Breakfast with Brad Jacobs + How To Make A Few Billion Dollars

1. 0:00 – 5:17

   Hiring the Smartest People and the Breakfast with Brad Jacobs

   1. DSDavid Senra0:00

      One of the most important things that I learned from Brad's book, and we spoke about this when I had breakfast with Brad as well, was the importance of working with the smartest and most talented people that you can. Brad says that the most important thing that a CEO does is recruit superlative people, and Brad will recruit the smartest people he can find, and he actually talks about this. Brad says there's no substitute for smarts. And that reminded me of something that Steve Jobs said in this interview I read that Steve gave in the late 1990s, and this is what 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 the 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 50 or 100 to one. Given that, you are well advised to go after the cream of the cream. You need to build a team that pursues the A+ players." And this is exactly what Ramp did. Ramp has the most talented technical team in their industry. Becoming an engineer at Ramp is nearly impossible. In the last 12 months, they hired only 0.23% 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 24/7 to automate and improve all of your business' financial operations, and all of this happens on a single platform. The longer you use Ramp, the more efficient your company becomes. And 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 go out of business if you're too inefficient." Ramp helps you run an efficient organization. In the end of that interview, Steve Jobs added, he said, "A small team of A+ players can run circles around a giant team of B and C players." From a customer's perspective, what does a team of A+ 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." Ramp gives you everything you need to optimize all of your financial operations all on a single platform. Ramp's website is incredible. Make history's greatest entrepreneurs proud by going to ramp.com to learn how they can help your business today. That is ramp.com. So I wanna tell you what I learned when I had the opportunity to have a two-hour breakfast with Brad Jacobs a few weeks ago. So Brad Jacobs is, without a doubt, one of the most talented living entrepreneurs. In case you aren't familiar with him, he has started eight different billion-dollar or multi-billion-dollar businesses. He's done over 500 acquisitions. He's raised over $30 billion. Now that number's even higher. He started his first company at 23, and he is 68 years old today, and he's the most energetic person I think I've ever been around. I don't think he has any plans to retire or to stop doing deals and to stop building companies or really any [chuckles] plans to slow down at all. So about a year ago, he published his life story, which is called How to Make a Few Billion Dollars. It was one of my favorite books that I've read in the last year, and the episode that I made about the book, almost a year ago actually, uh, was one of the most popular episodes of Founders this year. And one of the most remarkable things is the fact that Brad listens to Founders. In fact, he sent me a message and he said he's addicted to these book reviews that I do. So coming from someone like Brad, you can imagine that fired me up. And Brad was actually kind enough to invite us and to host us in his home. So it was me and my friend Patrick O'Shaughnessy from the Invest Like The Best podcast, and then Brad's head of comms, Joe Checkler, who is a super nice guy and I'm really glad I got to meet, who also listens to Founders. So the idea was I wanna go over just a few things that I learned from speaking to Brad for two hours, and I guess the first story I should tell you actually happens on the flight up to see Brad. So maybe like an hour and a half into the flight, the guy sitting next to me turns to me and he goes, "Do you wanna be a billionaire?" And I was taken aback by his question. I go, "Excuse me?" Like, keep in mind, these are first words that he has said to me, and so he repeats it. He goes, "Do you wanna be a billionaire?" And so he points at me and he goes, "Because I have never seen someone go through a book like that." And so I look at what he's pointing at, and on my lap was my copy of Brad's book. And so this guy sitting next to me sees the title, How to Make a Few Billion Dollars, and he also had seen me going for like the last hour and a half going through all of my highlights and, uh, rereading my highlights and, uh, I have-- every single book I read, uh, obviously has a ton of Post-it notes sticking out of it. And so he assumed because I was reading it and I had all these notes that I [chuckles] assumed that this book was an instruction manual on how to make a few billion dollars. And I found that funny because it kind of is an instruction manual to some degree. Uh, if anything, it's an accounting of how Brad Jacobs made a few billion dollars. And so after my breakfast with Brad, I organized all my notes into basically seven lessons. And these are lessons that I wanna remember for myself, and I think by making it into a podcast, it'd be beneficial to you.

2. 5:17 – 11:49

   Lesson 1: Go to School on Everybody

   1. DSDavid Senra5:17

      So the first one is go to school on everybody. I have lost count how many of history's greatest founders that you and I study on this podcast are described at some point in their life as a sponge. If you listened to last week's episode with-- about Amancio Ortega, people around him literally describe him, they use that word, that he is a sponge. Amancio Ortega is one of the wealthiest people on the planet. He's been building up his company for over 60 years. He dropped out of school at 12 years old, but his dedication to lifelong learning and to being sponge-like and to going to school on everybody never ceased. And I thought of this because when I got to Brad's house, I was actually surprised at what Brad was doing. So he was at the table. Next to him was a stack of papers, probably 500 pages high. Brad had printed out my personal website So if you go to davidsenra.com, and if you're on my email list, you already know this, but basically what I do is I just, I try to whittle down all my notes and highlights from every book I read to, like, 10 sentences, as concise as possible. And then for every book I read, very simple, I just send that list out. And so Brad printed out my entire site, and you can just go through, you know, these books really fast. It's a way to, like-- Actually, a really good way to review the lessons on the podcast because you have 10 concise ideas for every single book. And this absolutely, this, this is, like, a relentless drive to learn. The, this total dedication to lifelong learning is a trait that Brad shares with ne- nearly every single... I can't think of a single person that you and I have studied. He shares it with every single one of history's greatest founders. And the reason I called this Going to School on Everybody is I actually got that idea in a biography of Jeff Bezos, because Jeff is definitely like this as well. There's a biography of Jeff called The Everything Store. I last covered this episode on-- or covered the book on episode 179, and I wanna read you a section from that book that seared this idea into my brain, and it's somebody that knew Jeff really well, and he said, "He went to school on everybody. I don't think there was anybody Jeff knew that he didn't walk away from with whatever lessons he could." Jeff Bezos went to school on everybody. Brad Jacobs goes to school on everybody. There-- Mitch Rails, the co-founder of Danier, goes to school on everybody. So Mitch founded this company called Danier. Danier is like $170 billion market cap company today, okay? A friend of mine was just telling me a story. He was at this small, intimate conference with Mitch recently, and he was actually, like, blown away by how focused Mitch was. So the entire time that Mitch was listening to the speakers, he was taking pages of notes. And my friend had the thought where he's like, he couldn't understand. He's like, "Why?" Like, he didn't say it, verbalize this, but he was just, like, thinking in his head. He's like, "Mitch, why are you... You're, you're more successful than anybody else here. Why are you taking notes?" And when my friend was telling me this story, I go, "No, wrong answer." There is a great line in Bill Walsh's book, which is called The Score Takes Care of Itself, and I think this line is very important related to this. And Bill Walsh talks about this. He says, "Champions behave like champions before they are champions." I guarantee you Mitch Rails did not build a $170 billion company and then start taking notes. I guarantee you that Mitch was doing that way before he was, quote-unquote, "the most successful person in the room." The entire time I was speaking to Brad, he had a notebook and a pen with him, and he would jot down notes when he heard something that he thought was interesting or valuable. And if you read Brad's book, you know that Brad was like this from an early age, too. One of my favorite excerpts from the book, uh, fr- from Brad's book, How to Make a Few Billion Dollars, I wanna read to you. It is about the amount of research that he does before entering an industry. This part blew my mind. And so Brad writes, "I'm obsessive when learning about an industry. I start by reading everything I can get my hands on: journals, periodicals, newspapers, trade publications, employee reviews on web-based recruiting sites, you name it. I look at all the websites and social media of the major players and the up-and-comers in the industry. I watch lots of interviews with CEOs. I use paid services like Bloomberg, AlphaSense, and Root & Reuters. I look at analysis from sell-side and buy-side analysis... or an, an analyst, rather, and search the SEC database, which has large amounts of information on every publicly traded US company, including IPO documents, financial reports, and proxies. I scope out the most valuable industry conferences and attend them. Sell-side conferences are an opportunity to meet management teams face-to-face and hear the questions investors are asking. Trade associations have a wealth of industry data experts. I interview experts. I seek out people who live and breathe the industry I'm considering. This phase is more about getting face-to-face and listening intently. I love talking to CEOs. In addition to CEOs, I seek out investment bankers who are most active in the industry and who know it deeply. I also talk to venture capital firms because they spend a lot of time looking at the big trends in different industries. And I tap buy-side institutions and successful fund managers who have battle scars from investing in the industry. Industry vendors are also a good source. They have a sense of the trends that could drive changes in the market environment. Shareholder activists often have important insights as well. And I reach out to journalists who know the industry because by nature they're a skeptical bunch, and I wanna hear their perspectives." That is the end of the quote from Brad's book. What he's describing here, this is one of my favorite parts because th- this is all effort and enthusiasm. This is just collecting more information. This is applicable to every domain. There is a maxim for this, and it comes from David Ogilvy, and David Ogilvy says, "The good ones know more." David Ogilvy wrote about this in this book called Confessions of an Advertising Man, which I think was, like, published in 1965 or something like this, and this is the advice he was giving. He said, "Set yourself to becoming the best-informed person in the agency on the account to which you are assigned. If, for example, it's a gasoline account, read books on oil geology and the production of petroleum products. Read the trade journals in the field. Spend Saturday mornings in service stations talking to motorists. Visit your clients' refineries and research laboratories. At the end of your first year, you will know more about the oil business than your boss, and you'll be ready to succeed him." That's the end of the David Ogilvy quote. And the reason I think this, this is the first thing I wanted to, to bring up is collecting more information and putting forth more effort is still a competitive advantage today, and it always will be. This is not a matter of intelligence or talent. This is a matter of effort. So go to school on everybody.

