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

24:03Jesselson ran the largest commodity trading company in the world. And Mr. Jesselson took an interest in a young Brad Jacobs. And he actually mentored Brad. And the two would have lunch together all the time when Brad was in his starting, when Brad was in his 20s. And what's fascinating to me is like the bits of, you know, business wisdom that Brad learned during those lunches, Brad still uses to this day. And in his book, Brad said that the most important lesson that Mr. Jesselson, which was his most important business mentor taught him happened when 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.

24:37He says, at one lunch, I arrived burdened with problems that I began to unload on him. Mr. Justison listened 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 beget even bigger problems. If your initial reaction to a major setback is overwhelming frustration, that's counterproductive.

25:17You should be excited. Great. This is an opportunity for me to create a lot of value. If I can just figure out how to solve this problem, I'll be much closer to my goal. And this is one of my favorite things about entrepreneurs. I try to point out in all the books I read, you know, most of the people I get to build a list with, they're older than me, smarter than me, wealthier than me. And yet they're just like Mr. Jusselson was to a young Brad Jacobs. In my mind, when I think about this, there's a bunch of different examples. But, you know, one of my favorite books I talk about over and over again, it's episode 255.

25:48It's called The Fish That Ate the Whale about Sam Zemuri. 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, or actually the biggest fruit company, was this company called United Fruit. United Fruit was founded by this guy named Andrew Preston. And what is very common is when you have a 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. Juselson believed that a young Brad Jacobs had potential and was worth the investment of his time.

26:28And so Andrew Preston, this is one of my favorite quotes or paragraphs from the Fish to Eat the Whale. It says, when Andrew Preston, the president of United Fruit, visited Mobile, Alabama in 1903, he asked to meet Sam Zemurri, the Russian selling the ripes. Preston was about 57 years old at the time, and Sam Zemurri'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 Zamuri with admiration. He said the kid from Russia was closer in spirit to the banana pioneers than anyone else working.

27:08He's a risk taker, Preston explained. He's a thinker and he's a doer. Preston winds up buying. I think he invests like, I think he buys 25. He thought Zamuri was so talented. He's like, Oh, this is another me. He winds up buying, I think, like something like 25 % of his company. What was fascinating, and when Preston was alive and he was running United Fruit, he respected Zamuri. And then Preston dies, and you have these non -founders take over the company, and they looked at Zamuri with scorn. Instead of partnering with him, instead of helping him, they tried to compete against him. The executives underestimated the person that Preston respected.

27:46and 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 my stress on he's also what he does for younger talented people that younger entrepreneurs that he think are talented because there's something that Brad asks you to do when he goes to when you go to his house that has to do with dancing okay so I have friends that Brad has helped out and taken an interest in and they had told me about this before so when Brad mentions hey, come over here and let's do this. I go, oh, I know all about the dancing.

28:16And 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 takeaway 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 we're shocked at 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.

28:50He 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 of breakfast, right, he leads Patrick through a guided meditation. And I think this is the opposite of what most people try to do.

29:19They try to like present a certain act to the world. And I think the most important thing is like just be a human being, even in so -called professional settings. At breakfast, we talked a bunch about business, but I bet you it was probably 25 percent or less of the conversation. We talked, me and Brad talked a lot about our childhoods. We talked about this idea that you can always understand the son by the story of his father, the story of the father's bed and the son. That's true for me. That's true for Brad. Brad gave me great advice on marriage and what to expect when my kids are grown and they go away to college.

29:48The conversation went in all kinds of unexpected and unpredictable directions. And Brad is an eccentric guy, and I am too. And I like him even more because of that. You felt it was Brad being who Brad really is. And people love, I think the main takeaway that I always try to remind myself is like people love authenticity way more than they love perfection. There are no perfect human beings. 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.

30:23when when you especially because munger and zell were such public they had such public personas but you know you could go on youtube and watch them on stage and and and watch their interviews or you could hear them on a podcast and when you're with them in person that's exactly what you got both munger and zell were exactly that way they did not try to hide their eccentricities they embrace them and that's part of the reason that they had such a cult -like following and so So takeaway number six for me was don't hide my eccentricities, embrace them. I think I do this now, but I'm going to make sure it's a constant reminder.

30:56Just be who I really am, even if that person is imperfect. So number seven, relationships run the world and your reputation is everything. So there is a video of Warren Buffett you can see on YouTube. It's Warren Buffett in 1991. I think he's testifying before Congress. This is when he was having this issue with the Salern brothers, that big scandal. And he says something that I think is very powerful. And it's the advice that he was giving for not only people in Salern brothers, but he repeats this over and over again for everybody that's around him. He says, lose money for the firm and I will be understanding.

