00:19:41 · Kenn Ricci, David Senra
[00:19:41] S1: I know I had out to sea. I figured if I got to go into the military, flying looks like a lot of fun to do. I'm copying the number down and somebody taps me on the shoulder and they said, can I help you? And I said, yes, sir, I'm an incoming freshman at Notre Dame and I would like to join the Navy because I want to fly. And he said, You've been admitted to Notre Dame? I said, Yes. He goes, I'm shocked because they usually admit smarter people than that. He said, The Navy has ships and the Air Force has planes. I'm Colonel Muller. I'm head of the Air Force detachment and I'm enrolled in the Air Force. And I never heard, I never knew how my parents reacted, but I came home. Because then they'll pay for school. Yeah, yeah. I don't know that I've ever told this story. Was the first time I learned how to defraud the government. It was. I'm a freshman at Notre Dame. I'm enrolled. I've got my hat, got my uniform. And the sergeant who administered that said, Now, I know you're a plead here, but here's how you get a $100 a month stipend for general expenses. He goes, but there's other income. He goes, here's what you do. You go to the bookstore, you buy all brand new books. You bring me the receipt. I'll reimburse you for the new books. You take them back to the bookstore and then you buy the used books. So like my first interaction with the military is I was taught like how to take advantage of the US government. [00:20:57] S0: Do you take time off from Notre Dame to learn how to fly?
00:20:57 · David Senra, Kenn Ricci
[00:20:57] S0: Do you take time off from Notre Dame to learn how to fly? [00:20:59] S1: No, no, you learn it concurrent. You, one day a week, and this was the tough one. One day a week, have to stay in uniform. And believe me, at that time, you know, that Vietnam War era, that was not an easy task because people did not like the military at all at that time. So, you know, you have all these courses around the air force. In the summer, you go to whatever your summer program was, your summer school and so on. And then, so that's where I learned to fly. [00:21:26] S0: So what kind of planes do you fly the first time? [00:21:28] S1: Oh, you're flying. You know, Cessna 152, Cessna 172. [00:21:32] S0: They're not putting you in [00:21:33] S1: like the F-sixteen. No, that comes after grade. No. No. In fact, you know, when you graduate, what happens, then you go to general flight training, which is done like in T, at that time was done in T-37s and T-38s. And then you get assigned, you know, it's a year and a half before you get control of a jet in the air force. There's the primary training, then there's the training you go into. [00:21:52] S0: Okay. So you mentioned, hey, I'm an inch wide, but I'm a mile deep. All my businesses focus on the, this, we've mentioned Buffett and Munger. I don't know if you said it on the show or if we were talking before, but like we've mentioned, both mentioned Buffett and Munger a bunch of times. And their whole thing is like, know your circle of competence and just stay inside that circle. So that sounds like what you did. Your first
00:21:52 · David Senra, Kenn Ricci
[00:21:52] S0: Okay. So you mentioned, hey, I'm an inch wide, but I'm a mile deep. All my businesses focus on the, this, we've mentioned Buffett and Munger. I don't know if you said it on the show or if we were talking before, but like we've mentioned, both mentioned Buffett and Munger a bunch of times. And their whole thing is like, know your circle of competence and just stay inside that circle. So that sounds like what you did. Your first [00:22:08] S1: I always say my portfolio of investments is unbelievably diversified. It's cash and airplanes. That's my diversification strategy. So what's the first [00:22:17] S0: business you do in aviation? [00:22:20] S1: So first of all, I don't think of myself as a businessman. In fact, I'll often say there's two people that are very successful in business. One is a person that just gets business. They could run a yogurt store. They could run a steel manufacturing plant. They just get business. They understand how they're connected. They see market strategy and business is just very clear to them. And the other ones that are just passionate about what they do. You're passionate about your podcast. You're successful in business because this is what you love to do. I'm successful because I love to fly and I learned everything airplane, right? That's what put me here. But I didn't, I never had a goal to become wealthy or to build a business. [00:22:57] S0: That's the accidental wealthy part, you're- Sure,
00:22:57 · David Senra, Kenn Ricci
[00:22:57] S0: That's the accidental wealthy part, you're- Sure, [00:22:59] S1: of course. In many ways, right? Accidentally that I even formed a business. Accidentally that, you know, that when I go into private aviation, there's only 5,000 jets in the world. And today there's 35,000 jets. So part of [00:23:13] S0: my luck- Wait, wait, wait. Say that part again. [00:23:15] S1: Yeah. [00:23:15] S0: When you started- So what are [00:23:17] S1: your years? 1985, figure about the- [00:23:18] S0: There's only 5,000 jets? [00:23:19] S1: 5,000 jets in the world. And today there's 35,000 private jets in the world. So part of my luck was just to be when this industry grew up. I entered an industry because I could have been an airline pilot. I could have gone into, I could have stayed in the military, but I was attracted to private aviation. It was more free to me. It was more spontaneous. It was more interesting. The people you would meet, there's no cockpit door. I could have conversations with passengers and learn from them. So who knew in 1985 that private aviation would be this unbelievable growth industry in the next forty years? I didn't know that. So that's part of it. But what I'm really doing is flying. I leave the military. I become a cargo pilot, flying air freight. Then I go to Northwest Orient. I'm at Northwest Orient in a very brief period of time. They have a furlough, so I lose my job. [00:24:09] S0: So wait, Northwest Orient doesn't exist anymore? No. It's a- was an airline.