3. 11:49 – 16:08

   Lesson 2: Clarity of Thought and Being Easy to Interface With

   1. DSDavid Senra11:49

      Number two, the importance of clear thinking and being easy to understand and easy to interface with. So I wanna read something from this book called Insanely Simple, which was written by an advertising executive who worked very closely with Steve Jobs. And he talks about in the book how different Steve's... Steve's cl- i- in all the people I've studied, Steve is the clearest thinker out of anybody I've ever come across. And this advertising executive also noticed this, and he compares and contrasts Steve with some of his other clients. And this is a great description of why this is so important. It says, "Clarity propels an organization, not occasional clarity, but pervasive 24-hour, in-your-face, take-no-prisoners clarity. Never underestimate the degree to which people crave clarity and respond positively to it." I know a bunch of people that know Brad, and they all say things like this. They say he just cuts right through it. You are never confused by the point he's trying to make. And I, I don't know if you'd even agree with this, but I, I pulled a line from his book that I really think is, is r- his one way to, to understand that he's just really easy to interface with. And so he says, "I'm what's called a money maker. I love working with outrageously talented people to deliver outsized returns for shareholders in public stock markets." When you read that line or if Brad was to say it in an interview and when he says, "I love working with outrageously talented people to deliver outsized returns for shareholders in public stock markets," that is Brad expressing the refinement of his thinking. That is Brad making him very easy to understand and very easy to interface with. And w- he even talks about this with, like, his grander strategy. So one of the things we talked about, um, was like I really-- we were really curious, like, what is in his mind, like, the role of the founder, the role of the CEO, the role of the company leader? And by answering this question, he describes his basic approach to company building. So, you know, as the founder, as a leader, he has the vision. That is the first thing. He has to set the vision. He has to visualize it in his mind. And I know sometimes when you bring up visualization, people, like, think it's like some willy foo-foo thing. All I can tell you is it's in a ton of these books, and I take note of it every time I come across it. Estée Lauder talks about this, Bob Noyce, the founder of Intel, Edwin Land, Steve Jobs, Arnold Schwarzenegger, Tiger Woods, Kobe Bryant, Chung Ju-yung, the founder of Hyundai, Jay-Z, Brad Jacobs. This concept comes up over and over again. Brad says the leader has to have the vision. They visualize it. Then the leader has to get the very best people. Then you incentivize the very best people with a lot of money, but you have to tie that money to certain checkpoints along the way. And then as long as you have the major trend right and you have the best people and you're investing in technology, he says, then it's very hard not to make lots of money. And so when I was thinking about the conversation I had with Brad, I came back to e- this is the note I left, clarity of thought, taking time to refine your message so you're easy to understand and thus your message is easy to spread, right? 'Cause anything that's easy to understand is easy to spread. Then keeping your organization committed to a common goal. All of those ideas I feel are related to one of my favorite quotes from Brad's book where he says, "Narrow your focus to your most important dreams and tune out everything else." That sounds a lot like Steve Jobs to me. And just like if you go back and read about Steve Jobs, people who work for him say, "Hey, you might not like what Steve's saying, but he's-- you, you have-- you don't have to guess at what it means. He's very, very easy to understand." So is Brad. Brad's clarity of thought was obvious when I spoke to him. It was obvious in the interviews he does. It's obviously obvious in the book. It's also obvious to other people. My friend Rick Gerson just spent a weekend with Brad, and after that we were talking about Brad Jacobs. And unprompted and unsolicited, Rick told me how clear of a communicator Brad is. My friend Jared Kushner just invested in Brad's latest company and joined his board. Jared told me he spent several hours with Brad. I think this might have been at a board meeting if I remember correctly. But he said it was one of the most educational and enlightening meetings that he'd ever had, and that Brad's ideas are well thought out and easy to understand. So the second thing I took away from my breakfast with Brad is the importance of putting work into clarifying your thinking and making sure that you're making yourself easy to understand and easy to interface with the people around you. The third takeaway is related to the second takeaway, and you'll see how all of these work together. And the third one is people are power law, and the best ones change everything.

4. 16:08 – 18:54

   Lesson 3: People Are Power Law, Overpay for Talent

   1. DSDavid Senra16:08

      Brad says that the most important thing a CEO does is recruit superlative people. In his book, he says, "Make sure that your hiring choices, you make your hiring choices as perfect as they can be because there are few mistakes costlier than hiring the wrong person." And he's got a great maxim on this that I've, I've remembered since I read it the first time. He says, "An empty seat is less damaging than a poor fit." And so even to this day, he spends most of his time recruiting the very best people because people are power law and the best ones change everything. He says there's no substitute for smarts, and you need to double down on hiring the brightest people you can. And he also talks about the importance of not over-hiring. He says, "I find that slightly understaffed teams are more focused and spend less time doing redundant busywork." And one thing we talked about at breakfast is the fact that not only does he spend a ton of time recruiting, he thinks it's, you know, the most important thing that the CEO does, but he says when you find the most talented people, you pay them a lot of money. This is what he says about this in the book. He says, "I do business in dozens of countries, and money animates people everywhere. That's why I've, quote, unquote, 'overpaid' almost every direct report I've ever had to ensure that I had top-tier people in place." And when I read that the first time, the note I left myself in the book was overpay for talent because it's nearly impossible to overpay for talent. The example I give is that if you think about when Apple buys NeXT, right? They paid essentially a half a billion dollars for NeXT. That's not the way I think about it. The way I think about it is Apple paid half a billion dollars to rehire Steve Jobs, and they got the deal of a lifetime. This is a mistake that Brad sees other companies make. He says it makes no financial sense to skimp on salary and incentives to save $100,000 a year when hiring a second-best candidate may cost you millions of dollars in lost profit. This is something that Brad repeated. Find the very best people, literally the best people you possibly can, and pay them. Most people don't do this. Most companies fail doing this. In fact, this is another thing that David Ogilvy noticed. He has a great, uh, line in one of his books where he says, "You pay peanuts and you get monkeys." So whatever it takes, surround yourself with by far the most talented people. My favorite, the way I think about this, it's Ed Catmull, who's the founder of Pixar. He talks about the importance of, you know, you never, ever forget the dynamic range of humans. And he says, "If you give a good..." This is why getting, hiring the best people is so important. This is what Ed Catmull said. "If you give a good idea to a mediocre team, they will screw it up. If you give a mediocre idea to a brilliant team, they will either fix it or throw it away and come up with something better. The takeaway here is worth repeating. Getting the team right is the necessary precursor to getting the ideas right." So find the smartest and most talented people you can and work with them. Zero exceptions. You would rather have an empty seat than a B player.

5. 18:54 – 23:51

   Lesson 4: Get the Big Trend Right and Invest in Technology

   1. DSDavid Senra18:54

      Okay, so takeaway number four, get the big trend right and invest in technology. Brad spoke about one of his most important mentors at breakfast. This, uh, this guy's also in Brad's book. It's this guy named Ludwig Jesselson. And one of the most important pieces of advice that Brad ever received from Mr. Jesselson is the fact that you can mess up a lot of things in business and still do well as long as you get the big trend right. And Brad said he took Mr. Jesselson's words to heart, and that with each new company that he started, he made sure to understand the major trends that could either threaten the business or help it soar. And so I was thinking about what Brad said and what he wrote in his book about this, and I thought of this blog post that Marc Andreessen did many, many years ago. It's probably 15 years old. And he was trying to figure out, like, what correlates the most to success. Is it team, product, or market? And I'm gonna read an excerpt from this post to you. And, and so Marc writes, "And for those of us who are students of startup failure, what's most dangerous, a bad team, a weak product, or a poor market? If you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. That is the obvious answer, in part because in the beginning of a startup, you know a lot more about the team than you do the product, which hasn't even been built yet, or the market, which hasn't yet been explored. Personally, I will take the third position. I will assert that market is the most important factor in a startup's success or failure. Why? In a great market, a market with lots of real potential customers, the market pulls product out of the startup. The market needs to be fulfilled, and the market will be fulfilled by the first viable product that comes along. Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn't matter. You're going to fail." So let me pause there, and I'm gonna introduce another idea. So this is like an idea inside of an idea inside of an idea. We're getting, like, Inception levels here. [laughs] So hearing Brad speak about this, then I think about the Marc Andreessen post, then I'm reading the Marc Andreessen post, and you know who I think of there? I think of Billy Durant. Billy Durant was the founder of General Motors, one of the most talented entrepreneurs to ever live. But Billy Durant's business before General Motors is a perfect example of what Marc just said. Marc said, "In a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn't matter. You're going to fail." What was Billy Durant doing before he founded General Motors? He was one of the main manufacturers of horse-drawn carriages. And at first, he was very resistant to not making... He was making a ton of money manufacturing horse-drawn carriages. And then this new invention called the automobile comes up, and then eventually he realizes, "Oh, shit, I can have the best horse-drawn carriage in the world, I can have the best team inside this industry, and it doesn't matter. If I don't switch, I'm dead." So back to Marc Andreessen's post. "You can obviously screw up a great market, and that has been done, and not infrequently. But assuming the team is competent and the product is fundamentally acceptable, a great market will tend to equal success, and a poor market will tend to equal failure. Markets matter most. Markets that don't exist don't care how smart you are." So now back to Brad and takeaway number four, get the big trend right and invest in technology. So, so the second part of that is something that he's been doing since his first company at 23. There's a line in Zero to One from Peter Thiel that I think is accurate. He says, "Properly understood, any new and better way of doing things is technology." I believe that every company, especially today, every company is a technology company. You and I talked about this last week. Amancio Ortega built a $130 billion fortune applying technology to an ancient industry. He was the most technologically advanced clothing company, for God's sake. And there's a great line in that Ortega biography that I think Brad would agree with, where Ortega says, or somebody, uh, describing Ortega's approach says, "There are no mature sectors where everything is already discovered, but rather companies are managers with closed minds who resist innovation." I bet Brad would agree with that statement. And so the advice from Brad is if you wanna make a lot of money in almost any industry, you have to plan to heavily invest in tech. And we obviously talked a lot about that at breakfast, 'cause that's also not a new idea. Go read Andrew Carnegie's biography. Carnegie was building his steel company in the late 1800s. In his autobiography, he talks about the old heads in the, in his industry. Remember what Ortega's, you know, the lesson from Ortega. There's no mature sectors where everything's already discovered, but rather companies are managers with closed minds who resist innovation. Carnegie ran up against the old heads in the, in the steel industry, and they're like, "Why are you spending all this money investing in all these newfangled operations?" And Andrew Carnegie knew what Brad Jacobs knows, that if you wanna make a lot of money in almost industry, industry, any industry, you should plan to invest heavily in tech. And so the takeaway, well, the main takeaway, I would argue, from Carnegie's, uh, autobiography is invest in technology. The savings compound. It gives you an advantage over slower-moving competitors and can be the difference between a profit and a loss. So takeaway number four, get the big trend right and invest in technology.

