Raw Transcripts - Video 1: Sarah Moore Interview (https://youtu.be/dF6zvTXimxY) | Video 2: Harvard MBA 0M Business (https://youtu.be/kaFSsAhxbCI) | Video 3: Brad Jacobs 8 Billion-Dollar Companies (https://youtu.be/U-FlqVzbj0s)

podcast_transcript.txt

[0.0-1.4] Welcome to this Classics episode.
[1.7-4.0] Classics are my favorite episodes from the past 10 years,
[4.2-5.0] published once a month.
[5.4-7.6] These are end-of-one conversations with end-of-one people.
[8.1-11.3] Brad Jacobs' simple principle of think big, move fast
[11.3-12.6] is one I think about often.
[13.0-14.3] He is a true force of nature,
[14.4-15.8] and I hope you enjoy this episode.
[18.6-19.8] Hello and welcome, everyone.
[20.0-22.2] I'm Patrick O'Shaughnessy, and this is Invest Like the Best.
[22.5-24.9] This show is an open-ended exploration of markets,
[25.1-27.5] ideas, stories, and strategies that will help you
[27.5-29.3] better invest both your time and your money.
[29.3-33.0] If you enjoy these conversations and want to go deeper, check out Colossus Review,
[33.3-37.5] our quarterly publication with in-depth profiles of the people shaping business and investing.
[37.8-42.0] You can find Colossus Review along with all of our podcasts at joincolossus.com.
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[81.6-86.4] Visit WorkOS.com to get started or just hit up their Slack support. Yes, they have real
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[96.8-102.4] to make your app enterprise ready today. Patrick O'Shaughnessy is the CEO of Positive Sum.
[102.7-108.0] All opinions expressed by Patrick and podcast guests are solely their own opinions and do not
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[128.1-133.8] My guest today is Brad Jacobs. Brad's resume is remarkable. He's founded seven companies,
[134.0-139.0] all of which are billion-dollar or multi-billion-dollar businesses. He's done 500 M&A
[139.0-143.9] transactions and raised $30 billion of debt and equity capital. Currently, he's the executive
[143.9-149.1] chairman of XPO, a commercial trucking company that he started in 2011 and has grown into one
[149.1-153.3] of the largest logistics businesses in the world. He's also written a book that will be out in
[153.3-159.1] January titled How to Make a Few Billion Dollars. What a title. Brad's energy is infectious and our
[159.1-164.3] conversation unpacks his strategies for M&A, his propensity for speed, and methods for earning
[164.3-168.1] team buy-in. Please enjoy my great conversation with Brad Jacobs.
[169.0-175.4] So Brad, it's hard to know where to begin this conversation because you have built so many
[175.4-180.3] interesting businesses across so many different industries. So maybe the uniting thread is what
[180.3-186.4] are you looking for when searching for the next opportunity? Because there's definitely through
[186.4-190.5] lines to what you've done, but there's also, you've made pretty big jumps. I think maybe
[190.5-194.9] you'll make another jump and maybe you'll never stop. What is it that you're looking for in an
[194.9-199.9] industry or a market or an area as you're sussing out what to do next?
[200.5-207.0] In a word, scalability. So the only way I know to create huge value is to create a company that
[207.0-213.3] five and 10 years after you started is much, much larger. And the easiest way to do that is through
[213.3-218.8] M&A. Of course, you have to have organic growth as well. But I look for an industry where it's
[218.8-223.1] large enough. If I want to create a company that's tens of billions of dollars in revenue,
[223.1-226.3] then I have to do an industry that's hundreds of billions of dollars in revenue.
[226.6-229.6] If I want to consolidate an industry, there has to be things to buy.
[230.0-232.3] There have to be things to buy on accretive terms.
[232.8-236.1] There have to be things that we can buy at lower multiples than we're going to trade at.
[236.4-239.6] I look for industries where there's synergy.
[239.8-242.9] As you get bigger, there's economies of scale, there's benefits of size,
[243.2-247.2] that as you buy things and get bigger, you just don't get bigger, you get better.
[247.6-250.4] You spread your SG&A out more, you get better technology,
[250.4-253.0] you get a better sales force, you get better training.
[253.1-256.0] So the advantages aside, you have a better cost basis.
[256.4-257.8] You please the customer better.
[258.0-262.5] You have more density, more advantages of being a national network or maybe even a global
[262.5-262.9] network.
[263.2-264.5] Basically come down to scalability.
[265.2-268.0] So if that's the metric, why aren't there 10 of you?
[268.2-274.1] Why is there only one distinct story like yours that somebody in a serial fashion sort
[274.1-280.0] of goes and builds companies with some similar ingredients in the recipe in different industries?
[280.5-284.3] It's strange that there's not other people that have had a similar story like yours.
[284.8-288.5] There's plenty of other people who have done M&A and created tons of value doing M&A.
[288.8-291.2] I've maybe done a little more M&A than most people.
[291.5-295.4] And the teams I've led have done it very well in terms of integration and optimization of
[295.4-296.2] those acquisitions.
[296.7-297.8] But I didn't invent M&A.
[298.1-299.2] M&A has been around for a long time.
[299.9-304.2] One of the things you said is the ability to do great accretive acquisitions, buy at
[304.2-306.8] a lower multiple than your stock trades at maybe.
[306.8-309.7] I think of Henry Singleton or some of the great stories through history.
[310.4-314.1] What are the markers of industries that have that feature? Do they tend to be very mature
[314.1-318.7] industries? Do they tend to have anything else that you would look for that would cause those
[318.7-323.1] low multiples to exist, hyperfragmentation or something else? It's not that they have to have
[323.1-327.5] low multiples, although I tend to go to industries that are single-digit multiples,
[327.7-331.9] not double-digit multiples, maybe low double-digit multiples, but I'm not a 15,
[331.9-338.0] 20 times EBITDA kind of guy. If you look at the 500 or so acquisitions that I and my team have
[338.0-343.2] done, average multiples in the mid to high single digits. And I don't like to buy things that are
[343.2-347.7] priced for perfection and everything's got to go perfectly, swimmingly right in order to
[347.7-353.1] achieve and maintain a 15 or 20 times EBITDA multiple. I look for industrial companies for
[353.1-359.2] the most part. I'm not a tech guy. I use a lot of tech. I invest in tech. I am tech forward in my
[359.2-363.3] companies. We utilize tech every possible place we can. We automate anything we can,
[363.7-368.2] but I don't buy tech companies per se, mainly because the multiples are too high.
[368.9-380.5] Can you tell me the story of the earliest acquisition that you did that stands out in memory as one that taught you a lot of lessons Earlier ones taught me more lessons than my more recent ones because I messed up so many times
[380.5-385.2] I made so many mistakes in my first few dozen acquisitions. That's where you really learn.
[385.4-389.7] You learn from your mistakes. You don't learn as much from your success. And the main mistakes I
[389.7-395.8] made in the earlier acquisitions were around people and integration. I was too slow to integrate.
[396.1-397.3] Now I'm real fast when I integrate.
[397.5-399.6] When I integrate now, I rip off the Band-Aid.
[399.7-408.2] And I'm on one CRM, one HRS, one ERP, one dashboard, one key performance indicator metric
[408.2-409.6] universally throughout the system.
[409.7-411.1] Everything is one, one, one, one, one.
[411.6-413.6] Because you have visibility into the business.
[413.8-414.8] You can manage it better.
[414.9-418.1] You have a clear understanding of what's going on in real time.
[418.2-420.6] You have your finger right on the pulse of what's going on.
[420.6-423.4] And it's really important when you're leading a company, particularly when it's growing
[423.4-424.1] so fast.
[424.7-426.1] You have the controls in place.
[426.2-426.9] You have the oversight.
[427.0-428.0] You have the governance in place.
[428.5-433.5] When I was younger, I used to be concerned about the inevitable fallout when you do integration
[433.5-436.1] because people whine and scream, oh, I like this.
[436.1-437.0] I've been using this.
[437.1-439.9] And there's some temporary discomfort, but it's worth doing that.
[440.0-440.9] Got to do it really fast.
[441.4-446.4] The other types of mistakes I made earlier in my career in acquisitions were sizing up
[446.4-446.8] the people.
[447.1-447.9] I think I've gotten better at that.
[447.9-452.0] You start seeing patterns in different types of personality types, different character
[452.0-453.0] traits and so forth.
[453.0-457.0] And that's the most important thing you can do is make sure you get fantastic talent.
[457.7-461.0] Can we talk about the positive and negative patterns that have emerged in the people?
[461.1-464.8] I assume you're talking about both the seller, whoever it is that is representing the seller
[464.8-466.7] or the seller themselves and their teams.
[466.9-471.0] What are the things that you've gravitated towards and away from as you've done more
[471.0-471.8] and more acquisitions?
[472.3-476.9] First of all, I never buy a company if I don't really like the seller because I've seen a
[476.9-482.0] correlation between how I feel about that seller and how that deal turns out one, two,
[482.0-482.7] three years later.
[483.0-495.1] The integrity of the seller is really important to me because the company that seller has created reflects the integrity or lack thereof of the owner or of the CEO of the senior leadership team.
[495.4-496.5] It reflects the work ethic.
[497.0-502.6] It reflects the amount that they are collegial and respectful and collaborative or not.
[502.8-504.2] I really need to like the seller.
[504.6-507.7] It's very important to me that I have a personal affinity for them.
[508.2-508.9] Can you define integrity?
[509.5-510.3] Integrity is real simple.
[510.4-511.0] It's being honest.
[511.0-515.3] it's doing what you say you're going to do and being straightforward about it, not playing games.
[515.5-520.1] And I like to work with people that don't require a lot of effort to figure out what do they really
[520.1-524.3] mean? I like to work with people who they mean exactly what they just said. And they say it in
[524.3-528.1] real simple terms. They're very predictable and very straightforward. What about the negative
[528.1-531.7] side of the ledger? Is it just not integrity or are there other things that you've found
[531.7-536.8] lead to bad deals two, three years after doing them? Two, three, four years down the line,
[536.8-541.9] if you find bad things with the company, it's really my fault if I haven't fixed it by then.
[542.3-546.6] But in the first year or two, sometimes it's undisclosed liabilities. Sometimes there's
[546.6-551.4] things in the company that you really weren't aware of because buying a company is a little
[551.4-555.3] bit like getting married. You don't really know who you got married to until after you've been
[555.3-558.3] married a little while. Fortunately, in my case, that's worked out really well. But sometimes
[558.3-563.1] people get surprised. And when you buy a company, particularly if you buy it in a process,
[563.1-568.2] If you buy it in a banker-run process, you don't get the fulsome amount of due diligence
[568.2-572.6] that you really need in order to responsibly buy a company and confidently think you're
[572.6-573.7] not going to have a lot of surprises.
[574.3-575.4] I'd love to ask a few more questions.
[575.6-579.8] The assembly line of the deal, so to speak, one great quote that I saw you write was that
[579.8-583.2] there's three times that people go insane and one of them is when they're selling a
[583.2-583.5] company.
[584.0-589.6] What is the psychology like of a seller and how do you take that into account when you
[589.6-591.6] are negotiating the deal itself?
[592.3-595.2] So I have a relative who's a psychologist.
[595.8-602.3] And she told me that an otherwise perfectly sane person, two times in their life, becomes
[602.3-605.9] temporarily insane and develops an access to personality disorder for a short period
[605.9-606.2] of time.
[606.6-609.6] And those times are when their spouse tells them, I'm divorcing you.
[610.0-612.0] And another time is when your boss tells you, you're fired.
[612.3-616.0] And it's just people have a very bad reaction to that and they can just lose it.
[616.5-617.5] And I've noticed that.
[617.5-619.5] I've noticed those two examples in many people.
[619.5-623.1] But I'm going to add a third to that as I write in the book, thank you for reading it,
[623.4-625.0] which is when people sell a business.
[625.2-629.4] When people sell a business, particularly if they've spent decades building it up and
[629.4-632.8] they have family in the business and they're prominent in their community and their identity
[632.8-638.3] is associated with that business, they get really nervous and they get very anxious and
[638.3-639.5] they're very stressed out.
[639.9-645.8] And it's extremely important when you're buying a company to be very understanding and very
[645.8-648.2] respectful and very empathetic towards the seller.
[648.6-652.0] It's not just a personal family business either, even a corporate one.
[652.4-656.8] Even a corporate one, if the stakes are high, and they have advisors telling them to do
[656.8-661.3] this and do that, and it's usually not really good advice in terms of relationship building,
[661.4-665.6] which for me is the most important thing in M&A is having a good relationship with the
[665.6-666.6] seller, with the other party.
[666.9-670.3] So they definitely do things that they normally wouldn't do otherwise.
[670.9-673.1] How tactically do you run these processes?
[673.3-676.5] And I'm especially curious, since obviously you must have built some sort of machinery
[676.5-677.2] around this.
[677.2-680.2] So you're doing so many acquisitions, you're not personally in there doing them all.
[680.6-686.4] So what have you learned about pacing, building relationship, but keeping moving very quickly,
[686.6-690.8] balancing those two things, and any other relevant machinery that you found to be most
[690.8-693.0] helpful for doing so many of these at scale?
[693.5-696.1] I'm probably more involved in M&A in the weeds.
[696.3-699.1] Like I said earlier, you need to know what you're buying.
[699.4-702.9] And in order to do that, you have to gobble up as much information as possible from every
[702.9-706.0] possible source you can get it from, external and the company directly.
[706.7-710.1] And that's really the main stuff I want to figure out when I'm doing a deal.
[710.3-712.6] I want to understand what is this company really about?
[712.9-716.7] Every company's got positive things about it, strong things about it, opportunities,
[717.1-718.2] wins, successes.
[718.5-721.1] And every company also has negative parts.
[721.4-722.0] That's normal.
[722.1-725.2] There is no company that's all good or all bad, at least that I've come across.
[725.6-729.8] So the due diligence process in M&A is to try to figure out both of those things.
[729.8-732.9] What are the things that make it a strong investment case?
[733.4-735.3] And what are the things that, these are risks.
[735.9-737.0] These are downsides.
[737.1-738.3] This is hair on the deal.
[738.8-739.9] Is this hair we can take off?
[740.1-741.5] Is this a risk that we can live with?
[741.7-743.6] What do we think the chances of the risk happening?
[744.0-763.0] And if the risk does happen is it fatal Does it destroy the whole investment thesis So you really got to get both of those things And I write in the book about a friend of mine who done a lot of M once showed me a four quadrant chart of M And the top two quadrants were large easy deals
[763.0-768.4] with no hair on them, which don't exist. Below that, on the bottom part of the four quadrants
[768.4-773.6] are small, hairy deals. Nobody should do a small, hairy deal. First of all, it's small. So how are
[773.6-777.4] going to create a lot of money doing a small deal. And it's hairy. So if you take the hair off,
[777.4-781.5] it's a small deal. You're not going to make a lot of money on it. And then the quadrant in the
[781.5-787.6] bottom right are small, unhairy deals. Straightforward, easy, no problem deals. But
[787.6-792.3] they're small. So it's not going to work. Which leaves you with the most important quadrant up in
[792.3-797.4] the upper right-hand one, which are large, hairy deals. And that's where you make the big money.
[797.4-803.2] You make the money on large deals that certainly they have issues, but they're issues that you've
[803.2-807.9] thought through, you've analyzed, and you have figured out how you're going to sell them,
[808.2-812.4] how you're going to address them. And if you can shave off the hair on those big hairy deals,
[812.7-816.8] that's how you make a lot of money in M&A. I'm curious in each of these different company
[816.8-822.6] stories, how much of the M&A was you've got some grand vision, there's some puzzle and you know
[822.6-827.6] the puzzle pieces you need, and you're going out and finding them one by one to build this picture
[827.6-833.5] that you've pre-built in your mind versus it being more organic and bottom-up where you just say,
[833.7-837.4] if something comes up that could slot in, we do that deal if it's a great deal. So is it more
[837.4-842.9] bottom-up or top-down as you've built? It's both. There certainly is a strategy and a plan
[842.9-847.5] and a vision of where you're going, but you have to be opportunistic. You have to be agile. You
[847.5-851.7] have to be flexible. You have to be open-minded. You can't be rigid on this. You have to take
[851.7-856.5] deals that come to you and say, yeah, that's interesting. It wasn't in my original plan.
[856.9-857.8] Actually, this makes sense.
[858.3-859.9] So you look at XPO, for example.
[860.3-865.3] We started out, the very first company we bought was a company called Express One, which
[865.3-866.5] is where XPO came from.
[866.5-867.4] That was their ticker symbol.
[867.6-870.7] They were a small cap company, less than $200 million market cap.
[870.8-875.0] And their ticker symbol on what was then called the Amex was XPO.
[875.3-877.1] And they were in a few things.
[877.1-878.5] They did truck brokerage, which we like.
[878.8-880.3] They were doing expedite, which we like.
[880.3-882.5] And they're doing freight forwarding, which is okay too.
[882.5-887.2] And our original plan was, okay, let's buy this company and let's keep buying more companies
[887.2-891.6] in those three sectors, particularly the truck brokerage, but let's also add Intermodal.
[891.8-893.4] So we thought Intermodal would go together.
[893.5-896.4] And a few years later, we bought Pacer, which was a big Intermodal company.
[896.6-897.7] And that was the original vision.
[898.2-903.7] Over the course of time, we had opportunities presented to us to buy New Breed Logistics,
[903.8-908.3] which is, in my opinion, the best run warehouse contract logistics company that's ever been
[908.3-910.4] around that Louis DeJoy was selling at the time.
[910.4-915.1] and I remember Eli Gross, who's now head of investment banking at Morgan Stanley. Then he
[915.1-918.7] was running transportation, calling me up on a Sunday and saying, I got an interesting deal
[918.7-922.6] down in North Carolina. It's a little bit different, here in the sense that it wasn't
[922.6-927.1] in the original strategy. It was a pivot. And he said, it's a little bit off what your original
[927.1-932.2] strategy was, but I think it fits. It fits real well. And I said, what is it? He said,
[932.2-937.8] it's contract logistics. And I said, okay, what's contract logistics? I didn't know what that meant.
[937.8-939.9] And that's a part of the world I never really explored.
[940.6-945.0] And so I got some fast education and tutorials about the warehousing business,
[945.1-947.3] supply chain management, contract logistics.
[947.9-949.3] I looked at who the customers were.
[949.9-953.4] I saw opportunities to do things with those customers in the original four things we were
[953.4-954.8] looking at and made perfect sense.
[955.1-957.5] So that was an example of, yeah, we had a strategy.
[957.6-958.6] Yeah, the strategy was working.
[958.6-962.2] But an opportunity to enhance the strategy by getting a whole new line of business.
[962.6-966.7] And over time, we bought other contract logistics companies, put them all together,
[966.7-971.8] integrated around a global basis. Eventually, we spun it off. And today, that's called GXL
[971.8-976.5] Logistics, which is a New York Stock Exchange company trading on its own and doing super well.
[976.7-980.6] Another example of pivoting, of being opportunistic, of having an opportunity
[980.6-984.4] fall on our head, and instead of getting a headache, we looked at it and said,
[984.6-988.8] that's interesting, was I was trying to buy this company called Menlo Logistics,
[988.8-994.8] which was the contract logistics subsidiary of Conway. And in the course of negotiating with
[994.8-999.8] the Conway team and getting to know them and flying out to Ann Arbor and learning the business
[999.8-1003.5] that they had in Menlo, they proposed to me.
[1003.6-1004.1] I said, you know what?
[1004.3-1005.3] Why don't you just buy the whole business?
[1005.6-1007.3] Why are you just buying contract logistics?
[1007.5-1009.3] The LTL business is a fantastic business.
[1009.8-1010.1] Why?
[1010.3-1011.6] Why is that a fantastic business?
[1011.7-1013.0] But I kept an open mind about it.
[1013.3-1014.0] They persuaded me.
[1014.2-1018.3] They said it's a business where there's been no new entrant of any size for several decades.
[1018.6-1020.1] There's a big moat around the business.
[1020.6-1025.1] It's got great pricing power because capacity actually has been leaving the industry,
[1025.3-1026.4] not coming in the industry.
[1026.8-1030.5] And there's ways to continually improve the business over time.
[1030.9-1031.7] So I studied it.
[1031.9-1032.7] I studied Conway.
[1032.9-1037.6] And it was interesting because they told me, they said, Brad, one thing you need to know
[1037.6-1039.7] is there's not a lot of cost-out opportunity here.
[1039.9-1040.3] I said, okay.
[1040.8-1045.7] And I went in and I found tons of cost-out opportunity because I saw the organizational
[1045.7-1046.1] chart.
[1046.4-1048.4] It was like someone just took spaghetti and threw it against the wall.
[1048.9-1052.9] It was three different HR organizations, three different IT organizations, three different
[1052.9-1053.8] operating divisions.
[1054.0-1057.1] Everything was three for the different parts of the company instead of having a shared
[1057.1-1059.0] services, which is a more traditional way of doing it.
[1059.4-1062.7] And I said, wow, it's like a lot of money we can take out of this just doing that.
[1062.7-1067.1] They had a government relations division with a fairly sizable staff and significant
[1067.1-1068.3] budget, but they didn't really need that.
[1068.5-1069.1] It really didn't make any difference.
[1069.3-1070.2] So we pivoted.
[1070.4-1071.0] And we said, you know what?
[1071.1-1073.3] Let's get into asset-based LTL.
[1073.5-1077.5] It was a big pivot because we had been previously doing non-asset businesses.
[1077.5-1082.1] Although Intermodal was quasi-asset because you lease the trailers, the containers.
[1082.8-1084.6] So that ended up becoming a fantastic deal.
[1084.7-1090.8] Had I turned that down, had I been rigid in my thinking on that, had I just stuck to the
[1090.8-1094.8] original initial strategy and said, you know what, no, that's a little off the beaten path,
[1095.0-1099.0] we would not have created billions of dollars of value because we bought that company for
[1099.0-1100.4] $3 billion today.
[1100.8-1103.7] We're not selling it, but if we were to sell it, it would be many times that.
[1103.7-1109.2] What are, in your mind, the components of a fantastic business, the term you just used?
[1109.7-1111.8] The perfect business, which doesn't exist, by the way.
[1112.0-1114.8] But if I had the perfect business, here's what it would look like, Patrick.
[1115.0-1119.3] Number one, it would be highly respected in the industry by its competitors.
[1119.8-1131.5] It would be very highly valued by the customers The customers would say I willing to pay more to do business with this company because their service is so great and their people are so great
[1131.5-1135.5] and their technology is so great. Everything about them meets my needs. It delights me as a customer.
[1135.8-1142.0] It's a business that has lots of organic growth, just grows by itself in terms of price, in terms
[1142.0-1145.0] of volume. Some industries, you're not gonna be able to raise price because it's too competitive.
[1145.4-1149.7] Some industries, you're not gonna be able to grow volume because there's just so much market out
[1149.7-1153.0] there, maybe it's a declining market. It's not even a growing market. So if you can find a
[1153.0-1159.2] business that can grow both price and volume, and you have ways to continuously improve the
[1159.2-1163.6] operations and grow your margins, that's a great business. And I'll go another step further.
[1164.0-1168.1] Perfect business for me, and this is a key point for me in every acquisition I've ever done,
[1168.4-1173.9] what's their turn on capital? Because at the end of everything, that's what creates shareholder
[1173.9-1178.5] value. What creates shareholder value is you have a finite amount of debt and equity. You need to
[1178.5-1184.9] put that to use and you have to get back a lot more capital than you put out. That's what it's
[1184.9-1191.0] about. And a business that has a high ROIC, whether it's in favor, whether it's out of favor, whether
[1191.0-1195.4] it's the fad, it doesn't matter, over the long term will absolutely create value.
[1196.1-1200.8] When you think about the deals that you didn't do, how often was it price? So if you've got
[1200.8-1205.4] this fantastical business on one side, there's no business for which a terrible price can't
[1205.4-1211.7] ruin the investment. So how does and has price slotted up against the quality of the business?
[1212.3-1217.4] Many times I've seen an interesting business, maybe not perfect, but definitely good enough
[1217.4-1224.7] and would love to buy it, but I can't buy it at a price that makes sense. So the IC in ROIC matters.
[1225.1-1229.9] So the IC in M&A is the purchase price and whatever you're subsequently going to put into
[1229.9-1234.4] the business. If there's CapEx improvements, invested, you want to grow it and that requires
[1234.4-1238.5] capital, the aggregate of your purchase price and how much money you're going to put in over the
[1238.5-1242.3] next year or two, assuming you're going to put in rather than take out money, that's your invested
[1242.3-1247.1] capital. And that's what you have to generate a return on. So the purchase price is very important
[1247.1-1252.8] and you must stay disciplined on price. If you overpay for an acquisition, you're in a hole.
[1252.8-1258.5] And it may be many years of destroying value before you're creating value. That's a sin.
[1258.6-1262.9] No management should do that. If you were to boil down source of returns and equities as simply as
[1262.9-1267.2] you could, you might say it's multiple change and fundamental change. Growth of the business,
[1267.4-1271.1] change in the multiple. It sounds like change in the multiple, meaning buy well,
[1271.3-1277.4] buy at a good reasonable multiple, has been your strategy more than materially change the business.
[1277.5-1281.1] Is that roughly right? Not really. All the businesses that we've bought,
[1281.4-1286.6] we've integrated very tightly into the business. We don't run a loose confederation of lots of
[1286.6-1290.1] different companies, which you see some business models and some of them work. I don't like doing
[1290.1-1294.4] that myself. I feel out of control. I like to have everything standardized and one way of doing
[1294.4-1300.9] everything. The price does matter, but the multiple matters too. For example, when we looked at
[1300.9-1305.2] ourselves in the mirror at XPO Logistics a few years ago, and we said, look, we've been trading
[1305.2-1310.4] at eight and a fraction times EBITDA for a while now. That's what the market says this is worth.
[1310.7-1314.5] We didn't think it was worth that. We thought if you looked at the sum of the parts of the business,
[1314.8-1318.9] this should be trading many turns of multiple higher than that, significantly higher than that.
[1318.9-1322.8] But we said, I don't think we're going to get there on our own because the market has spoken.
[1323.1-1327.4] So we decided to do something that very few companies do, which is to make ourselves smaller.
[1327.6-1329.9] And we divided the company up into three companies.
[1330.3-1336.4] And those three companies, we put the circles around the different parts of the business of how we're going to divide it up with two things in mind.
[1336.8-1341.9] One was, how can we run this business with greater focus operationally, execution-wise?
[1342.1-1344.5] And secondly, what will get a better model?
[1344.9-1347.3] Because Wall Street generally likes pure place.
[1347.3-1351.3] as a general rule, not always, but generally likes pure plays. It likes to have easy to
[1351.3-1356.1] understand stories. Typical sell side analyst, for example, covers 32 stocks. So they don't have
[1356.1-1361.2] the luxury of time to really go deep studying stuff. We divided the company up into one company
[1361.2-1366.2] that was primarily LTL, which is XPO. Another company that was primarily brokerage, truck
[1366.2-1370.9] brokers, non-asset, which is RXO. And a third company, which we were talking about before,
[1371.0-1376.0] which is the supply chain business, was GXO. And now each of those companies gets EBITDA multiples
[1376.0-1377.8] of 11, 12, 13 times.
[1378.2-1378.9] That's a big change.
[1379.3-1385.1] So we unleashed the value from getting multiple expansion by dividing the company up into
[1385.1-1385.8] smaller companies.
[1385.9-1389.2] So the multiple you get from Wall Street matters because it goes back to what we were talking
[1389.2-1393.5] about a few minutes ago, where you have your cost of capital, what you can raise money
[1393.5-1396.5] at, to put it in more simple terms, what multiple you can raise money at.
[1396.8-1401.0] And then you have businesses that you can buy, acquisitions that you can do at a lower
[1401.0-1401.4] multiple.
[1401.6-1402.6] So there has to be a spread.
[1402.6-1410.1] And when you look at all the ways that you create value, and there's dozens and dozens of levers in the business plan, that often is the most important lever.
[1410.3-1422.3] Sometimes it's one of the top three, but the differential, the disagio between, the delta between what you can raise capital at, what the market will give you money at, and where you can deploy it at in acquisitions, that's a big value creator.
[1422.4-1423.7] So you need to pay attention to that.
[1424.3-1429.8] In that value creation mechanism, the relationship with capital markets and with Wall Street specifically is obviously very important.
[1429.8-1435.5] how do you as a CEO manage that relationship well? What have you learned about interfacing
[1435.5-1439.6] with Wall Street in the most constructive way possible? I have a lot of friends who are
[1439.6-1444.5] portfolio managers and analysts, and it's very easy. They want to make money. It's as simple
[1444.5-1448.0] as that. They've never bought my stock because I'm handsome or I have a full set of hair,
[1448.1-1452.4] anything like that. They bought my stock and supported me because we created Alpha and we
[1452.4-1456.8] outdid the competition and we were a great investment, made a lot of money for investors.
[1457.2-1461.8] And I think if the investment community understands what you're doing and you're truthful with
[1461.8-1465.0] them and you tell them, as we were talking about before, the good things and the bad
[1465.0-1466.4] things going on, because it's always both.
[1466.7-1469.8] And you can't be one of these management teams like, everything is sunny, everything is great,
[1469.9-1470.3] everything you want.
[1470.5-1471.0] That's baloney.
[1471.2-1471.8] It's not like that.
[1472.0-1475.9] If you confide in your shareholders of what's worrying you and what the challenges are,
[1475.9-1480.4] and at the same time, what the opportunities are and what your vision is, and you consistently
[1480.4-1484.5] post up good numbers consistent with what you forecasted, and they should be ambitious
[1484.5-1486.0] ones, then you'll get a following.
[1486.0-1490.3] I'm lucky and humbled that I have a pretty big following, but I have no illusions of why that is.
[1490.5-1493.7] The reason I have a big following is I've made a lot of money for investors. They get bonuses.
