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

One of the most important things I learned from Brad's book, and we spoke about this when I had Brackers of 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 when 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 businesses, 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 want to 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 dollars now that numbers 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 are really any 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. It 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 as me and my friend, Patrick O'Chranisey from the Invest Like the Best Podcast and then Brad's head of comms, Joe Checkler, who was a super nice guy and I'm really glad I got to meet who also listens to founders. So the idea was I want to 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 want to be a billionaire? And I was taken aback by his question. I go, excuse me. Like, keep on, he's talking about his words that he is set to me. So he repeats it. He goes, do you want to 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 they also had seen me going for like the last hour and a half, going through all of my highlights and rereading my highlights. And I have every single book I read, obviously has a ton of posts to notes sticking out of it. And so he assumed because I was reading it and I had all these notes that I 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. If anything, it's accounting of how Brad Jacob's made a few billion dollars. And so after my breakfast for Brad, I organized all my notes and said, we'd be basically seven lessons. And these are lessons that I want to remember for myself. And I think by making into podcasts, it'd be beneficial to you. So the first one is go to school on everybody. I have lost count. How many of history's greatest founders at UNI 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 a Montserratega, people around him literally describe him. They use that word that he is a sponge. Montserratega 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 into 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 David center.com and if you're on my email, it's sure to 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 really good way to review the lessons on the podcast because you have 10 concise ideas for every single book. And this absolutely this is like relentless drive to learn the this total dedication to lifelong learning is a trait that Brad shares with now nearly every single. I can't think of a single person that you and I studied shares with every single one of history greatest founders. And the reason I called this going to school on everybody is that actually got that idea in a biography of Jeff Bezos because Jeff is definitely this as well. There's a biography of Jeff called the everything store. I last covered this episode on I covered the book on episode 179. And I want to read you a section from that book that seared this idea into my brain and it's some way a new 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 Dana here goes to school on everybody. So Mitch grounded this company called Dana here. Dana here is like 170 billion dollar 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? He didn't say verbalize this but he was just like thinking it says like Mitch why you you're more successful anybody else here. Why are you taking notes? And when my friend was telling me this story, 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 to not build 170 billion dollar 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 to one of my favorite excerpts from the book. From Brad's book how to make a few billion dollars. I want to 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, employers, 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 and Reuters. I look at analysis from cell side and by side analysis. I'm 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. Cell 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 breed 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 bakers who are most active in the industry and 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 skeptical bunch and I want to 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 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 Ogrivy and David Ogrivy says, the good ones know more. David Ogrivy 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 be coming 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 and service stations talking to motorists, visit your clients for fineries and research laboratories. At the end of your first year, you will know more about the oil business and your boss and you'll be ready to succeed him. That's the end of the David Ogrivy quote. And the reason I think this is the first thing I wanted 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. 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 is 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, 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 notices and he compares in contrast 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 prisoner's 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 don't know if you'd even agree with this, but I pulled a line from his book that I really think is his one way to understand it. He's just really easy to interface with. And so he says, "I'm what's called a money maker. I love working without ragiously talented people to deliver outsized returns for shareholders in public stock markets." When you read that line or Brad was to say it in an interview when he says, "I love working without ragiously 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 he even talks about this with like his grander strategy. So one of the things we talked about him 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 is a leader, he has the vision. That's 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 Flufu 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. Estee Lauder talks about this. Bob Nois the founder of Intel, Edwin Land, Steve Jobs, honor, Schwarzenegger, Tiger Woods, Kobe Bryant, Cheng Juyang, 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 rate and you have the best people in your investing technology, he says, then it's very hard not to make lots of money. And so when I was thinking about the conversation I would, Brad, I came back to, this is the note of the 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? Because 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, if people were from say, "Hey, you might not like what Steve's saying. You don't have to guess at what it means. He's very, very easy to understand." So it was Brad. Brad's clarity of thought was obvious when I spoke to him. It was obvious. And the interview he does, it's 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 of 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 they had 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 of 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. Brad says that the most important thing a CEO does is recruit superlative people. In his book, he says, "Make sure that you're hiring choices. "You make your hiring choices as perfect as they can be "because there are a few mistakes costlier "than hiring the wrong person." And he's got a great maximum on this. 