6. 23:51 – 28:31

   Lesson 5: Pay It Forward and Help the Next Generation

   1. DSDavid Senra23:51

      Number five, pay it forward. Help the next generation. And so Brad mentioned his mentor, Mr. Jesselson, a bunch in the book. He mentioned him several times during our breakfast. And Mr. Jesselson ran the largest commodity trading company in the world, and Mr. Jesselson took an interest in a young Brad Jacobs. And he actually mentored Brad, and the two would have lunch together all the time when Brad was in his, starting when Brad was in his 20s. And what's fascinating to me is, like, the bits of, you know, business wisdom that Brad learned during those lunches, Brad still uses to this day. And in his book, Brad said that the most important lesson that Mr. Jesselson, which was his most important business mentor, taught him, happened when, when Brad was in his 20s. And he-- I'm just gonna read the story to you, 'cause it, it's one of my favorite stories in the book. He says, "At one lunch, I arrived burdened with problems that I began to unload on him. Mr. Jesselson listened carefully, then he said, 'Look, Brad, if you wanna make money in the business world, you need to get used to problems, because that's what business is. It's actually about finding problems, embracing and even enjoying them, because each problem is an opportunity to remove an obstacle and get closer to success.'" Brad says, "I learned something invaluable. Problems are an asset, not something to avoid, but something to run towards. Big ambitions often beget even bigger problems. If your initial reaction to a major setback is overwhelming frustration, that's counterproductive. You should be excited. Great, this is an opportunity for me to create a lot of value. If I can just figure out how to solve this problem, I'll be much closer to my goal." And this is one of my favorite things about entrepreneurs I try to point out in all the books I read. You know, most of the people I get to, to build this with, they're older than me, smarter than me, wealthier than me, and yet they're just like Mr. Jesselson was to a young Brad Jacobs. In my mind, when I think about this, this is a, a bunch of different examples but, you know, one of my favorite books I talk about over and over again, it's episode 255, it's called The Fish That Ate the Whale, about Sam Zemurray. And one of my favorite stories in that book is one of the very first, you know, multinational c- c- companies, uh, in existence were these fruit companies. And one of the biggest, or actually the biggest fruit company, was this company called United Fruit. United Fruit was founded by this guy named Andrew Preston. And what is very common is when you have a, a very talented entrepreneur, they know that there is a younger version of themselves. And in many cases, they seek that person out, and they try to help them. They mentor them, just like Mr. Jesselson believed that a young Brad Jacobs had potential and was worth the investment of his time. And so Andrew Preston, this is one of my favorite quotes or, or, uh, par- paragraphs from The Fish That Ate the Whale. It says, "When Andrew Preston, the president of United Fruit, visited Mobile, Alabama, in 1903, he asked to meet Sam Zemurray, the Russian selling the ripest." Preston was about 57 years old at the time, and Sam Zemurray's somewhere in his 20s when this is happening. And this is the description: "The titan who began the trade shaking hands with the nobody who would perfect it. Preston later spoke of Zemurray with admiration. He said the kid from Russia was closer in spirit to the banana pioneers than anyone else working. 'He's a risk-taker,' Preston explained. 'He's a thinker, and he's a doer.'" Preston winds up buying, I think he invests, like-- I think he buys 25-- He thought Zemurray was so talented, he's like, "Oh, this is another me." He winds up buying I think, like, something like 25% of his company. What was fascinating, and when was-- Preston was alive, and he was running United Fruit, he respected Zemurray. And then Preston dies, and you have these non-founders take over the company, and they looked at Zemurray with scorn. Instead of partnering with him, instead of helping him, they try to compete against him. The executives underestimated the person that Preston respected. And so I wanna remember to the degree that I can, I wanna pay it forward, I wanna help the next generation. And this is something, you know, Brad benefited from because he talks about Mr. Jesselson. He's also what he does for younger, talented e- people, younger entrepreneurs that he think are talented because there's something that Brad [chuckles] asks you to do when he goes to, when you go to his house that has to do with dancing, okay? So I have friends that Brad has helped out and taken an interest in, and they had told me about this before. So when Brad mentions, "Hey, come over here and let's do this," I go, "Oh, I know all about the dancing." And he's like, "How do you know about the dancing?" I go, "'Cause my friend Jake Sloan told me." And what Brad said next was a perfect illustration of this. He goes, "I love Jake Sloan. He's a young Brad Jacobs." So takeaway number five, as much as you can, pay it forward and help the next generation.

7. 28:31 – 34:20

   Lessons 6 and 7: Embrace Eccentricities and Protect Your Reputation

   1. DSDavid Senra28:31

      Number six, don't hide your eccentricities. Embrace them. I can't tell you how many messages I got from people that heard the podcast and then bought Brad's book and were shocked at the fact the first, the first part of Brad's book is all about building a strong and healthy mind. He talks about the importance of meditation. He talks about the value of thought experiments. And this is so important that the first chapter is called How to Rearrange Your Brain. And so probably within, like, the first, I don't know, like, 20 or 30 minutes of the breakfast, we're talking about visualization. Brad's talking about meditation. And my friend Patrick mentions n- like, not being able to visualize, like, when you close your eyes, actually seeing it. And so Brad immediately goes, "Oh, I can help you through this." And right in the middle of breakfast, right? He, he leads Patrick through a guided meditation. And I think this is the opposite of what most people try to do. They, they try to, like, present a certain act to the world. And I think the most important thing is, like, just be a human being, even in so-called professional settings. At breakfast, we talked a bunch about business, but I bet you it was probably 25% or less of the conversation. We talked-- Me and Brad talked a lot about our childhoods. We talked about this idea that you can always understand the son by the story of his father, the story of the father is better than the son. That's true for me. That's true for Brad. Brad gave me great advice on marriage and what to expect when my kids are grown and they go away to college. The conversation went in all kinds of unexpected and unpredictable directions, and Brad is an eccentric guy, and I am too, and I like him even more because of that. You felt it was Brad being who Brad really is, and people love-- I think the, the main takeaway that I always try to remind myself is, like, people love authenticity way more than they love perfection. There are no perfect human beings, and I think it's a mistake to pretend otherwise. And if you've listened to some of the other episodes I've done, like these I had dinner with or I had lunch with episodes, like the one I did on Charlie Munger, uh, the one on, uh, when I had lunch with Sam Zell. When, when you, especially 'cause Munger and Zell were such public, they had such public personas But, you know, you could go on YouTube and watch them on stage and, and, and watch their interviews, or you could hear them on a podcast. And when you're with them in person, that's exactly what you got. Both Munger and Zell were exactly that way. They did not try to hide their eccentricities. They embraced them, and that's part of the reason that they had such a cult-like following. And so takeaway number six for me was don't hide my eccentricities. Embrace them. I think I do this now, but I'm going to make sure it's a constant reminder. Just be who I really am, even if that person is imperfect. So number seven, relationships run the world, and your reputation is everything. So there is a video of Warren Buffett you can see on YouTube. It's Warren Buffett in 1991. I think he's testifying before Congress. This is when he was having this issue with Salomon Brothers, that big scandal. And he says something that I think is very powerful, and it's the advice that he was giving for not only people at Salomon Brothers, but he repeats this over and over again for everybody that's around him. He says, "Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless." And in later instances, he says, you know, why this is so important, he says, "It takes twenty years to build a reputation and five minutes to ruin it." And if you think about that, you will do things differently. You will act differently. And so I would take that idea from Warren Buffett, and I would tie it to this other idea that I read in a biography of David Ogilvy one time. The book is called The King of Madison Avenue, and it was written by a guy who worked with David Ogilvy for quite a while. And he has a line in there. They call it the David file. And so he says almost everyone who brushed up against the man has a David story. And so he gives an example of the first time he added to his, quote-unquote, David file. And the reason I'm telling you this is I think you already see where I'm going with this. There is a Brad file, and I'll explain that to you. So from The King of Madison Avenue, the, the person working for David Ogilvy says, "David was 52 and famous. I was 33 and a junior account executive. Early on, he wrote a letter to one of my clients. After listing eight reasons why some of the ads prepared for the company's design department would not be effective, he delivered his ultimate argument." This is what David wrote. "The only thing that can be said in favor of the layouts is that they are different. You could make a cow look different by removing the udder, but that cow would not produce results." That is the end of Ogilvy's quote. This is now the guy working for him. "So began my David file. Almost everyone who worked at the agency kept one." So Brad has been an entrepreneur for over 40 years, okay? Since this, this happens when I make episodes about people that are alive, uh, because since I made the episode about Brad's b- uh, Brad's book, I've been on the receiving end of several Brad stories that are, that are very unique. And just like David Ogilvy, just like brushing up against David Ogilvy, if you brush up against Brad, it's gonna produce a memorable story. Now, here is the mind-blowing thing, considering he's got a four deca- over a four-decade-long track record. Every single story I've heard was positive, and many of them are hilarious. And so this idea, th- this reminds me of one of my favorite maxims. That is, opportunity handled well leads to more opportunity. Because of his track record, because of his reputation, because of the compounding of his relationships, Brad is now able to pursue opportunities that would have been impossible or inaccessible when he was just starting out as a 23-year-old entrepreneur. And I think the important reminder is the long-term view is the right view. And just like Buffett said, we must never jeopardize our reputation or harm our long-term relationships for short-term gains. So takeaway number seven is relationships run the world, and your reputation is everything. And so what I'm gonna do now is I'm gonna replay the episode I