[1494.2-1497.2] Have you made any major mistakes dealing with capital markets?
[1497.6-1500.0] I've made major mistakes in everything, including
[1500.0-1505.5] Capital markets. Absolutely. So sometimes I've raised too much money and then I didn't have a
[1505.5-1509.3] use for it right away. And then it was dilutive. Sometimes I didn't raise enough money. I had
[1509.3-1513.4] these fantastic opportunities and I didn't have the capital. And when you do acquisitions in
[1513.4-1518.6] particular, you didn't have the money. You can't credibly go to a seller and say, hey, let's sign
[1518.6-1523.0] a deal and I'll go raise the money. Even if you can raise the money, things change. Geopolitical
[1523.0-1526.4] events happen, market corrects, all kinds of stuff happen. And so sellers want to make sure
[1526.4-1530.2] your money good. Sometimes they haven't capitalized the business enough. And I think in my next
[1530.2-1534.7] ventures, I will err on the side of raising more capital rather than less capital. I've lost so
[1534.7-1537.8] many opportunities over the years because I didn't have enough money on the balance sheet.
[1538.2-1543.0] Can you tell the story of the large buyback that you did with XPO on the opposite side of the
[1543.0-1547.3] capital allocation ledger from acquisitions? So that was another example of opportunism,
[1547.3-1552.1] where we had something fall in our lap that we weren't expecting and wasn't in our plan.
[1552.1-1556.8] And that came in the form of this crazy short seller report back in 2018.
[1557.4-1558.4] I don't remember the guy's name.
[1558.5-1559.0] I blanked it out.
[1559.3-1561.8] But this report came out, just pure nonsense.
[1562.1-1562.8] We were doing this.
[1562.9-1563.5] We were doing that.
[1564.2-1568.9] And he was very sophisticated in the sense that he knew all the right buzzwords to say.
[1569.1-1570.3] And we researched him afterwards.
[1570.4-1573.9] He says pretty much the same thing about every company does a short seller on the word processor
[1573.9-1580.2] that just gets the bots to repeat it and then sell the stock and to get various media outlets
[1580.2-1581.1] to write the story.
[1581.1-1585.4] And it's a near certainty that when he comes out with that report, the stock's going to go down.
[1585.5-1591.5] It's almost 100% certain. And they lever up quite a bit. They use derivatives. And if the stock had
[1591.5-1595.0] gone up like 20 cents, he probably would have gone bankrupt. But the stock's not going to go
[1595.0-1598.9] up 20 cents. It came down. In our case, it came down like 26% the first day, big drop.
[1599.2-1603.5] And it was interesting because the day it happened, just as it happened, just by coincidence,
[1604.1-1609.3] I had Adam Carr and Matt Adams in my office, who were the two top guys running a little over a
[1609.3-1613.7] billion position at the time in XPO, visiting my office. And I was in the middle of the room,
[1613.9-1619.4] and someone walked into the room and passed me a paper, a screenshot actually, of what had just
[1619.4-1624.2] gone on. The stock is down 20-something percent, and some short seller is making up all this crazy
[1624.2-1629.3] stuff about us. And so in real time, we talked about it. Because every situation, there's a play.
[1629.7-1634.4] Every situation, there's a way to make money. If you stay cool, and you're smart, and you
[1634.4-1638.2] keep an open mind, and don't take it too personally, you'll find ways to capitalize
[1638.2-1643.2] in that situation. In this case, we said, okay, look, the stock is down a lot, but for no reason.
[1643.5-1647.0] It's not like our numbers got worse. It's not like we did a pre-announcement and we're going
[1647.0-1652.5] to miss by a mile our earnings. It's not because it was some big lawsuit that was very vicious or
[1652.5-1656.0] the government regulator. There was no reality to this. It was just a bunch of silliness. And so
[1656.0-1660.5] temporarily the stock was dislocated. So we said, what's the right move here? The right move was
[1660.5-1665.7] really obvious. Let's go buy back our stock. And Orbis bought, I think they bought over a billion
[1665.7-1669.7] dollars of stock and we bought about $2 billion of our stock back. And I remember talking to the
[1669.7-1673.9] bankers when we were mobilizing to do this and they said, nobody's ever done this before in terms
[1673.9-1678.9] of the percentage of market cap and buyback in a short period of time. It would be blazing new
[1678.9-1683.6] ground, new territory here. And I said, so what? That's an interesting data point, but the fact of
[1683.6-1687.8] the matter is we're definitely going to make money on this trade. We take $2 billion and buy our
[1687.8-1693.1] stock. It was already on the low side, but after it fallen down like this, it was ridiculously cheap
[1693.1-1697.6] by any measurement. So I said, let's do it. So we bought it back. And two years later,
[1697.6-1701.2] the stock was three times what the price was when we bought it. We made $6 billion on that trade.
[1701.4-1703.5] So it was a very advantageous thing for us to have done.
[1704.0-1707.1] There's a great Winston Churchill quote, which is always more audacity.
[1707.6-1708.4] What do you think of that quote?
[1708.9-1712.3] I don't know. You don't want to have audacity just for the sake of audacity.
[1712.8-1716.2] You don't want to be reckless. You want to be disciplined. You want to be rational. You want
[1716.2-1719.9] to be logical, but you need to be bold too. You need to be creative. It's a balance like
[1719.9-1725.5] most things in life. You want to have one ounce of daringness and one ounce of cautiousness.
[1725.7-1731.1] Balance those two out and come up with really good moves, good strategies, good tactics.
[1731.7-1736.3] How do you think about setting your own scope of ambition? Because when I was talking to your
[1736.3-1739.8] colleague before we started and asked them to describe you in two words or two phrases,
[1740.3-1744.8] one of them was related to the scope of ambition and the second one was related to the pace of
[1744.8-1749.0] execution. We'll talk about both. But starting with scope of ambition, it does seem as though
[1749.0-1753.8] that's been a common theme in your various entrepreneurial stories that maybe you're just
[1753.8-1760.0] wired to click the ambition dial a couple of points higher than most people are. So I'm curious
[1760.0-1764.4] how intentional that is and also whether you think more people should think that way.
[1764.9-1768.0] Well, it's funny you say that because I wasn't part of that conversation because it showed up
[1768.0-1771.3] earlier than I did here, but that's what I would have said. I would have answered it,
[1771.8-1775.6] think big and move fast. I don't think I invented that phrase, but that's a very good phrase that
[1775.6-1780.4] describes my team, that's our culture, is to think big and execute fast because things don't get
[1780.4-1786.1] better over time. Law of physics is entropy sinks in. I think it's important to think in very big
[1786.1-1791.0] scales because often you're not going to accomplish 100% of what you are achieving. If you're not
[1791.0-1795.1] thinking huge to begin with, you're not going to accomplish anything big. And life goes by fast.
[1795.3-1800.5] I'm 67 years old. I feel like I'm 37, but technically speaking, I'm 67 as I am. That's
[1800.5-1805.7] my biological age. If I live to, I don't know what, 87, that's 20 years. You take 20 years,
[1806.1-1812.2] you multiply that times 365 days, it's only about 7,000 some odd days. That's not a lot of days.
[1812.3-1816.9] And your last one or 2,000 days, I don't know, usually aren't your best days. You have 5,000
[1816.9-1820.6] great days left here. I want to accomplish something really important every single one
[1820.6-1826.3] of those 5,000 great days. And so I think time is important to utilize properly. Time is not
[1826.3-1831.9] something to waste with frivolous things. So the goal of the CEO is to get the whole management
[1831.9-1838.7] team to collectively to buy into a big vision, big goal, very clearly thought out, very clearly
[1838.7-1844.6] envisioned what that is. And then for everybody to sign up for what are they going to do in order
[1844.6-1849.3] to help materialize that goal. So thinking big, but then you got to get a team. You can't just
[1849.3-1855.6] think big. You've got to get a team together to get mobilized to materialize that big goal you've
[1855.6-1859.2] put out. And that's not unique, by the way. There's plenty of other companies that think big
[1859.2-1863.7] and move fast, but we've been consistently thinking big and very big, and we've been
[1863.7-1866.8] consistently executing with discipline on that big vision.
[1867.5-1880.3] What are the keys to moving fast at scale You always hear that pace is the advantage of the startup right They can move a lot faster than the incumbent but you trying to do this at scale So what specifically about moving fast even when there lots of people and lots
[1880.3-1885.2] of companies and lots of stuff going on, what have you found unlocks speed for you and your
[1885.2-1885.5] teams?
[1885.5-1890.8] The most important thing in order to unlock speed is have people on the management team
[1890.8-1895.1] who are comfortable with moving fast, but moving fast in a disciplined way.
[1895.3-1896.1] Use this analogy.
[1896.1-1900.9] You have a car driving down the highway as fast as it responsibly can.
[1901.3-1904.1] The hubcaps may be shaking a little bit, but they're not going to fall off.
[1904.5-1908.1] You don't want to drive so fast that you're going to have self-created problems.
[1908.2-1908.9] You can't be reckless.
[1909.0-1910.1] You need to be disciplined.
[1910.2-1910.8] You need to be professional.
[1911.2-1912.2] But you want to move fast.
[1912.5-1914.3] Jack Welch was a big proponent of speed.
[1914.9-1918.4] He was always emphasizing throughout the whole organization, you got to move fast.
[1918.5-1920.8] Things get worse, not better, particularly with deals, by the way.
[1921.0-1923.3] When I do M&A, I do them very, very fast.
[1923.6-1925.1] I can get a deal done in two weeks.
[1925.1-1937.2] Whereas I've gazumped, I've interfered, I've preempted many sell-side processes where a bank has a book and a data room and a whole schedule of here's the first round, here's the management meetings, here's the second round.
[1937.7-1941.9] Everyone gets their consultants and they spend all this time and money doing all this due diligence.
[1942.4-1943.5] I know what I'm looking for.
[1943.7-1945.2] I don't need a lot of that due diligence.
[1945.4-1946.3] I need to meet with the people.
[1946.3-1948.8] I need the basic fundamental paperwork, obviously.
[1948.8-1953.7] But I don't need to know why SG&A is an eighth of a percent higher than it was in the forecast
[1953.7-1956.8] and hire a consultant to write a report on that nonsense.
[1957.2-1959.9] And then you just take the report and no one ever does anything with it afterwards.
[1960.2-1961.3] I need to meet with the people.
[1961.4-1965.7] If I can meet with the top dozen or so people in a company and I can spend an hour, hour
[1965.7-1968.5] and a half with each one of those people, I know everything I need to know about that
[1968.5-1968.8] company.
[1969.3-1972.3] Do you have favorite questions to ask in those processes of those people?
[1972.7-1973.3] It'll change.
[1973.4-1976.9] It'll change from company to company because what's pertinent is different from company
[1976.9-1977.3] to company.
[1977.3-1981.6] So there are some things that are the same, things about how they make money.
[1981.8-1982.5] What's the game here?
[1982.6-1984.5] What is different about their company than the next guy?
[1984.7-1985.6] What's their advantages?
[1985.7-1986.5] What are their disadvantages?
[1987.1-1987.8] What are the opportunities?
[1987.9-1990.8] If they were CEO, had they been CEO, what would they have done differently?
[1991.1-1993.5] What if I buy this company, should I change?
[1993.6-1995.0] Because it's not optimal.
[1995.5-1999.5] What if I buy this company that I should definitely not change because it's really good and it's
[1999.5-2000.5] working really well?
[2000.7-2006.1] And my list of questions are brief because I want to hear what the answers are.
[2006.1-2010.5] And then based on listening carefully to those answers, follow-up questions.
[2010.8-2014.1] I'm much more interested in what they want to set the agenda than what I want to set
[2014.1-2015.6] the agenda because they know the business.
[2016.0-2017.2] I'm just learning the business.
[2017.6-2019.6] They've been living the business maybe for 10 or 20 years.
[2020.2-2023.5] What is your favorite part about post-acquisition integration?
[2024.2-2024.5] Speed.
[2024.9-2030.7] Getting to the point where you no longer can tell that this is a company we bought three
[2030.7-2035.8] months ago versus the company that we home grew or 10 years ago we bought it and it's
[2035.8-2040.5] been with us for a decade. You get the same look and feel, the same brand, the same IT,
[2041.2-2045.9] the same culture, the same excitement. They're using all the same internal social media,
[2046.0-2048.8] because I always like to communicate a lot through our internal social media.
[2049.2-2054.6] Then it just is identical in every way. Now, I shouldn't say in every way, because every branch,
[2054.7-2059.7] every location, every district, every region does have its own flavor. It has its own personality,
[2059.7-2063.5] because you have cultural differences in different parts of the country or in different countries.
[2063.5-2068.6] but the general blood and guts of the business is the same. And for me, that's the goal. The
[2068.6-2074.6] goal is to get to the point where you have fully integrated this business on every level into the
[2074.6-2078.6] rest of the company and it's part of the family. How do you do the cultural component of that,
[2078.7-2082.2] especially if the culture leans most different from the culture that you've been running?
[2082.7-2088.8] Listening and demonstrating sincere respectfulness. So this is probably my most important learning in
[2088.8-2095.8] integration is not to come into an acquisition thinking I know it all and getting up there on
[2095.8-2098.7] stage and telling everyone, okay, and giving them a long speech of here's what we're going to do.
[2098.9-2104.1] No. What I want to do is I want to come in with a very open, receptive mind to say, look,
[2104.1-2108.2] we've just paid millions and millions, in some cases, billions of dollars for this business.
[2108.7-2112.9] Obviously, we think it's valuable. And these are the people who are going to make this company
[2112.9-2120.2] work. And I look at those people as an extremely valuable source of information about the company
[2120.2-2124.5] that we just spent all that money to buy. And I often find, and I write about this in the book,
[2124.6-2129.0] that I often find that employees at all levels, whether they're frontline, middle management,
[2129.1-2134.1] senior management, have never been asked, what's your best idea to improve the company? Tell me
[2134.1-2138.9] everything that you would do if you had my job. And when you ask them that, and then shut up and
[2138.9-2142.9] just listen carefully to what they're saying, write it down. It's an amazing experience.
[2143.3-2148.1] Sometimes you ask those questions and then for 45 minutes, all the people you're interviewing
[2148.1-2152.3] just are piling on and interrupting each other because it's just such an exciting experience to
[2152.3-2157.7] say how they could improve the business. It's unleashing these perspectives, this knowledge,
[2157.7-2161.5] this information about the business that you don't get otherwise. I find a lot of companies,
[2162.0-2167.5] many companies, in fact, the majority of companies, they have this valuable thing there in
[2167.5-2173.0] terms of this repressed information that's not unleashed. And if you can go in there and figure
[2173.0-2178.6] out ways to unleash this information flow and get these feedback loops going and recognize people
[2178.6-2183.5] for contributing to this improvement plan, wow, you can create tremendous opportunities, tremendous,
[2183.6-2189.3] and make a lot of money for everybody. Are there most common sources of bloat that you've seen in
[2189.3-2194.4] companies that you've acquired? Oh yeah, I've seen lots of bloat. I should caveat that. I've seen
[2194.4-2200.8] two types of travesties. One is where a company just has way too much expense, just bureaucracy
[2200.8-2206.7] and red tape and people aren't really triplicates of every division. Well, they say, so how do you
[2206.7-2211.6] contribute to the value of the company? This is long pause. They're really not. They're just on
[2211.6-2216.3] some tangent that just wasn't managed properly, just grew up like a weed. But I also see companies
[2216.3-2220.9] that are underinvested, that haven't put enough money into the business and they've lost opportunity
[2220.9-2225.5] to grow the business as a result of not investing in the business. And both of those, too much
[2225.5-2230.9] bloat or actually just bloat and too skinniness in the overhead, both of those things are bad
[2230.9-2234.4] things. You want to find, like most things in life, you want to find that middle path. You
[2234.4-2237.3] want to find that good harmony. Can you tell me about Ludwig Jesselson?
[2237.9-2241.6] Oh, I'd love to. So Ludwig, you see a big smile comes to my face. So Ludwig Jesselson,
[2241.6-2257.6] may he rest in peace He died in 1993 Ludwig Jesselson was the head of Philip Brothers which was before there were hedge funds the word didn exist back then but he was the largest hedge fund I would call him a hedge fund because they were a commodity trader They traded oil they traded metals and a global business
[2258.1-2262.4] And Mr. Jesselson, I never heard anyone call him Ludwig. Mr. Jesselson, I always called him,
[2262.4-2268.7] sometimes Mr. J. Mr. Jesselson was an amazing individual. And he was my first big business
[2268.7-2275.6] mentor. And anytime I met someone in my business career who was older than I was and was very
[2275.6-2280.3] successful, I tried to glom onto them and I just picked their brain and just asked them,
[2280.5-2284.0] so how'd you get so successful? How did you accomplish all this? What are your secrets?
[2284.1-2288.5] What did you achieve? And I found that every time I did that, they're very generous with doing that.
[2288.5-2293.0] Mr. Jesselman was my first big business mentor. And he was a customer of mine,
[2293.1-2297.4] Philip Brothers, because I had Amorex, which is a oil brokerage firm, and Philip Brothers is a
[2297.4-2302.4] big trading firm. So I was getting oil from them and matching them together with Exxon and Shell
[2302.4-2307.1] and BP and Texaco and Gulf and all the different major oil companies and independent refiners.
[2307.5-2312.3] And I started doing a lot of business with them because we came out of nowhere. And suddenly,
[2312.5-2316.0] after a relatively short period of time, we were doing billions of dollars of brokerage volume.
[2316.3-2319.3] And Philip Brothers was a big player. So naturally, our paths crossed. One day,
[2319.3-2323.0] I got a call from his secretary saying, Mr. Jessison would like to have lunch with you.
[2323.0-2325.3] I said, wow, that's a big break.
[2325.4-2326.3] I'm in, tell me when.
[2326.7-2329.4] So I went in and this became one of many lunches.
[2329.5-2330.7] I went to New York to his office.
[2331.1-2333.7] And during those lunches, I paid attention.
[2334.2-2336.2] I just zeroed in on everything he said,
[2336.3-2338.5] everything he did, his nuance, his face, everything.
[2338.8-2340.3] And I just asked him lots of questions.
[2340.6-2343.1] And he was very generous with sharing his insights on stuff.
[2343.3-2344.8] And I learned a lot about business
[2344.8-2345.8] and I learned a lot about life.
[2346.1-2347.6] He was a very religious person,
[2347.6-2348.8] much more religious than I am.
[2349.1-2351.0] And he believed in principles.
[2351.0-2352.7] He believed in certain basic concepts.
[2353.0-2355.5] And in Judaism, he was Jewish, Orthodox Jew.
[2356.1-2357.5] It was a lot about morality.
[2357.7-2358.5] It was about ethics.
[2358.6-2361.6] It was about right and wrong and about certain things are not gray.
[2362.0-2363.3] They're either black or they're right.
[2363.5-2364.0] Murder's out.
[2364.3-2364.9] Murder's not good.
[2365.4-2368.1] He saw life in terms of honesty.
[2368.1-2373.5] He saw life in terms of people who he could trade with, who would be reliable trading
[2373.5-2376.8] partners, and people who were, in the Indian, they call it ganas, thieves.
[2377.5-2380.0] And he tried not to do business with the ganas.
[2380.0-2384.1] And when he had a trading partner that was honest, that was ethical, he did a lot of
[2384.1-2384.7] business with them.
[2384.9-2386.7] Because back then, remember, there was no email.
[2387.1-2388.1] There wasn't even the fax machine.
[2388.2-2390.7] There was telexes and twixes that barely worked.
[2391.2-2393.4] And so your word really was your bond.
[2393.8-2396.8] And you needed to trade with people that were going to perform.
[2397.2-2401.3] Because if you bought a cargo of oil for someone, $23, and then the market went up to $25,
[2402.0-2404.4] you didn't want a partner that said, I'm not honoring that deal.
[2404.5-2405.0] There's nothing in writing.
[2405.1-2407.5] So you needed people who would honor their word, had integrity.
[2407.5-2412.2] He placed a very high value on integrity and dealing with people.
[2412.6-2417.3] And he put a lot of emphasis on dealing with people who would perform what they said they
[2417.3-2418.2] were going to perform.
[2418.8-2423.6] If you could have a five-hour session around a nice fall fire with Mr. J and two or three
[2423.6-2425.0] other people, who would you pick?
[2425.1-2426.3] Who would you add to that conversation?
[2426.9-2430.7] I was fortunate to hang around with his family a lot of times on Shabbat.
[2431.1-2433.3] But unfortunately on Shabbat, you can't talk business.
[2433.5-2434.6] So I couldn't talk business.
[2434.7-2435.1] But that's okay.
[2435.1-2435.8] We talk about life.
[2435.8-2440.1] But I had many lunches with him and his son, Michael, who's a good friend of mine now.
[2440.2-2443.9] And I spent a lot of time with his wife, Mrs. Jesselson, Erica Jesselson.
[2444.0-2445.3] It was an amazing story.
[2445.4-2446.5] She came out of the Holocaust.
[2447.3-2452.1] And before the Holocaust, she had dozens and dozens of, she had a pretty big family, the
[2452.1-2454.2] Poppenheim family in Austria and Vienna.
[2454.5-2455.9] She had dozens and dozens of cousins.
[2456.1-2457.6] And after the Holocaust, she had a handful.
[2457.9-2459.8] And the large majority of her family died.
[2459.8-2463.5] And that really formed her worldview that, wow, evil in the world exists.
[2463.5-2467.8] and it can have very serious consequences if it's not addressed right away. I spent a lot of time
[2467.8-2470.5] with Mr. Jesselyn and his family. I was very fortunate to do so.
[2471.0-2476.5] Pretty wonderful. If you think about the process of employing technology in your businesses,
[2477.3-2480.2] what lessons have you learned there? Because you said before, you're not a technologist,
[2480.2-2485.2] but you use a lot of technology. I imagine that today, AI is probably on the front of your mind
[2485.2-2489.1] in some way, shape, or form if you're a user of technology. How do you approach problems like
[2489.1-2492.9] this? Okay, there's a toolkit out there in the world that keeps getting better. It's pretty cool.
[2492.9-2497.7] I get to use that stuff. When do you know how to be an early adopter, a late adopter,
[2497.9-2502.3] quasi-technology business? The Adams versus Bits question for you in particular seems very
[2502.3-2506.1] interesting. So one of the things I learned from Mr. Jesselson, and I write about this in the book,
[2506.2-2510.5] is you can mess up a lot of things if you get the major trend right. And if you get the major trend
[2510.5-2514.5] wrong, you can do a lot of things right and you're not going to make a lot of money. So getting the
[2514.5-2519.0] major trend right is very important in any business. You can't be on the wrong side of the
[2519.0-2525.1] trend. The biggest trend of them all is technology. So in the book, I have a two million year
[2525.1-2530.3] synopsis. I think it's a really interesting chronology of technology and inventions,
[2530.8-2535.3] starting from over two million years ago when cavemen started using pebbles for tools,
[2535.7-2539.4] and then invention of fire a little time later. And then when I say a little time later,
[2539.6-2544.3] like a half a million years later, and then invention of shelters, another half a million
[2544.3-2549.1] or more years later, and then all the inventions that accelerated in time leading up to today
[2549.1-2551.0] where we are in this very AI-centered world.
[2551.2-2553.1] Technology is critical to get right.
[2553.2-2558.0] You cannot be in a business where technology is going to disrupt you and technology is
[2558.0-2561.5] going to diminish the value of the service or the product that you're providing.
[2562.1-2566.5] And on the other hand, you must be in a business where technology is your ally, is your friend,
[2566.9-2567.8] is wind to your back.
[2568.2-2571.3] And all my businesses, fortunately, have been on the right side of technology.
[2571.3-2576.8] On technology, if you look at today, the three companies that I chair, I'm no longer CEO,
[2576.9-2582.0] but that I chair, technology is all over the place. You look at XPO, the third person I hired
[2582.0-2588.2] at XPO back in 2011 was a guy called Mario Harik. Mario Harik had an advanced degree at MIT in
[2588.2-2592.6] machine learning and AI. And I loved him the first second I met him. And I said, okay, I'm going to
[2592.6-2597.0] hire this guy because like me, he talks fast and thinks fast. And we were just completely got what
[2597.0-2603.5] my vision was of automating brokerage. My original hypothesis for brokerage back in 2011 was,
[2603.8-2607.6] this is going to get automated eventually. You're not going to have people in rooms talking on
[2607.6-2610.8] phones. You're going to have computers talking to computers, and we got to get ahead of the
[2610.8-2615.2] curve on that. He understood that immediately. And I hired him very quickly, and he was my CIO
[2615.2-2633.8] for a number of years And then he became chief customer officer did a great job there And then he ran LTL and today he CEO of the whole company And he doing a fantastic job This morning the stock was up 12 They announced earnings and they did a great job It a good quarter So technology has been a big part of the culture of XPO largely due to Mario and my support
[2633.8-2635.2] of that right from the get-go.
[2635.2-2642.6] And if you look at the companies we spun off, RxO, so RxO is a very tech forward brokerage
[2642.6-2643.0] company.
[2643.4-2648.7] So they're matching together shippers and deliverers, trucks and shippers, and doing
[2648.7-2649.8] it in an automated way.
[2649.8-2658.4] When we started that business, 0% was done automated. Today, 97%, almost 100%, 97% is either
[2658.4-2663.4] generated or fulfilled electronically. So it's complete transformation of a business using
[2663.4-2670.2] technology. If you look at the third company that I chair, GXO Logistics. So GXO is the largest
[2670.2-2675.3] pure play warehouse company. It's got over 200 million square feet of warehouses with about
[2675.3-2682.1] a thousand warehouses in dozens of countries. And it's probably the most tech forward warehouses
[2682.1-2685.8] you'll ever see. Not you'll ever see, in the future, they'll all be automated like that,
[2685.8-2690.0] but you will be able to see today. There's warehouses that are large warehouses that
[2690.0-2696.4] a competitor may be running and having hundreds of people running it. And GXO is running it with
[2696.4-2700.8] 15 people and everything's well-engineered and well-designed using state-of-the-art technology.
[2700.8-2705.9] And it has a big joint venture with Nestle over in Europe of the warehouse of the future,
[2706.0-2707.6] which now is the warehouse of today.
[2708.0-2711.9] So I'm just giving you a few examples of utilizing technology, but I could give you hundreds
[2711.9-2718.1] of examples because that's a mindset that's in every company I've run is how do we use
[2718.1-2720.9] technology and capitalize on the trends?
[2721.0-2723.3] How do we make technology our friend, not our enemy?
[2724.0-2727.9] In your entire history of studying trends and making sure you don't miss the big ones,
[2728.5-2730.3] what is the fool's gold that you've seen?
[2730.3-2732.7] And when does it seem sometime there might be a trend?
[2732.8-2736.9] And what might be the reasons that something that initially appears to be the next big
[2736.9-2738.0] thing, in fact, is not?
[2738.6-2742.9] I'll give you one very graphic example of something I thought was a trend, and I wrongly
[2742.9-2745.0] thought it was a trend, and I ended up losing a lot of money on it.
[2745.0-2750.8] Back in, I want to say around 1999 or so, there was this Transportation Equity Act for
[2750.8-2751.7] the 21st century.
[2751.8-2752.5] It was called T21.
[2753.2-2759.1] And the idea was to repair all the bridges and the tunnels and the roads and all the
[2759.1-2763.0] decaying infrastructure across the United States. And the government was going to spend $600 billion
[2763.0-2766.9] to do that. And I thought that was a trend. I said, wow, I got to get in on this trend.
[2767.0-2771.9] We're going to see a lot of... By the way, $600 billion back in 1999 was a lot of money. Today,
[2772.0-2775.6] that would... I don't know how many headlines it would even get. It's not trillions. But back then,
[2775.6-2779.8] the equivalent of today, $200 billion. And I thought, we need to get in this game. And I went
[2779.8-2785.4] out and I bought a lot of barricade companies and cone rentals and striping and all those things
[2785.4-2789.7] that are orange on the highway of doing reconstruction, bridges and tunnels. And I said,
[2789.7-2793.8] I'm going to be like the big apartment rental guy, this burgeoning trend of the government
[2793.8-2798.2] refixing all the roads around the country and the infrastructure. And of course, as governments often
[2798.2-2802.7] do, they didn't spend the $600 billion. They spent a much smaller fraction of it. And it didn't go to
[2802.7-2806.9] companies like United Rentals for the large part. So it just didn't work. I ended up getting out of
[2806.9-2811.1] the business because it turned out to be a lousy business. And I resold it for a half a billion
[2811.1-2816.7] dollar loss. So sometimes you spot a trend and get all excited about it and act on it. It's not a
[2816.7-2820.4] real trend. That's an example of that. You got to be careful that you don't have false trends.
[2821.0-2825.3] When I was reading the tech chronology in your book, it gave me flashbacks to reading
[2825.3-2830.2] Ray Kurzweil's work back in my 20s or something. The singularity is near. What do you think of
[2830.2-2835.4] that notion? Surely anyone that looks at this, if you put it on a visual chart, you see this
[2835.4-2840.5] very Kurzweilian exponential growth. What do you think about this notion of the singularity?
[2841.1-2845.2] So you'll notice the very beginning of the book, I have the acknowledgement section.
[2845.7-2850.2] And usually in the acknowledgement section, you thank your manager and your publicist
[2850.2-2852.6] and your publisher and your wife and God, whatever.
[2852.9-2853.9] And they're pretty much all the same.
[2854.2-2857.1] And I say, I don't want to waste the reader's time, do some boring thing.
[2857.2-2859.0] I tried not to put anything silly in the book.
[2859.2-2860.2] I tried to be snappy.
[2860.3-2864.0] I tried to make it substantive and respect the reader's time because people are busy
[2864.0-2866.1] and they're doing me the privilege of reading the book.
[2866.2-2868.4] I want to give them something in return, something that's worth reading.