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 the state, since most of this 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 busy work." And one thing we talked about at breakfast is the fact that not only does this spend a ton of time recruiting, he thinks it's the most important thing that a 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 have 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 overpaid 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 was 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 Olgarveen noticed. He has a great line in one of his books where he says you pay peanuts and you get monkeys. So whatever takes surround yourself with buy for the most talented people, my favorite, the way I think about this, it's Ed Cappemoll, 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 way. Ed Cappemoll 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. 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 guy's also in Brad's book. It's his guy named Ludwig Jesselsen. And one of the most important pieces of advice that Brad ever received for Mr. Jesselsen 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. Jesselsen'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 Mark Injuryson 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 as a team, product or market. And I'm gonna read an excerpt from this post to you. And so Mark 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 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 going to introduce another idea. So this is like an idea inside of an idea. Inside of an idea, we're getting like inception levels here. So here in Brad, speak about this. Then I think about the market reason post. Then I'm reading the market reason post. And you know how 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 Mark just said. Mark said in a terrible market, you can have the best products in the world and absolutely killer team and it doesn't matter. What was Billy Durant doing before he found in General Motors? He was one of the main manufacturers of horse-drawn carriages. And at first, he was very resistant to not making use, making him some 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 could have the best team inside this industry and it doesn't matter if I don't switch. I'm dead. So back to Mark and Jason'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 fundamental 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 take away number four, get the big trend right and invest in technologies. 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 Till I think is accurate. Says properly understood any new and better way of doing things is technology. I believe that every company for sure today every company is the technology company. You and I talked about this last week. Amazio or Tega built a hundred and thirty billion dollar 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 or take a biography that I think Brad would agree with where or take a says or somebody that's subscribing or taking his approach says there are no mature sectors where everything is already discovered but rather companies or managers with closed minds who resist innovation. I bet Brad would agree with that statement. And so the advice from Brad is like if you want to 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 because that's also not a new idea. Go read Andrew Carnegie's biography. Carnegie was building his steel company late 1800s and his autobiography he talks about the old heads in the in his industry remember what or take us you know the less of more take us number two sectors where everything is already discovered but rather companies are managers with closed minds who resist innovation. Carnegie ran up against the old heads in the steel industry and they're like why are you spending all this money investing all these new fangled operations and Andrew Carnegie knew what Brad Jacobs knows that if you want to make a lot of money in almost industry industry any industry should plan to invest heavily in tech. And so the takeaway with the main takeaway I would argue from Carnegie's 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 number five pay it forward help the next generation. And so Brad mentioned his mentor Mr. Jelsus and a bunch in the book he mentioned them several times during our breakfast and Mr. Jelsus and ran the largest commodity trading company in the world. And Mr. Jelsus and 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. Jelsus and which was his most important business mentor taught him happened when when Brad was in his 20s and I'm just going to read the story to you because it's one of my favorite stories in the book. He says that one lunch I arrived burden with problems that I began to unload on him. Mr. Jelsus and listen carefully then he said look Brad if you want to 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 be get 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 on all the books I read you know most of the people I get to to be with their older than me smarter than me well here than me and yet they're just like Mr. Jelsus and was to a young Brad Jacobs in my mind when I think about this is 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 to Eat the Whale about Sam's and Murray and one of my favorite stories in that book is one of the very first you know multinational companies in existence were these fruit companies and one of the biggest are actually the biggest fruit company was this company called United Fruit reunite fruit was founded by this guy named Andrew Preston and what is very common is when you have 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. Jelsus and believe 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 for our paragraphs from the fish ate the whale it says when Andrew Preston the president of United fruit visited Mobile Alabama in 1903 he asked to meet Sam's Murray the Russian selling the ripes Preston was about 57 years old at the time and Sam's Murray'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 Zomerie 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 press and explain he's a thinker and he's a doer Preston winds up buying thinking of vest like I think he buys 25 he thought Zomerie was so talented he's like oh this is another me he winds up buying I think like something like 25% of his company was fascinating and when was Preston was alive and he was running United Fruit he respected Zomerie and then Preston dies and you have these non-founders take over the company and they looked at Zomerie 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 want to remember to the degree that I can I want to pay it forward I want to help the next