8. 34:20 – 41:15

   Book Review Begins: Brad's Career and Rearranging Your Brain

   1. DSDavid Senra34:20

      made on Brad's book. If you haven't listened to it, make sure you listen to the whole episode. If you've listened to it, you know, but it was over a year ago, listen to it again. It's worth the time to remind yourself of the lessons. I will also leave a link down below in the podcast player and available at founderspodcast.com. If you haven't yet bought Brad's book, highly recommend that you do so. And if you do so using that link, you'll be supporting the podcast at the same time. Thanks for listening this far, and I hope you enjoy my review of Brad's book, How to Make a Few Billion Dollars. During my 44 years as a CEO and a serial entrepreneur, I have made every possible mistake in business. I've overpaid for acquisitions and botched integrations. I've run operations for cash when I should have invested for growth. I've delegated tasks I should have done myself. I've hired the wrong people. I've made strategic bets that didn't pay off. And yet, my teams and I have managed to create tens of billions of dollars of value for our shareholders. This book is about what I've learned from my blunders and how you can replicate our successes. I'm what's called a moneymaker. I've started five companies from scratch, seven if you include two spinoffs, and turned them all into billion-dollar or multi-billion-dollar enterprises. My teams and I have completed approximately 500 acquisitions. In total, these ventures have created hundreds of thousands of jobs and raised about $30 billion in outside capital. My career began in 1979 when I started a privately owned oil brokerage company called Amerex Oil Associates. I was 23 with just a few thousand bucks and no experience. Within four years, my partners and I had $4.7 billion in annual brokerage volume with offices worldwide. We sold Amerex in 1983, and I moved from New York to London to start an oil trading company called Hamilton Resources. Hamilton generated about a billion dollars a year in revenue, and we made this money through an opportunistic combination of crude oil trading, countertrade, prefinance, and refinery processing deals. In 1989, so six years later, I moved back to the United States and entered a new sector, the rapidly expanding field of solid waste management. I called my new venture United Waste Systems and took it public in 1992. So founded the company in 1989, takes it public in '92, is gonna sell it in '97. We became the industry's fifth largest player, and in 1997, we sold United Waste for $2.5 billion. United Waste taught me that I love working with outrageously talented people to deliver outsized returns for shareholders in public stock markets. So he sells United Waste in 1997. That same year, he says, "I started a new company, United Rentals, to rent construction equipment for job sites. I took this venture public later that same year with a growth strategy that emphasized acquisitions from the start. Within 13 months, we had built the largest equipment rental company in the world." There's a hilarious story later in the book, uh, about a lunch that Brad had with the CEO of the, his major competitor in that industry. I'll get to it later on in the episode. Within 13 months, we had built the largest equipment rental company in the world. United Rental stock is a hundred bagger. The share price at inception was $3.50, and it now trades at more than 100 times that price. In 2011, I was onto my next big thing, XPO Logistics. XPO was the seventh best performing stock in the Fortune 500 of the last decade. Its main focus was freight transportation, matching truckers with shippers, forwarding freight, and expediting urgent shipments. We built XPO into an integrated global logistics leader. I divided XPO into three separate publicly traded companies as a value creation strategy. We spun off GXO, the largest contract logistics provider in the world, and RXO, a freight brokerage platform that runs on technology that we developed in-house. I currently chair all three companies, and each business is helmed by a strong CEO. These experiences have allowed me to share thought experiments that can help you learn to think differently, which is an essential prerequisite to accomplishing big things. This book is a guide. If you have a burning passion to make enormous amounts of money in business or wanna turbocharge your chances of success in sports, the arts, politics, philanthropy, or any part of your life, read on. That was an excerpt from the book that I'm gonna talk to you about today, which is How to Make a Few Billion Dollars, and it was written by Brad Jacobs. In addition to starting seven separate billion-dollar companies, Brad also listens to Founders. He sent me a very nice message saying that he was addicted to listening to these book reviews. And he was kind enough to send me an early copy of this book a few months ago, and I read it and wanted to re- to make an episode, or to release the episode rather, uh, when it's available so you can actually order it, which I highly recommend that you do, and you... That'll be obvious as we go through some of the ideas contained in Brad's book. So I wanna jump right into it. He says, "I've come to know a lot of extremely successful people in my life. They all have one thing in common. They think differently than most people. All of them, to a person, have rearranged their brains to prevail at achieving big goals in turbulent environments where conventional thinking often fails." I wanna read one more sentence, and I'm gonna read to you this quote from Peter Thiel that popped to my mind when I got to this section of the book. I love that, what he said. "All of them, to a person, have rearranged their brains to prevail at achieving big goals in turbulent environments where conventional thinking often fails. Making a few billion dollars doesn't just happen, but it's possible with intense focus and a willingness to transform how you use your mind." That is the first chapter. So I got to this section immediately when I read that. The, the, one of my favorite quotes from Peter Thiel popped into my mind, and Peter said, "The single most powerful pattern that I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas." That idea of finding value in unexpected places and thinking from first principles instead of formulas, uh, instead of using conventional thinking, remember that. Uh, later on, we're gonna talk about this outrageous thing that happened. Brad winds up making about $4 billion buying back a bunch of his stock even though bankers and advisors around him were saying, "Hey, no one's ever done something like this before." And his response was perfect because you could tell he was thinking from first principles. He's like, "Well, just because we were the first company to buy back such a high percentage of our stock in this situation doesn't mean it's a bad idea." And it turned out to be a phenomenal idea.

9. 41:15 – 48:44

   Managing Your Mind: Positive Outcomes and Thought Experiments

   1. DSDavid Senra41:15

      So I like that he starts the book with this, where it's like you need to rearrange your brain to prevail at achieving big goals in turbulent environments where conventional thinking often fails. If Brad had... Or another way to think about that, in this situation which we'll cover later, if Brad had listened and adhered to conventional thinking, he'd be $4 billion, him and his company would be $4 billion poor. And so spread throughout the book, you're gonna see these, like, boxed standalone maxims or pieces of advice that relate to what he's currently trying to teach us, and they really, like, w- the way I think about him is he's distilling down his knowledge from ma- uh, into, like, simple to remember maxims. And so he says, "So much of success in business comes from keeping your head in a good place." He talks about expecting, the importance of expecting positive outcomes. And I think it says a lot that the first chapter of this book is called How to Rearrange Your Brain, and that he spends a lot of time on the importance of managing your mind and attitude. Entrepreneurship is difficult and stressful, requires sound judgment, and you cannot make high quality decisions if you don't manage your inner monologue, your inner feelings. And I love this idea of expecting positive outcomes. Expect positive outcomes. Stop beating yourself up mentally. I have. The next time you catastrophize something that isn't that bad, understand that your reaction is a genetic survival trait that you inherited from your hunter-gatherer ancestors. "The only time that I've ever felt truly lost was when I stepped down from United Rentals in 2007." So he's gonna talk about... This is really, this entire section is why understanding and controlling your mind is so important for founders. And you and I have talked about this before, and there's a great, uh, quote by Marc Andreessen that said entrepreneurs only ever experience, uh, two emotions, euphoria and terror, [chuckles] and nothing in between. It's the highest highs and the lowest lows. So you've got to learn to control your, your mindset and your emotions. "The only time I felt truly lost was when I stepped down from United Rentals in 2007. I started looking for my next big thing, and I couldn't find it. I became depressed. I'm an ambitious person by nature and a deal maker by inclination. Now I had no deal going, no industry sector where I could envision working my magic." And so he starts reading, like, a library of psychology books trying to figure out how to fix this. He says, "I learned to turn my internal chatter to my advantage by reframing negative thoughts as useful data, as useful data rather than objective reality." That is tied to another idea that he's gonna use over and over again, something you and I have talked about over and over. Uh, it comes f- there's this fantastic quote from this legendary founder named Henry Kaiser, uh, who was building companies around World War II. I read his biography because Charlie Munger recommended it to me, and actually, when I went to Charlie Munger's house to have dinner with him, uh, the book was sitting behind Charlie on the shelf, and I actually got to, to ask him about it, and it was incredible. Charlie hadn't read that book probably in, like, 15 years, but his recall, like, he could, he... It was i- impeccable. Like, told me, like, r- essentially recited all of the facts that were in that book as if he had read it yesterday. But Henry Kaiser has this great quote in that biography, uh, that says, "Problems are just opportunities in work clothes." And so I think it's a similar analogy to what he's saying here. It's like, yeah, everybody's gonna have negative internal chatter in your mind. Why don't we reframe that, use those negative thoughts as useful data rather than as objective reality? Back to Brad. "Inevitably, the process of running a business will test your bias towards hope or fear." Euphoria or terror is the way you and I talk about this. "When I notice I'm feeling anxious about something, I ask," this is fantastic, "I ask, 'What's the worst that can happen, and how would I cope with it?'" And then he has another question he asks himself. "If a friend had a similar worry, how would I advise them to handle it?" So this idea of stepping outside of yourself is something I've tried to practice as well. Step outside of yourself. It's your problem. Pretend it's somebody else's problem, a friend, a loved one, uh, even a competitor maybe. And it's like, okay, if I had that similar worry or the similar property, uh, problem, and it wasn't me, how would I tell them to solve it? And then just take your own advice. So he's saying putting distance between yourself personally and the source of your anxiety actually helps you, uh, think more objectively about positive outcomes. This idea, like, think about it. Yeah. The guy has started seven separate billion-dollar companies, and his, the, the first chapter of the book is all about the importance of managing your mind and attitude. So he says, "Not beating myself up has been a hard-learned lesson for me. I've become much happier in my middle age when I stopped expecting unrealistic levels of perfection from myself and my family." I still struggle with this all the time. I beat myself up. I have a very... I always say my inner monologue sounds a lot like David Goggins. If you ever heard his, uh, audiobook, Can't Hurt Me, [chuckles] that's what mine sounds like, so I'm gonna have to take Brad's advice here. "I've become much happier in middle age when I stopped expecting unrealistic levels of perfection from myself and my family, my friends, my coworkers, not to mention customers, vendors, and shareholders. Uh, the reality is that when you're trying to make a few billion dollars, your team is likely running in multiple directions at a fast pace. Accept that some goof-ups are inevitable, and you'll find that it's much easier to maintain your mental equilibrium as you pursue big goals." This goes over several pages. Try to summarize this for myself so I can remember in the future. Don't beat yourself up. Emotions blur judgment. Keep a positive mental attitude, and stay calm. And one way that Brad does all of that is he's a big fan of thought experiments. The reason you... I mean, you're just... I think it's a no-brainer to, to buy the book, but there's a bunch of stuff that, uh, that I'm not gonna cover in the podcast that's in here, uh, that the appendix... I think of this as, what I would do is, like, I'd read it straight through, and then I'd keep it on a shelf or keep it on your desk, and then use it as a reference. And you'll go back, and there's a bunch of things. Like, all the chapters are separate things. So, like, how to run great meetings, uh, how to do a lot of, uh, M&A without imploding your company, how to build an outrageously talented team. I really do think this is a fantastic reference that should stay close, um, at hand. And so one of the things he has in this book is a bunch of thought experiments that he uses. So I just wanna outline why those things are so important to him. He says, "Albert Einstein was a consummate daydreamer." And then he preferred the term, uh, it's German. I'm not even gonna [chuckles] try to pronounce it, but it's, it's daydreaming, thought experiments. So he says, "Thought experiments are not limited to genius scientists. Gifted artists, composers, composers, mathematicians all use them for creative work or problem-solving. I usually spend about half an hour a day meditating. Much of this time is spent in thought experiments. This, uh, produces a profound sense of calmness and is when many of my best decisions materialize." I don't, I can't remember if I have already said this, but Brad was kind enough to invite me to, uh, the book launch party they had in New York. I flew up, uh, to New York just for, like, 16 hours just to go to the book launch and, and meet Brad. Um, what was fascinating, and I had this inclination, is, like, he's just got great energy. Uh, he's got great... I hate to say, I have no other way to say this. He's just got great personal vibe when you're, like, in person with him. And I talked to people that worked for him. They said the same thing. They, like, l- love him. They enjoy, like, the work environment that he's created. And the best source I know to experience, like, how Brad is, is I would listen to, uh, the Invest Like The Best episode that Brad did with my friend Patrick. It's episode 352 of Invest Like The Best, and Brad, in that interview, talks a lot about the importance of meditating. He's been meditating, I think, for over 50 years. And as he says right here in the book, he, he feels it's been a, a b- a huge benefit, uh, to his career because that's where he feels many of his best decisions actually materialize.

