#366 Mr. Beast Leaked Memo

0:00A few months ago, I got to spend seven hours over two days with John Mackey, the founder of Whole Foods. And it was during one of our conversations that John Mackey told me one of the craziest things that anyone has ever said about the podcast. By the time we had met, he'd already listened to over 100 episodes. And he said that if founders had existed when he was younger, Whole Foods would still be an independent company. That since the podcast and all of history's greatest entrepreneurs constantly emphasize the importance of controlling expenses, he would have put more of a priority on it. especially during good times.

0:29It is natural for a company and for human nature to not watch their costs as closely because everything else is going so well. The importance of that idea was noticed over 150 years ago by Andrew Carnegie. He would go around repeating this mantra. He would say, profits and prices were cyclical, subject to any number of transient forces of the marketplace. Costs, however, could be strictly controlled and any savings achieved in costs were permanent. This is something I was talking about with my friend Eric, who's the co -founder and CEO of Ramp. Ramp is now a partner of this podcast. I've gotten to know all the co -founders of Ramp and I've spent a ton of time with them over the last year or two.

1:03They all listened to the podcast and they picked up on the fact that the main theme from the podcast is on the importance of watching your costs and controlling your spend and how doing so gives you a massive competitive advantage. That is a main theme for Ramp. The reason Ramp exists is to give you everything you need to control your spend. Ramp gives you everything you need to control your costs. Ramp gives you easy to use corporate cards for your entire team, automated expense reporting, and cost control. Those two words, cost control. There's a line in Andrew Carnegie's biography that says, cost control became nearly an obsession.

1:36Carnegie is not alone with that obsession. In fact, one other thing that John Mackey told me, which was really surprising, he talked about the role that Walmart played in Whole Foods success. That potential competitors to Whole Foods tried to compete first with Walmart. And they found that it was impossible to do so. Here's what Sam Walton said in his autobiography. Our money was made by controlling expenses. You can make a lot of different mistakes and still recover if you run an efficient operation, or you can be brilliant and still go out of business if you're too inefficient. Ramp helps you run an efficient organization.

2:08Ramp is everything you need to control spend and optimize your financial operations all on a single platform. Ramp's website is incredible. I hope you go check it out. Make history's greatest entrepreneurs proud by going to ramp .com to learn how they can help your business control costs. That is ramp .com. I'm usually very reluctant to make an episode about a young founder that hopefully has decades left in their career, but I made an exception for this leaked memo, which is called how to succeed in Mr. Beast's production. And I really, there's two primary reasons I wanted to make this episode.

2:41One, I know Jimmy, he listens to this podcast. We spent a bunch of time talking about the ideas found on the podcast, found from the life and work of history -based entrepreneurs and all these biographies. I also flew and visited his headquarters, Beast headquarters, with my friend Rick Gerson. So Rick has invested in Jimmy's company, and Rick and I spent seven straight hours with Jimmy. We got to see his entire operation. We sat in on meetings with his top team. We talked to his CFO. and I would say we got a very intense download of how Jimmy thinks about YouTube and how he thinks about the business empire that he is building and the business empire that he wants to build.

3:20The second reason I wanted to make this episode is because I devoured the memo. And from the very first page, it's obvious how a lot of the ideas contained in this memo will relate to the biographies that you and I study every week. And so I printed out the memo and I went through it just like I do all the biographies, really the way I read anything. So it starts off, he says, hi, I'm Jimmy. And as the team is growing larger, I no longer get to spend as much time with everyone as I used to. The first dozen employees had unfiltered and unlimited access to me to learn as much as they could about my vision and what I wanted.

3:51Sadly, you don't have that luxury. So I thought it would be useful to try to brain dump as much as I can into this silly little book to give new people and to help bring them up to speed on everything we've learned over the past decade with this channel. We've been through a lot and chances are most of the problems you face we've dealt with. So I genuinely believe that if you intently read and understand the knowledge here, you'll be much better set up for success. So right from the very beginning, when he's like, hey, this stuff may be new to you, but we have a ton of experience and likely the problems that you're encountering are not novel.

