David SenraBrad Jacobs, QXO, XPO, United Rentals & United Waste | David Senra
EVERY SPOKEN WORD
145 min read · 28,919 words- 0:00 – 0:31
Introduction and Setting the Tone
- BJBrad Jacobs
[static] I'm ready when you are, man.
- DSDavid Senra
Let's go.
- BJBrad Jacobs
I'm in the zone. I'm in the zone, man!
- DSDavid Senra
[laughing] We're gonna- [laughing] right? I hope we start with this. I love your energy. This is what I always tell people when... You know, I did the episode on your book, right? And since then, thousands, and this is not an exaggeration, thousands of people have sent me messages. But what I try to explain to people, they're like: "Well, what's, like, so different about Brad?" I was like: "Well, first of all, how long do you have?"
- BJBrad Jacobs
[laughing]
- DSDavid Senra
Second of all, he's got the best energy and the most energy of any person I've ever been around. So, like, I really appreciate you taking the time and agreeing to do this.
- 0:31 – 2:41
Mentorship and Key Lessons from Ludwig Jesselson
- DSDavid Senra
One of my favorite things is your affinity and relationship that you had. You had a bunch of mentors, but one of your most important one that you mentioned, I think, four times in the book, is Ludwig Jesselson. You have a list of maxims in the very beginning of the book that you learned from other people. Uh, the maxim that you listed for him was, "Get the major trend right." So if you could just talk about your relationship with him and what he meant to you, I think that's a perfect place to start.
- BJBrad Jacobs
He meant a lot. So Mr. Jesselson... I never called him Ludwig. Mr. Jesselson-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... he was, you know, significantly older than me and much more accomplished than me, so I showed him respect by calling him Mr. Jesselson. Mr. Jesselson, uh, was a special guy. This was someone who was deep, very profound, and had lived life fully and by principles. And he was a religious guy, but I wouldn't say he was, like, ultra-religious. He was more taking the, the morality of Judaism, the do's and don'ts, and ethical behavior, and honesty, and so forth, and, and that became the core of his life. That became the core of his personal life and his business life. Relationships, deep relationships, long-term relationships, honest relationships, relationships you can keep coming back to. And sometimes one person has the leverage, sometimes the other person has the leverage. Doesn't matter, you don't take advantage of that. It's long-term relationships. And he had, he had about a few dozen deep principles, and, and one of them is one, one you just mentioned, which is, 'cause he was a trader-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... ran the largest commodity trading firm in the world, Phillips Brothers, it was, "You gotta get the long-term trend right." You can get a lot of other stuff right-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... but if you don't get the long-term trend right, you're kinda in trouble. So you gotta, you gotta figure that one out. You gotta say, "What, what's going on here?" You need context. You need to see what's happening, what did happen, what is happening, and what will likely happen in the future. And what are the different future states that could happen, and what's the probabilities for each one of those? And then you have your risk management. So yeah, the converse of that is, if you get the major trend wrong, you can do a thousand things right, you're still gonna lose. You're not gonna create alpha, you're not gonna create value there. So yeah, that, that was a big lesson from him.
- 2:41 – 6:07
Embracing Problems as Opportunities
- DSDavid Senra
The other thing that I love is you were 22 years old. You're having lunch with him on a very frequent basis. Like you just said, he's much older, he's one of the most successful people in the world, he's taking an interest in you, and yet you were still comfortable to, like, unload your, like, your stresses and your problems, and he would sit there patiently listening. And then I love his response, where he's just like: "Yeah, business is problems." Like, one of the, I think, most important lessons was, like, problems are... There's a line from Henry Ka- Kaiser, who was, you know, in his day, was as famous as, like, say, like, an Elon is today or you're becoming. And, you know, he started 100 different companies, he built the Hoover Dam, uh, he built Liberty Ships, uh, uh, for the Allies in World War II. And I've read a bunch of biographies on him, 'cause he was, uh, Charlie M- one of Charlie Munger's favorite founders. And he said a line in the biography that's in multiple life stories about him, that, "Problems are just opportunities in work clothes." And so I read the, the, your recounting in your book of your l- uh, some of your lunches with, uh, Mr. Jesselson, and it's like, oh, he had the exact same- he essentially gave you the same advice.
- BJBrad Jacobs
Yeah. So i- in the book, I talked about a specific episode when I was having lunch with him, and I was kinda down and glum, and he said, "What's going on?" And I was talking about this problem and this thing. I was just kinda down, you know? And he said: "Well, don't stay in the business world if you're gonna get down on this stuff. [chuckles] This is the things you should get up from."
- DSDavid Senra
Yeah.
- BJBrad Jacobs
"We have problems, we have challenges, you have obstacles. By addressing those, that's how you make money."
- DSDavid Senra
[chuckles]
- BJBrad Jacobs
"You make money. So the more problems you have, as long as you can solve them, as long as you figure out how to address them and remove the, the problem, that's how you're creating value." That's a, a wonderful way to go through life. Number one, it's a great way to make money-
- DSDavid Senra
Mm
- BJBrad Jacobs
... 'cause you're not always down, 'cause you'll always have incoming missiles when you're in the business world. You have problems with, with employees, with competitors, with regul- I mean, just, just all day long you have incoming missiles. You have great stuff too, but in between that is punches to the face, and if you're gonna get beaten up by that, you're not gonna... You're not gonna be successful, and secondly, you're not gonna be happy. So you're gonna go through life, like, glum. You see sometimes, you see these, like, multi-billionaire guys, and they always look like this. Well, what's the point of all the money? [laughing]
- DSDavid Senra
[laughing]
- BJBrad Jacobs
Seriously. The- so I, I, I would not be want- wanna be one of these billionaire guys who's, like, frowning all the time, [chuckles] like, and upset and angry and depressed. That's much more important to me, to be in the right frame of mind and to go through the short time we have in life-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... happy, reasonably happy. I don't have a perfectionist standard, I have to be, like, in ecstasy and bliss 24 hours a day, seven days a week, but generally happy.
- DSDavid Senra
Did you ever meet Sam Zell when he was alive?
- BJBrad Jacobs
I did, yeah. I met him many times.
- DSDavid Senra
Okay, so he-
- BJBrad Jacobs
Great guy
- DSDavid Senra
... he, he had the same thing. I was lucky enough to have a two-hour, very intense lunch with him. He said the same, very similar thing to you. He's just like: "I know all the rich guys." He's like: "You wouldn't believe how many are miserable." He's like: "Don't do that." He's like: "I wake up every single day..." You guys have a lot of similarity, where, like, I'll spend time with you. You know, the very first time I met you when I went to your book launch party, right?
- BJBrad Jacobs
Yeah.
- DSDavid Senra
I just remember, like, "Oh, this guy's got crazy energy." And I'd already read your book by then, but something that you talk about over and over again in your book is, like, problems are just opportunities. It reminded me of, there's this line from, um, in, well, Jeff Bezos's, uh, his... There's several books on him, but one of his main biographies is a book called The Everything Story- Everything Store. And they said that Jeff, you would tell him problems about his business, and he would get excited.
- BJBrad Jacobs
Yeah.
- DSDavid Senra
'Cause he's like, "Oh," and he talks about it in the shareholder letter, he's like, "Oh, this is like, these are problems. If I solve these problems, this is gonna increase the enterprise value of the company that I'm building. These are actually good things to identify and embrace instead of avoid."...
- 6:07 – 7:58
The Importance of Recruiting Top Talent
- DSDavid Senra
One of the most important things that I learned from Brad Jacobs is the importance of working with the smartest and most talented people you can. Brad says the most important thing that a CEO does is recruit superlative people. Brad recruits the smartest people he can find and says there's no substitute for smarts. Steve Jobs believed that this was important, too. Steve said, "I think that I've consistently figured out who the really smart people were to hang around with. You must find extraordinary people. The key observation is that in most things in life, the dynamic range between average quality and the best quality is at most two to one. But in the field that I was interested in, I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was fifty or a hundred to one. You need to build a team that pursues the A-plus players." That is the end of the Steve Jobs quote, and that is exactly what Ramp has done. Ramp has the most talented technical team in their industry. Becoming an engineer at Ramp is nearly impossible. In the last twelve months, they hired only point two three percent of the people that applied. That means when you use Ramp, you now have top-tier technical talent and some of the best AI engineers working on your behalf twenty-four/seven to automate and improve all of your business's financial operations, and they do this on a single platform. That means the longer they use Ramp, the more efficient your company becomes. This is important because, as Sam Walton said in his autobiography, "You can make a lot of different mistakes and still recover if you run an efficient operation, or you can be brilliant and still go out of business if you're too inefficient." Ramp helps you run an efficient organization. From a customer's perspective, what does a team of A-plus players sound like? It sounds like this customer review that I read, which said: Ramp is like having a teammate who you never need to check in on because they have it handled. Go to ramp.com to learn how they can help your business save time and money today. That is ramp.com.
- 7:58 – 10:14
Maintaining Long-Term Reputation
- DSDavid Senra
I do have a question on your long-term reputation, okay? So there's this line... Do you remember when Buffett got, uh, involved-
- BJBrad Jacobs
I remember it.
- DSDavid Senra
-in all that trouble with, uh, with Salomon Brothers?
- BJBrad Jacobs
Right.
- DSDavid Senra
And he's like: "Listen, you can lose money, that's fine, but you lose a shred of reputation-
- BJBrad Jacobs
I'll be ruthless.
- DSDavid Senra
... I'll be absolutely ruthless."
- BJBrad Jacobs
Yeah.
- DSDavid Senra
I- it was a very jarring experience for me at your book launch party, because first of all, I was the only one that didn't show up in a suit.
- BJBrad Jacobs
[laughing]
- DSDavid Senra
So I rectified that today, right? And, uh, and then everybody else was just like, you know, "I've known Brad for three decades." Like, how-- basically, everybody there was like: "How do you know Brad?" It's like, you know, he, he... "I was an investor of his. You know, he made all this money for the pension fund that we were on," and everything else. And, like, the stories that I've heard at the party and then since I released the episode is just like, you have a fantastic long-term reputation. Do you have any advice on how you were able to maintain that and how important it was for other people to do the same thing?
- BJBrad Jacobs
Reputation is really important. Your br- your personal brand is extremely important because, based on that, people are going to want to do business with you or they're gonna want to not do business with you. So every day you're in the office and doing stuff, you're either raising your brand or you're lowering your brand, and that's the main thing you gotta work on. You gotta make sure that your brand reflects integrity and honesty and dependability and stability, and people can count on you. This goes back to Mr. Jesselson. So Phillip Brothers, this is before email, this is before... actually, it was even before faxes. [chuckles] It was more Twixes and Telexes, so which took a few days to go through, when they went through- [chuckles] sometimes didn't go through. So you could do a deal worth hundreds of millions of dollars on a handshake or on a phone call. There's no written confirmation of that for, like, days. In the meantime, maybe the price of whatever you were trading, oil or copper, had gone up a lot. You still had to have a deal. [chuckles]
- DSDavid Senra
Yeah.
- BJBrad Jacobs
Otherwise, you know, the whole system doesn't work. So dependability is so, so... Trust is so, so important to do.
- DSDavid Senra
How old were you when you d- when he gave you that advice, did you-
- BJBrad Jacobs
Mid-twenties
- DSDavid Senra
... immediately start applying it? So you, you were optimizing for the long term, even when you were that young?