10. 48:44 – 56:35

    Business Is Problems: Jesselson, Danny Meyer, Bezos and Munger

    1. DSDavid Senra48:44

       So let's go to this, what I mentioned earlier, that business is problems. This comes up over and over again, that business is problems, and great companies... The way I think about it is great companies are just effective problem-solving machines, and I first heard that idea or that idea was planted into my mind maybe seven years ago when I read Danny Meyer, the famer- famous restaurateur, his autobiography. And Brad's gonna talk about his most important business mentor and the lesson that he taught Brad when Brad was in his 20s. "I've had multiple business mentors over the years, but none have been more important than Ludwig Jesselson. Mr. Jesselson ran the largest commodity trading company in the world. I got to know him in my 20s when his company was a client of my oil brokerage business. Uh, before long, we were having lunch regularly, and he would share bits of business wisdom that have stayed with me ever since. At one memorable lunch, I arrived burdened..." Remember, Brad's in his 20s at this point, okay? Uh, uh, "One lunch I arrived burdened with problems that I began to unload on him. Mr. Jesselson listened carefully and waited until I had finished speaking. Then he put down his fork, turned to me, and said, 'Look, Brad, if you wanna make money in the business world, you need to get used to problems, because that's what business is. It's actually about finding problems, embracing and even enjoying them, because each problem is an opportunity to remove an obstacle and get closer to success.'" I'm going to put this book down, and I'm gonna go to where I have my highlights stored from Danny Meyer's book, which is called "Setting the Table." It's in-- If you have access to Founders Notes, I highly recommend going, searching for Setting the Table, and then listen-- and then reading all of them. Takes less than 10 minutes, and it gives you a good overview or a reminder of the lessons that Danny Meyer was trying to teach you and I from his book. But he had this, a very similar experience. I'm pretty sure he was in his 20s at the time as well. He's having dinner with another older, more successful entrepreneur at the time, this guy named Stanley Marcus of the Neiman Marcus family, and it's remarkable. It's very almost dead on with what's happening with Brad in his, when he was in his 20s, when he's talking to Mr. Jesselson. And so Danny Meyer's kind of unloading his problems and his stresses to an older, wiser entrepreneur. He says, "Opening this new restaurant might be the worst mistake I've ever made. Stanley set his martini down, looked me in the eye and said, 'So you...'" This is one of my favorite quotes I've ever read in any book. "'So you've made a mistake. You need to understand something important and listen to me carefully. The road to success is paved with mistakes well handled.' His words remain with me through the night. I repeated them over and over to myself, and it led to a turning point in the way I approached business. Stanley's lesson reminded me of something my grandfather, Irving Harris," who was a famous-- or not famous, a successful entrepreneur as well. Uh, "Stanley's lesson reminded me of something my grandfather, Irving Harris, had always told me. The definition of business is problems." That's exactly what Mr. Jesselson is telling a young Brad Jacobs. "The definition of business is problems. His philosophy came down to a simple, uh, to a simple fact of business life. Success lies not in the elimination of problems, but in the art of creative, profitable problem-solving." That's an excellent line too. "Success lies not in the elimination of problems, but in the art of creative, profitable problem-solving. The best companies are those that distinguish themselves by solving problems most effectively." The way, the maxim I distilled that down so I could remember myself is that business is problems, and great companies are just effective problem-solving machines, as we're gonna see. We'll, we'll continue on this page. They get-- A l- a lot of the best entrepreneurs, they would get excited. They would get [chuckles] excited when they found businesses or, uh, problems in their businesses. And so Brad continues what he learned from this lunch, uh, with Mr. Jesselson. "In that moment, I learned something invaluable. Problems are an asset, not something to avoid, but something to run towards. Big ambitions..." That's so e-excellent. Not something to avoid, but something to run towards. You know what? Let me interrupt. Let me interrupt where I'm at because wh- when I got to this part, again, just popped right to my mind. I wrote down Jeff Bezos, Henry Kaiser. I already told you Henry Kaiser loved problems. He said, "Problems are just opportunities in work clothes." Jeff Bezos, multiple books. In "The Everything Store," the first biography of Jeff Bezos written by Brad Stone, there's, [chuckles] there's this interaction between one of, one of Jeff and one of his, um, one of his employees, and he tells him, like, some bad news, something that, like, they need to improve on or whatever. And he goes, "I brought him very bad news about our business, and for some reason, he got excited." Is that not exactly what Brad Jacobs is saying? Problems are an asset, not something to avoid, but something to run towards. Later on in... I think this was in Jeff's, uh, one of Jeff Bezos' shareholder letters. But he said that he finds waste, uh, very exciting. So he says, uh, "The customer experience path that we've chosen requires us to have an efficient cost structure." This is Jeff Bezos writing, by the way. "The good news for shareholders is that we see much opportunity for improvement in that regard. Everywhere we look, we find what experienced Japanese manufacturers would call muda," uh, translates into waste. What experienced manufacturers would call waste. "I find this incredibly energizing. I see it as potential years and years of variable and fixed productivity gains and more efficient, higher velocity, and more flexible capital expenditures." That is from the book "Invent and Wander." Uh, highly recommend. I've done, I think, two podcasts on that already. Uh, it's Jeff Bezos-- all Jeff Bezos' shareholder letters, and then transcripts of, like, his best speeches. But I love-- I reference that book all the time. It's exactly what Jeff is talking about there. He's like, "Oh, I get excited. Ooh, this is waste. Good. This is incredibly energizing. It's potential years and years and years of improvements in our business." Very similar to what Je- uh, to what Brad Jacobs is telling us here. Uh, big ambitions often beget even bigger problems. If your initial reaction to a major setback is overwhelming frustration, that is counterproductive. Instead, do this. Great, this is an opportunity for me to create a lot of value. Is that not the exact same idea that Bezos just told us in his shareholder letters? It's exact- it's the same thing. It's exactly the same. Great, this is an opportunity for me to create a lot of value. If you can figure out how to solve this problem, I'll... If I, excuse me, if I can figure out how to solve this problem, I'll be much closer to my goal. In the four decades since that lunch with Mr. Jesselson, I've dealt with nearly every problem you can imagine. Challenges with acquisitions, people, tech, branding, you name it. I am not surprised when things don't go perfectly. That's the nature of this universe. The big gunky problems can be where the best opportunities lie. This reminded me of, uh, when I got to, to, to talk to Charlie Munger. He said the same thing, and it's-- you notice this, um, in his last, I think the last published interview he ever, he did, or one of the last ones, was with John Collison, uh, the founder of Stripe interviewed him. It's actually published on the best, like, The Best Feed too. It's also obvious, like, w- uh, after spending a few hours talking to him. When I got back to my hotel that night, I l- I had, like, this... I immediately just put all, like, everything we talked about, 'cause I didn't look at my phone one time when I was with him. I was like, "Man, this is a once in a lifetime experience. I need to... I, I wanna document this. I wanna remember this." And one of the things that I wrote was that Charlie had a complete, almost a complete indifference to problems. He said they should be expected. You should toughen up. Like, you should just essentially suck up and cope when you have problems that come your way, and then you should be wise enough to try to prevent any, any other problems. Uh, but this idea, it's, like, very similar to what he's saying. I'm not surprised when things don't go perfectly. It's impossible. He's been a CEO and entrepreneur for 44 years. You don't think he's run into every single problem? Like, of course. That's what makes the, the book so valuable. I think I saw it selling for, like, $27. Like, [chuckles] that's absurd. That's an absurd amount of value that you get. You get almost half a century of wisdom distilled down. At his book launch party, he said this. He's like, "I don't have another book in me." Like, "I'm not writing another book. I gave you all my ideas. Get, buy it if you want it." [chuckles] And, uh, but I just think it's, it's, it's,