[2868.4-2874.8] So in the acknowledgement section, I picked about 15 or 20 people that have been my mentors,
[2875.1-2878.5] that have been my teachers, that have been my friends that I learned stuff from, just
[2878.5-2883.1] people that I've really benefited a lot, gained some wisdom, gained some insight that I wouldn't
[2883.1-2883.7] have had otherwise.
[2884.3-2884.9] And that's what I put.
[2885.0-2887.9] I put the person's name and then in one sentence, what did I learn from them?
[2888.0-2889.7] What's one of the most important things I learned from them?
[2889.8-2895.1] One of the acknowledgements actually is Ray Kurzweil because Kurzweil wrote a book in,
[2895.3-2898.2] I want to say 2006, 2006 or so.
[2898.4-2905.5] called The Singularity is Near. And its premise was that technology is advancing at ever-increasing
[2905.5-2911.3] speeds, it's accelerating, and humans are not evolving as fast as machines, as technology,
[2911.4-2916.8] as software and hardware. And ultimately, we're going to keep using that technology that we're
[2916.8-2921.2] creating. Technology is a tool that we're creating, just going back to the stone tools I talked about
[2921.2-2925.7] a few minutes ago, just like fire, just like the wheel, just like the telegraph, just like all the
[2925.7-2930.5] tools that we've invented over the years, this technology that we've been creating is becoming
[2930.5-2936.3] more and more integrated with us. And we're using it to enhance our senses. We're using it to enhance
[2936.3-2940.6] our cognitive functioning. We're using it now to enhance our feelings, our relationships,
[2941.0-2947.5] so many things that AI is generating. Our writing are now generative AI. And his hypothesis was,
[2947.6-2954.4] and still is, that we're merging with technology. And just as 99.9% of all the species that have
[2954.4-2958.4] ever existed on the planet have gone extinct. Humans, we're going to go extinct someday too.
[2958.7-2962.3] He thinks we're going to go extinct not too long from now. He thinks we're going to go extinct in
[2962.3-2968.0] the next decades, not the next centuries or millennia. And he thinks the next species will be
[2968.0-2974.1] a combination of humans and machines, humans and technology, that will be so different that you
[2974.1-2977.9] have to call it another species. And I don't know about the timing on that, but directionally,
[2978.0-2983.1] it makes a lot of sense. When you're evaluating how to deploy a new technology, let's just take
[2983.1-2988.6] AI, it's the one of the day for sure, inside of a business, what are the tactics of doing that?
[2989.0-2993.3] Is it pushed down to your team? Is there a normal way that you run this process in some
[2993.3-2997.6] regular interval to say, are we using the technology of the day efficiently enough?
[2997.7-2999.6] How do you actually do it? Especially because
[3000.0-3006.3] Businesses have been so real world, heavy, CapEx heavy, asset intensive.
[3006.6-3008.3] This is not a bunch of software flying around.
[3008.8-3011.3] So the exact opposite of what you would originally think.
[3011.6-3014.2] I don't say, okay, here's all this technology.
[3014.3-3015.0] How can we use it?
[3015.1-3016.1] It's the exact reverse.
[3016.4-3021.3] I ask all my employees, and I have formal ways to do that through questionnaires, through
[3021.3-3021.6] emails.
[3021.7-3025.4] And we also do town halls with a big campaign to ask all of our employees.
[3025.4-3031.8] if you had a wishlist and there was no financial impediment, just an initial exercise, don't worry
[3031.8-3037.4] about what it costs, and you could design any technology you would want to have, what would
[3037.4-3042.2] make your job easier? You could do your job faster if you had it. What would you be able to please
[3042.2-3047.4] the customer more if you had it? What are customers asking you for? What are ways that instead of
[3047.4-3052.5] something taking 10 minutes, it could be done in 10 seconds? And fantasize. Fantasize your
[3052.5-3058.8] perfect technology, your ideal world of technology, and then you get all these ideas come in.
[3058.9-3063.5] Then the tech people who have to be very tightly integrated with the commercial people, otherwise
[3063.5-3067.5] they're creating stuff that there's no application for. They're very much involved in this process.
[3067.8-3072.6] They then take it together with the FP&A, with the financial people, and look at each one of
[3072.6-3077.3] these ideas and say, okay, what would be the financial impact? Supposing we did this. Supposing
[3077.3-3082.2] we automated this function, for example, how much more money would that save? And we could pass
[3082.2-3085.7] along some of that to the customer and keep some of that for ourselves and we grow margin here.
[3086.1-3090.3] And then what would it cost and how much time would it take? What would the timetable look
[3090.3-3093.9] like on that? What would be the investment in that? And then it all comes down to ROIC,
[3094.2-3098.4] which is the basic thing of businesses, ROIC, you're deploying capital and getting money back.
[3098.6-3102.9] And then they stack rank all those. And now we've got the beginning of a business plan for our tech
[3102.9-3109.5] group. Here's what we asked all of our employees, what's the fantasticest tech you can imagine?
[3109.5-3113.9] and now we've gone into detail of what it would cost
[3113.9-3116.3] and what the return would be and timing for it
[3116.3-3118.6] and we've stack ranked them and now we have our plan.
[3119.1-3120.1] And then we track that plan.
[3120.4-3122.9] We execute that plan based on a timescale.
[3123.2-3125.1] We assign responsibilities to people.
[3125.5-3128.7] Now we have a checklist and we have weekly
[3128.7-3131.4] and monthly meetings where we color code our progress
[3131.4-3133.4] on that of how likely are we to hit the goal
[3133.4-3135.0] by that date that we initially said.
[3135.0-3135.5] Is it green?
[3135.6-3136.0] Is it yellow?
[3136.1-3136.6] Is it red?
[3136.8-3138.5] And then we attention direct based on that.
[3138.5-3144.0] And we don't just do with employees. We ask all of our customers and our vendors. We say,
[3144.2-3149.2] what could we do in technology that would make you love us more, that would make you want to
[3149.2-3152.9] do more business with us, that would make your life easier, that would delight you? And then
[3152.9-3156.8] we do the same exact process I just described. Get that all down. Maybe we have hundreds or
[3156.8-3160.2] thousands of ideas. And then we stack rank them based on our IC.
[3161.1-3162.3] You seem to love problems.
[3162.9-3166.7] Yes, I do. And by the way, you mentioned Mr. Jesselson before. One of the things I learned
[3166.7-3172.4] from Mr. Jesselson is that problems are your friend. Problems are your opportunities. Problem
[3172.4-3177.2] solving problems, that's the way you make money. So if there's no problems to solve, you're not
[3177.2-3182.3] going to make any money. Shareholder value comes from identifying problems, running towards the
[3182.3-3186.4] problems, solving the problems. Talk to me about thought experiments and the role of thought
[3186.4-3190.0] experiments in your life. I haven't had a lot of time for a lot of hobbies because I've been
[3190.0-3195.1] very busy building great companies, leading teams, and just running fast. I haven't had a lot of time
[3195.1-3199.5] for a huge amount of hobbies. So a little time I've had, my biggest hobby is meditation. So I
[3199.5-3202.4] meditate twice a day. And I've been doing this since I've been 16 years old.
[3202.4-3202.9] Holy cow.
[3203.1-3207.6] 51 years. I've missed almost no days. I've done it almost every morning and every afternoon.
[3207.9-3211.2] And I've tried lots of different forms of meditation. I've mashed them all together
[3211.2-3215.9] and made my own personal meditation that works for me. And one of those approaches to meditation
[3215.9-3219.7] are thought experiments. Thought experiments actually is not a phrase I made up. It comes
[3219.7-3223.1] from Albert Einstein, actually. Albert Einstein had a German word that I can't pronounce. It was
[3223.1-3227.7] phonetically something like Gedanken experiment, which translates to thought experiment. In fact,
[3228.1-3232.3] using a thought experiment is how Einstein discovered relativity because he pictured
[3232.3-3237.2] himself, he imagined himself, did a thought experiment of riding a beam of light and
[3237.2-3241.5] pictured what that would be. And he saw the relationship between time and space and all
[3241.5-3246.4] became clear to him. So thought experiments are picturing things intentionally in your mind.
[3246.7-3250.6] And I try to do things that are numinous, meaning I try to do things that are novel,
[3250.6-3254.7] that are different, that are inspiring, that take me out of my comfort zone, that give me a
[3254.7-3258.7] perspective that's not normal, so to speak. Because if I just have normal perceptions,
[3258.7-3263.0] I'm going to achieve normal results. And I want to achieve super normal results. I want to lead
[3263.0-3267.3] teams that create huge amount of alpha. In order to do that, I've got to have people think
[3267.3-3271.2] differently. I have to have people think out of the box, thinking in a different way than
[3271.2-3275.8] ordinary thinking. So thought experiments for me help me do that. So sometimes I think in terms of
[3275.8-3281.2] different perspectives on space, either very big, bigger than the universe, an infinite number of
[3281.2-3285.8] universes, a multiverse. Sometimes I shrink my awareness down to tiny spaces, like I'm inside
[3285.8-3290.3] an atom, even on the quark level, there's elementary particles. Sometimes I do that not
[3290.3-3296.2] just with space, I do it with time. I go back in time, maybe decades and memories from my childhood
[3296.2-3302.8] or growing up, smells or sights or sensations or faces or places. Sometimes I go back thousands of
[3302.8-3306.9] years or millions of years, and I picture what would have been in the past. I'm just giving you
[3306.9-3312.3] a few examples of different ways of thinking. And that's time, that's space. I apply similar ways
[3312.3-3318.2] of looking at sensory activity, feelings, emotions, and some of the best emotions in life,
[3318.3-3322.2] like love, and figure out ways to amplify those emotions. And I have a lot of fun with that.
[3322.6-3324.1] 16 is very early to start meditating.
[3324.6-3327.9] Maharishi Masayuki, I saw a poster of. I was at Northfield Mount Hermon School.
[3328.3-3328.8] I was a junior.
[3329.0-3329.5] I was 16.
[3329.7-3334.2] I saw a poster of this man with a beard, and there was a saying under the poster that said,
[3334.3-3335.0] life is bliss.
[3335.5-3336.1] So that's interesting.
[3336.2-3338.7] That's a different, you don't really think about life being bliss.
[3338.8-3340.3] That's not like a normal saying.
[3340.4-3341.3] It was a free lecture.
[3341.4-3345.7] So I went to lecture, and there was this redheaded woman, Janice Old, what I think her name was.
[3345.7-3346.7] I still remember to this day.
[3346.8-3350.8] And she seemed to have something interesting about her, a certain calmness and glow about
[3350.8-3351.0] her.
[3351.1-3351.9] And I learned TM.
[3351.9-3353.7] I learned TM, and I did it for decades.
[3354.0-3357.3] And I hung around with Maharishi when I was a student, when I was younger.
[3357.3-3361.3] And then eventually I left the TM movement and I started studying other types of meditation
[3361.3-3362.8] and I built on that foundation.
[3362.8-3364.4] What was he like to be with?
[3364.4-3365.4] What was the affect?
[3365.4-3383.5] He was a very interesting guy and a person who was complex had a lot of different things about him that were opposites On the one hand he was a very humble man a lot of humility and a lot of sensitivity and a lot of caringness a lot of love and very kind hearted person generous And in another angle he had a lot of big plans himself
[3383.5-3387.2] and a lot of big things. And you're either on the bus or off the bus. And if you were
[3387.2-3391.4] not helping with that, you were off the bus. But he was a very bright person,
[3391.9-3398.8] extremely intelligent, very charismatic. He was able to charm thousands, actually millions of
[3398.8-3404.3] people to follow him. I liked following him. I liked being part of a group that was different,
[3404.5-3408.0] that was learning new things, that was experimenting with, he called it consciousness
[3408.0-3412.7] as a field of all possibilities. I thought that was a really cool saying. He knew a lot about
[3412.7-3418.9] meditation. He had studied meditation deeply in India, had met many different gurus that he had
[3418.9-3422.3] met with, and he had formulated it that was something that was easy for Westerners to do.
[3422.4-3424.3] So he was very brilliant with meditation techniques.
[3425.0-3429.2] What formative experience comes most easily to mind prior to age 16?
[3429.6-3430.7] For me, it was education.
[3431.2-3437.0] For me, I was lucky, I was privileged to be able to go to summer enrichment camps instead
[3437.0-3438.7] of normal camps like most kids go to.
[3438.7-3444.5] My mother put us into geeky, nerdy camps that were for the sciences and for the arts and
[3444.5-3447.2] were educational, basically extensions of the school year.
[3447.6-3451.2] And there was one at Moses Brown School in Providence, and there was one that was called
[3451.2-3453.0] the Governor's School for the Gifted.
[3453.0-3457.5] I participated in these summer programs that I learned that there's a lot of people who are a
[3457.5-3462.2] lot smarter and gifter than I am. I learned it was really nice to be around. It was very enlivening
[3462.2-3466.4] to be around people who are smarter than me, people more talented than I was. Because when
[3466.4-3470.4] you're in your own school, maybe you're the top student in that class or the top one or two
[3470.4-3474.0] students in the class. You think you're really smart. When you go to school for the gifted,
[3474.2-3478.0] you realize suddenly you're in the lower quartile, not in the top one or two students in your class.
[3478.1-3482.0] And I found that very enriching. In fact, they were called enrichment camps. And I remember
[3482.0-3487.6] the excitement of being in a group of really bright people, maybe 20, 30 people in a class,
[3487.8-3492.9] and a very talented teacher up in front, and that teacher bringing out a lively conversation.
[3493.3-3497.6] For me, that was a learning of an electric experience, how to run an electric meeting,
[3497.9-3501.9] which fast forward to today is the title of one of the chapters of my book is How to Run
[3501.9-3506.0] an Electric Meeting. And one of the keys to that is to make sure that people in the room
[3506.0-3509.2] have the right people in the room. Yeah, you're doing my job for me. You got to tell us about
[3509.2-3513.6] the electric meetings? What are the components? So our meetings in all three of those companies
[3513.6-3519.7] are different, very different than the typical boring meeting that most companies have.
[3519.9-3524.7] Most companies have a meeting where someone's up there and they've got a PowerPoint or they've got
[3524.7-3529.6] a speech they've prepared and people are sort of semi-listening to the speech. Going back to what
[3529.6-3533.6] I was saying before, when you get my age, you only have 5,000 to 7,000 days left. You want to have
[3533.6-3538.1] every minute of that something exciting, something valuable, something rewarding. And that's not the
[3538.1-3542.6] kind of way I want to spend my days going forward. The way we get those meetings very exciting and
[3542.6-3547.6] very valuable and productive is to first have the right people in the meeting, people who are
[3547.6-3552.3] very honest, who are very intelligent, who are very hardworking, who are very collaborative,
[3552.5-3558.3] and people who understand respectfulness. People understand how to listen and how to be open and
[3558.3-3563.2] receptive to other people's ideas, to what other people's perspectives are, and people who can
[3563.2-3568.3] think dialectically, meaning thinking from different perspectives on the same problem,
[3568.4-3572.6] not rigid thinkers, not black and white dichotomous thinkers, not people who think,
[3572.8-3576.2] I've got it all figured out and anyone who disagrees with me is wrong and I'm never going
[3576.2-3579.4] to change my mind because you don't get anywhere with that. So you want to have an atmosphere
[3579.4-3585.3] where people are encouraged to disagree, but disagree respectfully. And if you can create
[3585.3-3591.1] a safe zone for people to lean in and disagree with each other in a nice way where the person
[3591.1-3594.5] who's being disagreed with doesn't feel bad because you're not attacking that person.
[3594.7-3598.9] You're debating that idea. You're very different. You're not labeling the person or denigrating or
[3598.9-3603.0] demeaning the person. There's no bullying or any of that kind of stuff. There's passion in those
[3603.0-3606.7] meetings. There's energy in those meetings, but it's the energy of ideas. It's the energy of
[3606.7-3611.9] a shared purpose between all the people in that meeting that we want to get to the right decisions
[3611.9-3617.0] on these things. And we want to then, as leaders of the company, go back to the field and mobilize
[3617.0-3622.6] large numbers of people to create a ton of alpha. That's a fantastic meeting. The way you run an
[3622.6-3627.3] electric meeting is the leader doesn't set the agenda for the meeting. The people set the agenda
[3627.3-3631.8] for the meeting. So what I do is I send out what would normally be the PowerPoint presentation
[3631.8-3636.0] of the agenda for the meeting ahead of time. And people are expected to read that.
[3636.4-3640.3] And then I have everybody, we have an app and everybody has to fill out the app and put in
[3640.3-3644.8] their biggest takeaways that they learned from reading that and from being in the business
[3644.8-3650.0] unrelated subject. And secondly, they have to put in, okay, now we've read what our challenges are,
[3650.1-3655.2] what our opportunities are, what our goals are. What do you think are questions that are worth
[3655.2-3659.8] going around the room once we meet in person? It's a good use of everyone's time. That's going
[3659.8-3664.2] to help us achieve goals of creating value for shareholders, for delighting customers, for
[3664.2-3670.4] improving their employee engagement and so forth. And then we take all those, we eliminate the dupes
[3670.4-3673.5] because often you get a lot of dupes on the good takeaways and the good questions.
[3673.9-3679.4] And we send them back and everyone rates each one of those takeaways and each one of those
[3679.4-3684.3] questions on a scale of one to 10 in terms of the importance of the value that they think
[3684.3-3686.1] discussing that in the group would add.
[3686.3-3687.2] And now we've got our agenda.
[3687.5-3692.0] We start with the ones that have the highest rankings and we go down until class is over.
[3692.2-3693.9] I'm joking, class, until the meeting is over.
[3693.9-3700.8] And that becomes an inclusive, democratic way to set the agenda that people really buy into.
[3701.2-3704.5] They really pay attention to what's going on in the meeting because they set the agenda.
[3704.8-3706.1] This is what they wanted to talk about.
[3706.4-3709.3] And that's a rule of the meeting is that there are no devices on.
[3709.5-3710.8] There are no side conversations.
[3711.3-3712.9] There are no distractions here.
[3713.2-3714.0] You have to pay attention.
[3714.3-3718.1] If you have the privilege of being invited to this meeting, you're concentrating on the
[3718.1-3723.3] one person who's speaking at a time and you're giving that person your 100% attention.
[3723.7-3725.2] Your eyes are right on that person.
[3725.5-3728.1] Your ears are listening right to moving from that person's mouth.
[3728.3-3729.7] And you're feeling what they're feeling.
[3729.8-3731.2] And you get really in tune with the person.
[3731.6-3735.4] And it's such an exhilarating experience for the speaker and for the people listening,
[3735.6-3736.8] for the person speaking.
[3737.3-3740.0] Imagine how validating that is, Patrick, that you're in a meeting.
[3740.2-3742.5] You got 20 of your colleagues, of your peers there.
[3742.9-3756.6] And everyone is just looking right at you and really genuinely interested in what you have to say It just builds up your confidence It also gets you in the flow gets you in the zone And you also feel a certain inspiration and motivation
[3756.6-3758.3] to say important things
[3758.3-3759.6] because you've got all these people
[3759.6-3761.0] paying attention to what you're saying.
[3761.0-3762.8] So it gets you really in the zone.
[3763.2-3764.5] And then all the people are listening
[3764.5-3767.0] and it cultivates a flexible mindset,
[3767.0-3769.4] which is so critical in leadership and business,
[3769.4-3772.8] where you're constantly reevaluating your hypotheses
[3772.8-3774.8] based on new evidence, new information.
[3775.0-3776.5] And that's what those meetings are like.
[3776.6-3778.6] And people really want to be in those meetings.
[3779.4-3781.5] Who's the best leader you've ever experienced?
[3782.0-3786.3] I've had the fortune to have lots of great leaders in the company that I've led.
[3786.4-3790.9] If I had to point to the best leader, I'd have to say three, because by definition,
[3790.9-3794.3] I thought they were the greatest leaders in the company because I promoted them to be
[3794.3-3795.6] CEO of the three companies.
[3796.0-3801.1] These are the people I felt that were most qualified, most suited to lead over 100,000
[3801.1-3801.7] people.
[3802.1-3803.5] And they're very different.
[3803.5-3827.5] So you look at Mario Harek for XPO, you look at Malcolm Wilson for GXO, you look at Drew Wilkerson for RXO. On the surface, very different ages, different backgrounds, different cultures, different accents. One's from Lebanon, one's from England, one's from South Carolina. They look very different from each other. But when you dig down to the things that matter, not the superficial stuff, but the more important things, they're identical.
[3827.9-3829.8] These are people who are honest to the bone.
[3830.1-3831.1] That's critical for a leader.
[3831.4-3835.5] You won't get tens of thousands of people to follow you if you're a BS artist.
[3836.1-3836.9] People are smart.
[3837.2-3837.9] People are smart.
[3838.0-3839.5] They may be making $20 an hour.
[3839.7-3840.5] They're still smart.
[3840.7-3844.9] People can know if a leader is telling the truth or if they're giving them baloney.
[3845.0-3845.6] They can smell it.
[3845.7-3846.9] It's like the people are programmed for that.
[3847.2-3848.4] So these people have integrity.
[3848.9-3849.9] These people are hardworking.
[3850.2-3852.5] These people are not people you have to check on them and prod them.
[3852.5-3856.3] And these are the people who are all in, lean in and all in and really take a lot of pride
[3856.3-3857.5] in doing a really good job.
[3857.7-3859.5] These are people who are collegial.
[3859.8-3861.6] These are people who get along with other people.
[3861.9-3863.6] These are people who are collaborative.
[3864.1-3865.1] These are people who are not arrogant.
[3865.2-3866.0] These are people who are humble.
[3866.2-3869.8] These are people who understand that we come and go in a few decades.
[3869.8-3870.7] We're not that important.
[3871.3-3874.8] We're just a little tiny flick and a flash in the whole universe.
[3875.0-3875.7] It's a huge universe.
[3875.9-3877.5] And people don't take themselves too seriously.
[3877.9-3881.6] These are people who have, on the one hand, enormous amount of self-confidence, enormous
[3881.6-3885.9] amount of self-confidence that a leader has to have. At the same time, even though it's an opposite
[3885.9-3890.8] trait, don't overemphasize to themselves how important they are because we're not that important
[3890.8-3894.1] in the end. So they have humbleness. And so these are people who have the qualities. These three
[3894.1-3897.7] people are great leaders. They have the qualities that I've just been articulating. They really
[3897.7-3901.7] embody them. They don't have to be tutored and mentored and get a coach to get them to be more
[3901.7-3905.8] honest, to get them to be more collaborative and get them to be harder working and so forth. This
[3905.8-3910.0] is what they're made of. This is their DNA. What, if anything, about business are you
[3910.0-3914.3] interested in that you feel like you haven't yet figured out? What I'd like to figure out more is
[3914.3-3919.1] something that I've figured out a lot, but haven't gotten to the end zone yet, which is how do I
[3919.1-3926.0] motivate and deal with people who aren't thinking clearly, who are victims of their own faulty way
[3926.0-3931.8] of thinking, of their biases, their prejudices, their cognitive distortions, their schema in life,
[3932.0-3936.1] the prison that they have to interpret all the things that are happening in life. And sometimes
[3936.1-3940.4] to see people who have some significant weaknesses in the way they're thinking. And I would really
[3940.4-3944.7] like to figure out a way to better communicate with those people, to better mentor those people,
[3944.8-3948.9] coach those people, to just unthink their stinking thinking, as they say. That's something I would
[3948.9-3953.0] like to really get better at. I'm not bad at it, actually. I'm good at it. I'm good at identifying
[3953.0-3957.2] that. I'm good at being empathetic and helping people, but I'm not proficient at it. I'm not
[3957.2-3961.9] perfect at it. And I would like to get better at it. A related question is the key to getting the
[3961.9-3967.0] most out of someone? Everyone has something to offer. It varies person to person, both in type
[3967.0-3973.4] and degree. What is the best way to get the most out of people? In business, how about paying them
[3973.4-3978.3] well? How about paying them a lot of money if they perform? So two things there, paying them a lot of
[3978.3-3982.9] money, but if and only if they perform. So most people come to work, they don't want to make
[3982.9-3986.2] money. That's the purpose. They're coming in not because they want to hang out. Although if you
[3986.2-3989.8] have a fantastic company, that is a motivation to come in because they like the people they work
[3989.8-3993.6] with maybe as much as the people they live with. But that's not the main reason why a person is
[3993.6-3996.9] coming in. The main reason a person is coming in is because they want to make a lot of money for
[3996.9-4002.0] themselves and actually for the people they love. In most cases, it's for the people they love. It's
[4002.0-4006.7] for their spouse and their kids and whatever else they donate to and whatever's important in their
[4006.7-4010.1] life. They want to give back and they want to support people. They want to get the self-esteem
[4010.1-4015.8] from enabling other people to live a comfortable life. And so if you can provide them with an
[4015.8-4020.1] opportunity to make a lot more money than they're going to make across the street, but tie it to
[4020.1-4025.8] performance, tie it to them actually executing on the things that will help us materialize our big
[4025.8-4030.2] vision. People will create miracles. People will do things they didn't even know they were capable
[4030.2-4035.7] of doing. What do you want now? You're someone that has done a lot of thinking big, a lot of
[4035.7-4040.1] moving fast, had a lot of success as a result of those two things across a lot of industries.
[4040.5-4044.3] You strike me as someone that is not going to stop or slow down. So what do you want?
[4044.6-4045.3] What do you still want?
[4045.8-4047.1] I have a big, long list of things to do.
[4047.2-4048.7] My wife and I actually have a bucket list.
[4048.9-4050.7] She keeps a little book where we have our date nights.
[4050.8-4053.4] And every time we come up with a place we want to go or something we want to do, she
[4053.4-4053.9] puts it down there.
[4054.1-4057.1] We're not going to get through 5% of that list because there's just not enough days
[4057.1-4057.3] left.
[4057.3-4063.1] But my main goal right now is to continue what I've been doing, which is to start companies
[4063.1-4067.7] from scratch and make them into big multi-billion dollar companies and make the shareholders
[4067.7-4073.1] a lot of money and make the employees real happy and make the employees a lot of money.
[4073.1-4078.0] Also, I want to have a money tree organization where everyone who's touching that organization
[4078.0-4079.9] is getting their fair share of gold.
[4080.2-4082.0] And for me, I get a lot of satisfaction out of that.
[4082.0-4083.3] It's something that really turns me on.
[4083.3-4084.2] I really enjoy doing that.
[4084.4-4090.0] I like the creativity of getting a big idea that starts off by definition abstract.
[4090.3-4091.1] It's all in your mind.
[4091.2-4092.6] You're just picturing something in your mind.
[4092.7-4094.7] I want to create this large industry leader.
[4094.8-4098.9] I want to create this gargantuan company that's going to be respected in the industry and
[4098.9-4100.4] customers are going to love and so forth.
[4100.9-4102.6] And the shareholders are going to want to invest in it.
[4102.6-4108.2] and then making that concrete, and then materializing that abstract vision with precision.
[4108.6-4111.8] For me, I really enjoy doing that. It's a creative process for me. It's the same process
[4111.8-4115.1] that a musician has or an artist has, where you first got to conceive of something,
[4115.4-4116.7] and then you actually make that happen.
[4117.2-4130.7] One thing that you have to do well by definition given you started all these companies and all these industries is know when to leave How do you know when a chapter is done I was talking to James Gorman the other day who the retiring CEO of Morgan Stanley
[4131.0-4132.3] And I was telling James, don't quit.
[4132.4-4135.2] He's stepping down as CEO, and he's going to become executive chairman.
[4135.3-4137.8] And I have a great relationship with him, and I have a great relationship with his bank.
[4138.0-4139.9] And he said, I really don't want to see you go.
[4140.0-4141.0] You're still in your 50s.
[4141.0-4141.6] You're still young.
[4141.6-4143.8] And he said, no, I feel it's time to go.
[4144.1-4145.4] I feel it's the right time to go.
[4145.5-4147.3] Everything is well and wisely put.
[4147.4-4149.1] I've got a good succession plan in place.
[4149.1-4152.8] I think I can leave holding my head high and feel real good what I accomplished.
[4153.2-4157.5] And I understand that because I've left many companies over there. I've left five companies
[4157.5-4161.3] over the years that I built up to very large companies and it was time to move on. There
[4161.3-4166.0] comes a point in time when it's time to move on. It doesn't feel the same. You look forward the
[4166.0-4170.2] next few years and you say, what do I want to accomplish? And is that aligned with what the
[4170.2-4174.0] company is going to do? And if it's not perfectly aligned and you don't have your heart 100% into
[4174.0-4178.3] that, you should leave. You should leave and move on. And if you feel the slightest bit bored as a
[4178.3-4182.5] leader, it's time to move on. Because if you're doing your job right, you're not going to be
[4182.5-4185.9] bored for one second. You're going to go through every day, you're going to have a to-do list,
[4186.1-4189.6] and you're not going to get through a quarter of your to-do list every day. If you do,
[4189.6-4194.2] your to-do list is too short. And when you get to the point when there's some type of a
[4194.2-4196.8] been there, done that mentality, then it's time to move on.
[4197.3-4201.1] I'd love to do a really quick tour of the businesses and something surprising about
[4201.1-4204.0] the business that you learned building them that people might not appreciate,
[4204.1-4207.4] maybe starting all the way back with oil business and your couple adventures there.
[4207.4-4212.6] For the first 10 years of my business career from ages 23 to 33, I was in the oil business.
[4212.8-4213.9] And I loved the oil business.
[4214.0-4220.8] It was this global business that back then in 1979 to 1989, there was no internet.
[4220.9-4221.8] There was no email.
[4222.0-4223.8] Futures Exchange were just starting towards the end of that.
[4224.3-4228.3] And information was hidden, particularly information about pricing.
[4228.6-4233.2] So you could go to an OPEC country and sign a contract for $23 a barrel.
[4233.2-4236.1] and they only set the price every three months or so
[4236.1-4237.9] when they would meet in Vienna or they meet in Geneva.
