0:00:03 One of the things that we talk about at Sequoia is you can’t just be better.
0:00:05 You have to be different too.
0:00:08 It’s whether you want to be conventional or contrarian, you have to be right.
0:00:13 If you’re right and conventional, it’s probably a less interesting solution.
0:00:19 But if you’re right and, um, and contrarian, you probably won’t be able to make
0:00:23 a lot more money because nobody’s fault, nobody’s going after that opportunity.
0:00:26 Um, I often find that it’s interesting.
0:00:29 There are people who just want to be contrarian, but if you’re contrarian
0:00:31 wrong, that’s not a great situation.
0:00:36 I try to put things in these two by two matrices of right and wrong
0:00:37 and conventional and contrarian.
0:00:46 Welcome to the Knowledge Project.
0:00:48 I’m your host, Shane Parrish.
0:00:52 In a world where knowledge is power, this podcast is your toolkit for mastering
0:00:54 the best what other people have already figured out.
0:00:58 Today’s episode will transform how you think about building and scaling,
0:01:00 transformative companies.
0:01:05 My guest is Alfred Lynn, one of Silicon Valley’s most successful operators
0:01:06 turned investors.
0:01:10 After meeting Tony Heich at Stanford over a pizza arbitrage scheme,
0:01:15 Alfred went on to help build and sell Link exchange to Microsoft, then
0:01:21 scaled Zappos from startup to its $1.2 billion acquisition by Amazon as
0:01:22 the COO and CFO.
0:01:25 Now he’s one of tech’s most influential people.
0:01:29 Like a lot of outliers, Lynn struggled in school, preferring to hack
0:01:31 solutions together than follow instructions.
0:01:32 Sound familiar?
0:01:36 That changed with one of his teachers who made him realize the importance
0:01:39 of enduring impact over short-term gains.
0:01:42 Whether you’re building a company, scaling operations are making complex,
0:01:44 strategic decisions.
0:01:47 Alfred breaks down the frameworks and mental models that have guided him
0:01:50 through multi-billion dollar outcomes.
0:01:53 We explore everything from his unique approach to company culture and
0:01:58 hiring that help make Zappos legendary to how he evaluates opportunities
0:02:02 at Sequoia to the crucible moments that shaped his decision making philosophy.
0:02:06 This conversation goes deep into specific practices around scaling,
0:02:10 competing with giants and navigating technological disruptions, while
0:02:14 revealing the deeper principles that have guided him through multiple
0:02:16 successful chapters in tech.
0:02:20 His insights on building and during impact over short-term gains are more
0:02:23 relevant than ever as we enter the AI era.
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0:03:50 You’ve had a remarkable journey from entrepreneur to investor.
0:03:53 And I want to know more about this story, but I want to start with some
0:03:59 of your early life experiences that changed you and impacted you in the future.
0:04:01 I guess I was born in Taiwan.
0:04:06 The two parents who were both commercial bankers.
0:04:12 In an early age, from what they tell me, I was always a little, I saw
0:04:15 the world a little differently and did things that are a little different.
0:04:18 The story that they like to tell about me being different was when
0:04:20 I was about two years old.
0:04:26 There was a new dresser that was delivered to our apartment in Taiwan.
0:04:30 And I figured out a way to get to the top by pulling out the first
0:04:33 drawer, crawling into it, then pulling out the second drawer,
0:04:37 pulling it, crawling into that and then getting all the way to the top.
0:04:40 And when I got up there, I thought I could fly, so I jumped off.
0:04:47 And so they left telling that story because they rushed me to the hospital
0:04:52 and they were very concerned whether there was any permanent damage
0:04:53 and things like that.
0:04:56 And my mom kept bringing me back to the hospital again and again.
0:04:59 And the doctor said, don’t worry, I think he’s fine.
0:05:00 I think he’s fine.
0:05:04 And eventually he said, well, is there going to be any problem with his development?
0:05:09 He’s like, well, he’s either going to be a genius or he’s going to be an idiot.
0:05:10 He’s one or the other.
0:05:15 I mean, so that’s that’s how my parents would describe me.
0:05:18 High variance and high beta.
0:05:21 And throughout school and throughout life, I was very much like that.
0:05:25 I like to hack things and not do the work until one day.
0:05:29 And this was in elementary school.
0:05:34 I just tried to not do the work and hacker my way through things and got
0:05:39 to spend it a few times, one of which was just coming up with a creative idea
0:05:42 of taking chairs from the second floor to the first floor.
0:05:45 I went down the slide instead of following the teacher’s directions.
0:05:46 I got suspended for that.
0:05:52 And so I didn’t never really like school that much because it was so rigid until
0:05:55 until I used to hack my way through things.
0:06:00 And one of the teachers that I had, Mrs. Einstein, had this way of teaching
0:06:01 where she would put up a problem.
0:06:07 She would then have us try to solve that problem or do the assignment and try
0:06:10 to understand why she put the the reading up there.
0:06:15 And I would always bet with her if I knew the answer or if I knew
0:06:18 the conclusion of the lesson, then I wouldn’t have to do the homework.
0:06:21 She let me get away with that once or twice.
0:06:25 And then she said to me once, you know, you’re you’re very smart.
0:06:27 I’ve seen a lot of people waste their talent.
0:06:32 So do you want to do you want to start first or do you want to finish first?
0:06:37 And I think I retorted back saying, well, I like to start first.
0:06:40 And finish first with the least amount of work possible.
0:06:46 And then she said to me, that’s a great answer for a sixth grader.
0:06:49 But what happens in life when there’s no finish line?
0:06:50 What are you going to do then?
0:06:53 And that sort of put me back.
0:06:58 And I didn’t quite understand it until maybe now that this is the whole
0:07:05 concept of having an infinite game and thinking through not some thing,
0:07:09 some finish line, some goal, but just think about what you want your
0:07:12 enduring impact to be and what you want to do and what you want to accomplish.
0:07:16 And when the world doesn’t give you a finish line, we all have the same
0:07:18 24 hours in a day.
0:07:20 What do you want to decide to accomplish in that 24 hours?
0:07:23 We have an unknown number of years on this planet.
0:07:25 What do you want to get accomplished?
0:07:28 That sort of shaped the way I sort of started thinking about the world.
0:07:32 Did it hit you then at the time or was it something you reflected on later?
0:07:39 I think it hit me then, but I didn’t think I, I don’t think I understood it then.
0:07:46 And so then that led to a number of explorations on what I did want to accomplish.
0:07:51 Why was it important to think about this concept of like infinite games?
0:07:54 How do you win an infinite game when there are no set rules?
0:07:58 You’re making the rules for yourself in an infinite game.
0:08:01 And the rules change.
0:08:02 You get to change some of the rules.
0:08:04 The world changes some of the rules.
0:08:07 How do you, how do you navigate that?
0:08:10 And then you quickly realize not that winning.
0:08:14 They’re in a finite game chest.
0:08:14 There’s a winner.
0:08:17 There’s a loser in an infinite game.
0:08:20 There are a lot of different people in the world.
0:08:27 They play the game differently and in some ways they’re all trying to get on
0:08:29 with the world and trying to do the best they can.
0:08:32 But some people are more successful than others.
0:08:37 And the reason they’re more successful, I think, is because they really know what
0:08:41 their, their values are and they really know what impact they want to have on the world.
0:08:43 What are your values?
0:08:50 Over the years, I, I thought through, and this has changed over time, but I think
0:08:56 the, the values for me are when you meant, when you want to accomplish something,
0:08:58 it’s about the inputs.
0:09:03 It’s about the process by which you go about getting the outputs.
0:09:06 I think it’s very, very important to have that.
0:09:14 And I value that clarity of input eventually leads to output and focus on the inputs.
0:09:20 I value consistent compounding and just getting every single, getting up every
0:09:25 single day and just making small improvements every single day and compounding that.
0:09:36 I value honesty and truth and just being very direct with people.
0:09:38 I don’t try to sugarcoat anything.
0:09:47 Um, I value, I value people for who they are.
0:09:54 My father, um, I learned this from my father where he’s, he told me once
0:09:58 because I was like, Oh, I’m just so much smarter than everybody else because
0:10:00 it’s a little cocky little kid.
0:10:05 And he said, well, actually you can learn anything from, you can learn many things
0:10:08 from every single person on this planet.
0:10:14 I think I was probably a six or seven at the time and he was, uh, he’d show me
0:10:20 all the different people that he learned from and that the collection of these
0:10:24 lessons from many, many different people is what you become.
0:10:27 And that was a pretty important lesson.
0:10:31 So I value people for who they are and trying to learn as much as I can from
0:10:32 each individual person.
0:10:36 I value family and friends.
0:10:38 Um, pretty important to me.
0:10:45 We talked a little bit about work life and work life balance from, from, as you said,
0:10:48 for many of us, it’s work life integration.
0:10:52 And if you don’t have some grounding with people who see you for you, who you
0:10:57 are, call out when you’re not, you’re not being a good person or you’re not doing
0:10:59 the things that you said you were going to do.
0:11:02 Um, what is there in life besides that?
0:11:07 How do you want somebody to call you out in those situations or how do you call
0:11:08 out other people?
0:11:15 The way I do it is try to be fact based and, um, just give examples specifically
0:11:20 of what has been working and what has not been working.
0:11:22 And that tends to work pretty well.
0:11:27 And there, there are times when we’re back at my wife will say, Hey,
0:11:28 this is not working for us.
0:11:31 So what do you want to do about it?
0:11:35 Uh, you can try to keep going the same way, same way down the certain path.
0:11:37 Well, we can try to change it.
0:11:39 If we don’t like something, we just change it.
0:11:44 And it’s just much easier to have those kinds of conversations.
0:11:50 Um, my son a few days ago was being, um, quite negative about his school.
0:11:56 And, you know, he’s starting, he’s 13, he’s going to be 14 this year.
0:12:00 He’s starting to be like me when I was younger and think that he’s smarter
0:12:02 than the whole rest of the world.
0:12:08 And said, Hey, Atticus, do you want to be, do you want to have a negative attitude
0:12:10 because you’ll spin into this negative spiral?
0:12:16 Um, and by the way, if you have a negative attitude, the world just looks worse.
0:12:20 When you have a positive attitude, the world just looks better.
0:12:25 And we played this, let’s use yes and for a bunch of things and let’s create
0:12:30 options and then you’re going through the no butt situation and it doesn’t work.
0:12:35 So let’s try to just change your attitude about some of these things.
0:12:39 And I thought that was quite an interesting conversation where just by simply
0:12:42 changing the framework, he became much more positive.
0:12:48 When you talk about inputs versus outputs, what inputs do you think about in life?
0:12:56 Well, I think the inputs I think about are, um, you know, that it depends on
0:13:00 what I’m trying to get accomplished, but if the inputs are just thinking about
0:13:03 hard work, how do I get up every day?
0:13:04 Do I want to stay healthy?
0:13:06 Do I get up every single day and work out?
0:13:10 I hear that you work out every single day because instead of trying to figure
0:13:13 out which days you’re going to work out, it’s always in negotiation with which
0:13:17 days and some days you don’t feel like, um, exercising.
0:13:19 You just work out every day.
0:13:20 I have the same philosophy.
0:13:24 You just get up every single day and do the things that are important.
0:13:28 Um, so the inputs I have is I get up every morning, I work out.
0:13:32 I look through, I read through my email and I try to think about what’s the
0:13:35 most important thing that I have to get right today.
0:13:40 What’s the most and, um, and think about first order issues.
0:13:43 What is the first order issue that I have to solve?
0:13:46 What is the first order issue of a company that needs to get fixed?
0:13:50 Um, what is the first, what is the thing that I need to do to influence an
0:13:54 outcome for, um, for a founder?
0:13:58 And, you know, that’s very, very clarifying.
0:14:03 Often we can create a very, very long to-do list and then you’ve got to pop up
0:14:06 the level and just look at the list of what’s the most important things I
0:14:07 have to get accomplished.
0:14:11 Because if you just list off to do is you probably will not be able to get to
0:14:14 all of them and the most important thing might be the last one you list.
0:14:18 And so you can’t just go down that list and do them one by one.
0:14:23 Often it’s by popping up a level where you sort of look at the whole list and
0:14:25 it’s like, okay, well, most of this is not important.
0:14:28 Is that what you mean by first order issue?
0:14:30 I think you mean something a little more nuanced.
0:14:33 Some people talk about the most important thing.
0:14:38 Um, and I think, I think about first order.
0:14:42 If I get this problem, I have a problem on my hands.
0:14:45 If I get to the first order issue and get to the root cause of that.
0:14:49 Usually that helps solve that problem.
0:14:52 And there are other issues that are not first order.
0:14:57 Um, and that concept is quite important.
0:15:03 We also sort of navigate that into other situations where, um,
0:15:05 where they are crucible.
0:15:13 So as an example, like you, you have, you have situations where the website’s
0:15:14 not working fast enough.
0:15:15 That’s apples.
0:15:17 We had a situation where the website’s not fast enough.
0:15:21 Is the first order issue that we have too many pictures?
0:15:22 Well, we want the pictures.
0:15:23 We have lots of photos.
0:15:27 We want to show those photos is the first order issue that we need to, um,
0:15:34 just trim the number of search results while customers want longer search results.
0:15:35 It’s like, no, it’s none of that.
0:15:38 We need to figure out how to make the website go faster.
0:15:42 And so we start cashing the, the search results.
0:15:43 We start cashing things.
0:15:48 And so you start developing the technologies that solve the speed issue.
0:15:51 But the first sort of issue is that we need to solve this with technology, not
0:15:54 with a bunch of either or solutions.
0:15:58 Um, that’s an example that I learned a long time ago.
0:16:04 Another situation is the distribution of the apples was not flowing well.
0:16:08 Um, and we couldn’t figure out which process was broken.
0:16:10 Was it the picking process?
0:16:13 Was the, was the ordering process broken?
0:16:14 What was broken about it?
0:16:21 And we went and just looked through the flow and the flow was broken.
0:16:27 And so, uh, there was too many handoffs, uh, across all of these
0:16:29 different discrete processes.
0:16:35 And so we had to sort of pop up a level and figure out what the flow of from when a
0:16:41 customer orders something, when it gets through the distribution center, how is
0:16:45 going to be picked, packed and packaged and shipped.
0:16:49 And when you look at that from a flow perspective, you start thinking about new
0:16:54 solutions that allow there to be much better flow throughout the distribution
0:16:59 center, then then to batch things for picking batch things for, um, packing
0:17:03 packed batch, batch things for, uh, for shipping.
0:17:05 So that’s what you mean by first order.
0:17:10 Uh, I want to get into more of your experience, not only at Zappos, but, uh,
0:17:14 being on the board of some of the companies that everybody has heard of, uh,
0:17:15 today or being involved.
0:17:18 But before we get there, I want to come back to the school for a second.
0:17:22 Are there any other experiences that you had during school with teachers that
0:17:23 might have impacted you?
0:17:29 You know, earlier on in junior high school, I was, um, I was suspended
0:17:33 from the computer lab because I built, uh, this was very old.
0:17:37 So they’re a radio shack, TRS 80s, so we call them trash 80s today.
0:17:44 Um, and there was the computer lab at, you know, you had to run time in our
0:17:47 computer lab to use the computer and it built this game.
0:17:53 And the central server at the time was literally a floppy drive where all of
0:17:56 us saved our programs there.
0:18:03 And one day, uh, a bunch of the students, uh, in the computer lab all found
0:18:05 the game that I programmed and then started playing with it.
0:18:09 The teacher and the principal just happened to walk in and saw that
0:18:10 we’re all playing this game.
0:18:15 And, um, I was told that computer lab is valuable time and you should
0:18:18 be doing something much more productive than, than producing a game.
0:18:22 So I, I was no longer allowed to work in the computer lab.
0:18:25 And the computer lab teacher was Mrs.
0:18:31 Petosa and she, she also ran the math team and she said, well, you’re, I’m
0:18:33 sorry, the principal wants you out of the computer lab, but you should
0:18:34 join the math team.
0:18:36 And I joined the math team there.
0:18:39 And, um, one of the things I was really good at was math.
0:18:43 And she told me that if you want to be a leader and you want the team to
0:18:47 win, it’s not good enough for me to just solve the problems.
0:18:50 We figure out how to get the rest of the team to perform.
0:18:54 And so I started teaching the rest of the math team.
0:18:58 Some of the reasons why I was able to solve some of these problems more
0:18:59 quickly than there were.
0:19:03 They’re very talented, but I had figured out tricks that they had not figured
0:19:06 out and they taught me tricks that I had not figured out.
0:19:09 So we got better and better by riffing each off each other.
0:19:13 And so I’d learned the value of teamwork by just being thrown into
0:19:15 a situation like that.
0:19:19 You started a company before you joined Zappos.
0:19:20 What was that?
0:19:21 I started a bunch of things.
0:19:23 I started a lemonade stand when I was younger.
0:19:26 I, those were not interesting.
0:19:29 I started a long-long service in junior high school.
0:19:32 Um, I did it myself and realized it was not fun.
0:19:34 It was too hot in New York city.
0:19:39 So I, I got the contracts and then asked some of my friends from school if
0:19:43 they would do, help me do the work at a few odd jobs here and there.
0:19:50 And it was just never as fulfilling as working at a company that from the ground
0:19:55 up when Tony Shay left, um, Oracle to start this company.
0:19:59 That was originally called internet marketing solutions because they’re
0:20:00 building websites.
0:20:02 Uh, he asked me to join that company.
0:20:06 I said, no, then they found out that they couldn’t get any of, anybody to
0:20:07 go visit these websites.
0:20:09 So he connected all of them.
0:20:12 Um, and that became link exchange.
0:20:15 And I joined that company soon after Sequoia invested in that company.
0:20:18 And it was a banner advertising exchange.
0:20:23 That was one of the largest banner advertising exchanges in 1998, 1999.
0:20:26 We saw that to Microsoft for 265 million dollars.
0:20:29 And, um, that was quite the experience.
0:20:33 Did you know at the time we were sort of in a bubble or how did you
0:20:35 think about it back in the late nineties?
0:20:39 I mean, we had a business, we had 15 million dollars in revenue.
0:20:43 You can kind of tell that we’re in a bubble when someone would be willing
0:20:47 to buy a company that at 15 million dollars in revenue for 265 million dollars.
0:20:52 Um, but also, you know, it was the third largest acquisition at the time.
0:20:58 So I think when you’re in it, you don’t realize you’re in a bubble, but popping
0:21:00 up, like the numbers don’t make sense.
0:21:01 Yeah.
0:21:07 So that’s why I think it’s valuable to have people who are slightly outside
0:21:10 of where you work to keep you accountable.
0:21:12 It’s like, Hey, how’s this, how does this work?
0:21:18 Just by simply asking questions, you get into a situation where like, wait, I
0:21:19 can’t explain that question.
0:21:21 I can’t answer that question six only thing.
0:21:22 I can’t explain it.
0:21:27 Maybe that person’s question has more insight than I would have expected.
0:21:30 What are some of the lessons you learned from link exchange?
0:21:36 Boy, that was so many, um, there are many, many lessons because it was
0:21:40 the first time we’re doing anything, um, that was at scale.
0:21:50 And you hear this all the time that, um, that you should hire, you should hire
0:21:54 slowly and make sure you really, really understand who you’re hiring for.
0:21:59 And you, you know, often when someone’s not working out, you should, it’s
0:22:00 probably time to let them go.
0:22:02 And we always gave people too long.
0:22:08 And, and I think the company’s velocity, uh, didn’t, couldn’t go any faster
0:22:10 because we didn’t hire as well as we could have.
0:22:12 We didn’t let people go when they weren’t working out.
0:22:15 And those are very, very important things to get right.
0:22:19 I often sort of think about the velocity of a company velocity.
0:22:21 And I measured that in two ways.
0:22:25 This, you know, use the word velocity, velocity as opposed to speed
0:22:30 because speed is just how fast you’re going, but velocity, velocity also
0:22:33 has direction and think the combination of two is quite important.
0:22:37 But the whole speed of a company generally doesn’t get any faster
0:22:41 unless you’re pushing and the best companies, they keep pushing.
0:22:46 And otherwise you’re just going to go slower and slower and slower.
0:22:51 You know, I think building a real business is really important.
0:22:57 Um, many of the companies that were founded in 1999, 1998, 1999, 2000,
0:22:59 they were not real businesses.
0:23:01 They had lots of eyeballs.
0:23:02 They had lots of users.
0:23:06 Um, but that’s not really enough.
0:23:11 And at Sequoia, we often talk about the fact that we own shares in a company.
0:23:13 We don’t own shares in the founder.
0:23:15 We don’t own shares in the product.
0:23:18 We don’t own shares in their market strategy.
0:23:22 We own shares in the company and that company needs to have a business one day.
0:23:27 My partner, Pat Grady, loves to say that free cash flow equals freedom
0:23:32 because eventually a real business generates real free cash flow.
0:23:38 And the freedom being that the freedom that allows you to not have to raise money
0:23:43 and the freedom to allow you to invest in new areas, the freedom to continue
0:23:48 to grow because you can invest in growth and invest in new novel technologies
0:23:54 and new product lines, the freedom to, um, not worry about the quarterly, uh,
0:23:57 sort of pace of having to do more and more sales.
0:24:01 You just, you, you generate free cash flow and it just generates a lot of freedom.
0:24:06 Let’s go back to the push-pull theme for, you know, you said companies don’t
0:24:09 generally increase velocity without force.
0:24:14 How do you think about the difference between adding force or removing obstacles?
0:24:19 That’s a very, that’s very, very insightful of you.
0:24:26 I think many times applying force, um, is what, what leaders try to do,
0:24:30 which is just to apply a forcing function and make you make a choice.
0:24:36 And often I think removing obstacles are just as important as, as applying
0:24:39 the pressure to keep going on and on and on.
0:24:45 But often, you know, when you apply force, you realize where the
0:24:50 obstacles are because you, you butt against that obstacle.
0:24:53 And then you realize, okay, I keep butting against this.
0:24:55 Maybe I have to figure out a way around it.
0:25:02 Um, and I, you know, my job as a board member is to help you identify
0:25:06 obstacles and help you remove it, but sometimes you just need to be pushed against it.
0:25:10 Is there an example that comes to mind when you say that where you push and it
0:25:12 helped you identify an obstacle?
0:25:16 Maybe in the early days of Airbnb, I think people forget it was much
0:25:20 more of a listing service and it was less of a marketplace.
0:25:24 And if you sort of take the definition of a marketplace, you have to complete
0:25:29 the transaction and you just not only have to complete the transaction, you
0:25:31 have to remove as much friction as possible.
0:25:38 And so Airbnb in the early days had a calendar, held the money, paid
0:25:42 out the money, but there was this big friction, big, big friction.
0:25:48 And it was because there was not enough trust between the host and the guest.
0:25:55 And so the early days of the removing of that friction was to get, um, connected
0:25:57 through Facebook Connect.
0:26:01 So you can check someone out and check out their Facebook, um, pages
0:26:05 and who they are and to see if this is an authentic person.
0:26:10 But even that, checking that out took 24, 48, 72 hours.
0:26:12 That’s just too long.
0:26:18 And you just kept pushing, this is not going to work long term, um, because
0:26:24 there’s only so many people that can book travel and wait 24 to 72 hours
0:26:26 before they know that they can go there.
0:26:33 And, and so it started out, many great companies start out as a fringe sort
0:26:37 of activity and you have to figure out how to make it more mainstream.
0:26:42 Often that is about removing obstacles or removing friction, but you
0:26:45 butt against this and you’re like, what’s the solution here?
0:26:47 And you keep playing, playing for us.
0:26:50 This is, this is going to limit our growth if we don’t solve those.
0:26:55 And eventually, um, Brian and the team and the product team figured
0:26:56 out that we needed instant book.
0:27:00 We needed to figure out how to instantly book people.
0:27:05 Well, you have a whole set of hosts now that are used to not accepting
0:27:08 guests just because they booked them.
0:27:10 So how are you going to remove that obstacle?
0:27:11 Well, you start with new hosts.
0:27:16 It’s like, let me show you that Airbnb can be trusted.
0:27:20 We’re going to, as new hosts, we’re going to send you some customers and you
0:27:22 should just book them automatically.
0:27:27 And eventually more and more of the, of the hosts realized that instant
0:27:28 book is just the way to go.
0:27:34 And, um, that’s an example where you just have to be pushed against that for a
0:27:36 bit of time to find the solution.
0:27:38 Was DoorDash sort of fringe too?
0:27:41 And when mainstream, did they start in like the suburbs or something?
0:27:44 DoorDash started more fringe than even the suburbs.
0:27:47 It started on a, on, on a college campus.
0:27:54 And the reason, uh, we, we passed on the seed round at Sequoia was we’re
0:27:59 concerned that the frit, this is like just something that college students
0:28:01 did with their parents’ money.
0:28:08 Um, and then they started out, um, focusing on Stanford and then Palo Alto.
0:28:09 And they went to other suburbs.
0:28:15 And it turned out that it, that was a very smart thing to do because everybody
0:28:16 was going after the cities.
0:28:20 And one of the things that we talk about at Sequoia is you can’t just be better.
0:28:22 You have to be different too.
0:28:26 And if it’s easy to say and hard to implement because everybody, and when
0:28:32 everybody is chasing after, uh, the cities, because conventional wisdom tells
0:28:36 you that that’s the right thing to do, uh, it’s very, very hard to do
0:28:39 something slightly, to do something slightly different.
0:28:46 Um, but if you just hear, uh, Tony and the team talk about their business, you
0:28:50 realize that they had way more than just, Oh, I’m going and doing something
0:28:51 contrarian.
0:28:55 They actually had real reasons why the suburbs were actually a better place
0:28:59 to start the value for someone who lives in the suburbs.
0:29:02 I have to drive 20 minutes to go get their food as higher than someone that
0:29:07 they can go from their, um, apartment, go downstairs and walk a few blocks
0:29:08 and get the food and bring it back home.
0:29:12 So that was like pretty interesting.
0:29:16 The other one was, well, is there enough density, uh, around the
0:29:16 suburbs?
0:29:20 And it turns out, yes, there’s, there is density.
0:29:21 You just might not think about it.
0:29:27 And they had examples where that’s in Palo Alto, there was University
0:29:32 Avenue and there was California’s, um, street and both of those places.
0:29:35 There, that’s where all the restaurants were.
0:29:40 And so there’s density in where you can go to those, those restaurants
0:29:42 and you can radiate out from there.
0:29:47 So it was not as random as any, any restaurant can be anywhere
0:29:48 and any home can be anywhere.
0:29:54 Um, and it turned out when you go look and look at the data, small towns
0:29:57 all have this, there’s the reason why small towns, there’s a main street
0:29:58 where everything happens.
0:30:04 And so then you start realizing that the density problem is not as, not
0:30:05 as complicated as you might think.
0:30:09 And they won because they were able to take the profits of the
0:30:11 suburbs to go into the cities.
0:30:16 I often think about that as, um, you know, there are people who, uh,
0:30:20 think of the world and they just follow conventional wisdom.
0:30:22 And then there are people who want to be contrarian.
0:30:26 Well, in either case, whether you want to be a conventional or contrarian,
0:30:27 you have to be right.
0:30:32 If you’re right and conventional, there’s probably, it’s probably
0:30:33 a less interesting solution.
0:30:39 But if you’re right and, um, and contrarian, you probably won’t be
0:30:42 able to make a lot more money because nobody’s following, nobody’s
0:30:44 going after that opportunity.
0:30:47 Um, I often find that it’s interesting.
0:30:49 There are people who just want to be contrarian, but if you’re
0:30:52 contrarian wrong, that’s not a great situation.
0:30:56 I try to put things in these two by two matrices of, uh, right and wrong
0:31:00 and, and convention, conventional and, uh, contrarian.
0:31:04 You know, the term I use for that is advantageous divergence.
0:31:06 Advantageous divergence.
0:31:07 Tell me more about that.
0:31:07 Well, that’s it.
0:31:09 It’s exactly what you just said, right?
0:31:10 It’s not enough to be contrarian.
0:31:11 You have to be right.
0:31:15 And so you have to diverge from the crowd, but you also have to be correct.
0:31:15 Yeah.
0:31:18 So it sounded like it’s kind of the Walmart strategy, right?
0:31:22 Where it’s like, we’re going to go in this area with hat, which has less competition.
0:31:25 We’re going to get really good at what we do.
0:31:28 And then we’re going to use the money or profits or, and we’re going to funnel
0:31:30 into maybe the more desirable area.
0:31:35 Like when Walmart started competing with Sears, they didn’t go into cities and
0:31:40 came out, you know, they went into the suburbs where nobody was, or the contrast,
0:31:46 I think between their ability and what they were competing against was much higher.
0:31:47 Yeah.
0:31:51 And, and, and I think that that is, uh, that’s what all startups should focus on.
0:31:55 You don’t want to compete with someone bigger than you head on because they
0:31:57 have more money and they have more people.
0:32:02 They have more history, wherever they have more, uh, abilities.
0:32:06 You just want to compete with them where they’re not competing.
0:32:07 Double click on that for me.
0:32:12 Well, your example about Walmart, where the example about DoorDash focused on,
0:32:18 um, the suburbs, there’s a example about DoorDash where you want to win McDonald’s
0:32:21 or do you want to win the top 100 merchants?
0:32:23 And it’s not just about one or two.
0:32:29 Yes, McDonald’s is one of the largest merchants, but winning a whole suite of
0:32:30 them is actually more valuable.
0:32:39 Um, Google, but long tail keywords were valuable than, you know, the head.
0:32:43 And most of advertising was broadcast advertising.
0:32:48 You start from the top and this is a bunch of like long tail keywords.
0:32:55 And they think a lot of great companies, um, whether it’s intentional or not, um,
0:32:58 try to do things very differently than what exists today.
0:33:03 Apple, they weren’t the first to many things.
0:33:07 They were, you know, they didn’t make the first, uh, personal computer.
0:33:12 They just made the user, their focus was always about the user experience.
0:33:18 Whether it was the computer, the phone, the watch, everything they do is about
0:33:19 having a great user experience.
0:33:22 That was not the conventional thing that people thought about.
0:33:26 It was about, you know, in the early days of the PC, it was about processing
0:33:29 speed and which processor was the fastest, et cetera, et cetera.
0:33:32 Uh, when the phone came out, it was about the keyboard.
0:33:34 We don’t use the keyboard anymore.
0:33:37 The Apple thing is fascinating.
0:33:38 So is the Blackberry thing.
0:33:40 Cause they really hung on to that keyboard thing.
0:33:43 But I remember when they came out with their new, I forget what the device was called.
0:33:45 It was like their apple killer.
0:33:49 And I used it as a demo and I couldn’t figure out how to get on the internet.
0:33:50 And I was like, they’re done.
0:33:52 The user experience is so important.
0:33:55 It took a demo to like figure out how to use the internet.
0:33:56 Once you figured it out, it was great.
0:33:59 But I was like, oh man, this is so not intuitive.
0:34:03 You know, let’s go back to hiring and firing a little bit.
0:34:09 Was there any moments sort of at Zappos or earlier with link exchange where you
0:34:12 thought you had the wrong fit, but it turned around?
0:34:17 That’s a great way of asking that question.
0:34:23 I, I would say probably not in the early days of link exchange, we hired and back
0:34:29 to like conventional and, you know, we hired the conventional right person.
0:34:31 We were looking for a marketing person.
0:34:35 We’re looking for a marketing person that marketed to small, medium sized businesses.
0:34:36 They understood the internet.
0:34:41 They fit all the specs that you would have in a job description.
0:34:46 But they didn’t fit the way we operated.
0:34:49 They didn’t fit the way we value what we value.
0:34:56 And, you know, it’s easy to sort of limit that down to like they’re just a professional
0:34:59 marketer and they’re mercenary, non-emissionary.
0:35:01 That’s how Tony was told the story.
0:35:06 But at the end of the day, they didn’t value what we were trying to build.
0:35:09 They didn’t have the same values that we had.
0:35:14 And which is why when Zappos started, Tony spent a lot of time defining the values.
0:35:18 This is Tony Shea of link exchange and Zappos, the values of the company.
0:35:22 And it’s something that I talked to founders about.
0:35:27 If you don’t have the same mission, you don’t have the same values,
0:35:32 you don’t have the same operating understanding of the company.
0:35:34 It’s very, very hard to work together.
0:35:40 And then, you know, you’re asking someone to change when they fundamentally don’t
0:35:44 fit to the company and how the company works.
0:35:47 That is generally the issue.
0:35:58 Then the other issue on the flip side, on the functional side, when your
0:36:03 company is growing really, really fast and you see someone who is growing, but
0:36:07 they’re not growing as fast as the company, every single day, the delta
0:36:12 between how far the company is moving or how fast the company is moving versus
0:36:17 how fast or how far the person is moving, the delta gets bigger and bigger and
0:36:19 bigger, so it gets very hard to turn around.
0:36:24 And so we have this concept that a lot of people have at Sequoia.
0:36:27 We hire for slope, not intercept.
0:36:33 So experience obviously matters, but if you just hire for the experience and
0:36:37 their slope is not fast, that’s going to become a problem at some point.
0:36:42 And so we really, really ask founders to think about what is the person’s
0:36:48 potential, what is their slope and we much rather bet on someone with high,
0:36:56 high slope and low intercept because in startups, in companies that are new,
0:37:02 the experience is helpful, but you’re doing something different and new and
0:37:03 you need to reinvent.
0:37:10 Bring a playbook over from somewhere else is helpful up to a degree, but usually
0:37:13 many of the problems that you need to solve are just different.
0:37:17 And that’s why you hear a lot of founders talk about first principles,
0:37:25 thinking and don’t reason by analogy, et cetera, because you do have to solve
0:37:28 the problem a different way.
0:37:32 What’s the difference between slope and potential?
0:37:38 It’s just, well, slope is pretty much the same thing, slope and potential.
0:37:45 But having a high rate of learning, high rate of being able to move fast.
0:37:50 And so if someone has a lot of potential, they’re over here, their potential is
0:37:52 up here, that slope when you draw that line is pretty high.
0:37:55 How do you gauge somebody’s potential?
0:37:57 It’s like, you might be able to do this job and you might be able to grow
0:38:01 into it, but coming into it, they’re not going to check the boxes.
0:38:02 They’re going to look different.
0:38:06 The future does not look like the past, but you have nothing else to go on,
0:38:10 but the past and you can see whether someone moved really, really quickly
0:38:14 in the previous situation where they promoted three times in the same year
0:38:17 at a different company that was moving very, very quickly.
0:38:18 Do they have a sense of urgency?
0:38:20 You can test for some of these things.
0:38:22 You can ask about these things.
0:38:25 But yeah, you don’t know whether they have the potential to grow
0:38:30 into the next stage of the company until you put them in that position.
0:38:35 Often, I think the challenge is the company is moving so fast and you’re
0:38:39 hiring someone that has done the job before and you know that they can do
0:38:42 the job for the next year or two and that’s maybe good enough.
0:38:45 If you hire someone, you have to let them go on three months.
0:38:46 That was an asire.
0:38:50 There’s almost no reason why that person was not going to be able
0:38:52 to do the job for three months.
0:38:54 They either were not a cultural fit.
0:38:55 They didn’t have the right skills.
0:38:59 If they stick around for a year or two, it’s usually because they’ve done
0:39:02 the job before and they’re picking up a bunch of low-hanging fruit.
0:39:07 But I look at Tony at Doorash.
0:39:11 Many of the people who work for him have worked for him for a long period of time.
0:39:13 He likes to grow people from within.
0:39:15 He obviously hires from outside as well.
0:39:19 But many of the people who’ve been around the company have been around for a long time.
0:39:28 Amazon, many of the senior VPs that were around Bezos had been around
0:39:30 the company for a long, long time.
0:39:36 Now that Jassy’s there now as CEO, he’s trying to develop people also
0:39:38 for a long period of time.
0:39:43 If you look at great companies, they’re very, very good at developing talent
0:39:45 both from within and hiring from outside.
0:39:48 Is it a red flag if the turnover is too high then?
0:39:51 Is it like a sign that people don’t know how to hire, right?
0:39:55 I think it’s a red flag and you look at it and you don’t want to.
0:40:01 So the issue with metrics is people start managing to the metrics.
0:40:05 And so if you start telling them, hey, your turnover is really high,
0:40:08 they start managing to the turnover number.
0:40:10 And that’s another thing.
0:40:13 You have to manage the turnover of regrettable.
0:40:15 What is a regrettable turnover?
0:40:19 Why are you not able to retain your best people?
0:40:26 And if you have unregratable turnover, then why did you hire these people
0:40:27 in the first place?
0:40:30 And so if you break the problem down that way, you can’t find or read
0:40:32 some what the issue is with the turnover.
0:40:38 I really like thinking about it in terms of regrettable versus unregratable turnover.
0:40:42 A lot of people when they’re hiring, they sort of, we need this job.
0:40:45 I want to know somebody who’s done it at the next level because that’s where
0:40:46 we’re growing to.
0:40:48 So they’re trying to anticipate where they’re growing.
0:40:52 And one of the problems that I hear commonly is that people run into, well,
0:40:56 that person might have done the 100 million to 300 million growth,
0:40:59 but they had a different team than we have.
0:41:01 They have a different system, different resources.
0:41:04 How do you think about that when it comes to hiring?
0:41:07 My observation is that when you try to hire someone that is
0:41:12 from a company that is one chapter or two chapters ahead, they tend to work out better.
0:41:16 And then part of that is because they’re only one or two chapters ahead of you.
0:41:20 If you try to hire someone who you’re over here and you’re trying to hire
0:41:24 someone that’s 10 chapters ahead, that usually is a problem because you don’t
0:41:28 know whether they understand the problem a few chapters before.
0:41:29 It’s been too far away.
0:41:35 On this, on your particular point about the system, I do think that if you hire
0:41:41 people who are 10 chapters ahead and they have a whole system in place, even though
0:41:46 they took it from 100 to 300 in a product division inside of a large, large company,
0:41:50 they probably had a lot of guardrails that allowed them to not make a bunch of
0:41:55 mistakes. And so you have to dissect whether that operating system works
0:41:57 the same way as your operating system.
0:41:59 Most startups don’t have an operating system.
0:42:05 So the thing that you have to sort of assess is how well can this person
0:42:11 operate when it’s just more nebulous, it’s just less clear.
0:42:14 Are they going to put the operating system in place?
0:42:20 I’ve been to this story behind Zappos from sort of the initial idea in the early
0:42:25 days, just high level five minute version to the exit with Amazon.
0:42:31 Maybe from the start, Zappos was, this is this weird idea, I can’t even
0:42:38 believe we funded it because this was originally founded by Nick Swimmer.
0:42:42 He had called and left a message on our answering machine.
0:42:47 This is how old and back we were going in 1999.
0:42:52 And Tony and I were running a seed fund, a venture fund, an incubator
0:42:53 called Ventra Frogs.
0:42:57 And Nick said, hey, I have this crazy idea.
0:43:04 I’m a webmaster at Auto by Tel, which is an auto website.
0:43:05 I’m the webmaster there.
0:43:10 I think it’d be great to just start something for shoes because I went to
0:43:12 one store I couldn’t find the right size.
0:43:14 Once another store couldn’t find the right color.
0:43:18 Once another store, they didn’t even have the style that I’m looking at.
0:43:24 And he had already searched the web and found a whole bunch of websites where
0:43:27 people were basically trying to sell specific shoes on the internet.
0:43:29 And we thought it was the craziest idea.
0:43:34 And we almost, I think one of us had our finger on the delete button to that
0:43:40 voicemail and then he said that you might think this is crazy.
0:43:47 But mail order is already 5% of sales in the US for shoes.
0:43:50 I’m like, OK, 5% still small.
0:43:54 But the shoe industry is 40 billion, 5% is 2 billion.
0:44:01 And it just wasn’t rocket science to understand that the internet
0:44:03 was going to be bigger than mail order.
0:44:06 And so we took a meeting with the sides of making investments.
0:44:10 And we funded the company $500,000 at a time.
0:44:13 When we were venture frogs.
0:44:18 I had to then leave to go work at a company called Tell Me Networks.
0:44:23 And Tony joined Zappos relatively early on as an advisor and then became
0:44:25 co-CEO and eventually CEO.
0:44:29 But the most important thing back then was because it’s an e-commerce company.
0:44:32 And we were going from 1999 to 2000.
0:44:34 It was growing from 2000 to 2001.
0:44:37 I was like, uh-oh, we have a situation.
0:44:43 And the day after 9/11, the company had zero on sales, zero.
0:44:46 You went from whatever it was, which was small to zero.
0:44:51 And that was the first crucible moment using the term because Sequoia
0:44:54 uses terms crucible and what we’re going to do about that.
0:45:00 So it shook the company and we basically went back to basics and
0:45:02 we wanted to build a company that was profitable.
0:45:07 And so we ran, so Tony ran the company at break even and continued to grow
0:45:12 the company for a long period of time until Sequoia came in in 2004, 2005
0:45:14 to make the first investment.
0:45:20 Most of, and so most of the company was financed from a small seed round.
0:45:25 Tony invested $10 million of his own money, but most of it was financed
0:45:29 through being very creative, figuring out how to get merchants that we,
0:45:34 we ordered from to give us credit and to increase the credit line.
0:45:38 We had a, eventually got a, a line of credit from Wells Fargo.
0:45:42 But the company burned very little cash.
0:45:47 And for a company that went from zero, when we sold the company, you know,
0:45:52 had $1.6 billion in sales, uh, that really didn’t have a lot
0:45:56 of equity financing, uh, was pretty incredible.