- BJBrad Jacobs
Yeah. I think as you get older, you optimize for long term more, I think. I think when you're young, you're just so ambitious, and you wanna get stuff done, you're in the now. When- as you get older and as you mature, you have more context. I think life in general is about getting more context, seeing things in proportion to other things.
- DSDavid Senra
Can you say more about that?
- 10:14 – 19:50
Finding Context and Centering
- BJBrad Jacobs
Well, you know, 'cause we've talked about it a lot outside of your podcast.
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
I'm into meditation. So a lot of the meditation I do is changing- looking at space from different perspectives, not the normal perspective that we have right this minute. So I, I expand my mind from the Earth to the sun, to the solar system, to the galaxy, to clusters of galaxies, to the universe, to the multiverse. Just go way, way, way, way, way high, and then bring it all the way back in, and then go into the molecule, and the atom, and the proton, and the nucleus, and right in the middle of all that, and then go to strings. And, and, and I find that accordioning, making, making my mind like an accordion, getting really big and then really, really small. And then doing the same thing with time, looking at time go back towards my life over the last few decades, and then go back centuries and millennia, and just keep going way, way, way back, all the way back thirteen point eight billion years, go back all the way to the Big Bang. And then go all the way forward and, like, picture the world going forward, for- forward, forward, forward, forward, forward. That time and space juxtaposition, for me at least, different things work for different people, gives me context. It gives me humility, it gives me humbleness. It shows that I'm, I'm just one thing right here in a major, major thing going on. I'm just one little, little, tiny jet. But at the same time, I'm part of that. So I'm very uplifted, I'm very inspired, I'm very motivated. Like, wow, I'm part of, like, a real big deal here. [chuckles] It's great. We all are.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
We're all part of this huge, huge, huge, huge, huge thing. So I think context is really important. It gives you meaning, it gives you purpose, it gives you understanding, it gives you wisdom.
- DSDavid Senra
I know you hate when I say this, 'cause we've talked about this priorly. It's like, you obviously know I study uncommon people for a living, right? Like-
- BJBrad Jacobs
You do a great job at it. [chuckles]
- DSDavid Senra
I appreciate it.
- BJBrad Jacobs
They're unique.
- DSDavid Senra
Yeah, I appreciate it, but, like, think about how crazy it is. Like, the people that I study on Founders is, they were so good at their job, somebody wrote a book about their life. Like, you're talking about very small, but most of their inner monologues-... you're different. You were- have a much more positive energy, and, like, there's almost like a... Let me, let me give you some context here. We were together a few months ago at a mutual friend's birthday party in Miami, our friend Rick, and at the, uh... There was a bunch of interesting people at the party. One of them was Apollo Ohno. Okay?
- BJBrad Jacobs
Mm.
- DSDavid Senra
Apollo Ohno is the most decorated winter, American winter ath- uh, Olympian of all time. Uh, he's become a friend. I met him through the podcast, and he walks up to me, and this is the, the one of the funniest things, and, you know, 'cause he, he has... People think you're an Olympian, like, he was training since he was a kid. His dad would make him get up at, like, 5:00 in the morning and run drills-
- BJBrad Jacobs
Yeah
- DSDavid Senra
... in the, in the school parking lot, but he still ha- comes from, like, a very positive... He, he has a great relationship with his dad. Normally, it's, like, you know, not good when you- when they're put under circumstances. So he was asking me, he's just like, "I see this pattern in, you know, when you're reading all these hundreds of biographies about these great entrepreneurs, that, like, there is something inside of them driving them, and it's actually negative. It could be insecurity. It could be, you know, they grew up in poverty. It could be a bad relationship with their family." And he's like, "Are they all like that?" And I- and you're, like, 20 feet away. You, you see that guy over there? You go, I go, "You know who that is?" He goes, "No." I go, "That's Brad fucking Jacobs." [laughing]
- BJBrad Jacobs
[laughing]
- DSDavid Senra
I was like, "I guarantee you, he's not driven by that." This is what I mean. You're uncommon amongst uncommon among common people because at least from the outside and the conversation I had, it's like, I think part of this impenetrable nature that you have in, like, "Oh, yeah, business is problems. It's gonna come," you... What do you, what do you think we're doing here? Like, you, you don't seem to be rattled by them. So, like, what is your inner monologue like when, when, like, you're doing huge fucking deals right now? You're doing all kinds of crazy stuff. You built eight separate billion-dollar companies. You don't do that by accident. So how do you ma- like, I'll stop talking there. What is your inner monologue like?
- BJBrad Jacobs
So it goes back to what Ms. Jess- Mr. Jesselin used to say is, "Problems are your friend."
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
You wanna... You don't wanna just tolerate problems, you wanna embrace problems, you wanna hug problems. Problems are the way you succeed. You wanna run to the fire. You don't wanna run, run away from the fire. Be brave, and be courageous. Go into it. I think you can start with anything that's anything, and in this case, in Apollo's case, he starts with, and other people he's studied start with, negativity, trauma, stress, insecurity, fear, anxiety, and then that's their motivator. They, they zero in on that, and then that makes them run faster.
- DSDavid Senra
Was that ever your case, though?
- BJBrad Jacobs
No, that's not my case.
- DSDavid Senra
This is I don't... You're like a, a unicorn. I don't-
- BJBrad Jacobs
So you're... I don't know that I'm a unicorn. I don't embrace negativity. I, I, I'm ok- I'm okay with it, but I don't make a big deal about negativity. I'd much rather enjoy the positivity. I'm a sunny-side-up guy.
- DSDavid Senra
But your inner monologue, are you nice to yourself? Your ongoing inner monologue.
- BJBrad Jacobs
I'm, I'm, I'm reasonably nice, like... Yeah, I am.
- DSDavid Senra
I am vicious. I sound like, uh... You know who David Goggins is? This like-
- BJBrad Jacobs
Oh, yeah, it was just- someone was talking, the Oz, the m-
- DSDavid Senra
Yeah, my inner monologue-
- BJBrad Jacobs
... mentors was talking about.
- DSDavid Senra
My inner lo- monologue sounds like David Goggins. [laughing]
- 19:50 – 26:29
Perfectionism and Cognitive Therapy
- BJBrad Jacobs
So I suffered a lot from perfectionism when I was younger. I wanted to be perfect.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
Not only did I want to be perfect, I wanted everybody else to be perfect. [chuckles]
- DSDavid Senra
[chuckles]
- BJBrad Jacobs
Not only did I want o- myself and others to be perfect, I wanted the universe to be perfect. I wanted everything just to go swimmingly well at my, my beck and call and command. Well, it turns out that's not reality.
- DSDavid Senra
It's, it's not nature.
- BJBrad Jacobs
None of those three constituents are perfect.
- DSDavid Senra
There's something that you said in your book, uh, it's actually in this, this section that I was writing down. You're like, "I'm not surprised when things don't go perfectly. That's the nature of the universe. The big problems can be where the best opportunities lie." And so obviously, you know, like, anytime I read something, it's not that I'm reading it, I think about how it relates to every single thing I also have experienced and all the other books I read. And, um, I remember I got to have dinner with Charlie Munger. I spent three hours with him, uh, you know, uh, six months, eight months before he died. There's, like, a trend here, unfortunately, where it's like-
- BJBrad Jacobs
Uh-oh. [laughing]
- DSDavid Senra
... you're kind of danger. [laughing] Remember? You're like, "I don't know. I don't know if I'm gonna have dinner with you." Um, but one of the things I loved, it was the top note I left myself, 'cause as soon as I left there, I just wrote down, um, like, what I learned, and it said that, "Charlie has an almost complete indifference to problems. Troubles from time to time should be expected. This is inescapable, so why let it bother you?" And it's, like, one of the things I most admired about him. He's just like, "Yeah, it's a part of life. What's wrong with you?" Like [chuckles] you know, he had nine, 10 decades of, of life experience. He was way further down the line and obviously m- way wiser than I was, so...
- BJBrad Jacobs
I have two comments on that. One is, when you go back, go back to the Big Bang-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... the current construct model of how the universe was created, it was actually created out of imperfection. There was, like, a slight imbalance between matter and anti-matter, just a slight imbalance. A lot of debate of what caused that. As a result of that, everything came out of that.
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
Had there not... Had there been perfection at the beginning of the universe, the Big Bang would not have happened. So we are imperfection. We are the children of imperfection. Imperfection is good. Imperfection is not bad. Expecting perfection is, will cause you stress and strain and won't, won't, won't really work.
- DSDavid Senra
When you were in your 20s, though, you said, "Hey, I wanted to be perfect. Not only do I want to be perfect, I want everybody around me to be perfect."
- BJBrad Jacobs
Yeah.
- DSDavid Senra
"I wanted the universe to be perfect." Like, how long did it take for you to learn what you just explained?
- BJBrad Jacobs
So when I stepped down from United Rentals, a CEO, I still stayed as chairman. When I stepped down as CEO of United Rentals, I had done it for about 10 years, and I wanted to do my next big thing. I wanted to do another startup from, from the beginning. You know, I was running a big company. I wanted to start it from scratch. And there was a period of a couple years where I was trying to figure out what I was gonna do, and, and I w- didn't find it, and then the great financial crisis came, and I was kind of lost. I was kind of... It's kind of- it was probably the only time in my life that I was depressed. I- I'm just not depressed, but that period of time, I was actually clinically depressed. I took the Beck Depression Inventory, and I came up, yep, depressed.
- DSDavid Senra
Wow!
- BJBrad Jacobs
So, so I found a amazing cognitive therapist, and I went to the guy twice a week, hour and a half a shot, for two years. It was fantastic, one of the best things I've ever done in my life, because what we did was, in a, in a, in an environment that was very safe and confidential and trusting with someone who was a professional at, at, at psychology, I was able to, first of all, identify and then notice more fully my automatic thoughts, the negative thoughts-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... and the irrational thoughts, unconstructive thoughts, and then first validate them, then dispute them. First join, and then lead to a more constructive way of looking at things. So that cognitive therapy approach of identifying the, the, the thoughts and then, and then dealing with them, really was the turning point in my life on this perfection thing. Because after a few sessions, he said, "You know, I kind of know what's going on here now, for I've gotten your, your measure. You want to hear it?" I said, "Yeah, I want to hear it!" [chuckles]
- DSDavid Senra
[chuckles]
- BJBrad Jacobs
And he said, "You're suffering from perfectionism." [laughing]
- DSDavid Senra
[laughing]
- BJBrad Jacobs
Like, like, "You want everything to be perfect, and it ain't. [chuckles] So we need to get over that. We need to reduce these demands, these musts, these shoulds, these commands that-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... either I or you or the rest of the world is perfect to, you know, preferences, where I, I would like me to be better, I would like you to be better, I'd like things to go better, but they don't have to. I can still be happy, and frankly, they're not going to all the time, so I need to accept that, need to radically accept that. I need to, I need to be in reality, not put these..." You know, Jeff- you men- mentioned Bezos. Bezos says a lot of cool stuff, but one of the things he says often is, uh, "Don't fight with reality, because reality always wins."
- DSDavid Senra
Yeah.
- 26:29 – 36:50
Building Billion-Dollar Companies
- DSDavid Senra
Why, why do you keep starting so many companies? Like, what is going on? [chuckles]
- BJBrad Jacobs
That's my thing.
- DSDavid Senra
[chuckles]
- BJBrad Jacobs
Everybody's got their thing. So everybody... So you're a great podcaster.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
You, you have a talent. Your superpower is you can consume a large amount of information and then distill it down to, like, "Boom, here are the most important takeaways from that." It's, uh... It's really brilliant. That's your thing.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
That's why you're doing it, right?