4:25We can explain what you're likely to run into and how to solve them. So this was my exact experience when I talked to Sam Zell, when I had lunch with him, when I had dinner with Charlie Munger. they had entire historical databases of companies and industries and all these examples from 60 to 70 years of experience of building companies of studying companies by the time i met them there's probably not a single novel problem that they have not seen in the past there was a great line from last week's episode on nick sleep's partnership letters that talks about this you know him doing all this thinking spending all this time trying to think through problems he arrives at a conclusion and realize wait i'm buff to figure this out 50 years ago he says as a young man, there's something slightly depressing about thinking things through for a while, arriving at a somewhat reasoned conclusion, only to find that others have been there before you and years earlier.

5:12In some respects, we are 50 years behind Buffett. And I think these two lines that Jimmy wrote, we've been through a lot and chances are most of the problems you face we've dealt with. So I genuinely believe if you actually read and understand the knowledge here, you'll be much better set up for success. I think that's why you find in people that reach the top of the profession, they have this historical database they can draw from in their head. It's exactly why Sam Zell and Charlie Munger spent so much time reading and studying history. And so back to Jimmy says, this is not a rule book. I need to kick this thing off by saying the purpose of this is not to give you a bunch of rules to follow.

5:43What we do is complex and changes based on the situation. I need you to repeat this in your head three times. I will apply everything I read with a grain of salt. This is not an inclusive list of everything. I hope this inspires you with questions and to come to us to learn more. I could make a separate book for creative, a separate book for production, a separate book for editors, etc. But I think that's dumb. Everything we do here is interconnected. And the more you understand about what others are doing and trying to accomplish, the better setup for success you will be. I advise everyone to read this in its entirety.

6:16A good example of this is James Warren. He understands every single part of this company at a deep level and as a result can make decisions faster than anyone else. The stuff you will be reading about, he knows like the back of his hand. I've seen a team of five people work on a project for a week just to give up and James solve it in 30 minutes. That shows the power that comes when you understand everything in this book deeply. So I'll pause and interrupt myself there so that there's something that happens over and over again. My favorite line on this comes from Sam Zamuri from the book, The Fish That Ate the Whale.

6:46He says, if you know your business from A to Z, there's no problem you can't solve. And in addition to that line from Sam Zamuri, I had a bunch of notes around just this one section on James Warren, this idea that he understands every single part of the company at a deep level and as a result can make decisions faster than anyone else. You can have a team of five that can fail to solve a problem over a week, and he solves it in 30 minutes. In Sam Zell's autobiography, he talks about one of the most important relationships that he ever made. It was with this extremely famous and wealthy family that's in Chicago.

7:14It's the Pritzker family. And Jay Pritzker, I think is close to 19 or 20 years older than Sam Zell, serves as almost like a friend and a mentor to him for a very long time and teaches him a lot. In fact, in the autobiography, Sam Zell writes that Jay Pritzker was the smartest financial guy he ever met. And so one of the things that Sam Zell said that he learned from Jay Pritzker that I've never forgotten, even though I read the book, you know, over two years ago, I think, is he says that Jay taught me to use simplicity as a strategy. He had an uncanny ability to grasp an extremely complex situation and immediately locate the weakness.

7:48He always said that if there were 12 steps in a deal, the whole thing depended on just one of them. The others would either work themselves out or were less important. And Sam said that Jay was able to identify the most important part extremely fast. It reminds me of what Buffett said about Munger, that he says, Charlie's got the best 30 -second mind in the world. If I call him and describe a problem to him, any kind of a situation, he gets to the essence of it immediately. I think that's exactly what Jimmy is describing, the talent that James has and the importance of knowing as much as you can and as deep as you can about every single aspect of your business.

8:26I think this goes back to what Nick Sleep wrote in his investment letters. One of his favorite quotes was that the art of being wise is the art of knowing what to overlook. You bring a deal to Jay Pritzker, you say, here's 10 important things. He's like, bullshit. There's the one important thing. Solve that and everything else falls in line. And so back to this, Jimmy ends this section with very important advice. The more you know about why we do things and what we were trying to accomplish, the better off we will be. The next section is what is your goal here? Your goal here is to make the best YouTube videos possible.