11. 56:35 – 1:01:42

    Radical Acceptance and the $4 Billion Buyback

    1. DSDavid Senra56:35

       uh, incredible how, you know, everything I'm talking about, this is three, four pages. And we see similarities in the way Brad thinks, that Danny Meyer thought, that the guy from Neiman Marcus thought, that Jeff Bezos thought, that Henry Kaiser thought, um, that Charlie Munger thought. I just love, uh, it excites me when all these ideas, um, connect. Very, very fascinating. Moving on. This is great. He's got these great stories spread throughout the book. And, uh, [chuckles] uh, it-- This is how to lose $500 million. So, I wanna go back... Actually, before I get into how to lose $500 million, he's got a very unique, uh, acknowledgment segment sec- section. I, I read, I have to confess that I read a lot of the acknowledgment sections in the books that I read. They're usually boring and, like, kinda, like, filler. Every once in a while, you'll find, like, an interesting source or an interesting book or something. Brad, what Brad did was put it at the front of the book, which is unusual. And then what he did is, like, I-- he just made his acknowledgment section a list of maxims that he learned from other people. You, you have all these conversations, and you distill down one of the main ideas, and it's like, the-- he learned this from Michael Moritz. Small amounts of capital can generate gigantic returns. Uh, from Ludwig Jesselson, who we just talked. Get the major trend right, which we'll go into. Uh, you know, dare to do new things. See the world for what it is, not what you wish it to be, is one of the maxims in the acknowledgment section. And I'm glad I read that before I got to this story about how to lose $500 million, because see the world for what it is and not what you wish it to be is exactly what Brad did. And so he says, he calls this radical acceptance. Radical acceptance quiets the noise created by yesterday's decisions and today's wishful thinking. Here's a story about radically accepting a $500 million loss. So, in the late 1990s, Congress came up with this new law called the TE21 Tran- so it's the Transportation Equity Act for the 21st Century. In theory, this is what Brad thought was gonna happen, this legislation was going to allocate about $600 billion to rebuild the nation's infrastructure. So I was like, "Okay, there's gonna be a bunch of all this funding up for grabs." I started scooping up big r- uh, road rental companies, the ones that provide barricades, cones, striping, and the like. Then I waited for the market to come to me, but that never happened. Only about a third of the allocated government funding was spent, and that was spent in little bits over time. My decision turned out to be a huge mistake, and there was no point in compounding it. We ended up selling those road rental companies at about a half a billion dollar loss because it was the best way forward under those circumstances. So this idea of see the world for what it is, not you, not what you want, wish it to be. He, he, he's like, "Oh, this is gonna be great. They're gonna spend out, uh, dole out the $600 billion." When that didn't happen, he didn't hold onto it. What does he call? Uh, radical acceptance quiets the noise created by yesterday's decisions and today's wishful thinking. No reason to compound this loss. Let's cut our losses and move on. The next story I wanna tell you about is how to keep your head and make $4 billion. This is my, that was my summary of what's about to happen. So he, at the time, he's running XPO, which is, is his third public company. And I think this is in 2018, and they got hit with a short report. And so this short report gets picked up by the media saying there's all kinds of problems with XPO. You know, you should sell the stock, everything else. And so this is the story from Brad. The short report was packed with a lot of baloney. But of course, the market acted first and analyzed later, and our stock price went into free fall, down 20% or 26% in one day. His response was fascinating. We did exactly what I've been describing in this chapter. We concentrated on the situation at hand without judging what had happened to us. We spent hours going over the short report page by page, identifying the many places where their data had been twisted. And so he takes a problem, and he spots an opportunity, which is what he's been talking about, right? The short seller crisis had made our stock extremely cheap, and instead of fixating on that as bad, we focused on achieving a good outcome. From that perspective, the share price was manna from heaven, and we decided to buy back $2 billion worth of stock. So this is what I mentioned earlier, where the bankers are like, "$2 billion? It's way too high. You can't do that. It's too high of a percentage of your market cap. No one's ever done something like that." And Brad's like, "Who cares? Just because we were the first company to buy back such a high percentage of our stock..." Remember, it goes from the opening. It's like you have to, that you can't re- rest on conventional wisdom, is the way Brad put it. You have to rearrange your brain. The way Peter Thiel says is, hey, you sh- successful people find value in unexpected places, and they do so by thinking about business from first principles instead of formulas. There is no formula for the situation that Brad's dealing with, or if there was, it'd be like, oh, buy, you know, a little bit. Buy, like, 100 million back. But you can't buy $2 billion. What are you, nuts? Just because we were the first company to buy back such a high percentage of our stock in a similar situation didn't mean it was a bad idea. In fact, it was a once in a lifetime opportunity. A couple of years later, those $2 billion of shares we brought back, we bought back, ended up being worth $6 billion, giving them a profit on that one transaction of $4 billion.

12. 1:01:42 – 1:13:21

    Spotting the Big Trend: Oil, Waste and Equipment Rental

    1. DSDavid Senra1:01:42

       Okay, moving on. What, this is, this might be my favorite section in the entire book. Uh, I love how he describes all the research he does before he jumps into an industry, and it's this idea that he gets. He said, "One of the most valuable piece of advice I've received from my mentor, uh, Mr. Jesselson, is you can mess up a lot of things in business and still do well as long as you get the big trend right. I make sure I understand the major trends that could threaten the business or help it soar. I'm obsessive when learning about an industry." This, this part, this entire... I'd read the entire chapter. I'm gonna go over, uh, the parts that are obviously most interesting to me. But it's a, it's another illustration of this idea that you and I speak about over and over again. You see it in the books, and it came, came from David Ogilvy, and he says, "The good ones know more. They just do more research. They read more. They talk to more people. They just know more about what they're doing. The good ones know more." Um, and so his idea is, like, one of the main theme, themes, the, the mega trend, uh, is that technology is the, the dominant mega, mega trend in our universe. If you wanna make a lot of money in almost any, any industry, plan to invest heavily in tech. And that idea is as true today as it was a couple hundred years ago. Uh, I remember reading Andrew Carnegie's autobiography, uh, you know, many years ago. I don't know, maybe four years ago. And he's talking about building businesses in the 1800s. And he was talking about building Carnegie Steel at the time. And I had summarized the advice he was giving in that book, uh, uh, s- specifically around technology as this, and this, this comes up in the books a lot. "Invest in technology. The savings compound. It gives you an advantage over slowing moving competitors and can be the difference between a profit and a loss." That is from, th- th- that's a summary of Andrew Carnegie's ideas, which I think Brad, uh, based on this chapter, would definitely agree with. If you wanna make a lot of money in almost any industry, plan to invest heavily in tech. So this is how he starts doing research before he starts a new company. "I start by reading everything I can get my hands on. Journals, periodicals, newspapers, trade publications, employee reviews on web-based recruiting sites, you name it. I look up, I look at all the websites and social media of the major players and the up-and-comers in the industry. I watch lots of interviews with the CEOs. I use paid services like Bloomberg, AlphaSense, and Thomas Reuters. Uh, I look at analysis from sell-side and buy-side analysts, and I search the SEC database, uh, which has large amounts of information on every publicly traded US company, including IPO documents, financial reports, and proxies. I scope out the most valuable industry conferences, and I attend them." He goes to sell-side conferences because they're an opportunity to meet management teams face-to-face and hear the questions investors are asking. Trade associations have a wealth of industry data. I interview experts. Uh, I seek out people who live and breathe the industry that I'm considering. This phase of the research is about getting face-to-face and listening intently. I love talking to CEOs. In addition to CEOs, I seek out investment bankers who are most active in the industry and who know it deeply. Just look at how much work and how much information, uh, is collected, right? He, this is, it keeps going. Uh, so it says, "In addition to CEOs, I seek out investment bankers who are most active in the industry and who know it deeply. I also talk to venture capital firms because they spend a lot of time looking at the big trends in different industries. I tap buy-side institutions and successful fund managers who have battle scars from investing in that industry. Uh, industry vendors," keeps going. "Industry vendors are also a good source. They have a sense of the trends that could drive changes in the market. And finally," or not finally, there's two more, "shareholder activists, uh, often have important insights as well, and I reach out to journalists who know the industry because by nature they're a skeptical bunch, and I want to hear their perspectives." So then what he'll do is he runs through, like, short descriptions of how, uh, to get the major trend right in a bunch of the b- or how he did in a bunch of the businesses that he started, and, you know, this goes over 40 years. What's interesting is, uh, the first one. So he talks about Amerex and Hamilton Resources, and it's about, like, his time in the oil industry. It reminded me of a very important idea that I think, that it's, that you see applied to a bunch of different industries. This idea that you can identify a market with valuable but hard to get data. And [laughs] my favorite application of this, 'cause it's just so nuts, was, uh, the episode I did on the, the billionaire art dealer, Larry Gagosian, uh, episode 325. If you haven't, [laughs] if you haven't listened to that, that episode, it was fascinating 'cause that's exactly what he did. He identified a market with valuable but hard to get data, and then essentially made h- his, uh, made, uh, like, a personal treasure map that, that his entire business, uh, rests upon. So that came to mind when I was reading this section. A little bit of luck put me in the oil industry in 1979 when I started my oil brokerage company, Amerex. It was a highly profitable business, and my realization was that a big trend was forming around the need to capture and share information more quickly. Remember, this is 1979, pre-internet. This whole section is nuts. Uh, so it says, "That was a trend that transformed the industry in the late 1980s. We made a lot of money by being the first oil broker to get ahead of the trend. At the time, there was no internet, no email, no centralized databases with easy global access. The main s..." This is gonna s- blow your mind. "The main source of information about the price of oil was a newsletter that came in the mail." And so he talks about, he's like, "Listen, we're making verbal handshakes with clients in Europe and Asia for $50 and $75 million over the phone with nothing on paper for days." And so this next sentence is a description of the problem. "The lack of timely information was a big problem for oil brokers. We made our money by matching buyers and sellers and taking a commission," just like Larry Gogosian. "I could see that there was isolated pockets of valuable oil pricing data trapped all over the globe, and I knew that if we could figure out a better way to share that information, we could unlock a lot of value." And so there's no off-the-shelf solution, so he builds his own. I think this is something he does multiple times. And he says, essentially, they built, like, their own crude version of the internet. Um, but it allowed, uh, us to do something revolutionary. Every time an Amerex employee learned something useful about a buyer, seller act- buyer or seller activity or the price of oil, they entered it into our database. Then we could share that information much more quickly with our brokers around the globe. That process took hours, not days, which was close to instantaneous back then in the '70s and '80s. So take something that took days, now it takes hours. We had created a way to obtain objective insights into global oil supply and demand and pricing trends. And then here is the trends that he identified when he set up United Waste Systems. Uh, the Red Bull episode that I did, uh, episode 333, I think. Uh, it's pretty wild that, you know, that business is gonna make him, you know, his net worth between somewhere between, like, $20 and $40 billion. He was paying himself before he died somewhere between $500 and $800 million a year. He identified the opportunity from reading a magazine article. And like, "Hey, uh, the richest guy in Japan," I think it was the country, makes these, like, energy tonics 'cause there was no energy drink market at the time. That's interesting, and that cha- that reading the article changed his life forever. Dietrich M- Mateschitz, I think is how you say his name. But we see Brad Jacobs coming up with an idea too. He's just like, "Well," the idea from United Waste Systems. This is fascinating. I remember vividly the moment the industry caught my attention. In 1989, I was reading Merrill Lynch research reports in bed on a lazy Sunday morning. [chuckles] I love that. Uh, and came across a report written by the top-ranked analyst for environmental services then. The two largest companies in the waste industry at that time were each making about a half a billion dollars a year in profit. Remember, that's why I brought up the Red Bull guy. He's like, "What? This guy is the high, paying the most, he's making the most money in this entire country, and he sells energy tonics?" And then Brad's sitting in bed reading research reports, right? And he's like, "Wait a minute. These guys are making half a billion dollars a year in profit in 1989." And I thought, "How hard can it be to have trucks pick up trash, deposit it in a safe place, and then send out an invoice? I wanted to know more." And so he identifies the two big trends at the time. Uh, landfill capacity was becoming pr- uh, precious because regulations were pushing small trash dumps out of business. So that's trend number one. Trend number two, integration of hauling and disposal. This created an opportunity for end-to-end consolidation. I looked for a way to capitalize on both trends and found it in tech-based truck routing. So think about the entire oil industry kinda operating blind, waiting for this, [chuckles] this letter in the mail to tell them the prices. He sees a very similar trend, uh, or problem in the waste management business. Mom and pop owners were running trash collection companies by the seat of their pants and making money at it. Few companies were planning their truck routes methodically, much less using technology to do it. I think he says they used, like, a map and, like, push pins. It's like, this is... He's like, "This is ridiculous." They did not focus on optimizing routes, and so he starts optimizing routes, and this is the result. Instead of sending 50 trucks out over five days to pick up X tons of waste, 20 trucks, so more, less than half, could now perform the same service in three days. So instead of 50 trucks in five days, he's doing the same work in, with 20 trucks in three days. Our costs kept coming down as our processes improved and our profit margin grew significantly. That is the company that he sells for $2.5 billion. Then he talks about where he gets his idea for his other company, United Rentals. Uh, I was looking up to roll, I was looking to roll up another industry, and so I set up half-day meetings with nine different groups of bankers and analysts at Merrill Lynch. One of those analysts asked if I thought about going into the construction equipment rental. So that's how he finds the idea for his next billion-dollar company. And even though it's a different industry, he sees the same problem. This is the part that I texted to a bunch of friends 'cause I absolutely love. While the rental industry overall was slow to computerize, the larger regional players were more tech-savvy. By 1997, nearly all of them were running on software developed by a company called WIN Systems. This is how to get God mode, uh, what I wrote to myself. When I was a kid, I played a lot of video games, and you'd use, like, cheat codes like Game Genie and stuff like that. Uh, and you could, one of the things that you would try to unlock is something that was referred to as God mode a lot, which essentially gives you, like, om- omnipresent, uh, like, view of the entire world and, like, what you wanna do. You could think of what's happening here, this, this, this idea, what I absolutely love that he did. He gets omnipresent data of his entire industry. It's almost like operating in God mode in video games when I was a kid. By 1987, nearly all of them, all the larger, larger players in this industry he's in now, right, were running on software developed by a company called WIN Systems. This told me that software was capable of managing hundreds of thousands of pieces of equipment flowing on and off job sites because they buy construction equipment, and then they rent them out. It's a very, you know, straightforward business. So what does he do? I bought WIN Systems. He bought, [chuckles] he bought the software that all of the main players were using. Owning WIN accomplished two things. One, we had an industry-best platform that we can continue to develop internally for our own use, and the acquisition gave us access to aggregated, anonymized data on macro trends acros- across the industry. This gave us a high-level view of emerging market trends, such as equipment gluts or shortages in the makin- making. What does buying the software company allow him to do? N- We could now proactively adjust our pricing and asset management while the rest of the industry was being reactive. I'm gonna repeat that. That is so important. We could proactively adjust our pricing and asset management while the rest of our, the industry, the rest of our competitors was being reactive.