0:45:59 When you hear about companies raising hundreds of millions of dollars
0:46:06 to get to $1.6 billion in GMV or, um, or in sales.
0:46:10 And here’s a company that basically raised $10 million.
0:46:15 And it probably was under capitalized, but it really did highlight
0:46:21 that you can build a company by having cat be profitable on the first order,
0:46:25 by being focused on customer service and not focus on marketing.
0:46:28 Talk to me a little bit more about that because you didn’t have
0:46:30 a huge budget for marketing.
0:46:34 You had to get, you know, within the first month, you basically
0:46:36 had to pay back yourself for marketing.
0:46:39 How, how do you think about that?
0:46:42 Not only back then, and then what’s different now in a world
0:46:46 where there’s a lot more money and, and maybe all the players
0:46:48 aren’t rational about how they’re spending money to grow.
0:46:52 Back then, we thought that that was a, you know, we probably thought
0:46:56 it was a curse that we couldn’t raise more money because you probably
0:47:00 would rather run the business a little bit looser so we can grow
0:47:02 a little faster, et cetera.
0:47:07 But being tight led us to find solutions that was again, non-obvious
0:47:09 or divergence to use your term.
0:47:14 Um, and the divergent idea we had was if we can only spend money
0:47:18 that was profitable on the first order, we needed other ways to grow.
0:47:23 And the focus was to become, um, much better at customer service.
0:47:29 We noticed that it was much easier to keep a customer and ordering,
0:47:33 getting that customer to order more than it was to acquire a new customer.
0:47:38 And then we just went down the line of what we can do for the customer.
0:47:42 We, we, we tried to make the website load as quickly as possible.
0:47:45 We tried to pick back and ship within four hours.
0:47:48 The solution to pick back and ship in four hours was to solve
0:47:53 a operations flow issue and not batch the, the operations, which I don’t
0:47:57 think anybody else figured out in a commerce back then, besides Amazon.
0:48:05 Um, we, we decided to work very, very closely with UPS in particular,
0:48:10 and then FedEx and USPS to figure out how to get, um, the shipping
0:48:12 raise as low as possible.
0:48:16 We started shipping so that it was, you know, five to seven days,
0:48:20 um, ground shipping to eventually overnight shipping so that
0:48:22 the customer got it the next day.
0:48:25 We figured out logistics, uh, reverse logistics.
0:48:28 So we’re bringing the shoe to your home.
0:48:33 Um, we heard lots of reasons why people didn’t, uh, want to order shoes
0:48:34 on the internet.
0:48:39 We knew that before, before we invested and we knew that we needed to
0:48:44 bring the, the, the store to your home, have you tried on and then return
0:48:47 to things that you did not, uh, that didn’t work for you.
0:48:48 You did not want it anymore.
0:48:53 And by doing all those things, um, we provided much better customer service.
0:49:01 When we, on any given day, the, the orders that we had, 80% of it was
0:49:07 from repeat customers and we grew the business, some with marketing, but the
0:49:12 majority would, by providing great customer service, having high repeat rates,
0:49:19 having high LTV and having customers basically tell everybody else how great
0:49:23 that business was, how well they were treated, et cetera, et cetera.
0:49:27 I read somewhere, and this was counterintuitive when I, I came across it.
0:49:31 So correct me if I’m wrong, that your best customers returned the most shoes.
0:49:31 Yeah.
0:49:37 That was a very contentious discussion because every, every year, the return
0:49:40 rate would go slightly higher and it was slightly higher.
0:49:41 Well, we kept crying.
0:49:46 So one way to look at it is, well, it’s not really hurting us.
0:49:51 And then the other way is, well, the return rates are high and the most
0:49:58 expensive process in the distribution center was, was managing the returns.
0:50:00 You had the return shipping.
0:50:02 You had to open up the boxes.
0:50:07 You had to look at the product and figure out whether it, it’s ready to go back
0:50:11 on the shelf, it’s damaged, I need to fix it, or it can no longer be sold again.
0:50:15 Because if you put something that cannot be sold away again on the website,
0:50:19 on the website and make it available and that gets ordered, it’s freaking
0:50:20 going to come back and be returned again.
0:50:26 We then did this analysis, and this is the type of analysis I really enjoy doing.
0:50:29 It’s like, let’s take our best customers and let’s take our worst customers
0:50:31 and look at their return rates.
0:50:35 And it turned out that our best customers at the highest LTVs return the most.
0:50:38 And like that, that is crazy.
0:50:39 How is that possible?
0:50:45 Well, it turns out because they were, they understood how to use Zappos.
0:50:47 They just ordered more.
0:50:52 Yes, they returned more, but they kept more too, because they would be willing
0:50:55 to try things if you never returned anything.
0:50:59 That means the only thing you buy are the things that you’re super comfortable with.
0:51:01 You know the size, you know the style.
0:51:07 So we were trying to help people open up the aperture, try new things.
0:51:12 So we did this analysis on the extremes and compared them and realized
0:51:14 our best customers have the highest return rate.
0:51:18 So then you say, well, the board doesn’t like the fact that we have
0:51:22 such expensive return policy and it’s costing us a bunch of money.
0:51:28 So then the solution is not to reduce the return policy and make it less liberal.
0:51:31 You want to keep the return policy as liberal as you can,
0:51:34 but make the cost of processing as low as possible.
0:51:39 And so the first order issue there is exactly going back to first order issue.
0:51:41 The first order issue is not the return rate.
0:51:47 The first issue is making the return process as cheap and efficient as possible.
0:51:49 It’s so counterintuitive, right?
0:51:51 When you think about it, because you’re actually like, no, we’re OK
0:51:54 with people returning shoes as long as they’re buying more.
0:51:58 And then they’re trying to monitor at home, which is exactly what we want.
0:51:59 And sending back what doesn’t work.
0:52:02 You know, I think we changed the whole industry.
0:52:05 And it originally was just a competitive response.
0:52:08 We had a liberal return policy in 30 days.
0:52:10 Other people copy 30 days.
0:52:13 Then it was 90 days out of the people copy 90 days.
0:52:17 And then we made it 365 days and not everybody can copy that.
0:52:21 Some did. But by doing that, it would put a stake in the ground
0:52:26 that we want people to try the Zappos experience and have a great experience.
0:52:31 Why do you think it works for shoes, but doesn’t seem to get as much traction
0:52:33 when it comes to clothing?
0:52:35 No, I think it got a lot of traction for clothing.
0:52:39 It was an understood problem by the time we got into clothing
0:52:42 that you wanted wanted to have for high returns.
0:52:44 You’re going to have high returns.
0:52:47 And therefore you need better processing for clothing.
0:52:51 I think for clothing, for shoes
0:52:55 and for a variety of soft goods, return rates are high
0:52:57 because you need to try it on and try it out.
0:53:03 I’d also point out that shoes, the difference in sizing really does matter.
0:53:08 I mean, you wear a smaller or medium, both could probably fit.
0:53:11 And you may look more buff when you wear a small
0:53:16 and you lose fitting when it’s a medium or whatever size you want to use.
0:53:20 But for shoes, the difference between seven and seven and a half
0:53:23 or 12 and 12 and a half is big difference.
0:53:26 And did you guys do things?
0:53:28 And I was nowhere as opposed to customers, so sorry.
0:53:32 But like, did you do things where it’s like, hey, last time you you’re ordering
0:53:36 in 10.5 or 11, last time you ordered a 10.
0:53:40 We’re just letting you know as an effort to like reduce returns.
0:53:42 Like maybe you hit the wrong button.
0:53:43 We let people know those things.
0:53:47 We also let them know that this brand, you’re used to buying this brand.
0:53:52 Like A6, running shoes and Nike fits a little looser.
0:53:56 So you might want to up the size with this measure of like,
0:54:01 does this fit true to size or does it fit a little looser or a little tighter?
0:54:04 You guys also had like an incredibly unique culture.
0:54:07 What went into the thinking behind them?
0:54:11 The culture of Zappos was very special.
0:54:16 And it was something that we wanted to preserve, partly because
0:54:21 Tony Shea had this experience at Link Exchange, where we didn’t define
0:54:22 the values of the company.
0:54:27 We started hiring people that were conventionally right for the positions
0:54:28 in the job.
0:54:32 And one day he woke up and realized the company that he had founded
0:54:36 and built was no longer the company he wanted to work at.
0:54:39 And he wanted to make sure that the company
0:54:44 that had this special culture that was Zappos kept the culture.
0:54:48 In the early days, it was not very well defined.
0:54:50 What is the culture of Zappos?
0:54:54 Well, you know, that that was
0:54:57 more nebulous in the early days.
0:55:01 And then the company grew and people asked, well, what is the culture?
0:55:03 We don’t have it written down.
0:55:04 How do you know someone’s a culture fit?
0:55:06 Well, does Tony like them?
0:55:07 Does Fred like them?
0:55:09 Does Alfred like them after the interview?
0:55:13 And I don’t like the term the word like.
0:55:16 Like could mean so many different things.
0:55:18 It was just not well defined.
0:55:21 And at some point, Tony decided to just ask the company,
0:55:23 what do you think the values of Zappos are?
0:55:26 What are your personal values?
0:55:28 And what do you not like about Zappos?
0:55:31 And just parsing through that.
0:55:33 We got a lot of responses.
0:55:36 And in his book, Delivering Happiness, he talks about the fact
0:55:39 that we started with 38 different values that, you know,
0:55:43 these are all Zappos values and combined them, shrunk them.
0:55:46 And we ended up with 10 core values.
0:55:50 The problem with 10 is that they’re probably a handful of people
0:55:52 that remember all 10.
0:55:55 Most people remember the first one or two or three of them.
0:55:59 And the first one was to deliver well through service.
0:56:04 It was the, in some sense, the most important core value.
0:56:08 But we meant it in a way not just to deliver well through service
0:56:14 to customers, but also to employees, to our partners,
0:56:16 our business partners and to investors.
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0:56:37 You had a different management system as well.
0:56:40 Talk to me about, was it holistic management?
0:56:41 Holocracy.
0:56:42 Holocracy.
0:56:43 Holocracy, yeah.
0:56:49 So the management philosophy was different,
0:56:51 partly because we wanted to hire people
0:56:56 that could just self-run and self-sustained.
0:56:59 And so there was an element of allowing people
0:57:04 to do what they loved the most and pair them with other people
0:57:08 who love other things and make it sort of homegrown.
0:57:11 I think Tony’s perception of his job
0:57:17 was that his idea of creating a operating system
0:57:21 for the company was to basically build a greenhouse.
0:57:25 It was his analogy and he’s going to try to help
0:57:31 every single person grow as tall and as strong as possible.
0:57:35 And so he very much focused on allowing people
0:57:38 to focus on their strengths and hire other people
0:57:41 for their weaknesses to supplement them.
0:57:43 Is there an ideal growth rate, do you think?
0:57:45 Like, can you grow too fast?
0:57:46 The answer depends.
0:57:51 I think the easy, if you’re growing so fast
0:57:55 and the customer experience starts to degrade,
0:57:57 you’re hurting yourself.
0:58:01 And so yes, you can grow so fast that it’s just a complete mess.
0:58:05 You’re losing customers because you’re not servicing them correctly.
0:58:09 And at Zappos, we were very mindful that whatever customer experience
0:58:12 that we delivered, it was the best customer experience
0:58:15 that we can deliver at that growth rate.
0:58:21 And I think if you ask Tony Hsu at DoorDash or Brian Chesky at Airbnb,
0:58:23 they would probably say the same thing.
0:58:27 It’s like, we want to grow as fast as possible with the constraint
0:58:31 that we want to make sure that there’s a great customer experience.
0:58:33 And maintain the internal culture.
0:58:39 Yeah, and maintaining the internal culture is one way of thinking about it.
0:58:43 And you may have to grow the culture over time.
0:58:45 You have a company, it’s growing.
0:58:48 Do you think the culture that was on day one is going to be the culture
0:58:53 that’s going to work five years, 10 years in?
0:58:54 It’s not a static thing.
0:58:55 It’s not a static thing.
0:58:58 Cultures should not be static.
0:59:01 Every year, you do a strategic plan and a financial plan.
0:59:04 You figure out what your next year’s revenue is going to be.
0:59:07 You’re hiring a plan, you’re marketing a plan.
0:59:09 You have all these plans.
0:59:12 You should also have a plan for culture on how to grow that.
0:59:14 I think the best companies think about that.
0:59:17 Like, how does our company change?
0:59:18 How do we grow up?
0:59:24 How do we become one year older and better and faster at the same time?
0:59:28 How when you’re having so much success scaling,
0:59:32 like going from a million dollars in sales to a billion,
0:59:36 do you not sort of get complacent?
0:59:37 I think that–
0:59:39 Because you were dominating the market at the point in time.
0:59:43 You were the leader clearly in that space.
0:59:44 You’re talking about Zappos?
0:59:46 Yeah, well, in general, either.
0:59:49 In general, I think in for every company,
0:59:54 if you read Jim Collins’ book, Why the Mighty Fall,
0:59:58 it’s the first sign is the hubris of much success.
1:00:04 And at Sequoia, we’re just never complacent.
1:00:07 But you only really work not to be complacent.
1:00:09 We actively work not to be complacent.
1:00:11 At almost every single company, it’s
1:00:14 to make sure that you’re not complacent.
1:00:17 Successful companies just think that way.
1:00:22 At Sequoia, we talk about you’re only as good as your next investment.
1:00:30 At Sequoia, as Zappos, we talked a lot about how easy
1:00:34 it is to ruin a good reputation.
1:00:38 The next order, if that’s not good for a customer,
1:00:43 you’ve built all this effort to build a good reputation
1:00:49 with a customer and one bad order on an important order,
1:00:52 like their wedding day, and you ruin that reputation.
1:00:54 And so I think a lot of companies
1:00:58 have different ways of thinking about that.
1:01:00 And Brian Chesky thinks about what’s the next thing?
1:01:03 What’s the transformation that we’re going to create?
1:01:05 What is the next thing for the customer experience
1:01:07 that’s going to be great?
1:01:11 Tony Shoo thinks about the next product
1:01:15 to power the local economies.
1:01:19 What’s the next set of people that we’re going to help?
1:01:27 And I think if you go back in the history of any business,
1:01:32 you notice that customers are just enormously impatient.
1:01:35 They’re enormously unsatisfied.
1:01:40 Everything that is new and novel becomes standard.
1:01:43 And based on this line about how customers are just
1:01:46 always, always dissatisfied.
1:01:48 I want to kind of go deeper on that.
1:01:50 It’s almost like there’s a natural entropy
1:01:54 to create more sediment inside an organization.
1:01:56 Toby, Luke, and our interview use the word sediment,
1:01:59 like you start building up the bureaucracy.
1:02:02 And entropy being like that’s the natural result
1:02:03 of growth and scale.
1:02:05 And then you actually have to apply a lot of energy
1:02:08 to make sure that it doesn’t happen.
1:02:12 What are the early signs that you see that–
1:02:14 of sediment?
1:02:18 Well, there are a lot of examples of this.
1:02:26 When you– the reason I always take a snapshot of when I go
1:02:27 into a company for the first time,
1:02:30 just see how fast they’re moving.
1:02:35 And then I tell them, today is a great day.
1:02:39 Hopefully, you will move faster than today.
1:02:41 And I hold that as a bar.
1:02:43 And if you don’t have that mentality,
1:02:46 it will start to slow down.
1:02:48 And so what’s the sediment?
1:02:50 Like the process becomes–
1:02:54 instead of making fast, good, fast decisions,
1:02:59 the thing that people value is having a good process that
1:03:02 slows you down to make sure you have the right decision.
1:03:07 You have to make high-velocity decisions at scale.
1:03:08 And I look for that.
1:03:12 Like, are we able to make high-quality, fast decisions
1:03:13 as quickly as possible?
1:03:18 Or do you let the process determine the decision?
1:03:21 How do you judge a decision’s quality?
1:03:25 You can, necessarily, at the moment in time.
1:03:28 You can think about things at the moment in time
1:03:31 as how reasoned, how deep have you
1:03:33 thought about the problem, how much research have you done.
1:03:38 And you can sort of at least say, well, you researched the problem.
1:03:40 You understood it deeply.
1:03:42 And you picked a course.
1:03:43 And hopefully, that’s the right decision.
1:03:47 And in hindsight, you can always look back
1:03:49 and look at whether those decisions are right or wrong.
1:03:53 And I don’t think enough companies look at that enough.
1:03:55 And instead of projecting next year’s revenue
1:03:59 and next year’s strategic plan, part of the strategic plan
1:04:01 should be about looking backwards.
1:04:03 What decisions did you get right?
1:04:05 What decisions did you get wrong?
1:04:07 Why do we need to course-craft?
1:04:09 You guys also had an element of–
1:04:12 I think it was even specific back before it became popular.
1:04:16 But getting 1% better talked to me a little bit about that
1:04:19 and what it meant, practically speaking.
1:04:24 There are two things at Zappos that I push very hard
1:04:25 and popularize.
1:04:29 One was the power of and, because I
1:04:34 found too many people trying to figure out ways to do either or.
1:04:39 And it wasn’t like, OK, we’re going
1:04:43 to ship product more quickly, but the website’s
1:04:45 going to be slower.
1:04:48 Those are– you got to do both.
1:04:54 And if you think about the little things that we do at Zappos,
1:04:58 it was about just compounding 1% every single day.
1:05:05 And I used to write on the whiteboard 1 plus 1% to the 365.
1:05:09 Because if you take a dollar and compound it 1% every single day,
1:05:15 you get this ridiculous result, which is you get $37, $38.
1:05:22 And so when I hear about making a leap forward,
1:05:26 1 to 38 is a big leap.
1:05:29 And it’s on a scale of figuring out what’s a 10x idea.
1:05:31 It’s even bigger than a 10x idea.
1:05:36 I hear founders talk all the time about I only want 10x ideas
1:05:38 because those are the things that move the needle.
1:05:43 And it turns out just simply compounding 1% every single day
1:05:46 moves the needle even more than a 10x idea.
1:05:49 Where do people tend to go astray, right?
1:05:51 So you have a great core product.
1:05:53 And I’m just imagining you start building up a team.
1:05:55 You start getting out of your focus.
1:05:58 Like, where do companies go wrong?
1:06:03 A number of places, if you just look at great companies,
1:06:07 they compound at a very high rate for a long period of time
1:06:09 in their core business.
1:06:11 Google for a long period of time was search.
1:06:14 Amazon for a long period of time was e-commerce.
1:06:19 And I think there’s a difference between Act 2
1:06:20 and category expansion.
1:06:24 So in Amazon, they went from books to music to electronics
1:06:28 to a whole bunch of– they just went category by category.
1:06:30 But it was the same rule, like core business,
1:06:35 which is getting product to the distribution center,
1:06:37 pick pack and ship the products that you want
1:06:40 and shipping it to you.
1:06:40 And it could be books.
1:06:41 It could be music.
1:06:42 It could be electronics.
1:06:43 It could be shoes.
1:06:46 It could be tools.
1:06:47 It could be a hammer.
1:06:49 But that’s one core business.
1:06:52 And I think founders start their company
1:06:55 because they have novel and compelling insights
1:06:58 into the world, and specifically for their company.
1:07:01 And they like the new shiny penny.
1:07:03 I’m not saying that you shouldn’t focus on the new shiny penny
1:07:05 that is adjacent to your business.
1:07:08 I’m just saying that you shouldn’t focus on the new shiny
1:07:12 penny that is way out, away from your business.
1:07:15 Eventually, all companies needed Act 2.
1:07:18 AWS was an Act 2.
1:07:22 That was very different than the e-commerce business.
1:07:28 But even the way that Amazon thought about their web services
1:07:31 business is like, well, we’re very good at building
1:07:34 distribution centers.
1:07:36 Originally, the distribution center that we built
1:07:38 was for physical things.
1:07:41 And here, we’re building a distribution center
1:07:44 for electronic things, for bits.
1:07:48 Like, even the way to think about it was quite interesting.
1:07:51 They didn’t think this was a high margin business.
1:07:53 They thought of it as like, OK, this will be a low margin
1:07:54 business, too.
1:07:56 And we like low margin businesses.
1:07:59 And that was Bezos’ famous quote, right?
1:08:02 Your margin is my opportunity.
1:08:03 I like the idea of Act 2.
1:08:06 For a lot of companies, Act 2 is the founder steps down.
1:08:09 Professional management sort of comes in.
1:08:10 Talk to me the difference between,
1:08:12 as you see it, a founder-led company
1:08:15 and a professionally-led company.
1:08:17 And I use the word professionally loosely,
1:08:18 because founders are professionals.
1:08:21 But I just want people to get the distinction in their head.
1:08:24 Well, there’s a lot being said about the difference
1:08:26 between founder mode and manager mode.
1:08:29 And I would go back to the question,
1:08:31 is shouldn’t it be and?
1:08:33 Shouldn’t you want– don’t you want to be both?
1:08:35 I have a concept of fire and ice.
1:08:39 The best company is at both this huge fire.
1:08:41 They have this entrepreneurial spirit.
1:08:44 And they run hot because the idea is
1:08:46 so compelling and interesting.
1:08:49 But they also have this icy side.
1:08:50 It’s just cold facts.
1:08:51 It’s management.
1:08:54 It’s about getting to the details.
1:08:56 And the best companies have both.
1:09:01 And it pains me to see that you have to choose one or the other.
1:09:04 Because the best companies do have–
1:09:08 they figure out how to make sure that both are
1:09:09 in the company.
1:09:11 What are the different strengths, I guess,
1:09:12 then maybe that’s a better way to think
1:09:16 of this question between founder mode and management mode.
1:09:18 What are the weaknesses and strengths of each?
1:09:20 How do they work symbiotically together?
1:09:26 I would say that there are many different modes of a founder
1:09:29 or a manager.
1:09:32 The beginning days, you’re a creator.
1:09:34 You’re finding zero to one.
1:09:37 You’re creating something that the world has not seen before.
1:09:40 And the mode there is to be a creator.
1:09:41 And instead of calling it a founder,
1:09:44 you’re creating something that the world has never seen.
1:09:47 Once you create that, sometimes it
1:09:51 gets into operator mode.
1:09:53 And many founders are finding operating
1:09:56 and making their creation better.
1:09:58 It’s about understanding the inputs and outputs.
1:10:03 How do I make the system better?
1:10:05 I create something I need to go to market with it.
1:10:11 How do I systematically make the go-to-market happen?
1:10:15 And you’re trying to just operate the thing in a way
1:10:19 that sort of scales the business.
1:10:23 And if many founders are very, very good at the scale,
1:10:25 then you get to a mode where you need to manage.
1:10:28 You’re trying to figure out resources, resource allocation.
1:10:32 And it’s like, should I invest a dollar in the core business
1:10:36 or should I invest that dollar in a new project?
1:10:38 And sort of having a framework on how to make management
1:10:40 decisions like that.
1:10:44 That’s what a lot of companies at scale,
1:10:46 but the CEO needs to figure out.
1:10:48 And then there’s just a level of leadership
1:10:52 around how do you lead the organization
1:10:56 and think about it from an organizational standpoint.
1:11:01 So some of that is manager mode and some of that is founder mode.
1:11:04 But let’s just break it down to what it is
1:11:09 and not talk about one contrast over the other.
1:11:10 I want to go back to something you said earlier
1:11:13 about crucible moments.
1:11:15 What are they and how do you identify them?
1:11:21 Crucible moments is the term we use at Sequoia
1:11:25 for things that are basically very important type one
1:11:27 decisions.
1:11:34 And I’ve had to deal as an operator before Sequoia,
1:11:36 we didn’t call them crucible moments,
1:11:39 but I’ve gone through a fair share of crucible moments.
1:11:45 Link exchange, do we want to sell the company in Microsoft?
1:11:52 Had tell me networks were burning $60 million a quarter.
1:11:54 How do we get through that?
1:11:58 And how do we pivot the company from a consumer business
1:12:00 that wasn’t working into an enterprise business?
1:12:04 These are decisions that change the trajectory of a company.
1:12:12 At Zappos, it was what do we do after 9/11 when sales went to zero?
1:12:14 What do we do during the financial crisis
1:12:16 when credit became very, very difficult
1:12:20 and we were borrowing $60 million.
1:12:22 We had $60 million that we did nothing wrong,
1:12:27 but the banks didn’t have the liquidity anymore.
1:12:28 They’re calling the loan.
1:12:31 And how do you go through these things?
1:12:34 At Airbnb, there have been a number of crucible moments
1:12:36 as well, one of which started very early on.
1:12:38 Brian Chesky talks about a lot, which
1:12:44 was the PR crisis with a guest trashing a host.
1:12:47 And that led to host guarantees.
1:12:48 But there were many of those.
1:12:51 There was a fight to win Europe.
1:12:55 And a competitor called Windu that copied the Airbnb
1:12:57 website pixel by pixel.
1:13:02 Or Jordan Ash’s decision to go after suburbs
1:13:04 and not the cities.
1:13:05 They didn’t give forgo the cities,
1:13:07 but we’re going to start with suburbs first.
1:13:11 Jordan Ash’s decision to focus on merchants and selection
1:13:13 over speed.
1:13:17 And you can have a situation where
1:13:21 you can increase speed delivery by just having a smaller
1:13:26 radius, which then if I only showed you the restaurants that
1:13:29 are close to your home, you’ll get them faster.
1:13:31 But it doesn’t give you the breadth of selection
1:13:33 that you may want.
1:13:36 And these decisions changed the trajectory of the company
1:13:41 and their choices that many of the times,
1:13:42 they’re one-way doors.
1:13:44 Once you make that decision, you can’t go back.
1:13:49 And I think they’re very, very important to get right.
1:13:52 And so at Sequoia, we have a podcast about it,
1:13:54 partly because we want to highlight
1:13:58 how the founders and the management teams puzzle
1:14:01 through these decisions.
1:14:04 And then other characteristics about crucible moments
1:14:08 is every one of them doesn’t look like the other.
1:14:11 So you’re presented with a new problem.
1:14:14 And you’re trying to figure that out for first principles,
1:14:16 how to solve that problem.
1:14:18 That’s the second or third time you’ve
1:14:19 brought up first principles thinking.
1:14:20 What does that mean?
1:14:23 For me, it means start from a blank sheet of paper
1:14:25 and you have a bunch of frameworks
1:14:28 that you have that help you sort of triangulate the answer.
1:14:29 Throw those out.
1:14:33 Maybe you need a new framework for this particular situation.
1:14:35 You’re the king of dental models.
1:14:37 To me, they’re frameworks.
1:14:40 We love them because it instantly
1:14:42 helps us think about the world and narrow down the options.
1:14:46 In some situations, you want to generate more options
1:14:49 and more ideas.
1:14:51 And in those particular situations,
1:14:52 you’re on narrow, you’re thinking.
1:14:53 You want to broaden your thinking.
1:14:58 If we’re on a board together and we get a problem imagined
1:15:00 and it comes up, and how do you think through that
1:15:02 in first principles thinking?
1:15:05 How would you do that in that setting?
1:15:09 I’ll give you an example from Airbnb.
1:15:12 And when the pandemic hit, you can
1:15:14 decide to do a variety of things.
1:15:18 And there’s all these pressures.
1:15:23 There’s the investors who want you to raise enough capital
1:15:28 so that you can go through and weather the storm.
1:15:30 There are employees that want to know
1:15:31 that they’re going to be employed.
1:15:37 There are hosts that want to know that even though guests
1:15:41 can’t travel, that they have a non-refundable cancellation
1:15:42 policy, they’re going to get the money.
1:15:47 You have guests who want to figure out
1:15:50 how to get their money back because they’re not traveling.
1:15:53 You have a business that went from a business that
1:16:00 was growing 20%, 30%, 40% a year to a business that declines
1:16:03 and you lose 80% of your revenue.
1:16:05 There’s all these pressures.
1:16:07 It’s a complete mess.
1:16:09 And the solution that you had yesterday
1:16:12 doesn’t work for today.
1:16:14 Because Airbnb, before the pandemic,
1:16:17 was a lot of cross-border travel.
1:16:21 And today, after the pandemic, there is no cross-border travel.
1:16:23 How do you think about this problem?
1:16:25 Where do you start?
1:16:26 It’s a mess.
1:16:29 Everybody is yelling at you from all these different angles.
1:16:31 And Brian, just one of the most important things
1:16:34 is to stay calm and look at the problem that we have at hand
1:16:38 and figure out what the most important problems to solve
1:16:40 for a second and third.
1:16:43 And he had principles that he had outlined.
1:16:46 We used to have these emergency board meetings.
1:16:48 And it was just always discussing what’s
1:16:50 the emergency this week, this week, this week.
1:16:54 And then he leveled up and decided to say, hey,
1:16:58 we need principles to decide what we’re going to do.
1:17:06 And he decided that we have a once-in-a-generation pandemic,
1:17:09 one in 100 years.
1:17:11 That’s outside the building.
1:17:13 There’s nothing that he can do to fix the pandemic.
1:17:17 But what he can do is to make sure
1:17:21 that Airbnb survives for the next generation.
1:17:23 And he had principles by which he
1:17:27 wanted to make sure that when we get out of this,
1:17:31 we’re seen as someone who created Airbnb
1:17:34 for the next generation and not something
1:17:37 that wasn’t going to survive this generation.
1:17:39 Then he went to work.
1:17:45 And he had these great plans of we’re
1:17:49 going to reduce our burn by doing all the things in this order.
1:17:50 We’re going to cut marketing.
1:17:52 Nobody’s traveling anyway.
1:17:53 Easy decision.
1:17:56 We’re going to cut contractors.
1:17:59 We don’t have enough work for the easy decision.
1:18:01 We’re going to have to raise money.
1:18:03 And we’re going to do it in a way that
1:18:06 doesn’t burden previous investors.
1:18:08 So we’re not going to raise money at a low valuation.
1:18:10 We’re going to raise debt.
1:18:12 Why do we need to raise the money?
1:18:15 To survive this crazy situation where
1:18:19 both the guests and the hosts want their money back.
1:18:23 We have $3 billion of capital on the balance sheet of Airbnb.
1:18:28 But we have $3 billion or $4 billion of customer deposits.
1:18:31 We can give all of that to one side,
1:18:33 and one side will be pissed at us.
1:18:36 Give it also a host, the guests will be pissed.
1:18:38 If we give it to the guests, the hosts will be pissed.
1:18:44 And we won’t have a business when we emerge from the pandemic.
1:18:46 So he goes out and raises $4 billion.
1:18:50 $2 billion of debt, so $2 plus our $3 is $5.
1:18:53 We can cover both sides and then take both sides.
1:18:56 OK, we can pay both sides.
1:19:01 Instead of paying it out, why don’t you just calm down.
1:19:02 You’ll get this money.
1:19:04 You know you can get this money.
1:19:07 And let’s see how the system works itself out.
1:19:12 And so he had to sort of project confidence and imagine
1:19:13 your way out of this thing.
1:19:17 And you imagine a solution which is, OK, well, we’re
1:19:18 in New York right now.
1:19:20 Not a lot of people want to stay in their apartments
1:19:21 in New York.
1:19:22 They’re traveling upstate.
1:19:24 In San Francisco, where I was, not a lot of people
1:19:25 wanted to be in San Francisco.
1:19:27 They went to Napa.
1:19:31 And so slowly but surely, it didn’t happen in March.
1:19:32 It didn’t happen in April.
1:19:36 But in May, we found resilience in the business model
1:19:40 where people started to travel again, just in their own
1:19:42 backyards, in their own country.
1:19:47 And that allowed the company to come out of that.
1:19:51 And the thing that he did last was to lay off employees.
1:19:53 He knew that the employees were going
1:19:57 to have a harder time finding another job during that time,
1:19:58 during the pandemic.
1:20:01 And so you just had these principles
1:20:03 of how he’s going to go solve this problem.
1:20:08 Nobody would have told him to do that in that order.
1:20:10 That’s an incredible example, thank you.
1:20:13 And then on the flip side, this is the craziest thing.
1:20:17 So because Airbnb was the poster child
1:20:20 of the number one IPO possibility for 2020.
1:20:24 And they had seen their revenue go down 80%.
1:20:28 And then they came out of that and then went on
1:20:32 to be the number one IPO of that year in December.
1:20:36 And DoorDash, I had the opposite experience
1:20:40 of DoorDash, which was, boy, they were also
1:20:42 going trying to go public that year.
1:20:45 But instead of being beaten down by the pandemic,
1:20:48 they really accelerated during the pandemic.
1:20:53 And also there, Tony Hsu had a lot of principles
1:20:56 behind what he wanted to get accomplished.
1:20:59 And it was like anything else during the beginning
1:21:02 of the pandemic, it was very, very scary.
1:21:05 Because around the world, there are some places
1:21:09 that were completely shut down, including restaurants.
1:21:12 And if you shut restaurants down because of his experience,
1:21:14 having worked in a restaurant with his mom,
1:21:18 by his mom’s side, washing dishes with his mom,
1:21:20 he knew that restaurants wouldn’t survive.
1:21:22 They had less than 30 days of cash.
1:21:26 And that’s less than 30 days of cash when they actually
1:21:28 are running at full speed.
1:21:32 So now they have less cash.
1:21:38 The restaurant is shut down for a period of time.
1:21:40 People didn’t know whether they can order food
1:21:41 and it would be OK.
1:21:44 As soon as we figured out that the restaurant shouldn’t be
1:21:46 shut down and the restaurants can
1:21:49 remain open for delivery and take out,
1:21:53 he went to full force and making sure
1:21:58 that the business could help merchants bridge the gap.
1:22:02 This is not something that other companies couldn’t have done.
1:22:07 But one of the things I really respect about Tony and the team
1:22:11 is they decided these merchants are going to be hurting
1:22:12 and we need to help them.
1:22:17 And so they proactively went out and uploaded menus
1:22:21 from different merchants on to DoorDash and said,
1:22:23 hey, I know you guys are hurting.
1:22:25 The only thing you can do is delivery.
1:22:26 We’re here to help you.
1:22:29 We’ve uploaded the menu, your menu.
1:22:31 We found your menu, whether it’s on the internet
1:22:33 or we’ve got a copy of your menu, we uploaded it.
1:22:34 It’s ready to go.
1:22:37 Just let us know if we can turn it on for you.
1:22:41 And that allowed DoorDash to grow very, very quickly
1:22:42 during the pandemic.
1:22:48 I thought that DoorDash was a well-run company in 2019.
1:22:52 And it was a process by which they grew very fast.
1:22:55 They probably grew too quickly.
1:22:58 Their unit economics wasn’t great.
1:23:02 They had a few hard fund raising rounds for the C&D.
1:23:04 They fixed the unit economics.
1:23:07 So in 2019, it was a walled oiled machine.
1:23:11 And I saw this walled oiled machine pushed to another level
1:23:15 in 2020 during the pandemic when they really
1:23:21 did help restaurants when they were in a world of hurt.
1:23:25 So the pandemic is a crucible moment for every business.
1:23:27 It was a crucible moment for every business.
1:23:33 What differentiated the founders in Sequoia
1:23:36 from the ones who took advantage of that opportunity
1:23:40 and came out of it stronger and the ones who didn’t?
1:23:45 I think we were–
1:23:48 I hate to say this as a baby tripe,
1:23:51 but going through the pandemic, we all came out stronger.
1:23:52 It was a shared experience.
1:23:56 Sometimes when you go through crucible moments and crises,
1:23:58 you don’t have the shared experience.
1:24:04 But to answer your question more succinctly,
1:24:11 I think there are people who knew that the crisis was
1:24:12 an opportunity.
1:24:16 And then there are those who just thought of it as a crisis.
1:24:21 And I think it was Andy Grove that says that good companies
1:24:23 are– get better.
1:24:25 They’re defined by a crisis.
1:24:29 Whereas there are a lot of companies
1:24:31 that are destroyed by a crisis.
1:24:37 And many great companies were defined
1:24:40 and they changed the way they did things in a way that you–
1:24:43 they found solutions that you would not have imagined
1:24:46 when the crisis didn’t happen.
1:24:50 And I think the founders that are–
1:24:53 they realize they’re in a crucible moment.
1:24:56 They realize they need to do something differently.
1:24:59 They stay calm.
1:25:00 They stop.
1:25:01 They look around.
1:25:04 And they figure out– they look around 360 degrees
1:25:07 and say, that’s the direction I’m going.
1:25:10 Even though the whole world is revolving around them
1:25:12 and it’s a complete whirlwind.
1:25:16 And they imagine why they should go into that direction.
1:25:20 And in most cases, they had to find a different solution,
1:25:24 a different product, a different way of operating,
1:25:27 and then scale that into that direction.
1:25:32 Those are the ones that come out really, really successful.
1:25:37 In Airbnb’s case, they had to change cross-border travel
1:25:38 to local travel.
1:25:40 They changed to long-term stays.
1:25:44 They changed to having experiences.
1:25:49 In DoorDash’s case, they simply had to sort of do things
1:25:51 that they’ve never done before.
1:25:52 There wasn’t a new–
1:25:54 it wasn’t a product change.
1:25:56 But they had to imagine a different solution.
1:25:59 But they’re not going to wait until merchants call them
1:26:02 and say, negotiate a deal.
1:26:05 They said, look, we’ve uploaded your menus
1:26:08 onto the website, into our app.
1:26:09 These are our standard terms.
1:26:12 Do you want to go or not?
1:26:14 That wasn’t a product that they had designed
1:26:15 before the pandemic.
1:26:19 Often, you need to find a completely different solution to–
1:26:22 I mean, they seem so simple after the fact.
1:26:24 But at that moment, it is completely
1:26:27 unclear that that was the right decision.
1:26:29 But that’s why you need to stay calm.
1:26:32 That’s why you need to look around.
1:26:34 You need to stop, look around, and find the right direction
1:26:37 that you want to go in, and then accelerate.
1:26:41 I think that’s really an interesting approach, right?
1:26:44 Where you sort of stop, you don’t panic,
1:26:47 you evaluate what’s going on as rationally as you can
1:26:51 in the moment, despite everybody wanting things from you
1:26:53 and all this pressure that you probably have from investors,
1:26:56 but you also put on yourself to take care of your employees,
1:26:59 to take care of your customers, to take care of your family,
1:27:01 and everybody’s worried to put the same thing.
1:27:03 So you’re operating in a very amplified environment
1:27:06 to begin with.
1:27:08 And the best founders are doing this day to day.
1:27:11 But here, the time frames are much, much shorter
1:27:12 and much, much more compressed.
1:27:16 And people’s voices are much louder.
1:27:22 Just recently, Tony said that it’s about many good decisions
1:27:23 about sequencing.
1:27:27 We all know what we need to do, but sequencing it, right,
1:27:30 is actually what matters.
1:27:33 And the sequence of how you do something often
1:27:37 determines whether you’re remembered or not remembered.
1:27:41 In the example that we talked about for Airbnb,
1:27:46 there’s a sequence of what is the values that I have
1:27:51 for the company, and let’s go through the sequence that most
1:27:52 matches the values.
1:27:58 So Brian wanted to take care of the employees the most.
1:28:01 And so the layoff was the last thing that he did.
1:28:04 He tried to do everything else before the layoff.
1:28:09 In Tony’s case, the sequence was to make sure–
1:28:11 because he had a heart for merchants–
1:28:14 the sequence was to take care of the merchants.
1:28:21 So it’s just when you have these well-understood values,
1:28:24 it makes the sequencing a lot easier.
1:28:25 And often, people forget.
1:28:28 They write down their values for a good reason.
1:28:31 Because when you don’t have a playbook anymore,
1:28:36 all you have left is the essence of what the company is,
1:28:37 which is the values of the company.
1:28:39 Often, that’s the essence of the founder,
1:28:42 the values of that founder, and how they want to operate.
1:28:45 But you forget that because it’s noisy.
1:28:49 Lots of people, lots of different parties
1:28:52 wanting your time and your attention.
1:28:57 Work from home has become a somewhat contentious topic.
1:29:00 But I really want to hear your thoughts on the pros and cons
1:29:02 and how you see it.
1:29:08 Pros and cons.
1:29:12 I think it’s very, very hard to build an early-stage company
1:29:13 remote.
1:29:16 And the reason I say that is, unless you’ve
1:29:20 worked with each other before, I view there
1:29:24 to be a well of trust that is created when you work together.
1:29:29 And the reason why people who have worked together
1:29:33 for a long period of time can anticipate each other’s
1:29:35 movements and what they’re going to do next
1:29:37 is because they’ve been around each other for a long time.
1:29:42 And as you know, most of our communication is not verbal.
1:29:46 There’s body language and how you said, how you react.
1:29:48 There’s a lot of communications that we
1:29:53 miss through work from home.
1:29:56 And you just can’t read it as well on the screen
1:29:57 versus in person.
1:29:59 Because there’s only your–
1:30:01 on screen and in Zoom, you only have your head.
1:30:05 There’s the rest of your body that you don’t see.
1:30:10 And so I think it’s quite important for early-stage teams
1:30:12 to work together.
1:30:13 I mean, they don’t have an office.
1:30:16 They find the coffee shop to work together at.
1:30:17 Why do you do that?
1:30:18 You can all work from home.
1:30:20 But why do you get together, a coffee shop to work together?
1:30:22 It’s noisy.
1:30:24 There are a lot of people around.
1:30:26 There’s a reason why you want to do some of these things.
1:30:29 And I think, does it mean that every single day I’m
1:30:31 more productive in the office?
1:30:33 No, there are days when I’m writing a memo.
1:30:36 It’s probably better if I sit in the office
1:30:40 or I’m at home and just cranking.
1:30:42 It’s also very hard to build culture
1:30:46 if you’re all separate and apart from each other.