8:56That's the number one goal of this production company. It's not to make the best produced videos, not to make the funniest videos, not to make the best looking videos, not the highest quality videos. It's to make the best YouTube videos possible. Everything we want will come if we strive for that. This sounds obvious, but after six months in the weeds, a lot of people tend to forget what we are actually trying to achieve here. So I think the best thing to do here is look at this paragraph through the lens of what you and I talked about all the way back on episode 360. 60, Robert Kierlin. Bob Kierlin is the founder of Fastenal.

9:28He wrote this little 98 -page book that's excessively hard to find. And Bob's entire thesis, he's got one idea in that book. And his idea is that the leader of a company, leader of an organization, they have to maintain commitment to the organization's common goal. Every single person in your organization should know the organization's common goal. It should be repeated over and over again. It is very natural. He talks about in the book that you'll drift from you overcomplicate things. And then the leader's job is said, no, no, no, we got to get back on track. We got to go back to our commitment to this shared common goal.

9:59And so in Bob Kearland's case, his common goal was growth through customer service. In Jimmy's case, it's we will make the best YouTube videos possible. And if we do that, everything we will want will come to us if we strive for that. And in many cases, your employees will respond to that. There's a book that I've read three times that I absolutely love. It's called Creative Selection. It's episode 281, which I think I titled Working with Steve Jobs, because that book was written by a programmer that demoed multiple times and worked for Steve for years. And he has a line in that book that I think is very important to why it's so beneficial to make your thinking as clearly as possible.

10:34So it makes you easy to interface with. And for Steve, he did it in three words, insanely great products. Do you want to build insanely great products? Come with me. If you don't, this isn't the place for you. And so in that book, Creative Selection, the author Ken Kosciano describes what it's like to be on the receiving end of this. Steve Jobs provided his single -minded focus on making great products and his vision motivated me. Okay, so the next section is I don't care how traditional media does things. This is not Hollywood and I do not want it to be Hollywood. And if that sentence is a turnoff to you, then you're probably at the wrong job.

11:06I genuinely mean that. YouTube is the future and I believe with every fiber of my body, it's going to keep growing. So I want to pause it right there. when I got to this section, I was thinking about one of my favorite things that I've studied and learned or watched and read in the last month is that video where Lee Lu, he goes to Columbia Business School. It's like 17 minutes long. He just lights them up. He is essentially disgusted at their lack of dedication and their lack of commitment and work ethic. Towards the end of that video, Lee Lu says, all of my employees never went to business school, never worked for an established management firm.

11:40Some of them never even had accounting. I found it easier to train them than somebody who did. This is something that reoccurs a lot in these biographies that the founders find that it's better to have no experience than bad experience. Better to have no habits than bad habits. And so Jimmy is saying this is not Hollywood. I don't want it to be Hollywood. He believes that YouTube is the future. And he says, I believe with every fiber of my body that's going to keep growing. 99 % of movies or TV shows would flop on YouTube. On top of that, they would be wildly unprofitable. Have no flexibility in long lead times that can't adapt to trends.

12:13You need to be nimble and produce content our way, not the way you were taught before. If you want the highest probability of success, I beg you to learn why we do what we do at a deep level before you try to fix anything. And he puts fix in quotation marks. We've done countless videos and invested hundreds of thousands of hours collectively building how we do things. It's not perfect, but we have a reason for how we do most stuff, and it's probably a decent one. And then he moves on to this next section, and he says, The amount of hours you work is irrelevant. Recall the story about James solving a problem in 30 minutes that a team of five couldn't in a week.

12:48In that example, does it really matter how many hours they worked? Obviously, we want grinders that put in the hours and love you guys to death that do, but at the end of the day, you will be judged on results, not hours. We are a results -based company. Get shit done and move the goalpost. And then Jimmy makes it very clear the kind of people that he wants working with him. I only want A players. You're either an A player, B player, or C player. There's only room in this company for A players. A players are obsessive. They learn from mistakes. They're coachable, intelligent. They don't make excuses.