generation and this is something you know Brad benefited from because he talks about Mr. Justin he's also what he does for younger talented people that younger down to winners and he think are talented because there's something that Brad asked 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 told me about this before so when Brad mentions hey come over here and let's do this I go all I know all about the dancing and he's like how do you know about the dancing I go because 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 take away number five as much as you can pay it forward and help the next generation 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 shot that the fact that 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 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 breakfast right 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 of business but I bet you 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 sun by the story of his father the story the father's bed in the sun 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 essential guy and I am too and I like him even more because of that you felt it was was Brad being who Brad really is. And people love, I think the main takeaway that I always try to remember is, I was 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, the one on, when I had lunch with Sam Zell. But when you, it's just you, '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 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 falling. 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 concern 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. Warren Buffett in 1991, I think he's testifying him for Congress is when he's having this issue with Salon Brothers, a big scandal. And he says something I think is very powerful. And it's the advice that he was giving for not only people in Salon Brothers, but he repeats this over and over again for everybody that's around him. 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, why is this so important, it says it takes 20 years to build a reputation and five minutes to ruin it. And if you think about that, you will do things differently, you'll 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 Ogreby one time. The book is called The King of Madison Avenue and is written by a guy who worked with David Ogreby for quite a while. And he has a line in there, they call 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, I think, great, you see what 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 person working for David Ogreby 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, while 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 utter, but that cow would not produce results." That is the end of Ogreby'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. Since this happens when I make episodes about people that are alive, because since I made the episode about Brad's book, I've been on the receiving end of several Brad stories that are very unique. And just like David Ogreby, just like brushing up against David Ogreby, if you brush up against Brad, it's going to produce a memorable story. Now here is the mind blowing thing. Considering he's got a four decade, over a four decade long track record. Every single story I've heard was positive. And many of them are hilarious. And so this reminds me of one of my favorite medicines 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, our 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 going to do now is I'm going to replay the episode I 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 findsparkass.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 as far and I hope you enjoy my review of Brad's book, How to Bake a Few Billion Dollars. During my 44 years as a CEO and a serial entrepreneur, I've 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've 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 money maker. I've started five companies from scratch, seven if you include two spin-offs and turn 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 dollars 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, counter trade, pre-finance 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 a public in 1992. So founder of the company in 1989, takes a public in 1992, is going to 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 without ragiously 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 about a launch that Brad had with the CEO of his major competitor in that industry. I'll get to it later on in the episode. 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 in each business as 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 want a turbo charge, 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 I'm going to talk to you about today, which is how to make a few billion dollars and reswritten 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 make an episode or to release the episode rather when it's available so you can actually order it, which I highly recommend that you do. And that'll be obvious as we go through some of the ideas contained in Brad's book. So I want to 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, interbulent environments where conventional thinking often fails. I want to read one more sentence. And I'm going to read you this quote. "From Peter Teal 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, one of my favorite quotes from Peter Teal 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 instead of using conventional thinking. Remember that, later on we're gonna talk about this outrageous thing that happened. Brad winds up making about four billion dollars, 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 can 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. So I like that he starts the book with this word. It's like, "You need to rearrange your brain "to prevail at achieving big goals "and turbulent environments where conventional thinking "often fails." If Brad had 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 four billion, him and his company would be four billion dollars 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, the way I think about him, is he's distilling down his knowledge into like, a 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 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 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've talked about this before. There's a great quote by Mark Andreessen that said, "Entrepreneurs only ever experience two emotions, euphoria and terror, and nothing in between. It's the highest highs and the lowest lows." So you've got to learn to control 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. It comes from, this is fantastic quote from this legendary founder named Henry Kaiser 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, the book was sitting behind Charlie on the shelf and I actually got to ask him about it. And it was incredible. Charlie hadn't read that book for like 15 years but his recall, it was impeccable. Like Tony, essentially recited all the facts that were in that book as if he had read it yesterday. But Henry Kaiser has this great quote in that biography that says, "Probms are just opportunities and workflows." 