1:30:47 There’s no ritual.
1:30:49 Culture is the values.
1:30:51 But how do you express those values?
1:30:54 They’re your behaviors.
1:30:55 They’re the rituals.
1:30:58 They’re the narratives that we tell each other.
1:31:03 And those things are just a lot harder to do over Zoom.
1:31:08 So I think all companies should go back to being
1:31:11 in the office a certain number of days a week.
1:31:13 It doesn’t have to be five.
1:31:16 I think that we can’t put the genie back in the bottle
1:31:18 on remote work.
1:31:21 But at the same time, we thought the world
1:31:24 was going to be different when we were all online.
1:31:28 And it turns out we actually enjoy seeing each other in person.
1:31:30 We enjoy having dinner together.
1:31:33 I don’t enjoy having dinner over Zoom with someone.
1:31:37 I enjoy it when we’re breaking bread right next to each other.
1:31:42 Do you believe that you can please both sides?
1:31:44 And that’s sort of the hybrid model
1:31:46 where people are going to work at the office
1:31:47 two or three days a week.
1:31:50 And then you can work from home two or three days a week.
1:31:52 Do you believe in that being effective?
1:31:55 Or do you believe you have to pick a predominant one
1:31:57 and focus?
1:31:59 Like, because you’re operational back-end,
1:32:00 your company culture, your cadence,
1:32:02 they’re all going to be determined by what you pick.
1:32:04 And if you pick in the middle, you’re
1:32:06 probably making trade-offs on both sides
1:32:08 and not getting maybe the advantages
1:32:11 because you don’t want to make trade-offs.
1:32:16 I think it’s best if you take a stance, take a side.
1:32:19 Hybrid– I would cripple with the fact
1:32:21 that hybrid doesn’t work at all.
1:32:23 I think you can be in person.
1:32:24 You can be remote.
1:32:25 You can be hybrid.
1:32:27 You just need the systems around it
1:32:32 to make up for the fact that you’re
1:32:34 going to operate in this way.
1:32:37 Every multinational corporation,
1:32:38 when they have multiple locations,
1:32:41 was doing some form of hybrid.
1:32:43 You have some people who are in this office.
1:32:44 Some people in this office, they’re
1:32:50 connected through telecommunications.
1:32:52 And some people are on the road.
1:32:56 Any company that gets a certain scale,
1:32:58 the salespeople in the field, they’re not actually
1:32:59 at headquarters.
1:33:03 And you are having in all hands those people call in.
1:33:06 But when you have an important all hands,
1:33:07 you call everybody in.
1:33:08 You have an important offsite.
1:33:11 You call everybody in.
1:33:13 And there are just certain things
1:33:14 that should be done in person.
1:33:17 There’s certain things that are OK to do over Zoom,
1:33:21 over telecommunications, over email.
1:33:25 I think that there is a different medium
1:33:29 to do different jobs, depending on the objective is.
1:33:32 And you should understand what the drawbacks
1:33:35 and the advantages of each one.
1:33:39 At Sequoia, we take a lot of first meetings over Zoom.
1:33:43 And during the pandemic, when we were only
1:33:46 doing meetings over Zoom, you just
1:33:50 never got the right texture for the company, the cadence
1:33:52 of how the company operated.
1:33:55 And yeah, we might still take first meetings over Zoom,
1:33:59 but we’re going to meet the team at some point in person.
1:34:02 And did you analyze your investing during that period
1:34:06 where you’re meeting more over Zoom versus more in person
1:34:08 when it comes as approaching the investment decision?
1:34:11 Yeah, we can make those assessments.
1:34:14 But the hard part is the environment is also different.
1:34:17 So 2021 valuations were nutty.
1:34:20 Was it the issue of making those investment decisions
1:34:21 over Zoom?
1:34:24 Or was it the environments that drove valuations higher?
1:34:26 So therefore, the returns are going
1:34:29 to be more difficult, more challenged when–
1:34:30 valuations are higher.
1:34:33 Why do you play when the valuations are higher?
1:34:38 When sort of like the game is loaded against you in a way?
1:34:39 Why choose to keep playing?
1:34:42 Why not back away and then come back when
1:34:43 the odds are in your favor?
1:34:47 Well, historically, valuations have gone up.
1:34:51 But if they keep going up, then how does that work?
1:34:55 I think our LPs pay us to make money
1:34:57 during good times and bad times.
1:34:59 And here’s the thing that is most interesting
1:35:01 to me.
1:35:05 You can decide to shut down, but then you
1:35:09 won’t get the texture of those companies being developed.
1:35:13 And sometimes, you got to keep meeting companies, right?
1:35:14 So you don’t shut things down.
1:35:20 You can decide to invest fewer dollars when things are hot.
1:35:23 And you could decide to invest more dollars
1:35:25 when things are cold.
1:35:28 But the market is also smart.
1:35:30 So when things are hot, it’s usually
1:35:33 because something new is happening.
1:35:34 And things are cold.
1:35:38 Maybe it’s just not a good time to invest, too.
1:35:42 If you could identify when it’s irrationally exuberant,
1:35:45 yes, you’d decide not to invest in the irrationally
1:35:47 exuberant situations.
1:35:50 But in 1999, which was one of the–
1:35:53 if you go back in history and look
1:35:57 at megatrends in investing, you know,
1:35:59 I’m 52 years old right now.
1:36:02 When I was in junior high school,
1:36:04 one of the things I did as a business
1:36:11 was to build PCs, clone PCs, because the IBM PCXTAT,
1:36:14 they were really expensive.
1:36:20 And so that was one megatrend, which is the PC revolution.
1:36:23 Then there was the internet revolution.
1:36:25 And then more recently, the cloud revolution,
1:36:28 the mobile revolution, right now we’re
1:36:29 in the AI revolution.
1:36:32 And the internet revolution, when I first
1:36:35 started working professionally after college,
1:36:36 was the Ed Lake exchange.
1:36:40 And then we started investing in 1999.
1:36:42 That’s when venture frogs started.
1:36:44 And if you decided not to invest in that time,
1:36:47 you would have missed out on Google, Salesforce, PayPal,
1:36:50 Zappos, OpenTable.
1:36:51 There are a lot of great companies
1:36:53 that were still founded during that time.
1:36:57 And paying market prices for those investments
1:37:00 would have been just fine.
1:37:00 And you can–
1:37:02 Would have been better than just fine.
1:37:05 Would have been better than just fine.
1:37:07 But you could wait until 2001.
1:37:09 And maybe you could invest in lower valuations.
1:37:13 But often, in the public markets,
1:37:16 you can wait because those companies
1:37:20 are available when the multiples are low.
1:37:23 And private companies, just because the valuations have
1:37:26 come down, doesn’t mean the company that you want to invest
1:37:28 in is looking to raise around.
1:37:33 Maybe in 1999, you wanted to invest in Google.
1:37:35 In 2001, they happened to be public.
1:37:37 You could invest in Google.
1:37:39 But if they were private, maybe you wouldn’t be able to.
1:37:39 Yeah.
1:37:43 John Bragg said this thing in my recent interview with him
1:37:46 that I had never fully appreciated, I don’t think,
1:37:49 which was he had a reputation for overpaying
1:37:51 for all of the land he was acquiring.
1:37:53 And I said, why do you do that?
1:37:55 He’s like, well, if we’re easy to deal with,
1:37:56 people want to deal with us.
1:37:59 And he’s like, these assets only go for sale once.
1:38:02 And he’s like, so maybe it takes 12 years instead of 10
1:38:03 to get our payback.
1:38:05 But it doesn’t really matter because there’s no opportunity
1:38:08 10 years from now to buy it again.
1:38:11 Yeah, I think that’s an example for us.
1:38:15 It’s the same as true in investing in private companies.
1:38:18 It’s still much better to pick the right company.
1:38:23 And slightly overpay than to invest in something
1:38:25 that is cheap.
1:38:29 You brought up AI as the next revolution.
1:38:30 Where are we going with AI?
1:38:31 Where do you see that?
1:38:34 And obviously, the longer we go out on the horizon,
1:38:35 the harder it is to predict.
1:38:37 So maybe let’s start with, what do you
1:38:41 see as the next 12 months in AI?
1:38:43 And where do you think we–
1:38:47 how do you envision 12 months to five years?
1:38:50 It’s funny because I think in the history of technology
1:38:54 changes, and then Bill Gates said this, it’s easy.
1:38:58 We almost always overestimate what
1:39:00 things are going to happen in a year.
1:39:03 And we underestimate what’s happened in 10 years.
1:39:06 Yes, it’s harder to imagine 10 years out.
1:39:10 But in the business I’m in at Sequoia,
1:39:14 we are paid to make investments and to hold on long term.
1:39:18 And we do have to sort of imagine 10 years out.
1:39:21 In the next year, these foundation models
1:39:26 are getting so good that you can see certain things being
1:39:29 automated that we used to do that we’re not
1:39:30 going to do as much.
1:39:33 But I think the next step after that
1:39:35 is if you think about–
1:39:37 lots of people talk about customer service
1:39:41 and how we can automate some of the customer service emails
1:39:43 or calls and things like that.
1:39:45 OK, let’s say we do that.
1:39:46 What’s next?
1:39:49 Well, then you should reimagine the customer experience.
1:39:52 And so AI will help us automate some of these things,
1:39:55 and there’s the massive cost savings.
1:39:59 But AI should also allow us to reinvent the customer experience.
1:40:02 And that’s why we’re very excited about a company like Sierra.
1:40:05 They’re not just going to help you automate customer service
1:40:06 tickets.
1:40:08 They’re going to help you reimagine what customer service looks
1:40:09 like.
1:40:13 Just similarly to what happened in the internet,
1:40:15 you could– in the internet happened,
1:40:18 we could book things–
1:40:21 we could book travel on the internet.
1:40:23 We didn’t have to call it a travel agent.
1:40:24 It changed the experience.
1:40:25 We could search.
1:40:26 That changed the experience.
1:40:28 It broadened.
1:40:31 I had to imagine where I wanted to go and call someone
1:40:33 to get me a techie or to get–
1:40:34 now I can search.
1:40:37 So my imagination could be broadened.
1:40:43 And that just changed my experience of travel.
1:40:47 And the airlines didn’t allow you to change tickets
1:40:51 once you bought them, because that was in some back-end system.
1:40:53 They didn’t want to open up that system.
1:40:57 Now we can change flights on the website.
1:40:58 Well, the same will be true with AI.
1:41:01 Like, start with automation, start with new experiences,
1:41:04 and the experience will completely change over time.
1:41:06 And it always takes a little longer.
1:41:09 I mean, I remember we talked about autonomous vehicles
1:41:12 probably 10 years ago, and today we
1:41:16 have autonomous vehicles working in a few cities with Waymo.
1:41:20 People imagine that that would be solved very, very quickly.
1:41:22 But where are we going?
1:41:25 I think we’re going in a world where
1:41:28 many of the problems that we have in the past
1:41:30 will get solved through automation.
1:41:32 Many of the things that–
1:41:35 many new problems will get solved through AI,
1:41:38 because they’re going to be as good as we are
1:41:41 and doing analysis and doing– being creative and things
1:41:41 like that.
1:41:46 And so I think it will be a very, very productive mega shrub.
1:41:50 One way to explore this topic is to ask you what you’re
1:41:52 looking to avoid with AI investments.
1:41:55 And I’m thinking maybe something that comes to my mind
1:41:58 is like it’s a wrapper over chat GPT or something.
1:42:00 What are you trying to avoid when it comes
1:42:02 to making AI investments?
1:42:05 So the wrapper is a good example of something.
1:42:09 It just is just a different user interface
1:42:11 on top of a foundation model.
1:42:16 But I think we’re trying to make sure that something persists.
1:42:17 And what if it persists?
1:42:19 It has its unique distribution.
1:42:22 It’s embedded into your workflow.
1:42:25 It has true ROI for a long period of time.
1:42:29 And it changes the experience.
1:42:32 Other things I’d say we try to avoid
1:42:39 is things that are roadkill along the way of a company
1:42:43 like OpenAI or Google or Amazon or Meta.
1:42:47 So small refinements into what the model doesn’t do well today.
1:42:50 That’s just going to be roadkill along the way.
1:42:57 And then I think we’re trying to avoid things that are–
1:43:01 that sound good, but they’re not good businesses.
1:43:03 Back to 1999, there were a lot of things
1:43:07 that had lots of usage that not had the revenue.
1:43:09 And so right now, there’s a different example
1:43:12 where there’s a lot of test revenue.
1:43:15 But the churn is very high because people don’t stick.
1:43:18 So there are a lot of things where
1:43:20 you see very, very fast adoption,
1:43:23 but the churn rate is very, very poor.
1:43:25 So we’re trying to avoid those kind of companies.
1:43:27 Do you think Google and Microsoft,
1:43:31 like how do you think you compete with them
1:43:33 on a foundational model basis?
1:43:36 Like, A, they can scale into enterprise overnight.
1:43:39 B, they can spend $100 billion on GPEs.
1:43:41 How do you think about that?
1:43:42 Are we going to end up in a world
1:43:45 where there’s only a few foundational models
1:43:47 and we’re all going to plug into them?
1:43:49 To be honest, I don’t know.
1:43:54 But I’ll tell you this, in the history of technology
1:43:56 investing that I’ve been involved with,
1:43:59 if you’re afraid of the incumbents,
1:44:01 you should just punch out.
1:44:05 But in 1999, you could have been afraid for Microsoft
1:44:08 because they have lots of money and lots of servers.
1:44:10 And yet they didn’t win search.
1:44:12 Someone else won’t search.
1:44:17 Microsoft won the browser war for a hot socket.
1:44:21 It was Netscape against Internet Explorer.
1:44:24 I don’t know many people who use Internet Explorer today.
1:44:26 Most people I know use Chrome.
1:44:31 So this is not a static situation.
1:44:34 I think you just have to sort of have an open mind on why
1:44:36 you will win.
1:44:40 And often, the reason why large companies don’t win
1:44:43 is because they have their own internal issues
1:44:44 that slow them down.
1:44:46 So Microsoft, during the internet,
1:44:51 it was the antitrust situation.
1:44:52 And that slowed them down.
1:44:58 They could no longer bundle IE into the operating system.
1:45:01 And so they had to break all those things apart.
1:45:04 Google has its own regulatory challenges,
1:45:05 and so does Microsoft.
1:45:08 So I don’t presume that they’re all just going to win
1:45:09 because they have a lot more money
1:45:14 and they have more capital and they have a lot more people.
1:45:16 And besides, if you thought that,
1:45:18 then I would be out of a job.
1:45:21 So how important do you see what Facebook’s doing,
1:45:24 then, where they’re spending $50 to $100 billion,
1:45:26 but they’re making it open source?
1:45:29 I think open source is a very, very important aspect
1:45:31 of what has happened in technology.
1:45:36 And you have these religious fights between closed and open,
1:45:39 and you have religious fights between Apple and Microsoft
1:45:41 or Apple and IBM.
1:45:46 Let’s go back to ant.
1:45:49 The world is built on ant.
1:45:52 And open source, in the internet days,
1:45:54 there are lots of things that were built on open source.
1:45:57 And some of it was closed source and some is open source.
1:46:03 And I think the same will be true with AI.
1:46:04 There are going to be things where you just
1:46:08 want to host it on a closed source model
1:46:10 because you know it has the breath of functionality.
1:46:13 And there are things where you can only make it work
1:46:17 if you use your specific data, train it very specifically
1:46:22 for you, and you’re going to use open source models for that.
1:46:28 And just like Google built a great business that
1:46:34 is pretty close source on open source software like Lytx,
1:46:37 I think the world of AI is going to be ant as well.
1:46:39 There’ll be closed source and there’ll be open source.
1:46:44 I want you to imagine you’re in charge of, let’s say, Canada
1:46:47 and the US and maybe the UK.
1:46:51 And I tell you that we are optimizing
1:46:54 to be the best in the world at AI.
1:46:56 What are the policies that you think about?
1:46:58 How do you approach this problem?
1:47:03 And how do you encourage us to be the world leaders?
1:47:10 I’m maybe overly optimistic about human nature.
1:47:18 And so I believe that you want to have as little regulation
1:47:21 as possible in the early days, let people experiment,
1:47:22 let people try things.
1:47:25 And is it all going to be good?
1:47:26 No.
1:47:29 But if we had over-regulated the internet,
1:47:31 it would not have grown to the scale that it is today.
1:47:33 And do we have problems on the internet?
1:47:35 Absolutely.
1:47:38 And so I believe in sort of having regulation that
1:47:43 is more open than not and then slowly close off things
1:47:47 that you know is not good or the behavior is not good.
1:47:49 Regulators often worry about the fact
1:47:52 that if you wait too long, you won’t be able to regulate it.
1:47:55 I don’t know if I believe that.
1:48:01 And then on the flip side is it’s always been–
1:48:04 I don’t know of a time that has ever
1:48:06 worked to fight against technology
1:48:09 and to over-regulate technology.
1:48:11 You could have over-regulated the fact that the Scribes were
1:48:14 going to no longer have jobs because we came with the printing
1:48:18 class and go all the way back in time like that or figuring out
1:48:23 how to have a plow so that you need fewer people to sow seeds
1:48:27 because the plow could do the work of three or four people
1:48:28 all the way up to a tractor.
1:48:32 How have we done trying to regulate or over-regulate
1:48:37 or control things that sort of make human beings much more
1:48:37 productive?
1:48:39 That’s what we’re talking about with technology
1:48:41 and that’s what we’re talking about with AI.
1:48:49 And then if you want to start applying regulation,
1:48:52 there’s maybe a slightly different framework
1:48:55 that I would use, which is you want–
1:48:58 as an example, with the combustion engine,
1:49:00 nobody regulated the engine.
1:49:04 We regulated what engines can go on the streets,
1:49:06 what can go into a plane.
1:49:09 You regulated how it was applied.
1:49:15 But in a lab, and people were sort of doing research
1:49:18 and trying to make the combustion engine even more powerful,
1:49:20 being more fuel efficient.
1:49:22 You don’t regulate that.
1:49:26 You regulate it when it gets in the hands of a consumer.
1:49:29 So that was like removing barriers almost.
1:49:31 But what about amplifying?
1:49:32 What about the push?
1:49:34 How do we encourage more?
1:49:38 How would you embrace this as a country?
1:49:41 The market is pretty good at pushing.
1:49:45 When they see opportunity, more and more capital goes into it.
1:49:48 More people go into school to–
1:49:52 in almost every single technology revolution
1:49:55 I’ve been part of, there are too few people
1:49:58 who understand that technology.
1:50:04 So when it was the PC industry, there are some people
1:50:05 who understand Ray friends.
1:50:07 Very few people understand PCs.
1:50:08 More and more people–
1:50:10 more and more investment went into PCs.
1:50:11 More and more people bought PCs.
1:50:13 More people started using PCs.
1:50:16 More people started building applications for PCs.
1:50:19 And so over time, there was just a lot more people
1:50:21 and a lot more investment in it.
1:50:23 People went to school to sort of write software specifically
1:50:26 for the PC as opposed to the mainframe.
1:50:27 That happened the internet.
1:50:30 Most people didn’t know how to build a website.
1:50:34 More and more people learned how to program in HTML and Python
1:50:40 and wrote and Linux and how to use Linux to build today.
1:50:43 And that happened with Cloud and mobile.
1:50:45 So today, we have probably too few people
1:50:48 who really, really understand the technology
1:50:50 and its application.
1:50:52 But you have so many people go into today
1:50:57 because they see the future is going to be powered by AI.
1:50:58 And so wait a year or two.
1:51:01 I bet you there’s plenty of push today.
1:51:06 That’s why the valuations are high for AI companies.
1:51:07 And wait a year or two.
1:51:10 There’s going to be a lot of things that are going to be built.
1:51:15 And in fact, the hot take is that many things will be overbuilt.
1:51:21 So maybe we’re building too many GPUs for a year or two years out.
1:51:24 Maybe there are too many data centers that have GPUs a year
1:51:25 or two years out.
1:51:27 And maybe those things will get cheap.
1:51:30 And when they get cheap, we’ll find new applications
1:51:31 when it gets really, really cheap.
1:51:33 That would be sort of the history of market.
1:51:35 Actually, it’s interesting that you brought up
1:51:36 don’t fight technology.
1:51:39 There’s a saying in investing, don’t fight the Fed.
1:51:42 It’s sort of the same sort of–
1:51:45 If Fed is way more powerful in many respects–
1:51:46 Then technology?
1:51:48 No.
1:51:53 Well, I think the Fed can constrain or can loosen money
1:51:56 supply in a very dramatic way.
1:52:00 So it applies throughout the whole economy,
1:52:03 as opposed to just about technology.
1:52:05 And historically, businesses have cycles.
1:52:08 We tend to overbuild when we’re optimistic.
1:52:09 And then you go through that phase,
1:52:13 you just talked about, out of the large technology companies
1:52:17 today, who do you think is best positioned?
1:52:18 That’s hard.
1:52:22 Well, if you want to use don’t fight the tape,
1:52:26 when I started in my technology career,
1:52:28 Microsoft was the largest technology company.
1:52:32 And today, they’re the largest company.
1:52:35 And so they seem to have figured out,
1:52:38 through their ups and downs, how to stay relevant
1:52:39 and stay on top.
1:52:46 I think Google’s having some challenges
1:52:50 with their own regulatory issues.
1:52:55 And Apple don’t ever count Apple out.
1:52:59 Because back to, they weren’t the first to come up with the PC.
1:53:03 They weren’t first to come up with the mobile phone.
1:53:05 There’s so many other mobile phones.
1:53:06 They just wait until they can create
1:53:08 a great customer experience.
1:53:11 And then when they do, they pounce.
1:53:16 They weren’t the first to come up with an MP3 player.
1:53:16 More phone.
1:53:17 More phone.
1:53:19 How do you think of NVIDIA?
1:53:32 I think NVIDIA is a very great company for a variety of reasons.
1:53:38 One of which is, it went from a graphics processing company
1:53:44 to being the way we power all of AI.
1:53:48 And they fought for so long about this idea
1:53:53 of parallel processing, where the CPU worked a certain way.
1:53:55 The GPU worked a different way.
1:53:58 And the GPU is now shown to be more powerful.
1:54:03 After we sort of got to the edge of Moore’s law,
1:54:05 the GPU is winning out.
1:54:09 Because they can process things much more efficiently.
1:54:13 But they worry about, they’ve only had one leader
1:54:14 in their whole cycle.
1:54:17 I worry about what happens when Jensen decides
1:54:23 not to be at the head of NVIDIA.
1:54:25 Yeah, that is the question, I guess, right?
1:54:27 I think that’s the question a lot of people have.
1:54:30 Jensen’s a remarkable sort of CEO.
1:54:32 Jensen’s a remarkable CEO.
1:54:35 And he does things very differently than anybody else.
1:54:36 We had him speak at our base camp,
1:54:39 which is our annual retreat for our founders.
1:54:42 And he just came out with so many great stories
1:54:44 about NVIDIA, about his personal life,
1:54:47 but also about his management style that is so different.
1:54:49 I remember being there, and that was awesome.
1:54:52 Yeah.
1:54:54 Sometimes you’ve said in the past
1:54:56 that sometimes the path to greater efficiency
1:54:58 is doing things sequentially.
1:55:00 And sometimes it’s doing them in parallel.
1:55:01 Can you explain that?
1:55:05 I think most people are trained to do things in serial.
1:55:07 They take a problem, they break it down into pieces,
1:55:09 and they do one piece at a time.
1:55:12 So step number one, solve the problem number one,
1:55:13 solve problem number two.
1:55:17 Because we need the solutions of problem number one
1:55:19 to feed into problem number two.
1:55:22 And they eventually go down the path.
1:55:26 And a lot of– if you’re an individual contributor,
1:55:29 you just write code, you just keep writing the code,
1:55:31 and you finish the code, and you submit it.
1:55:33 But if you’re managing a team, you
1:55:37 need to break down this piece of software into components
1:55:39 so that you can give it to your team members.
1:55:43 You now have all 10 of them working on it.
1:55:47 As opposed to you write it yourself,
1:55:51 and even if you’re a really good software writer,
1:55:54 you literally have to be a 10x engineer on top
1:55:55 of your 10x engineer.
1:55:57 So you have to be a 100x engineer to do it
1:56:02 in the same time frame that 10x engineers can do it.
1:56:04 And sometimes it’s just more efficient
1:56:08 to just break the problem down so that you can put them
1:56:10 in parallel and then stick them all together.
1:56:14 How do you think about companies and time span,
1:56:18 and specifically maybe with an angle towards positioning
1:56:22 yourself to rapidly adopt to whatever the future brings,
1:56:25 versus trying to predict the future and running ahead of it?
1:56:29 I think the consensus would tell you
1:56:32 that it’s very, very hard to predict the future.
1:56:38 And your ability to predict the future is uneven,
1:56:42 because in the world that you know,
1:56:46 you may be able to be very good at predicting the future.
1:56:49 But the world is not stationary, and the world changes.
1:56:52 And in this new world, trying to predict the future
1:56:55 when you don’t have many facts or many patterns
1:56:58 that you can go against, it’s much better
1:57:02 to have a machine that goes one to pounce
1:57:05 than to try to predict what’s going to happen.
1:57:07 Go deeper on that a machine.
1:57:09 Well, your company is in some sense a machine,
1:57:11 and so you’re trying to figure out
1:57:15 when you should pounce on an opportunity.
1:57:17 You’re building, you’re building, you’re building,
1:57:23 and you decide, I’m going to take this path now,
1:57:25 and you’re going to make your company
1:57:28 and go in this direction, because you
1:57:33 see the opportunity in this path.
1:57:36 Maybe make the example more concrete.
1:57:38 Perhaps, as an example, DoorDash
1:57:43 started with food delivery, but specifically restaurant
1:57:46 delivery, and they waited until they figured out
1:57:50 an advantage that they can have in grocery.
1:57:54 But the mechanism by which to deliver restaurant food
1:57:58 and grocery food were pretty much the same.
1:58:01 And figuring out when to enter the grocery market
1:58:05 had a lot to do whether the company was ready,
1:58:08 the customers were ready, the market was ready,
1:58:10 the groceries were ready.
1:58:16 And you can predict that customers want this
1:58:18 before they want it, or you can just
1:58:22 wait until you see lots of customers bang on the door,
1:58:28 writing into DoorDash, hey, can you also get my groceries?
1:58:29 And so it’s a matter of what, do you
1:58:32 want to be pushing the customer to do what you want,
1:58:37 or do you want the customer to pull you in the direction
1:58:39 that they want to go?
1:58:40 Is the biggest risk there that you
1:58:43 try to tackle two problems at once?
1:58:46 I’m assuming they knew they wanted to get into groceries.
1:58:48 So part of the risk at the start is
1:58:50 if we’re focusing on restaurants and groceries,
1:58:53 all the time we’re spending on one of those two things,
1:58:54 and not all of it, but a lot of it’s
1:58:56 coming at the expense of the other.
1:58:59 Or do you see that as no, it’s not?
1:59:01 It’s a very sharp insight that you have.
1:59:05 I think the one thing that you’ll find
1:59:10 is that there are lots of examples that I could use
1:59:12 to support your conclusion there.
1:59:16 Because before DoorDash happened,
1:59:20 there were plenty of other service solutions.
1:59:24 And most notably, there was Grubhub.
1:59:27 That was just the website.
1:59:30 And then they passed the order to the restaurants
1:59:32 and the restaurant delivered.
1:59:36 And Tony’s observation was that’s
1:59:39 not deep enough of a solution.
1:59:41 And so why was it not deep enough?
1:59:43 Well, there are a lot of restaurants out there
1:59:46 that don’t have their own delivery staff.
1:59:48 And why don’t we just–
1:59:50 You’re creating problems for them in a way.
1:59:51 Exactly.
1:59:56 And so the only restaurants that would be on Grubhub’s website
2:00:00 were all the companies that already had delivery
2:00:01 staff available.
2:00:04 So what DoorDash did was to expand the market.
2:00:05 And by expanding the market, they
2:00:08 were very focused on that problem.
2:00:13 Because really, you’ll take the orders, I cook it,
2:00:14 and you’ll deliver it for me.
2:00:15 I’ve never heard this before.
2:00:19 So you’re just educating the market for a period of time.
2:00:21 Because you’re just focused on that problem.
2:00:26 As opposed to besides Grubhub, which didn’t do that,
2:00:28 there was Postmates.
2:00:32 Originally, Postmates wasn’t just in restaurant delivery.
2:00:33 They were doing anything.
2:00:36 They would pick up from anywhere.
2:00:38 And they would deliver it to anywhere.
2:00:40 And they would even pick up something
2:00:44 from, I don’t know, Bloomingdale’s or from Walmart.
2:00:48 But in that example, there’s just too many different things
2:00:50 that you could do.
2:00:51 And it wasn’t focused.
2:00:54 And even more broadly than not, there
2:00:56 was TaskRabbit where you can run errands.
2:00:59 Well, one of the errands you can have them run,
2:01:02 someone who’s on TaskRabbit is to go pick up food
2:01:03 from any restaurant.
2:01:09 So simplicity of the solution is the reason why I think
2:01:12 you want to start with a very focused problem.
2:01:17 It’s much easier to tell people, this is what Dornash does.
2:01:19 And then over time, you expand that.
2:01:21 You expand the remit because you’ve
2:01:25 earned the trust of the customer to allow you
2:01:26 to do more things.
2:01:29 One of the problems when you were saying that is like,
2:01:32 how did Dornash find drivers in those early days?
2:01:33 Yeah, it was hard.
2:01:40 Because the one thing that if you believe
2:01:44 that it was more profitable to transport humans
2:01:48 than deliver food, then you would come to the conclusion
2:01:53 that Uber and Lyft would get all the drivers.
2:01:54 And Dornash would not get any other drivers.
2:01:57 And it turned out that, well, A, there
2:02:01 are some people who prefer to deliver food or a package
2:02:02 over delivering people.
2:02:04 They didn’t want to have to have social interactions.
2:02:08 And then there are some people with perfectly fine cars.
2:02:12 But they’re not perfectly fine cars to transport humans.
2:02:17 And so early on, we thought it was going to be a problem.
2:02:21 But it was less of a problem than we had originally imagined.
2:02:25 One of the problems that I anticipate or maybe
2:02:27 from the outside looking at and I can be completely wrong
2:02:29 is when you sign up a grocery store customer,
2:02:31 they want to work with you in a particular way.
2:02:34 But it might not be a standardized way.
2:02:36 And then you might say yes, because you
2:02:37 want to sign up that customer.
2:02:39 Maybe it’s like Albertsons or something.
2:02:41 But then you go to the next largest grocery store chain
2:02:43 and they want to work with you in a different way.
2:02:46 How do you think through the standardization, which
2:02:49 is like, no, we work in this way versus creating
2:02:50 all of these one-offs?
2:02:52 And I see a lot of startups do this
2:02:54 where they want to sign a customer.
2:02:57 So they’ll violate their standard procedures.
2:02:59 And they’ll create these one-off contracts
2:03:01 and technical solutions.
2:03:03 And then they’re trying to get revenue
2:03:04 so that they can still exist.
2:03:07 How do you think about that trade-off?
2:03:08 It’s a very–
2:03:09 I think it’s a–
2:03:18 I use the accordion example often, which is you pull the accordion
2:03:20 too far, and then you have to push it back in.
2:03:26 And at some level, if you are super rigid,
2:03:28 you’re not going to win your first few customers.
2:03:32 So at the very beginning, the accordion is completely folded.
2:03:34 And you do pull the accordion.
2:03:37 And you allow things that you may not have allowed.
2:03:41 You may not want to allow in that very early days.
2:03:42 And it gets super far stretched.
2:03:45 And you’re like, shoot, I need to standardize a bunch of things.
2:03:47 And then first, you’re not going to go back
2:03:51 on these customers or merchants.
2:03:55 So you’re going to go into the next inning
2:03:57 with a lot more standardization.
2:04:03 Or you break up your 100 customers into three personas
2:04:07 or four personas and try to have four different standardizations.
2:04:10 But trying to be overly standardized at the beginning
2:04:14 is generally not a great idea.
2:04:18 And the opposite of that is have a standardized product
2:04:23 and then allow customization on the edges.
2:04:25 And I think a lot of software companies
2:04:28 try to do that when build a platform.
2:04:30 The platform is not changing.
2:04:31 You’re buying the platform.
2:04:34 But on the edges, we lock for customization.
2:04:36 And you allow– you do it at the beginning.
2:04:39 You find other developers who are
2:04:42 willing to do the professional services on the side
2:04:45 and go from there.
2:04:48 It’s almost like you earn the right to do standardization
2:04:49 when you’re trying to be the back end,
2:04:51 where you have to accommodate at the start
2:04:52 and widen the accordion.
2:04:55 And then as you get scale and network effects
2:04:59 and more and more benefits to the merchant or partner
2:05:03 that you’re partnering with, you can more standardize.
2:05:03 Is that true?
2:05:04 That is true.
2:05:08 And I also just think it’s very–
2:05:09 there’s a lot of hubris in thinking
2:05:11 that you can standardize at the beginning when you don’t even
2:05:14 know whether that’s the right solution for everyone
2:05:16 to standardize on.
2:05:18 And so bring some customers.
2:05:21 They’ll tell you your standardization doesn’t work for–
2:05:23 not only just because it doesn’t work for them.
2:05:27 It may be that it doesn’t work for many people,
2:05:28 and at least learn from that.
2:05:31 What’s the difference between working backwards
2:05:32 and working forwards?
2:05:35 So working backwards is this idea
2:05:40 that Amazon popularized, which was
2:05:44 you start with the vision of the world that you want to imagine.
2:05:49 And you think about, if everything goes right,
2:05:51 what is the world that we live in,
2:05:54 and what does this product become that you’re trying to build?
2:05:58 And at Sequoia, we’ll call that the pre-period.
2:06:01 And if everything goes right with this company,
2:06:03 what does it become?
2:06:07 And then you work backwards from there.
2:06:11 One year before that, what does it look like?
2:06:15 Two years before that, what does it work look like?
2:06:17 And Amazon popularized by working backwards,
2:06:22 meaning that go from the future all the way to today.
2:06:25 And I love that concept, in a sense.
2:06:27 But I’ve also seen lots of founders
2:06:30 struggle to take it from the future, which
2:06:31 they have this great vision of the world,
2:06:35 and really map it all the way back to today.
2:06:38 They map it somewhere five years out, 10 years out,
2:06:40 but they can’t map it today.
2:06:43 And I also tell founders, OK, that’s
2:06:45 the future that you’re aiming for.
2:06:47 Here are the realities of today.
2:06:50 What does it look like one year ahead, two years ahead,
2:06:51 three years ahead?
2:06:53 That’s working forwards.
2:07:00 And if the two don’t match, you’re not on the same trajectory.
2:07:03 And so I believe in having founders work both backwards
2:07:04 and forwards.
2:07:07 Often when you work backwards and you think
2:07:10 you have a great plan, and then you miss executes,
2:07:13 and you don’t know that you’re not executing,
2:07:15 it’s because you haven’t worked forwards
2:07:18 on what the year one, two, and three look like
2:07:21 to be on that trajectory.
2:07:24 What are the two or three mental models
2:07:26 you keep coming back to most when you’re making a decision?
2:07:34 I’ve been asking you that question.
2:07:35 This is your interview.
2:07:37 Nobody’s here to listen to me.
2:07:40 I want to know what your three mental models that you use.
2:07:42 I think the one that I learned from Amazon
2:07:45 is whether this is a type one or type two decision.
2:07:48 And if it’s a type one decision, I’ve
2:07:51 learned from Brian Chesky to run out the clock
2:07:54 because he can’t go back as a type two decision.
2:07:59 And you just move forward, make a call,
2:08:02 and of course, correct along the way.
2:08:06 Type one being irreversible, and type two, yeah.
2:08:08 So if it’s irreversible, run out the clock,
2:08:10 meaning get all the information, make sure
2:08:14 that that’s a high confidence decision.
2:08:17 Type two, if you can always change it,
2:08:20 make a fast decision, and keep iterating.
2:08:21 That’s one model.
2:08:29 The other mental model I think about is working backwards,
2:08:30 working forwards.
2:08:34 That’s also top down versus bottom up.
2:08:36 It’s a similar sort of idea.
2:08:38 Some problems are better solved thinking top down.
2:08:45 Some problems are more easily solved just working bottoms up.
2:08:51 Another one generally is to break up hard problems
2:08:53 into smaller and smaller, bite-sized problems
2:08:56 and solve each of those individually.
2:08:58 And just the way I live my life, this
2:08:59 is not a mental model.
2:09:02 It’s a lot about consistent compounding.
2:09:08 And just every single day doing the little things
2:09:12 that sort of improve myself or oneself or the company
2:09:13 that I’m working with.
2:09:16 Talk to me how you think through the breaking problems
2:09:21 thing, because you mentioned bringing it
2:09:22 into smaller problems, solving those,
2:09:24 and then you get the solution.
2:09:28 How do you think of that versus the individual–
2:09:32 like the optimal solution for that particular sub-problem
2:09:37 might not lead to the optimal solution for the bigger problem?
2:09:42 Yeah, so I think there is local optimization and global
2:09:44 optimization you’re talking about.
2:09:45 That’s a much better way to work it.
2:09:48 If you want to solve a global optimization problem,
2:09:49 you need to pop up.
2:09:52 And if you’re trying to solve a local optimization problem,
2:09:54 you want to go down.
2:10:00 And so I think the problem first and foremost
2:10:02 has to be at the right altitude.
2:10:05 And then you can break the problem down from there.
2:10:08 Is there an example that comes to mind for your thinking?
2:10:11 If you’re trying to climb a mountain,
2:10:18 and the top-down problem is what’s the path?
2:10:20 So even before you climb the mountain,
2:10:24 you’re going to plot the path before you get onto the mountain.
2:10:26 But once you’re on the mountain, then you have a path.
2:10:30 You’re just going one step in front of the other on that path.
2:10:33 And if you find that the path is not right,
2:10:36 hopefully you’ve had some backup paths and backup plans
2:10:39 that you can go one foot in front of the other.
2:10:40 Path A doesn’t work.
2:10:41 Well, path B might be a little better,
2:10:47 because I plotted the alternative plot to path B.
2:10:52 So that’s an example of planning top-down on your path
2:10:55 and your alternatives and doing a bunch of scenario analysis.
2:10:58 And then when you’re executing on a day-to-day period,
2:11:02 you just literally just go execute.
2:11:04 And I don’t see that any differently than a company.
2:11:06 You have a plan for the year.
2:11:09 You have some scenario planning around it.
2:11:12 And so the more scenario plans that you have,
2:11:15 the more easily you can course correct.
2:11:18 You know you’re supposed to be on path A.
2:11:21 You decide that you’re still going on path A.
2:11:22 You’re slightly off.
2:11:24 Let’s go back on path A.
2:11:26 Path A turns out not to be the right thing.
2:11:28 We’re going to pick path B because that’s
2:11:29 the second alternative.
2:11:32 We’re going to go right one foot in front of the other,
2:11:35 plotting against path B.
2:11:38 We always end these interviews with the same question, which
2:11:41 is, what is success for you?
2:11:43 I know that this question was coming.
2:11:52 And to me, the success is just the process
2:11:54 and having a good process.
2:11:59 Because if you have a process that is consistent
2:12:04 to who you are and your values, and you live that every single
2:12:06 day, and you get up every day and follow
2:12:09 through on that process, you’re already successful.
2:12:13 When lots of people talk about success is not
2:12:15 the destination, it’s the journey,
2:12:18 I think it’s just the process before the journey.
2:12:21 Which direction are you going to go?
2:12:23 Why did you decide to go in that direction?
2:12:25 How fast do you want to go in that direction?
2:12:28 Before you can go on that journey,
2:12:29 hopefully you’ve planned things out
2:12:33 and you have had a process to sort of plan that out.
2:12:35 And if you did that right, you know
2:12:38 you’re going to be successful.
2:12:42 [MUSIC PLAYING]
2:12:46 Thanks for listening and learning with us.
2:12:50 For a complete list of episodes, show notes, transcripts,
2:12:55 and more, go to fs.blog/podcast or just
2:12:57 Google the Knowledge Project.
2:13:00 Recently, I’ve started to record my reflections
2:13:03 and thoughts about the interview after the interview.
2:13:06 I sit down, highlight the key moments that stood out for me,
2:13:10 and I also talk about other connections to episodes
2:13:11 and sort of what’s got me pondering
2:13:13 that I maybe haven’t quite figured out.
2:13:15 This is available to supporting members
2:13:17 of the Knowledge Project.
2:13:21 You can go to fs.blog/membership, check out the show notes
2:13:23 for a link, and you can sign up today.
2:13:25 And my reflections will just be available
2:13:27 in your private podcast feed.
2:13:30 You’ll also skip all the ads at the front of the episode.
2:13:32 The Front On Street blog is also where
2:13:34 you can learn more about my new book, Clear Thinking,
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2:14:08 [BLANK_AUDIO]

0:00:07 In my definition, good business equals profitable cash flowing, what I call a cash flow versus
0:00:12 cash suck business. So you get paid upfront for a service, not after you provide a service.
0:00:19 Sustainable, it can exist for a long time. Historical, it has existed for a long time.
0:00:25 Understandable, you can explain it to grandma really easily. And you have what’s called the
0:00:30 lindy effect, the likelihood of the future continuing to cash flow just as it did in the past.
0:00:34 Those are my parameters for a good business. A bad business would be a business that is
0:00:42 unprofitable, hard to understand, hasn’t been around for very long. You have to provide the
0:00:47 service before you get paid for the service. That is a business that is just much harder.