- DSDavid Senra
Yeah.
- BJBrad Jacobs
'Cause that's what you're good at.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
You're not playing professional baseball or, you know- [chuckles]
- DSDavid Senra
Yeah
- BJBrad Jacobs
... acting or singing, whatever. You're, you're doing what you're good at.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
This is what I'm good at. I'm good at figuring out what's the right industry to consolidate.
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
And secondly, I have a toolkit, and it's the same old toolkit. It's not-
- DSDavid Senra
You told me this last time. Can you explain this? I love the way you described this toolkit, of how you approach building your businesses.
- BJBrad Jacobs
So first I find the right industry. I find something that's large, I find something that's growing, I find something where it's fragmented. I, I find something where we can buy things at reasonable prices. I find things where technology is at- would, would- could be used. It's not a very tech-forward industry. I find stuff that AI and automation are not gonna disrupt at any time in the, in the near future. So I l- I find industries that have certain characteristics to it, whether it was garbage, whether it was construction, whether it was, uh, transportation or logistics and now distribution, it's, that's... They all have the same characteristics, the same traits. So that's point number one. Point number two is, I then put together an amazing team. I put together a team of people who are generally smarter than me and who are more talented than me in what they do. So I have a great CHRO who knows everything there is to know about HR and compensation and talent recruitment and so forth. I have a great M&A team who really know how to do deals and get deals done rather than turn them into dramas. I have great finance accounting people who understand everything there is to know A to Z about running a, a, a fast-growing company, keeping the books clean, so et cetera. And I get the team together, then I get the compensation sorted out. So I make everybody my partner on the senior team, and I give people tons of equity, but there's a catch. It could vest, but you can't sell it for five years.
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
And most of it vests in the last two years. So everyone is committed, going back to long-term relationships. Sure, people come and go for whatever personal reasons, or people burn out or whatever, but generally speaking, most of the team stays for a while. And you, you work together as a team. And then I have, I have certain rules of how we're going to interact with each other in a very respectful way, but in a way that encourages looking at things from different angles. So we disagree, and we argue. Argue's too strong of a word. We present different ways of looking at a situation that partly overlap and partly conflict, and then we, in a very scientific way, figure out, well, let's, let's risk-adjust these things, figure out what's right. It's, it's a scientific experiment, an ongoing science experiment, like all day long of trial and error and experimentation and A/B experimenting. And so that culture that we create is... gives us a power. It gives us a power to attack the industry in a way without all the, the, the, the noise that a management team has. We're a very coherent team, like a superorganism, like a brain, like a very organized group. And then I have, between all those people, we have experience at our main job, which is to buy companies at reasonable prices, where there's a difference between what we can raise capital at and what we can deploy it at, and then we have a skill set to be able to improve the companies that we buy. These are the two main things we're good at, is buying companies in a disciplined way. Price is too high, we don't do it. Price is reasonable, doesn't have to be cheap, we're not trying to steal companies, but the price is reasonable, we go for it with gusto. And secondly, the other talent that the team collectively has is we know how to improve the businesses. We know how to improve the pricing, improve the procurement, pr- uh, the HR element, the compensation systems, the technology, the whole tech stack, just everything from A to Z.... we're just good at transformation. We're, we're good at taking a company that is making a billion dollars of EBITDA, of, of profit-
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
-and within three to five years, doubling the, doubling the profit, doubling the EBITDA. That's the main criteria I look at when I look at a, at a company, is purchase price, and secondly, can we double the profit in three to five years? And, and most of my main acquisitions have done that. So Conway, Robert Half International, New- all these different ones, they were great companies, and everyone says, "Oh, they're working really well." Okay, well, three years later, we doubled the profit [chuckles]
- DSDavid Senra
Yeah.
- BJBrad Jacobs
'Cause we apply the toolkit. We apply the playk- playbook, and it's the same playbook industry after industry. The playbook gets refined a little bit here and there, but it's the same playbook.
- DSDavid Senra
So when you say, "This is just what I do," like, to me, you now have figured out who you are as a person, right? I have this weird theory that I can't, um, I can't prove, but I believe, and, you know, there's, like, this myth of, like, the genius young entrepreneur, and I was like, "Well, I don't know. If you study... Like, you study the history of entrepreneurship pretty intensely, you realize that, like, people do, most of the time, their best work many decades into their career." And so there's all, all kinds of reasons. They're like, "Oh, they've had more experience. They're wiser. They have more resources. They have more practice," and I don't dispute that. That is all true, but I have this weird theory that they also know themselves way better, and I think the key to being a great entrepreneur is building a business that's... I used to say, building a business that's authentic to you, and then I read Michael Dell's excellent autobiography, and he has a better line. He said he built a business that's natural to him, and there's a great story. I, I want your opinion on this in one second, but there's a great story where, you know, Michael starts in-- his company when he was 19. He's in his 20s, and it's doing fa- fabulously well, but he realized, like, "Hey, I need some, like, grownup, like, some... I need some help here." And so he, he gets this guy, I think his name was Lee Walker, if I remember correctly, and he's about 20 years older than, than Michael, already started a bunch of companies, rich, you know, didn't have to work anymore, but he, he saw an unusual, once in a, you know, generation talent, and, and Michael decides to help him. He lasts, like, four years, and so I read the book, and then I was about to make the podcast on it. I go and see it. I say, "I wonder whatever happened to this guy?" And I found an interview that he did, and he's in his 80s, and he's talking about that time, and he gave me some of the best context to really understand this story, and Michael's story is really a story of you and everybody, and all the people, really, are, you know, very similar people that we're studying. And he's just like, "You know, Michael starts this company with $1,000, says, 'I'm gonna take on IBM from my dorm room.'" IBM is the most valuable company in the world at the time, which I didn't know. It was the first company to, to hit 100 billion market cap, which is nuts, and he's... You know, just the audacity to have that, and he's like, "In the first few years, like, we're going against this behemoth, and I lasted four years. I started losing my hair. My back hurts."
- BJBrad Jacobs
[chuckles]
- DSDavid Senra
"I can't sleep. I'm unhealthy," and he, and he goes, but he goes, "But Michael was energized by it. He built a business that was natural to him-
- BJBrad Jacobs
Yeah.
- 36:50 – 42:27
The Role of A Players in Success
- DSDavid Senra
That leads me to another great one of your, uh, I don't even think you think it's a maxim, but it's how you differentiate between A, B, and C players, where you're like, uh, I'm, I'm just gonna summarize this, then jump in whenever you want, but, um, you're- you envision, you do another thought experiment [chuckles] -
- BJBrad Jacobs
Yeah
- DSDavid Senra
... of, okay, do you wanna see if you have the absolute best people on your team? Just vi- visualize that they're coming into your office, and they're saying, "Brad, I quit."
- BJBrad Jacobs
Yeah.
- DSDavid Senra
So then what happens next in, in this scenario?
- BJBrad Jacobs
So I'm, I'm always interacting with my CHRO-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... and going over talent and making sure everybody's happy and motivated and-
- DSDavid Senra
How much percentage of your, like, your-
- BJBrad Jacobs
A lot. I sp- I spend most of my time on people and talent issues.
- DSDavid Senra
So most of your time?
- BJBrad Jacobs
Yeah.
- DSDavid Senra
There's a fun-
- BJBrad Jacobs
Well, no, not the most, but the most... If I did a pie chart of, like, how I divide up my time, the largest percent is on people issues.
- DSDavid Senra
I- there's a funny story about this, and then I, um, I don't wanna interrupt, but I, I do- this is inside of me, and it just has to come out, all these stories, 'cause I find them fascinating. So there's two MBA students in, uh, Stanford in the 90- in late '90s, and in '97 they interview, uh, 16 technology company founders, since they're in Silicon Valley at the time, you know, and they publish this book called In the Company of Giants, and everybody's in there. You know, Bill Gates and Steve Jobs and everybody else. And they're telling Steve, they're like, "Well, uh, you know, you're the founder, y- of course you don't have time to, you know, recruit people." And Steve's like, "What?" Like, no, it's the most im- it sounds exactly what you said in your book, it's the most important. He goes... And he, he does it a great, great way to demonstrate the point. He goes, "Let's say you're starting a company, right? You're in Silicon Valley. That's what you're doing over here. You pick your co-founder. You should think long and hard about that. Your co-founder is 50% of the company at that point." [chuckles]
- BJBrad Jacobs
Right.
- DSDavid Senra
And then he goes, and then he goes, "But it still goes out. Now you have to pick the 10th person. That person's 10% of your company, and you're saying you don't have time? Like, what else are you doing?"
- BJBrad Jacobs
It's all about the people. It's all about the people. You know, systems and tech and budgets and customers and sales, all these things are really, really important, but you can't achieve excellence in those things without fantastic people, without fantastic leaders, and I spend a lot of time, especially on the top few dozen people. I wanna make sure everybody's in it to win it, everybody is fully, fully engaged. And I do a mental exercise where I picture the person coming into my office and saying, "Brad, I quit. Like, this is not a conversation about you making me a counteroffer. I'm done. I've already moved, and it's over with. This is about a conversation about how do we make an orderly transition, 'cause I respect you, and I don't wanna leave you high and dry." And then I try to feel and visualize, what would be my reaction if that person came into me and quit? If my reaction to that is, "Yes!" [laughing]
- DSDavid Senra
[laughing]
- BJBrad Jacobs
I, I don't wanna smile or things, I don't wanna act like I'm happy about this, but you know, I, I didn't have... You know, nobody likes firing people. [laughing] And I, I, I just didn't, you know... I, I, I just kept postponing firing that person-
- DSDavid Senra
Yeah [chuckles]
- BJBrad Jacobs
... I shouldn't have, but I did, and this is great. I don't have to pay severance. [laughing]
- DSDavid Senra
Yeah.
- BJBrad Jacobs
And, uh, and you know, I, I- that solves that problem. No problem at all. We'll replace them. That's a C player. That's someone really you should get the courage up to take- to get off the manage- get off the team right away. And then it- on the second category, if my reaction to it is, "You know, it kind of sucks. You know, it's what I would have preferred that person stayed, but it's not the end of the world. We'll hire a headhunter, a headhunter. We'll get someone as good, maybe somebody even better, and, you know, things will work out," that's a B player. But if when I visualize that person quitting, my reaction to that is pure terror- [laughing]
- DSDavid Senra
[laughing]
- BJBrad Jacobs
... and absolute panic, and like somebody took a baseball bat and just whacked me in the stomach and then punched me in the face, I'm going, "Oh, my God! Like, I'm never gonna find someone as good as her."
- DSDavid Senra
Yeah.
- BJBrad Jacobs
"No way," or, "I'm never gonna have someone as talented as that person. I'm never gonna have someone who brings to the table their particular superpower."
- DSDavid Senra
Yeah.
- BJBrad Jacobs
I am... And I, I don't even- I can't even hear what they're saying anymore, so I'm just like-
- 42:27 – 44:23
The Power of People in Business
- DSDavid Senra
Like, it's the same situation. It's like you're in charge, you get to choose... Again, this goes back to one of the gift of being the CEO, of being an entrepreneur. It's like, it's very rare that you get to literally choose who has access to you, who's around you, and I love this idea. It's like, hey, the organization is just like a party. You want people to, uh, you only want people to-
- BJBrad Jacobs
David, it's all about the people... It's all about the people, 'cause the people then create all the, all the different processes, and work streams, and transformations, and everything.