[4238.3-4240.7] In the meantime, the spot market is like $33 a barrel,
[4240.8-4243.1] for example, and you could resell it for $10
[4243.1-4244.7] back to back with no risk.
[4245.0-4246.2] If the price happened to go down,
[4246.3-4247.2] you just don't lift the cargo.
[4247.3-4248.5] You minimize the amount of lifting you have.
[4248.7-4250.8] So this was a wonderful business to be in
[4250.8-4253.6] because of the information immaturity,
[4253.8-4255.5] the lack of free flow of information.
[4255.5-4257.2] You would find out the pricing of oil
[4257.2-4258.1] if you weren't in the game,
[4258.2-4259.4] if you weren't in the business all day long.
[4259.4-4261.7] Buy a snail mail newsletter you would get
[4261.7-4266.6] from McGraw-Hill-Platz Oil Grant, it was called. And that's how people discovered price. Now you
[4266.6-4270.4] discover it every second. It's up on the screen with futures and you see it every tick. So that
[4270.4-4275.2] was a big opportunity to make a lot of money. I would no way make the kind of money I made back
[4275.2-4280.3] then today doing the same thing because that just doesn't exist. The pricing is transparent and
[4280.3-4284.8] where the oil is, where it has to go is transparent. And we did a lot of processing deals.
[4285.1-4289.5] We did a lot of deals where we would rent, quote unquote, the refinery from Shell Rotterdam or
[4289.5-4296.1] BPN and we would then get the oil, charter a ship, bring it to that refinery, pay them a couple
[4296.1-4300.7] dollars or whatever to process it. And then we would sell what came out of that. And people said,
[4300.8-4304.3] wow, that's real risky business. And we were like, really, it was almost no risk. It was a little
[4304.3-4309.0] risk, but almost no risk because we understood each component of that. And today, everybody
[4309.0-4313.2] understands that. That's not unique proprietary information, but the time was really great.
[4313.2-4319.2] The next business I went into was waste management. And this was, I started a business in 1989 and
[4319.2-4325.2] took a public in 1992 called United Waste Systems. And the strategy there was real simple. It was to
[4325.2-4329.4] go into these tertiary markets, not even secondary markets, but to go into the upper peninsula of
[4329.4-4335.6] Michigan or Appalachia or West Virginia, Kentucky, and go down to rural Mississippi and buy up the
[4335.6-4339.5] landfill capacity and then buy the hauling companies, the collection companies that were
[4339.5-4345.9] coming, it was called tipping at those landfills, and build up scale and build up a density so that
[4345.9-4349.7] you could run the business. You could run one truck instead of 10 trucks and pick up the same
[4349.7-4353.2] amount of garbage in the same amount of time. Obviously, margins would increase quite a bit
[4353.2-4358.0] as a result of doing that. And we used technology to do route optimization, which now everybody does,
[4358.0-4364.4] but back then that was revolutionary. And that business, we outperformed the S&P 500 from 1992
[4364.4-4370.0] to when I sold it to what's now called Waste Management for $2.5 billion by 5.6x. So if you
[4370.0-4373.9] bought one share of the S&P and one share of United Waste, you would have made 5.6 times more
[4373.9-4378.8] money on the United Waste Fund. What I learned from that was that the trend is important. Again,
[4378.8-4382.2] we would not be able to make that kind of money today in the waste business. We had a trend going
[4382.2-4388.2] on where right around that time, the EPA was outlawing these dumps, which were unsanitary
[4388.2-4392.1] and were polluting the environment and really should be outlawed. And the amount of landfills
[4392.1-4396.6] decreased by a large amount. And the remaining landfills, which then cost about $4 or $5 million
[4396.6-4401.2] to build up, made a lot of money because they were the survivors. So we capitalized on that.
[4401.2-4406.7] And then after that was United Rentals I ran for 10 years. United Rentals was based on one
[4406.7-4413.2] simple premise. The premise was there was a lot of construction equipment that was being owned
[4413.2-4419.6] by construction companies and by end users that was only used like a few months, a few weeks,
[4420.1-4424.3] sometimes a few days out of the year. We said, this is nuts. This is absolutely crazy. It makes
[4424.3-4427.2] absolutely no commercial sense. And then you had to have a maintenance team.
[4427.7-4430.3] It's almost like the Uber and Airbnb insight before them.
[4430.3-4434.2] in a way, in a different industry? Yeah, absolutely. It was a form of sharing,
[4434.3-4439.4] of crowd sharing. And at the time, about 15% of construction equipment in North America was
[4439.4-4444.1] rented, 85% was owned. And we said, that's going to flip. There'll come a point in time where
[4444.1-4449.8] there'll be more equipment rented for short periods of time and utilized over the course
[4449.8-4454.5] of the year by sharing it with many different users than is owned all year long. And of course,
[4454.6-4458.2] that turned out. So we had a tremendous amount of organic growth and we had a tremendous amount
[4458.2-4462.4] of M&A opportunity as well. We bought well over 200 companies in the industry and we bought them
[4462.4-4466.9] at multiples lower than what we were trading at. So we created a lot of alpha. The first Monday at
[4466.9-4470.3] seven o'clock in the morning, we showed up after we bought a deal just by the accretion and the
[4470.3-4474.2] deal. They're all accretive deals. The other thing I took away from United Waste was that was my
[4474.2-4478.5] first exposure to public markets. Everything I did in the oil industry was private. The waste
[4478.5-4483.0] business was the first time I had a public currency. And I remember when we IPO'd it with
[4483.0-4487.3] the two banks that then at that time were the two leading banks in environmental services.
[4487.3-4489.6] there was Payne Webber and there was Alex Brown.
[4489.6-4491.1] Of course now Alex Brown's part of Deutsche Bank
[4491.1-4492.4] and Payne Webber's part of UBS.
[4492.4-4494.9] But at the time I went to two conferences
[4494.9-4496.5] and I saw Jim Groninger,
[4496.5-4498.3] who was an investment banker speaking for Payne Webber,
[4498.3-4500.0] and I saw Tammy Preston, who was the,
[4500.0-4504.6] investment banker for this field, Alex Brown. These were the two big shot bankers. I said,
[4504.7-4508.3] I want to use these bankers. I want to work with the people who are actually doing the most amount
[4508.3-4512.3] of business in the area, who understand the business well. And so I did. And I formed good
[4512.3-4516.0] relationships with them. I took their advice. We took it public pretty quickly. Then I said,
[4516.1-4521.2] after we sold United Ways for $2.5 billion, I want to build on the skillset that we've developed,
[4521.2-4525.9] that we've honed, of doing M&A, of doing integration, of running a business in a
[4525.9-4532.4] standardized way. I was in the town next over from Dan Tully, who was the CEO of Merrill Lynch at the
[4532.4-4537.3] time. Fantastic man. May he rest in peace. And Dan, this is the old days when you could meet
[4537.3-4541.9] with the banker and the analyst in the same room. So Dan set up and his son, who's also named Dan,
[4542.0-4546.9] set up a series of meetings. I'd say about a dozen meetings with different parts of Merrill Lynch
[4546.9-4551.7] that had ideas of what should be the next industry that I should consolidate. Where are their M&A
[4551.7-4555.0] opportunities? And we looked at healthcare, we looked at financial services, we looked at
[4555.0-4559.6] education. And we looked at Crippin Rentals. So that got me into United Rentals. And United
[4559.6-4565.1] Rentals was a big win, obviously. United Rentals, I started at, the company was $3.50 a share.
[4565.4-4569.8] I haven't checked it today, but recently the stock has been $435. It's over a hundred bagger.
[4570.1-4575.7] United Rentals was a durable business that we created. And then XPO, I started in 2011,
[4576.2-4580.8] and it was a similar business plan. It was a business to consolidate an industry that was
[4580.8-4586.0] still fragmented. And that's what I did. I looked at over 2,000 acquisition opportunities, and I
[4586.0-4590.3] bought 18 companies. And we tightly integrated those 18 companies. And if you look at those
[4590.3-4595.4] companies that we bought, before we bought them, they were doing roughly about a billion dollars
[4595.4-4599.5] in EBITDA collectively, pro forma. You look at them today, they're doing something like
[4599.5-4604.0] two and a half billion dollars EBITDA. So we and my management teams that succeeded me
[4604.0-4607.4] have improved those businesses, have made those businesses more profitable.
[4607.4-4611.9] And that's the other component. You can't just buy stuff. You have to buy stuff and then integrate
[4611.9-4615.7] them and optimize them. And that's a very important part of the value creation opportunity.
[4616.0-4620.3] That's what I learned at XP Logistics is to, I just honed the skills and just built on the
[4620.3-4624.2] skills that we had done in the previous company. What, having listened to this,
[4624.3-4629.0] would still surprise people about you? I was talking to one of my investors the other day,
[4629.1-4631.4] and he said he's learned more about me in the last three months because I've been on
[4631.4-4635.7] interviews and different forums. I've been opening up a little bit about my personal life. I've
[4635.7-4640.2] usually kept my personal life and my approach just out of it and just tried to just institutionalize
[4640.2-4644.5] myself and just be a corporate CEO and just do a real good job and deliver the numbers and get
[4644.5-4648.5] results and people will appreciate that and do it. So I've been interviewed a bunch of times the last
[4648.5-4662.6] few months and I taken questions like the good questions you been asking me and I been answering them So I don know what surprised people about me I really don I think I saw somewhere that you would consider something like accounting as an area that you might go check out but then decided against it
[4662.7-4666.6] And I'm always just so interested by why you might pass on something. Is that a real example? Did I
[4666.6-4671.5] have that right? And if so, why did you decide not to do it? Over the last year, I've looked at over
[4671.5-4676.7] 500 opportunities, mostly M&A opportunities, industries that we could consolidate, businesses
[4676.7-4681.5] we could do a lot of acquisitions in. And I've rejected the vast majority of them. I'm down to
[4681.5-4686.2] a very short list. And accounting was one of the ones I looked at. And I got to be careful because
[4686.2-4689.6] every business I have has accountants. I don't want to say anything that annoys my auditors,
[4689.7-4695.5] but I think there's a real existential risk to accounting. I think AI in five years, 10 years,
[4695.6-4699.1] 15 years, I don't know the timeframe, could do everything that accountants do right now.
[4699.3-4703.7] Particularly the ones that are just doing individuals, personal income taxes, for example.
[4703.7-4708.9] I think that's very mechanical and anything that's mechanical and just process and can be formulaic,
[4709.1-4713.7] AI is going to rip that out and just do it for cheaper or for free even. So I don't want to get
[4713.7-4718.4] into a business where technology trends are going to be my enemy. I want to get into a business where
[4718.4-4722.2] technology trends are going to be my friend. I want to get into something where AI is going to
[4722.2-4726.7] help us grow margins, help us grow the business. Is there anything else about software versus
[4726.7-4732.6] physical technology in the software sense of incredible software businesses obviously have
[4732.6-4736.7] been built, but software can get disrupted by other software fairly easily. Whereas disrupting
[4736.7-4741.9] United Rental or something, I guess it's possible, but it's not going to be done by a programmer in
[4741.9-4746.3] his closet. I like to be in businesses that you can touch and kick and there's nothing physical
[4746.3-4750.3] there to it. That's not necessarily better. It's just me. That's what I like. I gravitate towards
[4750.3-4755.0] things like that. I like to be in businesses where the metaverse is not going to replace it.
[4755.3-4759.2] So there's certain things like your house. Eventually, even if all day long you're wearing
[4759.2-4762.4] goggles or a contact lens or somehow you're in the metaverse for a large part of your time,
[4762.6-4778.4] You're probably going to still sleep in a bed and you're probably going to still take a real shower with a real shower and you're going to brush your teeth with a real toothbrush. There's other things that will be replaced, will be placed by AI and it's no longer going to be. And I want to make sure I'm in the first category, not in the second category.
[4779.0-4780.8] I love the idea of think big and move fast.
[4781.0-4782.5] I interpret it almost as a challenge.
[4782.8-4786.1] That's something I can take and go do, try to do more of each of those two things.
[4786.6-4792.1] Is there any other way that you would frame a challenge to those listening to live what
[4792.1-4793.7] obviously has been a very full life?
[4794.1-4796.2] The book is called How to Make a Few Billion Dollars.
[4796.5-4800.3] It's a little bit of a misnomer because it's not just about how to make money.
[4800.7-4801.1] It is.
[4801.1-4821.4] It designed particularly with aspiring CEOs in mind but that not the only purpose of the book The purpose of the book also is to help people achieve whatever they want to achieve in their personal life in their business life in relationships but anything important something that big Life goes by real fast and you can just dilly through it and just die
[4821.6-4827.4] or you can do real fun stuff and real exciting things. And you can change the world if you want
[4827.4-4830.5] to change the world. You can help other people if you want to help other people. You can learn
[4830.5-4834.8] things that are really important to learn. You can explore the arts and the science. And there's so
[4834.8-4839.2] many things that are amazing in life. Life is a wonderful opportunity. We have a privilege.
[4839.5-4844.7] The biggest privilege we have is just being alive, being a living, breathing organism that has
[4844.7-4849.8] cognitive functioning and has sensory activity that has purpose and a meaning and has feelings
[4849.8-4855.6] and can know what love is and have relationships with people. This is not what most things have,
[4855.8-4861.1] but we don't have it for a long period of time. We have it just for a few decades and it goes by
[4861.1-4865.0] fast. As you get older, it goes by faster and faster. I remember when I was a kid,
[4865.3-4868.5] summer seemed like forever. Today, summer seems like it goes by in a week.
[4868.8-4874.9] I think the book is to help people dream big, have people get out of their ruts of thinking
[4874.9-4881.6] and explore bigger, newer, important ways and increase their desire, increase their goals,
[4882.0-4887.6] and to help them at least show them what's worked for me. Some of those things will resonate and
[4887.6-4890.3] will be applicable and will help people and they can use those same techniques.
[4890.8-4895.5] But hopefully even the ones that don't, we'll give them examples and ideas and illustrations of
[4895.5-4899.9] things that they can customize for themselves. I'm not a perfect genius and know the answers
[4899.9-4905.0] to everything. I have some things that are proprietary and idiosyncratic to how I've
[4905.0-4909.3] built these beautiful businesses that I put in the book. One thing I learned from writing this book
[4909.3-4914.6] is I have a few dozen, maybe a hundred unique ideas and I put them all in the book. I don't
[4914.6-4918.6] have another book in me. This is my only book. I'm not writing another book. At least that's not my
[4918.6-4922.8] plan because I don't think I could come up with another hundred things that are unique and special
[4922.8-4927.6] and different. But I did put down in that book every single thing that I think at least was
[4927.6-4932.6] responsible for the success that my teams and I have had. How did you get the book done so fast?
[4933.5-4937.2] Concentration. Just really focusing on that. And so just the way we've done everything in business
[4937.2-4942.6] is having a clear vision of what we're trying to achieve and then laser focus on that. So we
[4942.6-4947.2] talked earlier about the acknowledgement section where I listed various mentors and friends and
[4947.2-4950.5] people I've met that I've learned important things, life-changing things. And one of them
[4950.5-4954.7] I mentioned is Louis DeJoy. One of the people is now the Postmaster General of the United States.
[4954.8-4958.4] And I got to know Louis pretty well because I bought his company and he was on my board of
[4958.4-4961.5] directors for a while before he went into government service. And what I learned from
[4961.5-4971.7] Louis was laser focus on the things that matter and avoid distractions He would say that over and over again So let oh that a distraction When he was running a meeting there was an agenda
[4971.7-4974.9] and it was something that came in that was just not helpful to what we're trying to achieve.
[4975.0-4979.6] He said, no, let's refocus. Let's stay focused on the points. And when we was running a warehouse,
[4980.1-4983.7] he had everybody focused on the KPIs, the key performance indicators, the metrics,
[4984.0-4989.0] the measurements of success that mattered and just kept coming down to that. And I watched him,
[4989.0-4992.5] how he would run the business. He had these video conferences with all the managers at the
[4992.5-4996.2] different warehouses, and he got into great detail of what they were doing. And he would
[4996.2-5000.7] always bring the conversation back to the 10 or so KPIs. How are we doing on this? How are we doing
[5000.7-5004.3] on this per hour? How are we doing on this number? How are we doing on this productivity? How are we
[5004.3-5007.8] doing on employee engagement? How are we doing on customer satisfaction? How are we doing on defect?
[5008.2-5013.5] Focus, focus, focus on the things that matter. The thing that gives me joy is something that's
[5013.5-5017.6] happened today, which is I've done 400 of these. I've not met someone quite like you. You're this
[5017.6-5022.9] interesting combination of almost like John Collison's endless curiosity and optimism and
[5022.9-5027.1] energy with Frank Slootman's intensity or something like that. Some really interesting
[5027.1-5030.5] combination that I haven't encountered. And I've done a lot of these and I've met a lot of people.
[5030.6-5035.0] And so I've just really enjoyed your affect. It's really cool. The book is fantastic.
[5035.6-5040.0] I have one final question for you. And I ask everyone the same question. What is the kindest
[5040.0-5043.8] thing that anyone's ever done for you? That's an easy question for me to answer. I don't need
[5043.8-5049.0] any time to come up with the answer. It was the president of Banque Paribas was a gentleman called
[5049.0-5055.0] Christian Weyer, W-E-Y-E-R, Christian Weyer. And he's still alive. He's 101 years old, French,
[5055.1-5060.4] but living in Geneva. And Christian did two things for me. And the second one is the most kind.
[5060.7-5065.1] The first one was very helpful for me in business. He gave me a billion dollars line of credit from
[5065.1-5069.6] Banque Paribas to go do oil trading. So he had confidence in me. He believed in me and I didn't
[5069.6-5073.7] let him down. Really appreciated that. But the second thing was even kinder. He introduced me
[5073.7-5078.7] to my wife. We've been together now for almost 40 years. Fantastic. Brad, thank you so much for your
[5078.7-5085.2] time. Thank you, sir. If you enjoyed this episode, visit joincolossus.com where you'll find every
[5085.2-5090.6] episode of this podcast complete with hand edited transcripts. You can also subscribe to Colossus
[5090.6-5095.7] Review, our quarterly print, digital, and private audio publication featuring in-depth profiles of
[5095.7-5101.4] the founders, investors, and companies that we admire most. Learn more at joincolossus.com
[5101.4-5102.4] slash subscribe.
[5103.7-5104.4] Bye.

video1_clean.txt

all right what's up it's Sean and I'm going to start by reading you a tweet that I did a year ago it says I have a new hero and her name is Sarah Moore and the reason that Sarah Moore is my hero and somebody that you probably never heard of is because Sarah Moore was somebody who was a student in college that you know she's in her young 20s she has no money no experience uh the only thing she owned in her life was her car a Rav 4 and she hustled this crazy hustle story of how she basically decided I'm gonna buy a business even though I got nothing nothing to my name and she spends a year searching through 100,000 businesses and she finds this Niche business called eggcartons.com uh you literally this guy sells the carton that your eggs come in and she bought this million you know multi-million dollar business with all debt um so she put no money in because she didn't have any money and so and then she had grown it a bunch since then and I just said I think this is like a $2 million business that this woman bought and like wow what a hustler so I told this hustle story on the podcast and it kind of went viral it blew up nobody had ever heard about this story before she has done no interviews she has no social media she was like a ghost and I honestly I didn't even know if it was true because it's one of these stories that's too good to be true uh here's this girl who comes from absolutely nothing she talks about this in the interview like she literally had no parents she was in and out of jail as a kid like she was just trouble and then she has this turning point in her life that gave me goosebumps she ends up paying somebody to take the SAT so she gets into college she hustles her way through college uh finds a way to buy this business and it's this amazing success story and two things happened one the story kind of went viral she said that like Netflix and others reached out to her after the episode went live that people started showing up on her doorstep asking them asking her for advice on buying a business and like honestly it was kind of bad like it was too much and please don't do that again because she's like dude I'm trying to run a business I don't even know you you start telling my story and this went crazy and so a year later now she's like okay first I was kind of like wow this is crazy then I was kind of annoyed and scared like is this going to mess up my business but then as she started to see you know the upside of telling her story and she was like look I still have no social media I still do no interviews but you kind of you were very nice and you told my story I will agree to come on and do one interview and so she's like after this I'm one and done I'm going to come on and I'm going to lay it all out there I will tell you everything you want to know about buying a business how I did it what I did the good and the bad all the mistakes that I made uh I'll tell my kind of the life story part two that's the sort of you know made for TV it's it's unbelievable her life story along the way and she's like I'm doing one interview and then that's it I'm disappearing after that and she did not disappoint we just finished the recording uh it's one of my favorite episodes we've ever done she is somebody that I really admire and I don't use that term lightly like she is really a hustler super genuine and her story is um is frankly incredible like it's not often I have gooseb bumps during an episode of a podcast so enjoy this episode with Sarah [Music] Mo all right today's episode is going to be all about buying a business rather than starting a business we usually talk about ideas that you should use to start a business but as you know like U one of our best uh friends of the house Andrew Wilkinson has told us many times buying a business can be a better path but uh how the hell do you actually do it that is the question and we're going to talk to somebody who not only has done it not only has done it successfully but has really never told her story you Sarah Moore you are basically not on the internet welcome to the internet because I first heard your story and then I went Googling and I couldn't find anything you were a ghost uh intentional or unintentional very intentional I'm a very private person and I'm not a fan of public attention you kind of blew up my spot though so things have changed a bit yeah sorry about that so we a long time ago I don't know what it was hundreds of episodes ago um I came on the Pod and I said hey I got a story for you I said I would love to have this person on as a guest but you can't find them on the internet I said I think this is kind of an incredible story there's this woman who out of college um bought a most boring sounding business you could think of eggcartons.com and I called you like the queen of queen of carton or something like that and I was like she's the the queen of eggs and she buys this business that some guy had been running for like 20 years and um she's running it she's growing it and I was like the way she did it with no money down I was like her story sounds really interesting but again there's literally one like text interview of you on the whole internet so then I I did I emailed you and I said hey I'd love to have you come on I don't think I got a reply or something but then I sent you a Google doc and I said look I just have to know I got to I need answers to these questions just from my own personal curiosity I sent you a Google do I said just can you just fill this out and to my surprise you actually did and so when I came on the Pod and I told your story suddenly a bunch of people were were very interested in you giving you a lot of attention and uh correct me if I'm wrong sometimes in not the most nice nice way it wasn't all good is that right that's correct I've I've come across quite the cast of characters and why do you uh what do you think what do they say to you where where how are they finding you and what do they say to you some people beg me to talk to them for 15 minutes they'll offer someone specifically offered me $500 for five minutes of my time and it's crazy because I'm so irrelevant most days I'm out in s in Massachusetts so there's not much happening here I'm kind of under the radar so all of a sudden I've now gotten a ton of inquiries from people and a lot of people want specific information a lot of people are emailing to say hey I'm doing this exact thing how do you get financing or can I get your opinion on this business deal or I'm about to close how did you get a bank to actually do your deal without putting much or any money down right right well hopefully uh hopefully this podcast tells your story in a good way does not create even more uh people chasing you down because we're just going to tell all the answers right here so that people everybody leave Sarah alone after this yes I'm serious please do not contact my business you can email me or or really reach out to me on LinkedIn but please do not contact my business or show up there for that matter yeah yeah we've had a couple of those a few stragglers there's always a few stragglers unfortunately there's always a few stragglers uh it doesn't help that your story is kind of unique because you didn't come from money um and we're going to talk about that you didn't know how to do this it's not like you knew how to do this or you were an expert you were a total beginner when you started so that's appealing um your woman doing this I think that's more unique uh so there's like there's a whole bunch of like angles and then you did it in a kind of a niche that sounds kind of like you know like boring businesses have become sexy now and so you did it in a boring business and so I think there's a bunch of reasons people are excited but let's let's start at the start so okay let's just start with the high level what did you actually do you uh were in school and you decided I want to buy a business first tell us why did you decide that how did you even know that that was a path you could go down oh boy there's a lot of context here so But to answer your question in the simplest of of ways is I was between my first and second year business school and I was talking to somebody about what they wanted to do afterwards and they mentioned something called a search fund which is where you essentially can go out and buy some grungy business and become the CEO basically overnight without any money or experience that was very appealing to me you're like hey I fit that criteria no money no experience absolutely buiness is sign me up our software is the worst have you heard of HubSpot see most crms are a cobble together mess but HubSpot is easy to adopt and actually looks gorgeous I think I love our new CRM our software is the best HubSpot grow better and so you hear this idea and you're like what was your plan before that were you did you have another plan or like did this replace something or you just put it in in a vacant spot so okay we'll do a bit of Storytelling here yeah please when when I was in business school there was a guy I was working on a project with and he was incredibly responsive almost annoyingly responsive kind of one of those and I asked how are you so responsive all the time and he said Goldman and he's referring to Goldman Sachs and he said at Goldman saxs there was a rule of 15 minutes meaning you had to respond to whatever form they reached out to you in within 15 minutes 24 hours a day 7 days a week and I said okay so what if you're in the shower 15 minutes right what if you're running a marathon 15 minutes Christmas day 15 minutes and my favorite what if your wife is giving birth 15 [ __ ] minutes and I mean we laugh but my I worked my ass off to get into business to even graduate high school worked my ass off to be frank and I'm thinking you went to an Ivy League undergrad you're clearly off the chart intelligent you have this amazing network of people you come from money you have everything that I don't why would you choose to essentially sign up to be frank someone else's [ __ ] like I didn't say that to him but that was my thinking and so I had no idea what I wanted to do but up until then I was at HBS Harvard business school trying to fit in with all of these people and sort of find my footing and after that I'm thinking I don't want to be like these people I don't want to do this I don't want to be a consultant I don't want to be a banker this is so not me and if I'm going to be someone else's [ __ ] like that's just not an option for me right I'm only going to be one person's [ __ ] and that's my own yeah that's every entrepreneur ever there was a guy who um there's a guy who we went to college with he was our next door neighbor in our dorm great guy Sam soy and he went to work at UH same thing Goldman or one of these one of these Banks I don't even know what the hell that was that's just foreign world to me I don't know Sam's gone and he doesn't you know he's busy now he works 80 hours a week and he uh he read our blog we used to blog about how we were building our company and we'd be like yeah we woke up we did the we had these calls and we were pitching this guy and then we went for a hike because we lived in Boulder it's like we went for a hike in the middle of the day because that was awesome then we had an idea on the hike and we came back and did it it sounded so sexy in reality it was honestly pretty lame but you know it was like blogging was like social media it's like Instagram back then you make it look good and so Sam quits his job and he moves into our our bedroom or moves into our our living room lives on our couch and he's like I'm goingon to do this I'm like dude you were making six figures you're making zero figures here and he's like um and he he's like yeah but it's better we couldn't really understand the culture and then he sent an email and we were like hey Sam you said something in this email I've never heard before but you said hey can you get that to me ASAP or sooner and I was like what do you mean ASAP or sooner ASAP means as soon as possible and he's like a that's a banking thing it's ASAP or sooner I'm like what the [ __ ] is sooner than ASAP and I was like that's the mentality I was like I get it I get why you quit I get while you're out of there because asaper sooner is not a way to live not at all and it honestly blows my mind again given the pedigree of these people you would think you would shoot for the moon year you would want to have this freedom in your life but you're literally choosing a form of enslavement enslavement in my opinion right right right yeah anytime you know I think banking Consulting these are often brain drains the talent really talented people go there because it's sort of uh safe um and it's like a well respected path but if you think about how much how many more cool interesting things could be built or created if those same talented people went out and and and did more entrepreneurship but you know whatever to each their own so you hear that you're like all right I'm not going to do that and now you you hear this idea of buying a business okay but where do you start how do you even know how to start and we're going to go into your fullback story but like the kind of the high school how you even got to college which is a crazy story in itself we're going to get to there but first you hear this idea about buying a business okay Sarah now what what do you do great question so I to your point in the beginning I lacked the ability to evaluate businesses I had no experience doing that prior to business school I was in the steel industry and I thought if I could get a business I was pretty comfortable with the idea that I could run it probably if I tried hard enough but searching in itself I thought I need to have background in private Equity I have no idea what I'm doing and people will say you have a Harvard MBA but Harvard is very corporate they don't teach you how to look at a corporate or commercial window washing business and evaluate their financials to see if you want to buy it right they're looking at very complicated Financial models which these are not at all and so I thought I probably need to go the investor route because there are investors out there that will actually pay you to search I'm thinking that's incredible someone's going to pay me to look for this and then they're going to invest this is amazing look further into it and see that if you were to get an investor to back you they'll give you plenty of money you can live a cushy life you can do this in a fancy office you can whine and dine these sellers but you have to pay back one and and a half times that and so if they gave me to 50% increase so if they had given me 200k to search I'd have to pay back 300K so that in and of itself was absolutely ridiculous and so one of my friends actually sat me down and convinced me that if you it's similar to dating he said and if you get enough reps in you cannot not recognize a good business when you see one for whatever reason I figure I may as well just try and go out my own worst case scenario literally worst case I bring someone in Midway but why not at least give it a go on my own and see what happens right so what so what did you do you you decide to go on your own um how do you go about it what was your process okay so step one for me I'm not good with technology and I didn't have any money so Step One is I'm going to Leverage What I've got around me which is I'm now in a school with a bunch of smart people so I had one of my smart friends scrape one of the databases with all the private companies within an hour and a half of my apartment in Boston that's step one yeah you're like you're like my criteria is it's an hour and a half away tell me every private business in this area truly and the problem is with these databases people think oh you've got all this great information not really the we estimated just by looking at some financials we actually knew about that the database was accurate about 50% of the time accurate meaning the owner's name is correct the revenues correct the employee count all of those metrics because they're all self-reported right so who's actually going to give you accurate information knowing it could be public right and so we tried to pair down the list by Revenue but we did it by multiple of like 5x meaning let's say a business so for instance the business I'd worked for previously it said that business did a million dollar in Revenue the business is doing over $100 million in Revenue right it there's all this information but we tried to narrow it down somewhat anything over I think a 100,000 or I'm sorry $100 million we took off the list uh Revenue wise it was fair game yeah after that it was obvious things and when I say obvious I mean it you have to be sure so that would be a legal firm or an accounting firm or 7-Eleven other than that again fair game because my business was actually under farming so everything else you don't know it's it's self- selected the industry we kept the rest there so we were still up with a pretty massive list of companies and you told me by the way you said one of your things is like you think industry is overrated you think people over index on I'm looking in this space this is the niche this is the industry I'm looking in you don't believe in that and you didn't do that uh why do you think that's the case so initially here's why I I think that from experience initially I did what I think most people do what investors actually require you to to do you sit there and you have a thesis about the kind of industries that would be great businesses and usually those Industries have characteristics that make them stable which is what you're looking for when you're buying a business with a lot of debt and what I found is that the industries were absolutely irrelevant what matters is that you find a business that is established and has been consistently profitable for a number of years everything else garbage there are so many businesses in amazing Industries like let's talk Pest Control right great industry you've got people that have pested they're not going to say you know what not a great year for me this year I'm just going to let my house be infested like that's not really a thing right it almost gives you I think Industries a false sense of security because you think just cuz I'm in this Pest Control business I'm good when you're really not there's way more to it than that and so what I found is find a business that's established and consistently profitable for get the industry cuz people could say I'm in e-commerce right so that's that's a that's an unstable industry I worked in the steel industry you would think that's an absolute hell no business I used to work for it's a hell yeah it's great great business right but Industries would tell you otherwise gotcha so you didn't look top down at industry instead you were just like okay I have this you have this list you remove the obvious outliers businesses that are way too big for you to buy and now you have still an enormous list and here you are one person sitting on campus trying to sort through this um so what was your approach what' you do well I wasn't a oneman show here thank God or I wouldn't have made it I hired hella interns and I didn't mean for it to get as big as it did but initially I had five interns that worked for me and we actually did the industry approach we did the painstaking process of look each interned to give me 50 companies a week with they were they met my criteria these company you found email addresses for and then we contacted there were five you had five interns but you're a college student you're an intern what how did you get how does an intern have interns what what what happened here so I'm quite the pitch and truthfully here's what it is and I swear to you like I use what I learn searching every single day and my interns tell me this all the time we text each other about it all the time private Equity this is private equity and private Equity is an industry where they don't do free internships you're more of a liability waste of their time than the free internship so you're not going to get a free internship at a private Equity Firm you need to have actual skills you need to have Investment Banking skills probably before you're even at their front door and so this opportunity is hey you're going to get private Equity experience and I'm going to give you transparency into everything I'm huge on transparency so I created a conference line and I said I'm going to let every single person listen on these calls whenever they want so those were calls with all the owners Brokers accountants attorneys anyone from HBS anyone that I contacted my phone was basically tapped 247 if you're interested in finance this is very helpful actually I mean who wouldn't want to it's like you Sean sure people would would is weirdly enough want to listen in on your calls when you're talking business when you're doing business deals you would learn a lot I'm sure so that's a huge portion of it the learning Ben Graham told Warren Buffett Warren Buffett was he admired Benjamin Graham and he wanted to go work for him and he said I'll work for you for Warren Buffett says I'll work for you for free and Ben Graham goes your price is too high and um because it you're right it's the time the energy so for for for a lot of people they're not even they're going to say no to a free uh for to somebody who's willing to work for free because the time and energy it takes to train somebody and give them that access is too expensive um relative to the free labor but you smart you made it a different you were in the opposite position you're like I do need help I do need free labor and um you rebranded yourself as private equity which technically you were but absolutely private equity for sure it's like where's your office it's like it's in the cafeteria we sit at this table and that's my office um all right so works and these were other Harvard students or these are just people in