31:24Lose a shred of reputation for the firm and I will be ruthless. And in later instances, he says, you know, why is it so important? He 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 will act differently. And so I would take that idea from Warren Buffett. And I would tie it to this other idea that I read in a biography of David Ogilvie one time. The book is called The King of Madison Avenue and is written by a guy who worked with David Ogilvie for quite a while. And he has a line in there they call the David File.

31:59And 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 you see where I'm going with this. There is a Brad file and I'll explain that to you. So from the King of Madison Avenue, the person working for David Ogilvie 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.

32:35This is what David wrote, the only thing that can be said in favor of the layouts is that they are different. You could make a cow look different by removing the udder, but that cow would not produce results. That is the end of Olga B'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. OK, since this this happens when I make episodes about people that are alive, because since I made the episode about Brad's Brad's book, I've been on the receiving end of several Brad stories that are that are very unique.

33:15And just like David Ogilvie, just like brushing up against David Ogilvie, 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 idea, this reminds me of one of my favorite maxims, that is, opportunity handled well leads to more opportunity. Because of his track record, because of his reputation, because of the compounding of his relationships, Brad is now able to pursue opportunities that would have been impossible or inaccessible when he was just starting out as a 23 -year -old entrepreneur.

33:59And I think the important reminder is the long -term view is the right view. And just like Buffett said, we must never jeopardize our reputation or harm our long -term relationships for short -term gains. So takeaway number seven is relationships run the world and your reputation is everything. And so what I'm 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 findispodcast .com.

34:33If 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 Make 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 should have done myself. I've hired the wrong people. I've made strategic bets that didn't pay off.

35:06And yet, my teams and I have managed to create tens of billions of dollars of value for our shareholders. This book is about what I've learned from my blunders and how you can replicate our successes. I'm what's called a moneymaker. I've started five companies from scratch, seven if you include two spinoffs, and turned them all into billion -dollar or multi -billion -dollar enterprises. My teams and I have completed approximately 500 acquisitions. In total, these ventures have created hundreds of thousands of jobs and raised about $30 billion in outside capital. My career began in 1979 when I started a privately owned oil brokerage company called Amarex Oil Associates.

35:54I 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 Amorex 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.

36:39I called my new venture, United Waste Systems, and took it public in 1992. So, founded the company in 1989, takes it public in 92, is 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. dollars. United Waste taught me that I love working with outrageously talented people to deliver outsized returns for shareholders in public stock markets. So he sells United Waste in 1997. That same year, he says, I started a new company, United Rentals, to rent construction equipment for job sites. I took this venture public later that same year with a growth strategy that emphasized acquisitions from the start.

37:23Within 13 months, we had built the largest equipment rental company in the world. There's a hilarious story later in the book about a lunch that Brad had with the CEO of his major competitor in that industry. I'll get to it later on in the episode. Within 13 months, we had built the largest equipment rental company in the world. United Rental stock is a hundred bagger. The share price at inception was $3 .50 and it now trades at more than 100 times that price. In 2011, I was on to my next big thing, XPO Logistics. XPO was the seventh best performing stock in the Fortune 500 of the last decade.

38:04Its 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 XBO into three separate publicly traded companies as a value creation strategy. We spun off GXO, the largest contract logistics provider in the world, and RXO, a freight brokerage platform that runs on technology that we developed in -house. I currently chair all three companies and each business is helmed by a strong CEO. These experiences have allowed me to share thought experiments that can help you learn to think differently, which is an essential prerequisite to accomplishing big things.

38:47This book is a guide. If you have a burning passion to make enormous amounts of money in business or want to turbocharge your chances of success in sports, the arts, politics, philanthropy, or any part of your life, read on. That was an excerpt from the book I'm going to talk to you about today, which is How to Make a Few Billion Dollars, and it was written by Brad Jacobs. In addition to starting seven separate billion dollar companies, Brad also listens to founders. He sent me a very nice message saying that he was addicted to listening to these book reviews. And he was kind enough to send me an early copy of this book a few months ago.

39:23And I read it and wanted to 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,

39:52I want to read one more sentence, and I'm going to read to you this quote from Peter Thiel that popped to my mind when I got to this section of the book. I love that, what he said. All of them to a person have rearranged their brains to prevail at achieving big goals in turbulent environments where conventional thinking often fails. Making a few billion dollars doesn't just happen, but it's possible with intense focus and a willingness to transform how you use your mind. That is the first chapter. So I got to this section immediately when I read that one of my favorite quotes from Peter Thiel popped into my mind.