13:24They believe in YouTube. They see the value of this company and are in the best in the goddamn world at their job. B players are new people. They need to be trained into A players. And C players are just average employees. They aren't exceptional. They aren't obsessive about learning. C players are poisonous and should be transitioned to a different company immediately. I think one of the companies that had the largest collections of A players in the early days was PayPal. If you read that book that my friend Jimmy Sonny wrote about the history of PayPal, it's called The Founders. There's a quote in there from Max Levchin.

13:57And he was talking about the fact that PayPal prioritized speed over everything else except in one area, which is recruiting and hiring. And so Max would repeat this mantra over and over again because it says, Levchin kept the bar for talent exceedingly high, even if that came at the expense of speedy staffing. Max kept repeating, A's hire A's, B's hire C's. So the first B you hire takes the whole company down. And one thing they did in the early days is that they mandated that every single potential prospect would have to meet every single member of the team. And so back to this, I spent basically five years of my life locked in a room studying virality on YouTube.

14:36Some days, me and some other nerds would spend 20 hours straight studying the most minor thing. And the result of those probably 20 ,000 to 30 ,000 hours of studying is I'd say I have a good grasp on what makes YouTube videos do well. and so because this memo was originally meant just to be read by people that are working in MrBeast production it's going to talk about things that I'm going to omit if you're interested in making videos he's going to talk about you know click -through rate average view duration average view percentage I'm obviously going to skip over that because I want to get to one of the most interesting things that he says and he says this a few times and I think this is a really great idea and so he's talking about something that's happening inside a video we're going to skip over that but this is the main idea he says another way to look at this is it's a segment that only Mr.

15:19Beast can do this. The emphasis that Jimmy is placing on doing things that only he can do, things that only his team can do, that is straight from Steve Jobs, that is straight from Edwin Land. Edwin Land has this motto. He says, my motto, don't do anything that someone else can do. That is one of the most important ideas that I've ever learned from all the reading for the podcast. Don't do anything that someone else can do. And a few pages later, Jimmy is going to give an example of that. We offered someone $500 ,000 that they could live in a circle in a field for 100 days. And instead of starting with his house in the circle that he would live in, we bring the house in on a crane 30 seconds into the video.

15:55Why? Because who the fuck else on YouTube can do that? The impression that leaves on the viewer is invaluable to us. Anytime we do something that no other creator can do that separates us in their mind and makes our videos more special to them. You cannot track the wow factor, but I can describe it. Anything that no other YouTuber can do. And so when I got to this part, I immediately thought of a story that I read in a biography of Larry Ellison. The biography is called The Billionaire and the Mechanic. And so Larry Ellison is obviously an extreme winner. He's ruthlessly competitive. And so the book is about him trying to win the America's Cup race.

16:33And in the book, Larry is talking to his sailing team about other sailing teams. And he has this idea to build this giant, what he calls a hard wing. all the other competitors are using these soft main sales. And so Larry is looking for essentially what Edwin Land said, what Jimmy's saying right here is like, what can we do that no one else can do? And so he says, Larry went on. I know that most people think trying to build a hard wing of this size is crazy, but that's the beauty of the idea. The other side isn't trying to build one. So we'll have a wing and they won't. And the note I left on that section when I first read it is a great summary of this.

17:06If we can do something really hard, we won't have any competition. Okay, so the next chapter, he gets into the actual creating of the content. I would summarize this entire section, and this is where I have tons of notes. I might have more notes than it's actually words on the page. The good ones, no more. That was a line from David Ogilvie. When he says the good ones, no more. He's talking about advertising agencies. But you see it with literally every single profession on the planet. And so let me read what Jimmy says first. He says, I want to pass on things I see new people typically fail at.

17:35And in general, what I want. Our videos are hard and they're only going to get harder. This is why I want the best people in the world and people who are obsessed with YouTube. I want you to be obsessed with YouTube. Get rid of Netflix and Hulu and watch tons of YouTube. It will, without a doubt in my mind, make you more successful here. The more invested you are in the world of YouTube, the more you'll understand how we can stand out and be more original, what we could be doing better, etc. You should also really try to watch every Mr. Beast video on all the channels. This sounds obvious, but I've asked multiple people this week what they thought about last week's gaming video and not a single person had seen it.