the in the area No in fact I initially used the student job boards and they were actually the worst you get these cookie cutter students who think like everybody else they were basic the best interns I found came off Craigslist my one of my first interns who was with that initial batch of five he was with me from the entire duration of my search and he came off of Craigslist nice it's people that aren't just thinking like every other college student and by the way a lot of these weren't college students you told me something you were like you know initially we're going through this list of like 400,000 businesses that like you know were in the criteria and so even if you're doing 50 outreaches a day and we have 5 10 15 interns doing this the math ain't math it just doesn't work you can't get through this list so you Chang your approach what did you do absolutely so we realized our response rate is awful I no matter how customized you get you're reaching out to people most of which aren't looking to sell their business so it's a very low response rate so if it's already this bad we may as well just start and we're already filtering in the wrong way we made many mistakes the interns would have all these false positives false negatives we decide we're just going to light everybody and their mother up because if you look at email addresses they're all more or less the same you start to see a pattern if you're looking all day for an email address you see most emails are first name last initial at domain first initial last name at this it's the same for patterns so we created a big Excel file guessed the combinations and then ran them through something I think it was bulk email checker to see whether or not they were actually like real addresses and so you you get their contact info and now you're going to email all of them one generic email because you're like [ __ ] it my response R is bad anyways um if even if it gets cut in half but I can email five times more or 10 times more people oh yeah that's a good trade absolutely and what was interesting is you know we we had this huge list of people and we You' think oh well if somebody reaches back out to me how am I going to talk to them but you realize it's kind of the same conversations over and over so we would do this approach where it's like bombs away and I after we'd send out an email we'd be getting tons of phone calls from people and we had sent the emails out in such a way that it looked like it was done targeted like it looked like we specifically did our research it said hey I I'm looking for a business to buy and yours seems to perfectly fit the bill because it's within this Revenue a new Range it's been around for a really long time and it's been profitable for a number of years and the people that reached that responded and said actually no you idiot that's not true great now we know that perfect right yeah they filled out your survey essentially yeah they didn't but they didn't realize it they thought they were telling us off yeah and the best replies were the ones that were wow you really did your research here this is great they reach out to me they're telling me how much research I've done I have no idea who they are I've got the intern scrambling figuring out what area code is this who is this what could this possibly be as I'm pretending to have spent this time researching their business I have no clue right it's like being at a party and then somebody knows you but you don't remember where they're at so you have to say really generic things to uh to keep the keep it going while your brain is like searching searching like how do I know this person what is their name exactly exactly and so you uh what was your specific criteria did you have like a revenue Target or did you have like a e the Target that you were using initially I looked at businesses ideally between 4 million and 20 million in revenue and I wanted something at or above a million and a half in I okay but over time that changed again just like the industries you realize why does it need to be this way I realized so much of what I was doing was just based off of what I had heard over and over and so things got tweaked as I realized I didn't need to necessarily have that criteria I actually lowered my expect ations a lot and standards it worked out well I think and so you uh you lower you you widen your thing you're reach out to a bunch of people and one and one of them is this business uh EDG cartons uh that eggcartons.com so what stood out there and then tell the story about how you ended up buying that company okay so I send out that email which again looks like it's customized but it's not the owner sends back a very long email saying wow you really done your research I am so impressed and he starts outlining the specifics of what I said in the email you're right we have been around for a while we started in 2001 and this business has been to your point profitable ever since consistently we have an amazing reputation we have a very strong customer base and from there I said okay this has my interest because at first let me back up I'm getting this email and I'm thinking guys we're reaching out to Farms now because it looked like they were a farm Feed Store it really did and so I the first thing I always wanted to know was okay let's see the financials because if the numbers aren't there numbers meaning you have actually been as you allege consistently profitable for a number of years I'm not really interested right but they were there and so anytime you see that you know because it is a rare by the way I would say maybe 5% of the businesses we looked at were consistently profitable and established that few and so he had he met those parameters I'm immediately interested and so I started asking about the business and learning a little bit more like okay this is a commodity right and he says no it's not we actually have a lot of proprietary products we have some patents I don't sorry just explain explain what it is it's literally the carton that your eggs come in you you buy a dozen eggs they have to be packaged in something yes this guy was making the packaging he was manufacturing it or he was the middleman he was the middleman yeah I'll back up so I found out what they're basically doing is they're a Wholesale Distributor and they're buying storing and selling egg currents so I immediately think okay this is simple enough that an a person with average intelligence me can do this like I think I could sell an egg card I think I could buy one too that was essentially what it was the business of course though again there were proprietary products there were a couple things that made it much more desirable but at the end of the day we're buying and selling eight cartons right right and the website I went to it now which is like you know after you took over and it's so basic uh and we've talked about this on the thing the logo isn't even just the logo it's egg cards.com so you you have the Doom in the logo which is great and then under it attached to that in the same image is your 1 1800 number it's like you know call 188 uh 825 what whatever whatever and so this business is so simple and so old school looking but you weren't scared Away by that you actually you wanted that you didn't want some internet business you didn't want something that was like kind of new and Innovative is that right that's correct I think you have to play to your strengths here this is where you it's not so General you you can buy a business that suits your abilities mine were honestly kind of limited I'm not handy I'm not good with technology anything with engineering is over my head so I figured the simpler for me the better I didn't want to rely on anybody going in there for the first couple months to just learn the basics this was a business you could walk into and day one more or less get it and so you uh what happens you make them an offer you meet them for lunch how do you how do you actually get this deal done so for me I stopped going anywhere until we spoke about a tentative price range so I would always throw out a number very quickly cuz they were all kind of going between three to four times so I'd think okay if you're above the average business I've looked at this month you you're closer to four if you're below that you're closer to three maybe closer to two profits or Revenue Prof profits I immediately got down to that on the phone it was great you're in this range they didn't really understand terminology I wanted to keep it very simple so I'd say okay what's your income looking like what are you guys averaging each year and they'd say the numbers and so the I immediately was thinking you know this is this is worth three and a half times I always went a little bit up because I always knew there'd be more in the number to bring it down but you want to be a little optimistic but you're not ripping them off you're not being dishonest you're being in best case scenario it's probably around here right so I threw out a number and I go is your is your price anywhere within that range because a lot of people the combo ends because they think they're business is worth 10x and it's just not right so I give out the number and he goes okay yeah I think I can work somewhere within that range he had looked into selling his business previously so he was a lot more aware of what these small businesses are actually worth a lot of owners more realistic about his baby versus saying this is the best thing ever it's worth 20 times profit right the second thing for me was a sell's note that was a non-negotiable for me that because a sell's note to me was a substitute for getting equity and I didn't want to get any investors involved so the next step was okay are you willing to do a sellers note and I I phrased it a different way to make sure he understood it but he actually did and he was willing to do that and so then I said okay let's talk now just to Define num what what a seller's note is so Define what is a sell's note for anybody who doesn't know Absolutely I'll use an example let's say you're buying a house for a million dollars rather than giving the seller a million dollars up front this let's say you have a 25% sellers note you would give that seller at close $750,000 and then they would get paid the remaining $250,000 over time and whatever you define those terms at whatever interest rate you decide on and time Horizon yeah the seller becomes the bank they're sort of financing you to be able to purchase the rest of the business exactly and it was also great because the argument there is because some sellers didn't want to do it and the argument is well you're telling me how great your business is you're telling me that it's simple enough for me to operate if those things are true why would you have an issue doing a seller's note right right this thing stable right exactly and uh my friend I helped my friend just buy a business actually kind of similar to yours uh recently and he did a good thing which was in the sellers note he said look here's the purchase price here's the sellers note but if eida was to drop way below where it is today because you know I find some skeletons in the closet or this thing turns out to have been built on some quicksand then we're going to forgive the rest of that seller's note right and then he was able to structure it accordingly so so it's it's a good mechanism for for any buyer um that's doing it I I I I don't did you do that or did you just do a sellers note as is I did it as is there's something called an earnout which is similar to what you're saying and it's based on the performance of the business and you choose am I going to do it on revenue or profits for me I tried to keep this extremely simple because the devil really is in the details here and these sellers a lot of them don't even have high school degrees but they're very good at business they've been very successful so I'm trying to do a deal here where these terms are extremely straightforward and when you start doing terms like that the seller freaks out because then it's wait I may not get this money I don't even know you all of a sudden he skeptical of you so I'm not a big fan of those yeah that that was your other thing one one of your points of view was like you know industry is overrated I like that point why you know because you're really looking for just actually just this rare beautiful business that's stable and profitable um and you shouldn't like use industry filters for that necessarily um have have the thesis and walk in as this genius who has a thesis up front H you know be open-minded at at the start and then the second part is you were like I try not to use any jargon like no B even though you were at business school you weren't saying iida you would say how much money are you making or income uh you know you were not trying or even in the structure you were not trying to get super fancy in the structure because if you don't understand it they're not going to understand it essentially right yes and that's the biggest mistake too because people think well I don't have a Harvard MBA or I don't know any of this I honestly think ignorance truly is bliss here because the less you know it's kind of better CU you can keep things extremely simple for the seller and I think that breeds trust and so you uh buy this business how much cash did you put into the business to buy it you don't need to put any cash down and I didn't have to because of the sellers note so I did a 25% sellers note and a 75% bank note and the idea there was when shopping around for a bank to do the deal it was all about and it took me you know 20 plus Banks to figure this out it was all about how did they view the sellers no banks that viewed that sellers no which very few did as Equity I could I could work with the ones that didn't not so much because if they viewed it as Equity it's like well you're okay there's 25% Equity we'll loan you the other 75% exactly exactly and how' you get them to think that that was Equity because it's not it's kind of not Equity honestly I wish I could have some like really Savvy answer here but it to be frank and I'm not trying to to say this about all banks but most Bankers have no idea what they're doing or what they're talking about truly I had to learn this the hard way they think they can Finance the deal they have no idea how to finance the deal they have no idea what these structures look what the details are of these structures so a lot of it I'm sorry it's just ignorance of them and their board right said here's the purchase price and then here's how much we need from the bank and then they're like oh rest is equity um and they didn't call it Equity they knew it was debt they called it but the way they reviewed it like when they're looking at their ratios for these these Banks they have all these rules it was whatever internal rules they were using to evaluate the debt ratio and and one big thing is this the bank had priority over everyone else right so the bank was going to be paid before this sellers know and the business had many many years of a track record of profitability yes that's why that that is so important you have to have they're really banking on that business's track record and then a little bit with you it's a question of okay it's done well for 20 years what could you do to make it not do so well right right and so you um you buy this thing you told me you go the only asset I had at the time I had no money no experience no whatever I only owned my my my car I had a Rav 4 and that's literally like all I had to my name and you were able to buy a multi-million dollar business and then walk in and be the owner of it just by really hustle and a kind of a numbers game so we didn't even talk about some of the hustle of this so some of the hustle of this was scraping the database some of the hustle was getting people off Craigslist to be interns to sift through the database then it was well those interns need a place to work so you got fake IDs to get them into the library is that right like tell the fake ID story absolutely we hustled for those IDs too we hustled for those that was hard work you said you uh what was it you like went to alumni you like you're like looking at the intern and you're like all right which Alum looks like this intern and then I'll ask them for their student ID hours of that truly hours we shot to hundreds and hundreds of people hundreds and so you've got these inter then you realize hey we need to just be blasting this kind of like fake it till you make it email where it looks like we've researched them specifically and they'll sort of self- Select you end up doing this deal where you don't put any money down because you were able to shop 40 Banks or something like that to get them to to give you the financing for it a lot of this to me the story here is like um not counting yourself out because a lot of people Al somewhere along that way would have counted themselves out I don't know how to do this you know uh this is uncertain I don't have the money I don't have the experience I don't have the time they would find a way to count themselves out you didn't do that uh figure out a way to get it done so like you know don't all the rules are sort of imaginary you can you could sort of work around them and the last one is it's just a numbers game like you said it's like it's like dating we're just going to need to look at a lot of businesses we're going to need to get a bunch of interns to find the good ones we're going to look at a bunch of businesses to find the good ones we're going to talk to a bunch of banks to find the one that will do this deal is that accurate because that's what I'm hearing yes if there are two things I'm very passionate about in this world it's obviously a currens but also it's this concept of spreading the good news which is that anyone who wants to buy and I really mean anyone who wants to buy and operate a small business can do so it is not a matter of can or can't it's a matter of will or won't that's a fact because this is an industry where you can choose any type of business you want any size business you want you could be a cleaner looking to buy another really small cleaning business from a guy or gal that's looking to retire you can buy a dog Walking Company there is truly No Limit here and that's what I love about it because to me it's one of the few areas left of the American dream where you can go out and just put in a ton of effort and elbow grease and make something of your life and actually make good money without killing yourself and not having to work you know three jobs right and so you since you took over the business you don't have to share the exact numbers but let's just say if the business was making $100 before um in the years since you've bought the business what have you been able to do like how have you grown the B how much have you grown the business and how what' you do to actually grow the business because a guy had been operating for whatever 15 16 17 years something like that you come in as a beginner but you've been able to grow the business so I want to know kind of roughly like how much value were you able to create how many multiples of what you bought for and then also um what did you do what what were the new insights or techniques or or operational things that you put in place to create that value great questions here so when I first bought the business the first couple years things may have been on the decline a little bit I may have made quite a few mistakes and so it wasn't looking too too promising you're not getting invited on podcast for that story at that time Sarah you bought a business and you are driving it straight into the ground how does it feel tell us for what what's secret yeah I probably would have been fired or kicked off as CEO but what happened was so when I first bought this business I'm just going to back up really fast I really thought I'm in the egg industry so I'm looking what's the duck egg market like what's the chicken egg Market you know these things and realiz again Market's kind of BS it's all a bunch of crap these Frameworks and stuff because you don't really really know until you're in it and I realized when I got in it I'm not really in the egg industry I'm in specialty packaging and so it actually was a lot more of an opportunity than I ever realized and I wasn't some genius figuring this out I just looked at our order history we were getting orders from people that were selling crickets and du buy roaches and people that were using the egg cartons for um small parts people that were using them for bath bombs cupcakes I estimate now that 40% of our Revenue has nothing to do with eggs and so when I realized that there was a lot of potential there and I realized that our specialty was really also these proprietary products I spent most of my time focusing on that not this really amazing modern website but focusing on these products that I call really sticky kind of a silly jargon term year but these products were we're making a custom mold for a customer that they then are going to keep buying from us assuming we don't rip them off or totally botch it right and so from that and then Co coid was like cheating because we five Sixx during Co to answer your question on the numbers we really blew up so it was a combination of recognizing how big our Market really was and then recognizing that coid was an incredible opportunity for us to take all of our capabilities and run with it right I like that and when you when you talked about uh specialty packaging you you said something to me you go in that Google doc you go we're not we're not about egg cartons anything that needs sep what is it separation and prot what did you call it separation and protection prot I always say anything requiring protection and separation is fair game and I stand by that 100% it's true anything and you think about how massive that market is it's enormous right yeah you could be making bras with that definition I love it this is this could be anything this is we're talking cups we're talking what whatever you want so you um truly and so are you like reaching out by the way because like you your website is still eggcartons.com and I'm not trying to Sean Parker you like drop the eggs just carton.com that's the way to go here if you're making 40% off of non-egg stuff why don't you kind of Rebrand it so it's funny we are actually in the process of doing a little bit of that and I've continued to buy a bunch of domain names so things like machine shop trays or bath bomb cartons any variations of that I'm just buying domains left to right who knows whether they'll stick but that's that's a huge portion of it but it's very challenging to figure out how to do that without compromising other important variables other important Revenue drivers it's a lot more challenging than you'd think but we are tierpoint looking into that I'm always like stop with the eggs and everyone of the companies like we sell egg carts it's taken me years to really get people to understand this is bigger than eggs we're not abandoning the Farms we're not abandoning the chickens you guys it's just way bigger than that so like stop talking about the chickens and the Ducks and whatever the geese I'm so jealous of you cuz I feel like if I ran an egg carton company I could fulfill my dream of being Michael Scott at Thunder Mifflin and like just come into the warehouse I just imagine that this is like a Dunder Mifflin style business and you could come in and like you know um you know just have be the crazy boss every day do you when you look back now at what you did because again we talked about starting as a rookie if you could go back and I gave you an hour that you could uh spend with you know younger you either during the search process or during the early days of of the business what would what would you if I could give you that time when would you go back to what would you tell yourself as advice um with the wisdom and the the benefit of hindsight so I would actually just borrow the advice I got from my mentor but I'd actually follow it which there were two pieces it was higher and Fire fast didn't do that huge mistake and do not change anything big or really anything at all the first year both of those things cost me a lot what about that that second one tell me more about that so it's obviously a Temptation you come in you're so excited you've been searching you've been searching You' searching you finally find the thing you close the deal after painful you know you don't know it will it go through will go through it finally closes and now the keys are yours it's got to be tempting to go play with the toys um what what's the what's the wrong way to do that what's the right way to do that yeah so let's get into that actually when I come in I'm thinking okay I knew I didn't know much truly I didn't think I was going to reorganize the warehouse or start changing anything seemingly big but there were things that I thought were really simple like the phones we had hardwired phones in our office and there were cables everywhere because we've got all these offices and conference rooms I'm thinking dude this is like 20 whatever like warm lless in 2020 here what are we doing with this we should just change our phones to Vo phon so that I can see everything remotely where there's not phones ringing let's get you know into the Modern Age here seems like not a big thing no that was one of the biggest mistakes I made because you called and our phone number is actually extremely important people look at the Domain that's great but our number is used by our biggest customers by the the new customers it's everything to us and we actually have multiple phone numbers that that one800 number is forwarded to like 10 12 lines and so it's very important and Spectrum may have lost our phone lines mid porting and so our phones were down for almost a week and it was a huge deal because it was a new owner and people are thinking did they go out of business right what is going on here cuz you're not the phones are gone they're dead now and it was a huge so it's like maybe just do a first off I wouldn't do anything with the phone lines now I'm I'm to this day I will not change our phone lines because I've been so traumatized by the experience but if if you were maybe you just like change one phone line maybe two maybe not all of them but something like that that you think is small can actually be pretty big I like that and you you said like we kind of hinted at this earlier but uh I want to make this point which is I've uh you know I said one thing you didn't do is you didn't count yourself out and that's important I think one of the reasons people count themselves out almost subconsciously is that they um they don't see the themselves a certain way they've never done that their family didn't do this and so they just sort of are like I don't know I guess that's just something other people do and that's even if you hear something you're like that that sounds like a cool idea but like where where would I start I have no I have no foothold here to do that and you have a pretty unique background that I think should you know debunk that idea of of of kind of like even if you're not from that track you can sort of get on that track at any time and so uh when I first was talking to you I was like wow this is some whip smart you know Harvard per it's like basically you take the Harvard pedigree but then she added some some Street Smart some hustle and I thought that's what I thought when I met you and then you were like you said something like you're like I didn't even take the SATs and I was like wait how'd you get into Harvard Business School tell the story of your background because I think it's amazing okay yeah this is a little detail here so we're going to go way back um I'm one of three and my my sisters and I would say sort of had a subpar upbringing in that we didn't really have parents and we were split up and we bounced around and living in a lot of different homes my two older sisters they made the most of it they got really into academics and sports I made the worst of it I would say and I became somebody that you would not want your kids hanging out with okay I was partying all the time I had a I would go to school so I had a truancy officer I went to jail I I was just so disrespectful to everyone and I got away with it because people felt sorry for me and the beginning of high school I was living with a woman that was an alcoholic and her favorite thing when she got drunk was to take all my items and throw them out into the front lawn and just tell me to leave and I didn't really have anywhere to go I was a kid and so there was a woman named Natalie Bracken who used to pick me up and take me to her house and she'd let me stay there until this woman inevitably you know came back to Earth and said where did you go and called the police and so it was constantly going back and forth between Natalie's the bracken's house and this other household I was being transported by the police and no one could really do anything about it nobody seemed to really care and one day just she just got so fed up and she said I'm going to adopt you obviously it was pretty informational so I'm living in her home with with her family and her daughter I was actually friends with so her husband one day kind of let me have it because I was trying to skip school like the first week living there and he sat me down and he he literally explained and it sounds it's embarrassing almost to say that he literally explained how life worked to me the basics of you don't lie you don't just skip things when you don't want to show up that's not how this isn't reality and he explained where my life was going which was basically absolutely nowhere and it was very emotional for me because up until that time a lot of people had given me lectures but it felt like it came from this place of you're bothering me or this is really inconveniencing me so can you just stop your crap where he came from this place I could tell he really cared and up until then I didn't really feel like anybody did care and so I got my [ __ ] together very quickly after that I really did I was so nervous about like being like sent back or them regretting their decision because up until that time no one and I mean no one was looking to invest in me I was like a junk bond investment wise this is not a safe investment I was not a good kid I didn't do myself any favors and so after that and getting my [ __ ] together step one was getting a job and so the first time I ever remember studying truly in my life was with Mrs Bracken when I was learning a menu to get a job at a diner and then from there I applied those new study skills I had to school Mr Breet had explained like listen you've got a 2.0 here kid you're not getting anywhere but Community College with that so you need to like G act together and so from there I got all A's because I wanted to boost my average at least to a 3.0 I'm working at this Diner and this couple would come in all the time and they never had kids and we just got not along that's the best way to explain it I never told them about my upbringing really initially I think my co-workers probably did there were days I probably weren't there and they probably could just tell and so they offered me a job at their company probably initially out of sympathy out of the kindness of their heart and I started working there and it just it just seemed to fit and so when I was working there I got weight listed from North Eastern where I ended up going to college and when I was weight listed did the owner of the so these two I'm sorry backing up this couple I had no idea they were extremely wealthy I always thought rich people were at fancy restaurants but this couple's coming in going to a diner getting cheeseburgers each week I had no idea like they're worth a lot of money and when I was weight listed Steve said you need to take yourself off of financial aid because of these schools especially a school like nor Eastern without a big endowment they're going to take that into consideration when evaluating your candidacy and I said how am I going to take myself up eight I have no money and this school is so expensive and he said we're going to pay for your school wow and so yeah I mean it's I it's very it's hard for me to not an emotional talking about because it's so between these two couples I mean they changed my entire life um they it wasn't just the money too it wasn't just the home it was these people changed the way I viewed myself they invested me when I was truly the world's worst investment I mean who takes a kid like me what I was like and say you know what I'm going to go all in on this like they put their ass out in the line for me on multiple occasions with the worst track record record you can possibly imagine like truly possibly imagine and from these two these two families I had this whole concept in my head of I just want to be that one person for one person because for me I literally begged when I was a kid sometimes for people to help me I would beg judges I would beg attorneys I would beg social workers to like put me in better circumstances or help me with X and Y nobody helped me at all they felt sorry for me but nobody took action so this concept of being that one person for one person carried over into college because I went to North Eastern to be a social worker initially and that was way too kumbi off for me as you can probably tell I'm not like that's just not me and so from there I said okay something a little bit more aggressive more me could be law I was watching CSI what I thought of law so I figur I'm going to be in Juvenile Justice I I can be I I can be the attorney I wanted to have I can be the social worker I want to have but again it was I just realized these professions were just not me so one day I called Steve the owner of this company I worked for I call him boss and I said hey boss like I don't know what I'm going to do here I'm now a junior in college and I've worked for you but that's kind of my only work experience and I have no I have no experience in anything but criminal justice now and social work and I don't want to do these professions and he said you are not an academic you're you are Geared for business It comes naturally to you and he said and you can have a way bigger impact in business than like criminal justice or social work and so I said okay well what am I going to do now though because I'm in my junior year and I don't have anything to show for this I can't just go and get a I can't just go into a business who's going to want me and he said you need to go to business school cuz he had gone I didn't even know it he had gone to Stanford Business School back in the day they went right after school but now the average age of business school candidates at least at the Ivy Leagues like Harvard is 28 and when we were talking about this I was like 21 I was about to graduate and um I said there's no way I'm going to get into a business school he didn't know I had paid my sister to take my SAT from me because I had confidence I can study hard enough but I'm not going to get caught up enough I don't even know what's on the SAT I imagine it's all the subjects but I just had no confidence in myself like when I got to college I was at a 33% reading level what does that mean I I went off campus one day and like I like it was horrible so I went off campus one day because I was convinced this is horrible I was really convinced I was mentally handicapped when I got to college because I just did not understand anything and I got this test done and they said there's really nothing nothing wrong with you're just like at a low level here and they did say my intelligence was below average at that time and so it was it was horrible because it was a factual evidence hey you're not that bright and by the way you're you're at the 33 percentile like oh that's [ __ ] great like it it basically put into P onto paper that I'm an idiot and it was heartbreaking for me but I was so embarrassed and I didn't want anyone to know and so the only thing I really knew at that point was to just try really hard and again I didn't want to disappoint like my biggest fear to this day would be to disappoint the brackens or the greens like ever and I just I figure if they've gotten me here I have to make this work and so I I studied like you wouldn't believe like nobody knows the nor Eastern University Library like I do so I studied my ass off and I my biggest fear was even getting a be can I question about that that part um I've met a couple people in my life who have had that sort of like I come to Jesus moment or that but but I call it like the conversation with yourself it's like there's a day where you have a conversation with yourself like look it's this is either going to go one of two ways either this is what it is and it'll just be what it's going to be or like I'm going to change it I and I always ask them because I I I think these Mo there's a few moments in your life where like decades are are sort of decided and it's some conversation you have with yourself this is my theory I don't know you tell me was there a conversation you had with yourself at that time to be like okay I'm just going to apply I'm going to go in bury myself in this Library until I come out with the 99% reading level or what what happened there I've never been one of those like long-term planners it was for me it's more of a day-by-day week by week thing but I did have this mentality I remember of I'm going to give this literally everything that I have everything that I have like every day I really mean that because I will I had a mentality of I will not disappoint these people I will not disappoint them so if that means I studied Round the Clock and it still wasn't good enough at least I can say I gave this literally everything and I'm sorry that was kind of my thinking that was it a lot of people think that it's you know the hardest thing is when nobody believes in you actually the most pressure is when almost nobody believes in you but a couple people do and when a couple people do it adds a whole different level of emotional pressure to the situation more so than when nobody believes in you yes it's funny I it's rare to I don't never me actually anybody that gets that but that's exactly how I felt I wanted to live I felt like what they believed in me wasn't true and so I wanted to live up to who they thought I was that who I didn't think I was that's I mean I didn't come from the situation you came from I was luckier than that uh it just to be born into the right sort of family and circumstances but um yeah the the Birch family here in San Francisco they're the ones who were that for me where you know I'm 24 years old and they they invested in me and they they sat they literally sat me down and said I think you're going to do special things they go we've met a lot of people in Sila Valley I think you're going to do special things you're going to go on to do special things we want you to do them you know we just think then they Nam me CEO of the company they like here's the keys we think you should do them here you're going to do them at some point and at that time I didn't really view myself as special in any way um it was kind of the first time that somebody had ever really said something like that but also put their money where their mouth was that wasn't maybe my parent where my parent it's like ah uh in a way you sort of take that for granted unfortunately and so I took that for granted when my parents would say oh you're so great it's like yeah just like every mom you know thinks their kids so great you know that's how I felt at the time um and hearing a total Outsider you know this billionaire say no no no I believe in you and then and then for me soul crushing the next six years I like didn't succeed but I was trying really hard but I wasn't succeeding and I remember feeling that pressure of like did I was I remember think like I wish nobody believed in me that would be easier um than somebody really believing you and you not wanting to disappoint them um that was I remember just feeling that day by day so I I definitely at least resonate with that part of your story yeah no that's that's really that's that's very real it's funny a lot of people will say oh I didn't have it as bad as you but it's all I learned a lot of the same and you adapt to what you're going through so I'm sure the feelings in a lot of ways were actually almost the same but the externals just looked a little bit differently yeah yeah your life is a movie um and my life is uh you know like you know the the normal thing but like your life is literally I told you this on the phone your life is literally the plot of the movie blinds side like you're just not this like huge football player instead you you know you're you went and bought a business instead but like same sort of idea where people you know took a took a chance on you have you uh taken that mentality of like be one person what was it be one person for one be that person for one person um be that one person for one person I love that that's kind of amaz is that from something or did you invent that it just I kept it just came to me I don't know I it was just something I thought of one day have you done that do you feel like you've been able to do that do I feel like I've been able to do that that I do actually and that's truly one of the most rewarding things about my job now and why I try and keep my circle very small I'm really big on doing what these families did for me as much as possible which is a lot of one-on-one mentorship because I can only do so much on a mass scale but one onone I can really bring people to the next level what ever that level is and I'm huge on and I have no tolerance for people's self-doubting I'll say nope you can do it like do it again we're doing this again and I will sit there and everyone of the business I used to say I will come any day any time I will sit with you for as long as it takes if you try and you're honest with me I'm not going to give up on you and I I really mean that if somebody tries and they're honest with me I'm not giving up on them right when you were talking I was getting Goosebumps uh on my arm here because I I mean I love love the story but also um I think that coming on a podcast like this and telling your