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 terrors, 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, something I've tried to practice as well, step outside of yourself. It's your problem, but tend to somebody else's problem that friend, the loved one, even a competitor maybe. And so I say, if I had that similar worry or the similar 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 think more objectively about positive outcomes. This idea, like think about it. Yeah, the guy has started seven separate billion dollar companies. And 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 "learn lesson for me. "I've become much happier in my middle age "when I stop expecting unrealistic levels "of perfection for myself and my family." I still struggle with this all the time. I beat myself up. I have a varied, I always say, my inner and monologue sounds a lot like David Goggins. If you ever heard his audiobook, "Can't hurt me," 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 stop expecting unrealistic levels of perfection for myself and my family, my friends, and my coworkers, not to mention customers, vendors, and shareholders. 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, except 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 it 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, I mean, you're just, I think it's a no-brainer to buy the book. But there's a bunch of stuff that I'm not gonna cover in the podcast that's in here. That the appendix, I think of this as what I would do is I gotta redistrate through and then I'd keep it on a shelf or keep under a 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. How to do a lot of 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 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. He says Albert Einstein was a consummate daydreamer. And then he preferred the term, it's German. I'm not even gonna try to pronounce it. But 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 produces a profound sense of calmness and is when many of my best decisions materialize. I can't remember if I've already said this, but Brad was kind enough to invite me to the book launch party that had in New York. I flew up to New York just for like 16 hours just to go to the book launch and meet Brad. What was fascinating, and I had this inclination, is like he's just got great energy. He's got great, I hate to say, I have no other way to say this. This is just a great personal vibe when you're in person with him. And I talk to people that work for him. They said the same thing. They love him. They enjoy the work environment that he's created. And the best source I know to experience like how Brad is is I would listen to the invest like the best episode that Brad day 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 feels it's been a huge benefit to his career because that's where he feels many of his best decisions actually materialize. 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 famous restaurant tour, 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 Jesselsen. Mr. Jesselsen 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. 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, remembered Brad's in his 20s at this point, okay? At one lunch I arrived burdened with problems that I began to unload on him. Mr. Jesselsen 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 out 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 going to go to where I have my highlights stored from Danny Myers book, which is called Setting the Table. It's in if you have access to Founders notes, I highly recommend going searching for a 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 Myers was trying to teach you and I from his book. But he had this 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 when he was in his 20s, when he's talking to Mr. Jesselsen. And so Danny Myers kind of unloading his problems and his stresses to an older wise Rancher. He says opening his new restaurant might be the worst mistake I've ever made. Stanley set his martini down. Look me in the eye and said, so you this is one of my favorite quotes I've ever read in any book. So you 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 is a famous or not famous success one. Well, Stanley's lesson reminded me of something my grandfather Irving Harris had always told me the definition of business's problems is exactly what Mr. Jesselsen is telling a young Brad Jacobs. The definition of business is problems. His philosophy came down to a simple to a simple fact of business life. Success lies not in the elimination of problems, but in the art of creative, profitable problems solving. That's an excellent line to 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 maximize 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 going to see it will continue on this page. They get a lot of the best entrepreneurs they would get excited. They would get excited when they found businesses or problems in their businesses. And so Brad continues what he learned from this lunch with Mr. Jesselsen 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 excellent, not something to avoid, but something to run towards. You know what? Let me interrupt. Let me interrupt. Rom out because 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 with your software changes and workflows. Jeff Bezos multiple books in the everything store, the first biography of Jeff Bezos written by Brad Stone. There's this interaction between one of one of Jeff and one of his one of his employees. And he tells them 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. That's something to avoid, but something to run towards later on in, I think this was in Jeff's one of Jeff Bezos' shareholder letters. But he said that he finds waste. Very exciting. So he says, 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, translated 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. Highly recommended. I've done two podcasts on that already. Jeff Bezos, all Jeff Bezos' shareholder letters and then transcripts of his best speeches. But I love, I have a reference I'll call the time. It's exactly what Jeff is talking about there. He's like, oh, I get excited. Oh, this is waste. Good. This is incredibly energizing its potential years and years and years of improvements in our business. Very similar to what to what Brad Jacobs is telling us here. Big ambitions often be get 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 initial hollers? It's the exact, it's the same thing. It's exactly the same. Great. If you can figure out how to solve this problem, 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. Justice and 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. It's reminded me of when I got to talk to Charlie Mugger. He said the same thing. And it's you notice this in his last, I think the last published interview here he did or one of the last ones with John Carlson, founder, Stripe, interview to him. It's actually published on the best like the best feed to. It's also obvious like after spending a few hours talking to him. When I got back to my hotel that night, I had like this. I immediately just put all like everything we talked about because I didn't look at my phone one time when I was with them. I was like, man, this is once in lifetime experience. I need to, I want to document this. I want to 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 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. 