40:28And 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 going to talk about this outrageous thing that happened. And Brad winds up making about $4 billion buying back a bunch of his stock, even though bankers and advisors around him were saying, hey, no one's ever done something like this before.

41:04And his response was perfect because you could tell he was thinking from first principles. He's like, well, just because we were the first company to buy back such a high percentage of our stock in this situation doesn't mean it's a bad idea. And it turned out to be a phenomenal idea. So I like that he starts the book with this, where it's like you need to rearrange your brain to prevail at achieving big goals in turbulent environments where conventional thinking often fails. If Brad had, or another way to think about that, in this situation, which we'll cover later, if Brad had listened and adhered to conventional thinking, he'd be $4 billion, him and his company would be $4 billion poor.

41:34And so spread throughout the book, you're going to 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 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.

42:09Entrepreneurship is difficult and stressful, requires sound judgment, and you cannot make high quality decisions if you don't manage your inner monologue, your inner feelings. And I love this idea of expecting positive outcomes. Expect positive outcomes. Stop beating yourself up mentally. I have. The next time you catastrophize something that isn't that bad, understand that your reaction is a genetic survival trait that you inherited from your hunter -gatherer ancestors. The only time that I've ever felt truly lost was when I stepped down from United Rentals in 2007. So he's going to talk about, this is really this entire section is why understanding and controlling your mind is so important.

42:47for founders. And you and I have talked about this before. There's a great quote by Marc 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 dealmaker by inclination. Now I had no deal going, no industry sector where I could envision working my magic.

43:20And 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 going to use over and over again, something you and I have talked about over and over. comes from this 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.

43:59And it was incredible that Charlie hadn't read that book probably in like 15 years, but his recall, it was impeccable. Like told me, like essentially recited all of the facts that were in that book as if he had read it yesterday. But Henry Kaiser has this great quote in that biography that says problems are just opportunities and work clothes. And so I think it's a similar analogy to what he's saying here. It's like, yeah, everybody's gonna have negative internal chatter in your mind. Why don't we reframe that, use those negative thoughts as useful data rather than as objective reality. Back to Brad.

44:30Inevitably, the process of running a business will test your bias towards hope or fear, euphoria or terror is the way you and I talk about this. when I notice I'm feeling anxious about something, I ask, this is fantastic, I ask, what's the worst that can happen and how would I cope with it? And then he has another question he asks himself. If a friend had a similar worry, how would I advise them to handle it? So this idea of stepping outside of yourself, something I've tried to practice as well, step outside of yourself, it's your problem, pretend it's somebody else's problem, a friend, a loved one, even a competitor maybe.

45:00And so, okay, 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. 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 -learned lesson for me. I've become much happier in my middle age when I stop expecting unrealistic levels of perfection from myself and my family.

45:40I still struggle with this all the time. I beat myself up. I have a varied, I always say my internet monologue sounds a lot like David Goggins. If you ever heard his audio book, 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 middle age when I stopped expecting unrealistic levels of perfection from myself and my family, my friends, my coworkers, not to mention customers, vendors, and shareholders. 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.

46:09And you'll find that it's much easier to maintain your mental equilibrium as you pursue big goals. This goes over several pages. Try to summarize this for myself so I can remember in the future. Don't beat yourself up. Emotions blur judgment. Keep a positive mental attitude and stay calm. And one way that Brad does all of that is he's a big fan of thought experiments. The reason, 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 going to cover in the podcast that's in here. I think of this as what I would do is I'd read it straight through and then I'd keep it on a shelf or keep it on your desk and then use it as a reference.

46:48And 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 want to outline why those things are so important to him. He says, Albert Einstein was a consummate daydreamer. And then he preferred the term. It's German. I'm not even going to try to pronounce it.

47:20But it's daydreaming thought experiments. So he says, thought experiments are not limited to genius scientists, gifted artists, 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. materialize. I can't remember if I've already said this, but Brad was kind enough to invite me to the book launch party they 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.

47:59What 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 it. This is just a great personal vibe when you're like in person with him. And I talked to people that worked for him. They said the same thing. They like love him. They enjoy like the work environment that he's created. And the best source I know to experience like how Brad is, is I would listen to the Invest Like the Best episode that Brad did with my friend Patrick. It's episode 352 of Invest Like the Best. And Brad in that interview talks a lot about the importance of meditating.

48:33He's been meditating, I think, for over 50 years. And as he says right here in the book, he feels it's been a 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 restaurateur, his autobiography.