0:00:56 That’s a harder game to win.
0:01:02 Welcome to The Knowledge Project. I’m your host, Shane Parish. In a world where knowledge
0:01:06 is power, this podcast is your toolkit for mastering the best of what other people have
0:01:11 already figured out. Today’s episode will transform how you think about building wealth
0:01:16 and financial freedom. My guest is Cody Sanchez, who is known for her bold advice on helping people
0:01:20 buy, grow, and sell businesses. Whether you’re looking to increase your income,
0:01:24 start a side business, or completely transform your financial future, Cody breaks down exactly
0:01:30 what separates those who successfully build wealth from those who stay stuck. This conversation is
0:01:35 packed with immediately actionable insights. We talked about the single most important thing to
0:01:39 know about building financial freedom, and it’s not what you think it is. The biggest
0:01:44 mess around money, the difference between acquiring and keeping money, the rich versus
0:01:50 broke mindset and how it changes everything, non-obvious lessons on negotiating, and so much
0:01:55 more. If you’ve ever wondered about the real playbook for financial freedom, this is it.
0:02:00 Keep in mind, this podcast is not financial advice. Cody’s opinions are her own,
0:02:04 and she’s pretty bold about them. It’s time to listen and learn.
0:02:12 There are too many podcasts and not enough time. What if you could skip the noise and get just the
0:02:18 insightful moments, even from shows you didn’t know existed? That’s what Overlap does. Overlap
0:02:23 is an AI-driven podcast app that uses large language models to curate the best moments from
0:02:30 episodes. Imagine having a smart assistant who reads through every transcript, finds just the
0:02:35 best parts, and serves them up based on whatever topic you’re interested in. I use Overlap every
0:02:41 day to research, guess, explore, and learn. Give it a try and start discovering the best
0:02:47 moments from the best podcast. Go to joinoverlap.com. That’s joinoverlap.com.
0:02:55 You built a business around acquiring other businesses and enhancing them.
0:03:01 Where did this all get started for you, and what have been the key moments over that journey?
0:03:07 I stole it all from private equity. I never would have thought about buying businesses,
0:03:12 and it seemed too big and scary, and I didn’t grow up a lot of money or cash or understanding of
0:03:17 money. If you would have told 20-year-old Cody, you would be buying businesses and then buying
0:03:21 more businesses and building on top of them. I would have thought I had to put in the lottery or
0:03:29 something. Thankfully, I got into finance, and I kind of hated finance. I didn’t want to be anybody
0:03:35 in any of the companies, even the people at the top. I finally realized that after 12 years.
0:03:42 I was like, “Wow, they really understand this language of money, and they know how to buy assets
0:03:48 that make money, even bring back more friends.” I was like, “I want to learn how to do that,
0:03:51 and I just don’t want to have to do it in a suit, and I want to be able to do it in businesses that
0:03:56 I want to be able to do it, and I want to be able to hold the businesses forever as opposed to buy
0:04:02 them, split them up for parts, and then sell them off.” It got started because I’m a pretty good
0:04:07 copycat. I was just like, “Oh, here’s a model that works. Can I do the same thing, but a lot
0:04:12 smaller because I don’t have that much cash?” Then, if it keeps working, can I scale up to
0:04:16 be like the big boys? That’s where it started. I think sometimes the best way to make money
0:04:20 is just to follow other people who are really good at making it, try to mimic the same thing,
0:04:22 and then add a little bit of your own sprinkle to it.
0:04:25 Talk to me more about that language of money. What does that mean?
0:04:31 The most important language I’ve ever learned is money. Growing up, I didn’t understand anything
0:04:38 except how to save, maybe how to spend less. My parents were, my mom was a 30-year special
0:04:44 education teacher. My dad came from an immigrant family to the US, and so they didn’t have any
0:04:49 money. Their biggest concern was don’t fall into debt, kind of like Dave Ramsey. No debt,
0:04:55 save everything you possibly can, don’t use credit cards, the typical things we learned.
0:05:00 But when I went into finance, I realized that’s not how the rich think. The rich actually know how
0:05:06 to use debt intelligently. They understand that money is simply a tool in a toolkit. There’s no
0:05:12 emotional value to it. If you understand what attracts money, then you probably will never
0:05:17 have to work again in your life because you will just be able to take money and like a magnet,
0:05:21 sit it next to more money, and it’ll bring it over. It took me a long time to figure out how
0:05:27 to do that, since I was a journalism major. But once I realized, oh, you can, people say it on
0:05:32 the internet in sort of like a kitschy way now, get other people’s money, passive income. I’ve
0:05:37 never earned a dollar passively. That’s always been active. But once you have a decent chunk of
0:05:43 change, then you can put it into other people spending their active time to make more money for
0:05:48 you. That’s what I wish I learned early on. And the algorithm that taught me that the most was
0:05:58 every single way to make money is sort of like a game. And there are some games that are low-level
0:06:04 games. So think about it like pickleball, let’s say. If you want to become a top paid athlete,
0:06:08 get all the chicks, you’re probably not going to go play pickleball, right? It is a game that people
0:06:14 play. It’s not a highly paid game. And maybe it’s not that high of a status game, as opposed to
0:06:19 football, you know, soccer internationally. Oh, well, some of the highest paid athletes in the
0:06:23 world. Also, you get lots of checks if that’s what you’re into. And so if you’re going to think
0:06:26 about where do you spend your time? If you want to be an athlete, you think about what your skills
0:06:31 are. But also, what’s like the best indicator of future success? Other people who have future
0:06:36 success. And so with money, I realized, oh, wow, if I want to make more of it, I probably don’t want
0:06:41 to be a teacher because that’s just not a highly paid job. And probably I want to be in the industry
0:06:46 in which more people than anywhere else are on the Forbes, let’s say, 100 list. And that would be
0:06:53 finance. So the number one category of people on the Forbes 100 list is some version of finance,
0:06:58 whether that’s buying and selling companies, whether that’s being an active investor in equities,
0:07:03 whether that’s being in hedge funds. But that’s the number one way. And so I realized, oh, okay,
0:07:07 well, I’m going to go learn finance because they seem to understand how to attract money.
0:07:12 Is that like, was it a freedom thing to get out of that? Like you felt like your time with somebody
0:07:17 else’s?
0:07:19 You
0:07:21 You
0:07:24 You
0:07:26 You
0:07:29 You
0:07:31 You
0:07:33 You
0:07:35 You
0:07:37 You
0:07:39 You
0:07:41 You
0:07:43 You
0:07:45 You
0:07:47 You
0:07:49 You
0:08:21 Yeah, I mean, I saw I’ve crossed the border hundreds of times illegally documenting sort of what
0:08:28 happens in conflict zones. And after a while, I was like, what’s the difference between them and me?
0:08:33 It really wasn’t that I was American. It was, they just didn’t have any money. They had no
0:08:38 resources whatsoever. So the world asserted its will on them. And I didn’t ever want that to happen
0:08:43 to me. I would rather try to architect my own world. And I think the key to that is money.
0:08:48 Yeah, you have to have a little bit of money to create the opportunity. How do you go about
0:08:54 doing that? Like, do you work at a nine to five job and save out money and build
0:08:57 these income streams? Or is there another approach to this?
0:09:01 Yeah, well, anytime you hear advice from somebody on the internet, I always think you should look
0:09:07 at their biases, right? So mine is that I was a, I was risk based. I didn’t want to go out and
0:09:13 become an entrepreneur and sleep on a couch or a floor and make $0 and have some crazy idea.
0:09:20 I didn’t have any of that. I was kind of scared. And I didn’t know what my big move could be.
0:09:23 So for me, the best way to do it was I went and worked at nine to five in the industry that
0:09:27 paid me more than anywhere else, which is finance, which wasn’t really nine to five, I’m guessing.
0:09:32 Oh, God, not at all. No, no, no, it was quite long. But when you’re young, you have an incredible
0:09:38 ability to withstand pain. And it’s much easier to do it when you’re in your 20s than it is in
0:09:43 your 40s or 50s. So I was like, well, I could either have short term pain in the form of long
0:09:50 hours and long term gains, or I could have short term fun. And in the future, I will probably be
0:09:55 sacrificing things for that. So I’m like, no, when I’m young and hungry, let’s go hard. Let’s work 10,
0:10:02 11 hour days. And let’s let’s be voracious and knowledge accumulation. And then once I have
0:10:07 some skill set that is valuable enough, then I can assert my will on my hours, etc. But to begin
0:10:12 with it was just, let’s go to finance because they pay really well. I want to understand the game of
0:10:17 money. And after you do that, then you can go and build whatever you want. But I think starting
0:10:22 with a nine to five is super underrated today. I think so too. Like you can learn so much. Somebody
0:10:27 else is paying you to learn if you have the right mindset and approach, but not many people seem to
0:10:33 have that approach. Oh, yeah. I mean, I totally agree. So when I started at Vanguard, they said
0:10:39 that they put about $100,000 a year into their new hires. And so we had, it was called Vanguard
0:10:46 University. And they trained us on securities and bonds. And I think I have four or five licenses
0:10:50 in the securities industry from my days of Vanguard. And then I went to Goldman Sachs,
0:10:54 where I think to get into Goldman as like a little peon analyst, which is what I was,
0:11:00 I think I had to do like 13 interviews and like PowerPoint presentations. And at the time,
0:11:05 I was like, this is very annoying. But actually, what an incredible gift all that training wants.
0:11:09 And you go to a startup, there’s no way they’re putting you through a training program. There’s
0:11:15 no way they’re critiquing your PowerPoint skills. Everybody’s just barely trending water. And so
0:11:19 I think if you have a chance to go to a big corporation where you get well paid, they train
0:11:24 you a lot. And then you put an exit clock on. Two years from now, I’m going to leave at the moment
0:11:30 in which they won’t pay me more or I’m not learning. And because I did that, I accumulated millions
0:11:34 before I ever ran my own business. And so a lot of people ask me, like, how’d you have all this
0:11:39 money to invest? And I’m like, well, you know, you’re in finance for 11, 12, 13, 15 years.
0:11:42 You learned to invest the entire time you’re doing it. You’re making a lot of money while
0:11:47 you’re doing it. And you’re putting the money back into the stock market and into deals.
0:11:52 And so I didn’t have to risk a lot of my own capital, except in the beginning not being paid
0:11:55 very much because, you know, I was brand new and I didn’t know what I was doing.
0:12:01 Imagine I’m a novice and I’ve never invested a cent and I have five minutes with you. Like,
0:12:05 what’s the single biggest lesson that I need to take away?
0:12:10 Lesson number one is you never get rich investing. You get rich earning. And so the only people who
0:12:14 are going to tell you to go invest first to make your first million are people that are trying to
0:12:18 sell you something. Because it’s just really hard to make money investing without money.
0:12:25 That’s rule number one. Your biggest ROI is on you and your time. And then rule number two would be
0:12:30 once you understand that, it’s how can you make your time your best investment possible? And so
0:12:35 that’s why you have to obsess on increasing your earnings potential. And a lot of times people
0:12:39 hear this and then they go, well, I negotiated with my boss and, you know, they didn’t give me
0:12:44 a raise. And I’m like, no, no, no, that’s not the play. The play is you understand how a business
0:12:49 actually makes money and how you make money for a business and how every action you make makes
0:12:54 a business more or less money. And then you try to negotiate a percentage of the money you make
0:13:00 the business. And like if you are a employee right now, you would be incredibly rare and
0:13:06 incredibly valuable if you went to your boss or the CEO of the company and depending on size
0:13:11 and said something like, Hey, I want to make more money at this company, but I would never want
0:13:17 to take more money just because I want it. Of course, I understand how business works. Instead,
0:13:22 I was thinking if I hit this goal, which is 25% above the goal that you’ve set for me,
0:13:29 I’d love to make 5% of that additional 25% I brought in. You get to keep the extra 20%,
0:13:34 you beat your goals. I look good compared to all the rest of everybody else. And I only make money
0:13:39 if you make money. Would you be open to something like that? And they might say, no, and life will
0:13:44 be littered with series of rejections continuously if you want to have any success whatsoever.
0:13:50 But they might also say yes, or we can’t do it that way, but we could do it this way.
0:13:54 And then you learn how the business makes money. And most people will never do that
0:14:00 because they just say, I want an extra 25K or I want to raise or I’m going to leave,
0:14:04 and that just pisses your boss off. I think most people don’t have that mindset. You’re either
0:14:08 directly contributing to revenue or you’re helping somebody contribute to revenue or you’re
0:14:13 a cost. 100%. And if you’re a cost, then what are you doing there? If you’re not contributing
0:14:19 in one way or another to revenue? Yeah, it’s the best way to make more money is to figure out one.
0:14:23 Are you a cost center or a profit center? And then two, how much of a profit center or a cost
0:14:28 center are you? And if you can do that, it’s not just that you’re helping your boss and the company.
0:14:32 You are now thinking like an owner for the first time ever. And you don’t have to own a business
0:14:38 outright to think like an owner and get a piece of a business. It’s called partial acquisition.
0:14:44 And a way that you can get part of a company for your work or sweat equity is simply by saying,
0:14:49 I understand what the business’s goals are and I understand the next level we want to get to.
0:14:54 And if I help us get there, could I get some sort of participation for that? That is how
0:15:01 really rich people think. And anybody that goes, no, that’s not possible. Sadly, you will never
0:15:05 be rich if you think that way. I think like in a big organization, I could see them saying no
0:15:10 to that proposal. But if you’re a small business owner was saying no to that proposal, I’d be
0:15:14 starting to look for a new job. You’d be shocked. Yeah. I mean, think about it for you too.
0:15:20 If they were like, Hey, listen, Shane, what if I brought in these three partnerships and you like
0:15:25 them, you sign off on them, they’re on brand for you, they bring an extra X dollars for you,
0:15:28 would I be able to take a cut of the extra partnerships I brought in? Even though I’m just
0:15:34 your producer, you’d be like, Yeah, sure, dude. Yeah, great. 100%. You know, and if you do work
0:15:39 in a big company, then the only question you need to ask is instead of saying, if I do this,
0:15:46 could I make more? It’s in what part of the company, if I work more, and if I hit my goals,
0:15:52 can I make more money? What jobs do we have at this company like that? They’re typically sales
0:15:58 jobs, right? Maybe a leadership or recruiting job. But you want to get on the side of the
0:16:04 profit center. And that’s how you earn more. Is there different sort of phases to our career
0:16:08 when you think about it? Like, is it like 20 to 30? We should not be worried about money at all,
0:16:14 just learning as much as we can and then switch over. Or how do you think about that?
0:16:21 Yeah, we talk about it like, learn, earn, invest, repeat. So I think when you’re in your 20s,
0:16:26 you’re in your learning phase. You still want to try to increase your earnings. But if I had to
0:16:32 choose between earning more or learning in that period, I’d optimize for learning because learning
0:16:38 has unlimited upside potential. Like you’re never going to go in your 20s from making 30k a year
0:16:45 to 300k a year per year because you negotiated a better salary. That’s a very high likelihood.
0:16:51 What you very well could if you learn something additional in that one year compound that over
0:16:56 30 years to multiple millions or more. And so I obsess on learning first. And then as I get into my
0:17:02 later 20s and early 30s, I start thinking more about earning. So how can I make more money? Like
0:17:08 my first job, I made $37,000 a year when I was at Vanguard. I thought that was at the trillion
0:17:15 dollars. And then I realized quickly it wasn’t, especially after taxes. But that first job in
0:17:20 Vanguard set me up for jobs at four of the biggest financial institutions out there,
0:17:25 and an ability to earn more when I didn’t want to be in the world of finance anymore.
0:17:31 And like you said, they invested $100,000 in your education from being there.
0:17:37 Totally. And then if I think back even further, there was a really interesting study. And I wonder
0:17:44 if you saw it. It’s called economic interconnectedness. And so basically the idea is this. If there’s two
0:17:50 groups of two neighborhoods with two different groups of people in them, where on average,
0:17:54 the average salary is the same in both neighborhoods, right? So I don’t know,
0:17:59 average person in both neighborhoods makes 50K. It’s a lower income neighborhood on both of them.
0:18:04 But in neighborhood B, as opposed to neighborhood A, they have a few people who make a million
0:18:09 dollars a year. So they just have a few rich people in this neighborhood that interact with
0:18:12 some of the poorer people. As opposed to this neighborhood, they really don’t have any.
0:18:17 If you are in this neighborhood, and even if your family is in that $50,000 a year bucket,
0:18:23 but you interact with some of those rich people, AKA you have more economic interconnectedness,
0:18:28 this group of people has a 30% higher earnings over the course of their life for the same skill
0:18:34 setting experience. And what I thought was really interesting about that is that it really just
0:18:38 goes to show you kind of want two things. You want somewhere you can learn as much as humanly
0:18:42 possible. And you want to be somewhere where you are around people who have more money than you do
0:18:48 by orders of magnitude, if at all possible. And we don’t really know if it’s causation
0:18:53 or correlation. But we do know that if you are around people who are wealthier, on average,
0:18:58 you tend to be wealthier, even if that’s not your background or skill set. And that I think is kind
0:19:06 of liberating. Why? Why do you think that that is? I have a guess. But my guess would be you realize
0:19:10 that other things are possible. You don’t have this ceiling of these like false rules that we
0:19:15 learn. And then all of a sudden, it’s like, I can do more. I can get out of the situation. I can
0:19:21 aspire to more. Yeah. I mean, I think there’s a couple. That one seems the most likely to me.
0:19:27 It’s just, it’s like the, where was it? It was like somewhere in the Nordic countries where they
0:19:32 had mostly had female heads of state. I don’t remember what they call them there. They were the
0:19:37 head of parliament or what, but mostly female heads of state. And so there was a small school
0:19:43 program where the boys and girls in the school were asked, how likely are you to be the next,
0:19:47 I don’t know, head of parliament or whatever. And in the Nordic countries, all the little girls
0:19:52 raised their hands because they had seen that example so much. Whereas in the US, and this,
0:19:56 I think the study was done more than 20 years ago. So in the US, it was all the little boys
0:20:01 that raised their hand. Like I could be president, right? And it was just had you seen an example
0:20:06 that looked like you previously. So I think that’s probably the drive and factor. It could also be
0:20:11 you have a conversation with these individuals and you get networking opportunities.
0:20:15 You have a conversation with these individuals and you just ask them advice. So you have advice
0:20:20 from people who have already done the thing that you want to do, which is an unfair equalizer.
0:20:26 And it could also be that maybe they hire you. I mean, I know for young people, like me, when I
0:20:32 was coming up and we had no money, I got really lucky to, I don’t even know what you would call me,
0:20:37 I was kind of like a bitch. I just was like a little assistant for one of my brother’s friends
0:20:42 in high school, his mom. And they had a lot of money. And so I would drive their fancy cars,
0:20:46 the car wash, I would pick up their dry cleaning, I would take their dog to the vet, all this stuff
0:20:52 for basically no money. And just watching them, I learned a ton. How do you organize? What do
0:20:57 you guys do for a living? They sold, they sold equipment rentals, like big tractor equipment
0:21:02 rentals. I was like, that’s so interesting. And that’s when I first heard about buying businesses,
0:21:07 because he sold his equipment tractor business. And then it went kind of under,
0:21:10 went a little sideways, and then he bought it back for pennies on the dollar. And I was like,
0:21:15 I didn’t know you could do that. And then that same family was one of my first investors back
0:21:21 when I had a fund in the private equity space. And so that was 20 years later. And I think
0:21:28 when rich people see hungry, driven, competent humans, by and large, they want to help,
0:21:33 because it’s rare and you are somehow a mirror for them. They’re like, oh, I remember when I
0:21:41 was like you. Totally. So if our 20s are about learning, how do we get in front of the people
0:21:46 that we are most likely to learn the most from, be it call them wealthy or high performers,
0:21:51 whatever you want? Like how do we put ourselves in that? Because odds are, it’s probably not our
0:21:56 loss. No, no. And so like, how do we seek this, if we’re going to spend a decade sort of like
0:22:01 learning and trying to increase our income, we should be methodical about how we approach this.
0:22:05 Yeah. Well, a couple of things. I was thinking about this today. Like we have a company here,
0:22:09 Contrarian Thinking, which is our media company. And then underneath it, we have Contrarian Capital,
0:22:13 which is our venture fund, and the Main Street Holding Company, which is where we own a bunch
0:22:20 of small businesses inside of it. And we get a lot of applications for jobs. And I was looking
0:22:25 around at our team today, you just met two of my employees. And the reason that both of them came
0:22:30 was because they wanted to be around other people who were high performing. So one of the nice things
0:22:36 about the internet today is, yeah, maybe you can’t get to Shane as much because you’re well known on
0:22:40 the internet and you might not have time to mentor people. But how often could you see somebody who
0:22:44 likes on the internet and then go, I want to work for them? You can do that a lot now. And a lot of
0:22:49 people who are on the internet are hiring like crazy. And so you can’t go and just slide into
0:22:55 somebody’s DMs and say, I want to work for you. What can I do? Lazy. But instead, you could keep
0:22:59 on job applications continuously for people that you think are high performing in companies that
0:23:04 you think are high performing. And there was another study that I thought was fascinating about
0:23:11 underperformers and high performers. And the study basically showed it was hundreds of employees
0:23:19 at many different companies. And it was about proximity. So if you sat next to a high performer,
0:23:25 15% increase in productivity, if you sat next to a low performer, 30% decrease in productivity.
0:23:30 And so I don’t think people realize that if you just look at it like numbers, let’s say you make
0:23:36 100 grand a year. Well, if you sit next to Shane or a high performer, I make 115k. It’s a gross
0:23:42 generalization, but an easy way to think about it. If I sit next to Cody who sucks, wow, what if I
0:23:47 only make 70k? Because my performance has actually dropped. And so I think about that a lot. I think
0:23:54 the best way to get mentors today is go work for them. Don’t ask to do stuff one off. Go to the
0:23:59 highest performing companies you think you can get into. And if they’re not that, switch to another
0:24:05 one because you get paid to get mentored. What a crazy idea. And that really didn’t exist for
0:24:11 like my parents’ generation. Sticking all the knowledge you have now, how would you go about
0:24:17 getting in front? You’re 22. How would you go about getting in front of Cody? Yeah, a couple things.
0:24:25 One. At the risk of blowing up your inbox. No, not at all. I mean, every single company that
0:24:32 is growing has a careers page on it. And you will be shocked how often those are not applied to
0:24:39 across multiple companies. And then how seldom they are chased. I think the number one problem,
0:24:42 if you can’t find a job right now and you want one and you can’t find a high performing job
0:24:49 right now, is are you applying like a shotgun or like a sniper rifle? And I remember, for instance,
0:24:56 one of my employees, they came to work for me. She really wanted the job. So she applied for,
0:25:00 I think the job at the time was like maybe my chief of staff. She applied for my chief of staff
0:25:04 normally. You fill out the resume, you fill it out, you wait. That’s all most people do.
0:25:09 But that wasn’t going to be her. She also was like, Hey, I imagine you need a lot of newsletter
0:25:14 writers. This was in the beginning. So she wrote an entire newsletter for me kind of in my voice
0:25:18 and just sent it to me, like, you know, didn’t ask for anything else. And then she said, I also
0:25:22 see you’re hiring for these other roles. Here’s a couple of other candidates I thought might be
0:25:25 interesting. I kind of pulled some profiles for you. And then she said, you know, I imagine you’re
0:25:32 really busy. You’re hiring this chief of staff role. I just read these two books on, on assistance.
0:25:36 And I wish I could remember the name of the one book because now I give it to some of my employees,
0:25:42 but basically on making a top performer, a higher performer. So she was like, you’re already great.
0:25:46 But here’s a couple of books I’m reading to figure out how do I make great people even greater?
0:25:51 One, she’s giving me a compliment, a little ego stroke. And then two, she’s saying, I think I
0:25:56 understand what you need, which is like, you don’t have enough time. And what if I just solve
0:26:02 problems for you? So of course I hired her, like, yeah, this is great. And so most people don’t
0:26:08 even, when I tell a lot of people in my email inbox, they’ll ask me for something. Sometimes
0:26:14 an email really stands out. And so I’ll respond and say, Hey, you want to learn about fundraising?
0:26:19 Okay, great, read, I don’t know, venture style or something, if you want to learn fundraising,
0:26:24 and then come back to me and, you know, tell me what you think. How many people do that? Nobody
0:26:30 reads, nobody. And so it’s like, if you really want a thing, the obstinate in getting it,
0:26:37 you will be shocked how few people go to that level. And I would say, I’ve done this multiple
0:26:42 times in my life. So when I wanted a job, I wanted to head the Latin America business at
0:26:48 Credit Suisse back in the day, which was a big finance company, I was totally, I really was not
0:26:52 credentialed enough for that job. It was a private equity job, I was going to be building out the
0:27:00 region. And I went ham, I think I traveled to, I went to Europe, I went to LA, I went to New York,
0:27:06 where the headquarters was to interview in three different places on my own dime. I heckled the
0:27:10 head guy there, Ryan, who I’m still friends with to this day, with all these different ideas for
0:27:15 the business with contacts, I gave him leads from people I already knew down there. And so finally,
0:27:19 you know, I was in the final running with one other woman. She ended up beating me out. I was
0:27:22 sad. But Ryan came back to me about six months later and was like, she’s not working out, do you
0:27:27 want it? But by that time, I had already gotten a position heading to another business in Latin
0:27:32 America. So it was cool. But that’s also how I got my first job at State Street. I think I did
0:27:38 like eight interviews and sent custom gifts to a bunch of the corporate heads then. Because just
0:27:46 a little bit of effort shows you’re such a decrease of risk as a new hire. I mean, most of the reasons
0:27:52 that people don’t work out when you hire them is not capability, it’s effort. And so if you can
0:27:57 decrease the likelihood that you won’t work hard for them, even much higher likelihood of getting
0:28:01 a gig. I used to test people because I would get these imbalance being like, I want to work for
0:28:07 you. I’m like, no problem, like let’s grab lunch. And they’re like, oh, I’m not in Ottawa. And I’m
0:28:10 like, oh, well, if you’re ever here, let me know. Do you know how many people ever showed up? How
0:28:18 many? None. Not one person was ever like, I will hop on a plane and I’ll grab lunch with you. And
0:28:21 I just thought it was like this excellent filter, which is like, well, if you’re not willing to
0:28:27 do that, why should I invest my time? That is a great filter. Yeah. Yeah, Ottawa is useful.
0:28:32 And now. Yeah, because it’s so hard to get to, right? It’s so inconvenient. Nobody ever flies
0:28:37 there. How do you think, is it effort? Is it follow up? Is it determination? Is it result? Like,
0:28:43 what is it? Because certain people seem to have it. And certain people don’t. But I also think
0:28:48 it’s totally learnable. Winning is probably one of the most learnable skill sets out there when it
0:28:53 comes to business. Because the only thing that really differentiates most businesses from winning
0:28:58 and losing is giving up. You know, when we go and invest, I don’t know, in 20 or 30 startups a year
0:29:06 in our venture fund, the research shows by and large, the reason why Silicon Valley wants two
0:29:10 founders is because the number one risk for investing in a company is that a founder gives
0:29:17 up number one. And so if you know that it is really just grit, like Angela Duckworth’s study on grit,
0:29:21 then that is what you want to test for. You need to have a good idea. You need to have the foundation.
0:29:26 But we really want to try to figure out how much pain can you tolerate? And the more pain you can
0:29:31 tolerate in business, the higher likelihood you’ll succeed over time. It’s just shots on goal. And
0:29:35 so I think people should be really liberated by that. I was, you know, I’m like, well,
0:29:39 you know, I don’t really have to be smarter than anybody else. I don’t have to be richer than
0:29:44 anybody else. I don’t have to be better connected. I just have to be a little bit aggressively
0:29:49 relentless. And that is something anybody can do. It’s not comfortable in the beginning, but you
0:29:54 can do it. So when we go out and we look at, okay, should I give a couple hundred thousand dollars
0:30:00 to this company or this company? The number one thing we screen are the founders. So how do you
0:30:06 screen them? I want to best predict your future behaviors, past behavior, I think. So I want to
0:30:11 see a history of winning in some way, shape, or form. So also hard to beat a losing streak,
0:30:16 as you know, in sports. So a lot of times I want to see, yeah, I came to this startup. The startup
0:30:20 was growing really fast. I outrude the position and I was ready for my next adventure as opposed to,
0:30:26 I came to this position and the company kind of failed. I was bored. You know, it didn’t work out.
0:30:31 So I want that. The second thing I want is I really want, we do a specific type of interviewing
0:30:38 with founders that basically just takes them through every single company they’ve ever been at,
0:30:43 and you ask them why they went to that company and why they left. And those two questions at
0:30:50 least seem to tell us a lot about do they give up? Do they chase things? Do they allow things to
0:30:55 come to them? And easy enough system to gain. So you’d probably be smarter at coming up with
0:31:01 fancy questions. But imagine like you also have people, I love questions where you unintentionally
0:31:05 give people to divulge things. In this case, one of the things that strikes me, people would
0:31:11 divulge is like, I didn’t like my boss. It was like hours were too long. They wanted me to work
0:31:17 on. They’ll just passively slip up and some of these things, you know, like red flag. Red flag.
0:31:21 Well, and the beautiful part is, I think with having a brand on the internet,
0:31:26 how can people know what they’re getting into? You know, and I tell people, listen,
0:31:33 if you want to go work nine to five, have probably little to no stress whatsoever outside of work,
0:31:40 not have to work a ton, be able to take vacation days, have a low likelihood of getting fired,
0:31:44 go work for a vanguard. Like they’re great at that. Like they love people to stay forever.
0:31:51 They pay bottom of the pyramid. But because they do that, people stay there for a long time,
0:31:55 and there’s not as much exterior stress. Now, I was never more stressed than when I worked at
0:32:02 vanguard because I hate being held back by arbitrary rules. Like, no, you can’t make more
0:32:08 money until the three-year mark. It’s like, what? Why? I don’t like that. I magically have the skills
0:32:13 at, you know, two years and 364 days. I don’t have them, but then all of a sudden. Then you do.
0:32:18 Yeah. And they just have a very militaristic way of, at least when I worked there, how they hired.
0:32:23 And so I didn’t like that. I like to the Goldman, you go eat what you kill. And if you suck, you’re
0:32:27 fired. And if you’re good, you’re going to make more money. And I was like, okay, well, at least I
0:32:34 kind of can get benefit from working harder. But I think a lot of people, these days in particular,
0:32:39 like the hustle culture thing that’ll like it, which I get, but I don’t think you have to do it
0:32:46 forever, but you should do it when you’re young. And if anybody is getting triggered thinking about,
0:32:50 well, I wouldn’t want to work for Cody because she’s super tough and she’s going to make me work
0:32:58 really hard. I think it’s a tragedy, actually. I think, I think there’s something sort of spiritual
0:33:03 about working hard on something you’re obsessed with, with the group of humans all working towards
0:33:08 a goal of getting better. Like, where else can you get constant feedback and business,
0:33:12 be with a team of high performers and figure out what you’re really made of?
0:33:17 Did you see that Tom Brady Baker Mayfield thing where Baker came in? He’s like, well,
0:33:23 he implied that Brady, he was there to like lighten up the locker room. And Brady sort of
0:33:29 replied, this isn’t kindergarten winning championships is fine. And I was like, oh man,
0:33:35 like that’s crazy. Winning is fun. It is fun. And once you figure out the game, you want to win.
0:33:41 And if you lose, you want to learn a lot. And you don’t ever want to not win because you didn’t
0:33:46 go hard. And, you know, what’s fascinating too is, you know, it’s never fun to fire an employee.
0:33:51 I’ve had to do that many times over my life. Less fun to get fired, for sure.
0:33:58 But one of the things I’ve realized is most often people self-select, like they kind of know when
0:34:04 they’re just not a culture fit. And when maybe they don’t want to run so hard anymore. And when
0:34:08 it’s not their obsession. And when the thing you do is no longer your obsession and you’re no longer
0:34:13 learning, I think it’s perfectly cool to go move on to the next thing. And that’s happened to me
0:34:19 multiple times when I was working at big corporations. And I just, but I did it with hopefully a good
0:34:25 amount of grace. I think what goes sideways is when you turn yourself into a victim, you know,
0:34:29 they didn’t promote me, the company sucked, blah, blah, blah. Instead, it’s like, listen,
0:34:33 you’ve taught me so much. Thank you for letting me work here for this period of time. I hope I’ve
0:34:37 been high value to you. I’m ready for my next evolution. And I want to make sure you have a
0:34:42 smooth transition. Like, how can we do that? And if you’ll do that, like, I’m pretty much
0:34:47 friends with every single boss I ever had back in the day, minus, minus two. I did burn a few
0:34:53 bridges. But for the most part, I’m friends with most of them, even ones where I really disagreed
0:34:57 with, like, what they were doing in the business. I thought I should do it my way. But it wasn’t
0:35:03 my chips. So I had to go get my own. If you’re a boss, manager, owner, how do you determine if
0:35:10 somebody’s interested or obsessed? That’s such a good question. I always think about what can you
0:35:16 not sleep for the want of doing? You know, again, I find business to be sort of spiritual. And so,
0:35:21 I think when you felt that flow state in business before, it could be writing emails for me. Like,
0:35:28 when I am writing a really good email, and I am in the zone and I am focused, it’s maybe the most
0:35:32 beautiful thing I do. It’s my favorite thing in the world. And I’d rather do it than go out and
0:35:37 drink beers at the bar. And so, I like to ask people a couple of questions. One of my favorite
0:35:42 questions is, “When was the last time you pulled an all-nighter? You stayed up all night working
0:35:47 on something that you loved?” And a lot of times, you can tell if somebody is an interested,
0:35:54 versed, obsessed person by the fact that they’re like, “Fuck, I’ve never done that.” Or they might
0:35:58 say the opposite. “God, you know what? I don’t work as well at night. But God, I remember a couple
0:36:02 weeks ago, we had this problem. And I was just up at 3 a.m. thinking about it. So, like, I got up
0:36:06 and I just got the chalkboard out. And what I figured out is this.” And so, I really like that
0:36:14 question. The second one is thinking about, “I’ll ask something like, when was the last time that
0:36:20 you really believed X was the decision for the business, but one of your colleagues or somebody
0:36:25 else wanted to do Y?” And I just want to see how passionate they are about it. Now, a lot of times,
0:36:32 the answer for that is something like, you know, I wanted to get a raise and I didn’t get a raise
0:36:41 or something like that. But a good answer sounds like, “Well, they wanted to launch a new product
0:36:45 focused on Argentina.” And I told them that was a terrible idea because right now, the government
0:36:51 in Argentina was XYZ. And if we focused on an Argentinian bond fund, we were going to get slaughtered.
0:36:55 And I put together this PowerPoint that kind of explained why. And I thought through these
0:36:58 frameworks and I looked at these historical models and like, that was the reason why.
0:37:03 And, you know, and it turned out, you know, I was right. And either I wish I would have
0:37:10 presented it more convincingly, or I realized that my opinion, you know, wasn’t going to carry
0:37:13 weight there. And so, I wanted to go somewhere and take my own risk. And like, that’s what a great
0:37:18 answer looks like. And whether you’re right or wrong, it’s a great answer. Because if you say I was
0:37:23 wrong, but I did all the steps that I was supposed to do, I learned from that. Now, all of a sudden,
0:37:26 you get a different sort of tell. Yeah, that’s true. Because a lot of times it’s just I want to
0:37:31 understand how your mind works. Because what we’re always searching for is like examples where we’re
0:37:38 the hero, right? Where we’re sort of like saving the day. But it’s really, I think, interesting when
0:37:44 people point out, I wasn’t the hero. I was totally wrong in this situation. But I did make an argument.
0:37:52 I did sort of like outline my thinking. And maybe we were lucky or unlucky. Because nobody
0:37:57 corrected my thinking. Or maybe I learned because I missed this huge thing. Yeah. And what did you
0:38:03 do after that? I remember I ran a business where we sold money market funds to big pensions and
0:38:09 sovereign wealth funds. And overnight, my business was eviscerated. I mean, I’m talking about billions
0:38:13 and billions of dollars in assets under management. It was at State Street. So it wasn’t like all my
0:38:18 money, it was their money. But overnight, it was totally killed. And it was because of government
0:38:24 regulation that did this silly technical thing called they took away stable NAV. I won’t get
0:38:29 into what that is. But they basically changed the way accounting for this type of product worked.
0:38:33 And that meant that the pensions and sovereign wealth funds couldn’t use it anymore. So I went
0:38:38 from selling billions and billions of dollars of this stuff to, oh my God, massive redemptions.
0:38:43 They were like, give me all my money back. I was like, oh, this isn’t great. And in that moment,
0:38:49 I realized we had built a business that was technically pretty great, like incredible sales
0:38:57 team, great customer support, great brand, great product, great team. And we didn’t think of like
0:39:03 our biggest risk, which was the government regulation. And so that business basically became
0:39:09 like unprofitable overnight. And my next decision was I went to Georgetown and I got an international
0:39:14 MBA. And I went to Georgetown in particular, because I realized I didn’t understand anything
0:39:21 about government regulation and oversight, like nothing. I was so finance markets investing,
0:39:26 and I didn’t realize that the government is probably one of your biggest risks often. And so
0:39:31 I ended up doing that executive MBA for two years while working at the company and opening up a
0:39:35 Latin American investment business that was a different type of investment. But like that would
0:39:41 be a great example of like, I lost awfully. And so then what do I do about it? Do I go curl up
0:39:46 and die or do I go learn again? So I don’t make the same lesson twice, hopefully.
0:39:51 You had another mistake that stands out for me, which was you lost $12 million on a cannabis
0:39:56 deal in like three months. What happened there? Yeah, well, that one, we didn’t screen the founder
0:40:02 very well. I mean, this one was a scary deal because we didn’t have that big of a fund. I think
0:40:07 our fund was like 60 or 100 million bucks back then. And cannabis was raging, you know, it was
0:40:14 like straight up like hockey stick like growth. And the fund before that, this was our second fund.
0:40:18 So the fund before that, we killed it. It was like three to five X return over a pretty short
0:40:23 period of time, investors got their money back, we looked really smart. Well, the second fund
0:40:30 was really happening during COVID. And COVID almost cratered a bunch of cannabis businesses.
0:40:36 And the market started drying up. So no more capital to fund cannabis businesses.
0:40:40 And capital is the lifeblood of businesses. And especially for these businesses, they were almost
0:40:44 like venture businesses. Or if they didn’t keep getting more cash, they weren’t profitable. So
0:40:50 they weren’t sustainable. So this business, we had put in like $12 million into this business.
0:40:57 And it was like, it was a products business located out of California. And basically like,
0:41:01 I can’t remember, but it felt like two weeks later, after we put the money into this
0:41:05 business, we get a phone call from the founder and the founders like,
0:41:12 we’re basically out of money. We don’t know what we’re going to do next. And we need more cash.
0:41:16 And we were like, excuse us, like, we just did this huge analysis, you told us these numbers,
0:41:21 we confirmed to the bank account. Well, it turns out he had all these historical payments
0:41:27 that he was paying through, you know, massive fraud, you know, total malfeasance across the
0:41:32 company that we just completely missed. And sometimes that happens. And we were like, well,
0:41:37 fuck, you know, is this company going to fold? And so thankfully we have on our team a guy by the
0:41:41 name of Joe, who’s our turnaround guy, and he had to fly out to Oakland. And basically over the
0:41:46 course of the next four weeks, do massive cuts and restructuring and some some smart turnaround
0:41:51 stuff in order to save the company. But I thought we were going to go under and that was one of our
0:41:57 murky investments that we had made like two weeks prior. And my biggest lesson learning from there
0:42:03 is, well, two things really, remember when I met the guy. And now I have learned to really trust
0:42:09 my gut on the first interaction with somebody I’m going to invest in, I just didn’t really trust him.
0:42:16 He said a couple of things that were a little flashy. He drove a flashy car, which is always to
0:42:22 me a red saw a red red flag when the company’s not yet profitable. And a little too excitable,
0:42:27 a little too laissez-faire, but my partners loved him. And so I didn’t really raise my hand and I
0:42:31 didn’t put my foot in the sand. So that was my fault. That was the first red flag. And that’s
0:42:36 happened to me multiple times of partnerships. It took me like three times of having sort of
0:42:40 bad partnerships like that happened, starting listening to you. Yeah. If I don’t like it on the
0:42:45 first go, then we’re waiting a year is our new rule. So if I feel any sort of anything,
0:42:48 doesn’t mean I’ll never do a deal with a person, but I’m going to watch him for a year. It’s kind
0:42:53 of hard to fool somebody for a full year. So that was one. And then the second thing was
0:42:58 we now do a forensic audits on most of these businesses, which basically means you get somebody
0:43:02 to get in there and you get really deep into the numbers because even if they’re not committing
0:43:09 fraud, a lot of entrepreneurs aren’t the cleanest with their books. And so you can commit fraud
0:43:14 on purpose or by accident, both suck. And so I never wanted that to happen again.
0:43:17 It’s almost like people don’t realize like if you’re the only shareholder,
0:43:22 yeah, you can sort of like do what you want that’s legal. But if you’re not the only
0:43:24 shareholder, now all of a sudden you’re spending other people’s money.
0:43:29 100%. And so there’s a huge difference between the expense accounts, I would imagine.
0:43:35 And a lot of times they get, they’ve never before raised capital, so they get a bunch of money in.