18:19What he wants and the people that he's working with, what he wants there. It's really what is Ogilvy's describing when he says the good ones no more. This comes up over and over again. Think about the film, all the filmmakers I did, Tarantino, Spielberg. They have entire databases of the history of film in their head. they will literally watch some of their favorite movies 50, 100 different times. There's ideas that they learned in like 1975 that they didn't use in their own movie till 20 years later. There's countless examples of this in the biographies that I read and in the episodes I make.

18:52Think about the early days of Microsoft. One of my favorite all -time biographies is of a young Bill Gates. It's called Hard Drive. The book ends when he's like 35 years old. This is a description of Bill Gates when he's in his 20s. If you talk to Bill about any software company or any hardware company, there's a very high probability that he will be able to tell you who the CEO is, what their revenues were last year, what they're currently working on, and what the problems are with their products. He's very, very knowledgeable, and he prides himself on knowing what's going on in his industry.

19:20Here's another example from one of Edwin Land's biographies, the fact that he knew he was going to dedicate his life to the science of light. He was like 12 when he was doing this. It says, Land began to read about optical science and discovered the textbook, Physical Optics, by Robert Wood, who was a professor of physics at John Hopkins University. Wood was a great experimenter of great ingenuity in the areas of optics, light, electricity, and photography, which is obviously what is what Edwin Land dedicated his life to. Land slept with Wood's book under his pillow and read it nightly in the way that our forefathers read the Bible.

19:53A few years into the future, Edwin Land's going to go to Harvard, go to the library and read every single book about light in the Harvard library. Then once he reaches the end, drops out, moves to New York and does the exact same thing with the New York Public Library. You see this absolute obsession with collecting as much information as possible over in Oregon. John D. Rockefeller, before he started his own business, he works for Hewlett and Tuttle. And so he's a bookkeeper and an office boy for them. He's very young. Look what he does. It says, A fascination with business that can only be called a passion held him to the office.

20:24Figures in the ledgers were to him like words to a poet. The yearly accounting books resembled volumes of history. I used to go over the old books, he said. And soon he read every single accounting book for the entire history, going back to the entire history of the company. This is the end result of that. And soon he knew more about the firm than Hewlett did and more about the commission business past and present than anyone else in Cleveland. There's a ton of examples in Steve Jobs' biographies of him knowing the entire history of Silicon Valley, knowing the companies, knowing the founders. In many cases, if the founders were alive, he'd go build relationships with them.

21:02But he would also study the great work from the past. He could tell you how the work he was doing on the Macintosh related to Alexander Graham Bell's work on the telephone. And I want to bring that up as we go into the next section, because I think a lot of what Jimmy's writing about, it's like, this is effort. This is caring. This is passion. I don't know if you can teach this. My personal viewpoint on this is what Jeff Bezos said. People don't have ideas. Ideas have people. So he continues, on top of learning from watching YouTube, I'd love you to read the book, The Goal. I used to make everyone read it.

21:32I know bottlenecks may seem obvious, but just not knowing and understanding something as simple as bottlenecks has fucked tons of videos. And so he gives some examples of mistakes made in the past and how to avoid them. let's say you're in production and a video you're assigned to is put up 45 days out. A lot of things need to happen before you can start working on it. The big things would probably be a thumbnail sketch and creative on your team to write the video. Do not just go to them and say, I need creative. Let me know when it's done. And I need a thumbnail. Let me know when it's done. This is what most people do.

22:03And it's one of the reasons why we fail so much. I want you to look them in the eye and tell them that they are the bottleneck and take it a step further and explain why they are the bottlenecks so you both are on the same page. Tyler, you are my bottleneck. I have 45 days to make this video happen and I cannot begin to work on it until I know what the contents of the video is. I need you to confirm you understand this is important and we need to set a date on when the creative will be done. Now let's say Tyler and you agree that it will be done in five days. You don't get to set a reminder for five days and not talk to him for five days.