49:06And Brad's going to talk about his most important business mentor and the lesson that he taught Brad when Brad was in his 20s. I've had multiple business mentors over the years, but none have been more important than Ludwig Jesselson. Mr. Jesselson ran the largest commodity trading company in the world. I got to know him in my 20s when his company was a client of my oil brokerage business. Before long, we were having lunch regularly and he would share bits of business wisdom that have stayed with me ever since. At one memorable lunch, I arrived burdened. Remember, Brad's in his 20s at this point, okay?

49:40At one lunch, I arrived burdened with problems that I began to unload on him. Mr. Justelson listened carefully and waited until I had finished speaking. Then he put down his fork, turned to me, and 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. I'm going to put this book down and I'm going to go to where I have my highlights stored from Danny Meyer's book, which is called Setting the Table.

50:16It's in, if you have access to Founders Notes, I highly recommend going, searching for Setting the Table, and then reading all of them. It takes less than 10 minutes and it gives you a good overview or a reminder of the lessons that Danny Meyer was trying to teach you and I from his book. But he had a very similar experience. I'm pretty sure he was in his 20s at the time as well. He's having dinner with another older, more successful entrepreneur at the time, this guy named Stanley Marcus of the Neiman Marcus family. And it's remarkable. It's very almost dead on with what's happening with Brad when he was in his 20s when he's talking to Mr.

50:46Jesselson. And so Danny Meyer is kind of unloading his problems and his stresses to an older, wiser entrepreneur. He says, opening this new restaurant might be the worst mistake I've ever made. Stanley set his martini down. 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.

51:20Stanley's lesson reminded me of something my grandfather, Irving Harris, who was a famous, or not famous, successful entrepreneur as well. Stanley's lesson reminded me of something my grandfather Irving Harris had always told me, the definition of business as problems is exactly what Mr. Jesselson is telling a young Brad Jacobs. The definition of business as problems, his philosophy came down to a simple fact of business life. Success lies not in the elimination of problems, but in the art of creative, profitable problem solving. That's an excellent line too. Success lies not in the elimination of problems, but in the art of creative, profitable problem solving.

51:56The best companies are those that distinguish themselves by solving problems most effectively. The way the maxim I distilled that down so I could remember myself is that business is problems and great companies are just effective problem solving machines. As we're going to see, we'll continue on this page. 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. Jesselson. In that moment, I learned something invaluable. Problems are an asset, not something to avoid, but something to run towards.

52:30Big ambitions. That's so excellent. Not something to avoid, but something to run towards. You know what? Let me interrupt. Let me interrupt where I'm at. 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 are just opportunities in work clothes. Jeff Bezos, multiple books in the Everything Store, the first biography of Jeff Bezos written by Brad Stone. There's this interaction between one of Jeff and one of his employees. And he tells them some bad news, something that they need to improve on or whatever.

53:05And he goes, I brought him very bad news about our business. And for some reason, he got excited. Is that not exactly what Brad Jacobs is saying? Problems are an asset, not something to avoid, but something to run towards. Later on in, I think this was in Jeff's, one of Jeff Bezos's 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.

53:44translates 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 recommend. I've done, I think, two podcasts on that already. It's Jeff Bezos, all Jeff Bezos' shareholder letters and then transcripts of his best speeches. But I love, I reference that book all the time. It's exactly what Jeff is talking about there. He's like, oh, I get excited. Ooh, this is waste, good.

54:21This is incredibly energizing its potential years and years and years of improvements in our business. Very similar to what Brad Jacobs is telling us here. Big ambitions often beget even bigger problems. If your initial reaction to a major setback is overwhelming frustration, that is counterproductive. Instead, do this, great. This is an opportunity for me to create a lot of value. Is that not? the exact same idea that Bezos just told us in his shareholder letters. It's the same thing. It's exactly the same. Great. This is an opportunity for me to create a lot of value. If you can figure out how to solve this problem, if I, excuse me, if I can figure out how to solve this problem, I'll be much closer to my goal.