0:43:39 And just like I would, if I had ever raised capital for my independent businesses,
0:43:45 you’re like, okay, now let’s grow. But you don’t really know how to look into the future with
0:43:49 that kind of money and say, if I do this action, will it make me more money? Because you’ve never
0:43:55 done this game before. And so I think a lot of times that’s a danger point in startups.
0:43:59 I also joke that anytime you see a startup founder who takes capital from third parties
0:44:04 and they start like doing Twitter threads and writing blog posts, it’s like a red flag.
0:44:08 Unless they’re like, unless they’re a media company, it’s like, no, no, no, stay focused,
0:44:12 you know? How do you think about focus when you, when you see somebody, one of the intuition
0:44:16 things I’m imagining is sort of like they’re distracted. They got like 20 things going on.
0:44:19 When you’re investing, I would imagine you want 100%.
0:44:25 Yeah. Well, it really depends. First is, is their first rodeo. If it’s the first rodeo and the first
0:44:29 time you’ve ever run a business, do one thing really well until that thing is profitable,
0:44:36 self-sustainable, and you don’t have to focus on it 100% of the time. That’s my rule. If it’s
0:44:40 not your first rodeo and you’ve already had a successful exit or two, then I think you can
0:44:45 get better at layering. And so, you know, one of the things I’d want to see if I was investing
0:44:50 in founders, a good example would be like Brett Adcock who started Figure, the robotics company.
0:44:57 So he had before had a company that was drones that company did really well. They exited that
0:45:01 company, big exit, then he started Figure, he raised a ton of cash, now the company’s worth
0:45:06 more than a billion dollars. Well, Brett also started another company after that. And that
0:45:12 company is focused on like security inside of schools and humbling areas. And typically,
0:45:16 if Brett was a first time entrepreneur, I would be like, red flag, you know, we should watch
0:45:21 why he’s starting these two companies. Since he’s a multi-time founder, less concerned.
0:45:26 And then the third thing to think about is, are they accretive or not? Like,
0:45:32 does one plus one equal three? And so, if Kim Kardashian would be a great example.
0:45:37 So Kim Kardashian has her big media empire, right? You could say, just stay focused on that Kim.
0:45:42 Well, she’s looking for better ways to monetize that audience. So she has skims, right? Plus,
0:45:50 she has Sky, her private equity portfolio, right? You know, plus she has whatever Kim calls her
0:45:54 cosmetics company. But they’re all sort of accretive because they use her media platform
0:46:00 and she gets to sell similar things to her audience and increase her overall basket size.
0:46:05 And so that’s how I think about our businesses today. I’m like, Cody, you’re not allowed to start
0:46:10 a beauty company because that’s not accretive. It has to be like BizCout, which is our business
0:46:15 buying and selling marketplace. It has to be Resi Brands, which is our small business trade
0:46:21 franchises. It needs to be like right now, we’re focused a lot on helping our businesses scale,
0:46:25 not just people buy a business, but, okay, you bought it. Now let’s get it to 10 million instead
0:46:31 of 1 million. And so it has to really ladder into the same portfolio. Otherwise, you’re distracting
0:46:36 yourself. What are some of the biggest lies or misconceptions that you hear about money?
0:46:43 One that it’s hard to make. I do not actually think money is hard to make. I think it is hard
0:46:50 to get a skill set that is valuable. And once you get a skill set that is valuable,
0:46:55 money can be very easy to make. And people confuse the two. They say like money’s hard.
0:46:59 And it’s like, no, no, no, you just haven’t obsessed yet on having a skill set that people
0:47:04 will pay enough money for. But you can do that. And then money can become easier.
0:47:10 I also think it’s a very freeing idea. Like if you keep telling yourself, making money is hard,
0:47:14 making money is hard, making money is hard, well, it’s going to be hard. But if you keep telling
0:47:18 yourself, no, it’s actually not hard. I just haven’t done what is necessary yet to get what I want.
0:47:25 That would be first. And then the second is that I think money is a cruel mistress. So I always say
0:47:29 money likes attention just like a mistress does. And if you don’t pay attention to her,
0:47:35 somebody else will. And so, you know, I think there’s a lot of benefit early on in your career
0:47:42 to sort of obsessing on race to your first 500K and feel no shame about that shows that
0:47:49 happiness increases post 500K in income or up to 500K in income after 500K, there’s sort of these
0:47:55 plateaus and it’s not really materially different. And then the second thing on it is really obsessing
0:48:00 on money on a daily basis. Like, are you looking at your bank account? Are you looking at the bank
0:48:05 account of your business? Are you looking at how much you make or sell in products? Are you taking
0:48:10 one action every single day to make more money? A money related action? And I think if you do
0:48:15 those things, you’ll kind of be surprised at how you can compound over time. Are there different
0:48:22 skill sets between acquiring and sort of maintaining or keeping your money? Oh, yeah. I mean,
0:48:30 it’s always in my opinion, easier in the beginning to save, but easier in the long term to earn.
0:48:35 So you can only save your way to zero. You know, there’s very, there’s limited downside,
0:48:42 but there’s unlimited upside. And so I do think that what do they call that? They call that like
0:48:48 spending creep lifestyle creep. And so there’s certainly that the more money you make,
0:48:52 the more you spend, and then all of a sudden you realize that you’ve totally outspent your income.
0:48:58 That is a big problem for many people. But I think on average, we’ve been told that we need to save
0:49:04 a lot more. And here’s why. One, if we’re saving consistently, what does that mean? It means that
0:49:09 we’re putting money into third party investment products. It means that we have money sitting
0:49:15 at banks. Like if we save, we’re helping a lot of other individuals make money. If we earn and
0:49:21 invest money in our individual businesses, we are actually giving money back to employees. We are
0:49:29 giving money back to local economies. Like this benefits a few really big guys saving earning
0:49:36 benefits a lot of little guys. And so I understand why society has pushed us to save more as opposed
0:49:42 to earn more. I also think by and large, money equals freedom. So the more money you can make,
0:49:48 the more decisions that you can make by yourself and most people, they don’t want free people.
0:49:56 You know, the people on high really want us to follow rules and to think in terms of safety,
0:50:01 not opportunity. And so I think we should obsess on making money and you should obsess
0:50:06 on making money because then you get to push back when people tell you things that you don’t want
0:50:12 to do. And then you have freedom. Yeah, 100%. Like ultimate freedom in terms of you call it,
0:50:16 fuck you money, call it whatever you want. But it’s like, no, I don’t want to do this thing.
0:50:22 Yeah, 100%. Now I can opt in or opt out. Yeah. I mean, in society today, it’s totally doable.
0:50:26 I think it is, it’s very hard these days to make a profitable business. I think there’s never been
0:50:31 a harder time to make a profitable business. Never been an easier time to start a business.
0:50:36 That’s kind of why I obsess on buying businesses because you just know it’s already making money.
0:50:41 It has a history of past performance. So best predictor of future behaviors, past behavior.
0:50:46 It’s not a guarantee, but it is a higher indicator. And so because of that, I like buying businesses
0:50:54 because then you can operationalize them, you can increase the growth. And so I also think people
0:51:00 listening, before I made quote unquote a lot of money, if you would have told me that I would
0:51:04 have a nine figure holding company or that I would have all of these small businesses,
0:51:09 I would have thought you were crazy. And it just wasn’t part of my psyche that that was possible
0:51:15 for a normal human being. And even though I get shit about it on the internet, I like to push
0:51:22 upon people that it’s actually very possible for you to have a lot of wealth. Now, I don’t think
0:51:27 you most people want a nine figure holding company, actually. There’s always something going wrong.
0:51:31 There’s always challenges. There’s always mistakes. It’s a lot of stress. But I do think
0:51:36 everybody can make hundreds of thousands of dollars a year over time if they focus on earning it.
0:51:40 Do you think that’s largely possible? It’s almost like people, they want the outcome,
0:51:44 but they don’t want the trade-offs to come with the outcome. We look at the gold medal,
0:51:48 but we don’t see the training days that are like 4am constantly, the injuries,
0:51:54 the recovery, the lack of family time. We don’t see everything that goes into making that possible.
0:51:58 And if we do see it, we often don’t want it. Yeah, I think that’s true.
0:52:02 Is there a difference between like a rich mindset and then a broke mindset then?
0:52:10 Many things. I think a couple things. Rich people overall, they really don’t believe
0:52:15 in that word impossible. They’re not like, if you said to a really rich person,
0:52:21 “Hey, it’s just not possible for you to start this next business and execute on it,”
0:52:24 kind of doesn’t enter their psyche. So they have what I’ve always thought of as like an
0:52:31 armor of nose. So rich people have gotten told so many times, they’ve been rejected so many times,
0:52:34 that it almost just bounces off of them. They kind of go, “Yeah, I’m going to do it anyway.
0:52:41 Thanks for the feedback. I’m going to try it.” I think poor people, they have confirmation bias of
0:52:47 no. So when stuff has happened to them that’s bad or when stuff hasn’t worked out, instead of an
0:52:51 armor of no, they’re wearing a coat of no. They’re like, “Yep, just let it in. Let’s just build some
0:52:56 more on this coat. Let’s make this cape longer.” And I think if you can kind of visualize it like
0:53:00 that, a deflection versus an accumulation of nose, that’s the difference between rich people
0:53:08 and broke people. And in my career, for a very long time, I think you want to be around people
0:53:14 who often tell you, “Do more. Go harder. Keep going,” as opposed to people who say, “That’s not
0:53:18 possible. It worked for you, but it wouldn’t work for me.” And I think that’s the difference also
0:53:23 between allies. Those are people who want you to win and friends who are people that want you to
0:53:30 stay with them, whatever level they’re at. Go deeper on that. So I think most friendships,
0:53:33 if you just think about human nature, like I saw this cool thing, I wish I had like a,
0:53:39 it’s kind of like this. So there’s a monk by the name of Dandie Pondie. Sorry if I
0:53:44 fucked that up, but something like that. And he talks about how as you get rich,
0:53:50 you sort of, and I’m going to hold it like this, you sort of rise up like this. And let’s say your
0:53:56 friends, your family, your colleagues, your husband or girlfriend or boyfriend or something,
0:54:01 they’re sort of these corners. And as you start rising in wealth or success, what happens? They’re
0:54:04 like, “Wait a second. You’re leaving me behind. I love you. I don’t want you to leave me.
0:54:09 You seem to be superseding me. This is scary,” natural response. But what they don’t realize is
0:54:14 right now, as you’re rising, they’re not really rising. You’re just getting further away from them.
0:54:20 But as you get higher, you pull the rest of them along with you. And so with most friends,
0:54:26 all they see is this bottom part of your journey. They don’t actually realize forward-looking,
0:54:30 you’re going to take them with you. Now, the people who do see this are your allies.
0:54:35 Those are the people who want you to win no matter what. And those are the people who see,
0:54:41 “Oh, okay. If Shane keeps winning and then he takes us with him to some of these events,
0:54:46 and we meet these people too, and I share his podcast and he kind of shares my new newsletter,
0:54:51 we’re all going to win.” This is, “Oh, man. Shane did it. I can do it. That’s an ally.”
0:54:55 Oh, man. Shane’s gotten kind of too big for his britches. Oh, man. Shane thinks that he’s better
0:55:01 than us. I never hear from Shane. I miss you, Shane. Friend. And I think in our life,
0:55:06 as we’re in our growth journey, obsessing on a few more allies is helpful.
0:55:10 Do you lose friends as you go up? What’s your experience with that?
0:55:21 Yes. I think that success, buying of itself these days, is sort of a lonely pursuit. And that
0:55:27 when you are focused on building something, you’re not boring, you’re building. But you are in an
0:55:35 era where if you don’t have focus, you won’t win. It is definitely a relentless grind in order to
0:55:42 build something completely new for yourself. I remember I had a series of girlfriends in college
0:55:48 that I was quite close with, I think very highly of them still to this day. But I remember, I posted
0:55:52 this one picture on Instagram, really sort of like flippantly. I didn’t think anything of it.
0:55:56 And in the picture, we’d all been drinking. So we kind of looked goofy. We were these young
0:56:03 college girls. So we’re like, “I think they look cute. I look a little crazy.” And I posted it
0:56:11 something like, “I’ve been there partying just like you have to. You can do both.” Something
0:56:18 like that. And I remember one of them texted me and was sort of like, “How dare you? You think so
0:56:27 little of us. We’re just your partying, shithead, drunk friends.” And we were never the same again
0:56:31 after that. So I apologize profusely. I was like, “I don’t know how you could have seen that. That
0:56:35 is not at all what I meant by it. In fact, never even entered my consciousness. And of course,
0:56:40 I’ll take it down if it makes you feel uncomfortable.” And from that moment, we’ve never been friends
0:56:45 again. And this group of girls and I have never been friends again. And at first, I really couldn’t
0:56:51 wrap my head around it. But I do think what happens is when you become really successful,
0:56:56 you are a mirror on the things somebody else could have been. And so you are a reflection of every
0:57:02 decision that they made that was short-term as opposed to long-term. And so I’ve lost many a
0:57:11 friend by the mirror. And I always openly welcome them back and wish them well. But I do think that
0:57:15 you won’t succeed very far if you stay around the same people that you started with.
0:57:19 I never thought of it like a mirror before. That’s a really interesting way to frame it.
0:57:23 Do men and women think about money differently?
0:57:30 Well, I want to add one other thing. So one thing I don’t like, actually, is I have noticed a lot
0:57:36 of people on the internet saying things like, “If they’re not above you, if they’re not in front
0:57:43 of you, you’ve got to leave them behind. And if they’re not moving as fast as you are, then
0:57:48 you don’t need to be friends with them anymore.” And I totally disagree with that. In fact, the
0:57:53 research really shows the opposite. Arthur Brooks does an incredible series of studies about
0:57:59 having what he calls “worthless friends.” And worthless friends are the friends that you have
0:58:03 no transactional value you want from them. You don’t want anything from them. They don’t want
0:58:06 anything from you. They want to hang out with you. They want to go on a walk with you. They don’t want
0:58:11 your email list. They don’t want access to your money. They just want to have a beer on a Friday
0:58:17 night. And these friendships end up materially increasing our happiness, these worthless friends,
0:58:22 whereas these transactional friendships actually end up in many ways decreasing our happiness.
0:58:28 And so I think when people say, “Hey, if they’re not on your level, ditch them.” They don’t actually
0:58:35 understand the research. And I had a friend here, actually, who I saw get really, really successful
0:58:42 on the internet. And I saw the most fascinating thing, which was I just started meeting people who
0:58:48 had done business with this person before. And every one of those people, as this person superseded
0:58:54 them, had sort of a negative story to tell about them. Oh, interesting. And it was like, yeah, the
0:59:01 second that they got bigger than I did, I became irrelevant. The second that I was no longer useful,
0:59:05 I was… And after five or six of these stories, I thought, wow, I don’t think that people realize
0:59:13 the repercussions of not allowing other people to rise with you. And in fact, your reputation is
0:59:18 one of your most valuable assets. And people often think about their reputation online as like,
0:59:23 “To the masses, am I a good person?” It’s like, nah, to the guy at the grocery store,
0:59:26 are you a good person? To the person that you did a deal with, who was your last employer,
0:59:31 partner, didn’t work out, are you a good person? And if you’re not to those people who are worthless
0:59:36 to you, then it will come around. And I truly believe that. And so I just want to say that
0:59:42 because I’ve thought it before too, like, “Hey, if they’re not on your level, keep going.” I don’t
0:59:45 actually think that’s true. And I think it will catch up to you when I’ve seen it firsthand.
0:59:49 One of Buffett’s filters, I think, if I remember, my reading curricula is that
0:59:54 he was super friendly with people, but if they asked him for a favor, it was an indication
1:00:00 that they weren’t necessarily friends in the other person’s eye. And I thought that was like an
1:00:05 interesting sort of… Not like the common favors you would do with your friends. “Oh, my husband
1:00:10 needs a job,” or “My wife needs a job,” those kind of favors. I thought that was an interesting
1:00:16 thing. And I never thought about it again until this moment. I think I’ve had a lot of screens
1:00:20 over my… I’ve only been on the internet for like three years or something like that.
1:00:25 You’ve been playing this game a lot longer. So your spectrum is so much wider and more
1:00:30 vivid than mine is. Oh, you play it better. You have millions of followers. Well, do I play it better?
1:00:35 I like gamifying things. And I think you like deeply understanding things is sort of how I
1:00:40 perceive you, at least. And so I find growth to be really fun. That’s like one of my favorite games.
1:00:46 So I obsess on growth. And sometimes to the detriment of deep understanding. And I think
1:00:53 that seems to be one of your skill sets, which is really beautiful. But in the time that I’ve been
1:00:58 on the internet, I think everybody’s my buddy. This is so like… You know, when I meet people,
1:01:02 I truly am like, “No, he was so nice. We did a podcast. We’re like best buds. We’re texting each
1:01:07 other.” And I’ve had to realize, “Oh, they’re just really charismatic. We’re not that good of friends.”
1:01:13 And that’s okay. And so to your point, I don’t know, on the favor’s thing, I guess
1:01:20 I’m always curious how people are going to be when people lose money or things go sideways.
1:01:25 Totally. When people are talking shit about you, when it’s inconvenient to be your friend,
1:01:30 who will be there? And so when those moments happened to me, one of my favorite mentors always
1:01:36 said, “Allow, accept, thank you, let it go.” And so when something tough is happening, I’ll go,
1:01:42 “Okay, this is happening. I accept it’s happening. Thank you for this happening. Now kind of let
1:01:50 it go,” like whatever it is, move on. And I’ll kind of see who there checks in, who there speaks out.
1:01:54 And that, I think, is really valuable feedback. It’s not that you’re judging them. You’re just
1:02:00 saying, “How much am I going to give you long-term? Like, how much of me do I want to invest in you
1:02:06 as a fellow human?” So I do believe in choosing sides. And I think I want to find people who
1:02:12 have at times done a really inconvenient thing for themselves because it was the right thing to do,
1:02:16 or they thought it was the right thing to do. Totally. That’s a great indicator to me of
1:02:23 a human with moral integrity. Do you have that mindset based on what you just said? It sort of
1:02:26 brought this, and correct me if I’m wrong, that you’re either with me or against me?
1:02:39 No, but I have a mindset of, “Can I trust you in my darkest moments?” I joked the other day.
1:02:45 I had a little incident with a girlfriend, and I joked with her about it. I was like, “Man,
1:02:50 wait until you meet the real me. Like, if this pissed you off, wait until you really get to
1:02:57 build me.” And we joked about it, and then we were fine. But I do have that belief that I want
1:03:03 friends who will hide you in the basement when you need to. And Chris and I, who’s my husband,
1:03:08 I talked about that a lot during COVID because there was so much craziness happening in the world.
1:03:16 And I remember thinking, if we have an unpopular view, who would hide us? Not because they even
1:03:20 believe what we believe. I don’t think you need to do that, but because they’re like, “You’re my
1:03:24 people, and I love you, and I’m going to be there for you.” And so, no, I don’t believe in moral
1:03:30 absolutism. It’s actually interesting that our company right now, for the first time ever,
1:03:35 we have something so beautiful I’ve never seen, which is, we have really, really conservative
1:03:40 people at my company, and really liberal people. And we talk about it. And in fact, we often jokingly
1:03:46 label each other. We’ll be like, blah, blah, blah, the commie, and blah, blah, blah,
1:03:55 the right of Russia and blah. And what’s interesting about that is with these groups
1:04:00 of people, they start to respect each other as humans and realize that political views are maybe
1:04:04 the most uninteresting thing about most people. And I’ve never had that at a company before,
1:04:11 and I really like it. And so, they have this curiosity about one another as opposed to judgment.
1:04:16 I have a theory that part of this whole work from home thing is actually amplifying political
1:04:21 divide. Because we go to the office, we have to work with the person who thinks opposite to us.
1:04:26 And all of a sudden, it takes the power out of that position. It takes the, “Oh, they’re a nice
1:04:30 person. They might believe something completely different.” But now, all of a sudden, it just
1:04:37 tones down the emotion. But when we don’t go to work, we’re on a laptop and we’re commuting.
1:04:42 The whole world just looks like us. Our friends probably vote the same
1:04:46 we do. They make the same amount of money that we do. The world looks, it starts to get insulated.
1:04:52 Yeah. It’s a beautiful view. I mean, some of the research shows, one, higher levels of depression
1:04:56 and anxiety with work from home. So, I actually think that was a great lie. It was a big, beautiful
1:05:01 lie. That sitting in our sweatpants in our house on Zoom meetings all day would actually make us
1:05:07 happy and give us more freedom. Hard to disagree. I do think that sitting in a cubicle under
1:05:11 fluorescent lights is a form of mental insanity over the long term. And I have no interest in
1:05:16 doing that again. But I do not think that we humans were meant to be isolated. And there’s much
1:05:22 research that supports that. And to your point, it’s so much easier when you’re an anonymous troll
1:05:28 on the internet to hate everybody and to think that they hate you. And another thing that I
1:05:31 learned from Arthur Books, who’s become a friend of mine, and he wrote a book called Love Your
1:05:38 Enemies. And I remember I have this one Twitter troll. And like, Shane, when I tell you, like,
1:05:45 I mean, almost every day, like tweets about me, weird stuff, like, she’s a dude, you know.
1:05:52 She was a secretary at Goldman Sachs. Just, she never even worked at Goldman Sachs. She owns
1:06:01 no businesses. She, I don’t know what else. And all these things. And it was annoying me, to be
1:06:08 honest. I was like, do I need to be showing my tax return? Like, I want to picture me in a bathing
1:06:16 suit. And at first, I remember wanting to clap back. And then I thought, nah, don’t feed the trolls.
1:06:21 That’s not very useful. And then second, I was like, very judgmental of this person. I was like,
1:06:25 what a fucking basement dweller, you know, blah, blah, blah, this person, this person. And then
1:06:30 I read Love Your Enemies and talked to Arthur. And he was like, just try this thing for me.
1:06:36 He’s like, just like, very sincerely wish this person well. Like, anybody who is in your mind,
1:06:43 in your mind, in your mind, wish this person well, like, send them like, good, good vibes,
1:06:49 and hope that, that they are wonderful. And he said, because wonderful, happy people don’t do
1:06:54 things like this. And I was like, math. And then I did it. And I will kid you not, this is my
1:07:00 woo woo, because we’re an Austin Crystal Center of the world. They publicly posted like two weeks
1:07:06 later a, hey, sorry, Cody Sanchez, I actually think you’re really, you seem like a really good person,
1:07:09 like out of nowhere, and DM to me like a dissertation sort of apologizing.
1:07:10 Oh, wow.
1:07:15 I know, no, I don’t think the universe does that every single time. But it taught me a lesson,
1:07:20 which is like, every time like, I get hate, I just try to send back a little love,
1:07:24 because I think it’s hard to combat. And I think negative emotions are really draining and a lot
1:07:29 of work. And so instead, I try to not have that.
1:07:34 The temptation, I think, in that situation is to like go tit for tat, right? Like,
1:07:39 to reply to every post to like, and then you get angry, and then you’re sort of like defending
1:07:44 yourself. Why didn’t you do that? Arthur really helped me. Simultaneously, I think another truth is
1:07:50 like, especially with the internet, if you mute, block these people, ignore, they don’t exist in
1:07:55 your sphere. They’re not in the room with you ever. They’re not in your business. They’re not
1:08:00 in your friend group. You’re not shaking hands with them. So the only way they exist is if you
1:08:05 allow them, which is actually a fascinating sort of phenomenon to think about. But if you don’t
1:08:08 look at their stuff, how do you even know what’s happening? You could say, well, other people
1:08:12 could send it to you, tell people don’t to not send it to you. Don’t look at the comments,
1:08:19 ignore the DMs. And the only times that like this really gets to me is when I think there’s a kernel
1:08:26 of truth. So like, if we made a typo on a post, and so somebody was right about that, or if we get
1:08:33 something wrong, or, you know, if we write a story and it wasn’t the right one, you know, then I’m
1:08:39 like, okay, that bothers me. But for the most part, they don’t exist in my sphere, because if
1:08:45 they’re online, it’s only if you let them. Like Mark Andreessen famously who I’m a fan of and have
1:08:50 grown to respect, like he uses the block button pretty consistently, because he just doesn’t
1:08:54 want to engage with those people. So does Naval Ravikant. He’s like, wish you well, but out of
1:09:00 my sphere, because my energy is like too precious to protect. Yeah, I think it’s an underutilized
1:09:06 feature for anybody who has a large social media following. Yeah, I think so too. I want to circle
1:09:12 back to reputation. I want you to go deeper on reputation, like what do you see as the advantages,
1:09:16 disadvantages? Like how do you think about reputation as a concept? First of all, Buffett
1:09:22 said the most important thing, which is what did he say exactly? It was something like he said,
1:09:29 if an employee makes a mistake and loses us money, I will allow that. But if an employee makes a
1:09:35 mistake and hurts our reputation, they will immediately be fired. And I think that’s quite
1:09:41 true because it’s very hard to get back your reputation. And especially if it’s your fault,
1:09:47 like you did something that is out of sync with who you say you are publicly. When I think about
1:09:51 reputation, I try to be as transparent as humanly possible on all the things good, bad, and other
1:09:58 wise that are true with me. So for instance, we know that a lot of female founders get a hard time
1:10:05 and get like business insider pieces written on them for being too harsh and too whatever.
1:10:09 And there’s sort of this phenomenon of this happening to female founders.
1:10:17 And I think sometimes that’s because they portray themselves as like sweet, kind, I’m here for other
1:10:23 women, whatever, and I’m always nice all the time. And so I don’t do that. I’m like, I’m tough,
1:10:28 I’m tough sometimes. And we work really hard. And if you don’t want to be a part of that,
1:10:34 don’t work at my company. And so I try to say the quiet part out loud as often as humanly possible.
1:10:37 And then we do what’s called the noculations against reputation, which is basically,
1:10:42 can you say things a few times that you think are very, very true, but you know will be very,
1:10:47 very unpopular. And if you do that so often, then people don’t get that surprised by what you say.
1:10:53 And I think Joe Rogan’s a great example of this. You know, he often says the quiet part out loud,
1:10:57 he says things he knows will be quite unpopular. And because he does that, people one, think he’s
1:11:03 telling the truth more often. And two, his audience is inoculated because the people who really hate
1:11:08 who he is and the things that he does, they just bail, like they leave. And so every so often,
1:11:12 I do kind of this culling of our audience because I don’t want to have to deal with trying to be
1:11:17 a perfect person. I’m very flawed. And with our company, Contrair and Thinking, we’re very flawed.
1:11:22 We’re all just like a bunch of, you know, sort of two bipedal monkeys running around trying to
1:11:34 figure it out. Right. Like we all have flaws. We all make mistakes. We all have bad days. We all,
1:11:39 but there’s no tolerance for that. Yeah. Because you’re Cody Sanchez. Like you have millions of
1:11:46 followers. Like you can’t have a bad day. Yeah, it’s weird. I also think that
1:11:54 that I think your reputation is also, it can be cultivated. And so, you know, it’s this series of
1:11:58 small decisions you make every single day that becomes the person that people think you are.
1:12:04 And so I try to really have congruence between that. I mean, you’ll see, you know, if you worked
1:12:08 for my company, I’m not asking anybody to do anything I wouldn’t do. That would be very hard
1:12:13 for somebody to claim. It would be very hard for somebody to claim that they work harder than I do.
1:12:18 I don’t, you know, I work quite hard. I wouldn’t really allow that. There’s no world in which I
1:12:22 say Chris and I, my husband and I have a perfect marriage. You know, we fight all the time. We
1:12:28 try to figure it out. So I do try to say all of those things. But I also remember that I asked
1:12:34 for this, you know, I got on the internet. I got obsessed with this idea of growth. That is on me.
1:12:38 And so I think it’s one thing if people get famous sort of by accident, maybe,
1:12:43 or they’re a CEO of a company and they’re just trying to grow a company and then they get slaughtered.
1:12:46 But if you’re going to try to be an influencer, if you’re going to try to be a celebrity, like
1:12:51 it comes with the territory, I think. So that’s a decision you have to make one way or the other.
1:12:59 But one thing I am shocked by that I don’t think people are honest about is people who are very
1:13:05 famous and well known on the internet, they’re obsessed with their reputation and brand. It is
1:13:13 never by accident. This shit is cultivated. It is created. It is mocked up. It is power pointed.
1:13:18 Like I always like to use the rock who I think really highly of. But when you look at the rocks
1:13:23 Instagram, for instance, count for me next time just for shits and giggles, how many of those
1:13:29 pieces of content are an ad for like his energy drink, for his face cream, for his next movie,
1:13:37 for his, you know, XFL for WWE, almost every post is like, I would say probably somewhere
1:13:42 between 80 and 98% of the posts are. Wow. How could he get away with that? Because he has such a
1:13:48 strong brand and every single thing that he promotes is so tied into his brand that it feels
1:13:54 effortless. But it is absolutely not effortless. And so give yourself some credit. I think anybody
1:13:58 who’s trying to make a brand online or you’re trying to build a business like nobody gets famous
1:14:03 by accident for the most part, they all cultivated even like the Haktui girl or whatever that
1:14:08 chick’s name was. She’s got a whole team behind her. She’s got agents now. She had people doing
1:14:13 her filming for her the second that she went super viral, people creating her, people funding
1:14:19 her own content creation process. And so I think we all need to be a little bit more honest about
1:14:23 that because people are like, oh, I just grew because, you know, it just happened one day.
1:14:28 And you’re like, nah, you didn’t. That’s how it works. So as I was doing research for this,
1:14:32 I was watching some youth. My kids are totally into YouTube. So we’re watching YouTube where
1:14:36 like come across some of your stuff because I’m trying to research this. My kids are interested
1:14:40 in business. How old are they? 15 and 14. Oh, it’s amazing. You look young.
1:14:48 And so I feel old on the inside some days. And one of the shows we used to watch was
1:14:53 Undercover Billionaire. So my youngest son was like, ask Cody what she would do if she was
1:14:59 dropped off like Grant Cardone was. And I forget the other guy’s name. And, you know,
1:15:04 you’re in, you get a hundred bucks, you get a phone, you get no contacts. You’re the same age
1:15:09 you are now. You go to this random rural town and he wanted to know the answer to this question.
1:15:13 It’s a great question. I’d go find the most expensive thing to sell that I could sell.
1:15:20 I think the fastest way to make money when you have no money is find other people who already
1:15:26 have something valuable and sell it to other people. And so I remember, I think I watched one
1:15:30 episode of the one that Grant was on and he was in like Philadelphia or something. And it was sort
1:15:36 of like a manufacturer in town. In that instance, I think I would go apply for his, I mean, you go
1:15:40 to the library because you don’t have a phone, right? And you maybe have a car and gas. I can’t
1:15:44 remember. I think you get a cell phone and you have a car and a full tank of gas, but you have no
1:15:48 place to stay. You don’t have a hundred bucks. Yeah. That would be the very first thing I’d do.
1:15:52 So I’d probably go to the library, get on the computer at the public library, and I’d start
1:15:57 looking up in this geographic area, or because remote sales happens now, I would go figure out
1:16:03 how could I get something where I could sell something as fast as possible and with as high
1:16:09 of a price tag as possible. And the reason why is that’s just a game of, that’s a numbers game.
1:16:16 And so, especially with my skill set already, I know how to sell things. And if somebody already
1:16:20 has a market where other people are paying for it, all I’m doing is slotting myself in.
1:16:25 And then once I had done that, I would probably find a business where I could get a cut of the
1:16:29 business for the sales that I brought in. So especially because it involves to like get to
1:16:32 a million bucks, right? Isn’t that what you’re supposed to do? Three months, 90 days to build a
1:16:36 million dollar business. Oh yeah. I mean, but I wouldn’t build it. That’s where I’m probably
1:16:39 different than Grant. I would go and I would negotiate a portion of the business. I would
1:16:45 basically go and I’d say, all right, you’re selling what would be, what would be, I mean,
1:16:50 I probably do something in the online space because I play around in that space so much
1:16:55 right now. So I’d go to a bunch of businesses that were online businesses that sold things online.
1:17:00 I’d probably try to broker deals between B2B companies. And I’d try to close a couple of
1:17:04 those deals and then say, can I get a percentage of your company for all the deals that I brought in?
1:17:09 And, but if you didn’t have that skill set to negotiate deals to start, you’d just start
1:17:14 with selling as much as humanly possible. And even if you did that, if you did that with a boomer-based
1:17:20 business where that boomer wants more sales, needs somebody young and hungry, you could
1:17:24 negotiate part of that business just to apprentice for them and take it over over a long time using
1:17:32 seller financing. And that I think is so underutilized today because you’ve run a business before.
1:17:36 How many times in your varying businesses have you been like, somebody came to me with the
1:17:43 right price and the right terms to sell? I could take this thing, take it. And so business owners
1:17:47 have that all the time and people underestimate it. So there’d probably be a lot of door knocking.
1:17:51 I’d be going door to door saying, have you ever thought about selling your business?
1:17:55 Have you ever thought about selling your business? Have you thought about selling your business?
1:17:59 And using seller financing to basically acquire the business with very little rest to you.
1:18:04 That’s a really interesting approach. Nobody on the show did that. The reason we watch this,
1:18:08 what I loved about it just being a parent, it’s just the mindset of the people going in.
1:18:12 It wasn’t the person, it wasn’t how they went about it. It was the fact they were
1:18:18 rejected over and over again. And they just kept trying new things until something stuck. And then
1:18:22 they would like, oh, I’m going to go, I’m going to do more of this. This worked. Now, okay.
1:18:26 Now I can feed myself. Now I can sort of like get a hotel. Now I can start building a business.
1:18:32 Now I can get a base. I can build an agency. I can convince other people to be my allies.
1:18:35 Yeah. And I just love the mindset, the people. And I was like,
1:18:39 this is the mindset you need as kids. So true. I mean, I should play around with that a little
1:18:45 bit more in our content because I think one of the things I like to try to push upon people is
1:18:50 you’re way more capable than you think you are. Totally. You just haven’t done what is required.
1:18:55 You’ve done what you wanted. And if you were honest with yourself about that, you would realize
1:19:00 that if I worked 10% harder than I’m doing right now on a thing that I really do not want to do
1:19:04 very first thing in the day, I would build up willpower that would allow me eventually
1:19:07 to do the things that most people are not willing to do. And when you’re willing to do that,
1:19:12 you can win over time. I mean, even small things like I have a friend here. He’s a really good
1:19:17 guy. He’s very quirky, but he, you know, he’s, he’s one of the guys where when I wasn’t on the
1:19:21 internet at all, I was running a finance company back in the day when I first met him. And I just,
1:19:24 I reached out to him randomly. Now, mind you, I had a lot of money at the time. I knew nothing
1:19:29 about the internet and like a lot of money, meaning like, you know, I was doing the, okay.
1:19:35 And I reached out to him because I wanted to understand the internet. I thought that in
1:19:39 the future we might sell investment products and build investment businesses with the internet
1:19:42 and not with my old method, which was like going to pensions and sovereign wealth funds,
1:19:49 door knocking, steak dinners, all that stuff. I think I was right. And I’ve proved that. But
1:19:54 back then I wasn’t so sure. I was like, how do newsletters work? Like, what does email look like?
1:20:00 Like finance were so, were dinosaurs with that. And he was the master with Sumo me, right?
1:20:05 Exactly. And so he had a conference or two that I went to. And, and I was just like,
1:20:09 you seem really good at emails. You sell things with emails. Like, how does that work? And,
1:20:14 and I reached out to him and I sent him, I did research on him online and I found out that he
1:20:18 was into tacos, like weirdly into tacos. And so I bought him a bunch of socks that had his face
1:20:24 on it in a taco. And I sent them to him with like a note that was like, Hey, I’d love to learn from
1:20:29 you. You know, love what you’re doing. No need to respond if, if you’re way too busy. Like,
1:20:32 because I think that’s important too, you know, the pay, you don’t have to respond.
1:20:36 Anyway, for whatever reason, he did respond. And we became sort of friends and then he helped
1:20:41 teach me a lot of things. And he don’t have money right now. And you don’t know how to make it.
1:20:45 One of the best ways to start is just to learn to negotiate things that you don’t want to,
1:20:50 which is like, he has a famous thing where he goes into coffee stock shops, even Starbucks,
1:20:54 and like orders a coffee and then goes, I love a discount. And then shuts up.
1:20:58 And I’m like, what? There’s no discount here. And he’s like, well, I just love one. Like,
1:21:01 if that was at all humanly possible, is there any way for me to get a discount?
1:21:07 And often he is rejected, but sometimes he is not. And just those little lessons of like,
1:21:11 if I was on undercover billionaire, I’d be going to hotels and saying like, Hey,
1:21:16 how can they negotiate a stay for extra? Could I do work around here to do that? What do you need
1:21:19 help with? Like, you’re on your shift right now. What if I take over a couple of hours of your shift?
1:21:23 Do you think I could stay in an abandoned room? Like, I would just be trying to negotiate every
1:21:28 single thing I could, because you’ll be shocked how seldom Americans in particular do that.
1:21:32 Yeah, we’re brought up not to do that. It’s like the price is the price.
1:21:32 The price is the price.
1:21:35 Whereas a lot of other cultures, it’s sort of like the price is the starting point.
1:21:39 Oh my God. We have this guy that works for us and our investment team is Korean and he’s Egyptian.
1:21:45 And I think learning from other cultures on negotiation is such a life hack,
1:21:50 because they do it like a second language. If my first language that’s most profitable is money,
1:21:55 the second one is negotiation. And Karim will do it with this huge smile the whole time. That’s
1:22:00 a big key. So every time he asks for something, there’s a big smile. And he’s like, well, you know,
1:22:05 he’s very diminutive. He’s like kind of shrugged his shoulders like, well, we could do this, but like,
1:22:09 we could do that. Like, what do you think about that? And the whole time you’re negotiating with
1:22:15 him, you like the guy. And he kind of weasels his way in to getting you to consider another
1:22:21 perspective. And he jokes that like that’s just like Egyptian dinner conversation, that it’s
1:22:26 nothing. And he’s not that special. But having people on your team and learning from friends
1:22:32 from other cultures is really powerful. And so any chance you get to play with other people
1:22:36 who have normalized this idea of barter, I think is a great way to get better at making money.
1:22:43 The key is like the first no is really the final no. Right? Like if you stop at the first no.
1:22:48 That’s a great line, right? Like you you’re done. But like most people are not going to go past
1:22:53 the first no. So you’ve already differentiated yourself. I do this with the kids like, I live
1:22:59 in Canada, we get snow. So I make them like knock on doors and shovel driveways. And we got to a
1:23:05 point where somebody would have a driveway service. So literally, they’re paying somebody to come
1:23:10 with plow their driveway. And the kids, they’d be like, no, I pay a service. And like at first,
1:23:14 the kids would walk away. And I won’t negotiate. I’ll just do labor. But I’m like, you go to the
1:23:17 door. I want you to get rejected. I want you to learn sales. And then they eventually get to
1:23:21 this point where they were like, yeah, but who knows when they’re going to get here. And they’re
1:23:26 probably doing like 100 driveways a day. We’re doing like 10. Who do you think is going to do
1:23:30 a better job and take care of your beautiful car out there? And you know, they would get to a point
1:23:35 where they would actually the person be like, yeah, go do the driveway, right? It’s like the
1:23:41 first no is not the final. That is such a good line. And what a good way to try. So one of our
1:23:46 portfolio companies is called Resi Brands. And they have that one painter, which is a painting
1:23:51 company. And Pinks, which is a window cleaning company. And so I was going around with the CEO
1:23:56 Stephen for that one painter. And they were painting one house. And every time they paint a house,
1:24:01 they ask their employees to door knock for an hour. So while somebody’s inside painting,
1:24:05 some of it, they door knock. And so I’m like, let’s go do it. Let’s go knock on a bunch of doors
1:24:11 in Texas. After about, I can remember six or eight doors. One of the people that we knocked on
1:24:16 was like, oh, actually, I’ve been eating this and this and this. And that’s a $5,000 purchase.
1:24:23 And so in the span of 20 minutes, the company made $5,000 from six or seven door knocks.
1:24:27 And so how often is money sitting right in front of you, but you’re just not doing what it takes
1:24:33 to grab it. And I think asking and rejection is one of the biggest reasons why we don’t.
1:24:37 I love that. That’s awesome. I don’t like being in the house when I get these door knocks.
1:24:42 No, you get them all the time. 100%. What’s the difference between a good business and a bad
1:24:50 business? In my definition, good business equals profitable cash flowing, what I call a cash flow
1:24:56 versus cash suck business. So you get paid upfront for a service, not after you provide
1:25:03 a service. Sustainable, it can exist for a long time. Historical, it has existed for a long time.
1:25:09 Understandable, you can explain it to grandma really easily. And you have what’s called the
1:25:14 Lindy effect, the likelihood of the future continuing to cash flow just as it did in the past.
1:25:19 Those are my parameters for a good business. A bad business would be a business that is
1:25:26 unprofitable, hard to understand, hasn’t been around for very long. You have to provide the
1:25:31 service before you get paid for the service. That is a business that is just much harder.
1:25:36 That’s a harder game to win. And so as often as possible, I want to have the lifeblood that
1:25:42 is money come to me in my businesses. And that way, I can make more mistakes as an entrepreneur
1:25:48 because I have a trampoline that has a lot of give to it, as opposed to I think of cash suck
1:25:52 or bad businesses as a concrete floor that has no give. You’re going to jump out of the
1:25:57 window sometimes and fuck things up. And so it can help if you have cash flow in it because that
1:26:01 allows you to jump like a trampoline. A lot of businesses think they have a marketing problem
1:26:08 when they really have a product problem. How do you, going in, looking at acquiring a business,
1:26:12 determine if there’s a marketing problem or a product problem because that’s going to make
1:26:17 a difference for you as an investor or owner? Three things, three numbers you need to look at.