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 it to every single problem. Like, of course, that's what makes the book so valuable. I think I saw it selling for like $27. That's absurd. That's absurd amount of value that you get. You get almost half a century wisdom to still down at his book launch party. He said this. He's like, I don't have another book in me. I'm not writing another book. I gave you all my ideas, get by it if you want it. But I just think it's incredible. How, you know, everything I'm talking about, this is three, four pages. And we see similar reason we have Brad thinks, the Danny Meyer thought that the guy from Neiman Marcus thought, that Jeff Bezos thought, that Henry Kaiser thought, that Charlie Munger thought, I just love. It excites me when all these ideas connect very, very fastening. Moving on, this is great. He's got these great stories spread throughout the book. And this is how to lose $500 million. So I want to go back, actually, before I get into how to lose $500 million, he's got a very unique acknowledgement segment section. I read, I have to confess that I read a lot of the acknowledgement sections in the books that I read. They're usually boring and like kind of 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 just unusual. And then what he did is like, he just made his acknowledgement section, a list of maxims that he learned from other people. He have all these conversations and he just still down one of the main ideas. And it's like, he learned this from Michael Moritz, small amounts of capital can generate gigantic returns from Ludwig Jusselson, who we just thought get the major trend rate, which we'll go into, you know, dare to do new things. See the world for what it is, not where you wish it to be is one of the maxims in the acknowledgement section. 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, quites 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 T21 transportation equity act for the 21st century. In theory, this is what Brad thought was going to happen. This legislation was going to allocate about $600 billion to rebuild the nation's infrastructure. So I was like, okay, there's going to be a bunch of all this funding up for grabs. I started scooping up big 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's like, oh, this is going to be great. They're going to spend out, uh, dole out the $600 billion when that didn't happen. He didn't fold onto it. What does he call radical exception? Quiet's 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 want to 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 XBO, which 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 XBO, you know, he's still 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 focus on achieving a good outcome. From that perspective, the share price was mana from heaven. And we decided to buy back $2 billion with the stocks. 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 higher percentage of our stock remember it goes from the opening. It's like you have to that you can't rest on conventional wisdom is the way Brad put it. You have to rearrange your brain. The way Peter Teal says is hey, you 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 a be like, oh, buy, you know, a little bit buy like a hundred 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 and similar situation didn't mean it was about a day. In fact, it was a once in a lifetime opportunity. A couple of years later, those $2 billion shares we brought back, we bought back ended up being worth $6 billion, giving them a profit on that one transaction of $4 billion. Okay, moving on. What this is this might be my favorite section in the entire book. 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, Mr. Jesselsen, 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 is entire. I'd read the entire chapter. I'm going to go over the parts that are obviously most interesting to me, but it's another illustration of this idea that you and I speak about over and over again. You see in the books and it came came from David Ogrivy 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. And so his idea is like one of the main themes that the mega trend is that technologies that the dominant mega trend in our universe. If you want to make a lot of money in almost any industry plan to invest heavily in tech and that idea is as true today as it was a couple hundred years ago. I remember reading Andrew Carnegie's autobiography. 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 to time and I had summarized the advice he was giving in that book. It's just 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 that that's a summary of Andrew Carnegie's ideas, which I think Brad based on this chapter would definitely agree with. If you want to 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 Rooters. I look at analysis from cell side and buy side analysts and I search this 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 I attend them. He goes to cell 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. I see 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. In addition to CEOs, I see 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 is collected. This is keeps going. So it says in addition to CEOs, I see out investment bankers who are most active in the industry and who know it deeply. I tap buy side institutions and successful fund managers who have battle scars from investing in that industry. Industry vendors keeps going. They have a sense of the trends that could drive changes in the market and finally, they're not finally, there's two more 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 want to hear their perspectives. So then what he'll do is he runs through like short descriptions of how to get the major trend right in a bunch of the bid 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 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 my favorite application of this because it's just so nuts was the episode I did on the billionaire art dealer Larry Gagosian episode 325 if you haven't if you haven't listened to that that episode. It was fascinating because that's exactly what he did. He identified a market with valuable, hard to get data and then essentially made him his made like a personal treasure map that that his entire business rest 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. 