- DSDavid Senra
This is very fascinating, 'cause, like, it's obviously, you know, business is people, right? You're not just, like, the people that are building a product, but, like, all of business is... The best de- definition of business I ever heard actually came from Richard Branson. He says, "All business is, is an idea that makes somebody else's life better," right? And, like, there's infinite- that's why there's always more opportunity, 'cause there's al- infinite ways... We think technology's gonna, like, it changes things, but then it just usually opens up other ways to make other people's lives better. So just focus on, like, if you're looking for an opportunity, how can I just serve other people? Another, uh, line that's very related to this is Henry Ford, where he says, "Money comes naturally as a result of service." Like, I think those two ideas go together. The reason, uh, I, I was thinking about this, though, the best way I've just, I've heard described what you were just saying, it's all about people, work with the best people you possibly can, the A players. We're gonna talk about, uh, you have this great line about there's no substitute for brains. But before that, it's like, the way that I've heard this described best, in my opinion, is from Ed Catmull, the founder of Pixar, right? He would go around and give all these talks, and he was actually, like, shocked that he would ask the audience, like, "What's more important, people or ideas?" He says every single time, people got it wrong. They said it was the ideas, and he's like, "No, it's the people." And so he has this great line where he's just like, "Listen, if you give a mediocre idea," right, "to a brilliant team, they're either going to fix it or they'll throw it out and come up with something better or something new. But if you give a great idea to a mediocre team, they're gonna screw it up." So it's obviously, 'cause ideas come from people, so it's the people. Um, so do you-
- BJBrad Jacobs
That's exactly what I'm trying to say-
- DSDavid Senra
Well-
- BJBrad Jacobs
... what he said.
- DSDavid Senra
He says it in, like,
- 44:23 – 45:54
The Importance of Superior Intelligence
- DSDavid Senra
just a great way, but you have a very, like, explicit piece of advice in your book that I think is interesting, where you're, like, "Screening for... There's no substitute for brains. Screening for superior intelligence eliminates 90% of all candidates, so it's the first thing I look at. There's no substitute for smarts. The CEO trait most cor- mostly- most closely correlated with organizational success is a high IQ. Double down on hiring the brightest."
- BJBrad Jacobs
Yeah. Well, you want smart people, and I particularly want people who are smarter than me. I want people who are, who uplift me, who teach me. I don't want to be-
- DSDavid Senra
Do you want them specialized? 'Cause you mentioned earlier, you said you want some- them smarter than you, but also better at their particular...
- BJBrad Jacobs
The vast majority of them are specialized.
- DSDavid Senra
Okay.
- BJBrad Jacobs
They're, they're a finance person, they're an investor person, they're a, a strategic person, they're a... Th- they have s- something that they, a tech person, they bring to the table that they're re- an inch wide and a mile deep in. But you also want them to have certain human qualities that transcend what their specialty is, and those are as or more important than the, than the technical skills.
- DSDavid Senra
Explain.
- BJBrad Jacobs
Well, you want... You mentioned smart. You want people who are honest, you want people who are hardworking, you want people who are collegial. You want people who are really in it, like a, like, on the work-life balance thing, and boom, it's work. [chuckles]
- DSDavid Senra
Yeah.
- BJBrad Jacobs
And their life is a lot of their work, and, and, you know, that's, that- they enjoy that. I- I don't have to hold them like a schoolteacher, a stick over their head, getting them to work late or come in early, work on weekends. Like, they wanna do that. Like, they enjoy doing that. Their job, their career, their success, the collective success of the company is, is an important part of their gestalt. It's a really important part of their being and their purpose.
- 45:54 – 48:11
Balancing Work and Life
- DSDavid Senra
Was there ever a time... I don't mean to keep interrupting you, but this is fascinating, and it's almost selfish to have this conversation, 'cause, like, I get to ask you questions and, and learn from you. Was there ever a time where work wasn't, where you were more balanced?
- BJBrad Jacobs
No.
- DSDavid Senra
When was the last time you were balanced?
- BJBrad Jacobs
No, no.
- DSDavid Senra
So when- you started your first company at 23.
- BJBrad Jacobs
I did-
- DSDavid Senra
Now-
- BJBrad Jacobs
... and I've been completely imbalanced since then. I've been working seven days a week-
- DSDavid Senra
Yeah, 'cause you-
- BJBrad Jacobs
Very few vacations
- DSDavid Senra
... you guys scaled, like, four years to, I don't know, like, a couple billion dollars. It was just, like, an insane story in the book.
- BJBrad Jacobs
But for me, it's not work. For me, it's like i- I'm, I'm really enjoying it. To me, it's a craft, it's a skill that I have-
- DSDavid Senra
Were you always-
- BJBrad Jacobs
And I enjoy doing it.
- DSDavid Senra
Were you always honest with yourself that it was the, the top priority?
- BJBrad Jacobs
I think so, yeah.
- DSDavid Senra
I-
- BJBrad Jacobs
I try to be honest with myself
- DSDavid Senra
... I had a conversation with a friend of mine, uh, on the drive over here, and, um, I think I'm lying to myself, so let me give you an example. So, you know, in, in many cases, like, you read these biographies of these people, and it winds up being a cautionary tale, you know, 'cause they kind of, like, will sacrifice everything for professional success, their health [chuckles] their relationships, everything else.
- BJBrad Jacobs
Well, that I'm not in favor of.
- DSDavid Senra
Yeah, no, no, you are, you're still married, you're a good father, like, everything else. Yeah, for sure. Uh, but your main... It's not like you have a bunch, an abundance of hobbies outside of work-
- BJBrad Jacobs
No
- DSDavid Senra
... from what I understand. But-
- BJBrad Jacobs
Meditation and music, that's pretty much it. [chuckles]
- DSDavid Senra
There you go. So I, I, I, for a long time, uh, every single person I read about, I was like, okay, well, I, I even titled the episode My Personal Blueprint, which was Ed Thorp, right? Um, Ed Thorp, I'll give a short rundown real quick. He first, uh, in- first person to invent a quantitative hedge fund. Um, he invented, you know, the, the ability to count cards for blackjack, writes this book in the 1960s called Beat the Dealer, you know, made more money than he'll ever spend. But if you read his book, you get to the end, it's like he was much more balanced, right? He also came from academia, and maybe this had, uh, played a role into that. But essentially, like, lived a life of venture 'cause he truly loved what he did. Uh, once he made more money than he could spend, he stopped trading more time for money. Uh, he, his, uh, had a good marriage till his wife passed away from cancer, uh, took care of his health. But, like, much more of like a... Let's say there's five important things, and he kind of, like, divvied up. Maybe, like, work was 50%, but the other four are other 50%. And I was like, "Oh, that's, that's kind of my personal blueprint." And I said on the drive over here, "No, I'm lying!" [chuckles] It's like 90% of what I think about and how I spend my time is just work.
- 48:11 – 51:59
The Role of Passion in Success
- BJBrad Jacobs
That's a beautiful thing. So all the people you've mentioned so far, all these very, very successful people, I guarantee you, probably every single one of them, with few exceptions, if any, were all in.
- DSDavid Senra
Yes.
- BJBrad Jacobs
And, and what, what they were doing was their passion, and they were just so excited about it. They were in the flow. They were in the flow of being so absorbed on something that you'd, like, lose track of time, and the whole rest of the universe is gone. You're just, you're just in it. You're just really into something that you do well, and you're with people that you really like, and you're likely to be successful because you're, you're doing what you do.
- DSDavid Senra
When I was thinking about the amount of research that you do, that you explain, when you, before you get into an industry, before you start a company, it's like y-... the way I describe your book is buy it, read it all the way through, and then what I really think it is, you put it close to your desk because it's a reference manual. Because you can just pick this up now and read one chapter that takes 10 minutes and get good ideas out of it.
- BJBrad Jacobs
Do you know I'm writing a sequel?
- DSDavid Senra
Last time you told me, you was like, "I only had one book in me. I have nothing else!"
- BJBrad Jacobs
So I wrote the book, and I got so much feedback of what people thought about it, and people asked, "Well, you should really talk more about this, and this, this." At first, I said, "I'll never write another book."
- DSDavid Senra
Yes, I remember.
- BJBrad Jacobs
It takes a lot, takes a lot of time to write a book, [chuckles] and I don't have a lot of time.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
But I had so many people ask me similar questions, okay, I'm gonna write a sequel that addresses those particular questions. You know what the title's gonna be? That was How to Make a Few Billion Dollars.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
This one's gonna be called How to Make a Few More Billion Dollars.
- DSDavid Senra
[laughing]
- BJBrad Jacobs
It's a great award.
- DSDavid Senra
Yes. Let me get an early copy, please. You were very nice to send me an early copy of this one. Uh, but the w- w- I think what ties all this together, when I think about your research process, the way you go after life, all the people we've been talking about, from Steve Jobs to Jeff Bezos, this is like mediocrity is always invisible until passion shows up and exposes it.
- BJBrad Jacobs
Love it.
- DSDavid Senra
I think that is what animates me, is just like y- you, you see this. You're talking about, like, even when you buy great companies, good companies, so like, what else could you do? It's like there's always more-
- BJBrad Jacobs
Always
- DSDavid Senra
... 'cause you can always infuse passion into what you're doing, obsession, work with the best people. Of course, you can keep getting better and better results.
- BJBrad Jacobs
Yeah. Well, I agree with that. I think, so what you just said, you buy a company, it's doing very well, and then three, four years later, you've doubled the profit of it. What did you do? You went in with a toolkit, and you went into the... attacked the pricing using algorithms and elasticity analysis. You've attacked the compensation, so you've got the salespeople made partners rather than pupils to the p- to the parent authoritarian figure at corporate. You've put in technology that f- frees up time, that allows people to spend time doing selling and doing their job rather than trying to find information. You're sharing information in very good ways. So you apply a certain toolkit, boom, you double profit.
- DSDavid Senra
So wait a minute. This brings up something interesting, and I've been talking about lately, the different archetypes there is in founders and CEOs, right? Everybody thinks like, oh, there's kind of one archetype, and especially the ones that are popularized now. It's like, essentially, like the Steve Jobs dictator, make, you know, almost all the decisions.
- BJBrad Jacobs
I don't like that.
- DSDavid Senra
Y- yeah, so-
- BJBrad Jacobs
No
- DSDavid Senra
... th- exactly. I just heard the pupil part.
- BJBrad Jacobs
No, no, no-
- DSDavid Senra
So what are-
- BJBrad Jacobs
Who am I to criticize Steve Jobs?
- DSDavid Senra
No, no, no, no, no.
- 51:59 – 1:05:41
Effective Leadership and Meetings
- BJBrad Jacobs
you wanna get the right people in place, you wanna get the compensation aligned, and then you wanna be communicating with each other in a very constructive way, in a very prolific way. So Friday, we had our, our second MOR, monthly operating review, for this company we had bought, Beacon. And how did we come up with the agenda? It was a 10-hour meeting, two breaks. One was 10 minutes, one was five minutes. Nobody was distracted, nobody was on phones or devices, so it was all shut off. We're very concentrating on the one person that had the, the, the, the sp- the mic- the proverbial microphone at a time, and listening very carefully and intently what that person was saying, and then debating each point and each action point. How did we come up with the agenda? Here's how. Did I, the CEO, come from above and say, "Here's the agenda that I think-
- DSDavid Senra
Right
- BJBrad Jacobs
... is the important thing. I'm smarter than all of you, and here's what we should be doing"?
- DSDavid Senra
Yeah.
- BJBrad Jacobs
No!