1:26:20 If you want to figure out if you have a company that needs to sell more things
1:26:24 or needs to create better things, you need to figure out, one, what’s your referral rate?
1:26:29 How often do your customers tell somebody else that they need to buy something from you?
1:26:34 Two, how often do your customers repurchase from you? So your repurchase rate.
1:26:37 They call them they buy one water bottle, not enough, you need to buy two or three.
1:26:42 And the third is churn. How often do the customers, once they have you on a subscription plan or
1:26:46 they’re continuing to buy from you, bail out of that plan? And those three numbers can tell you
1:26:52 if you have a healthy product business or if you just have a great sales team. You can have both
1:26:56 types of businesses, but it is just so much harder when you have to continue to resell
1:27:03 your customers again and again and again. Much easier to keep them, find new customers, keep growing.
1:27:08 A hundred percent. I think it’s always easier to sell your same customers more things continuously.
1:27:12 Then you can sell your customers more expensive things continuously. Then you can get your
1:27:17 customers, their friends, to buy more things from you continuously. And then you can ask your
1:27:24 customers to say nice things about you continuously, aka reviews. And so those reviews, referrals,
1:27:29 retention, and reduction of churn are sort of the four main Rs in a good business.
1:27:34 One of the things that a lot of people listening do is hire people, whether they’re hiring within a
1:27:39 company or they’re hiring as a small business owner or maybe even a large business owner.
1:27:44 If you could only have two questions to ask a candidate, what would you ask them?
1:27:49 Well, first, if you’re going to hire somebody, the first question is who are you and what are
1:27:55 your strengths and weaknesses, meaning you yourself. Oftentimes, your first hire in a business
1:28:00 needs to be somebody who can do the opposite of what you can do. So it’s actually not about them.
1:28:05 It’s about can you define the problem first? I think most of the reasons why good hires do not
1:28:12 work out is because the person and the problem set has not been clearly defined. We tend to like
1:28:17 people that are like us. We shouldn’t always hire people that are like us. In fact, we often should
1:28:23 not. After we’ve determined, okay, I need this type of person to solve this type of problem,
1:28:27 the question is, how can you figure out are they that type of person and can they handle that
1:28:34 type of problem? I think a couple of things that are cheat codes. We use something called the Colby
1:28:41 test. Colby is actually allowed from employment certifications for people to figure out what
1:28:47 type of personality they have. It’s basically like what fills your tank. There’s four characteristics
1:28:53 to it from fast implementer. We do things right away. I’m sorry, fast action to implementer,
1:28:59 which is like I like to do things consistently over time. I am high fast action and low
1:29:05 implementation. I need to have an implementation person often in my business. I don’t need a
1:29:09 bunch of ideas person. I’m kind of an idea person. I need the opposite of that. It’s also what EOS
1:29:13 calls the visionary versus the integrator. I just think the word visionary sounds gross.
1:29:19 I want to be the integrator, not the visionary. It’s a weird title of that terminology.
1:29:26 The question that you need to be asking is how can you get to the root of whatever the problem
1:29:31 set and persona you’re looking for is defined? It’s really going to depend. If I know that I
1:29:37 need an implementer, I’m going to be asking questions. One of my favorite ones that I did the
1:29:43 other day was, I’d love to see how you organize your calendar. Can you show it to me? Real time,
1:29:48 pop up on Zoom, what does our calendar look like? If they’re an implementer, it’s probably highly
1:29:54 detailed. It’s color coded. It’s assigned specific timelines. If it’s all over the place or there’s
1:29:59 mismatched things on top of it, not an implementer. That’s a very easy one to tell.
1:30:07 Another thing I might do if I’m looking for fast action, basically, is I might say to them something
1:30:12 like, well, hey, we’re in the business right now. This is our problem. What would you do about it
1:30:17 right now today? I want to see, can they think quickly through what the next steps would be?
1:30:22 Well, I would do X and Y and Z and X and Y and Z. Then I might say to them, how long would that take
1:30:26 you to do something like that? See how quickly they could calculate what the timelines are?
1:30:32 If I already know what the job is, I know if those timelines are reasonable or not. I know
1:30:36 how good they are at calculating their own time and how speedy they are in that regard. The third
1:30:41 thing I’d do is I’d probably have some sort of follow up. I’d be like, all right, you think we
1:30:45 should do X and Y and Z. I’d love to pay you a thousand bucks to do a project scope for me.
1:30:49 That would be amazing. How fast could you turn around a project scope for me? If they’re like,
1:30:54 oh, a week, I’m like, oh, that’s not my guy. They need to be a 24-hour window. It doesn’t need to
1:30:59 be hyper detailed, but I want to see a one-page brief and then I can see what they think. I’m
1:31:06 not a good enough interviewer to not need an exterior tell. I really need, show me what your
1:31:11 brief looks like. Show me what your calendar looks like. I think some people just can tell by
1:31:18 communications. I can get persuaded by somebody. I think it’s really rare that actually people
1:31:24 have good intuition of her hire. I love what you said because it’s hard to fake. Exactly,
1:31:29 show me your calendar right now. I can’t make it look good. I have to do it on the spot. The same
1:31:35 is, what would you do? It’s harder to fake that you know something in those cases where so many
1:31:40 people are taking credit for, I worked with MrBeast and I know YouTube and it’s like, well,
1:31:45 what did you do with it? You can’t really verify it. They have this so much and then they get in
1:31:51 and you’re like, oh, God, what? No. 100%. Yeah. I think if you want to make a lot of money,
1:31:57 you got to figure out hiring. Every problem is a people problem. Every additional profit
1:32:03 is determined by people. That’s been a hard one for me to learn because I do like to go fast
1:32:08 and a lot of times I like to do it by myself. I can execute fast, so I kind of go.
1:32:14 And then you want to hand it off to somebody else. Right. But once I’ve really gotten good at
1:32:19 leading the team and bringing more people in, I’ve realized like leadership, I get now why
1:32:23 there are so many books on leadership. I didn’t use to, you know, when you’re young and starting
1:32:28 out, you’re like, just tell me how to make more money. Just give me the playbook. That’s a wrong
1:32:34 question. That’s the wrong ask. The right ask is, how do I create a vision so big that other people
1:32:39 think their vision is bigger with me? The second question is, how do I become so good that they
1:32:44 want to be with me and work with me because they think that I’m better in some instances? And if
1:32:50 you can’t do those two things, you’ll never attract top talent. And then it’s, how do I become
1:32:56 so good of a leader that I’m constantly helping somebody become a better version of themselves?
1:33:00 Because if I do that, it becomes addictive. And people love to be around other humans
1:33:05 who will help them become better if they’re high performers. I actually am not so good at like,
1:33:11 I forget my own birthday. I forget my husband in my anniversary. I’m not, I’m not the best at
1:33:19 like high empathy, touchy-feely stuff. I don’t know why. And, and so I think some people think,
1:33:23 well, to be a good leader, you got to know their kid’s names. And that’s probably a good one. But
1:33:27 like, you, you have to go really deep with them. You have to know everything about that employee.
1:33:32 And that’s just not how I lead. You know, I lead by being like, what do you want to achieve in life?
1:33:36 You know, what are your big goals? Because I bet you’re an amazing parent. I’m not a parent,
1:33:39 so I’m not going to tell you how to be better at that. I’m sure that you have incredible
1:33:44 hobbies that you’re good at. You can go do that by yourself. I’m here to help you make more money,
1:33:48 become a better version of yourself and achieve what you want in your career. And that’s interesting
1:33:53 to you. You should come work with me. And I’m going to do it in a genuine way to you as a person.
1:33:57 100%. Not going to fake that I’m interested in XYZ when I’m not or.
1:34:01 Yeah, I got murdered on the internet once because I said, it’s one of my dear friends who’s been
1:34:06 an employee of mine for a long time. But I was like, I did not want to hear about your child’s
1:34:12 soccer game. And I like just. I can see why that would go so. Oh, just murdered on the internet.
1:34:17 And I was like, no, I stand by it. I actually do not. And I think that’s incredible
1:34:23 that you care about that for your kid. But what I’m here to care about for you is like your career.
1:34:29 And sure, people can pretend one way or another to care about that, but they don’t actually care
1:34:34 about it. You get those casuals like how is your weekend? And then somebody launches into more than
1:34:38 a sentence and you can just see people’s eyes. Like I used to answer like, oh, I thought people
1:34:42 were genuine when they were answering this. I was like, I did XYZ and like I can see the
1:34:48 gloss in their eyes. Yeah. And it’s like they don’t really want to know. No. Well, like how
1:34:54 interesting are those stories? You know, it’s like, I think as a society, somehow we’ve lost
1:35:01 like the ability to be honest. And we think that being nice is the same as being kind.
1:35:07 And I don’t think that’s true. Talk to me about that. Being kind to me is when you see somebody
1:35:13 struggling on the side of the road with a, you know, with a flat tire, you get out and you help
1:35:18 them with it. You know, being nice is pretending to listen to somebody’s story about their kids and
1:35:23 thinking that, you know, they’ll like you more because you pretend to be interesting. Being
1:35:28 kind might be like, I’m so excited for that for you. Like, hey, you know, I got to go do this
1:35:32 other thing and work right now. But when you need help on that thing so that you can actually leave
1:35:36 to go hang out with your kid this weekend, I will help you with it so you can get out faster.
1:35:41 Kind as opposed to nice, which is like, I’m going to project this sort of performance on you,
1:35:46 because I think that it seems like a nicety in society. Niceties are sort of like sprinkles.
1:35:48 Kindness to me is like when you help somebody bake the cake.
1:35:54 In your inner circle, how quickly do you recognize underperformance and how do you
1:35:59 deal with it? I need to be faster. I mean, the good thing like for anybody listening is
1:36:06 like, you don’t have to be perfect. Oh man, the more rich people I meet, the more I realize how
1:36:12 achievable it is for most of us. And so I am highly flawed in hiring. I am highly flawed in
1:36:16 letting go of people or changing things when I need to in a business. I,
1:36:22 even though I sound kind of tough, I almost always defer on the side of like, ah, I wait
1:36:26 too long. I think too much about the person. I want to make sure they’re okay. Something I’d
1:36:34 like to get better at. I think it is the peak of ego to be like, oh, I shouldn’t let this person go
1:36:39 because they have it better with me than anybody else. I don’t know. I believe in their individual
1:36:44 capacity to go and do something great that lights up their soul. And if this isn’t it,
1:36:48 then let’s move them on to the next thing. And maybe the reason why is one time
1:36:55 at my, let’s see, company, two companies before I started my own, I had a CEO whose name was Jim.
1:36:59 And Jim is a badass. I mean, he’s like a billionaire many times over. He’s very
1:37:04 intimidating. And I remember I was running a business in Latin America then we were crushing
1:37:10 it. We were growing like crazy. I was running it for him. And he called me to a hotel we were at,
1:37:16 the Monarch, we were walking on the beach after one of our conferences. And he was kind of like,
1:37:20 listen, I can tell you want to run the business this way, we do business this way.
1:37:27 Either roll my direction or get out of the boat. And not so many words. And I was devastated. I was
1:37:34 so mad at him. And I disagreed with him. And I felt like a victim and I wanted to yell and scream.
1:37:41 And, and then I realized, like, it’s not my boat. So if I want to go roll in a different
1:37:47 direction, I got to get my own boat. And Jim, you know, essentially, in some ways pushed me out of
1:37:50 the company, you know, was like, we’re not going to do it that way. So we’re like, get out of here
1:37:55 if you want to do it that way, or do it my way. But he did something there that a lot of people
1:38:00 won’t do. Like he was just direct with you. Instead of like, subtly, like, I’m going to give Cody
1:38:04 less opportunity, I’m going to push her out. So I’m going to constructively dismiss her,
1:38:10 whatever the term is. No, he actually approached you head on and communicated with you that hard
1:38:18 thing. He was kind, not nice, you know. And in that moment, he let me leave in a way that like
1:38:25 changed my life forever. And then I went and built a giant company and had massive success. And I
1:38:30 never would have, I would have waited a long time if he hadn’t done that, I would have stayed
1:38:35 painfully at the company for a long time. And so I always remember that when I’m thinking about
1:38:40 letting go of an employee, I’m like, man, you might go achieve something so much bigger than me
1:38:45 if you lean into the thing that you actually should do. So go do it, you know, because I can
1:38:49 tell you want to your heart’s not in it here. And I just had a conversation like that with
1:38:55 an employee today, literally today. And I was nervous about having it. And this employee was
1:38:59 like, I’m so glad you brought this up because I’ve been feeling it, but I wasn’t sure how.
1:39:05 And I think that is also the mark of a good leader is you have a lot of conversations with your
1:39:10 people who are not aligning in your company perfectly. And you’re like, and so they’re never
1:39:17 surprised, you know, I don’t think I’ve ever let somebody go or moved in two directions from
1:39:23 somebody where they’ve been like, what, why? It’s always been after a few conversations. And that
1:39:28 is, I think, a respectful thing for employees. Do you rehearse that conversation in your head
1:39:33 before you have it with them or do you just walk in? Yes, definitely a rehearse. Yeah, I try to put
1:39:38 myself in their shoes. How would they feel in this situation? What would they want out of this
1:39:42 communication? I mean, Sun Tzu has a great line, which is give them a golden bridge on which to
1:39:49 retreat. And he talks about his enemies in this way. And I think, you know, giving your employees
1:39:55 a golden bridge on which to retreat is lovely, too. You know, if you’ve ever worked at a company
1:39:59 and somebody gets fired at that company, and then the boss talks really badly about that person,
1:40:05 it doesn’t actually make the boss looks better. It makes you think, ooh, so when I eventually
1:40:10 leave, they’re going to talk about me like that. And so I try to never do that. Now, I’m honest,
1:40:15 I might say, hey, we have a culture here that mandates X, Y wasn’t happening. And so for that
1:40:20 reason, we’ve parted ways. I’m not going to sugarcoat it or pretend that something was there that
1:40:28 wasn’t if that’s the case. But in most instances, unless there’s fraud or something reputational,
1:40:33 most times, it’s just that you two have been together for a period and that period has passed.
1:40:38 And that’s totally okay. Do you do performance improvement plans? Or are you just like, no,
1:40:42 like that’s never going to work? I’m not going to invest in that because now that’s an investment
1:40:46 on your part, too. Right? Yeah. It’s like, I’ve already invested months, time, salary, money.
1:40:51 And now to do this, I have to do more. Like, how do you think about that?
1:40:57 Typically, we do improve performance improvement plans for employees not at the executive level.
1:41:01 If we have executive level people, which is usually the people that I am hiring or firing now,
1:41:08 those people, we start with the end in mind. So when people come onto my company, a hack to
1:41:14 never have somebody be surprised by being let go is to start with a 30, 60, 90 day plan with every
1:41:18 single person that you bring on board, even a new assistant. And those 30, 60, 90 day plans
1:41:23 have very specific outcomes. And if those outcomes don’t happen at 30 days for your first check-in,
1:41:28 first red flag, they don’t have in it 60 days, second red flag, third red flag, you’re gone from
1:41:33 the company. And then we have that on a quarterly basis, too. So we have KPIs, key performance
1:41:39 indicators. And if you’re hitting those, then we’re good to go. You keep motoring. If you have
1:41:44 a quarter where you’re not hitting those, okay, we’ve got first red flag. Depending on the position,
1:41:48 if you have another month or sometimes another quarter of it, that means that you let go. And so
1:41:53 there aren’t, I hated when I was at a company and I didn’t know where I stood. It’s like,
1:41:59 am I doing a good job? Am I not doing a good job? Why did this person get promoted? Why did this
1:42:02 person get fired? It’s so confusing. And so I always wanted something where it was like,
1:42:07 just let me know where I stand and how to make more money and how to be successful and how to not.
1:42:11 And I think a lot of companies could do that better. We’re by no means perfect, but I’m working
1:42:17 on it. That’s such a big unlock. Just being clear. Because if you’re not clear, you’re floundering,
1:42:21 you’re throwing darts at the wall, and you’re hoping something sticks. And if it’s inconsistent,
1:42:27 you just give up eventually. You’re like, yeah, this is too taxing on the mind. Meanwhile,
1:42:32 if you could focus my energy, we’re going to get somewhere. So one of the key traits you mentioned,
1:42:37 I think of high performers was the kind versus nice. And the ability to communicate clearly
1:42:45 in a way the message is received even though it’s not always sure coded. What are the other traits
1:42:51 that you’ve learned from people that you would say are high performers? Yeah. If you want to be a
1:42:55 high performer, one, you got to be around other high performers. So try to find a group of people
1:43:01 that look like the life that you want in one shape or another. Second, if you want to be a high
1:43:07 performer, you want to make sure that you always do the things that you say you’re going to do.
1:43:13 And I think that is probably one of the most underrated ways to win is simply say you’re
1:43:18 going to do a thing and follow through on doing the thing. That is very rare. In fact, sometimes
1:43:24 it’s rare for me. I project manage the shit out of myself because I’m forgetful. I have too many
1:43:31 things on my plate. And I want to be a human of my word. And so I have like a notion task list
1:43:35 that has databases and priorities on it. And every single day I look at that task list and I say,
1:43:39 did I promise something to somebody? And I check off the things that I don’t or I forward expectation
1:43:43 set like even with you, I was like, blockchain, you know, I have this thing I’m going to do this
1:43:46 weekend. And I let you know ahead of time, I’m like, I’m a little worried. What if I can’t do it?
1:43:51 Do you think we could push it back? You know, we like over communicate almost, which sometimes can
1:43:57 feel like too much, but let’s the person know like, I’m taking this really seriously. Like I told you
1:44:00 that I was going to do this thing with you. And I want you to know I’m really, I’m thinking about
1:44:05 that. And I’m making sure I do everything I can to prioritize it. And if I can’t prioritize it,
1:44:08 you’re going to know why. Right. And so if you say you’re going to do a thing,
1:44:13 do the thing, you’ll beat 99% of people. The next thing that I found in high performers pretty
1:44:20 consistently is they are helpers, not Yelpers. And, and I think about this, like, you know,
1:44:23 those people that go to a small business, and there’s something wrong, it’s small business,
1:44:29 and they get on Yelp and they’re like, right, as opposed to the people who see something wrong
1:44:34 in a small business. And they go up to the owner or they go up to the person say, Hey, by the way,
1:44:40 you know, my food was a little cold. I didn’t get this. You know, I know it’s hard. I just want
1:44:46 to let you know. I want to let you know personally. I always find that high performers are the helpers
1:44:52 and they’re never the Yelpers. Because when you’re a high performer, you realize things like
1:44:58 the average small business needs 20 positive reviews to overshadow one negative review.
1:45:04 So every time you do that to a small business, you could be crippling it with the one thing that
1:45:09 happened in that small business. So I think about that. And the last thing I’ll say with
1:45:14 high performers overall, they’re usually quite giving. And so I think a good indicator of if
1:45:23 somebody is a winner or not, is do they overgive almost, because they sit from such a place of
1:45:30 abundance and mutual winning that they do not think that if Shane wins, I can’t win, you know,
1:45:36 if he gets this, that means that I’m less than and don’t get me wrong. Like if you’re sitting
1:45:40 there ever thinking, man, I’m a little jealous of that, or I wish I could do that. I have that
1:45:45 all the time too. You know, there, there are times where there’s somebody on the internet and,
1:45:50 you know, they’re growing faster than we are, or their business is doing better.
1:45:54 And I’ll feel that little twinge, you know, in my stomach, like shoot, gosh, why aren’t we doing
1:45:59 that? What am I doing wrong? And, and that’s human nature. And I might just mute them for a little
1:46:04 bit and just not play the comparison game. I’m like wish them well, but like, I’m not evolved
1:46:09 enough to not feel a little bit of that. But then if I was ever to engage with those people, I would
1:46:15 be like, you’re killing it. I’m so excited for you. And I hope you keep winning. What do you
1:46:24 spend money on that would surprise people? I’m really into lately matching sets. This is such a
1:46:29 girl thing. But I love outfits that match because you don’t have to coordinate them.
1:46:36 That’s such a nerd move. So like a shirt and pants or a dress and a shirt that that matches.
1:46:40 So then you just get to like go off and go. So I probably spend more money on clothes like that
1:46:48 than I used to. The second thing I spend a lot of money on is learning overall. So like if you
1:46:55 were to see where I spend probably like, I mean, houses, cars, I don’t really care that much about
1:47:00 that trips, those probably cost a lot of money. But something that might surprise people is like,
1:47:05 how many books am I buying? How many random courses am I taking? Like I’m taking one right now on
1:47:11 notion automations, for instance, because I want to get better at just prioritization of that.
1:47:16 I’m taking another one right now that I’m about done with on AI integration for small business,
1:47:21 like how could we integrate those a little bit better. So I spend an odd amount of money on
1:47:28 learning how to get faster and better. And I love doing that. And then probably the third is hiring.
1:47:33 Like every chance I can get, I try to think about where can I give somebody an opportunity
1:47:38 for them to be in their zone of genius, but also help me. And Tanner, who’s my creative director,
1:47:43 always gives me a hard time because people want me to say something like a private jet or like
1:47:49 something. And like, yeah, sometimes we fly private, but I would rather, I would rather
1:47:56 hire a couple more chiefs of staff. I would rather buy another business than spend on a liability.
1:48:04 And so I don’t do that a ton. But I do really want to farm with goats and many horses and chickens.
1:48:09 It’s just I can’t figure out exactly how to take care of it all without getting stressed out about
1:48:16 it. There’s like an expansion surface area, right? Yeah. Yeah. It’s like, should I just go
1:48:21 one a couple of weekends if I really want to? But I have a dude who’s become a friend,
1:48:24 Jesse Eitzler, and he’s like, I bought a farm and it’s the best fucking thing I’ve ever bought.
1:48:28 That was like, God, now I want one. So maybe we’ll do that eventually.
1:48:33 I think for you, part of that would be sort of like your weeks are busy, they’re stressful,
1:48:37 and this is like getting away, take myself out of a familiar environment, relaxing so that I
1:48:41 can come back on Monday and do it all over. Definitely. My husband and I are good at spending
1:48:46 on experiences more than things. Like it’s not like, I mean, I have maybe a couple of nice watches,
1:48:51 but I don’t really wear them that much. I don’t wear a lot of designer stuff. If you see me on
1:48:55 Instagram, a lot of times the stuff I’m buying is from small businesses and stuff like that.
1:49:04 I think it’s sort of a sign of, actually, I don’t want to judge. Just for me, labels and big
1:49:10 logos, I’ve never really gotten off on them. I do think there’s a bunch of research now.
1:49:14 Like I saw this thing the other day, I don’t know if you saw it, that there’s obviously something
1:49:19 called the pretty privilege, right? What’s that? Well, basically, women on average, there was a
1:49:27 fascinating study showing that women who wear makeup, but have the same attractiveness poll
1:49:32 in a group of people. So you were all sevens, let’s say, but a seven who wears makeup versus a
1:49:39 seven who doesn’t wear makeup will earn 15% more over the course of a year. Crazy, right? Then for
1:49:44 men and women who both, I can’t remember how they measured this one, but it was some measure of how
1:49:49 they dress, like they’re put togetherness. But I can’t remember the indicator of how they determine
1:49:56 that. Women earn on average 30% more, not just for their facial symmetry and whether they’re
1:50:02 pretty, but how they’re put together. And men earn 15% more. And so I do think there is a reason
1:50:10 to dress like a pro, so you can earn like a pro. And I’m sitting here in my sweatshirt shorts.
1:50:15 I think you agree. You’ve got your branding on. I mean, there’s definitely the cases where it’s
1:50:22 not true, but on average, it shows you earn more money. Why do you think it is?
1:50:27 I mean, I do suppose that we make, you know, they say that you make a first impression
1:50:33 in less than the blink of an eye, right? And so historically, we were predetermined worth based
1:50:38 on, you know, meeting capability, probably like protection if you’re a man and fertility if you’re
1:50:44 a woman, right? And so we’re trying to determine is our mate going to protect us or are they going
1:50:49 to provide us babies? And so prettiness or whatever was an indicator of health, which was an indicator
1:50:55 of fertility. And so I think for a lot of reasons, it’s like our Africa Savannah brain basically
1:51:00 saying, is this person going to be a good fit for me or not? And I should have a higher indication
1:51:06 of value for that. That would be what I would assume. And then maybe today, it’s also due to the
1:51:11 fact that you have a historical bias, like the people who do dress better historically have more
1:51:16 money. And so your prior interactions with people who have more money and look like this as opposed
1:51:21 to this. And then you take them more seriously. Yeah, it could be. What do you think? That would
1:51:26 be my sort of guess, right? Is you form a snap judgment unconsciously, like not consciously,
1:51:32 that this person is, and you can probably prove this, like if you were to walk into
1:51:37 a Porsche dealership and you’re wearing a fitted suit versus you’re wearing sweatpants,
1:51:42 how people interact with you, just on that. I want to come back to your husband for a second
1:51:46 because you guys do this thing I really want to talk about. But before that, you mentioned books.
1:51:51 What have you learned from business biographies? Oh, yeah. Well, I think that you learn more from
1:51:56 biographies of billionaires than most self-help books. I think, you know, I just went through a
1:52:02 list of a bunch of business biographies that I thought were really useful. And the reason I
1:52:08 like to learn about billionaires lives and even like in my book, I open up with the story of Wayne
1:52:14 Hezinga, who was the founder of Waste Management, one of the biggest garbage companies in the world.
1:52:20 And what’s fascinating is he started off owning a, sorry, not owning, he started off driving a
1:52:25 garbage truck. And what I think is interesting about that is he goes from owning a garbage truck
1:52:30 to working for a small garbage truck company to saying, wait a second, this guy is running this
1:52:35 garbage truck company. Couldn’t I do it? Why don’t I buy a series of garbage trucks and then
1:52:40 a series of garbage companies and then compile them into this big huge thing. And so if I can see
1:52:47 a model that works, then I can reverse engineer how to get there. And so I often find with
1:52:52 biographies of billionaires and lessons from billionaires, there’s a model in how they did things.
1:52:58 And you can sort of reverse engineer it your own way, as opposed to at times, if you’re following
1:53:05 like a self-help book, it’s a lot of theory or frameworks or ideation, which could be useful,
1:53:11 but maybe you don’t have the practical application. And so I like to see like, Tom did X plus Y,
1:53:18 which got Z. If Cody does X plus Y, likelihood of getting Z. And my brain sort of thinks and
1:53:22 not in numbers exactly like that, but equations like that.
1:53:26 I think that’s fascinating, right? But what I’m hearing is you’re filling your brain with this
1:53:33 repository of ideas, furniture, if you will, that are the raw material for when you run into a problem,
1:53:38 now when you’re searching this, you’re sort of like, oh, this reminds me of this situation. Maybe
1:53:43 I can handle it this way. Is the environment different? Can I apply it? Yeah. Well, I think
1:53:50 I don’t have the big huge type of brain that finds completely novel solutions and runs with it.
1:53:54 So my brain is in Colby, what they call a fact finder brain. So I first kind of like,
1:53:58 probably because I was a journalist, I look at the landscape and say, how have people done this
1:54:03 before? What does the data tell us? If I get, you know, 10 instances of this, what happens in nine
1:54:08 out of those 10 instances? Okay, now I have like some examples. And then I’ll go, okay, here’s my
1:54:13 problem. How do I apply those examples to my problem? And that just helps me feel a higher
1:54:17 degree of confidence that’ll work. So if you work at my companies, you’ll often hear me say,
1:54:23 like somebody will say, this is a good video. I’m gonna say, what does good mean? And they’ll say,
1:54:29 well, I like it, or it feels good, or whatever. And I’ll say, well, I can’t really quantify that.
1:54:33 Could you give me some different metrics? And so now we’ll have definitions with metrics for almost
1:54:38 everything. Because when you use the same words, then you’re actually having the same conversation.
1:54:44 Often we aren’t like good is too squishy. You can’t tell what it means. And so a lot of what we do
1:54:49 at our companies is figure out words mean things, different things to different people. What’s our
1:54:53 exact definition? And then once we have the exact definition, what’s the playbook we can use with
1:54:58 those words? I’m also really big on playbooks. I think they help. What’s your problem with
1:55:05 Rich Dad versus Porta? First of all, he’s a genius. And I think he changed, this is Robert
1:55:12 Kiyosaki, the author. I think he changed a generation of pure W2 employees who had never
1:55:19 thought about climbing the investment ladder to be allowed to climb the investment ladder.
1:55:29 My problem is, man, Sheryl Sandberg became how rich being a W2? Very rich. I mean, the CEO of
1:55:32 Google, one of the richest men in the world from being an employee, I think that we have
1:55:37 bastardized this idea of being an employee. And we’ve said it’s bad, and it’s less than you should
1:55:42 be a founder and entrepreneur. And so in Rich Dad, Porta, he has this quadrant where he basically
1:55:46 has a W2 employee at the low end of the totem pole. And I don’t believe in that. I think W2
1:55:51 is just your tax status. And actually, it doesn’t matter. Are you not smarter than the average
1:55:57 entrepreneur? If you are a W2 employee and you use the wages earned with zero risk because you’re
1:56:03 working with somebody else to invest in assets that then increase your income stream, but allow
1:56:07 you to still make money using somebody else’s risk. I don’t think there’s anything wrong with that.
1:56:12 So that’s my problem with that framework, which is called the Cash Flow Quadrant, I believe,
1:56:19 because I think that we have made people feel bad about being a W2. And I remember
1:56:24 one of my friends came into, we run a community of business buyers, right? And so it’s an academy
1:56:29 where you go and learn how to do M&A. And one of my friends came into the M&A Academy,
1:56:34 and this person was making like $600, $700,000 a year. And they were making $600, $700,000,
1:56:38 they wanted to buy a couple of businesses on the side, but they loved what they did.
1:56:42 And somebody said to them, “Oh, you’re just a W2.” And I was pissed. I’m like, first of all,
1:56:48 how do you expect to be a business owner one day with just W2 employees? You’re not going to have
1:56:54 any if you treat them like that. Second, why does that matter? It doesn’t. It just means
1:56:59 we need to be able to do what we love and have a backup plan in case that doesn’t work out,
1:57:03 which is some investable assets. So that’s my problem is I think it creates a series of people
1:57:08 who think that there are better than or somebody is worse than because of their tax status, which
1:57:13 makes no sense to me. What are the different types of income streams that are available to somebody
1:57:19 who’s a W2 employee, like working for somebody else, getting a paycheck every week so that they
1:57:24 can build financial freedom? I think one of the best times to invest in assets that can provide
1:57:29 more income is when you’re employed, because you have an income stream, which means you have less
1:57:34 risk. If you’re going to go and start a new business, you probably shouldn’t diversify right
1:57:38 off the bat with a bunch of investments. You kind of need to focus and make sure that you’re
1:57:42 going to grow your business or invest in other companies inside of your business. You could
1:57:48 do what’s called strategic M&A. But when you’re a W2 employee, I mean, gosh, we have probably,
1:57:53 I would say like 40% of our community and there’s thousands of business buyers in there are W2s who
1:57:58 largely want to keep their W2 salary. They probably are pretty high earners and they’re doing things
1:58:04 like they’re buying series of hotels or Airbnbs and running those simultaneously. Then they’re
1:58:09 buying property management companies that run those Airbnbs. So they have 20% that they take
1:58:17 back in them. They’re buying laundromats and car washes. So what I call people light businesses.
1:58:22 So you don’t need a ton of employees for those businesses. They might be buying vendors for
1:58:29 people that they know and use inside of their W2. So maybe they buy a studio like this because they
1:58:33 work for a podcast company and so they can cash flow on it. And then of course,
1:58:38 traditional things like investing in funds and the stock market and REITs and all of that,
1:58:43 which I think the other thing that’s a little funny about today is there’s a lot of people who
1:58:52 don’t like the stock market, who don’t like bonds, who think that you shouldn’t invest that way
1:58:58 and I think that’s bizarre. Like the best money managers in the world have diversification to
1:59:07 some way, shape or form for longevity over time. And so I think you’re crazy to not want to have
1:59:13 multiple ways to protect the downside. You and your husband do this thing, the team thing. Can
1:59:18 you explain this to me and how it’s helped your marriage? Yeah, we’ve added on to it. So I don’t
1:59:25 know if you have this, but when you keep sort of bickering with your spouse, like little things
1:59:30 and they kind of compile and you look back on a fight and you’re like, why was that so dramatic?
1:59:35 It was about a book left on the table. It was about a water stain somewhere left out. What a
1:59:41 dumb fight. And so we were having some of those. And so we have a coach that we use because I
1:59:45 believe in coaches in almost every area of your life that you can. I want to steal other people’s
1:59:50 10,000 hours always. And so Brandy was basically like, we do this thing called team, which is at
1:59:55 the end of the day, I want to say every day, but we don’t do it every day. So often sit down
1:59:59 and it goes like this, you touch. So the first thing, maybe you’re like holding hands, maybe
2:00:03 you’re sitting next to each other. The second is educate. So you sit down and you’re like,
2:00:08 what did I learn today? Oh, I learned this cool thing from my conversation with Shane. I share,
2:00:14 he shares, then appreciation. So it’s like, Hey, I really appreciate honey. If it’s a bad day, it
2:00:19 might be like, thanks for taking out the trash. That’s all I fucking got today. But I appreciate
2:00:23 that you did that. The only rule is you can’t keep using the same things every day. You got to
2:00:30 find something new to appreciate. And then finally, metrics. And metrics is like, I wish you did this
2:00:36 better today. Today, you didn’t take care of the dog. You didn’t feed the dog. And I wish you did.
2:00:40 And you said this to me and I wish you would have said it that way instead. And so we keep
2:00:46 the small things for a period in which we’re not elevated. And that is when we are at our best.
2:00:49 And so and at the end of that, we might also have something like
2:00:56 expectations. So that would be like, now we’re really busy and we’re both running businesses,
2:01:02 he runs our portfolio. And so we realized, even if we did team, like, maybe this week,
2:01:08 you’re traveling here and your wife’s home with the kids. And you know, you’re going to be in
2:01:12 studio six hours a day. And you’re not going to be available. And when you’re done, you’re going
2:01:15 to be so tired, you’re not going to want to get on the phone with her. You’re going to want a quick
2:01:19 call with the kids, but you’re going to need to go to sleep afterwards. And when you come home on
2:01:22 Friday, even though you’re going to want to like, she’s going to want to go to dinner and you’re
2:01:26 going to want to you’re going to be so tired, you’re not going to be able to. And so we do
2:01:30 an expectation meeting now on Sundays, where it’s like, all right, what’s going down this week?
2:01:35 I’m traveling here, you’re traveling there, we got this, we got this, the kids need this,
2:01:40 I need that. Okay, cool. What do you, what’s your expectation level of like energy? Is this a brutal
2:01:46 week for you? Yeah, this week’s awful. No, this week’s pretty light. So we go, okay, if it’s awful
2:01:50 week, I know, you’re probably not going to be at your best. You might be a little sure with me.
2:01:55 You might need a little bit more love. I got you this week. Or we’re both kind of, it’s a brutal
2:02:01 week for both of us. So let’s try it easy this week. Let’s, let’s try to not nitpick each other
2:02:07 so much. And I just think, you know, you do that with your teams, you’re like, all right, guys,
2:02:12 we got a big week this week. So like, everybody needs to be in the office here, you know, or let’s
2:02:16 take Friday off half day, because we got too much going on the rest of the week. But why not do it
2:02:20 with your marriage? Because otherwise, I think life can run you down. And you don’t realize you’re
2:02:23 not even fighting because you’re mad, you’re fighting because you’re tired and beat up and
2:02:28 you got nothing left, you’re just trying to survive. And so it really helped us.
2:02:34 That expectation thing is really fascinating. Often in couples, there’s one partner who’s
2:02:39 maybe working harder than the other. And it could be a female surgeon and a guy who works
2:02:44 in nine to five, and it could be the other way around or somebody running a business and their
2:02:48 partner is more, their job is more defined. How do you handle like a mismatch between,
2:02:54 you know, my day is 12 hours, your day is like six hours or vice versa, right? My day is six
2:02:58 hours, your day is 12 hours. When you get home, I’m like full of energy and I can’t wait to see
2:03:04 you and you’re like, oh, I’m drained. Yeah, well, we compromise. So mine might be like, all right,
2:03:10 I’m in my season. I’m in a build season. And it’s going to be brutal because I’m in my residency
2:03:15 for the next three years. And we know that. And so it’s not on a week basis, it’s a three year
2:03:20 basis. So let’s have some expectations studying about what these three years is going to be like.
2:03:24 All right, you know that I’m going to be exhausted all these days, but you know what? You’re still my
2:03:28 top priority. So on Saturdays, I’m going to make it up to you. We’re going to have a date night,
2:03:33 I’m going to plan it, I’m going to handle it. We’re going to do a vacation like three or four
2:03:38 times a year. I’ll make sure to prioritize that. If we do those things, like, does that fill your
2:03:46 cup enough? Right. I think a lot of times these things happen in marriage because we aren’t honest
2:03:51 about the fact that we don’t have full tanks all the time. And you know, you’re going to have a
2:03:57 build season. And if you can tell, you know, your partner, Hey, I just had a baby, you know,
2:04:03 these next, this next year, I’m probably going to be tired. And I’m, and I’m not going to go
2:04:06 to the gym as much as I want to. And I want to know you’re still going to love me and whatever
2:04:13 fears you have. Then it takes a lot of the edge off because a lot of times we’re not even acknowledging
2:04:20 what the real problem is, right? Which is like, I am just really tired. And because this year I
2:04:25 know like this quarter for me, I have a book launch, which is brutal and like harder than I
2:04:29 thought it was going to be. It’s like, Oh my God, all this traveling and I mean, champagne
2:04:33 problems. It’s like such a hard podcast. But like, you know, it’s, it’s a lot of focus.
2:04:38 People who aren’t in it don’t understand all the stuff that goes into it. If you’re trying to
2:04:45 excel at it. Yeah, it’s a, it’s a weird process. And so Chris and I sat down and talked about it.
2:04:51 And I was like, listen, the compromise is in January, February and March, I’m not going to do
2:04:57 any speaking events. Like I’m just nope, zero. And so stick with me for three months, then,
2:05:01 you know, come into the year, we’re going to chill out. There’s a light at the end of this tunnel.
2:05:06 Exactly. And so you got to find whatever your compromise is. Otherwise, I think if you’re
2:05:10 always like, well, I always work 12 hours, you always work six. Well, that might not a happy
2:05:15 marriage make. And I like how you’re sort of setting expectations, which is like, Hey, you know,
2:05:19 it’s going to be busy for the next three months. And then there’s like this light at the end of
2:05:23 the tunnel. Yeah, my husband totally taught me that I was terrible at it. I’m not a great communicator
2:05:29 actually, interpersonally. I just go, go, go, go, go. And he was, he’s the one that’s like often
2:05:34 like, All right, stop. Let’s talk about this. Let’s be really clear. What do you really want?
2:05:38 So I have to give him all the credit in the world for that. We always end on the same question,
2:05:43 which is, what is success for you? For me, it’s two part. Long term, it’s,
2:05:48 you know, Emma Bombeck has this quote, which is, when I stand before God at the end of my days,
2:05:54 I want to feel like I used everything you gave me. I have not one drop left. And that’s how I want
2:05:59 to feel. I want to feel like I’m rung it out. Like I just left it on the field every piece of ability
2:06:08 that I had. And then the second part is, I want to feel peace and like, I’m enough. Like no matter
2:06:14 even if, if I don’t want to wring out those last couple of drops, that’s okay. And so it’s this
2:06:20 balance between what am I capable of and no matter what I achieve is enough. Little child of God,
2:06:21 no big deal either way.
2:06:33 Thanks for listening and learning with us for a complete list of episodes,
2:06:41 show notes, transcripts, and more go to fs.blog/podcast or just Google the Knowledge Project.
2:06:47 Recently, I’ve started to record my reflections and thoughts about the interview after the interview.
2:06:52 I sit down, highlight the key moments that stood out for me, and I also talk about
2:06:57 other connections to episodes and sort of what’s got me pondering that I maybe haven’t quite figured
2:07:04 out. This is available to supporting members of the Knowledge Project. You can go to fs.blog/membership,
2:07:09 check out the show notes for a link, and you can sign up today. And my reflections will just be
2:07:14 available in your private podcast feed. You’ll also skip all the ads at the front of the episode.
2:07:19 The Furnham Street blog is also where you can learn more about my new book, Clear Thinking,
2:07:24 Turning Ordinary Moments Into Extraordinary Results. It’s a transformative guide that
2:07:30 hands you the tools to master your fate, sharpen your decision making, and set yourself up for
2:07:43 unparalleled success. Learn more at fs.blog/clear. Until next time.
2:07:53 [BLANK_AUDIO]

0:00:16 [Music]
0:00:20 Welcome to The Knowledge Project, a podcast about mastering the best of what other people have
0:00:26 already figured out so you can apply their insights to your life. I’m your host, Shane Parrish.
0:00:32 The final episode of The Knowledge Project for 2024 is a collection of the best
0:00:37 insights from the show this year. We’ve had some of our most popular episodes ever come out this
0:00:44 year and I’m excited to share some of the best ideas and our favorite moments in one episode.
0:00:50 These insights will set you up for an incredible new year. Thank you for listening and learning with
0:00:55 us together. We’re going to make 2025 even better. We have a lot in store for the podcast this year
0:00:59 until then. Happy holidays to you and yours.
