects and long-term stuff. Put that on hold for a
month, and it was fine. – And if you buy the creative
destruction argument, we’re gonna go through a shift, and the new industries that we shift to are actually gonna be better
for the economy longer-term, so going to remote work
and being more efficient, you may be able to hold
more jobs as a remote worker because you just get
the job done instead of having to do face time at the office. Even there was some
concern that Uber and Lyft would take a big hit ’cause who wants to get in the car with a stranger, but it turns out that may be better than getting in a subway or a bus, so people switch away into
other models of doing things. I think people are fundamentally creative and innovative and consumptive, and they don’t stop doing that. They just change how they do
it and what they do it around like this is gonna be
a huge boon for Netflix and Slack and companies like that which rely on people staying indoors. Zoom is gonna do great.
(frame whooshing) – There’s two things
that you should take away from that clip. The first is that we’re gonna be fine. Eventually, we’re all gonna be fine. The economy’s gonna be fine, the stock market’s gonna be fine. Most of us are gonna be fine. Coronavirus is really being
blown out of proportion by the press, and the press
should really be ashamed of the way that they are
handling things like this. The second thing to take away
is that during recessions or times of panic, it’s
when we have resets that introduce the new era
that is gonna take us forward, so whenever there is a meltdown, it means that there’s fertile land again for seeds to sprout, so this is the time,
this is the time for you to practice the habits, get the education, to build up your network
to be able to set the stage for your next opportunity and
the next chapter of your life. Every time I go through a personal reset: the business didn’t work out, the relationship didn’t work out. We’re starting over, you don’t
know who you are any more, that’s the time where the best ideas come on the other side of that
because now there’s time, there’s clay for you to mold. There’s newness. We don’t have attachment
to how things used to be or we thought it was supposed to be. That’s when new innovation happens. That’s when you as an entrepreneur have the best opportunity to make it. That’s when you as an investor
have the best opportunity to back the next company
that is gonna sprout. That’s when the best opportunities are, so recessions shouldn’t be avoided. We should really embrace them. We should really look
for the opportunities that happen out of that fertile soil, and if you’re not ready for that, then you could miss that
and have to wait seven years for the next recession. This is when it’s time for
you to get your mind right, your relationships right,
your network right, your plan right. This is the time for that, and it requires you taking some humble pie and being willing to start over again, to try new things again. That’s the beauty of this. This is when newness happens. It’s when great opportunity happens. We have a training inside The 1% that’s called “The Other Half,” and “The Other Half”
is basically the thing I wish someone had given
me when I was young and starting over. After a couple failures,
after graduating college and saying what the heck
am I gonna do with my life, this is the training that
every new entrepreneur, every ambitious person,
every person who is starting a new path should go through, and at the end of these 10 lessons, you’re going to have a new network, you’re gonna have a new
plan, a new strategy, a new financial plan, and
you’re gonna be getting momentum towards the direction that you want to go. You can get that around this video. I would highly recommend that
to you or someone you know who’s starting over or
going in a new direction. In all seriousness, I hope
you and your family are safe and prosperous during
this very uncertain time. I hope that our content is a
breath of fresh air for you. I hope it is a guiding light
for you and your family on your financial journeys. I’d love to hear from you in
the comments of this video, and if you need to be
surrounded by a group of people that is on this journey together, we’d love to have you inside The 1%. Thanks so much for watching Capitalism TV, and we’ll see you next time.
(pleasant funky music)

14 thoughts on “Price Gouging Is Good: How To Succeed During Coronavirus & The Upcoming Recession

  1. Price Gouging during a crisis is never good. Its the opposite and goes against getting paid by adding value to people’s live. This feels like a click-Baity title.

  2. There's no such thing as "Price Gouging". There is simply Supply and Demand and when governments get in the way and restrict prices, you end up with stock outs and less incentive for businesses to move quickly to replenish.

    With "Price Gouging" aka, increased prices to match increased demand and reduced supply, you would have less people buying 4 boxes of 45 rolls of toilet paper if the price was say $100 per "Box" (Package, case, whatever you want to call it) vs. $19.99, therefor, there would still be some available for those who actually need it and are willing to pay $100. It also incentives businesses to supply more toilet paper as quickly as possible to capitalize on the new higher price and much higher profit margin, but, as supply meets demand, prices drop back down again and balance is restored.

    Only the ignorant think "Price Gouging" is not good or evil.

  3. Great video Ryan! Thank you for doing this. This is a good way to change the focus from the fear virus that is spreading along with the COVID -19 virus.I have recently joined your One Percent Club. I will most definitely take advantage of your "The Other Half" lessons as I am moving forward with education and building new opportunities.

  4. 1:10 🤔UNCERTAIN where to begin: contradictory statements riddled within contextual jargon, what conotates difference "Greedy vs. Loving Price Hiking" or FACT your body language BETRAYS validity of your OWN words..
    i.e. ya don't believe the SHITyour'e sayin yourself!
    FYI People: some of these rules may apply to Soy Bean Futures & Crude Oil BUT IN NO WAY does it apply to Toilet Paper, Cans of Lysol, Bottled Water, Canned Food etc..Videos like this VALIDATE Hoarding/Price Gouging Mentality despite potential post claims to the contrary like: "😧i was implying stocks, mutual funds and wheat futures not hand disinfectant"
    Do Not Hoard Products That You Do Not Require People!
    ON TOP OF the Moral/Ethical codes withstanding so too are the NOW *CRIMINAL ENFORCED Implications of Businesses Gouging Prices (*AS OF YESTERDAY! look it up!)

    …AND if a financial example be required:
    In NY hours after 9-11 a Starbucks was sellin "Bottle Water for $5 per" normally 1/2 that…($2.50 today LetAlone in 2001 for bottled water is absurd!) …
    later when the Starbucks Manager was asked "Why price raised?" they answered: "Supply and Demand" ….
    Guess what?…
    Starbucks lost MILLION$ in revenue due to that Imbeciles "Freak-Economics" and subsequent media fallout.
    DON'T Hoard People‼ ESPECIALLY if you're a Business Owner.

  5. Again, naive textbook capitalism idealism on price gouging and ignoring human psychology and game theory. I think you should expand your thinking beyond one model (supply and demand). As they say, all models are wrong , but some are useful.

  6. Coronvirus is a distraction from economic collapse, food shortages, farm collapses etc. Supply chains will be crushed and "if" a grand solar minimum starts causing more chaos, it will get much worse. Go do some research on this. How many farms fields are flooded because of the insane amount of increase in moisture, especially in the midwest? This coming spring planting season is what you should pay attention to. Don't believe anything I'm saying…. go listen and talk to the source, actual farmers and people working in the supply chains. When ingredients start going scarce for all these consumable products… you'll really start paying attention.

  7. Hey Ryan, I know you’re not involved in the operation or drafting of this email, but Shawn Sherman this morning in email blast “Q: “Are you going to increase prices on anything
    soon? A lot of sellers are doing that on amazon
    right now.”

    A: No. We will never engage in surge pricing in
    response to any kind of crisis. Even as demand
    increases and supplies dwindle, our prices will
    remain the same. Period.”

  8. I just found your channel and I think it's pretty awesome. I would be way more concentrated if you turn the background music off though.

  9. Thank You Ryan! REALLY Put Everything Into Perspective!! Esp., what Dr. Drew said about the media! Thank You So Much For This Content! Taking Action Now!🤙❤️🌺

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