- DSDavid Senra
Yeah.
- BJBrad Jacobs
How pompous and arrogant and kind of ineffective, really, to do that.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
What I do is just the opposite. I send around a, a question pro- an app, and we say, um, "Here's all the materials, uh, pre-read for the meeting." We don't do PowerPoints and go through all that nonsense where everyone tells each other how great they're doing. [chuckles]
- DSDavid Senra
Yeah.
- BJBrad Jacobs
It's just the silliness that you see a lot in corporate America. We send all those decks out ahead of time, we have everybody read them, and then we have everybody fill out the que- the app, say, "H- based on everything I read, here are my main takeaways, and here are the main questions that I think are w- are so important in terms of creating value, that we should..." The whole team, all 25 of us who are in that meeting, spend time debating and discussing around the table in the limited time we've got, 'cause 10 hours goes by like that. And then I send back out the takeaways, and I send back out the questions. People rank them on a scale of one to 10. Again, we have an app for this. And then I send people the takeaways, here's how they were rated. Here's what w- people thought were the most important takeaways. Very valuable. Now you've got the benefit of everybody's perspectives on the same data. So people have seen the same charts, the same data, the same metrics, same KPIs, but they've seen it from a little different angle. It's very enlightening. And then I've got the questions. I tell everybody, "Rate the question one to 10," and then all the questions that are rated eight, nine, and ten, and between eight and 10, that's the agenda item. That's what we talked about.
- DSDavid Senra
Mm.
- BJBrad Jacobs
So we just went... We, we then we put them in categories. Everything about tech that was rated eight or above, here they are. Everything that was on comp or people, everything that was on strategic, everything that was on M&A, all the different categories, only the ones that the group voted on, at least an eight. Now, what i- what's the, what is the consequence of that? Number one, we have an amazing meeting. Like, it's a good agenda. Much better than I could, I could m- I could come up with, 'cause now it's got everybody's angle on it. It's group-sourced. Secondly, everybody's involved in it, because the boss didn't come down and like, "Here's the agenda." It's like, we collectively made the agenda. So people realize the truth of the matter is, we really respect each other's opinions. There's no one person who's the authoritarian figure, who's, like, teaching everybody else. It's a group. I've c- I've created a group. I've created a superorganism. I've created, like, a beehive- [chuckles] ... or, or a, or an ant colony-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... or a brain or a human body. Superorganisms.
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
Things that are a collection of people that-... the sum is greater than the collection of the parts, and and the, the whole is, is greater than, than each individual. We have a, a holistic, powerful approach to that. That's, that's how I run the business.
- DSDavid Senra
How many people would be in a meeting like that?
- BJBrad Jacobs
So I've experimented with this over the years. I used to have larger meetings with 40 or 50 people, and it just didn't work. And so those meetings, those monthly operating reviews, which are the most important meeting of the month-
- DSDavid Senra
Okay
- BJBrad Jacobs
... so then the most senior people in the company come together and do the exercise I just mentioned for 10 hours with almost no breaks, almost no breaks at all. That, I have 25 people, and I limit it to 25. I don't want more than 25. I, I don't know what's so magic about 25, but 20 to 25 is the ideal group. You have enough people that you get diversity of opinion, and you have dialectical discussions, meaning looking at issues from multiple perspectives, then analyzing those and synthesizing them and finding the truth, but you don't have so many people that you're, you know, people are peacocking and trying to impress each other and, and don't wanna be vulnerable. You want people to be vulnerable. You want people to be... to trust the other people in the room so much that you've created a safe zone to say, "You know what? I've been thinking this and thinking this, but the more I'm listening to you and the more I'm hearing about this, I may be wrong. Maybe I got this thing completely upside down. I'm starting to come around to looking at it like this with one little twist. Now, I think what we should do is X, Y, Z," and then, "What do y'all think of that?" That's a fantastic conversation. When you have leaders of the company feeling it's safe to show that, "Hey, I was wrong"-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... "I was thinking the thing wrong," and I model that. I role model that myself all the time. Be flexible in thinking. Don't be rigid in thinking. Don't be black and white dic- dichotomous thinking, but be open-minded, be receptive, to be willing to learn and to be challenged, and that's okay to be proven wrong. It's actually a good thing. We're learning together.
- DSDavid Senra
Two questions on that. How- what percent of the meeting are you speaking in a, a situation like that?
- BJBrad Jacobs
So I open up usually, and I ramble on for, like, an hour [chuckles] or maybe more than an hour of the state of the union from, from my perspective, and I try not to just mention things that I've formed conclusions on. But I try to frame things of, "These are the most important successes of the company, but these are the things where we need to improve, and here are the issues that, in my view, after reading everybody's rep- uh, votes and everything, I think are the things we should attention direct. We should spend most amount of time solving," 'cause I think those will create the most amount of value. And, and I, I try to keep it balanced, the good stuff and the bad stuff. Yes, I do attaboys and attagirls and rah-rahs. That's, that's a good thing to do for leadership, but I in equal measure do, "Look, we gotta keep it real. We gotta keep it honest. Here's things that we said by this deadline we're gonna do it. We're, we're a couple weeks behind on this. Let's get going here. What's going on? Here's we thought this outcome was gonna happen, and we're only 92% there. How can we get to 100%?" So I try to shu- start off with a balance, but then I try to shut up, and then I try to let the mecha- the mechanical going through the questions, where I just go down the questions by categories and then go around the room and hear everyone's opinion. And that's, that's... You don't want the leader talking a huge amount of time.
- DSDavid Senra
Yeah, so and you basically start with an hour, then the next, next, in this case, nine hour- nu- the nine hours for this meeting, you're-
- BJBrad Jacobs
Everyone else.
- DSDavid Senra
Everyone else.
- BJBrad Jacobs
And I'll talk, too, but not inordinately. I've already used up my hour, for God's sake, you know?
- DSDavid Senra
Yeah, this is one of the things that I felt, and I've seen this with a lot, with, like, really remarkable people, is how many people... Like, when we had this intense breakfast at your house a few months ago, you had a notepad, and you were... I'm talking, and you're taking notes. I'm like, "What the hell is going on? It's the reverse."
- 1:05:41 – 1:16:29
Feedback Loops and Continuous Improvement
- BJBrad Jacobs
tenets of all my companies is we have intense, voluminous feedback loops: feedback loops between the senior team, feedback loops between the senior team and mid-level management, senior feedback loops between senior, medium, and frontline management, feedback loops with customers, feedback loops with vendors, feedback loops with investors. All the par- all the constituents of the constellation that make a, a corporation, that make a, a company, we have, we have to be communicating. We have to be communicating very intensely with each other in an honest way, and then sharing that information. I share information much more widely in my organisms, in my, in my organizations, than most companies. Most companies, they, they, they're afraid to share it. They're afraid to share... They're afraid to share the good information. They think a competitor is gonna hear about it.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
Okay, well, they will. But let them try to copy us. They don't have all the ingredients to, uh, to do that. Or they say, "We don't wanna share the bad stuff because then the market's gonna hear our weaknesses." Okay, well, that's kind of true, too. That's so much overshadowed by the benefit of we're learning where we have to improve. We're learning how to become better.
- DSDavid Senra
... I read something Jeff Bezos said that changed my perspective on the importance of high-quality sleep. He said that he makes sure he gets eight hours of sleep a night, and as a result, his mood, his energy, and his decision-making is improved. His point was that you get paid to make high-quality decisions, and you can't do that if you're sleeping terribly. And the product that has made the biggest impact on my quality of sleep for years is Eight Sleep. I'm lucky enough to be friends with the founder of Eight Sleep, Matteo, and we live in the same city. A few months after I started using Eight Sleep, I randomly ran into Matteo at a restaurant, and I was with some friends, so I go over and say hi. When I got back to my table, my friend asked me, "Who was I talking to?" And I said, "That's Matteo, the founder of Eight Sleep." And my friend replied, [chuckles] "He looks like he gets good sleep." Matteo is living and breathing his product. I had never had the ability to change the temperature of my bed before I had an Eight Sleep. I had no idea how much that would improve the quality of my sleep. I keep my Eight Sleep ice cold. It's cold before I get into bed, so I fall asleep faster and wake up less during the night. That feature alone is worth ten times the price. There are very few no-brainer investments in life, and I believe Eight Sleep is one of them. That is why elite founders like Mark Zuckerberg and Elon Musk have all said publicly that they use Eight Sleep. I would recommend getting the Pod 5, which is the newest generation of their signature product. It is a smart mattress cover that you place on top of your existing mattress, and it is next-level sleep tech. It automatically regulates your body temperature throughout the night, independently for each side of the bed. The result is you get up to a full hour of additional quality sleep per night. Make the no-brainer investment in your sleep by going to eightsleep.com/senra, and use the code Senra to get $350 off. You can try it for 30 days at home and return it if you don't like it, but I'm confident you will love it. I will never let anyone take my Eight Sleep from me. Make sure you get yours at eightsleep.com/senra. So this is what you were describing earlier, this, like, almost a constant iterative trial-and-error process-
- BJBrad Jacobs
Absolutely.
- DSDavid Senra
-and just keeping the information flowing through the company. There's a idea that I think wh- when I thought of, um, your idea is, like, "Hey, we're gonna buy the company. We're gonna ask, like, w- what would you do if you were running the company? What's the stupidest thing we're doing? What's the smartest thing we're doing?" I- as you know, like, very... I'm not interested-- I'm interested in timeless principles, not timely, right?
- BJBrad Jacobs
Mm-hmm.
- DSDavid Senra
And when I read that in your book, what I thought of was not you building your company. I thought of Jim Casey building UPS 100 years ago. And what he learned... 'Cause a lot of these things that, these ideas have survived for a long period of time, they're not dependent on the company. They really depend on human nature, 'cause, like, history doesn't repeat, human nature does, right? Human nature's kind of constant, doesn't really change. And so what Jim realizes, the more successful he became, the more successful his company became, his executives, their incentives were to, like, hide the bad news and just tell him good things, 'cause then it's like, "Everything's great in the company, Jim, and so, like-- and I was the one that made that great, so pay me more and, like, make sure I keep this great job I have." And Jim realizes, like, "Oh, I need to have constant, unfiltered access from the people that are delivering the, the service to my customers." So he, what he would do is, like, he would h- he, he would instruct his driver, "Every time we see a brown UPS truck, you are to pull over," and he would get out, no matter how successful he was, and he would talk to the driver-
- BJBrad Jacobs
I love it
- DSDavid Senra
... unfiltered information.
- BJBrad Jacobs
Love it!
- DSDavid Senra
Same thing, people would go and they'd try to meet Sam Walton in Bentonville, Arkansas, right? They'd show up. They even have an appointment on the books, and they'd walk into the office and they're like: "Hey, I'm here to meet Sam for our, you know, seven a.m. meeting." And his, uh, secretary's like, "He hopped on..." Because he used to fly his own plane. "He left at five a.m. this morning, and he went to, you know, this Walmart over here, and he's hanging out and, like, greeting customers and talking to the people, stocking the shelves and everything else." But this constant... I think there's a lot of wisdom in what you said in your book, basically is what I'm saying. It's like you see this over and over again. They, they want unfiltered access from the front lines. They don't want the information to be, you know, massaged or, or presented in a manner that, m- that seems good.