0:01:16 There are too many podcasts and not enough time. What if you could skip the noise and get just the
0:01:22 insightful moments, even from shows you didn’t know existed? That’s what Overlap does. Overlap
0:01:27 is an AI-driven podcast app that uses large language models to curate the best moments from
0:01:34 episodes. Imagine having a smart assistant who reads through every transcript, finds just the best
0:01:40 parts, and serves them up based on whatever topic you’re interested in. I use Overlap every day
0:01:45 to research, guess, explore, and learn. Give it a try and start discovering the best moments from
0:01:51 the best podcast. Go to JoinOverlap.com. That’s JoinOverlap.com.
0:02:00 Hamburgler. Why are you calling? Rubble, rubble. McDonald’s has a new biggest burger called Big
0:02:05 Arch, made with two 100% Canadian beef patties, a new delicious sauce, and all the McDonald’s
0:02:10 flavors you love. And wait, you want me to help you get it? Rubble. Come on.
0:02:19 Compared to beef burgers on McDonald’s current menu at participating restaurants in Canada.
0:02:27 Let’s start with our most popular episode of the year featuring personal finance expert,
0:02:34 Morgan Housel. The skills it takes to get rich are different from the skills it takes to stay rich.
0:02:40 Do you understand this phenomenon more than Morgan? In America, we spend something like $100
0:02:46 billion a year on lottery tickets. $100 billion. It’s massive that people spend on lottery tickets.
0:02:52 And if you dig into who’s buying it, it’s almost exclusively poor people. They buy the vast majority
0:02:58 of lottery tickets. And the poorer you are, the more lottery tickets you buy. And these are some
0:03:04 people for whom they literally can’t buy food or they might be homeless. And whatever little money
0:03:09 they have, they go into a 7-Eleven and buy some scratcher tickets. And you might look at that and
0:03:14 say like, you idiots, what are you doing? This is the dumbest idea I’ve ever seen. And maybe that’s
0:03:19 the right answer. Like maybe you could just stop there. But in Kahneman’s framework, I think it
0:03:24 starts to make a little bit more sense. If you have someone in a situation like this who, in their
0:03:30 mind at least, they think, I can’t get a raise. I can’t build a career. I can’t get promoted. I’m
0:03:37 kind of stuck in minimum wage job. If that’s their mindset, then buying a lottery ticket might be the
0:03:43 only time in their life where they can say to themselves and believe like, this is my literally
0:03:48 ticket out of here. This is the only chance that I have to get ahead. And so it starts to make a
0:03:52 little bit more sense in that situation. And maybe you contrast that with someone who has
0:03:57 a very high net worth. They might be like, look, I can just put all my money in treasuries and just
0:04:02 live for the rest of my life to solve the interest. And when you have so much, you don’t need to take
0:04:06 the risk. Well, it comes down to perspective, right? So like if I could see what you see and feel
0:04:10 what you feel, that decision would be rational. Yeah. There’s so many things in life where you
0:04:15 can look at other people and the decisions they make, not just in money, but for politics, their
0:04:20 health decisions, whatever it might be, and fiercely disagree with it. But what’s easy to
0:04:25 overlook is that if I were in your shoes and had experienced what you had, had the same family
0:04:30 dynamic that you do, the same DNA that you do, I would do the exact same thing. And I think that
0:04:36 is a more important question to ask yourself. Like, what financial decisions would I make
0:04:41 differently if I were born in a different era, born to different parents, born in a different
0:04:46 country? And I think you can answer that question honestly, because you don’t know, but you know
0:04:50 there would be a lot of things different that are completely outside of your control. Where and
0:04:55 when you were born would have a massive impact. You and I should not pretend that if we were born
0:05:00 in the 1960s in Nigeria, that we would have the same views about investing in the stock market
0:05:05 over time that you and I do today. This kind of gets to the topic of luck. And a lot of people
0:05:09 when you bring up luck, they will say something that sounds smart that I fiercely disagree with.
0:05:15 They say like, oh, you should increase the surface area of your luck. You should like, oh, the harder
0:05:19 I work, the luckier I get was like some variation of that. And I’m like, no, if you can do something
0:05:24 that changes your odds of an outcome, it’s not luck by definition. Luck to me, the biggest
0:05:29 start where and when you were born, you can’t control it. Bill Gates couldn’t control it.
0:05:35 Elon Musk couldn’t control it, but it has a massive impact on where you’re going to go in life.
0:05:38 That to me is what luck is. It’s what you truly have absolutely no control over.
0:05:44 And then there’s also the not only the country you’re born into, but the socioeconomic household
0:05:50 you’re born into, the schools that you go to. How much of this is nature versus nurture versus
0:05:56 chosen nurture? The stat that I think is so astounding is that income among brothers
0:06:01 is more correlated than height or weight. So basically that means if you have a brother
0:06:08 who is rich and tall, you are more likely to also be rich than you are tall. It’s more correlated
0:06:12 than the literal DNA that you’re sharing with each other. Look, is it a perfect correlation?
0:06:17 No. Is it possible to be raised by a poor family and become rich? Of course. Is it possible to
0:06:22 be raised by a rich family and end up in the streets? Of course. But there’s a very strong
0:06:29 correlation between those two. I think people can get kind of testy when you talk about luck,
0:06:35 because if I say that you got lucky, I look jealous. And if I say that I got lucky,
0:06:40 I feel diminished in what I’m doing in life. So it plays a massive role,
0:06:44 but it’s very easy to ignore the impact that it has in the world.
0:06:50 How do we break down that contribution between luck and skill or what’s repeatable on our part?
0:06:55 Rather than saying, what is luck? I think it’s important to just say, what is repeatable?
0:06:59 What is something that happened that I could do again? And if we look at Buffett,
0:07:03 this guy standing behind our shoulder here, and let’s look at the course of his life.
0:07:10 I cannot, he cannot recreate the trading conditions that existed in the 1950s that
0:07:14 allowed him to buy blue chip stocks at three times earnings, whatever it was back then that he was
0:07:20 doing. He can’t recreate that. He couldn’t do it again. But could I or you or anyone else listening
0:07:27 try to recreate his patience, his risk framework? Yes. So that’s something we should pay attention
0:07:32 to. You want to find what is repeatable and what you could do again. And those are the things you
0:07:36 should just pay the most attention to. I think that’s fascinating, right? Because when we look
0:07:41 at Buffett, what we want is the outcome. And what we don’t think about is all the things that go
0:07:45 into creating that outcome. So what stays the same between all these different decades where he’s
0:07:51 done this, right? So he’s done it from buying net net, Ben Graham stocks, all the way to buying
0:07:56 great businesses, all the way to the patience to do nothing. And then once every 10 years,
0:08:01 deploy a whole bunch of cash. What is consistent across that period in your mind?
0:08:04 Two of the big ones, we could come up with dozens of things that are consistent with someone like
0:08:10 Buffett, but the two big ones are endurance and maybe tied to that capping a downside risk
0:08:15 that allows him to stick around for longer than anyone else. There’s also a psychological trade
0:08:22 of wanting to keep going longer than anyone else. I use this stat in my book that 99% of Buffett’s
0:08:27 net worth was accumulated after his 60th birthday. Like the vast majority of people, including me,
0:08:33 and maybe you, if we became a billionaire at age 60, would be done. She moved to Florida and
0:08:38 buy a private island and like live happily ever after. For him to be that successful and to keep
0:08:45 going full blast for what’s now another 33 years and still going stronger than ever is a very unique
0:08:51 characteristic that plays a massive role in his success. If Buffett had retired at age 60 or 50,
0:08:55 like a normal person would have in that situation, you would have never heard of him.
0:08:59 The whole reason he’s so successful is just the endurance. And there’s a, again,
0:09:04 there’s a psychological and a financial component to that, never getting wiped out financially.
0:09:10 And the psychology that will allow him to keep going full blast for nearly a century on end now.
0:09:16 But that sounds academically correct, but in temperament, incredibly difficult,
0:09:23 because I see my friends getting rich off like Bitcoin or something. And that makes me want to
0:09:29 change the patience that I have. I know how to get wealthy over time. We know historically that
0:09:35 what’s worked is saving money, being very patient, letting it compound decade after decade,
0:09:40 then all of a sudden you wake up with a ton of money and financial independence.
0:09:47 But if I see my neighbor getting richer quicker than I am, it makes me want to accelerate that
0:09:54 timeline. And my lack of patience sort of changes the outcome. Not having FOMO is the single most
0:09:58 important financial skill. I think it’s so important that you cannot ever imagine accumulating
0:10:03 significant wealth over your lifetime if you are susceptible to FOMO. Like if there’s literally
0:10:07 one thing, like one trait that you want that’s going to allow you to accumulate wealth, it’s the
0:10:12 lack of FOMO. Particularly in modern markets, I can get so crazy with social media and Reddit
0:10:18 and Twitter and everything. If you are susceptible to FOMO, there’s no hope for you over time.
0:10:23 I really don’t think that’s an exaggeration. And that being able to see your neighbor get much
0:10:30 richer than you and not being impacted by it is so incredibly critical and easy to overlook these
0:10:36 days. I don’t have that many financial skills. I could never be a stock picker. I could never be
0:10:42 a trader. I don’t have the intellect or the horsepower to pull that off. But I feel like I’ve
0:10:47 never been at least that susceptible to FOMO. It doesn’t bother me in the slightest to watch
0:10:52 other people getting rich. Brent Bishore, our mutual good friend, had a quote that I love. He said,
0:10:58 “I am perfectly happy watching you get very rich doing something that I would never want to do.”
0:11:04 And I think that’s a great way to frame it. I don’t get jealous or anxious to watch other
0:11:10 people get richer than I am over time. My investing strategy is to own index funds for as long as I
0:11:16 possibly can, to be average for an above average period of time. And I think that will actually
0:11:21 lead to an incredible outcome. Not only will it achieve the financial goals that I have for my
0:11:27 family, but I think over a long period of time, it will put you in the top decile at least of
0:11:31 people who are compounding money over time. I think it’s really hard to appreciate that what’s
0:11:36 short-term optimal and what’s long-term optimal are often two different things.
0:11:40 Completely different things. Howard Marks talked about this investor that he knew who,
0:11:46 in any given year, he was never in the top half versus his peers. He was never in the top 50%
0:11:52 of other investors. And over a 20-year period, he was in the top 4%. Because everyone else who
0:11:57 was beating him in a given year couldn’t keep it going. And so what’s your ultimate goal?
0:12:02 So much of investing is just to find the game that you’re playing. And I don’t look down upon
0:12:08 or criticize people who are short-term traders. Maybe that’s their game and for their investors
0:12:12 or for their… It makes sense for them. My game is different. I think your game is different. Most
0:12:17 people’s game might be a little bit different. And what’s important is that if your game is to
0:12:23 invest for the next 20, 30, 50 years that you’re not taking your cues from people who are playing
0:12:28 a different game of trading for the next quarter. And that’s where a lot of danger in investing comes
0:12:36 from. Hamburglar, why are you calling? Rubble, rubble. McDonald’s has a new biggest burger called
0:12:41 Big Arch made with two 100% Canadian beef patties, a new delicious sauce, and all the McDonald’s
0:12:48 flavors you love. And wait, you want me to help you get it? Rubble. Come on. Compared to beef burgers
0:12:57 on McDonald’s current menu at participating restaurants in Canada. It’s not easy to struggle
0:13:03 with substance use, but with the help and support you need, it doesn’t have to be quite so hard.
0:13:09 From taking the first step, even if you take it a hundred times, defining the right connection,
0:13:16 reaching out, and feeling supported, the thing that helps might not be the same for everyone.
0:13:23 So it can help to know where to start. Find supports and stories at helpstartshere.gov.bc.ca,
0:13:30 a message from the government of BC. Next, Blake Eastman, who has dedicated his entire life to
0:13:36 psychology and nonverbal behavior. And people are obsessed with recording the person on stage.
0:13:40 What’s more interesting is recording the audience. Because the truth is, I’m always asked how
0:13:44 did my presentation go? I don’t know. Let’s see the audience. A presentation is for that group
0:13:49 of people. So what often happens is a lot of communication experts will watch a presentation
0:13:52 and they’ll go, well, I think you should move your hands more or less. Or I think you should
0:13:57 speak up. They’re doing that through their perceptual lens. They’re not optimizing for the
0:14:02 engagement of the audience. So I used to record my presentation and the audience every third
0:14:06 presentation for three years. That’s fascinating. Why don’t we take that approach? I mean,
0:14:10 comedians effectively take that approach without recording the audience because it’s
0:14:15 based on, oh, that joke got a laugh. I’m going to use that next time. That joke fell flat.
0:14:20 I’m not going to use that next time. It’s the feedback loop is instant. So that’s how that was
0:14:24 such the value. Like when I was teaching psychology at CUNY, I was speaking like 80 to 100 hours a
0:14:30 week, both in my office and both instant feedback loop of what story worked, what story didn’t work.
0:14:34 Like, did that land, did that offend somebody? And you just start to develop this quicker repertoire
0:14:38 of things that actually work. But that comes from that audience interaction. But most people,
0:14:43 when giving a presentation, they’re not even present enough to do that because they’re so in
0:14:48 their head about the presentation. So it’s sort of a skill set that comes after you’ve been more
0:14:52 comfortable being on stage to be able to process and sort of predict the behavior of an audience.
0:14:56 What’s the biggest thing that gets in people’s way when they’re presenting?
0:15:03 Really, just the social construction that a presentation is something different. So people,
0:15:07 it’s got this whole cultural narrative. Oh, you got a, you have your big presentation coming up.
0:15:12 It’s hyped up as this different thing. You’re just talking to a group of people,
0:15:17 and they’re responding by shaking their head and nodding, and you’re setting up there. I think
0:15:21 that’s the first construct that needs to be broken. And then also just people just don’t
0:15:26 put in the reps. Like that’s something that just takes time. And most people work so hard for a
0:15:30 presentation, and they do it. And that’s like, oh, it’s flood of release where they should have just
0:15:35 done it every day for the next three weeks through a presentation, it’d be so much better.
0:15:41 What is putting in the reps mean? Does that mean crafting your story and positioning for the audience?
0:15:46 Does it mean your intonation? Like, how do you actually go about working on that? Like,
0:15:52 how would you make me an expert presenter if you had three weeks and you had one hour a day of my
0:15:57 time? So that’s so cool that you did that. So my question has always been, what was the constraint?
0:16:03 So if you said three hours a week, one hour a day of your time, the first week would probably be reps
0:16:09 of just, let’s get you comfortable. So the thing is, a lot of the nonverbal behavior stuff and
0:16:14 movement, I have found reliably that the most effective version of someone is when they’re
0:16:20 the most comfortable. Bar not every single time. So the whole joke is people think I teach like,
0:16:24 oh, stand this way. No, like step one is get you to the level where you’re the most comfortable,
0:16:29 where you feel the most free, and then build on top of that. So I try to get you there first.
0:16:34 And I wouldn’t be focusing on, I mean, it really depends. If you’re doing like a Ted Talk, that
0:16:37 was like 20 minutes, I’d probably tell you just to rehearse it and get that down. But we’re doing
0:16:42 like an hour presentation or the most presentations that people have to do. It would be all outlines,
0:16:49 repeat, repeat, repeat, repeat. And it’s a, it’s a careful balancing act to like understand where
0:16:54 you’re at. Because some people with a lot of anxiety, I will know, or some people that are
0:16:59 trying to get it right. I won’t be focusing on little details. It’s a way more dynamic process
0:17:04 like, so some people that have like these facial things to getting better at presentations, like,
0:17:06 it’s different for every person. Because some, if someone you’re telling someone,
0:17:10 listen, you’re moving your hands too much, and they’re going to get in their head about moving
0:17:14 their hands too much, you’re going to start looking all weird. And some people can take a cue
0:17:19 and immediately change it. And other people just get them comfortable, just get them comfortable.
0:17:23 And then using video, but you’re gonna hear something else fascinating. So what do you show
0:17:30 people video of themselves? I work once work with this woman. I hope she’s hearing this because
0:17:36 I love her, but not to call her out. So I, she gives one of the worst initial presentations
0:17:43 I’ve ever seen in my entire life. She was extremely flat. She was like moving her hands. She literally
0:17:48 spoke like this for an entire 20 minutes. And it was like painful to watch. And at the end of the
0:17:51 video, I was like, okay, so let’s see what we’re working with. And I put her video on her like
0:17:55 projector. And the first thing she says to me is like, I need to know his job.
0:18:01 And it just shows you like that’s where that person’s perception is focused on. Like,
0:18:07 we’re focused on these weird little different things that no one else recognizes or no one
0:18:13 else cares about. And I truly believe that the most world class best presenters are truly about
0:18:17 their audience and not about themselves. They’re not trying to come across a certain way. They’re
0:18:22 trying to like, I even feel that now, like I’m stepping more into my own self after the first
0:18:27 20 minutes. Like at first, it’s a little bit, you know, it’s a little different. I’m trying to be
0:18:31 more measured. Now it’s more me coming out of it. And the truth is, how do you get to that
0:18:36 immediately and build from there and go right away into that? I want to switch gears a little bit
0:18:43 and talk about workplace and sort of power structures and social dynamics. How can you
0:18:48 teach me to understand the power structure at work and social dynamics? How would you go about that?
0:18:56 So power structures. Oh man, that’s such a good question. They are these invisible things. That’s
0:19:00 what I when we talk about reading the room in a corporate structure, that’s what we’re talking
0:19:04 about. We’re talking about power structure, we’re talking about permissions, all these things. The
0:19:10 first way to do it is to do this exercise where you sort of do a decision tree of the potential,
0:19:16 like show people what the potential landscape could be. So for example, let’s say all of a sudden
0:19:23 a new CEO gets pulled in and we want to say, okay, what is this CEO going through? Is this CEO
0:19:29 just pushed in by the PE company? Does the CEO have performance base incentives? Like what are
0:19:35 they trying to do? And just map out all what quote unquote is possible and then start using the data
0:19:41 and evidence that’s coming in on a daily basis to like cross out which one it is. And then sometimes
0:19:46 just straight up ask. I think that’s something that a lot of organizations don’t do. I can’t tell
0:19:51 you the amount of times where I’m just like, so I have this really cool perspective because I work
0:19:57 with often the entire C-suite. So like the COO, CTO, like everybody I work with. And it’s like,
0:20:01 you two need to talk about this because this is blocking, you two need to talk about this.
0:20:05 But the amount of communication that just doesn’t happen at like a personal level
0:20:12 or just a level that’s like blocking decision making, it’s kind of crazy. I think organizations
0:20:19 need to talk way more than they are in this siloed environment sometimes. If you just were able to
0:20:24 have those conversations, you would be able to navigate and see the power structures way easier.
0:20:28 And people just don’t have that social skill set that the people skills to sit down with someone.
0:20:34 And I’ve just seen a lot of people get power structures. Oh, I’ll give you a good one.
0:20:42 If you are falling in line with a power structure, it’s often very difficult to navigate it.
0:20:48 Meaning if it’s like, oh my God, this person is this and this person is this and I’m just this,
0:20:52 you’re very rarely going to be able to see eye to eye with that person because you perceive them
0:20:57 here and you perceive yourself here. And I feel like people do that a lot inside of organizations
0:21:00 and doesn’t give them that creative freedom to actually read what’s going on.
0:21:06 Is the delta between where you are and where you perceive the other person?
0:21:15 Like, does that influence your how? I mean, just from like, of what you have quote on quote permission
0:21:21 to do or say, it’s all a perception. Like, I’ve worked with people like executive, I’ve worked
0:21:27 with CEOs that are the most open. Every all of their behavior suggests that they’re the most open,
0:21:31 honest, come to them with problems. But people don’t come to them with problems because they’re
0:21:35 a CEO. Yeah, they say it over and over and over again. And I look at why they’re like, I don’t
0:21:41 want to bother the CEO with this. They said seven times this year, come to me with this specific
0:21:47 kind of problem. Yeah, you’re right. But I just don’t know. You get in your head like that.
0:21:53 How much of that do you think is cultural too? Because I worked with a CEO who said that. But
0:21:57 the minute you came to him with the problem, he basically like scream at you. That’s the
0:22:02 kind of stuff that I correct. So that’s the bulk of my when you say something. But your patent,
0:22:09 a lot of these people often just don’t understand a lot of executives don’t understand the impact
0:22:15 of their own behavior. So I have met people that are wonderful, wonderful, wonderful people.
0:22:21 But yeah, the way they give feedback, oh my God, it’s just ripped the person apart. And they’re
0:22:26 like, no, I love them. They’re one of my best people. I think they’re great. I’m like, well,
0:22:30 let’s take responsibility for what that interaction looked like. And that’s why
0:22:34 zoom and video is so important for me. Because sometimes when you work with an executive or
0:22:39 you work with anybody, and you tell them something, they don’t see it like the way that you describe.
0:22:43 But when you show them on video, that feedback, I was like, listen, go back 20 years in your
0:22:48 career. If you were given this feedback, how would you feel? They’re like, yeah. And I do this
0:22:54 cool thing. It’s the exercise that really works. So, you know, leadership principles and all that
0:22:58 stuff, I’m not there to tell somebody how to lead. I’m not there for any of that. I’m there just to
0:23:04 make sure that their intent is aligned with their behavior. So I do this thing where I’m like, close
0:23:10 your eyes and imagine your funeral and everybody you’ve ever worked with in your entire life is
0:23:14 there. What are the stories and things that you’re saying about you? And I just make sure that those
0:23:19 things are in alignment with their behavior. And they choose and solidify what those things are.
0:23:23 And then I kind of hold them accountable to making sure that they’re carrying out those things.
0:23:29 And this is marketing expert April Dunford. Who’s in charge of positioning at a company?
0:23:36 Good question. This has traditionally been seen as a marketing function. And even more specifically
0:23:43 in tech companies, we often say this is a product marketing function. But I don’t believe that.
0:23:48 I think that’s not the right way to think about it. If we really think about what we’re doing
0:23:54 in positioning is we’re getting really tight on who’s our competitor? How are we different?
0:23:59 What is the value we can provide to them to the customer and who exactly are those customers?
0:24:05 If we made a change in that, that would be a big change in the business. If I think about,
0:24:13 again, my CRM example, if we switch from being general purpose enterprise CRM to CRM for investment
0:24:22 banks, that’s a whole different company. So I don’t think marketing has, first of all,
0:24:29 they’re not talking to customers every day the way sales is. They don’t necessarily understand
0:24:37 the differentiation amongst competitors the way the product team would. And sure as heck,
0:24:43 the CEO is going to have something to say about where we’re selling and how we win in the market.
0:24:48 So in the work that I do with companies with positioning, we do it with a cross-functional
0:24:56 team. So we bring together product marketing sales, customer success support, and we bring
0:25:02 everybody together. And everybody comes with what they understand about customers and how we win,
0:25:08 and we work through the positioning together as a group exercise. Now somebody needs to be the
0:25:14 steward or the police of that positioning once we’ve said it to make sure that we are consistent
0:25:18 about that in the way we’re using it in marketing and the way we’re using it in sales. And that’s
0:25:25 typically marketing that does that. I also think it’s good to have somebody be the person that
0:25:30 puts their hand up and says, you know what, things are changing in the market. We maybe need to come
0:25:35 back together and check in on that positioning. But I don’t think that marketing should be able to
0:25:41 change positioning or look at positioning or do it on their own. They could try, but it won’t stick
0:25:46 because sales won’t believe in it. The CEO won’t believe in it. What we actually need is a cross-functional
0:25:51 team to get together and look at it, make some decisions, get everybody in agreement and alignment
0:25:57 on it. And then we can all go execute on it in our respective departments. And then marketing
0:26:02 can be the steward of here’s the positioning, here’s how we define it. This is the messaging that
0:26:06 comes out of that positioning. And then marketing be the person to put their hand up and say,
0:26:10 you know what, this big acquisition just happened in our market and we might need to step back and
0:26:15 relook at the positioning. It’s interesting that you say that when you’re talking about a sales
0:26:21 person and the first call, I was thinking, oh, if things don’t go as planned, the sales person
0:26:26 points to marketing, marketing points to the sales person, everybody points to product.
0:26:31 But you even expanded this. You have a cross-functional team of sales, marketing,
0:26:36 product, customer success, support. And then you have the CEO involvement at some point in there
0:26:41 too. Exactly. And when things are going well, everybody is a winner and everybody’s responsible
0:26:46 for success. But the minute you have a problem, everybody starts pointing the finger at everybody
0:26:54 else. How do you determine that’s a positioning problem versus a larger problem? It’s interesting
0:26:58 because, you know, I do this as work as a consultant. And sometimes companies will call me
0:27:03 and they think they have a positioning problem. And then I have a conversation with them and I’m
0:27:06 like, I don’t actually think that’s a positioning problem because there’s lots of reasons businesses
0:27:12 aren’t successful and positioning is just one of them. So typically, so sometimes companies will
0:27:19 come to me and they’ll say, you know what? Every company we talk to loves us. If we can get them
0:27:24 in a meeting, we close all that business. And that tells me that positioning is good. You’re
0:27:28 just not getting enough meetings. You’re just doing a terrible job at lead generation. You should go
0:27:35 fix that. You just need to get more at bats. Sometimes what you have is a sales execution
0:27:39 problem. Like there’s something in the way you’re executing in sales that isn’t working.
0:27:46 So my test is often like, so first of all, do you have good, happy customers that stick with you
0:27:49 and love you and are referenceable and whatever? Most of the companies that come to me and say,
0:27:58 yes, yes, we have that. Okay. Do you have confusion at the beginning of your sales process where
0:28:05 they come in and they just don’t get it? That gap between what a customer knows and what a prospect
0:28:12 knows. We can close that gap with good positioning. What role does storytelling play in all of this?
0:28:18 Storytelling is one of these things. Marketers think a lot about storytelling and obsess a lot
0:28:25 about storytelling, particularly on the consumer side, business to business marketers like to
0:28:29 think about storytelling. I don’t think a lot of B2B companies are doing an amazing job at
0:28:33 storytelling. What’s really funny about that is if you go over to sales, sales doesn’t care about
0:28:38 storytelling. They never talk about storytelling. And yet they’re the ones that actually are face
0:28:42 to face with a customer. And if anyone should be telling a story, maybe it’s your sales team.
0:28:48 Most of the storytelling stuff that you see, or at least what I learned as a marketer going through,
0:28:52 if you go to marketing school and learn storytelling, a lot of what you’ll see is this
0:28:59 hero’s journey structure for storytelling, which is very common in entertainment. It’s the way most
0:29:04 movies are written. A lot of stories are written with this hero’s journey. So in B2B storytelling,
0:29:10 we think about the hero as the customer. So the customer has a problem they embark on this quest.
0:29:15 They meet a guide. That’s us. We’re the guide. And we give them a plan, and we help them be
0:29:21 successful and avoid defeat as we have this hero’s journey. The problem with that storytelling arc
0:29:28 is there’s kind of no competitor in there. And if we think about what a buyer is actually trying
0:29:34 to figure out is why pick you over the other guys? A hero’s journey doesn’t really give us an arc
0:29:41 to do that. In the work that I do with customers, we start with positioning. So we get really clear
0:29:46 on what’s the value we can deliver that no one else can. Who are the customers that really care
0:29:54 about that? And then we want to build a story around that. The story that we’re trying to tell
0:29:59 needs to answer this question. Why pick us over the other guys? So in that storytelling framework,
0:30:04 we need to have a spot in that framework to paint a picture of the whole market
0:30:10 and then show where we fit and where everybody fits. So we shouldn’t actually be just talking
0:30:13 about us. We should be talking about the alternative approaches to the problem,
0:30:18 which means we’re going to talk about competitors or at least the approach that the competitors take.
0:30:26 In the work I do, we take the positioning, we translate it into a sales pitch.
0:30:34 That sales pitch has a storytelling structure that starts with a conversation around the market.
0:30:42 So we’ll talk about, look, we look at this market in a different way than our competitors.
0:30:46 And because we look at it in a different way, we built the product in a different way.
0:30:52 And your customer, you have lots of choices. There’s other products that you could buy.
0:30:55 There’s other approaches you could take to this problem. Let’s talk about that.
0:30:59 We think about this all day. We have opinions about it. We want to hear what you have to say
0:31:04 about it too. So this is the way we look at it. You could do it this way, this way, or this way.
0:31:07 And here’s the pluses and minuses of these different ways of solving this problem.
0:31:12 And this is a conversation with the customer more than me telling the customer stuff.
0:31:18 But at the same time, I’m teaching the customer about what we think is important in a purchase
0:31:24 decision, which most customers don’t know early in their purchase process. They’re trying to buy
0:31:29 accounting software. Half the people doing a purchase in B2B have never purchased a product
0:31:35 like yours before. So they’re doing this for the first time. They’re overwhelmed with information
0:31:40 on the internet. Every vendor says, we’re the best. No, we’re the best. No, we’re the best.
0:31:44 What we need to do in good sales storytelling in B2B
0:31:52 is help customers understand how to confidently make a decision. In order to do that, I have to
0:31:59 paint a picture of the whole market so they feel good that they understand, ah, if I choose this,
0:32:06 I’m choosing to go big on this and low on this. If I choose this, here are the trade offs for this.
0:32:10 If I choose this, here are the trade offs for this. Or you could choose us and here’s the trade
0:32:15 offs for us. Are we a good fit for you or not? That’s what we should be doing in a good sales
0:32:20 storytelling, in my opinion. And who does that really well, in your opinion? I have a bunch of
0:32:26 clients that I’ve worked with, but one that I think is doing an amazing job of this for a really
0:32:32 technical, complicated product is a company I worked with in San Francisco called Postman.
0:32:42 Postman does essentially a platform for developing APIs. This is a new concept.
0:32:49 Nobody had this idea of a platform for APIs before Postman came up with it. They do an amazing job,
0:32:56 I think, of talking about why APIs are important, so important that you actually don’t want a set
0:33:03 of disjointed tools across your organization to work on them, why that’s important. They’ve coined
0:33:09 a concept called an API First World, and then they’ve done an amazing job of storytelling around that.
0:33:13 So if you go on their website, on their homepage, and you scroll down about halfway,
0:33:23 they have a graphic novel called The API First World, and it’s a graphic novel designed for
0:33:29 technical people to understand this story of what’s an API, why is it important,
0:33:34 why do we really want to have high quality APIs, why is that important for your business,
0:33:40 and why do we need a platform to enable that. So I think they do an incredible job of that,
0:33:45 and they do it in a thousand different ways. If you see the CEO do a conference talk,
0:33:52 he’s actually not talking about the product as much as he is talking about the market and this
0:33:58 concept, and why we need to think about APIs differently. But if you are aligned with his
0:34:03 point of view on the market, you’re going to buy this product. But they’ve really done a good job,
0:34:09 I think, of developing a point of view on the market, helping customers understand the context
0:34:14 around their product, and the things that you need to understand in order to understand
0:34:20 why their product is valuable and why you might pick it. One of my favorite guests of the year,
0:34:27 84-year-old blueberry billionaire, John Bragg. What are the key indicators you look at
0:34:32 for your businesses on a regular basis to gauge how well they’re doing?
0:34:42 Condorator Buffet were a big EBITB believer. The cash they generate. If it’s through depreciation,
0:34:47 that’s all right. How much cash are we generating, and how can we service the debt,
0:34:53 and what can we buy with that cash? And there’s a private company that’s worked for us.
0:34:59 When we were building the cable business, there was lots of depreciation, but the cash flow was
0:35:06 good and still is. It’s the same in the food business as we invest in factories and so on,
0:35:13 and we also try to work the angles on the tax situation and use our depreciation.
0:35:20 Warner said in the past, he’s not a believer in EBITDA, but we are. We think it’s the cash that
0:35:26 the business generates. And so we’re always saying, “Well, what’s the multiple on EBITDA?”
0:35:33 And so we know what cash is coming, because you can usually cut back on your capital if you need
0:35:39 to. We’re always trying to measure how much free cash the business are generating, and what do we
0:35:48 have to either pay down debt or to buy more Buffet Stock or something similar? How would you
0:35:56 classify your management style? Historically, a lot of hands-on. I really don’t find the day-to-day
0:36:06 operations as much fun as I do the investment of the funds, and so I’m enjoying moving to a
0:36:13 head office role as compared with, but I still like to monitor. We still have monthly meetings
0:36:20 with all our major investments. So probably a little, people would say a little too much detail
0:36:26 and so on, but God, when you’re signing the checks and the notes, you won’t know what’s going on.
0:36:33 And so I would rather be well informed up front so that I can help if there’s a problem
0:36:39 that come to the problem late. Operating without surprises is pretty important to me.
0:36:44 There’s a trend in business sort of like getting away from the details as you move up in the
0:36:51 organization. A friend of mine one time said, “You can run any company with five points on the back
0:36:58 of a cigarette package.” That was years ago, but that’s really basic. Just what are the key items?
0:37:06 Is it revenue, is it sales, is it margin, and costs? I’m a big believer in being a low-cost
0:37:13 producer. It doesn’t matter what you’re doing. There’s no excuse to waste money. Your low costs,
0:37:18 you’re going to stay in business in the tough times. The key points are different in every
0:37:24 business. So I would say, for instance, in the food business, all about costs because you don’t
0:37:27 know what the revenue is going to be because we don’t know whether we’re going to have a frost
0:37:33 or whether the currency’s going to change or whether somebody else got a big crop or a poor
0:37:39 crop. But if we keep our costs in good shape, we’ll be out right in the long run. And I would say in
0:37:45 cable, you always have to look at cost, but capital is probably the biggest thing in the cable
0:37:52 business because you can make big mistakes and you don’t get spending. I would say if they had
0:37:59 dollars to get into programming that just didn’t work out. Every company, I would say every business
0:38:08 has, you know, the five points might be different. You’re 84 now? 84. And you’re still working full
0:38:16 days? I try to. Yeah, I do. I do. I enjoy it. And I work a little every night. I’m always reading
0:38:22 about stocks or reading business stuff. I guess I’m not working quite as much as I used to,
0:38:28 but I could share with you. I’ve given some money to an entrepreneurial school at University of
0:38:34 Prince Edward Island. Catherine Colbeck, who was the former Premier there and the business
0:38:43 schools named after her. And she was a friend of mine at university and a great person. And so
0:38:51 we gave some money to an entrepreneurial school. And I said, on the condition that you put 7-0
0:38:56 on the wall, what’s 7-0? That’s the hours entrepreneurs have to work every week.
0:39:02 I love it. Not 50, but 70. And entrepreneurs do work 70.
0:39:07 What role did Judy play in all of this? I’d say she’s a great mother. She’s been a full-time mother.
0:39:12 We have four children. I don’t know whether she didn’t have any interest in the business or I didn’t
0:39:18 want to share it. But I do like going home and not talking about the business. We have four great
0:39:25 children and we have eight grandchildren. She’s been just a very supportive mother. I traveled the
0:39:32 world for years and she brought up our children. Her role is a supportive role, but not directly in
0:39:37 the business. Is there anything looking back that you would have done differently? Probably,
0:39:45 if you said, sure, I have done differently, maybe. But on the other hand, I was very comfortable
0:39:54 doing what I did and I worked hard. But we bought our first cottage and the theory was that Judy
0:40:03 could be at the cottage for the kids and I could work, which worked out well. Basically, our philosophy
0:40:12 of life and so on, I wouldn’t change. We lived a low profile on a rural community and at the same
0:40:19 time had the ability to do whatever we wanted to. What role did Focus play? Focus in business is a
0:40:26 big deal. When it comes to business principles, there isn’t one day bigger than Focus. Just
0:40:35 stay at it and work at it. It’s amazing how hard work brings you good luck after a while.
0:40:41 Focus is absolutely critical. Probably the biggest, maybe the biggest single principle you can have
0:40:46 in business. Is there anything about decision-making that you’ve learned that you think most people
0:40:56 miss or would benefit from in all it? Stick to your knitting. I’ve seen a number of friends or
0:41:03 associates who made the first million and then thought they knew how to make the second with
0:41:09 ease and they would get off Focus, go buy another company that they didn’t know anything about,
0:41:21 and just not focused on what they knew. I think it’s fine to diversify, but you have to be careful
0:41:28 how you do that. Frank Sobey, when I was in university reading a Financial Times, I don’t know
0:41:37 which one, and I read a quote where he says, “Always keep the back door open.” So although we were
0:41:44 levering through these formative years, the real debt load was in cable where the cash flow was
0:41:50 quite consistent. The mistake many people make is they have a business, they make the first
0:41:56 million dollars, and now they get into things they know nothing about in too big a way. I mean,
0:42:04 if you want to test the waters, that’s one thing. I’m a great believer in not having all the answers.
0:42:10 I always say the guy that asks the question looks better than the guy that has the answers,
0:42:16 and so I’d like to have the questions. But people get to have the answers. We’ve all
0:42:24 been around associates that once they make a little money, they know more than the next guy.
0:42:30 Frank In your experience, how often have those people self-corrected after they’ve
0:42:36 started to go down that path? Frank I haven’t seen much self-correction. The guy that’s really
0:42:43 doing well when he speaks up, you listen to him. When he goes broke, nobody listens to what he is
0:42:48 saying more. So making a million didn’t make you smarter, and losing it didn’t make you stupider.
0:42:54 Talk to me about the role of patience and long-term thinking in terms of your success looking back
0:43:00 over the last 50, 60 years. Frank Patience is a real virtue. I don’t know whether I
0:43:10 have enough, but I’ve had to have a lot because we’ve built our team. We have lots of imports now,
0:43:18 but on the early days we’ve built our team on locals that didn’t have as much experience as
0:43:25 people from away, and some have turned out to be great entrepreneurs. But you have to have patience,
0:43:33 bring them along and get them exposed. One guy said to me, because I was trying to point out
0:43:39 the way I wanted to report, and the guy says, “Yeah, but John, you’re outside and seeing all these
0:43:46 boards and reports. We don’t see that.” Although you’re smart, just didn’t have the imagination,
0:43:54 but today tremendous executive. But it does take a little time, and patience, respect,
0:44:01 civility, those words are big in our culture. One of the things that you’ve said that I was
0:44:07 most intrigued about that gives me a lot of hope is that most fortunes are made after 50.
0:44:13 I was a member of YPO, like lots of other entrepreneurs, and you get rocked out at 50.
0:44:18 I remember saying, “For me, this is just the beginning because I built a base now. I haven’t
0:44:25 really made any money, but I built quite a base, and now I’ve got to take that base and move on.”
0:44:30 Most of my real equity, the way you would measure it, has come after 60.
0:44:39 But before that, I was building land basis and factories and people, but it didn’t show up
0:44:46 in the bottom line. But I was building a real base of assets. Then I could say that after 70,
0:44:53 we’ve done a lot better still. We’ve got the base going, and like the portfolio we have,
0:45:02 I didn’t really get started until 75 maybe. I shouldn’t say played around. We had maybe
0:45:09 a significant portfolio, and some people might, but not one that you would see written up in
0:45:16 New York Times or something. But when I decided when these interest rates were so cheap that
0:45:23 they didn’t have to be a genius to borrow one or two percent and invest in dividends at five,
0:45:28 so we didn’t. We could have sat back and done nothing, and not everybody was doing that.
0:45:39 We have a board, and I was explaining to them what my thoughts were and how I thought it would
0:45:46 work and what the downside was. Well, we’ve just plugged away at it, and we’ve got a couple of
0:45:51 billion of equity or more now in the portfolio. All that came late in life.
0:45:57 Parenting extraordinaire Becky Kennedy. One of the things I wanted to come back to outside of the
0:46:03 world of teens and maybe inside the adult world here is you said earlier how we think about someone
0:46:09 affects how we communicate with them. I want to relate that to how we think about ourselves
0:46:16 and that inner voice we have and how the stories we tell ourselves, and what are the common ways
0:46:24 that we sort of self-sabotage or get in our own way with these stories that we’re telling ourselves,
0:46:28 and we’re not being kind to ourselves, and we’re not being gentle, and that has all of these other
0:46:33 sort of implications. How can I treat you nicely if I don’t even treat myself nicely?
0:46:40 I mean, there’s so many examples of that, and I think most of us, we can get into the causes,
0:46:49 but most of us have learned to wire struggles next to blame. They’re very, very close in our
0:46:54 circuitry, and I say blame because it’s often a combination of other blame and self-blame.
0:46:59 I think blame is often a two-way street. Some of us maybe specialize more in self-blame,
0:47:05 some of us in other blame, but usually it’s a seesaw. When something’s hard or something doesn’t
0:47:12 go our way, maybe I yelled at my kid, and all of a sudden I’m a monster, I’m the worst parent,
0:47:17 I messed up my kid forever. It’s just like huge spiral, or I did a presentation at work,
0:47:21 and my boss said something that I don’t know if it was critical, but it was kind of ambiguous,
0:47:25 and I leave, and I’m like, “My boss thinks he’s so stupid,” and I’m like, “Oh my goodness, I’m going
0:47:30 to get fired,” and we just, like you said, we start telling ourselves stories, and then those
0:47:36 stories start to influence, of course, they influence how we feel, they influence then the
0:47:40 next action we take that usually is just kind of further reifying that story or really that
0:47:47 interpretation, and we can really get off to the races. Another image I want to share,
0:47:51 because I think this is really one of my favorites, and it really illustrates what we’re talking about,
0:47:57 is like if you picture yourself as the driver of a car. This is an ad from BetterHelp. This
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0:48:29 We all have multiple passengers in our car, right? So like some of us have imposter syndrome as like a
0:48:34 very, very noisy passenger. Some of us have it’s all my fault. Some of us have the world is going
0:48:38 to end and everything is going to go badly, right? We get into problems not when those things are
0:48:44 our passengers. We get into problems and those things take over the driver’s seat. And actually,
0:48:47 a lot of us, when we’re aware of those voices, we try to get them out of our car.