00:24:09 · David Senra, Kenn Ricci
[00:24:09] S0: So wait, Northwest Orient doesn't exist anymore? No. It's a- was an airline. [00:24:13] S1: It was an airline. Yeah. You're an airline pilot? You know, the airlines were Pan Am, TWA, Northwest. The airlines that flew all around the globe, they were the good air... They were the airlines that were the prestigious ones. [00:24:24] S0: Okay. So you're Northwest Orient. You said you got furloughed, which is another [00:24:27] S1: Yeah. Name It's for fair concern for I don't have a job. So I came back to Ohio. Ohio birthplace of the Wright Brothers. Well not Dayton. That's in Southern Ohio. [00:24:37] S0: Yeah, but I think Dayton, right? [00:24:38] S1: Yeah, But my father was, he didn't see it as a very stable career. He said, I know a lot of jockeys. They just kind of move from place to place and they end up taking whatever job they can. It's just not a stable industry. So it was at that time that I went to law school. [00:24:57] S0: And I really- So you love flying in pilots. Your dad's giving you- [00:25:02] S1: I'm a little scared. [00:25:02] S0: Kindsight bad advice, considering where And your life is right you're gonna do something you don't love. Correct. Correct. For prestige or money, [00:25:12] S1: what needed was something to fall back on in case this aviation thing doesn't work out. Well, the aviation thing worked out okay. But... [00:25:20] S0: Did he live long enough to see it? [00:25:21] S1: You know, he died in 1991. So kinda. [00:25:24] S0: Okay.
00:25:25 · Kenn Ricci
[00:25:25] S1: Kinda. He saw me, he saw me have a business. He saw me fly. He flew on one of my first Learjets, loved it. Okay. But he never, I mean, know, he would never, he never saw this coming. Got it. The only job I can have in law school is a part time pilot. So I'm a fill in pilot for a company called J and J Aviation. And J and J Aviation was a fraud. I mean, I'm just an employee there, but what they did was in the early eighties, they had investment tax credit of 10%. And if you bought an aircraft, you got an immediate 10% credit. So they would sell these Citation jets for $750,000 So they had about a fleet of about six airplanes. And then they'd sell these Citation jets to investors on the West Coast, a long way from Cleveland. And they would, they'd get the $75,000 investment tax credit, and then they'd pay the $750,000 for the plane. And then the head of J and J was a guy named Jeff Toke. And every month he would pretend that these aircraft were on lease, but they weren't. The aircraft didn't even exist. He would make up a dummy statement. He would say it flew forty hours this month. The revenue was $90,000 The expenses were $78,000 Here's your $12,000 check. So he simply put the 70, the million 5, the two aircraft, and put the million 5 in the bank and kind of dribbled out the interest in a fake statement. Well, after about a year and a half, the owner said, we gotta see our jets. And they were never, they were always in the air. They were never around. But one day they caught him and he flew the coupe. So this little company, J and J Aviation had like three employees, you know, a secretary, a dispatcher.