- BJBrad Jacobs
So Todd Combs is one of Warren Buffett's-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... investment managers. And, uh, we were talking on a Saturday about, I don't know, 10 years ago, eight, nine, 10 years ago, uh, when he was first- he was getting on the JPMorgan board, and he was kind of moving up in the world, stuff like that. I've lost touch with him, but really great guy, real smart guy. And he said, "What are you doing?" I said, "I'm reading, uh, employee surveys. Uh, I'm reading all the employee surveys from the whole company of... We ask them two questions: "What's your single best idea to improve the company, and rate your job satisfaction scale of one to 10." And sometimes we add a third one of, "What it will take to make it a 10?" And I just, I just go through all these one by one, 'cause I, like, I feel like I'm talking to every employee and learning on that." He said, "That's amazing." I said, "What's so amazing about that?" He said, "I was just talking to Bezos, and Bezos was, uh, reading customer surveys. [chuckles] Reading customer surveys." So I'm talking- so it's this- so he's talking to customers, I'm talking to employees, but it's the same concept. You need feedback loops. You don't know how you're doing unless you have radar, like, sending beep, beep out there and seeing how it comes back. You have to have this very intense feedback loop.
- DSDavid Senra
This is why I'm so obsessed with what I'm doing, because what... Like, nothing we're doing is new. Like, you had all these people that ran all these kind of experiments for centuries, and they built great companies. And just because, you know, they passed on and maybe the company's not around anymore, it's like there's so- there's a treasure trove of data in there. So, like, uh, Bezos' idea I love, where he would publicize, he used to publicize the very early days of Amazon. "Jeff@amazon.com, email me." And he read... Part of the, one of the reasons that he figured out, he's like: "Oh, I, I can s- we, we can't just sell books. Like, I can sell anything." People- he'd be like, he would send emails to, I think, like, the top th- thousand customers, like, "What else would you buy?" And one guy, he had this epiphany, 'cause they, you know, they'd be like: "Hey, I want toilet paper, I want, you know, groceries," whatever. One guy's like: "I want windshield wipers." And he's like: "Windshield wipers? If this guy wants windshield wipers, I'm gonna be able to sell everything." [chuckles] Like, this is a true everything store. But I was, uh, I was thinking about this recently because I just read this book translated from French about the Michelin family dynasty, which starts out in 1891, selling tires in France. You're selling tires. There's, like, 350 cars on the road, for God's sake. But there's a line in the book that is related to all this, where they start... The, the, the, the, the two brothers have to take over this failing, uh, factory, and they don't know what to, to make because most of the products that they're manufacturing are unprofitable, they're on the brink b- bankruptcy. Their one profitable, um-... product, which, so they eliminate everything else, and they focus on the one profitable product, which is a rubber brake pad for horse-drawn carriages.
- BJBrad Jacobs
Say that again, though?
- DSDavid Senra
A rubber brake pad for horse-drawn carriages.
- BJBrad Jacobs
Okay.
- DSDavid Senra
Around 1800-
- BJBrad Jacobs
Okay.
- DSDavid Senra
This is 1888. And so it takes them, like, a year or two to figure out, like, "Hey, we should manufacture rubber." And there's two twin phenomenons. You're talking about get... Remember what J- Justice said, get the major trend right?
- BJBrad Jacobs
Yeah.
- DSDavid Senra
They're like, "Well, horse-drawn carriage has been around for a while- while. You know what's growing way faster? Bicycles and then cars, even from a small number. Like, we need to go to where the technology's going." But the point being is, like, so we need to make more t- uh, products. Uh, we need to make rubber tires. And the guy took over a factory, he's like: I don't know how to do that. So his answer was, he would go, and he sounds just like what you do. He, he only had, like, 50 employees that were making the rubber brake pads, and he would just ask questions. He's like, "I came to them, and I admitted my ignorance. I go, 'I know nothing about rubber manufacturing.' 'Why'd you do that? Can you explain to me? Can we... What if we did...'" And not in, like, what you just said. You said something about, like, not like coming down from on high. It's like a peer, almost like, "Teach me."
- BJBrad Jacobs
Yes.
- DSDavid Senra
And he's like, "It was wildly effective," and he's got a great line in that book. He's like, "It turns out, the guy that handles the material for eight hours a day while the CEO's in the office ha- has something to teach you. Like, he's going to understand something about that process because you ha- you're, you have, like, a bird level view." He has a very particular job-
- BJBrad Jacobs
Mm-hmm
- DSDavid Senra
... and he found it very instructive. And he's like, "It was a wonderful way to learn the business," and then that led him to, like, "Oh, now I know how to make things," and then to from there, to grow and grow and grow. And I just absolutely love this idea. It's like you should have this unfiltered access, unfiltered information over and over and over again.
- BJBrad Jacobs
Completely. All the different constituents in an organization need to be talking to each other, need to have feedback loops to know how they're doing. If you're not asking your customers how you're doing, you may think you're doing a lot better than you [chuckles] than you, than you really are, or, or-
- DSDavid Senra
How do you figure out how you're doing in your position?
- 1:16:29 – 1:22:55
Public vs. Private Companies
- DSDavid Senra
public. Do you have any-
- BJBrad Jacobs
I love being public.
- DSDavid Senra
What would... Like, what advice would you give to somebody that's, say, 30 years younger than you, they're trying to build a great pub- uh, a company, they've raised a bunch of money, but they don't wanna go public?
- BJBrad Jacobs
Well, they have to be at a level of maturity of the company to go public.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
They have to be preferably profitable.
- DSDavid Senra
But there's, there's a bunch of them, like, now-
- BJBrad Jacobs
Does not wanna go public.
- DSDavid Senra
Yeah, yeah, that are-
- BJBrad Jacobs
Well-
- DSDavid Senra
... that reach that criteria and are choosing not to.
- BJBrad Jacobs
You know, it'd be interesting to ask them why. What's the reason why you don't want- what are the re-
- DSDavid Senra
I think people think... Yeah, that, uh, I, I can't speak for them, but I think they're like, maybe they're scared of the public scrutiny, the hassle, the-
- BJBrad Jacobs
But that goes back to what we were talking about an hour ago, is so they might have a core belief saying, "I need everybody to always be, like, saying great stuff about me," which is never gonna happen. And they may think that, "Gee, if I go public..." When you're public, at any moment in time, you have people in favor of you and people who are naysayers. You have people who are selling and buying. The people who are selling think you're overvalued. People who are buying get the joke, and they understand j- just you have a real, real business plan here that's gonna create more, much more value. So you always have those two different things going. Maybe those people don't want to hear the naysayers. Maybe those people don't understand that naysayers sometimes can help you correct your own path, can tell you, "Gee, you know, maybe I'm cutting costs too much." People come in and say, "You're cutting costs too much. I visited one of your locations. I didn't think the service was so great." "Oh, wow! I didn't know that. Thank you for telling me that." So maybe now I have to invest more rather than cut costs. You have other people who say, "You know, I'm looking at your numbers here. Your margins are growing, which is great, but that's only half the, half the situation here. The other situation is, what are you doing with your top line? What are you doing with your price and volume? What are you doing with your organic growth?" In my business, in all my businesses, the only [chuckles] two things I had to do in the end in order to get great valuations and create shareholder value were grow the top line faster than the competition-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... faster than the market, be taking share, and growing the margins, increasing the marg- increasing the profit margins. If I did those two things, everything else flowed. Everything else flowed from that. But those are the two main things. In order to do those, accomplish those two things, you want as much input as possible. You want as many, many chef, many chefs in the kitchen as you possibly can. The public gets you hundreds and thousands of voices, so it's amazing data. It also, being public, allows you to build a brand much faster and much more volu- voluminously.
- DSDavid Senra
Explain that part.
- BJBrad Jacobs
So you wanna be a magnet for talent, uh, for drivers, for people in the branches, for people in mid-level management. You wanna, you wanna be get- going back to what we said before, you always want great talent coming in. Well, if nobody knows who you are, they're a little skeptical [chuckles] about joining your company. If you have research wr- written about you by bunches of firms, and you have press releases and a public website, and it's... You're very well-known what you're doing, it's very clear what you're doing, people say, "Okay, I get it. You're a known quantity, and, and I, I like this. I buy into it. I like what you're doing. I wanna join the company." So in order to-... and then you can pay them. You compensate them with stuff they can look on their iPhone every day and see the value of the compensation. If you're private, you give people these phantom shares or whatever the compensation plan is, they don't really know the value of it until they sell it someday, and it may be very different than what they thought it was all along. So from a, a compensation point of view, which is a big element of success in these high-growth business plans, being public is fantastic.
- DSDavid Senra
Was there ever a time in your career where you're like, "Maybe I should do a- should do a pri- a private company instead?" Or you were pretty much all in on it?
- BJBrad Jacobs
I've been doing public since 1992, [chuckles] and I'm nonstop, and, and I'm... I, I like it. I don't- I, I enjoy it. It's- I find it very helpful, very constructive. I like the pressure. I like, I like the ability to hear what the Street says and then agree with what I agree with, but to disagree what I th- what I think is wrong, what I feel passionately and I have evidence to support they're wrong. So sometimes the Street, particularly like the hedge funds, they're very focused on, like, this quarter-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... like, the next 90 days. That's a terrible thing long term. [chuckles] You don't wanna be focusing on just what's good for the quarter. You end up- you see these public companies that go out and they cut costs in the field that hurts customer service or hurts employee morale, and they're understaffed, which is even worse than being overstaffed, which is, which is bad. And, and here, it's a, it's a completely different story. So yeah, I, I, I like being public.
- DSDavid Senra
You said something interesting, "I like the pressure."
- BJBrad Jacobs
I do. Thrive on it.
- DSDavid Senra
What do you mean by that?
- BJBrad Jacobs
So many people give you the money, like, whether it's a, a, im- a, a retail individual, whether it's a high-net-worth family, whether it's, it's a sovereign wealth fund, whether it's a pension plan, whether it's, uh, an endowment, all these people are invest- long-only funds, mutual funds, all these people are giving you... They're wiring money to buy your shares. This is a intense pressure. This is a- this is probably the biggest pressure I have in life, is to make sure that I do everything I possibly can to make sure I give them back more money than they gave me, [chuckles] to make sure that they invest in the company. And, like, if you look at my neighbors and my friends, I don't know the exact number, but I would guess over 90% of them are invested in the company. [chuckles] And that, that's what it's been o- over time. Well, that's pressure, man. That's like, wow, I don't wanna disappoint them. These are my relatives, these are my friends, these are people I really love. These are people- people come to me and say, "Look, I believe in you so much, I put two-thirds of my, my retirement plan in, in, in your stock." Just single... No, no forget their-
- DSDavid Senra
[laughs]
- BJBrad Jacobs
... diversification. Boom! I'm going all in on Brad and his team. Well, that's a lot of pressure. I like that pressure. I enjoy that pressure. That motivates me, that inspires me, that makes me feel so-
- DSDavid Senra
I-
- BJBrad Jacobs
... I have something to do here that's important.
- 1:22:55 – 1:23:16
The Drive for Stress and Passion
- BJBrad Jacobs
Yeah.
- DSDavid Senra
He wanted-
- BJBrad Jacobs
Yes
- DSDavid Senra
... the stress. He's like, "I wanna be in the game."
- BJBrad Jacobs
Yes.
- DSDavid Senra
This is... He was an attorney. He just started his company. It was his first company. He was an attorney till he was 35 years old, and then he decides, "Hey, I'm gonna try to do an interstate or intrastate airline." And, like, then he, he had- it was, like, four years of legal fights before he could even take his first flight. He's just like: "I love this shit. This is what I want. I want the pressure."
- BJBrad Jacobs
Passion.