0:48:52 Like we do. We’re like, I shouldn’t feel that way. Or I know my boss doesn’t actually think
0:48:59 I’m stupid. Why am I thinking that? We either fight the voice or it kind of takes over us.
0:49:06 Like that’s usually what happens when I actually think mental health is not about getting those
0:49:10 voices out of our car. They’re there. They’re not going anywhere. But actually just like talking to
0:49:16 them when they’re in the passenger seat to ensure that they don’t take over the driver’s seat, right?
0:49:20 So for example, not first of yelling at my kids and maybe like, Oh,
0:49:26 there’s the I messed up my kid forever again, boys. Hey, it’s unfortunate, but you do tend to come
0:49:29 up whenever I make a little mistake with my kid. And like, okay, I’m just going to come back to
0:49:35 today like it is 2024. And, you know, I don’t really know what the next 80 years, you know,
0:49:39 kind of hold, but I’m pretty sure what I did today did not, you know, mess up my kids forever.
0:49:44 And I know you’ll say that again to me, but I’m just going to kind of keep you in the backseat,
0:49:49 right? Or, oh, okay, I don’t even feel great about my presentation and my boss to do this. But
0:49:54 there’s that my boss hates me voice. And it’s true. Whenever I even doubt myself a little bit,
0:49:59 I do tend to also think that my boss is about to fire me, right? And all of a sudden now I’m
0:50:06 actually in a relationship with these stories, right? Or with these parts, I would call them these
0:50:10 parts. And as soon as you’re in a relationship with a part of you, inherently that part of you
0:50:16 can’t take over you because you in the driver’s seat are like talking to it. And to me, that’s
0:50:20 what I actually teach adults and parents like all the time. It’s honestly like some of my favorite
0:50:23 interventions to teach kids how to do that when they’re young. I think it’s like one of the most
0:50:27 important skills I could take into adulthood with them. Because I think those are some of
0:50:32 like the ultimate coping skills in life. One of the other things we talked about earlier and I’m
0:50:36 sort of like going down a couple rabbit holes because we sort of covered a lot of ground really
0:50:44 quickly was regulating emotions. And not only do we as adults and parents have to teach our kids
0:50:49 or help them better regulate their own emotions, we have to often learn how to regulate our own
0:50:57 emotions. How do we do that? I get this question from parents often, right? Because the way kids
0:51:04 learn how to regulate emotions is through their relationship with their parents, right? It’s
0:51:08 not something you could get taught in a textbook. And it’s not to say when we get older, if we
0:51:11 don’t have a lot of those early experiences that helped us learn how to regulate our emotions,
0:51:18 which most adults I know a lot of them didn’t. It doesn’t mean we can’t get there. But our kids,
0:51:23 right, they kind of borrow our regulation in a moment and they kind of absorb it. And like I
0:51:28 was saying before, they kind of over time learn, oh, my emotion inside me that feels so scary to
0:51:33 me is less scary to someone else. And they kind of absorb that hope and they absorb that kind of
0:51:38 tolerance. And that really forms the foundation for so many of their coping skills. So parents will
0:51:44 say to me, okay, I actually get that. How can I do that for my kid? If I can’t, if I really do struggle
0:51:49 to regulate my own emotions, it seems like I’m teaching my kid and myself at the same time.
0:51:54 And we are. And like, that’s is just kind of the hand a lot of us for Dell. And it’s not an
0:51:57 impossible hand. It’s not an easy hand, but it’s definitely a winnable hand. Like, I know that
0:52:02 and I’ve seen it now with millions of adults who are, you know, winning a lot of their hands.
0:52:08 Um, and so I think there’s a couple of like concrete ways as adults that we can, you know,
0:52:14 start to learn how to better regulate our emotions. Right. Number one to me is just the word curiosity.
0:52:22 Like being curious about yourself is a foundation to regulating your emotions. Because it’s the
0:52:28 difference between saying, um, my kids whining, like who can stay calm when they whine all day?
0:52:32 Like, are you saying people like whining? I have to get to a place where I like whining.
0:52:36 No, nobody likes whining. Literally, nobody likes whining, but there’s a big difference
0:52:41 between not liking whining and, I don’t know, reacting and being in a state of reactivity
0:52:46 with screaming at our kids versus not liking whining and being able to regulate our emotions and
0:52:51 respond to our kid from a place of groundedness and sturdiness. Right. Still, nobody likes it,
0:52:55 but it’s very different. And curiosity to me gets us from point one to point two,
0:52:58 because instead of saying like, what’s wrong with my kid and why are they acting the way they’re
0:53:05 acting, we might say, what’s going on inside of me? What’s going on for me? What, what is
0:53:11 happening inside me? That is kind of a component of this reaction. Right. The idea that my kid’s
0:53:17 whining is an inherently making me scream at them. It’s a trigger, but there’s a story inside me.
0:53:23 There’s something that happens inside my body that frankly predated my kid’s existence.
0:53:28 So if I can get curious about that, right, then I can actually make a lot of progress. And to me,
0:53:33 I think it’s so easy to hear that and someone say, oh, so it’s my fault? No.
0:53:38 Like, I don’t know. I feel like we’re obsessed with the word fault. Like, it’s not your kid’s fault.
0:53:42 It’s not your fault. Like, why does it have to be anyone’s fault? Like, I don’t know why. Like,
0:53:47 it’s just, this is happening. Either we can be curious and like learn and do that learning,
0:53:52 probably live in a way that’s more in line with our values, feel more in control of ourselves.
0:53:56 Like, your kid’s going to benefit. But I promise you as the adult are going to benefit in areas
0:54:01 like way more like everybody wins. Right. And so I always say to parents, this isn’t a system
0:54:05 of like saying this is your fault. It’s a system of saying like, this is actually a place for your
0:54:10 empowerment and to like finally learn skills and skills always help us feel, you know, more powerful.
0:54:16 So one of my favorite emotion regulation skills to teach adults is something I call AVP. Okay.
0:54:21 And it’s like the simplest thing and has the most profound impact on people. Okay. So
0:54:27 AVP stands for Acknowledge Validate Permit. So I’ll teach each part.
0:54:33 Step one to regulating emotions is acknowledging them. And actually, this is a really good point
0:54:39 of the conversation relative to what we just said about this image in the car. So let’s say,
0:54:43 you know, my kid is whining. Step one, acknowledge like, well, I’m feeling really annoyed.
0:54:48 Right. Like, in a way, what I’m doing is like, I’m the driver of my car and annoyance in the back
0:54:53 seat is like starting to kind of make its way to the driver seat. And I’m like, Hey, there. Hey.
0:54:56 And that’s literally what I’m doing. I actually use the word high a lot because it always makes
0:55:01 me laugh. And to me, if I could add levity to like that process, it gets easier. So I’m like,
0:55:06 high annoyance or high anxiety, right? Or something like that. So step one is just acknowledge. You
0:55:11 can acknowledge by using a quote feeling word, like high annoyance or high sadness. A lot of people
0:55:15 don’t like really know the name of their feelings. And that’s totally fine. And you can also do it
0:55:20 in a more general way. Like, I’m feeling uncomfortable right now. Are you feeling about to
0:55:26 explode right now? I’m feeling tight right now. Any acknowledgement to is validate. And to me,
0:55:32 the best way that our body, I think likes to be validated. I don’t know why is the term makes
0:55:36 sense. I think there’s something where feelings feel like accepted by logic in our body when we
0:55:40 use that term. I don’t know. I haven’t like, I haven’t asked, but I think that’s what’s happening.
0:55:45 So I’d be saying, I’m really, really annoyed right now. Or, you know, when my kid was whining,
0:55:49 and I’d say to myself, well, that makes sense. Like, whining is pretty annoying.
0:55:56 It makes sense that I feel that way. That is a hugely helpful phrase in regulating our emotions.
0:56:06 Because the reasons our emotions get unregulated, right, is that they are exploding out of our body
0:56:10 in our behaviors. They literally, if you think about these moments of reactivity when I yell,
0:56:16 or the emotion is like coming out of my body and like through my mouth, right? It’s kind of like
0:56:22 a volcano, right? The opposite of that isn’t suppressing emotions because you just can’t
0:56:27 beat them. So it’s always, you know, an unwinnable, you know, endeavor. But we’re kind of saying when
0:56:30 you regulate an emotion, like it’s okay to live inside your body. Like it can just live there.
0:56:34 It doesn’t have to explode out of you. It can live inside there. Like it has a place. It has a home.
0:56:38 So if you think about those two steps already, like for some saying hi to it, like if you’re saying
0:56:41 hi to someone at a party, like maybe you don’t love them, but you’re probably like okay with
0:56:45 them being there because you said hi. And then you’re telling, you’re feeling like it kind of
0:56:51 makes sense that you’re here. And then P is permit, which actually just involves saying yourself,
0:56:55 I give myself full permission to be feeling this way, right? So another example of going
0:57:00 through an AVP would be like, I’m feeling really anxious right now and really, really worked up.
0:57:05 And, you know, that makes sense. Like I am managing my kid’s soccer schedules and, you know,
0:57:09 I’m thinking about what they need for dinner and I didn’t respond to that email. And I think tomorrow
0:57:13 is going to be a snow day and then my kid’s going to have canceled school and P permit, right?
0:57:19 I give myself permission to be feeling this way. And I think a kicker at the end is just adding the
0:57:25 phrase, and I can cope with it. And I can cope with it. I, you know, interesting enough, you’re
0:57:31 catching me on like last night, I was walking in Times Square. And as I do, I film videos myself
0:57:35 for Instagram when I’m like on my, on the way to the subway. So I was like filming myself and
0:57:41 this guy saw me. He’s this 28 year old guy stopped me. He goes, I’m a 28 year old man. I’m unmarried.
0:57:47 And I don’t have kids. And he goes, and I like, I’m so excited to see you. He’s like, you’re like a
0:57:55 celebrity to me. And he goes, he goes, AVP has changed my life. That’s what he said. This AVP has
0:58:00 changed my life. I’m reparenting myself. I know I never learned what some people learned in their
0:58:06 childhood. And I need to kind of reparent myself through those skills. And AVP has like, you know,
0:58:12 changed my life. And so there’s a couple of ways to use it. If regulating your emotions is new for
0:58:19 you, you can’t expect yourself to start to regulate your emotions when you’re in your most heightened
0:58:26 emotions. That would be like someone who has never taken a foul shot, taking a foul shot. Game seven
0:58:30 of the NBA finals when time has run out and the game is tied. Like that person is not making it.
0:58:36 You take foul shots and practice low stakes. And so the way I tell people to practice AVP
0:58:42 is literally going to their phone right now, setting a random time that they tend to be alone,
0:58:46 right? Not in the midst of things and just literally making a daily reminder that says
0:58:51 AVP. And when it goes off, you just stop and you say to yourself, what am I feeling right now?
0:58:57 And it can be like, I’m not feeling much. I don’t know. Well, that makes sense because this is a
0:59:02 new thing for me to check in with my emotions. So it makes sense that I’m not sure permission.
0:59:05 I’m giving myself full permission to not know how I’m feeling like there’s no way to get it wrong.
0:59:13 That’s what I’m saying. And I promise you, after a week or two, not only will you start to recognize
0:59:20 more things, but already that skill, that coping skill, will start to appear not in 10 out of 10
0:59:26 emotional situations. It will not, it’s not magic, but like in maybe two, three out of 10s.
0:59:31 And I think that’s like one concrete thing like all adults can do to start making progress.
0:59:37 And here’s business genius Brad Jacobs, who started eight multi-billion dollar companies.
0:59:43 Let’s deep dive on M&A. How do you think about it at a high level? And then specifically
0:59:50 walk me through your process for not only evaluating companies, but beginning to end,
0:59:55 including integration. M&A has been a big part of my business career, not in the first 10 years.
1:00:02 In the first 10 years from 1979 to 1989, I was in the oil business. It was all organic. We didn’t do
1:00:07 one single acquisition. So I’ll just trading and brokering and building up a business organically.
1:00:15 But since 1989, I’ve been doing roughly about 500 acquisitions. I’ve done a lot of M&A. I love
1:00:22 M&A. I love M&A as a way to create value for shareholders because I don’t know of another way
1:00:31 on a risk adjusted basis on a certainty level that is more likely to create massive shareholder value
1:00:38 than doing sensible M&A. In order to understand how to create value, I have to understand how
1:00:45 am I going to scale up the business. I only know how to create tremendous shareholder value
1:00:50 by growing a business tremendously. That’s how I know how to do it. And of course, it’s organic.
1:00:54 And I’ve had very good organic growths. The companies I’ve led have been well performing
1:00:59 companies that have had good market share and growing market share. And we’ve taken customers
1:01:04 away, we’ve taken business away from our competitors who aren’t managed as well.
1:01:08 But the real, when you look at the numbers, the real growth has been through M&A,
1:01:13 through acquisitions. What’s been my secrets on acquisitions? I’ll try to be concise because I
1:01:18 did a hour and a half podcast with McKinsey a couple of years ago with Andy West. That was the
1:01:22 only question. I asked one question and I babbled on for an hour and a half. It’s still a big,
1:01:28 people still watch that podcast because I really told everything about it. Here’s the gist. The gist
1:01:35 is, you first have to select an industry. You can’t just do M&A. So I spent the last year
1:01:40 going around studying dozens of industries, looking at hundreds and hundreds of acquisition
1:01:44 opportunities, mostly with Goldman Sachs, Morgan Stanley and some other friends, Sequoia and some
1:01:51 friends, figuring out, could I apply my playbook to this industry? Is the industry big enough?
1:01:57 Is the industry fragmented enough? Is there M&A to do? Is bigger better?
1:02:00 That’s not always the case. Are the economies of scale? Do you have a competitive advantage by
1:02:04 being bigger? Is there a way to apply technology? My companies have always been tech forward
1:02:11 to the industry because the industry is a little sleepy on technology. As the way I run a business,
1:02:16 the way I do the intake of people and the culture and the way we interact with each other and so
1:02:21 forth, is that something that’ll work in this industry, is applied in this industry? Is it
1:02:24 something related to something I know about industrial services? For example, most of my
1:02:30 companies since 1989 have been industrial services. I looked at many, many different industries and
1:02:35 I settled on the one that checked every single box, which was building products distribution,
1:02:41 and the name of my company is going to be QXO. M&A will be a big, big component of what we do.
1:02:47 There are 800 billion dollars of distributors in Western Europe and in North America, which is
1:02:53 where I want to plant my flag. I want to build a company that’s called 50 billion dollars.
1:03:00 I can do that. If there’s an 800 billion dollar size, I can take 6% of that through acquisition
1:03:04 and through organic growth. I can get to 50 billion dollars. There’s many other industries
1:03:08 that are nice, but I’m not going to be able to get to 50 billion dollars. I want to get to 50
1:03:15 billion dollars. So this industry, there’s a clear path of how I can do that. Now, I can’t just,
1:03:20 and there’s roughly about 7,000 distributors here in the United States. There’s about almost
1:03:25 twice that amount in Western Europe. So roughly about 20,000 distributors. You’ve got to be very
1:03:30 careful about who you buy. There has to be a reason why you’re buying that company. There has
1:03:36 to be a strategic, a compelling strategic reason of why you’re buying that company. What makes
1:03:41 sense for that? Why is that good for customers? Why is that going to make our business a better
1:03:44 business? Why does that fit with the other things that we’ve already bought and put together?
1:03:50 How’s it going to integrate well? I like to look at the multiples that I pay for an acquisition.
1:03:56 The price that I pay for an acquisition is very, very important because when I look at the levers
1:04:01 of how we create shareholder value, what contributes to that? The biggest lever, the biggest component
1:04:08 is the differential between what I raise capital at due to my relationships with mostly institutional
1:04:15 investors and because of the track record and what I can deploy that at on doing acquisitions.
1:04:20 The second biggest lever is how much can I improve the businesses that I buy? There’s many,
1:04:26 many levers, but those are the two biggest levers. When I’ve studied all these different
1:04:32 industries, I’ve studied historical acquisition multiples. One of the reasons I like building
1:04:38 products distribution is I believe that I’ll be able to buy companies at lower multiples of their
1:04:43 profit than I’ll be able to raise capital at. That’s going to be a big, that dasagio, that spread,
1:04:47 that difference, that Delta is going to create value, boom, just right away, right from the first
1:04:54 day. Now you asked about integration. Integration is extremely important. Anybody can buy a company.
1:05:01 It’s not that hard. You send a wire, you sign a document, it’s a few dozen pages,
1:05:07 lawyers have gone over it and you wire the money and you own it. So that’s not the hard part.
1:05:14 The hard part is after you’ve selected the right industry, after you selected the right companies
1:05:21 within that industry to buy, after you had disciplined so that you pay the right price
1:05:28 for all those, then you have to integrate them. I’ve never run companies that have hundreds
1:05:33 of different companies all running separately with different names and different SIF systems and
1:05:37 different back offices and there is some level of decentralization where you need to be closer
1:05:46 to the customer. But I have a very strong appetite for standardization, standardization of the ERP
1:05:51 system that you close the books with. So you close the books promptly right after the close of the
1:05:57 month and then you can have standardized dashboards. So all the managers have the same format of the
1:06:02 numbers they’re looking at, the KPIs, and they see them graphically very easy to understand.
1:06:09 I like to see so they can benchmark every location to every other location, every district to other
1:06:14 districts, every region to other regions. And for that you need standardization. I like to have
1:06:22 very standardized HRIS, Human Resources System, where all the people in the organization and we’ll
1:06:27 build this company up, we’ll have hundreds of thousands of employees. I need to have a standardized
1:06:33 data system for all of our employees. Everyone’s on the 401k, it’s the same exact way of doing,
1:06:37 all the benefits are the same, all the performance appraises are the same, compensation I can see
1:06:42 right away. I need to have transparency to the information about, I need to have the organization
1:06:47 charts very accessible right away. And every time we do an acquisition, I need to pull that
1:06:51 information up right away while we’re studying it quickly. So we have a competitive advantage
1:06:57 against other bidders to see what would the synergies be. So I need standardized HR technology
1:07:03 about everything. I need a standardized CRM, Customer Relationship Management System like
1:07:09 Salesforce.com or several others as well. And for that to be able to make sure we’re looking at
1:07:14 customers, the attractiveness of those customers, the profitability of those customers, the size of
1:07:20 their spend, so therefore the potential of those customers going forward, all the interactions
1:07:24 we’ve had with those customers. I need to see that in a standardized way, all across the globe,
1:07:28 everywhere, in every country we’re functioning in. So I need a standardized technology for
1:07:34 Customer Relationship Management for Sales Manager. So I’m giving, I need a standardized
1:07:39 internal social media. I happen to like, I’ve used Workplace by Facebook. It’s not the only one,
1:07:44 but I like that one really well. It’s nice and the interface is really, really good. So I like to
1:07:48 have everyone on the same one because I like to have one company with one culture where everybody
1:07:53 can ping each other. I like, I don’t want to have these silos of companies like sometimes you see
1:07:59 these companies roll up many different companies, but it’s all a mishmash. It’s all separate. I don’t
1:08:05 like that at all. I see a lot of these middle market private equity firms do that. They roll up
1:08:10 these small companies. They’re doing five, 10, 20 million dollars at EBITDA each and they bat and
1:08:13 they just buy a bunch of them and now they’re up to 100 million or 200 million EBITDA and
1:08:17 they just get a bigger multiple because they’re bigger, but it’s a mess. Whoever buys those,
1:08:20 whoever buys those companies, there’s a lot of work to be done. You’ve got to not standardize
1:08:25 everything and integrate everything and opportunity to improve them, but it’s a lot of cost and time
1:08:31 to fix all that stuff up. So I integrate from the moment that we agree to buy a company,
1:08:38 we’re starting the integration process and the day we close the acquisition goes up. We’re in there
1:08:42 and we’re standardizing everything as much as we possibly can and we’re communicating and
1:08:50 communicating quite a bit. A big part of the success for M&A is forming the relationship with
1:08:56 people and making sure we get off on the right foot and making sure that we don’t lose the great
1:09:03 talent and making sure we on the same time, we’re identifying the weak players and gracefully and
1:09:09 generously exiting them. So there’s a lot of different components to M&A. I’m summarizing a
1:09:13 lot of different facts in each one of those things. We could talk for an hour just on that block,
1:09:18 but those are the kinds of things that go through my mind in my approach to M&A. Nutrition and health
1:09:24 expert Rhonda Patrick. You know, I kind of have my own framework for approaching nutrition in
1:09:32 and it has a lot to do with, you know, I did my postdoc training in nutrition and specifically
1:09:40 looking at micronutrients. So these are about 40 or so essential vitamins and minerals that fatty
1:09:46 acids also and amino acids that we have to get from our diet. And those are in a variety of foods
1:09:51 and different foods have different levels and quantities of them. And these micronutrients
1:09:56 are running our metabolism, they’re running everything, our neurotransmitters that we’re
1:10:02 producing. So our cognition, just absolutely everything that is going on in our bodies. So
1:10:08 it’s important to get them because if we don’t get them, we can have deficiencies or insufficiencies,
1:10:15 which is quite worse because insufficiencies are kind of something that you don’t notice every day,
1:10:22 but there’s like insidious types of damage just happening each and every day. And it accumulates
1:10:27 over time and plays a role in age-related diseases like cancer and neurodegenerative disease. So
1:10:36 these micronutrients are things like, you know, calcium, magnesium, vitamin K, vitamin D, which
1:10:43 I’m sure we’ll talk about is actually something you can mostly get from the sun, omega 3. And so
1:10:49 when you think about the micronutrients that you need in your diet, it makes it a little bit easier
1:10:54 to think about what you should be eating. Okay, so well, let’s start with like some of the most
1:11:02 common deficiencies in micronutrients. We have magnesium. So almost half of the US population
1:11:10 is deficient in, or I would say they get insufficient magnesium intake. And magnesium
1:11:16 is, it’s at the center of a chlorophyll molecule. So chlorophyll gives plants their green color.
1:11:20 So it’s really easy to think about foods you should eat to get magnesium. You should be eating
1:11:27 greens, particularly dark leafy greens. So that’s something, you know, a framework where it’s like,
1:11:31 okay, well, I need to get my greens because they’re high in magnesium. Well, greens are also very
1:11:39 high in vitamin K. And vitamin K one, there’s two forms vitamin K one, you need it, it’s essential
1:11:45 when you when you take in vitamin K one, and it’s something like 35% of the US population is not
1:11:50 getting enough of that. And I’m sure, you know, in North American, Canada are very similar. I mean,
1:11:57 we have very similar diets. So vitamin K one is essential for all your blood clotting processes.
1:12:01 So you like in order to like, you know, have your blood clotting, which is important, you know,
1:12:06 if you have a cut or something, you know, an injury, you want that clotting to happen so that
1:12:13 you don’t have like a hemorrhage, right? So, so vitamin K is also, you know, high in leafy greens.
1:12:19 You can also get magnesium, sorry, calcium as well from greens. So that’s really an easy way
1:12:24 to kind of think about greens. The other, the other way, the other thing is omega threes,
1:12:32 right? So omega threes are very high in fatty fish. So this would be things like wild Alaskan salmon
1:12:39 or cod or mackerel sardines, like these are good forms of fish that have the marine types of omega
1:12:46 three. So that would be DHA and EPA. And those are very important for a lot of functions,
1:12:52 including brain health and cardiovascular health. And there’s a lot of evidence, if you actually
1:12:58 look at the evidence, a lot of work has been done by Bill Harris and his group at the fatty acid
1:13:04 research institute. And they have, they look at omega, the omega three index, which is a way you
1:13:09 can actually quantify your omega three levels. And that’s really good to be able to quantify
1:13:13 something. Because if you don’t quantify it, you don’t really know if you are getting enough of
1:13:22 it, right? So the mega three index is high in red blood cells. And sorry, it’s in, it’s, they’re,
1:13:27 they’re characterizing it from red blood cells, which is different than a lot of other ways of
1:13:33 measuring omega three, like for example, plasma omega three, which is basically kind of reflective
1:13:39 of your dietary intake the last week or so, the red blood cell or the omega three index is more
1:13:45 of a long term status. So it’s like 120 days for a red blood cell to turn over. So the omega
1:13:52 three index is a good marker of your omega three status. And people that have a high omega three
1:14:01 index, and that would be 8% or more, have a five year increased life expectancy compared to people
1:14:07 with a lower omega three index, which is more like 4%. Now people in the United States on average
1:14:14 have about an omega three index of about 5%. And you compare that to, for example, countries like
1:14:20 Japan where they eat a lot of seafood, their omega three index is around 10%. So, and they also have
1:14:25 a five year increased life expectancy compared to people in the United States. But there’s been
1:14:30 tons of studies looking at omega three index and life expectancy. And there’s been also like data
1:14:35 where they stratify stratify like looking at, you know, for example, and this I like talking about
1:14:41 this because I think it really puts in perspective the framework of nutrition and thinking about,
1:14:47 instead of focusing on what to avoid, focusing on what you need, because if you focus on what you
1:14:52 need, then it’s obvious what you don’t need, right? There’s no nutritional value in processed foods.
1:14:56 You’re not getting micronutrients. You’re getting calories. You’re not getting protein. You’re not
1:15:01 getting things that you need. So smoking is something that everyone knows is bad. You should
1:15:06 avoid smoking, right? It’s, you know, heart disease, cancer, you’re going to have a decreased life
1:15:13 expectancy, emphysema, all kinds of problems, right? Well, what Bill Harris’s group had done has,
1:15:20 they looked at life expectancy of smokers and non smokers, and then they categorized their omega
1:15:28 three index. And if you look at this data, it’s just mind blowing. So obviously, non smokers
1:15:36 that have a high omega three index of 8% or more have the highest life expectancy. And the lowest
1:15:41 life expectancy is smokers with a low omega three index. So there’s like, that’s the worst of the
1:15:50 worst. But when you look at smokers with a high omega three index, they have the same life expectancy
1:15:57 as non smokers with a low omega three index. In other words, smoking was like having low omega
1:16:04 three or having a low and omega three index was like smoking. And when I say the life expectancy,
1:16:10 if you look at the graph in the publication, the curves like overlay perfectly. It’s kind of freakish
1:16:14 where you’re like, whoa, like the people that are smoking, but they’re getting a lot of omega
1:16:20 three have the same like life expectancy of these people that don’t smoke, but have very low omega
1:16:24 three. And that’s kind of like, I like talking about that because I feel like it puts it in
1:16:29 perspective for people because like I said, no one’s really thinking about, I’m not eating my
1:16:35 fish today. I’m not supplementing with an omega three supplement to get those omega threes. But
1:16:39 people are thinking about, oh, I shouldn’t smoke because it’s bad. So again, it goes back to that
1:16:47 framework of thinking about what you need and starting there as opposed to like just like,
1:16:53 okay, what should I avoid? Because when you think about what should I avoid, then you’re not like,
1:16:57 people aren’t thinking about magnesium. They’re not thinking about the vitamin K. They’re not
1:17:03 thinking about omega three. And by the way, magnesium, I said about half the population
1:17:08 in the United States doesn’t get enough. They’re not eating enough greens. And unfortunately,
1:17:14 there’s not a great test for magnesium because our body stores magnesium in our bones. And so
1:17:18 anytime we’re not getting enough in our diet, our body pulls it out of our bones to like,
1:17:22 because we need it. It’s so important. You need it to make energy. Like without magnesium,
1:17:28 you can’t make energy. So nothing’s going to function. But you also, it’s needed to repair
1:17:33 damage. Like every time you have, you know, like right now, you and I, we’re, we’re having a
1:17:37 conversation, you know, we’re, you know, neurotransmitters are firing, we’re thinking about
1:17:42 things like that’s causing damage, metabolism, all that stuff causes damage on a daily basis,
1:17:47 but our body repairs that damage. But magnesium is a cofactor for these enzymes, these are proteins
1:17:51 that are doing everything for that to function properly. And so if you don’t get enough of that
1:17:56 magnesium to do that, what happens is you don’t repair that damage properly. And that can increase
1:18:00 the risk of getting a mutation that can lead to cancer. And so there’s all sorts of studies that
1:18:06 have looked at magnesium intake in cancer. And, you know, it’s been found that, for example,
1:18:13 for every 100, you know, milligram increase in magnesium intake, there’s something like a 20%
1:18:17 decrease in pancreatic cancer risk. And there’s been lots of studies like this looking at
1:18:22 magnesium intake in cancer risk. And so the higher the magnesium intake, the lower the cancer risk.
1:18:26 So again, it’s one of those things where it’s, you can’t look in the mirror and go,
1:18:30 as you’re brushing your teeth, oh, I don’t have enough magnesium today, right? Like nothing’s
1:18:35 like showing you that, but it’s happening. That damage is insidious. And I mentioned you pull it
1:18:39 out of your bone, like it’s pulled out of your bones. And that’s another thing it leads to osteoporosis
1:18:45 over time. So, you know, investing in magnesium. So in other words, remembering to eat your leafy
1:18:51 greens is getting your magnesium. So women need about, I’d say about 320 milligrams a day, adult
1:18:59 women, need about 320 milligrams a day of magnesium. Men need around 420 milligrams a day. And,
1:19:04 you know, this can change based on your physical activity level as well. So like if you’re physically
1:19:09 active, if you’re sweating, you sweat out magnesium, you also use it up for energy. So you might
1:19:16 actually require anywhere between 10% to 20% more than that level. So what’s called the recommended
1:19:21 daily allowance in the United States. So, you know, again, and people aren’t even meeting that.
1:19:28 So investing in magnesium is like a way, you can think about like also for bone health because,
1:19:32 you know, if you are getting enough magnesium on a daily basis, you’re not going to be pulling it
1:19:37 out of your bones. And therefore, you’re not going to, magnesium is important for your bones.
1:19:43 And so as you keep doing that year after year after year, it dramatically increases osteoporosis
1:19:49 risk, right? So there’s lots of reasons to invest in, you know, these micronutrients and to think
1:19:54 about the foods that you need to eat. And so, and beyond the micronutrients, it goes to the macros,
1:20:01 right? And finally, the guy who is beating death, Brian Johnson. If you can walk me through at a
1:20:09 high level, sort of the overarching day of blueprint, and what does it mean to live like Brian Johnson?
1:20:16 So the premise on this is I was posing the question, in the early 21st century, is it the
1:20:24 case that we have achieved longevity escape velocity, which means that for every one year of
1:20:30 chronological time that passes, can I stay the same age biologically? And if not, where are we at?
1:20:37 And so that’s the backdrop on what my daily routine is. And so what we did to establish
1:20:42 this routine is we looked at every single scientific publication that’s ever been done on
1:20:48 health span and lifespan. We then graded the evidence of these papers, and we then stack
1:20:53 ranked them according to effect size. And then we’ve systematically been implementing each one
1:20:58 of these protocols. So becoming the most measured person in history and using all the scientific
1:21:05 evidence. So my day begins really the night before I go to bed currently at 9 30 p.m. I just
1:21:13 changed my bedtime from 8 30. But it’s 9 30 on the dot. So it’s not, I don’t have a two hour
1:21:19 window of time. And I recently logged eight months of perfect sleep using my wearable,
1:21:24 which no human in history had ever done. So I wanted to demonstrate that you can get reliable
1:21:28 high quality sleep for this extended period of time. And then I wake up naturally, I never wake
1:21:36 up with an alarm, roughly 4 35 30 in the morning. And I will weigh myself the body composition,
1:21:43 like weight, hydration, fat, et cetera. I’ll take my inner ear temperature. I’ll take two pills.
1:21:51 I’ll do a few minutes of UV light therapy to start my circadian rhythm. It’s still dark in the
1:21:56 morning. I’ll go downstairs. I’ll make myself a morning concoction. I’ll take 60 pills. I’ll do
1:22:03 light therapy on my hair. I’ll like once a week, once a week, I’ll do my blood pressure.
1:22:11 I’ll then work out for about an hour in a specific protocol. I’ll come in. I will make breakfast,
1:22:17 which is a few pounds of vegetables. I’ll shower and do a skincare routine and get ready for work.
1:22:24 I’ll eat my second meal today. And then I work for the day. And then I have a evening and then
1:22:29 throughout the day, I’ll do various doctors appointments, medical procedures and measurement.
1:22:36 And then I have a wind down routine that I follow ritually. And what we’ve done is we’ve tried to
1:22:42 stack hundreds of protocols into my daily routine. Because we do so many things and we’re trying to
1:22:48 follow the evidence. I’m not able to just randomly do things that has to be highly structured in
1:22:54 order for us to control this experiment with the rigor we need for the results. And so we’ve just
1:22:58 done this for several years and fine tuned it. And we go through the process of measure me,
1:23:02 measure myself, look at the evidence, we do the protocol measurement evidence protocol again and
1:23:08 again and again. And I have a few dozen biomarkers that are pretty phenomenal. So for example,
1:23:16 my cardiovascular capacity is in the top 1.5% of 18 year olds. My bone mineral density is the top
1:23:23 0.2% of 30 year olds, which is age minute for that test. And my strength test, same thing,
1:23:28 like top 1.5% and 10% of 18 year olds. So the biomarkers across my entire body, whether it’s
1:23:36 my cardiovascular ability, my strength, my muscle, my muscle and body fat are the top 99.5%. So it’s
1:23:43 produced a pretty impressive list of biomarkers that indicate that I’m in pretty good health.
1:23:48 I thought your workouts were like 25 reps of exercise and stuff. Are you, is that giving you
1:23:54 the incredible strength? Yes. So it’s about an hour a day and you’re right. It’s like, you know,
1:24:03 20 plus. And so it’s mostly I try to flex and stretch every muscle of my body. So I don’t do
1:24:10 heavy weights that are hard in the joints. But yes, even doing these things, I do it every single
1:24:17 day. I don’t take any rest days. And yeah, I’m on my bench press. It’s a top 10% of 18 year olds.
1:24:22 And we use 18 year olds, a lot of people, I mean, with 99% certainty when I say this, people are
1:24:31 like, but wait a second, why not a 30 year old? It’s because you max out your weight to rep ratio
1:24:38 at age 18. So even though you can lift more in your 20s and maybe even your 30s, your ratio
1:24:45 peaks at 18, the same is true with your VO2 max, your cardiovascular fitness. And so we do a reference
1:24:50 to an 18 year old, not because it’s an easy way to pick off a number. We do it because according to
1:24:56 these age, these biological age standards, you’re looking at when the human when a male
1:25:02 peaks perform peak performance. And I think your last meal is at like 1130 a.m. That’s right. So I
1:25:07 have roughly, you know, 10 hours or so of fasting before I go to bed. Do you feel hungry when you
1:25:12 go to bed? I used to. I’m now normalized to it. And does that help your sleep? Like what happens
1:25:19 if you eat later? I assume this was all like sort of measured and the fasting. I eat my last meal
1:25:26 the day at 11am for the objectives of good sleep. Because I mean, there’s supposedly good benefits
1:25:32 on fasting. I think the evidence is still maybe developing. So I mostly do it for sleep because
1:25:38 when I eat my last meal the day, I have all my digestion finished. So when I go to bed,
1:25:43 my resting heart rate is around 46 beats per minute. And if it’s 46, I’m going to have a
1:25:50 perfect night’s sleep. If I eat at 5pm or 6pm, then my resting heart rate is going to be 56.
1:25:57 And when I do that, I’m going to knock off about 50% of my REM and 50% of my deep,
1:26:04 and I’ll increase my wake time by about 35 minutes. And so I’ve done so many experiments now. It is
1:26:09 algorithmic. And I know exactly what happens when I eat at what time and how it affects my sleep.
1:26:16 It sounds like blueprint is optimized for the sole variable of sleep. Is that correct?
1:26:20 I mean, so sleep is an important one. It’s the number one priority because everything else rest,
1:26:26 you know, hinges upon that. We are the first endeavor in history to focus on trying to rejuvenate
1:26:33 every organ of the body. So we have 70 plus organs and we’ve tried to quantify and rejuvenate
1:26:38 every organ of my body. We just tried to rejuvenate my thymus, which is a gland right behind your
1:26:46 chest here, responsible for your immune system. And so, you know, I can say I’m chronologically
1:26:53 46 years old, but the more important number is what is the biological age of my heart and of my
1:27:01 lungs and of my liver. And that’s really the more powerful predictor than a chronological number.
1:27:06 And where were you when you started blueprint? Were you basically your biological age for your,
1:27:14 like, was everything the same? No, I was coming from a pretty bad place. After being depressed for
1:27:19 a decade and running, you know, being a startup entrepreneur my entire life and having just gone
1:27:26 through a bunch of stuff, I was pretty beat up. And I was in a bad state. So I definitely subscribed
1:27:33 to grind culture, where, you know, you do things in society to try to earn people of respect
1:27:40 and have a position of a status in a social group to when you conform with these social norms.
1:27:46 And so like, when you hear a story about a colleague who worked on a program, a problem for
1:27:50 two days straight and didn’t sleep, it’s like, wow, they’re so awesome and amazing. You know,
1:27:59 it’s very hard to not be, you know, to be induced to think that that’s an emulation worthy behavior.
1:28:05 So I had to peel myself out of grind culture and find out that this is the thing is we are accustomed
1:28:12 death is the enabler of all things in mortality. You know, if you love country, die for your country.
1:28:18 If you want to pay the ultimate price of being a hero, sacrifice your life.
1:28:24 You know, if you want to achieve a mortality in your professional endeavor, have your work
1:28:30 to live beyond your death. Everything we think about existence is around death. And I was calling
1:28:34 question to death that maybe we have reached this time and place in human history,
1:28:40 where death is no longer inevitable. And if that is true, everything about our reality changes.
1:28:45 Do you think we’ll see a quantum leap in average age in the next 15 years?
1:28:50 To me, the most compelling contemplation is
1:29:01 trying to predict how fast intelligence is improving. So we humans have been the dominant
1:29:08 force of intelligence on this planet for 200,000 years. And we’ve been able to increase our
1:29:14 abilities of intelligence by forming better cooperation in our society with language and
1:29:18 all kinds of organizational methodologies. We’ve increased our ability to utilize our
1:29:25 intelligence with technological tools. We’ve now created intelligence in AI that is creating
1:29:32 better intelligence. And if you say what is the speed at which intelligence is improving,
1:29:40 it’s fast, faster than we can comprehend. And so when we model out the future and we say
1:29:48 what’s going to happen on a 10-year time span, we are unqualified to answer that question
1:29:56 because that time frame exceeds our own intellectual capacity to imagine. So it’s
1:30:02 the first time in human history where we, the superior form of intelligence, are up against
1:30:09 a wall of not knowing what to predict what comes next because it’s going to supersede us so fast.
1:30:16 And so this is the thing, this is why I come down to the only thing I know to be true in the
1:30:25 year 2024 is don’t die. That’s it. I don’t know anything else other than I want to be around
1:30:29 for what could be the most spectacular existence in this part of the galaxy.
1:30:34 Yeah, there’s a part of me that really believes if we take care of ourselves really well right
1:30:40 now, we don’t die. We’re going to get a lot of advantage from technology that thinks about things
1:30:45 in a way that we couldn’t even comprehend. I mean, you take the, for inspiration, if you say,
1:30:51 okay, well, point me to an example of where intelligence has been used that would give me
1:30:59 any sort of bearings on what I might imagine. Okay, so take AlphaFold. It was many people thought
1:31:05 solving the protein folding problem was unsolvable or would take us some unknown duration of time.
1:31:10 And DeepMind allocated their attention to that thing and solved it faster than anyone ever
1:31:17 thought possible. The same thing would go. And so when these groups of people that are very talented
1:31:24 focus on a very narrow problem, they solve stunningly hard problems faster than anyone thought.
1:31:31 And as these systems get better and use more broadly and as these systems create better systems,
1:31:36 this is why we are at this launch point. And, you know, is it going to happen in two years,
1:31:41 one years, five years? I don’t know. But it’s basically, if you zoom out far enough,
1:31:46 it’s in the blink of an eye at this point. And it’s a don’t die is don’t die individually,
1:31:51 don’t kill each other, don’t kill planet Earth. And when you’re building AI,
1:31:57 the objective function of AI is this don’t die ideology. So if you, I mean, what I’m trying
1:32:01 to say is like, so we’ve never been in a situation before where we’re baby steps away from creating
1:32:09 superintelligence. And when you’re at this, in this moment, we have this, this incredibly
1:32:15 practical question to ask, what do we do? Like, how do we think about reality? What do we care
1:32:20 about? What are our ideals? What are our objectives? And then if you start surveying the world of like,
1:32:25 hey, who can tell us how to practically think about reality? And you probe religions and capitalism
1:32:31 and communism and socialism and like any other group who can pull up and say, here’s a playbook,
1:32:36 here’s an instruction on how you actually think about reality. And that’s what I’ve been trying
1:32:43 to fill is that void is there is no philosophical stack that informs humanity on what to do on a
1:32:49 daily basis. For example, what to eat for breakfast all the way through the most complicated question
1:32:52 of how do you begin thinking about a philosophical alignment with AI?
1:33:09 Thanks for listening to our 2024 recap. Which guest was your favorite? I’d love to know. If
1:33:15 you’re interested in my personal reflections on all these conversations, go to fs.blog/membership
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1:34:07 to see what we have in store in the new year. Thanks for listening and learning with me in 2024. Happy New Year!
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