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's no internet, no email, no centralized databases with easy global access. The main so this is going to sit on 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 it. 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 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 Gagosian. 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 can 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. But it allowed us to do something revolutionary every time an Amerex employee learns something useful about a buyer seller act buyer 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 in 80s. So take something 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. The red bull episode that I did episode 33. I think it's pretty wild that you know that business is going to make him. Yeah, it's now works between somewhere between like 20 and 40 billion dollars. He was paying himself before he died somewhere between 500 million dollars a year. He identified the opportunity from reading a magazine article. And I'm like, Hey, the richest guy in Japan, I think, who is the country makes these like energy tonics because there was no energy during market at the time. That's interesting. And that reading the article changed his life forever. Dietrich Mishis. I think it's how you say his name. But we see Brad Jacobs coming up with an idea to 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. I love that. And came across a report written by the top ranked analyst for environmental services. Ben, 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 boy 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 said 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 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. Landfill capacity was becoming precious because regulations were pushing small trash dumps out of business. So that's trend number one, trend number two. Intergration 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, kind of operating blind, waiting for this letter in the mail, the download prices. He sees a very similar trend, 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 use like a map and like push pins. So this is like this 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, some 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, which 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. 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 Wien Systems. This is how to get God mode, whatever 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. And one of the things that you were trying to unlock is something that was referred to as God mode a lot. Which essentially gives you like omnipresent like view of the entire world and like what you wanna do. You could think of what's happening here. This idea with the absolutely love that you did, he gets omnipresent data of his entire industry. It's almost like operating in God mode and video games when I was a kid. By 1987, nearly all of them, all the larger players in this industry is in there. We're running on software developed by a company called Wien 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 very straight forward business. So what does he do? I bought Wien Systems. He bought the software that all of the main players were using. Owning Wien 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 across the industry. This gave us a high level view of emerging market trends such as equipment gluts or shortages in the making. Making what is buying the software company allow him to do. We could now proactively adjust our pricing and asset management while the rest of the industry was being reactive. I'm going to 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. Okay, so then I love this story that comes from the chapter on how to do lots of high quality M&A without imploding. And it reminds me one of my favorite things that I bring up a lot that opportunity is a strange beast and that frequently appears after a loss. What can appear to be a terrible thing actually be, actually wants to be 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 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. Great financial crisis arrived. Private equity firms began welching on deals and Cerberus 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 break up 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 for $7 billion in 2007, fast forward, what, 15 years, something like that. 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 setting up feedback loops. This is something that Brad's gonna have in common with, just some 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. 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 at Les Schwab, Sam Walton and Jim Casey would say about this and 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 want to know what's actually happening. They all say differently, but the idea behind it's the same. They're like, your executives, the team you have around you, like they over time, they search for 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 penetrate that, oh, Bayes has did this too. I just remember he would work, he has everybody in Amazon, including himself, would work customer service like in the call centers and actually answer calls directly from customers. So anyways, 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 Waltzman going stores and he talked to people, the cashiers, he talked to the people at the front door, he talked to people unloading the trucks, like tell me what the hell is going on in this company. I want to 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 obvious. But like almost, what I realized too is like, almost at the end of the book, 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 requiring 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, you could probably just send this an email, one at a time. Just everybody in the company. Respond back to this email. All right, I think of all the interesting data and ideas that you 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. 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 this is not an option for me. And so it sounds weird that this came to mind, but my son's too young for this, but my daughter's not. And so like I solicit feedback from, from her. I think I've told you this before, but I will 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 what's, like when do I feel for who told me to do this? Like I asked her, 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? 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 as a, like an individual question, right? It's just cut right through 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. So I absolutely love that idea. And again, so let's the feedback from Pete. 