story is going to do that for someone somewhere that you don't even know it's a different way of doing it but like somebody out there is going to hear this or they're going to forward it to somebody who said and say listen I don't even know if you know what the podcast app is but you need to hear this because you know something in there is going to resonate with somebody and so uh that's why I was getting Goosebumps because there's a way to kind of like the egg carton story and buying a business is cool that was kind of the bait uh but the the real kind of like the real story here is is kind of just the the mentality and also um uh those families that did that for you you know I think that's uh it's not as flashy as you know creating a foundation and giving away a billion dollars or whatever but it is it is a version of like you know philanthropy or or sort of giving back or cont contributing that is uh you know can change change somebody's life in a in a huge way versus a lot of people's life lives in a small way right and I think that's what's way more important to me and seeing it helps me a lot it keeps me motivated cuz unfortunately the farther removed you get from it the harder it is to remember what did you have to do when you kind of rewired yourself like what was the uh when you did try to that's a big shift right you basically changed all your habits maybe not overnight but like you changed all the [ __ ] you were doing that was getting you the bad results into things that started to get you good results um was it like what what was what was that like how did you do that I wish it was deep and I had like steps for you but it was a it was a lot of fear I was really scared of being anything like what I was I was scared of what I would be in the future it's kind of like a drug addict that nearly dies from an overdose and they are just scared straight I was kind of scared straight and so I also honestly lost interest in a lot of things I used to be interested in I used to get into fights I used to gossip I used to there was this golf course I used to get drunk pass out on the golf course wake up to the sprinklers no joke and I was disgusted by it afterwards thinking about it like who is that I don't even want to be around that it was like the idea of the taste or the smell bothering somebody it was like that but from there it was hard because I didn't know I didn't have any of the tools like I never I did not read a single book in high school not one book right you um I have a couple of docs here I want to share one is uh because I think it's cool to see the actual screenshots you you shared with me because uh the funny thing is when you told the story The when when we told the story the first time on the podcast there was two reactions one is wow that's an incredible story because here's what I tweeted out so I said I have a new hero and and her name is Sarah Moore at under 30 years old she had no money no experience and the biggest asset was her car a RAF 4 she spent one year hunting through like 100,000 businesses to find one to buy and she bought a I guessed at the time but I didn't know if this was true she bought a you multi-million dollar business called eggcartons.com with all debt no no cash down and so I told that story and I told on the podcast and basically the two reactions were wow that's incredible so awesome you know you go girl and on the other side it was um calling [ __ ] no way and people were like that's that's not you know you can't buy it all debt nobody could sift through 100,000 businesses um How do you go to Harvard and not have anything not have any money and honestly I started to when I saw those tweets I was like damn that never occurred to me actually like yeah you're right she was saying she kind of came from nothing and blah blah blah but she's at Harvard Business School like and I was like am I getting [ __ ] daros right now is this Elizabeth Holmes and I'm just getting duped um and so so that happened and then we have this researcher the researcher uh you you text us the other day you were like hey somebody's like contacting a bunch of my old interns and it was like our researcher fact checking just to make sure we don't look like idiots that like we're putting somebody on who did this actually happen um but I think that's kind of a cool thing that your story was literally too good to be true that people just started calling [ __ ] and I remember you didn't have any social media so there was no way for you to explain or tell your side the story and then I think your sister like created a Twitter account or something it started like that day she was like tweeting like no I'm in the car with her right now yeah we grew up broke and like we didn't have a family and like all this stuff and I was like wow I don't know what's happening right now but this is fascinating do you remember that that is so yes it started blowing up on Twitter and everyone my company was talking about it and my interns were talking about and they're like Sarah you need to go out there and defend yourself like we're going to defend you and I was worried about I know the internet can be vicious and I was worried about anybody getting any of that like you know pointed at them and then I started worrying about my company so my sister got on there and she was we're very protective of each other she was she created a Twitter just to go on there and defend me is this the SAT sister or the other sister this is the SAT this is the bright well they're both exceptionally bright but she's actually the director of HR for ABAC cromi and Fitch like corporate level so she goes so we're uh husband now but fiance the time goes you need to delete this Jane like you're something to lose yeah it's a lose situation like you guys are idiots why are you trying to defend yourself amongst like people online we're like it's getting out of hand so we had no I just that was my concern that people were going to think this was fake and this was somehow going to snowball in a negative Direction and all I cared about was preserve the business like don't [ __ ] with a cart.com don't let this random dude on the internet blow this whole blow your spot up all right so then you shared with us a bunch of the things so you shared with us the Craigs we'll put this on on YouTube so people can actually see the the Craigslist post but you wrote um Kenston green what's Kenston green that's what you named your thing I Mentor recommended to make the name of the company a name that would have a story to it and so I deliberately said I wanted to say I'm from Cleveland and I worked in the steel business I want to say I'm a bluecollar gal like you and so Kenston was the name of my high school in Cleveland I'd say and green was the name of the family IID worked for in the steel industry right so when they would ask immediately what's I don't no one wants an intro right hey I'm they don't care but when they'd say what's Kenston green it was my way of giving an intro without giving an intro that's amazing also it sounds kind of powerful and old money sounding I didn't mean for that but yeah no it works uh so you wrote It's a small unorthodox private Equity Firm accurate unorthodox for sure very unod probably very private just me um he said unlike a traditional private Equity Firm we will acquire just one business and the principal will operate upon acquisition all right no lies are told and said you will be working for an eccentric unpretentious Harvard MBA all right I like it and exposed to live deals interactions with Brokers accountants and attorneys and due diligence and negoti negotiations of various sorts every day see that's awesome you're you're saying like the value you're going to get out of this unique experience um we're looking for interns to help manage our multi-stage high volume funnel high in all caps um in the most efficient way possible it includes blah blah blah blah blah and you said you know I like this work will not include Financial modeling sophisticated analyses or anything that you or anyone else thinks is a waste of time tell me about that because that is beautiful love that in a in a job post I hate wasting people's time one of my biggest pet peeves are these jobs people have to sit there until 5 6 whatever o'clock and rub their fingers to leave it's like when your work is done just leave and don't pretend to be busy don't pretend like you're not on your cell phone so I'm not going to ask them do to do anything that's not going to be important very important right and they're not doing some this isn't Harvard we're not going to be doing these crazy Financial analyses it's really simple it can be done on the back of a piece of paper yeah cuz most of the time when you call these businesses you're like so what's your profit for the year and they're like I think it's like 1.4 no let me 1.6 I don't have my numbers in front of me and they're like and you look it's like actually you made 900k last year and they're like yeah I don't know what I gotta ask my guy about that um it's not like you're doing you know the diligence it's like they don't know their business it's not like they're hiding something from you they don't know it themselves this so so common um all right so then you said a bunch of other things looking for somebody hungry hungry comfortable with chaos um then here's compensation because some people were also like oh unpaid interns that's crazy and it's like dude I don't have any money and like this is these are willing and able people choosing to do this because they see some value in it for them you said this is an unpaid internship if you're looking for a glamorous internship in a formal prestigious work environment this job is not for you we are operating out of an unassuming spot in a library I will provide letters of recommendations as well as introductions to anyone in consulting firms Banks or private Equity firms should you perform well um should you perform well good good qualifier I will also help you with recruiting interviewing and grad school prep if you want me to wonderful this is wonderful this is so good I love seeing this um I also have here an email you sent um I think you were maybe sending this to a broker um but just very clear and direct to the point you were like hey my name is SAR Moore I'm a recent business school grad living in Boston I want to buy a small business that meets this criteria 100% of the business is for sale the iida or seller seller earnings are 1 to two million it's been profitable the last three years and seller financing is available um I have preference of B I have a preference for B2B service but this is not a requirement I'm able to finance acis below 25 million please let me know if you have any listings like very direct clear and were things like like how did you increase your luck so like how did you put things out there to increase the amount of good things that would come inbound to you let's go there actually I I have something for you guys I put to the side here okay so people talk all the time about this industry and being a woman and they think that it's a disadvantage well that's matter of perspective I deliberately wanted to leverage my gender and so part of that was within the broker Community it's all men usually so I'm 5'9 and I would go to only free broker events but I would go to them in 5in heels so I'm walking around as this 6'2 Amazon and always wear like a ridiculous outfit too like a loud color so when I'd call the Brokers I'd say cuz they never remembered they'd say who are you again I'd say I'm that extremely tall chick that introduced myself to you looking for a business there wasn't a single person that didn't remember that's for the Brokers but then I'm very active so I'd be going around Boston on these blue bikes which are free of course and I would be running or doing whatever and I wore this sweatshirt a version of this too like every day I want to buy your business and then the back was my number I it was an interesting experience with this yeah everywhere anything to get yourself it was anything free where I can I wanted the world to know I am looking to buy a business and I'm serious did you um get any good inbound from this was that like did somebody call you being like hey I just saw you ride by me on a bike um I think I caught this number correct I'd like to sell you my business it's funny I I didn't think it was working but you'd be amazed at what comes out of the woodwork um there's actually somebody that came over and said you know what my my dad asked me about whether or not this was actually a legitimate business like are you actually looking to buy something and that worked out and then I faxed everybody that was one of the interns idea to send out Mass faxes and part of the faxing campaign was just putting anything that will get their attention so part of it I did put my picture on there and I'd say we want to buy your business and I I told you this to this day I I have people that recognize me from those faxes people in the mill that I work in said wait a second I was wondering why you look so familiar did you try and buy my business like people on my street to this day in downtown Boston will say you're that girl that was wearing that sweatshirt or you're that girl that was faxing me all the time that's what I wanted unfortunately I I I a lot of those um replies came back after I bought a business but I was just that was what I was really hoping for somebody see it and know I was serious well that's brilliant because you're looking for these kind of uh long-standing sort of boring B2B service businesses they have fax machines nothing interesting is coming through the fax machine so it's a completely untapped unsaturated Channel you're like and I'm going to turn my disadvantages into advantages okay people say the disadvantage to be a woman you're not going to be taken seriously blah blah blah you're not going to be included in whatever well I'm also going to stand out if I'm the minority right like I'm going to be different than everybody else and I'm going to use the sort of psychology to my favor here and I love that you did that and are not like shy about that because I think a lot of people are very shy about things like this and um I love that you did that you faxing a picture is to me like it's in the all time hustle moves and I'll also say it doesn't matter if some of this stuff works because one life motto do it for the story I think that's that's a that's already just like a winning thing to do is just do things for the story and two is there's something that comes with the mentality of nothing is off limits I will do anything I am all [ __ ] in and it's a signal to yourself it's a signal to your interns and your team it's a signal to everybody in the world that I am all [ __ ] in and no idea is off limits no idea is too dumb no idea is too too out there too too um you know too loud no no we are everything's on the table as as a thing that we might do and I think that is the value of some of these things whether it's the lead that actually brings in the business or not is kind of secondary and I love that you did that anything Sean truly I was Shameless if I had anything I could throw out there I was throwing it out there whatever stuck I was okay with hey I'm Sarah Sarah Moore 5 foot n brunette if that's your thing I would love to buy your Pest Control business truly whatever it takes and if I could find out maybe the profits of your business I'd be happy to join you for a coffee uh let's let's do this um that's so so funny yeah and if you could leave uh any listeners to this with one I don't know message or takeaway what's what's your kind of what's your message what's your what's the last thing you want to sort of leave in people's minds here so my biggest value is freedom this country was not founded on equality despite how things seem now with the culture it was founded on freedom and part of freedom is using everything at your disposal so gender sex age whatever makes you you you can use any of those things to literally pull yourself up by your bootstraps and make your life what you want it this industry I can promise you is one of those Industries you don't have to have Harvard MBA what made me successful at this I really think was largely my upbringing those things weren't taught to me at Harvard to get a business the things I do day-to-day were not taught to me at Harvard they were taught at the cliche School of Hard Knox so if you want to be free pursue this route freedom is not free it's going to cost you time it's going to cost you like a lot of effort but I can promise you that anyone that wants to do this can do this if they really put their all into it and normally I say at the end uh how should people follow you or reach you but you don't really have social media and I think we may not want people to be reaching you after this um so like what's your message is leave me the [ __ ] alone is it stay away do you want to be contacted from this what what would you like my biggest thing I I've said what I want is for anyone who wants to pursue this career path I want everyone to have a fair opportunity to do so which is why I'm talking about it I'm going to give people within a Q&A type format detailed information to answer all the questions I get but we have truly experienced this crazy amount of volume on my in my inbox on my LinkedIn of messages like thousands and it really breaks my heart not being able to get back to all of them so I'm doing a mass reply that's that's the idea here we're going to give you as much information as we possibly can but please understand that I cannot respond to all these inquiries like I have a full-time job like I own other companies too we're very busy so the biggest thing is please do not contact our business please do not show up at the business we're going to create a Google doc something for you guys to fill out if you want information we'll send it to you but I I just can't get back to everybody like I'm not used to this I went I'm like a nobody so I'm not used to all this attention all these in Mount inquiries I can't I can't respond to them all I'd love to I really would but I can't so we're going to put a form in the description here that'll be like people can fill that in you'll send them a blast and amazing if there are people who fill out that form uh I might cherry pick a couple of people and be like hey if you're serious about this like I'll help you do it like I I don't I'm I'm taking a break from running companies uh you know we sold our last company last year I don't want to start a new company right now but I do want to do fun fun projects and one of the fun things is helping people buy business businesses that's one of the things that is actually pretty pretty dope because you learn about all these Niche businesses you get like the free MBA right yeah so so I think it's a good time you learn so much searching when I hear about people failing at this it's like you really can't fail unless you get investors of course but you really can't I I mean the amount we still laugh at some of the businesses out there and you view the world differently you view like I think of the freeway now and the the lines on the freeway and the signs on the freeway somebody made all of that right like these Christians come in like wow God made this and I'm thinking that and all these businesses made like all this stuff that we're looking at in using it's kind of wild right you're like no that's Trent in Cincinnati he does that what do you mean he has a name all right uh Sarah thanks so much for coming on I really appreciate it and uh really inspired by your story so thank you for coming and telling it thank you for having me I appreciate it

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i started a pe firm alone to buy a business but it wasn't your typical pe firm my office my quote unquote office was just a library at school there was no fund uh like no money i had a lot of help i had over 50 unpaid interns come from craigslist and i had them sift through over 400 000 private companies for a year and a half before i found eggcartons.com [Music] so a while back maybe a month ago i came on here and i was like um dude there's this business have you heard of this business called and you're like no what is that well that's exactly what it sounds like you go to eggcartons.com and it's a place where you could buy the packaging the carton for eggs um and like but also packaging for a bunch of different varieties of eggs like huge shipments small ones eco-friendly not eco-friendly but also just like in general like other packaging materials as well so i was like yeah fascinating business right like you go there it's an old school looking website you know it's like dial 1 800 eggs dot com you know whatever like to call us to place an order and i was like this is fascinating so i dug in i was like who's behind this and i basically found that it used to be owned by this guy he ran it for 24 years i was like okay this sounds about right you know his linkedin picture was him like with a you know like a phone with a cord in it and he's like got it up to his neck and he's like sitting at a messy desk and i was like ah this looks like the guy who started edcard.com 25 years ago but now as i notice oh it says like he ended his ownership one year ago so who who's behind this and i saw that there was this woman named sarah moore who was like not what you would expect to be like it's like oh this person should be like the ceo of lululemon or something like that why is she getting into egg cartons of all like beautiful harvard graduates yeah like you he looks like a celebrity a little bit um and so i tried to reach out to her i couldn't get a hold of her and but i couldn't resist so i came on the pod and i told the story it's like yeah so basically it looks like she purchased this business uh she did like one tiny interview about it and but i had done one thing that i didn't tell you about i don't think that day which is i've been experimenting with a format that i wish people use more on me like when people reach out to me they're like oh i'd love to talk to you sometime like if you have a question just send me the question in fact if you have a bunch of questions like just send me a google doc i'm going to look at it and if i want to answer i'll answer if i don't i don't and so that's what i did to her i go i sent her an email i said egg cartons like with five exclamation points i go that's hilarious like what a hilarious niche i go we got this podcast i'd love to feature you on it um i have five questions for you on this google doc if you answer them with bullet points i'll tell your story on the podcast we get 20 million dollars a year it'll be great for your business i go this is me on twitter by the way whatever i sent it no reply for 20 days um then she go she emails me out of the blue she goes i couldn't have paid someone to make me sound as cool as you and sam did on the podcast last week thank you so much i filled out your google doc i think they'll answer your questions i would have responded earlier if i didn't think this was spam um blah blah send me send me your address i'll send you some world-class egg cards right so i want to read you what she what what what did you heard what she replied but did you want any are you gonna are you gonna accept those cartons very nice really yeah very sorry very nice of you sarah but thank you but no thank you no dude everything in the house could turn into like a toy storage container you they have toys for all shapes and sizes all right so all right what did you say so i basically said here's my question i go you go you bought eggcards.com did you buy it alone as part of a pe firm she goes alone-ish firm my office my quote-unquote office no fund like no money i had a lot of help i had over 50 unpaid interns come from craigslist and i had them sift through over 400 000 private companies for a year and a half before i found what yeah i know then i go i so that was my first question second question i go how the heck did you buy it uh oh no why the heck did you buy it what about the business made you want to buy it was it the name the customer retention what drove you to it she goes my goal was to buy a business with all debt so i could have 100 ownership i had no collateral though except for my 2012 rav4 so i was trying to find something that was already stable enough that i could pitch a bank that the business itself was the collateral instead of my rav4 um that so i needed historical cash flows this business fit because it had been profitable since it started in 2001 had a high barrier to entry given the domain name and 100 plus other similar domain names that they own like egg cartons like misspelled and carton.com uh blah blah blah then she says the founder has usually purchased all these domains over the years to protect their like their demote it was simple enough it was also a simple enough business that somebody with zero operational experience me uh and average intelligence me could operate if they tried hard enough i was like wow this is incredible then i said i said i live in silicon valley people here are obsessed with crypto ai blah blah blah they would underestimate edcards.com can you give us a sense of the scale of the business that's a really good way to find that 10 million that's a beautiful way to frame that question because you nagged her a little bit like you said something a little rude you're like yeah you know it's probably not that big but maybe it is you know like impress me right i would think this is small but you know i'd love to be surprised would you say that this is more than this and less than this and so she anyway she came back with i'm in the middle of something that prevents me from sharing the numbers publicly uh all i can say is that our revenue is less than 50 million and i was like oh okay okay but that you not less than 20 if it was less than 20 i feel like you would've said less than 20. i feel like that that would be the case um i said how did you negotiate the deal she's like ah there's a bunch of contacts here she goes in summary i harass the owner until he replied then we hit it off we came up with the valuation together then i contacted over 100 banks most of which told me to f off one of them threw me a bone and agreed to an under uncollateralized loan the final deal was 75 bank debt and 25 the seller's note she bought this with no money down like the bank financing and the seller financed it she said before buying the business i had i i overpaid an accountant to check my work and do an audit of the business because frankly i had no idea what i was doing his fees got rolled into the deal itself so uh she used an account to cover her ass but also paid him out of the deal itself this one is amazing any other fun tidbits or anecdotes i i could share here's what she says this is where it gets great she goes uh while searching for the business i participated in several research studies just to make money uh like to while i was doing my search i went from i went legally blind from a deodorant study for a bit so i had to take a break from working from working until i could read again she goes my response rate was awful i started doing borderline insane things to get a reply at one point i took a photo of myself wearing a sweatshirt that said i want to buy your business with a massive grin and i faxed it out to thousands of businesses a day to this day i run into owners who recognize me from those faxes one of those owners is actually my neighbor then she says the library we worked out of required a school id to enter most of my interns didn't go to the school so we had to get fake id's for all the interns to get into the library every time we hired someone there was a lag because we would need to get more ids during before covet i used to fly to china i needed to examine the egg cartons on my first trip to india i got held by indian customs and interrogation for hours because they didn't believe that i was coming to india alone they did not believe that i was coming to investigate egg cartons uh related to india i almost got killed there i rejected a shipment from an indian vendor the his whole family lived there he was furious started chasing after me the hotel put me into incognito mode for my safety my driver luckily was at the door that i ran out of otherwise i'd probably still be there buried underground um she goes when i bought the business i considered an egg company but now i think of it as specialty packaging forty percent of our business comes from things entirely unrelated to eggs you'd be very surprised by our customer base you know think big brands like boeing spacex disney madison square garden crayola et cetera anything that requires protection and separation is fair game um anyways there's one one more i should say but dude what's the other one is sarah moore not my hero is she my hero is she not my hero this woman's wonderful why is she why didn't she talk about this publicly more often this is like it i feel like there was tons and tons of stories there dude you know people there's some people who are so in the game that they're like they're like oh yeah what am i going to stop and chat about the game like i'm in the game right like that's the feeling i get from her i've met some people that are like this that they're sort of like it's a combination of they kind of don't realize how story worthy their story is until like quite a bit later and the second thing they're sort of like you know either they just prefer privacy or they're like yeah i don't really know why i need to do that so why would i do that it's going to be kind of braggy and kind of weird and what's the benefit and maybe i'd just rather be personal um so i think that like i know a handful of people that i'm like dude i wish i could tell their story on the podcast because they're epic but they just don't see value in this and they're also not consumers of it that's the other thing i've noticed most of those people don't listen to a bunch of podcasts or take inspiration from it so it's kind of a foreign idea to them they're like they're like people will care it's like yeah of course people will care about this this is awesome so anyways i was totally inspired by the story and she is uh kind of amazing she is one of us she no small boy stuff for sarah moore so i think she's only when you if you google her you basically can't find anything i mean there's next to nothing on her there's like one or two pictures there's very little i found one article where it says that she's 28 and she uh it says she answered the question what inspired you to start buying companies she says freedom what is your mantra don't take counsel from your fears like that's pretty much all she and like she answered nothing this woman's amazing why can't we find anything about her there's a lot there's a lot going on with her we need to uh convince her to come on there's a 30 chance she's a fat guy named craig so like you know we could be getting catfished here i wouldn't put it past her uh but i'm gonna go with the with what i see i think she's amazing you

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so I looked at that org chart and said this is a messed up org chart which is great for making money if you can find something that's messed up and easy to unmess up boyah there's your money there's your opportunity to make a lot of money you've made a few billion dollars what lessons have you learned about money and spending money and living with money that you wish you knew sooner you you throw me off a little bit with the question cuz when you look at the the numbers the real growth has been through m&a through Acquisitions what's been my secrets Acquisitions here's the gist a lot of people have a rigid business plan that's spelled out for many years and that's it and it's very that doesn't usually work why because life changes markets change economies change and if you're rigid if you're just rigid thinking you're going to have things come your way to make money for shareholders and feel well it's nice it's great but it's really not our thing that's a bad way of thinking you've said you can get a lot of things wrong if you get the big Trend right what major Trend are you most interested in right now I'm most interested in because it is the trend it is the number one Trend Ray kurtwell who wrote The Singularity is one of your Heroes and you recently met him I'm curious what you took away from that conversation and what it was like well I did recently meet him and it was like meeting Albert Einstein or meeting someone on Michelangelo because when you look at his context his wide context he's looking at the history of the universe going back 13 point something billion years and how we got here and then looking at those Trends and where are we going he identifies the most important trend of all which is homo sapiens have created technology created tools starting with stone Pebbles and over a couple million years ago and then fire and then settlements and and over the last couple hundred years so much so much more so much more in the last 20 years accelerating accelerating and now with AI it's accelerating even more and where's that going where's that going is the tools that we've created the technology we've created is becoming more capable than we are at certain of our trades and we're able to Outsource a lot of our activities to our own technology and Ray predicts a singularity where by technology becomes more intelligent more capable than humans and we merge with technology that we use so much technology in our own in our own bodies with wearables and Nanobots so forth that and Ai and Outsourcing our memory and sensory and so forth that that you really can't call it Homo sapiens anymore because the traits characteristics have changed so much that we'll say Homo sapiens has become extin and there's a there's a new new species and I I think he's probably right what do you think the benefits of that are and what what do you think the drawbacks are well the benefits are we should be able to accomplish a lot more so if you look at us as a planet 8 billion people there's a lot of things we do well but there's a lot of things we don't do well primarily get along with each other and information sharing is not there resource sharing is not there I think with advances in technology we will be able to distribute resources more intelligently and and and uh more abundantly and have more resources for more people and I think uh medicine will be better and SC science will be better we'll be able to live longer we'll be able to be more in touch with the way we think and to be able to think more constructively because that's one of the places it's an area of improvement for humans is we don't think rationally a lot of times and I think with technology and AI advancements that we will think more rationally so it'll be non-stop therapy so to speak how do you think rationally when you have all this the information coming at you from all over the world you're emotional you have big swings I mean you've lost billions of and in market cap in a day I don't always think perfectly rationally I'm not a per perfect person I've paid attention to the way I think over the course of my life and I've studied with various people who that's their specialty is analyzing how you think and I did a couple years of therapy for three hours a week for for a couple years so I I have spent a lot of time reflecting on how I think what my automatic thoughts are what my biases are what my cognitive distortions are and I'm aware of those and I apply various techniques and tools in the toolkit that you learn from cognitive therapy dialectical behavior therapy positive psychology Etc to to think more rationally and more constructively and more accurately and I think that helps me in business quite a bit in business you need to keep your head on your shoulders you need to be calm you need to be cool you need to be collected you need to be dealing with lots of changing unplanned circumstances and then capitalizing on those and not being over overwhelmed by those not being beat up but be but utilize what comes in capitalize on what comes in to create money to create money for shareholders so I think the the human capital in the in the psychological uh uh sense is very very important so I I I put energy into that you've said you can get a lot of things wrong if you get the big Trend right what major Trend are you most interested in right now I'm most interested in AI because it is the trend it is the number one Trend whereby our technology software that intelligence will be able to consume so much information much more than we human beings can even with 100 billion brain cells the the power of comp Computing is so much greater and be able to then analyze that and be able to spit things out and be able to eventually I I'm looking forward to the point where computers become emotional where they do have emotion they do have empathy just like we have mirror neurons in the front of our bra in the prefrontal cortex I'd like to see that Trend FR materialize where computers can feel can have theory of mind can be sitting here with a conversation with Shane parish and and feeling what you're feeling and and feeling happy about what you're feeling happy about and feeling sad about something you're not feeling happy about I'm looking forward to that Trend a lot now saying AI is sort of everybody recognizes AI as being a trend but you've spotted several Trends well before people recognize them and you were way ahead on the AI curve too as I understand it how do you spot th those Trends before they become mainstream well I do spend a lot of time thinking about Trends I look I spent a lot of time thinking about the wider context of things like okay here's a situation what's the context of that situation what's its origin what's its present conditions and characteristics what are the ways could go and what would be the Catalyst to make it go right or straight or left so I I intentionally think about Trends quite a bit because in business in the business world you got to get the major Trend right you've got to get the major Trend right and as my main business Mentor make rest in peace lud jerson used to say you can mess up a lot of things but if you get the main Trend right you're gonna make a lot of money and conversely if you don't get the main Trend right you're swimming Upstream you can do a lot of other things right but you you're not going to make a lot of money so I I intentionally spend time thinking about what's the where does all this fit in and where could it be going what's your research process like I like people and I like picking people's brains and I'm Shameless about asking people their opinions and I like to be a student more than a teacher I find a lot of people make the mistake as they get older or they get more successful they they think they know everything they start teaching all the time I'm sharing through the book I wrote and through podcasts like this and so forth the few little things that I think have insights that I can give back to but I absolutely view myself as a student of life I'm I don't view myself as as a guru who's figured it all out by a long shot and I think if you keep that that element of profound curiosity of really interesting in being very interested to learn and being involved with the sensory experience be involved in the intellectual experience be involved in analytical capabilities I think you can learn a lot more and you can see trends that otherwise you don't see it you're just in it and you're living it but you're not seeing the trend you're just kind of going along a lot of people who reach your level of success sort of Outsource a lot of this work to other people and by that I mean um do research on this come back to me give me these points but you seem very Hands-On in the weeds very involved in the detail why is that important to you I do both Shane I do have a team that researches things for me but I also I I like to roll up my sleeves and get into myself I like to find even like when I do m&a so you know my teams that I've LED have done about 500 Acquisitions I've been involved in those Acquisitions I I I get into the details of what are we buying and to buy those 500 companies we looked at thousands and thousands of other companies that we didn't buy and I and I I love the process I love studying each company figuring out how they get to the point where now there are millions or hundreds of millions or billions of dollars of of Revenue and they started from scratch and how do they do that it's like a miracle it's fantastic I'm I'm very impressed and excited and enamored with entrepreneurs and companies that have created huge growth and huge value and I want to understand that so I want to get into the detail of it I want to pick their brains I I I see a big value in asking lots of questions people now today you're the one asking questions and I'm answering but normally it's a role reversal normally I'm asking a lot of questions if you go into a management meeting I'm usually asking lots of questions what have you learned about asking questions that you wish you knew five years ago I take questioning from the therapist so I wrote In the book that the only time in my life that I've been depressed but I was really depressed was in the mid 2000s when I had stepped down from being CEO of this big company United Rentals and now I didn't have anything to do I didn't you I was I was doing some art I was you know studying art and buying art and I was doing things with my family so forth but I didn't have a business and I learned learned from that that everyone has their own thing that makes them excited me is running businesses i' I've been a CEO since I've been 23 years old and I like being a CEO I really like that job real a lot now I wasn't a CEO and I felt a big gap I felt I felt depressed I was down and had a lot of unconstructive thoughts and inaccurate thoughts and so forth and that Drew me to to meeting a lot of fantastic psychotherapist and I mean fantastic at the top of their game so there was a psychotherapist in uh New York City called Albert Ellis he died about 101 15 years ago and he had formed a school of therapy called rational emotive behavior therapy rebt but in short it was cognitive therapy it was cognitive behavior therapy he together