13. 1:13:21 – 1:21:02

    M&A Lessons: Deals Avoided, Feedback Loops and Speed

    1. DSDavid Senra1:13:21

       Okay, so then I love this story that comes from the chapter on how to do lots of high-quality M&A, uh, without imploding. And it reminds me of one of my favorite sayings that I bring up a lot, that opportunity is a strange beast, and it frequently appears after a loss. What can appear to be a terrible thing actually be, uh, actually winds up being a blessing in disguise. And so he gives us some advice. He says, "Be sure to cover your flank. It's the stuff that comes out of left field that can take a deal down. In 2007, I sold United Rentals to the private equity firm Cerberus." No way I'm pronouncing that right. So this private equity firm buys it, uh, for $7 billion, or at least that's what Brad thought happened. "Highly satisfied that I just sold the company, I stepped down as chairman and wandered off to my private investment firm to begin planning my next venture. Then the great financial crisis arrived." Remember, this is 2007. Uh, great financial crisis arrives. Private equity firms began welching on deals. And Cer- Cerberus, uh, defaulted on the United Rentals agreement. As a result, our stock plunged 31% in 24 hours. Over the course of the following year, the stock fell to $5. We collected $100 million breakup fee, decided not to seek another buyer, and eventually got things righted. Today, the market cap of United Rentals is $38 billion. So tried to sell it, thought they sold it in s- for 7 billion in 2007. Fast-forward, what, 15 years, something like that. Good they, good thing they did not sell it for 7 billion because the market cap is now $31 billion higher. The deals I've avoided have contributed more to my success than the deals I've done. And I love this advice. He talks about the importance of set- setting up, uh, feedback loops. This is something that Brad's gonna have in common with j- just the ones that come to the top of my mind. Les Schwab, Sam Walton of Walmart, and Jim Casey of UPS. They all prioritize this. And what is this? It's getting data from frontline employees. They want data from the people that are actually interacting with the customers. They all talk about it in their biographies and autobiographies over and over again. So he says, "When we buy a company, we discover that the frontline employees, middle managers, and even some senior executives have never been asked, 'What would you do to improve the company?'" And this is insane. You would think that the owners would want to know that. And so what Les Schwab, Sam Walton, and Jim Casey would say about this, in Jim Casey's case, anytime he was driving, he'd see a UPS truck. He'd pull over or have his driver pull over, and he'd talk to them. He'd wanna know what's actually happening. They all make... They all say d- differently, but the, the, the idea behind it's the same. They're like, your executives, the team you have around you, like they, over time, they start to, like, filter information too much, and they can give you, like, an overly rosy or, like, false, like, positive view of what's actually happening in your company. And so the way you, you penetrate that... Oh, Bezos did this too. I just remembered. He would, uh, work... He has everybody in Amazon, including himself, would work, uh, customer service, like in the call centers, and actually answer calls directly from, uh, customers. So anyways, th- uh, your executives and the people around you over time tend to give you, like, an overly, like, optimistic view of your company. And so one way to cut through that is like Sam Walton would go in stores, and he'd talk to people, ch- uh, the cashiers. He'd talk to the people at the front door. He'd talk to the people unloading, uh, the trucks. It's like, "Tell me what the hell is going on in this company. I wanna know this." Like, what would you do to improve the company? Why are you not asking them that? Of course, you should ask them that. To them, it was very, uh, obvious. Uh, but like almost, I... What I realized too is, like, almost at the end of the book, he has another, uh... He has two questions that I thought were genius that I wanna add in this section too because I think it ties to what he's saying here. And so what he would do, it doesn't have to just be in a company you're acquiring too. It could be in your existing company. So he asks... I love these questions. He asks two questions. What's your single best idea to improve our company? What is your single best idea to improve our company, and what's the stupidest thing we're doing as a company? And so he would send that out company-wide. You know, send an email. I would, you know, s- You'd probably just send this in email one at a time to everybody in the company. Respond back to this email. What is your single best idea to improve our company, right? Think of all the interesting data and ideas that, that, uh, you could, could get. And then what's the stupidest thing we're doing as a company? I love this. I love these questions for business, and then I was actually thinking it's actually good for a family too. Like, I've talked about this before, where, you know, I'm obsessed with what I'm doing. I work seven days a week. Uh, you know, if you're listening to this, you're highly likely you're an obsessive person as well. And yet I don't want... I'm also a dad, so, like, I'm not going to be a shit dad. Like, that's just not an option for me. And so [laughs] it sounds weird that this came to mind, but, uh, my son's too young for this, but my daughter's not, and so, like, I solicit feedback from, [laughs] from her. I think I've told you this before. Uh, but I would literally go... You know, I'm not, like, I was just like, "Hey, like, how am I doing as a dad?" Like, am I, like... And I ask questions like this, like, w- what's the, like, when do I feel, "Fuck, who told me to do this?" Like, I asked her, uh, and I'll text her this too 'cause she's old enough to text, which is funny. Like, what do I do that makes you feel the most special? Uh, like, what don't you like that I'm doing? Or, like, just how I'm doing. But this idea is almost basically, like, I think it's a good idea in the business, but also the idea is like what's your, or your single best idea to improve our family is another way to think about that, right? Instead of what's your single best idea to improve our company. What's the stupidest thing that we're doing as a family? What's the stupidest thing that I'm doing as a dad? What's your single best idea to improve what I'm doing as your father? I love the simplicity of it, and I love the idea of, like, sending it out 'Cause you could bury... The problem is, like, what I like about the idea of sending it out as a s- uh, like an individual question, right? It, it just cuts right to the simplicity, as opposed to putting it in, you know, maybe like a survey where there's like 10 or 12 other questions in there. I think those questions are so powerful that they're good enough to stand on their own. Um, so absolutely love that idea. And again, solicit feedback from, from pe- this is just good intel. Like, why wouldn't you do that? So one thing that pops up over and over again that's really important is you just... It's like, I have so many notes in the book, it's like, damn, this guy's moving fast. And then they're like, there's speed. Oh, there's more speed. It just happens over and over again. And so I mentioned this earlier, this hilarious story where his main competitor, the CEO of, uh, Hertz, which was the largest, uh, not only did they have the, the, like, rental car company, but they're the, the, at the time, they were the, the largest, uh, equipment rental chain, uh, in the country as well. And Brad has this great line here. He's like, "Yeah, uh, Hertz did this, and they built up a national equipment rental chain to about a billion dollars of annual revenue over the course of 37 years. United Rentals did that in 13 months." And so he gets this invitation, "Come have lunch with the CEO." And he's like, "Oh, maybe he's, like, trying to buy me out. Like, what's happening? Let's just... L- let me go over there and see what's up." And it was ridiculous. And the, the note I left myself was, "A losing strategy. Take your competitor out to lunch and ask him to slow down." And essentially, that's what he did. He's like, "You know, you made me change one of my taglines. I had the largest car rental company and the largest equipment rental company in the world, and now I've got the largest car rental company and the second-largest equipment rental company. I don't wanna be second in anything." And he's telling him to slow down. "You're making a mess of this industry. You're going too fast. You're going to mess this up." And fast-forward, uh, several years, and they're, United Rentals is making, like, six times the amount of money. [laughs] So, uh, that is a losing strategy. Do not take your competitor out to lunch and be like, "Please slow down. Please be nicer to me." No. Foot on the gas and foot on their neck.