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 they're like, there's speed. Oh, there's more speed. It just happens over and over again. And so I mentioned this earlier, it's a hilarious story where his main competitor, the CEO of Hertz, which was the largest, not only do they have the, like rental car company, but they're the, at the time they were the largest equipment rental chain. in the country as well. And Brad has this great line here. He's like, yeah. Yet 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 a simulation, come have lunch with the CEO. He's like, oh, maybe he's like trying to buy me out like what's happening? Let's just, let me go over and see what's up. And he was ridiculous and the no left myself is a losing strategy. Take your competitor out to lunch and ask him to slow down and essentially that's what he did. Like, you know, you made me change one of my tag lines. 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 want to 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 several years and their United Rentals is making like six times the amount of money. So that is a losing strategy to not take your competitor out to lunch and play. Please slow down. Please be nicer to me. No, foot on the gas and foot on their neck. I want to go back to the maxims that are in the acknowledgement because this 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 want to actually lose perfectionism and that is in hiring. The most important thing a CEO does is recruit great people. Yes. And 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. Wait, wait, wait. 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 in empty seat is less damaging than a poor fit. This entire section is about the difference between super talented people and what they bring to your company. So I love this. I'm going to read Steve Jobs was asked one time, what talent do you think you consistently brought to Apple? This is his answer. This was his answer, rather. And I'm going to read to you first because I think it sets up 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. 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 going to 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 plus 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 ragiously 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 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 CO trait, most closely correlated with organizational success is a high IQ. Double down on hiring 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 definition of dialectically. 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, 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. For 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 busy work. 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. And organization is like a party. You only want to invite people who bring the vibe up. And so he talks about, listen man, I have advice for you. This is how you're going to 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 going to have some, but you can't have C players. And his whole point is that if you hire B players, they're likely to hire C players. So you got to be very careful with the B players too. And it's just organization scales. You can't have all A players. It's something Steve Jobs said that Pixar, when he had 400 employees, it's the first team of all A players that he ever saw in his life. And he said, you know, Apple, I think that time had 3000 people. And he's like, it's a possible to have a team have a company with 3000 A players. So of course, you're going to have some B players, but you got to 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. I imagine this person coming into my office and quitting without warning. Just by imagining this scenario, I can immediately tell for my own inner response whether this person is an A, B or C player. If my first thought is I was going to fire this person sooner or later, so there'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 going to 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 because here's the thing. The reason you should overpay them is because 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 some fields, the best person is not twice as good. There are a hundred times as good. Think about when Steve Jobs came back to Apple. Apple bought next for almost a half a billion dollars. 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. Brad talks about this a lot of things that motivate people. But you're silly if you don't think compensation. Yeah, they have to believe in the mission. They have to work to do that to find it until she's 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 out of all the three companies that he currently chairs. Now, a single one of them shows up for work because they want to make money for Brad Jacobs. They come because they want to make money for themselves and their families. Money animates people everywhere. So he's talking about it. I have employees all over the world. This is not just a United States thing. That's why I've overpaid, quote unquote, almost every direct report I've 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 an 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. I can save money. I hate when people try to like obviously a huge 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 the vast majority of the people you nice study. Watch 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 same job. I can hire a B player player for $100,000 less. No, that's not $100,000 less. You lost millions, millions. And in Steve Chau's case, if they didn't hire him, what if they said they didn't offer him, I think what was it, $470? What was that deal? $470 million, something like that? They said, no, no, it's only about $200 million or whatever it is. They try to short-changing buy a couple hundred million. He doesn't come back to Apple. Apple is 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. And then I want to 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. 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 who's 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 hard working 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 flock to him. Steve is the face of the entrepreneurial spirit. I wrote this book with people like him in mind. People who want to work their tails off, who want to outsmart the competition, who want to put their customers on a pedestal and who want to make a lot of money for their families. The summer after eighth grade I attended the Rhode Island Governor 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 past 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 I read it all the way through and that keep it close at hands as a reference. The appendix has a bunch of thought experiments. There's this really interesting history of technology timeline because it's a huge influence in the way Brad approaches his business because of the mega trend in the universe. He's got interview questions for job candidates, recommended books, how to conduct meetings. The appendix is like full of. 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, 300 and 35 books down 1000 ago and I'll talk to you again soon.