- 1:23:16 – 1:23:41
Learning from Other Entrepreneurs
- DSDavid Senra
What I love about this is, it's in your book, you, you constantly talk about the, the other, uh, people, uh, the other entrepreneurs, other investors, other CEOs that you learn from. The, the acknowledgements, all these maxims from all these other brilliant people. You talk about, uh, obviously Ludwig Jess- Jessiason. Uh, I do wanna talk about, I, I read something on LinkedIn about other... I wanna talk about the other people that you've learned from, the other founders, CEOs, executives that you admire.
- 1:23:41 – 1:29:19
Fred Smith's Legacy and Influence
- DSDavid Senra
Uh, I wanna start with Fred Smith-
- BJBrad Jacobs
Oh
- DSDavid Senra
... since he, he, he passed away.
- BJBrad Jacobs
Yeah.
- DSDavid Senra
Um, I read his biography, uh, probably, like, four or five years ago, and, uh, tell me if I'm wrong, you know more about this industry than I do, it just seems like FedEx had to be one of the most difficult operational companies to ever invent. [chuckles] Like, an unbelievable-
- BJBrad Jacobs
Yeah.
- DSDavid Senra
You're talking about somebody who wanted pressure.
- BJBrad Jacobs
The complexity.
- DSDavid Senra
Yeah, [chuckles] the complexity. You wrote on LinkedIn that you, you never missed an opportunity to spend time with him, and you admired him. Could you just tell, like, why?
- BJBrad Jacobs
So Fred endorsed my book.
- DSDavid Senra
Yeah, I saw.
- BJBrad Jacobs
And I was very touched he did that.
- DSDavid Senra
Yeah, he's a-
- BJBrad Jacobs
He, he was a competitor.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
Literally-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... a wall street competitor, still endorsed my book. So Fred was an amazing guy. I mean, this is a very special... You, you meet people in life that are just special, that are certain integrity, and I mean... So I met Fred for the first time in 2013, and I was doing, but I came out of nowhere from this industry. I got in in 2011, but I'd really started to do a bunch of acquisitions, uh, out of nowhere, and suddenly, like, I was on the front pages of the trade journals.
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
And I was in Atlanta at the National Association of Manufacturers, the NAM conference, and Fred was the keynote, so I, I was in the audience watching him. And somebody, um, said: "What do you think of Brad Jacobs?" I go, "Oh, my God!"
- DSDavid Senra
[laughing]
- BJBrad Jacobs
My heart starts beating. "Oh, my God, Fred Smith is about to, like, destroy me. [chuckles] My brand is gonna be completely crushed." You know, the icon of the industry is gonna say, "Oh, yeah, I don't believe he's like that." And he said, "I really like watching that guy work." [chuckles]
- DSDavid Senra
[chuckles]
- BJBrad Jacobs
He said, "He is coming into this industry with courage and buying things left and right, and has big goals and big ambitions, and I'm, I'm gonna keep an eye on that guy."... and I don't know, I, I cried. [laughing] I said, "Wow, Fred Smith likes saying great stuff." So I went up to him afterwards, after the, the speech was over, and I said, "Mr. Smith, uh, I'm Brad Jacobs, I really appreciate what you, what you said." He said, "Well, first of all, I'm Fred." [laughing]
- DSDavid Senra
[laughing]
- BJBrad Jacobs
"I'm Fred Smith." And that was the beginning of a great, great friendship, and we got together many, many times. Of course, he was on the business council. He was the longest serving member of the business council, over a quarter of a century.
- DSDavid Senra
Oh, wow!
- BJBrad Jacobs
And I'd go to every business council meeting I possibly can to meet other CEOs and to hear what other people are thinking. He was just a generous guy. This was a guy who had vision, he had passion. Talk about grit, I mean, he worked- maybe he was flying around all the time everywhere. Vietnam, he was decorate-- he was flying, [chuckles] flying helicopters with people shooting bullets at him-
- DSDavid Senra
[chuckles]
- BJBrad Jacobs
... to go get Marines who had been... He was a Marine.
- 1:29:19 – 1:40:25
The Importance of Technology in Business
- DSDavid Senra
The amount of information... So, like, think about it, like, he, he started in FedEx in the '60s, I think, something like that. No, after Vietnam, so maybe early '70s. But in the '80s, he says that he estimated in, in, during the 1980s, he spent four hours a day reading. He says, uh, he found- he relied quite heavily on his own vision, backed by assimilating information, which you've mentioned multiple times so far, from many different disciplines at once. You've talked about in meetings, you've talked about in trade journals, you've talked about all the research you do, right? This is his quote, though, that I want to read to you: "The common trait of people who supposedly have vision is they spend a lot of time reading and gathering information, and then synthesize it until they come up with an idea." That sounds like you to me.
- BJBrad Jacobs
I like that, yeah. Going back to what I was saying before, you don't want to be rigid in your thinking. You want to be open-minded, you want to be flexible, you want to be scientific about it, that if new evidence comes along that disproves your, your theory, then modify your theory. Go by the evidence, go by the facts. And you want to get- you want to interact with people who you respect, and you want to be picking their brain all the time.
- DSDavid Senra
Which are also, like, a lot... The way I describe it is, like, you're, you're also alive and paying attention. Like, the story in your book where you're, like, reading a magazine in bed on a Sunday morning, and you read about, like, uh, these waste management companies-
- BJBrad Jacobs
Yeah
- DSDavid Senra
... making, like, five hundred million dollars in profit. You're like, "Whoa, what?" [chuckles]
- BJBrad Jacobs
[chuckles]
- DSDavid Senra
Like, they're picking up trash-
- BJBrad Jacobs
Right
- DSDavid Senra
... from one spot and bringing it to another.
- BJBrad Jacobs
Right. [chuckles]
- DSDavid Senra
I need to learn about this industry. But that's my point, is like, you're, you're- people like Fred, people like you, I think, you know, there's a ton of people that have the same thing, where it's like they're... The, the whole world is like a classroom if you're actually paying attention. Like, you can pick up we- ideas all over the place.
- BJBrad Jacobs
So the waste management business, I contrasted to the oil business. The oil business was a lot more complex.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
We were negotiating complicated long-term contracts, and chartering vessels, and negotiating processing agreements with big major oil companies, and hedging, and I mean, it's a very complicated, complex business. When I read that about the garbage business, I said, "That is so much easier, [chuckles] picking up..." [chuckles]
- DSDavid Senra
[laughing]
- BJBrad Jacobs
"That's a simple business. Move some garbage and send out an invoice. I definitely think I can do that," and it seems like they make a lot of money, and, and the trend seemed-... seems in the, in the right direction. So yeah, you-
- DSDavid Senra
Oh, and the, and the application of technology, which is-
- BJBrad Jacobs
Right.
- DSDavid Senra
I love how-
- BJBrad Jacobs
Always
- DSDavid Senra
... at the end of your book, you have essentially, you what, what are all the, the, the some key idea- some key technology developed by humans starting, you know, back 300,000 years ago, and you move forward. I thought that was a beautiful way to, like, just put that in the, the context.
- BJBrad Jacobs
So I got that from Kurzweil, by the way, Ray Kurzweil.
- DSDavid Senra
Oh!
- BJBrad Jacobs
So Ray K- Ray, so Ray Kurzweil, huge mentor of mine. Only met him once, but met him for about six hours.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
But I've read every book he's written. I've read every article about him. I see every YouTube he's... And I, I, I'm a Ray [chuckles] Ray Kurzweil fan. I mean, I really s- And when I read in the Singularity Is Near in 2005, 2006-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... when that book came out, was amazing, where it was a chronology of the universe going, you know, my meditation, I go back- [chuckles] ... space and time. So kindred spirit here- [chuckles]
- DSDavid Senra
Yeah
- BJBrad Jacobs
... as somebody who thinks in large scale of time. And, and one of the key things that have happened over the last 13 billion years, and reducing that down to a couple hundred points, I think that was real helpful. So I, I modified it a bit and, and made it more specific to business, things that would be applicable to business. But the main trend, going back to Mr. Jesselson about you gotta get the main trend right, the main trend for the last two million years has been humans creating tools, AKA technology, to do things, to outsource to those things that do better than us and free up our time. So whether it was fire, or whether it was a wheel, or whether it was the printing press, and more recently, all the, all the digital electronic stuff we've done, and all the internet, and now artificial intelligence, and robotics, and nanotechnology, this is the trend. The tr- the main trend in life, and therefore in business, is technology. Outsourcing our senses, outsourcing our memory, outsourcing now our intellect, our speech, to, to, to computers, to, to the, to, to the cloud. This is big. This is really, really, really big. So when I looked at 55 different industries before I picked building products, I ruled out a bunch of them. So this just looks like an interesting industry, but I think AI and automation are gonna kibosh it [chuckles]
- 1:40:25 – 1:54:34
Time Management and CEO Responsibilities
- DSDavid Senra
we haven't touched on, and I, I have a question for you, and this is a quote from Fred in his biography. He says: "You have to be absolutely brutal in the management of your time."
- BJBrad Jacobs
Oh, yes.
- DSDavid Senra
Do you have any insights into-
- BJBrad Jacobs
Look, if, if, if you want someone to disagree with that, you're gonna have to talk to somebody else-
- DSDavid Senra
No, no, I'm curious how you-
- BJBrad Jacobs
... I'm 100% in agree with that.
- DSDavid Senra
I'm curious how you do this, though.
- BJBrad Jacobs
So time. So when you're a CEO, when you're an executive, you only got two things: You got time, and you got capital. And how you deploy that time and how you deploy that capital equals results. [chuckles]
- DSDavid Senra
Mm-hmm.
- BJBrad Jacobs
So it's your, it's your time, and it's the time of the people in the organization. So when I was running XPO, we had about 150,000, a little more, uh, employees worldwide. So each, each one of those worked- the senior management worked long hours, but the average worker worked eight hours a day. So you had eight times, about 1.2 million hours a day of, of work getting done. If you've got people very focused and very motivated and very well-trained and feel good about the company and feel good about their job, that productivity of that 1.2 million hours a day is gonna be a lot more than if the, if the conditions I just mentioned are not, are not present. So managing people's time, folk- putting them in the right priorities and, and telling... Ranking what people should be spending their time on is very, very, very, very important to success. Now, how do I spend my time? I spend my time deliberately and consciously and intentionally on the things that I think make the most amount of value for the, for the company.
- DSDavid Senra
How many things at any given time are you having to focus on?
- BJBrad Jacobs
No, a fair amount. So if you're CEO, you're, you're managing, you know, 15, 20 different things, always. You're managing people, you manage technology, you're managing budgets, you're managing investors, you're managing, uh, infrastructure, you're managing transportation, you're managing logistics, you're managing pricing, you're managing procurement with the vendors, you're managing customer relations, you're managing sales. There's... You're man- manage sales force excellence. I mean, there's just- there's about 20 things that are your life. Like, that's what a C- that's what a good CEO does. The problem with a lot of CEOs is they've come up through just sales or operations, and they're good at that, but they kind of just delegate the other 15 things. [chuckles] That's, that's really part of the CEO job. You look at the great CEOs, the, the CEOs who've created a lot of alpha, a lot of shareholder value, they've been in each one of those 20 or so things. You talk to a Dave Cote, or you talk to an Ed Breen, or you talk to a Larry Culp, you can talk about any of those 20 things, and they have an- they have things to say, and you can learn from them. You talk to CEOs who haven't created a lot of value, are not really good at this game, they'll know four, five, or six, or even half of those 20 things, but they don't do the other, they don't do the other part. You've got to be in all of them. But, but you're not in all those things in equal measure. Some things you don't have to spend as much time on. The people things and compensation things, I actually spend a lot of time on. So that's, that's core. That's critical to get right. That's, that's something that if you get wrong, you're, you're wasting... [chuckles] Budgeting, I spend a lot of time going on the budget. Cu- customer satisfaction, I spend a lot of time on that. The employee serv- the employee engagements, going out to the field, doing the town halls, doing the Zooms, I'm, I'm all in on that.