14. 1:21:02 – 1:29:22

    Hiring Perfectly: A, B and C Players and Overpaying Talent

    1. DSDavid Senra1:21:02

       I wanna go back to the maxims that are in the acknowledgement, um, because the thing about maxims is they're not hard rules, and you need to know when to break the rules. And so he has this idea that you should lose perfectionism. And so... But there's one domain where you don't wanna actually lose perfectionism, and that is in hiring. The most important thing a CEO does is recruit great people. Yes. I made the point that aiming for perfection can be counterproductive. Good is usually good enough. But if you're going to break that rule, you break it for people. Make your hiring choices as perfect as they can be because there are few mistakes costlier than hiring the wrong person. This is so good. Way to, way to remember this. An empty seat is less damaging than a poor fit. Make your hiring choices as perfect as they can be because there are few mistakes costlier than hiring the wrong person. An empty seat is less damaging than a poor fit. This entire section is about the difference between super talented people and what they bring, uh, to your company. So I love this. Um, I'm gonna read... Steve Jobs was, was asked one time, uh, "What talent do you think you consistently brought to Apple?" This is his answer. Uh, this was his answer, rather. And I'm gonna read it to you first because I think it sets up what, what Brad's trying to teach us right here. He says, "I think 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 the average quality and best quality is at most two to one." Pick anything. It's gonna be basically two to one, right? "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 50 or 100 to one. Given that, you're well advised to go after the cream of the cream. You can build a team that pursues the A+ players. A small team of A players can run circles around a giant team of B and C players." So then he's going to talk about how to build a outrageously talented team and what he feels is most valuable. Remember, Steve Jobs said, "Hey, I think one of the best things I did was I figured out who the really smart people were. I hung around them, tried to hire them, and built incredibly, outrageously talented teams." Brad says, "Screening for superior, superior intelligence eliminates 90% of all candidates, so that's the first thing I look for. There's just no substitute for smarts. There's no substitute for brains. The CEO trait most closely correlated with organizational success is a high IQ. Double down on hiring the brigh- the brightest." When he is interviewing people, he will ask himself, "Can this person think dialectically?" I'm going to define that for us because I love this d- definition of dialectically. The, the ability to think dialectically is the ability to view issues from multiple perspectives and to arrive at the most economical and reasonable reconciliation of seemingly contradictory information. That's so important. The ability to view issues from multiple perspectives and to arrive at the most economical and reasonable reconciliation of seemingly contradictial, contradictory information. Can this person think dialectically? That is, are they capable of thinking from multiple perspectives and reconciling streams of information that seem to flow in different directions? And second, second question, are they capable of changing their opinion? Rigid thinkers at any level of intelligence are less valuable because they are mired in their own points of view. More advice. You should hire ambitious people who want to accomplish big things and make a lot of money. More advice. It is better to be slightly understaffed. I find that slightly understaffed teams are more focused and spend less time doing redundant busywork. Brad is big on vibes. I think he calls it the love vibe, and he says, "My team and I spend a lot of time together, so it's a big deal that we like one another. An organization is like a party. You only wanna invite people who bring the vibe up." And so he talks about, "Listen, man, I have advice for you. This is how you're gonna differentiate between the A, B, and C players on your team." His whole thing is like, you cannot have C players ever. And when you figure out B players, it's inevitable that you're gonna have some, but you can't have C players. And his whole point, uh, is that if you, if you hire B players, they're likely to hire C players. So you gotta be very careful with the B players, too. But, uh, as this organization scales, you can't have all A players. This is something Steve Jobs said, that Pixar, when he had 400 pl- 400 employees, it's the first team of all A players that he ever saw in his life. And he said, you know, at Apple, I think that time had 3,000, uh, people, and he's like, "It's impossible to have a team, have a company with, uh, 3,000 A players, so of course you're gonna have some B players. But you gotta be careful because they love hiring C players, and C players suck." This is how you differentiate between A, B, and C players, and he does this in his mind. Again, thought experiment. Uh, "I mi- I imagine this person coming into my office and quitting without warning. Uh, just by imagining this scenario, I can immediately tell from my own inner response whether this person is an A, B, or C player. If my first thought is, 'I was gonna fire this person sooner or later, so it's no big deal,' that's a C player. If my reaction is, 'I don't like this, but I can live with it. The transition period might be a little bumpy, but we'll find somebody else, maybe even somebody better,' we are talking about a B player. But if my reaction is an internal dialogue of panic, and it sounds like, 'We're so screwed. How did we get into this situation? There's no way we're gonna find somebody as fantastic as this person,' that is an A player." And what do you do with A players? You overpay the hell out of them. 'Cause here's the thing, the reason you should overpay them is 'cause y- you-- The reason you overpay for talent is because it's nearly impossible to overpay for talent. Think about what Steve Jobs said earlier, right? In, in some fields, the, the, the, the best person is not twice as good, they're 100 times as good. Think about when Steve Jobs came back to Apple. Apple bought NeXT for almost a half a billion dollars, right? The way to think about that is Apple paid half a billion dollars to rehire Steve Jobs, and they got the deal of the century. It is almost impossible to overpay for talent. And Brad talks about there's a lot of things that motivate people, but you, you're silly if you don't think compensation. Yeah, they have to believe in the mission. They have to like the w- what work they do. They have to find it intellectually challenging. They have to like their team. They also should be paid oodles and oodles of money. So he says there's 174,000 employees, uh, out of all the three companies that he currently chairs. Not a single one of them shows up for work because they wanna make money for Brad Jacobs. They come because they wanna make money for themselves and their families. Money animates people everywhere. So he's talking about, it's like, "I have employees all over the world. This is not just a United States thing. Money animates people everywhere. That's why I've overpaid, quote-unquote, almost every direct report I've h- ever had to ensure I had top team people in place." Overpay for talent. It is nearly impossible to overpay for talent. That's such a g- uh, important thing to remember. Never, ever, ever forget the dynamic range of humans. It makes no financial sense to skimp on salary incentives to save $100,000 a year when hiring a second-best candidate may cost you millions of dollars in lost profit. "Oh, this guy's good. He's an A player. Let me... I can save money." I hate when people s- try to, like, obviously, a huge... What's, what's the two biggest themes in the history of entrepreneurship, right? Focus and watch your costs. That's repeated over and over again by all, by the vast majority of the people you and I study. Watching your costs does not count when you're doing talent. That's not, it's like, "Oh, I have a great A player, but I can hire the, uh, for the same job, I can hire a B payer, pl- player for $100,000 less." No. That's not $100,000 less. You lost millions. Millions. And in Steve Jobs' case, if they didn't hire him, what if they said they, they didn't offer him, I think, what was it, 470? What was that deal? 470 million, something like that? They said, they said, "No, no, it's only gonna be 200 million," or whatever it is. If they try to shortchange him by a couple hundred million, he doesn't come back to Apple. What's, Apple's probably out of business. Apple probably doesn't exist to this day. Never, ever, ever forget the dynamic range of human beings and overpay for talent, because it's nearly impossible to overpay for talent.

15. 1:29:22 – 1:33:56

    Closing Manifesto: The Entrepreneurial Spirit and Going All In

    1. DSDavid Senra1:29:22

       And then I wanna close on what I feel is almost like a manifesto, that it's an incredible honor and a good thing for the world to build products and services that make other people's lives better, to create jobs for hundreds of thousands of people, in Brad Jacobs' case, to create wealth for your shareholders, um, and really is a testament to the all-important entrepreneurial spirit. I love being a CEO. There's a joy in creating value and an even greater joy in knowing that so many people beyond our organization are benefiting from our accomplishments. The best way to perform our duty is to fill an unmet need in the economy with a strong business model and a responsible organization. We create a healthy workplace environment for our people, and we pay them well. We pamper our customers, and we approach challenges with practical optimism that open our minds to solutions. The great majority of the tens of billions of dollars of value that my teams and I have created have flowed outside of my companies. I am extremely proud that our company could be counted on to create value. This is only possible because we operate in free markets where creating prosperity is a virtue. I want to share a personal experience I had with a small business owner whose work ethic and customer focus echo the value system that I instill in my own companies. The small business owner, his name is Steve. Steve handles the HVAC system at my home. Steve had originally worked for the large HVAC company that had installed the system, but that company was sold, and Steve decided to set out on his own. So again, the all-important entrepreneurial spirit. Steve is a hardworking, take pride in your work entrepreneur who puts his customers first. He cares a great deal about doing his job the way it should be done. He told me his self-esteem goes up and down with his customer satisfaction scores. Naturally, he also measures his worth by how much money he's making to support his family. There's a fair amount of criticism being voiced about profit-seeking these days. Some people are embarrassed to talk about the importance of money, but Steve is totally comfortable with it. And in his pursuit of happy customers and a good living for his family, he built a successful business. As a result, customers flocked to him. Steve is the face of the entrepreneurial spirit. I wrote this book with people like him in mind, people who wanna work their tails off, who wanna outsmart the competition, who wanna put their customers on a pedestal, and who wanna make a lot of money for their families. 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'd 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," he said. "You have a choice. You can waste the next couple months and not accomplish much, or you can go all in. This is an opportunity to go deep on a project and do the best work that you've ever done. But you have to decide if you want it," he said. It was there that I learned what it meant to go all in, that magical connection between intensity of focus and the end result. If I put my whole heart and soul into a project, I had it in me to create really cool stuff. We have it in our own hands to either make life meaningful or just pass time until we die. That's up to us. I hope you're inspired to run hard at making a few billion dollars or achieving some other big dream, and I wish you the exhilaration of seeing it through to success. And that is where I'll leave it. Highly, highly, highly recommend buying the book. As I said before, I really do think it's a reference. I'd read it through all the way, uh... I'd read it all the way through, and I'd keep it close at hand as a reference. The appendix, uh, has a bunch of thought experiments. There's this really interesting history of technology timeline because that's a huge influence in the way Brad approaches his business. He calls it the mega trend in the universe. He's got interview questions for job candidates, recommended books, um, how to conduct meetings. The appendix is, like, full of... Uh, you could buy the book just for the appendix. Obviously, read the whole thing. But anyways, if you buy the book using the link that is in the show notes, you'll be supporting the podcast at the same time. That is, where I'm at? 300? 335 books down, 1,000 to go, and I'll talk to you again soon

Episode duration: 1:33:57