with another psych Psy psychiatrist actually Aaron Beck whose family and friends called him Tim I got the privilege of meeting him too and spending time with him and his family Tim Beck or Aaron Beck and Albert Ellis were the co-founders of cognitive therapy and I find that therapists have of all the different professions are the best at asking questions and the best of getting a person to relax getting a person at ease and to open up and what I learned from studying those psychotherapists first is you need before you start badgering someone with questions and inquiring and asking them all these important things sometimes personal things intimate things private things you need to create you need to create an atmosphere you need to create EnV environment that's a safe place that's a Zone where you're it's okay to be vulnerable it's okay to say what you really feel it's okay to take off your mask and show who you really are warts and all and that's really really important and to do that you need to be listening and and I learned from studying them that the most maybe the most maybe the single most powerful thing you can do in a relationship whether it's personal whether it's professional is to give someone your 100% like you're doing now you're giving me 100% of your attention I can see it you're you're looking at me you're listening to me you're actually paying attention to what I'm saying and that feels good by the way that's making me put a little pressure on me to perform better give give good answers but you're doing something powerful you're you're giving me your attention you're giving me 100% of your attention and I find with therapists that's that's their their little that's one of their tricks one of their skills one of their techniques is you have your session for 45 minutes or two hours or whatever it is and during that time they're all yours they're all listening to you and they've got all their attention on you and that has a certain effect on the person speaking and secondly they're not being judgmental so they're not they're going with you now there's they're not they're not disagreeing with you without first finding a way of agreeing with you joining then leading validating then disputing so even when they are changing a way you're thinking and say GE is there a better way to look at that is there another way we can look at that be more constructive before doing that before that disputing before that changing that transforming they're first joining they're they're showing that they understood you they listen to you they got you they got what you said message received and I find that's really powerful in business whether you're dealing with employees or whether you're dealing with someone whose business you're trying to buy or you're dealing with a vendor or you're dealing with a investor or an upset customer it's a it's very good to do that it's very nourishing and nurturing to give someone 100% of your attention and listen to them non-judgmentally I call it non-judgmental concentration I I think I made up that phrase maybe I didn't I forgot and I should have attributed to someone else but that's a phrase I use non-judgmental concentration when you're really taking all your Consciousness in giving it to someone and and not judging them but going with them trying to get into their way of thinking their their way of feeling even so not just what are they thinking but how are they feeling so what's the emotion that's underlying that and and I use that I use that quite a bit and you in the book I have a chapter on how to have an electric meeting how to run an electric meeting which means a meeting that's powerful a me a meeting that everyone goes away exhilarated everyone goes away with lots of things to do that can create a lot of value for the shareholders not just one of these whole home meetings and and an element of that meeting is everyone in the meeting shuts off all their devices and concentrates concentrates non-judgmentally non-judgmental concentration on the one person who's speaking at a time no side conversations no talking over each other one person speaks at a time but everyone in the room gives them all their attention it's really powerful thing I I like that a lot it's sort of the secret to our podcast in a way which is I want to see the world through your eyes I don't have to agree or disagree that's not my job is I just want to see what you see think what you think smell what you smell and then that way I can truly understand where you're coming from and I think that so often listening is transactional in the sense of I'm waiting for you to stop so I can just say something or I I have this point you don't understand it so I'm not really listening to you because you're talking about something else now and I think it's one of the biggest reasons we miscommunicate yeah is the work with the the psychotherapist is that where you learned about rearranging our brain and controlling the mind and the importance of sort of thought experiments and mindset or talk to me a little bit about that was one of the places you know for my my main hobby since I was a teenager has been meditation and various forms of meditation and then from meditation into learned self hypnosis and then and then from there I learned all the mindfulness and the positive psychology and cognitive therapy and so forth so I've mixed and matched a lot of different schools of thought and customized it for me my own personality and my background and my individuality so it's not just one thing I've had a many different influences that have created the way I look at life and the way I I deal with reality and a lot of that's was my education when I was a kid was I studied music I studied music in math but in music it is a lot about relationships unless you're a solo performer and I was not I like playing a group I like I like a band I like playing with other people interacting with the other folks is part of the magic of making really great music that that's had a big influence on me too I I Define myself I self-identify as a as a musician more than a business person which you might find odd because I've spent a lot of time building big businesses and running large Enterprises but when I think about myself I think about myself as a Music musician who happens to be doing a lot of business and has done well at business but I I feel like a musician and by that I mean my sense of sound is the dominant sense and I'm I listen very I listen to sounds I listen to my heartbeat listen to my breath I listen to sounds in this room going on right now I I suffer quote unquote and I put air quotes on it because I don't consider it suffering I consider it fantastic uh ttis where where you have have ringing in your ear from when I was a teenager probably from listening to music too loud and I have it right now I'm hearing very high pitch sounds I love it it keeps it interesting it's my friend it keeps me in tune sometimes they get louder sometimes they get softer now some people have tontis and they and I might be mispronouncing that but you know what I'm talking about yeah ringing ear that and they say oh my God it's a terrible thing it drives me crazy and they get all upset about the thing I have just the opposite attitude I feel I'm lucky to have that I'm I really am lucky and I I wouldn't know what life would be like without it and that's part of being a musician part of part of being a musician is embracing sounds no matter what they are no matter what they are and that's that's the reality of the moment and you should be in that reality and and go with that what's the relationship if you had to guess between music math and business a lot for me is a lot so let's start with the business and then that'll show how those other two things relate to it business is about making money for shareholders at at court the the report card for a business is you take money from other people the form of equity the debt you pay back but the equity is deer and people invest Equity into the business and now you have to give them back that money when they sell their shares but much much more money than they gave you so in my companies we've been fortunate that we've been able to give back 32 times the money in one and another company is over 150 times so really really large large large returns like over the top unusually high returns that wasn't by luck that wasn't um coincidental if it was coincidental it wouldn't happened five times in a row in in large amounts that was because there was a Playbook that because there was a a method to it and that method incorporates many many different elements and I talk about quite a bunch of them in the book that together give you an ability to create what we call Alpha in the business World which is not just beta which is the Market's going up so you're going together with the market but Alpha which exceeds the beta exceeds the overall uplift that pretty much all boats are lifting by the same tide and part of the part of the ingredients to that formula to make huge huge returns for shareholders involve analytical thought uh careful analysis of numbers is all the math uh making order out of disorder trying to see where how does this all fit together and seeing the relationships between different things how to reduce things to Simplicity because a great mathematicians reduce very complicated things to a formula for example yeah expressed with just a few handres so that's math that's mathematics that's the beauty of mathematics is seeing the patterns seeing the seeing the the how it makes sense out of this and on the music side it's being able to improvise because my training was originally classical but then I had the fortune to study with um U African-American musicians in in um in Bennington College Milford Graves Bill Dixon and part of that whole training was to be spontaneous and to be improvising and to be in the moment and there is no wrong note if someone plays a note that's just a new note it's not the wrong note it's like okay we changed keep let's go with that come on let's get going now now we're on so so that ability to go with the flow in music you need to have that in business sh a lot of people have a rigid business plan that's spelled out for many years and that's it and it's very not non-flexible that doesn't usually work why because life changes markets change economies change people change results change you get opportunities that you hadn't even thought of at the beginning so you need to you need to improvise you need to capitalize on that and to make money from that and if you're rigid if you're just rigid thinking if you're not a musician if you're not a musical business person you're going to lose opportunities you're you're going to have things come your way to make money for shareholders and feel well it's nice well that's a bad way of thinking I I'll share with you one of the best business deals I did in my life was U I bought in 2015 a less than truckload trucking company called Conway it's based in an Arbor Michigan it a few billion dollar deal it was a pivot because this was a hard asset business had tens of thousands of trucks and drivers it was a asset heavy as asset heavy businesses as you're going to get with fixed costs and depreciation amortization was not an asset like brokerage business which is how I started XO as an asset like non-asset-based business but here was an opportunity to buy something really really cheaply at a small fraction of what it was worth and even a smaller tiny fraction of what I knew we could make it be worth within a few short years this is a company that had a lot of excess overhead the organization chart was not mathematical going back to Symmetry and formula things that relationship makes sense I like to take I love or charts I just love to geek out on or charts and or chart should be pretty or chart should be simple they should be elegant they should be geometrical they should not be really complicated like you took some spaghetti and threw it like an abstract art on a canvas this was this was this was a bad orc chart this had three things of the three different HRS and three different it organizations and a lot of duplications and it just didn't make any sense a lot of silos and heavy heavy on the non-revenue generating top part of the organization which should be the lightest part of any organization the heaviest part should be parts of the organization that make money they generate Revenue they get close to the customer they generate sales so I looked at that org chart and said this is a messed up org chart which is great for making money if you can find something that's messed up and easy to unmess up Booyah there's your money there's your opportunity to make a lot of money and that was it it was just like I got so excited about the opportunity to take this company and I saw a way we could significantly grow the profit margin in the cash flow that I pivoted I pivoted and uh go ahead and did the deal I got beat up real bad by the market they said oh it's a change and I said give me some time and I remember I remember Eli gross who now runs investment banking for Morgan Stanley but at the time he was covering me XP as a Transportation uh banker and he said you know you're going to be in the dogghouse here for a little while because it's a pivot and markets don't like pivots but assuming you're right and I know you have high conviction and you deliver the numbers over time you're going to be a hero here and everyone's GNA understand what you did and fortunately he and I were right and you look at that deal even though it was a pivot it was a change was an improvisation we bought it for about $3 billion roughly half of it was equities really bought it for a billion and a half dollars plus plus some leverage today it's worth something like $15 billion and that's after having taken out many like five billion dollars of net cash from it that's after selling off $550 million of the truckload business that's after taking its Warehouse business the supply chain business which was called meno and putting that into our gxo subsidiary that was after taking brokerage business and putting that with our rxo brokerage business so this was the gift they kept giving Conway it's been an amazing amazing amazing ride and the returns it's been a I can't do it in my head but something like a 20 bagger 15 bagger a huge huge return on invested capital and uh had I not been trained as a musician and a mathematician I don't know that I would have saw it Shane I don't know if I didn't have the mathematical skills I would have been able to see okay this is a mess but we can make it clean I don't know if I would have been able to have the courage to improvise and to change from what the the script was for something that I that I had a high conviction would be very very lucrative for our shareholders and in business the bottom line the report card is how much money did you generate for your shareholders that's the that's the one it's it's an examination with one question on it it's how much did you make your stockholders how much money did you make for your stockholders how much how much Bliss did you give to your investors in terms of return on on on their Capital they invested in you they trusted you with you're a fiduciary in business you're you're a you have a solemn sacred obligate responsibility where you're taking other people's money debt and Equity particularly the equity and you're the custodian for that you're a custodian of it that you're temporarily using their their money and your job is to multiply that they have a thousand other places they could put that money they've picked you yeah they've picked you now you've got a big big responsibility and I think the the training of a mathematician the training of a musician and then all these experimentations I've done in in meditation and therapy and so forth I think that's been what largely explains at least as far as I can understand why my companies have created so much Alpha I have so many rabbit holes I want to go down there I I I think the opportunity hiding in complexity is really interesting because the way that I think about this and correct me if you see it differently is bad ideas can easily hide in complexity but they can't hide in Simplicity once your reaction to that I need to digest it my immediate reaction is yeah I think I get that because when it's when so so go back to that organization chart that I saw at Conway it was just a mess it was just like wow it's all over the place triple dotted line lines and squiggly lines and you to have different colors and different it's like that's not a real elegant or yeah I I think I see what you're saying in that you could hide inefficiencies as opposed to when it's a clean organization chart everyone's got clear kpis key performance indicators everyone has clear metrics everyone has clear goals and the compensation is tied to that and people are rewarded for achieving those goals yeah it's hard to hide the the other thing that I thought was really interesting is is you brought up the leverage Point how do you think about leverage and debt and employing it and at what point does it become too risky um and at what point do you think of future opportunity costs you mentioned sort of taking advantage of whatever the world brings but if you take on too much debt at now for an acquisition you're reducing your ability to adapt in the future should interest rates rise should uh a company become available that you really want that's a dream that wasn't available when you took on all the debt how do you think about that a Zen Buddhist approach to debt not too much not too little I don't think it's an optimal balance sheet if you have no debt because you can improve the returns by shrinking your your your Share account because you have few shares so the same amount of returns is is greater per share to have few returns so I think it's good to have a little bit of Leverage I don't think you should have a lot of Leverage particularly in today's world I don't think you should have a lot of Leverage because the significant geopolitical risk there's geopolitical risk in the Middle East in Ukraine in Taiwan there's United States politics is very volatile there's a lot of things that could go wrong real quick and and uh a kind of shock to the system would would hurt companies that have too much debt because business would slow down look what happened during covid if you were very highly levered during covid if you had way too much debt and then everything slowed down and your revenues went down you might not have been able to make your interest payments or your debt repayment payments and you could have gone bankrupt companies don't go bankrupt unless they have too much debt you go bankrupt from not being able to repay your debt so I don't think you should have too much debt in my new company that I'm forming qxo we're going to have I think our Target a healthy Target should be one to two turns of debt by that I mean we take our our our iida which is a measure of our cash flow and and we say let's have one or two turns of that so if our IID ends up being for instance in a period of time for example bill well let's have one or two billion dollar a debt that's that's a comfortable amount not too much more than that now you could have for short periods of time you could lever up like when I bought Conway we levered up to about four times a little more than four times but we very quickly sold off I mentioned that truckload division for $550 million boom we paid down a whole bunch of debt right from that we generated a lot of free cash flow we took that free cash flow instead of doing more Acquisitions we paid down debt so you can get your leverage under control by one of two ways by impr improving your profits by increasing your iida or by paying down your actual gross amount of debt and I I think you can manage that and that's uh that's something a good CFO does you've said in the past that you need to be liked and loved and yet you're quite contrarian at times in your approach to things how do you reconcile these two things I think you have to be contrarian I think if you want to make a lot of money in business you can't just be a conformist to do at what is in in fashion and what everybody else thinks if you're going to do what everyone else thinks you're going to get returns that everyone else gets which is by definition average so my companies have not made average returns my companies have outperformed their indexes not by one or 200 basis points but sometimes by five or six times what what the index was so you have to do you have to think differently and take things that are from a different point of view so one of my favorite investors in my companies has been orbis uh out in California and in Bermuda and they're contrarians they're willing to make a bet and a significant bet if they have a high conviction about a trend or a company that the Market's not seeing something's out of favor but the market doesn't understand something about maybe a company's not studied enough it's not covered enough maybe management is not good at communicating their story and and it's dislocated the price is dislocated and you can get a real good value by buying those shares and then being patient playing it out the cycle and make real good returns and I've seen them do that with my companies when something happened in the marketplace that made us uh a cheap stock for for a short period of Time Boom they came in they bought a lot of shares and rode them up and then sold there really really high I think that contrarian value approach to investing to business is is profound I think that's important and I remember I remember when I sold my first company amarx my old broker company we started a company in 1979 bunch of broke Scrappy kids and we were in the right place at the right time and the Iranian Revolution took place and the Sha got kicked out and Ki came in and they took 400 hostages and and the oil prices went way way way up so it was a great time it was a sad time for the world it's a lot of lot of chaos and pro problems but it was really good to get in the oil business Oil Business was really volatile and some young whipper snappers like us could come in and be taken seriously by Exxon and mobile and Texico and shell and Gulf and BP and all the customers that became our big customers over time we built that business up over four quick years to about a little under five billion dollars in brokerage volume so that's that was really big rapid rapid growth curve and I had a good team doing that around the world and then I sold it and I wanted to start a new business and I wanted and I was ambitious I was single I wasn't married didn't have kids I could take risk I could afford to do that and I was remember speaking with my my uncle Howard and uh may he rest in peace he long long passed away uh and of course my uncle Howard was born in the 1920s maybe even late late 190s and grew up in the depression obviously and uh during World during World War II and so forth and it was very tough times so he's very you know he grew up in a time when there's a lot of emphasis towards being very frugal and very risk averse he became an accountant and worked for the government and I remember talking to him and saying yeah I'm going to I'm going to start another company instead of being an oil broker I'm going to I'm going to go to the I'm going to go to the adult table instead of the Kitty table I'm gonna I'm Gonna Be An Old Trader because I've been I've been making all this money for my clients where they're making three four five dollars a barrel and I'm making five or ten cents a barrel of course I had no risk but they were taking positions said now I'm gonna I'm gonna put my money where my mouth is I'm GNA put my money into into a bank I'm GNA get a letter of credit I'm GNA actually buy and sale as opposed to just broker you said oh Brad don't do that don't do that you should maybe take a small percent of your savings and put it into your new business but take the vast majority of your money and just tuck it away just in case the next thing doesn't work out and fortunately I overruled my uncle Howard and I to go with what he said I did exactly the opposite I took a completely contrarian position where I took I think it was like a $100,000 or maybe at most $200,000 and I tuck that away I took all the rest of my money I deposited it with Bank Perry bar and now it's B&P Perry bar back then it was Perry bar and they gave me a billion dollar line of credit and I swung for the fences I I used sometimes up to 990 million dollar that line of credit doing counter trade deals doing pre-finance deals doing barter doing processing Deals Deals that I they were very complex going back to the math very very complex but organized I knew what I was doing and sometimes people would look at it and say wow there's a lot of elements to what you're doing there you're buying it you're shipping it you're refining it you're hedging it there's a lot a lot of moving Parts there said yeah but I understand each one of these parts and it's just math to me and I actually feel this is low risk this is basically just execution risk and I'm comfortable taking on the execution risk part of it I don't have Market risk even though it looked like I did but I really didn't and and as a result of not taking his advice and taking contrarian position and Having the courage or the guts the the strength to believe in what I wanted to do that I had a thought and I had the courage to say okay I'm gonna run with this thought I'm gonna go with this I'm gonna bet on myself I'm gonna bet on this idea we built a really nice oil Trading Company and did very very well for for our Sal and for our shareholders where did that confidence come from well I don't know probably confidence comes at a young age I would think so when you ask a question like that you know normally you start thinking about like what did your mother say what did your father say yeah so if if I had to think about what did my mother say what did my father say that was very uh transformational the first things that would pop my mind are with my dad who I loved and I had a lot of respect for and he was a great dad and a very honest person and he was a very dedicated and good provider for the family but he was very uh very blunt in what he said he wasn't very diplomatic what he said he just said what what he really thought and I remember one time when we were doing we had been doing erand we're driving home and he was in the driver's seat and I was in the passenger seat and we're at a stoplight and my father turned to me and said and he was a big guy with a low voice and you know big laugh and and said Bradley and my mom and dad were the only people ever call me Bradley but anyone who knows he calls me Brad he said Bradley it's really good that you have a really good personality because you're surely not going to get anywhere with those looks I laughed real real loud and that moment was a was a deep moment for me because on the one hand I was crushed I was like 13 years old you don't know whether you're good-looking or ugly when you're 13 years old you just are you just are what you are just don't even think about that but the message I was getting from my father was you know I may not be such a good-look guy okay on the other hand the other message he was giving me was but you have leadership skills you have personality you have Charisma you can you can get people to follow you you can become the president of your class you can become your group leader you can be the the leader of your band and so forth you can be president of the student council and somehow or another despite your your what he considered bet not pretty appearance not beautiful appearance you're were able to be a leader and accomplish things and get stuff done and get form teams get people so I think in a very a very very paradoxical kind of way my father insulting me on that uh gave me confidence it gave me confidence of okay so maybe I don't have great All-American good looks who cares I've got something else I've got something in terms of being able to to lead so maybe that that helped give me confidence because that's that's a an experience that I've relived many times over my life my father it's a big deal what your father thinks of you what your mother thinks of you on my mother's side if I had to think what was something that gave me a lot of confidence with my mother okay so so my mom passed away about 10 11 years ago and you know from the book one of the questions I like to ask people because I learned this from Marty Seligman father of positive psychology is what's a what's the happiest moment of your of your day as opposed to how did your day go and just have a little different angle to that question and we like to be validated we like to feel we're appreciated we're recognized we're understood we're approved of particularly from our parents and myom mom was was on her deathbed and my brother and sister and I were hanging out on her deathbed for good couple weeks and I don't know if you've been around people who have died but you know they they're sort of dying and then suddenly they wake up and like talking to you like nothing's going no no problem and and then they lie down again start dying again and they go in and out and it's kind of half dying and half not dying so forth and my mother had been lying there and that breathing funny when they when they're dying it's like really strange way of breathing it's not normal way of breathing it's irregular breathing and then then not breathing for periods of time and is a very bizarre experience death and you never we didn't quite know whether this was it like we're never going to talk again she's done and she suddenly like sat up she looked all three of us in the eye and said I'm really happy each of you turned out so well oh and smiled with a with a mother's love and and just kind of gracefully lied down and continue the dying process but that moment that might be the happiest moment of my life when when my mother my mom the the person whose body I came out of the person who took care of me from Young right from day one even before day one nine months before day one approved of me and uh validated me and and gave me a stamp of approval and uh that's given me confidence even though that's later in life that gave me a boost that was right at the beginning of starting XO Logistics which of all the different companies I've started that was the one that was the the biggest so far the most most successful so I would say that confidence later in life came from that boost that my mother gave me of just approving of us by the way I've learned something from that I've learned something from that and I try to learn from all these things how I can apply this to business because I'm a business person I'm trying to make money for shareholders that's my goal in life so all these things that I'm going through life learning about I'm then trying to take them and apply them to business to make money for shareholders so what did I learn from that I learned that the relationship between a parent in this case my mom and me or the other example my dad and me it's a real important experience has a big influence on the person what the authority figure thinks about the person and when you're in business particularly if you're the CEO you're the authority figure you are kind of like the dad you are kind of like the mom of in my case 150,000 employees and you have to be careful what you say and it's not just it's not just what you say Shane you can't just be you can't fake it and if you don't like someone disagree with somebody like say oh yeah aren't you great because because people are smart people realize when you're bsing them they just know that they know when it's phony and they know when it's real too so what I've learned is you've got to rearrange your brain going back to the book you got to rearrange range your brain your way of thinking so that you are positive about people because nobody's all good and nobody's all bad no I know at least and if you can train yourself to see the real good in someone and to reflect that to them and to make sure when you're doing the change part the Improvement part when you're giving them constructive feedback of how they could be doing a better job do that second don't do that first first thing is be like my mom and say you know I'm just so happy how how well you all turned out that that say that first you know when I do performance appraisals when I do performance reviews my direct subordinates my reports my direct reports I always start out with the Positive stuff I don't start right off with okay here's some things that you're messing up that you need to be doing better it's important to have that part of the conversation too because you need to help the person achieve more and do better but you want to start the conversation with I really want to congratulate you for XYZ I really want to appreciate I I want to express my appreciation because you've done one two and three but it's got to be sincere it can't be phony baloney false flattery that is like you're better not say anything than do than giving phony compliments but you should I try to rearrange my brain so I appreciate a person and say well why did I hire this person in the first place what did I love in this person what did I admire what did I respect what did I what really got me made them real high in my estimation and then translate that to okay how is that materialized and what they've done and what concrete things have they done not have compliments that are just like General compliments but have very specific concrete compliments of you know you did this this and this Kudos tip of the Hat good good job on that and uh it goes back to the psychology of validate then dispute join then lead I apply that to business I do that with with customers in in the world of business you know we've had millions millions and millions of customers they're not always happy because we're not no service provider is perfect once in a while you mess stuff up and you have a you have a difficult conversation with a customer maybe they're not trained in rearranging your brain and they go right into the insults and they skip the whole part about hey we really like what you're doing here they just go right to darn it you've youve been late on this or you've damaging that or your invoicing is messed up or whatever it is and what I learned from all that to answer your question is I've got to empathize with that I've got to first I have to put my mind in their mind I've got to put myself in their shoes I've got to I've got to say I've got to really I got to picture clearly how much what we did messed up their supply chain or cost them money or cost someone a job or whatever or just C someone annoyance or just made it difficult shoot up their time or and and and made them frustrated or whatever whatever I have to figure out what's upsetting them going back to what are they saying and what are they feeling so I've got to I've got to get in tune with how they're feeling and I've got to show them that I've heard them I've felt them I've both heard understood them what they're said and I've also felt the emotion that they're feeling and and and that I I get that and that and that I'm I I'm I have a an action plan to solve it so that is a sequence to all that I like your human Centric approach to this there there's a lot of people who sort of take for granted maybe positive feedback and so they offer uh negative only feedback to the people who the who they work with is that a blind spot or what do you think of that I think it's a mistake I think it's a mistake to give only positive feedback or only negative feedback so for example right now I'm in the middle of performance appraisals and we're each person is writing three things that they're really proud of that they've accomplished in the last few months and that they feel good about and they're it's an achievement it's definitely a A plus not a negative but also three things that you know we could have done better or we will do better going forward things that we didn't quite achieve that we hoped to achieve so it's a balance it's three good things it's three bad things but when I run meetings I like to make it like an Oreo cookie I like to make the good stuff the negative stuff but then end on the good stuff it's very important how you end a meeting for whatever reason psychologically how you end a meeting makes a big difference and how that person leaves the meeting so ideally even if we've had a tough meeting where we said look these numbers are in the red they're not in the black these numbers are down they're not up and we need to up our game and here's our action plan and here's how we're going to hold ourselves accountable and here's how we're going to Tinker with compensation in order to reward people for doing better and to not and take hit their bonuses and maybe eliminate their bonuses if they don't get better fast those are tough conversations that that you have to have but I don't like to end on that yeah I like to end done exercises along the lines of having everyone in the room okay now we've done all the all the all the tough stuff we worked hard on the business okay now let's put that aside take a breath now let's just talk about who I'll ask each person I'll go around the room supposed I have a dozen people in a meeting and I'll say tell me some so we just been meeting for two hours we've been working hard can't with some we identified some really important problems we need to solve and that if we solve them we're going to create a lot of money for our shareholders so good job team it was tough but good job we were went through a good rigorous process and you worked hard and and a lot of a lot of imperfections came up during the meeting and that was was humbling in a lot of ways but now I want to ask you something after working two hours collaboratively in a meeting like this difficult meeting who star went up and why who said something that they maybe you already held him in high esteem but you even you hold him in even higher esteem now as a result of the way that they thought their thinking process or maybe the elegance and Grace with which they expressed a difficult subject or the way they tackled something from an Innovative way someone who contributed to the magic of creating Alpha creating money for our sheer holders how did they do oh they they handled a situation of conflict because you have conflict in business in a way that was nice that was kind-hearted that was not mean-spirited so whatever why tell me every I go around the whole room I say tell me someone in this room who said something or did something or didn't say something or didn't didn't do something that made their star go up and why and people feel really good about that and I have a whole series of exercises and questions I do like that one of them I do is when we have long meetings sometimes we have like 10hour meetings or even 12 hour meetings we have people coming in from around the world and we're doing a quarterly operating review we're really covering lots and lots of material we take just few breaks we just keep going at it going at it so people are tired at the end of that it's been long long day we've been going from 7 in the morning to 7 at night for example with just a few quick um 10 or 15 minute breaks we work right through lunch right right through dinner I like to end with sometimes with getting everyone at the end of all that we stand in a circle and and I don't want to say anything I just want I just want to spend five full minutes five minutes is a long time to be standing in a circle with 15 or 20 other people not saying a word and I want I want everyone to look at each person and I want them to do two things I want them to think to themselves think to themselves I really respect this person because or I really admire this person or I'm so grateful that this person is on my team is on the team with us this or the these these this person has XYZ qualities that are so Noble so fantastic so positive regard that of each person each person one by one I want them to look around around the circle and the second thing I want them to do is I want them to say not only am I grateful for being on the same team with this person I really wish this person a lot of success I hope this person has a fantastic future at this company I hope this person has a fantastic career I hope they knock it out of the park in terms of their numbers in terms of profit the generation they're going to do and and I find those that two-handed experience of gratitude of praise gratit the gratitude that comes from honest Praise of of each person and then the the wish the well-wishing to each person it just everyone goes away from the meeting just figuratively flying on ear people go away with a really good feeling and feelings count in business in business I have I write about this in the book The Love vibe that you want the love Vibe you don't want the hate Vibe you want the you want that Good Vibration going around in the company you want people feeling good about themselves good about the com good about the people they're working with good about the customers good about the vendors you want them to be like one big happy family and you have to work at that that doesn't happen just by itself that's not a natural event that's something that requires effort that requires intentionality that requires some skill you've made a few billion sooner you know inter you throw me off a little bit with the question because I don't Define myself as in terms of how much money I've made like that's like just not like the big deal for me but it's it's a report card but it's not it's not who I am and it's not my be all and end all I happen to be in a business that makes a lot of money so I make a lot of money my occupation is making money for shareholders when I look at my motivation if you want to understand my gal how I look at the world how look at myself it's really I if you take those psychological tests I score very high on need to be appreciate so how does that translate into being a CEO well that translates into well I give you a perfect example last week we had a call with my 75 co-investors in my new company qxo so my wife and I are putting in $900 million and then Sequoia and uh a few dozen friends