- DSDavid Senra
But when you say that the CEOs that you think might not be doing the best they could, are they delegating too much?
- BJBrad Jacobs
Yeah. They're, they're, they're not-... they're, they're afraid to do the th- and gen- I'm making generalizations.
- DSDavid Senra
Yeah, please.
- BJBrad Jacobs
There's always exceptions, but generally speaking, what I find is they gravitate to the stuff they like and that they're good at, and they kinda just don't do the stuff that they don't like or they don't- aren't very good at. And, and you can't. You've gotta, you've gotta be- if you wanna be a good CEO and have a high-performing, performing company, and be in the top, and be in the top decile of, of stock performance, like, y- like, United Rentals and XPO were both top 10 stock performers last decade. [chuckles] That's not random that the- both those companies were- [laughs]
- DSDavid Senra
[laughs]
- BJBrad Jacobs
... 'cause it was the same, same principles, same, same structures. You've gotta have CEOs, and they, they did, where that are in the whole thing, and understand from A to Z what running a business is and how you create shareholder value, and see the whole picture of the levers. So I always tell friends who are port- and I have a lot of friends who are portfolio managers or analysts at, at on the buy side. I say, "When you bring a management team in, you need to ask them, what's your stock price gonna be five years from now? And what are the levers that I have to believe that's gonna get you there?" And if that CEO tells you, "I'll get... That's a great question, I'll get back to you," short that stock- [laughs]
- DSDavid Senra
[laughs]
- BJBrad Jacobs
... or at least don't buy that stock, because that's the first thing the CEO has to know. First thing a C- a CEO and the senior management team has to know with great specificity, "Here's where we are right now, the stock price. We wanna get massive outperformance and get to here." That's great. That's just the beginning. Here are the levers of how I get there. Here are the levers of the things that we must do as an organization that will improve our profitability, improve our multiple, generate free cash flow. Just how are we gonna get to there? And in my case, it's not that hard because when you do the, the, the, the graph-
- DSDavid Senra
Mm-hmm
- BJBrad Jacobs
... the first two bars, when you do the levers, comprise the vast majority of what you have to do to create the value, and those are buying companies right, meaning being very disciplined in what you pay, and looking at lots of acquisition candidates at the same time, so you don't fall in love with any one of them, and so you have alternatives, and you don't-
- DSDavid Senra
How... What, what's the distribution there? So you've done over 500 acquisitions throughout your-
- BJBrad Jacobs
My teams and I have.
- DSDavid Senra
By-
- BJBrad Jacobs
I like to give credit to my team.
- DSDavid Senra
You- yeah.
- BJBrad Jacobs
They deserve it.
- DSDavid Senra
You and your team, for sure. So you, you and your team have done over 500 acquisitions. You've looked at how many?
- BJBrad Jacobs
Thousands and thousands. I mean, many thousands.
- 1:54:34 – 2:01:04
The Power of Incentives
- DSDavid Senra
repeating that. When did you understand the power of incentives? 'Cause you talk about compensation incentives a lot.
- BJBrad Jacobs
Very, very early. Very early in the oil brokerage days. Because I used to have... We had tables, like 10 brokers at a table, and every month, we'd pay people monthly, I'd meet with everyone and say, "Look, we made so much this month in the bonus pool. What percent do you think you contributed to it?" And then I would add it up, and it would always come to, like, 300%. [laughs]
- DSDavid Senra
[laughs]
- BJBrad Jacobs
It never added up to 100%. So I had to have these difficult conversations with people and say, "Look, you know, I think you're inflated with how much of these are." But I, I- what I realized very early on is, people are coming to work not 'cause they love me. They might love me, I might love them, but that's not their main motivation. The main motivation why they're coming to work is to make money, [laughs] and make money for themselves, and more often, to make money for others, to make money for their families, for their spouses, their kids, or whoever. And that's important. To under- to understand the motivation of the other person is really, really important. It's called theory of mind, where you understand... And a child gets that after a few years. They don't have it at first, and there's been a lot of psychological studies done on that. It's important to, to look at things from what's motivating the other person, what's driving the other person, what's important to that other person. That's good in deal making, that's good in compensation, that's good in building teams, that's good in customer relations, that's good with vendor relations. You need to understand their point of view. You can't just be in your mind. You can't just say, "Here's what I want, here's what's important to me, and I'm a bully, I'm gonna go get it," 'cause then people are just gonna stick their tongue out at you. [laughs] They'll turn away and do something with else. You have to be a, have a partnership. You have, you have to be trading with people all the time. You've got to be figuring out what will help them-... what's good for them, and how can we make money together? Not me at your expense, or you at my expense, but how can we go conquer the world together?
- DSDavid Senra
I think you're a faster learner than me, because, like, I, I don't think I ever thought of- about incentives. Uh, I think episode, like, 97, so this is probably, like, six years ago. I'd read... That means I read 96 biographies before this. I get to Poor Charlie's Almanac, and he's really the one that got- Charlie was the one that really put into the- my mind about how important this was, because I thought he was one of the-- I still think he's the wisest person I ever met, and probably one of the most brilliant people. And he said something fascinating in that book, where he's like: "I've been in the top five percent of my age cohort my entire life of understanding the power of incentives and how it drives human behavior, and there's not a year that goes by..." And he's probably in his 60s when he said this. "There's not a year that goes by where I don't underestimate the power of incentives." And he would repeat it over and over again, "You show me the incentive, I will show you the outcome."
- BJBrad Jacobs
Remember I told you a few minutes ago that I give everyone on the top level of the company a bunch of equity-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... but it's locked up for five years. So I meet with my CHRO, who's fabulous, regularly, usually twice a month, and she shows me a spreadsheet of how much the equity is gonna be worth at $50 a share, $75 a share, $100 a share. And I, I look at that, I look at the numbers, and I, I say: "Okay, this person has something to work for. This person's on the team. This person... That's something that..." And I see them working really hard to get, get, get those numbers. Or I see, gee, you know, somehow or another, we messed up the comp, and maybe we've got to top the person up, or, wow, I can't take anything back, but maybe I gave too much equity [laughing] afterwards.
- DSDavid Senra
[laughing]
- BJBrad Jacobs
Whatever, but at least I know where everyone's head is at-
- DSDavid Senra
Yeah
- BJBrad Jacobs
... because I know what's in it for them. You know, there's always that joke, I listen to radio station WIFM, what's in it for me?
- DSDavid Senra
[laughing]
- BJBrad Jacobs
And, and, and people are generally... They don't care about you and me, David.
- DSDavid Senra
Yeah.
- BJBrad Jacobs
They care about them, which is normal. That's, that's, that's, that's, that's capitalism. That's free markets. That's a good thing.
- DSDavid Senra
Yeah, it's- I don't, I don't feel it's a negative thing at all. It's like we're all self-obsessed.
- BJBrad Jacobs
It's just how it is.
- DSDavid Senra
But I, I do think you have a great line in the book where you're like: money... He's like: "I've built businesses all over the world. When you have 150,000 employees, they're spread throughout..." You know, people are like: "Oh, it's all different cultures." He's like: "Oh, guess what? Money animates people everywhere."
- BJBrad Jacobs
Yeah.
- DSDavid Senra
For the whole point, you have a great line in the book, like, they're not coming to work to make Brad Jacobs more money.
- BJBrad Jacobs
Not at all.
- DSDavid Senra
They're doing it for their, their families. I love this idea of, like... I think it's really important to have a... And I think it's tied to your obsession with, like, the public markets, too, and what you said in your book about being very proud of building wealth, not just for yourself, but for schoolteachers, pension plans-
- BJBrad Jacobs
Firemen
- DSDavid Senra
... nurses, firemen, and everything else. So, like, the, the importance of having a, um, a mission bigger than yourself.
- BJBrad Jacobs
Yes.
- DSDavid Senra
I think, like, if you just live a completely selfish life, first of all, you would've stopped way- a long time ago. Like, you didn't need to... In, in general, people, j- you wouldn't have to do this. Um, and I've seen this in a couple different places where, like, um, Jeff Bezos, we talked about him a few times today, where his idea was when he started Amazon, he's like: "I want to build, build the world's most customer-centric company. So I want to be an example not just to our employees and our customers, but to other companies to see, look how you can, over the long term, you can align the interest of the customer and the shareholder are perfectly aligned. They just have to be done, d- d- done so over the extremely long term." But this idea of, like, going, like... It drives me. It's like I want to build wealth, you know, so my kids are proud of me, and like, and, and I show them, like, what it's like to, like, chase after something and be deeply committed to it and be passionate about it and love it-
- BJBrad Jacobs
Sure
- DSDavid Senra
... and also make something that's better for other people. And if you do that, automatically, you know, the family will prosper and everything else. So I think that's, like, I think, I lo- that was one of my favorite parts of, um, of your book.
- BJBrad Jacobs
Do you know, I, I think Amazon modified that, that mission statement. Now it's something with employee engagement, too.
- 2:01:04 – 2:03:14
Going All In: Final Thoughts
- DSDavid Senra
book, and I would summarize what I'm about to say here, uh, as go all in. You only get one shot at life, and I think this is a perfect, uh, spot to, like, wrap our discussion. And so I'm just gonna read from your book to you. And you said: "The summer after eighth grade, I attended the Rhode Island Governor's School for the Gifted in Art and Music, a summer enrichment program for kids who've been nominated by their schools. I wasn't sure what to expect. On the first night, I was captivated by a speech given by one of the leaders. I remember goosebumps rising on my arms as he spoke. 'This program is a special opportunity, but it's up to you to take advantage of it. You have a choice. You can waste the next couple of months and not accomplish that much, or you can go all in. This is an opportunity to go deep on a project and do the best work you've ever done, but you have to decide if you want it.' I learned what it meant to go all in, the magical connection between intensity of focus and the end result." This is, uh, to me, the punchline, and I love this. "If I put my whole heart and soul into a project, I had it in me to create really cool stuff." Can you talk about the passion and going all in and the advice that you'd have for other people listening to this?
- BJBrad Jacobs
I'm reliving the goosebumps, literally.
- DSDavid Senra
[laughing]
- BJBrad Jacobs
Physically, I'm feeling the tingling in my sensation because that was in a critical moment in my life where I, I, I understood that it's up to you. You can diddle daddle through life and just kind of sleepwalk and then die, or you can live life, you can embrace life, you can have big dreams and go all in and find your passion, which for most people is not gonna be bi- business or making money, but whatever it is, that's what it is, and really achieve something fantastic. And for me, that's a big motivator.
- DSDavid Senra
That's a perfect place to end. Thank you very much for writing the book. Thanks for taking the time. Brad, I really admire you. I've learned a lot from you, and now I, I'm very, uh, humbled and privileged to call you a friend.
- BJBrad Jacobs
Thank you, sir.
- DSDavid Senra
I really appreciate it. Thank you very much.
- BJBrad Jacobs
All the best.
- DSDavid Senra
I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review, and make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.
Episode duration: 2:03:15
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