and family like really friends in like my sister my brother my niece and nephew uh are putting in another $100 million we'll have a a cool $1 billion even putting into into this company and I told them at the end of the call it was an hour call just give him an update of what I'm working on I thank them not for the100 million because I didn't need the $100 million I could put another 100 million in mine in but I thank them for for giving me motivation giving me inspiration giving me a purpose because I want to please them I want to make them happy I want to make them a lot of money I like being happy I like being feeling good about myself I like looking in the mirror and like who I'm seeing and how I Define that is pleasing the people that I love and those are my investors my co-investors my my close friends and family and the people who have been good to me over the years and I give back to them let's Deep dive on m&a how do you think about it at a high level and then specifically walk me through your process for not only evaluating companies but beginning to end including integration m&a has been a big part of my business career not in the first 10 years in the first 10 years from 1979 to 1989 I was in the oil business it was all organic we didn't do one single acquisition was all just trading and brokering and building up a business organically but since 1989 I've been doing roughly about 500 Acquisitions I've done a lot of m&a I love m&a I love m&a as a way to create value value for shareholders because I don't know of another way on a risk adjusted basis on a certainty level that is more likely to create massive shareholder value than doing sensible m&a in order to understand how to create value I have to understand how am I going to scale up the business I I I only know how to create tremendous shareholder value by growing a business tremendously that that's how I know how to do it and of course it's organic and I've had very good organic growth the companies I've LED have been well performing companies that have had good market share and growing market share and we've taken customers away taken business away from our less not as our competitors weren't managed as well but the real when you look at the the numbers the real growth has been through m&a through Acquisitions what's been my secrets on Acquisitions I'll try to be concise because I did a hour and a half podcast with McKenzie a couple years ago with Andy West that was the only question asked one question I babbled on for an hour and a half it's still a big people still watch that that podcast because I really told everything about it here's the gist the gist is you first have to select an industry you can't just do m&a so I spent the last year going around studying dozens of Industries looking at hundreds and hundreds of acquisition opportunities mostly with Goldman sack Morgan Stanley and some other sequ and some friends figuring out could I apply my PlayBook to this industry is the industry big enough is the industry fragmented enough is there m&a to do is bigger better that's not always the case are the economies a scale do you have a competitive Advantage by being bigger is there a way to apply technology because my companies have always been teched forward to the industry because the industry is a little sleepy on technology as the way I run a business the way I do the intake of people and the culture and the way we interact with each other and so forth is that something that'll work in this industry is applied in this industry is it it's something related to something I know about Industrial Services for example most of my companies since 1989 have been Industrial Services and I looked at many many different Industries and I settled on the one that checked every single box which was Building Products distribution and the name of my company is going to be qxo and m&a will be a big big component of what we do there are there 8800 billion dollars of distributors in Western Europe and in North America which is where I want to plant my flag I want to build a company that's called $50 billion I can do that if there's an $800 billion size I can take 6% of that through acquisition and through organic growth I can get to $50 billion there's many other industries that are nice but I'm not gonna be able to get to $50 billion I want to get to $50 billion so this industry there's a clear path of how I can do that now I can't just buy and there's roughly about 7,000 Distributors here in the United States is about almost twice that amount in Western Europe so roughly about 20,000 Distributors you've got to be very careful about who you buy there has to be a reason why you're buying that company there has to be a strategic a compelling strategic reason of why you're buying that company what what make what makes sense for that why is that good for customers why is that going to make our business a better business why does that fit with the other things that we've already bought and put together how's it going to integrate well I like to look at the multip that I pay for an acquisition the price that I pay for an acquisition is very very important because when I look at the levers of how we we create shareholder value what contributes to that the biggest lever the biggest component is the differential between what I raise Capital at due to my relationships with mostly institutional investors and because of the track record and what I can deploy that at on doing Acquisitions the second biggest lever is how much can I improve the business businesses that I buy those are there's many many levers but those are the two biggest levers so I pay close when I've studied all these different Industries I've studied historical acquisition multiples and one of the reasons I like Building Products distribution is I believe that I'll be able to buy companies at lower multiples of their profit than I'll be able to raise Capital at and that's going to be a big that tagio that spread that difference that Delta is going to create value boom just right away right from the first day now you asked about integration integration is extremely important anybody can buy a company it's not that hard you write a you send a wire you sign a document it's few dozen Pages lawyers have gone over it and you wire the money and you own it so that's not the hard part the hard part is after you've selected the right industry after you've selected the right companies within that industry to buy after you've had disciplined so that you don't so that you pay the right price for all those then you have to integrate them I've never run companies that have like hundreds of different companies all running separately with different names and different sift systems and different back offices and there is some level of decentralization where you need to be closer to the customer but I have a very strong appetite for standardization standardization of the Erp system that you close the books with uh so you close the books promptly right after the close of the month and that you can have standardized dashboards so all the managers have the same format of the numbers they're looking at the kpis and they see them graphically very easy to understand I like to see so they can Benchmark every comp every location to every other location every District to other districts every region to other regions and for that you need standardization I like to have very standardized hris Human Resources system system where all the people in the organization and we'll build build this company up we'll have hundreds of thousands of employees I need to have a standardized data system for all of our employees everyone's on this for 401k it's the same exact way of doing all the benefits are the same all the performance appra are the same compensation I can see right away I need to have transparency to the information about I need to have the organization charts very accessible right away and every time we do an acquisition I need to pull that information up right away while we're studying it quickly so we have a competitive advantage against other biders to see what would the synergies be so I need standardized HR technology throughout throughout everything I need a standardized CRM customer relationship management system like salesforce.com there several others as well and for that to be able to make sure we're looking at customers the attractiveness of those customers the profitability of those customers the size of their spend so therefore the potential of those customers going forward all the interactions we've had with those customers I need to see that in a standardized way all across the globe everywhere in every country we're functioning in so I need a standardized technology for customer relationship for Sales Management so I'm giving I need a standardized internal social media I happen to like I've used um workplace by Facebook it's not the only one but I like that one really well it's nice and the interface is really really good so I like to have everyone on the same one because I like to have one company with one culture where everybody body can ping each other I like I don't want to have these silos of companies like sometimes you see these companies roll up many different companies but it's all a mishmash it's all separate I I don't like that at all I I you see a lot of these Middle Market private Equity firms do that they roll up these small companies they're doing five 1020 million ebit each and they B they just buy a bunch of them and now they're up to 100 million 200 million Ebon they just get a bigger multiple because they're bigger but it's a mess whoever buy those whoever buys those there's a lot of work to be done youve got to now standardize everything and integrate everything and opportunity to improve them but also a lot of cost and time to fix all that stuff up so I I integrate from the moment that we agree to buy a company we're starting the integration process and the day we close the acquisition gazam we're in there and and we're standardizing everything as much as we possibly can and we're communicating and communicating quite a bit a big part of the success for m&a is forming the relationship with people and making sure we get off on the right foot and making sure that we don't lose the great talent and making sure we on at the same time we're identifying the weak players and gracefully and generously exiting them so there's a lot of different components to m&a I'm summarizing a lot of different faction each one of those things we could talk for an hour just on that that block but those are the kinds of things that go through my mind in my approach to m&a yes some unique questions when you interview sort of the top 10 to 15 people as part of the diligence process can you walk me through what at least two or three of those questions are where you get the most useful information yes so you see some companies when they're negotiating by a company do this very lengthy and detailed and bureaucratic diligence process and they hire a firm and they write this big huge memo that nobody ever reads and some won reads it but nobody important reads it and it's basically just to cover their butt I'm not trying to cover butts I'm trying to make money for shareholders my goal is to make money for shareholders period And so what I'm looking for in diligence is I want to know how they make money I want to know the history of this company I want to know the current state of this company I want to ask those people I like to interview the top 15 or so people one-on-one like an hour hour and a half and I like to ask them if this was your money would you buy this company and what would if you did buy it what would you change what would you do differently where's the opportunity to do something differently than it's been done and I like to ask them okay if you were B buying this company what would you not change what what is so good about this company that's making it successful that's attracted a big bidder like ourselves that we should make sure we we'd be crazy to change that so I like to ask questions like that questions that give me insights into how the business got to where it is what are what's the future of this company how could we improve the company going forward where where are the things that have been blind spots of the current wether company's been run that we could fix and what are the things that are working well that maybe we could put more resources into where have we not been spending enough money where have we not investing enough money into something that could be a good return on investment on the other hand where have we been where has the company been wasting money where has the money been gone into things that why are we doing that doesn't really help customers it doesn't Delight customers does make customers happier or doesn't improve our our customer business reviews so why are we even doing it that's a i' like to ask those questions and they're really revealing the the first person who I talked to who had questions like that was cat Cole who is the vice president now at athletic greens when she turned around Cinnabon that's what she would do she went and worked in the stores and asked the employees what they would do differently and it was so revealing in terms of what they ended up Chang I find so many times in corporations people don't ask those questions yeah and I'm big in asking those questions I'm big at surveying using Town Halls oneon-one interview small group interviews asking questions about how are we going to win how are we going to win what are we doing wrong what what can we be doing better what are we doing right that we should do more of and I find it um very valuable very very valuable it yields a a great return on time and as I write about in in my book there's only two things a manager manages return on Capital and return on time and I believe that asking the employees and getting them involved in the process is a great return on time and a great return on Capital what's the role of a board in uh a strong founder Le company like qxo when you're you're investing 900 million of your own money you're the founder the CEO largest shareholder what role will that play how does that change the role of a board especially when it comes to m&a I've been really fortunate to have fantastic boards boards that are very strong PE comprised of people who are really competent people have they're invested in the company they're leaning in they take the job seriously they they are passionate about the company and my relationship with the board is a little bit different than most most boards we're completely transparent completely open any board member can reach out to any person in the company anytime they want and ask them anything they want and there's no supervision or people have to accompany them or none of that so I want board members to be very very informed I want board members to get copies of the customer surveys I want the good and the bad I want them to see that I want and I want them to see the analysis I want them to see the analysis of the customer surveys of where we're doing well and where we're falling short I want them to know that I want the board members to have all all the employee surveys and see all the word cloud word cloud analysis that we do all the trend analysis and all the benchmarking we do I want them to see where the pain points are of employees I want them to see where employees are happy I want them to see the trends of employees I want the directors to be invited to every operating View and every monthly operating view every quarterly operating view of any part of the company that tickles their fancy I want them the more they're involved the better off we're benefiting from them so I like to have board members that are very involed involved very knowledgeable and we have good conversations about the important stuff and I don't run board meetings the way most Fortune 500 company boards are run most Fortune 500 company board members board meetings are kind of they're very scripted and they sometimes they even rehearsed and there's a careful story that's being told by management and it's done by PowerPoint it's done by rehearsed presentations that come up and just a complete waste almost a complete waste of time uh you could do that whole thing just by sending them a document there's no reason to convene a meeting for that it's just a it's just a kabuki dance it's just I like to have real board meetings where ahead of time everyone's read all that data and between board meetings they've been in the business through what I've been talking about and they come to the meeting and we bring in over the course of a day somewhere between 10 and 20 managers EX Executives sometimes senior ones sometimes mid-level managers sometimes front level exe managers employees and and I I go around the room and I like every single director to ask whatever they want to ask I don't want to ask I don't want them to tell me ahead of time what they're gonna ask and I don't want them to tell the man the managers who they're interviewing to to know what the questions are ahead of time I don't want our Executives or our Frontline employees to waste time and I'm using the word waste deliberately preparing for the meeting some speech some script some sometimes phony baloney sales story about how great things are I want to ask real questions I want to including the tough ons and I want people to answer them honestly and spontaneously in the moment and completely so that those I love our board meetings so I'm now chairman at the moment of three different companies uh XO gxo and rxo and so we tend to have our board meetings every three months around the same time around the same twoe period it's some of my favorite meetings the whole year because I have highly engaged directors who are knowledgeable about the business and who ask really good question I learn a lot I learn a lot at the board meetings I don't dominate the board meeting with I'm the person speaking all the time A lot of times you find that the the chairman or the CEO is like making a whole big deal about themselves board meeting should not be about the chairman and the CEO or the chair and the CEO the board meeting should be about the directors getting the information they need to get they want to get they should be getting should it be focused on problems or what's going well or how do you think about that from a board level and then I want to get into more specifically management meetings but like at the board level how how would you organize that around how do you craft an agenda for that I don't craft the agenda so I what I craft is I figure out who are the right people to bring in but even that in terms of the management we should bring in I don't do that all by myself I get input from the lead independent director I get put from the vice chair we come up with something together with the CEO and then I distribute it around to the whole board said what do you think how does this look anyone have any changes people usually have changes people say that's great but I'd also like to have a section on HR just even yesterday we're preparing for a board meeting and one one of my vice chair said you know that's that's good but I want to have a section on human Capital Management people management so we we rearrange things and we're bringing some HR folks so my goal is to get the right people in the room in front of the directors and and then let the directors ask what they feel is right to ask I don't want to micromanage the agenda because that's my agenda I want I am never going to be smarter than the sum of all the directors that's never gonna happen mathematically or you have the wrong directors right very much so yeah and I I I like directors who are smart and who are engaged and really want to improve the company they want to play their role they want they take their fiduciary duty very very carefully they have a strong duty of loyalty they have a strong duty of care when you think about decision making how often are decisions made by committees in the companies you run versus made by individuals well I hate the word committee period committee is just like a bureaucratic red tape slow kind of low energy kind of word I just can't stand the word so I try not to call things committees just to nomenclature however there are times when a group of people will have to make a decision because it's more than one discipline that's required to get to the right decision there might be a tach that we have that has a financial element so you need someone from Finance accounting that certainly has an operational element to it you need Ops person there but also have a big people element so I need an HR person there and so I could have if it's a big decision with big impact then I'm going to have CA level the COO the CFO the chro that's a big decision I'm not going to waste those very important people's time with small decisions fpna financial planning analysis plays a big role in my company more than in most companies the fpna people are the ones who are turning all these IDE they're in a meeting they're listening to all these ideas and they're turning them into numbers they're turning them into forecasts they're turning them into projections they're turning them into probabilities they're turning them into the look we we have this these 10 things we're going to work on to create Alpha for our shareholders they're attaching probability to teach one of those I got a 90% chance of this is in the bag this is going to happen this is a long shot this is like a 10 20% chance of happening but it's not a zero% it's a 10 or 20% and it's got a high return if we achieve it so it's worth putting the effort in but I'm only going to give 10 or 20% credit maybe I'm gonna give less credit than that and and they're also doing budgeting constant iterative budgeting we don't do budgeting once in a while we do budgeting every day every single day where we've got our our our budget our our numbers that our plan is our plan and where are we tracking versus the plan and the FPA people are are are are really good at figuring out who's sandbagging and who's exaggerating by that what what I mean by that is you have some managers who just do their personalities or for whatever reason or maybe they're playing games with their bonus they want to lower expectations so they come out looking like Heroes well that's not good because we want to know the real likely outcome so we can plan around that on the other hand you have some people who are um overly self-confident and they think this is definitely going to happen and I'm gonna grow this that but if you look at their history if you look over the last three years they've missed their predictions by three to five percent like pretty much every year so they're going to discount them based on the past predicting their future likelihood of succeeding so the fpna people play a big big role in that figuring out what is is the highest lowest and likeliest outcome for all these different Endeavors that we've got and they're also playing a big role for allocating Capital so we talked before about the two big things that senior Executives do is is decide what kind of ways we're going to spend money allocate Capital it's finite even if it's billions of dollars it's not trillions gazillions it's billions is finite Capital how we going to SP invest that capital of all the different ways we can invest what's the highest and best uses of that capital and how we going to manage time how we going to get everyone focused on the things that really matter and not waste their time on the silly stuff that really doesn't matter is not going to create massive value for our shareholders which is what our mission is the FPA people help with understanding that putting it into numbers because sometimes you can get very inspired and motivated and it's a really really creative fantastic uh inspiring project comes up but when you analyze the numbers eh it's really not a really good return on time or return on Capital so maybe we shouldn't be spending so much time on that so we're we're also managing how much time are we spending as an organization on what kind of projects you find a lot of time in Corporate America somehow or another they get lost management gets lost on these tangents that are not Central to their main mission of creating value for shareholders and the fpna people keep track of that they're the scorekeepers to keep everyone honest of how we're investing Capital how are the Returns on that Capital versus what we expected it to be what we planned on how we spending our time is how we're spending our time proportionate to what has the highest impact of how we're spending our time and this is a very important role so fpna ends up being kind of omnipresent throughout the organization anytime we're making big decisions because they're really good at getting all this down to to reality to real numbers and they report to the CFO is that the structure internally uh FPA has has a two lines one is to the CFO on the and they have a dotted line to operations and to me so I I rely on my fpna person like every day I want to know for two reasons I want to know internally how are we doing on the projects that we're we're we're attaching high priority to I also want to know how are we doing on our commitments to shareholders to investors when you're a CEO of a public company you have a really important mission in that you've promised what your numbers are are going to be in the in the future how much your profit is going to be how much your organic Revenue growth is going to be how much your margin is going to be what your return on capital is going to be how much your free cash flow is going to be and now you've got a you've got a promise out there you've got a guidance you've got a forecast and and you're working really hard to achieve that I need to know and FP is the best place to know that how we tracking against that and if we're tracking higher than that and significantly higher than that there's a big deviation from that well well we'll talk to to legal and we'll talk to IR the investor relations and we'll say should we update the the investment Community ahead of the quarter ahead of when we normally produce our results and equally importantly maybe even maybe even more importantly I want to know God forbid if we're tracking below our estimates and once I know that then I have a meeting and I say whoa we're me of our of our six or seven top metrics that we've promised to our investors we're doing well on these five or six but on these or two no no no it's not doing very well what are we going to do to get back on track so constantly using our sensing information gathering and then getting back on track getting back on track do you do the forecasting because you're going to be going to the capital markets for for Capital at some point in the future with an acquisition strategy or would you not do that if you knew you weren't going to raise additional Capital well I I am a big user of Capital Market markets because all my companies have grown through uh Acquisitions and i' I've needed Capital to grow those Acquisitions we've raised money from the largest Sovereign wealth funds in the world and some of the largest Pension funds in the world some of the largest long only funds and you know all endowments and a lot of different people whose money we've taken and given them back a lot more money than they than they gave us so in order to do that you've got to hit the you've got to meet your promises your results matter results matter they're very very important so even if we weren't raising Capital the fact that we've taken capital and sometimes we've gone for years without raising cap well we've maybe refinanced debt to take advantage of changing interest rates or something like that but in terms of raising equity which is the deer thing raising Equity sometimes we've done some Acquisitions like in 2015 we did two big Acquisitions and then we digested them and we integrated and optimized and doubled and tripled the profit without doing any Acquisitions during that period of time we didn't need to raise equity and we didn't so but even though we weren't raising Equity even though we were not going to back to the capital market chain we still paid extremely rigorous attention to how we doing on the numbers that's our job our job as Executives as managers custodians to this business is to produce results and that's measured ultimately in financial results it's also produced in in operating results it's also concerned of customer satisfaction employee satisfaction but all those things lead to financial metrics and you've got to stay focused you have to have the whole organization focused on delivering those financial metrics and that's how you deliver them it's it's a conscious intention and a sense of honor and a sense of I need to do this this is this is what we need to do this is our promises promises made Promises Kept when people tell you they're not motivated by money you get suspicious why well I actually respect people highly if they're not motivated by money uh I know a lot of artists I know a lot of musicians I have um friends and relatives who are professors or retired professors in Academia just not into money I mean there's not into money they don't think about they don't read The Wall Street Journal they're not interested in that whatsoever and and I respect that they have a higher calling in a way they're they're focused on some deeper parts of life um but that's not who I want in my company I want my company people who are absolutely motivated by money who are raw capitalists who people who want to make money for themselves and their families and that we can figure out a way that by being part of our company they can help us make money for shareholders so that we can pay them more money here than they can make somewhere else I've had people on the senior level make many many people make become millionaires multi-millionaires I've had people become tens of millionaires I had one person who made over hundred million I have couple people now who are on track to make very large amounts of money this is a good thing this is a this is a outgrowth of success because we've tied everybody's compensation we've been very thoughtful about compensation plans we've tied their compensation to contributing to our big goals and the only way they can make all this money is if they're making money for shareholders so I love compensation plans for the senior Executives that have a big component of equity that's tied that's dependent on TSR total shareholder return so we look at what do the how does our stock perform versus called S&P 500 and what percentile are we if we're less than called it the 55th percentile I'm not so sure they should get any that I'm not sure that Equity should vest I could argue that if we're only getting roughly half roughly we're very middling in the results we're giving that's not why people invested in us people gave us the Sovereign wealth funds or pension the big investors they've given us money because they expect us to be much much higher returns than the average company so I like to have people bet on themselves so that if if our if our shareholder returns are less than 55% or so I don't want it to vest if it's 65% invest some if it's 75% invest more if it if it if if it's 85% 90% 95% I want it to I want them to make I want it to double vest I want them to make twice as much as they would otherwise so I want their interest aligned with the shareholders I want it to be so that the shareholders are saying wow I really hope senior management team makes a fortune because the only way they're going to make a fortune is if we're beating all the competition in terms of the returns with our investment so I like to I like that to happen one thing I liked about Goldman sachs's compensation PR that I took for them uh years and years ago when they were partnership a big chunk of their compensation plan I'm not up to dat in their Compensation Plan now now but back when they were a private partnership a big chunk like a significant percent of their comp was based on how many other partners said that they helped them with what they were working on yeah in other words I didn't just work on what I was trying to work on but I helped you Shane with your C with your client and that group effort going back to being a super organism so if we can have people on the front line and the midlevel management be rewarded financially because that's the biggest reward not the only rewarded but financially financially rewarded for helping other people achieve their goals that's a good thing too so we have all these bespoke compensation plans that are welld designed that a lot of thought go into that result in the magic meaning creating outsized returns for shareholders that's the that's how we do it now we also do just general recognition that's not as powerful as as Financial rewards but it's it's still a good thing so we have all the usual things of people getting Awards and rewards and trips to to places and president's clubs and employee of the month all all those kind of things where people feel good about themselves because they're recognized for going above and beyond but if I had to pick just one or two the field good stuff or the money I'm going with the money it's a powerful motivator I like how everything's tied to sort of like win-win everybody wins right you're it's not one of those places where you're you can get outside compensation even if our shareholders ERS lose that's a terrible thing that's an unfair thing that's that should never happen you should you you shouldn't you should have a complete alignment between how shareholders do with their investment in the company and how the employees do either both of those groups should be making a lot of money or not a lot of money now the shareholders can't control that all they're doing is investing their money the employees control that if the employees are selected well are working together in a good culture well are using technology or using ways that they they can succeed or have good feedback loops and they're they're making good decisions and being held accountable for those decisions they're exceeding them and delivering the numbers and the share price reflects that the share price goes up that's great the shareholder should make a fortune and the employee should make a fortune neither one should make a lot of money at the expense of the other that's not fair that's just not that's not right what CEOs do you think are underappreciated capital allocators when I look at um the companies that have uh taken money and and had small amounts of money and turned it into huge amounts of money immediately I'm thinking Mike Mo at SEO seoa he was chairman of seoa capital now he's retired from that he's at Square Heritage he's a senior adviser Square Heritage but if you look at his career everything he's done over the decades and I've studied Mike very very well for many many decades he was one of my first outside investors Square Capital came into my United wayte system systems way back in 1989 1990 and what is he the CH what is he the genius of He's The Genius of taking small amounts of money and turning them into huge amounts of money so you look at at Google at Yahoo at Netscape it's Sun micr all these companies that he invested relatively small amounts of money in and ended up being worth like 10 billion bucks that's that's good Capital allocation that's really really intelligent Capital allocation so I I I immediately think of I think of a mikee Morris for something like that I think in the industrial sector there's also people who who have gone through the same kind of processes I've gone through and been been disciplined at how they allocate capital and achieved high roic as a result of that you think of the academy level CEOs over the years Dave Cody for example when he was at honey well for years he was very very rigorous at this was very mathematical very dispassionate very intelligent about okay guys this is how much money we've got where we going to get the biggest returns allocating it very very carefully there so those are the people who come to mine off off top of my head talk to me about the relationship between quality and speed you need both so you see companies sometimes be really good on quality but oh my God they take forever so it's it's really not achieving what you're trying to achieve you see other companies that move real super fast but it's at the sacrifice of of qaqc of quality insurance quality control the real golden mean is how do you move fast but move fast intelligently so that you're not sacrificing qu quality in fact you're moving fast and improving quality at the same time that goes back to mathematics that goes back to engineering that goes back to planning understanding the lay of the land understanding what exactly is the inefficiency that we're trying to take out of the system what's the biggest lesson you've learned from the past year you could pick any time frame whether it's last 12 months last 10 years last my whole life and ask me what's the biggest lesson I've learned for sure I'm going to immediately default to something with people it's first I'm going to default the people and then I'm G to default to technology these are the two things because these are the two biggest needle movers these are the two biggest categories of things that make a difference so in the last year what have I learned about people okay one thing I've learned about people is I'm working with a team now at my my new company that's largely the same they were on my teams before they were either XO or one of the exos and what I've learned is it's great to have the band back together it's great to work with people that you know that you've been in the battles with you've shared the glories you've shared the pain it's great to be work work with people who we've been in the dark days together we've been in the strong days together we've won together we've Victorious together we can complete each other's sentences we we get each other we know each other's spouses we know each other's kids that's that's a beautiful thing I haven't always had that I have brought some people from company to company usually initial founding management for qxo are all xo people and uh one thing I've taken away from that is I really love these people these are people I really just respect and admire and I I just I'm just so thankful that I get to work with them like I feel and I think we all feel this way I think all of us feel that each of us is getting the long end of the stick by working with the rest of this team it's very hard to find a team a group of people this size that all love each other that all respect each other that all admire each other's professional and personal characteristics and traits and that's that's a beautiful thing that's a big takeaway for me now I'm going to go for on this what's my biggest Takeaway on technology in the last 12 months on technology what I learned was I went through this process of studying dozens of Industries and I went through the checklist and one of the checklists one of the things on the checklist was can I play can I take technology and apply our Tech forward mentality and our willingness to invest in technology and put put our money word mouths and put money in technology in in an industry where will get a competive advantage and I found an industry building products distribution that I can do that I found a company an industry that's got 20,000 companies and there's about six or seven that are doing really cool things in technology and that's pretty much it and I hate to say that so negatively but I think that's an objective assessment of it I think there's half a dozen or so companies the biggest ones that are couple of of medium-sized companies too but mostly the biggest ones who are approaching technology in the same spirit that we approach technology now we're going to double down on that and spend a lot more money and have the best techn technologists involved like we always have in our companies but if you look at the 99% of all the other companies they're were other industries were 20 years ago now I like that Shane I like going into an industry where I got something I can bring to the industry that's G to help I can be transformational I can be a catalyst to improve the quality of the industry I'm happy to get everyone all excited and share the vision about investing in technology but we always uh or I guess I always end with the same question what is success for you on on the professional level it's very simple it's continuing my tradition of generating superlative shareholder returns like off the charts great returns for investors that's my report card that is Success period there's a lot of other things that build up to that I have to have an Engaged workplace I have to have good good relations with my local communities after to do all those good stakeholder stuff but at the end of the day the report card is one question what is my share price performance versus The Benchmark and not only relative but absolute terms as well so it's it's about stockholder appreciation for sure professionally all the things I'm doing of hiring people and putting in techn all the things we've been talking about last couple hours that all comes down to to making money for shareholders if you're not making money for shareholders it's just jabber jabber it's just talk so for me success is defined by how is my stock price performance versus everybody else's so that's that's clear for me it's very very clear in my mind personally you know it's about my family it's about my friends it's about my relationships with them it's about can I create ways where in the limited time I I don't have as much time as most people because I'm really into the business but in the limited time that I do have can I make those enriching experiences can I make those experiences where there's a lot of love in the room there's a lot of good stuff going going on there's a lot of positive vibes and um I they're very symbiotic wonderful relationships where I'm helping the people I I love and they're helping me and if I can achieve that that's success that's amazing thank you so much for your time today this was a fascinating and wide ranging conversation I really appreciate the opportunity sh