54:59In the four decades since that lunch with Mr. Josselson, 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 uh when i got to to talk to charlie munger he said same thing and it's you notice this um in his last i think the last published interview here he did or one of the last ones was with john colson uh founder of stripe interviewed him it's actually published on the best like the best feed too it's also obvious like uh 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 a once -in -a -lifetime experience I need 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 into 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 the absurd amount of value that you get you get almost half a century of wisdom distilled down at his book launch party he said this he's like i don't have another book in me i'm not writing another book i gave you all my ideas get buy it if you want it and uh but i just think it's it's it's uh incredible how you know everything i'm talking about this is three four pages and we see similarities in the way brad thinks that danny meyer thought that the guy from neiman marcus thought that jeff bezos thought that henry kaiser thought um that charlie munger thought i just love uh it excites me when all these ideas um connect very very fascinating moving on this is great he's got these great stories spread throughout the book and uh uh this is how to lose 500 million dollars so I want to go back actually before I get into how to lose 500 million dollars he's got a very unique uh acknowledgement segment section I 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 unusual and then what he did is like I he just made his acknowledgement section a list of maxims that he learned from other people, you have all these conversations and you distill down one of the main ideas.

57:37And it's like, he learned this from Michael Moritz, small amounts of capital can generate gigantic returns. From Ludwig Justelson, who we just talked, get the major trend right, which we'll go into, you know, dare to do new things. See the world for what it is, not what you wish it to be is one of the maxims in the 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 quiets the noise created by yesterday's decisions and today's wishful thinking.

58:11Here'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.

58:47Only 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 what you wish it to be. He's like, oh, this is going to be great. They're going to spend out, dole out the $600 billion. When that didn't happen, he didn't hold on to it. What does he call? Radical exception quiets the noise created by yesterday's decisions and today's wishful thinking.

59:26No 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. That was my summary of what's about to happen. So at the time, he's running XPO, 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 XPO. You know, she sells 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.

1:00:01And our stock price went into freefall 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.

1:00:38And we decided to buy back $2 billion worth of stock. So this is what I mentioned earlier, where the bankers are like, $2 billion, it's way too high. You can't do that. That's too high of a percentage of your market cap. No one's ever done something like that. And Brad's like, who cares? Just because we were the first company to buy back such a high percentage of our stock. Remember, it goes from the opening. It's like you have to that you can't rest on conventional wisdom is the way Brad put it. You have to rearrange your brain. The way Peter Thiel says is, hey, you should successful people find value in unexpected places.

1:01:07And they do so by thinking about business from first principles instead of formulas. There is no formula for the situation that Brad's dealing with. Or if there was, it'd be like, oh, buy a little bit. Buy like $100 million back. But you can't buy $2 billion. What are you, nuts? Just because we were the first company to buy back such a high percent of our stock in a similar situation didn't mean it was a bad idea. In fact, it was a once -in -a -lifetime opportunity. A couple of years later, those $2 billion of shares we bought back ended up being worth $6 billion, giving them a profit on that one transaction of $4 billion.

1:01:42Okay, moving on. 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 pieces of advice I've received from my mentor, Mr. Jesselson, is you can mess up a lot of things in business and still do well as long as you get the big trend right. I make sure I understand the major trends that could threaten the business or help it soar. I'm obsessive when learning about an industry. This part, this entire, I'd read the entire chapter. I'm going to go over the parts that are obviously most interesting to me.

1:02:17But it's another illustration of this idea that you and I speak about over and over again. You see it in the books. And it came from David Ogilvie. 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, the megatrend, is that technology is 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.

1:02:49I remember reading Andrew Carnegie's autobiography many years ago, I don't know, maybe four years ago. And he's talking about building businesses in the 1800s. And he was talking about building Carnegie Steel at the time. And I had summarized the advice he was giving in that book specifically around technology as this, and 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's a summary of Andrew Carnegie's ideas, which I think Brad, based on this chapter, would definitely agree with.

1:03:27If 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 at all the websites and social media of the major players and the up -and -comers in the industry. I watch lots of interviews with the CEOs. I use paid services like Bloomberg, AlphaSense, and Thomas Reuters. I look at analysis from sell -side and buy -side analysts.

1:03:59And I search this SEC database, which has large amounts of information on every publicly traded U .S. company, including IPO documents, financial reports and proxies. I scope out the most valuable industry conferences and I attend them. He goes to sell side conferences because they're an opportunity to meet management teams face to face and hear the questions investors are asking. Trade associations have a wealth of industry data. I interview experts. I seek out people who live and breathe the industry that I'm considering. This phase of the research is about getting face -to -face and listening intently.

1:04:33I love talking to CEOs. In addition to CEOs, I seek out investment bankers who are most active in the industry and who know it deeply. Just look at how much work and how much information is collected. It keeps going. So it says, in addition to CEOs, I seek out investment bankers who are most active in the industry and who know it deeply. I also talk to venture capital firms because they spend a lot of time looking at the big trends in different industries. I tap buy side institutions and successful fund managers who have battle scars from investing in that industry. Industry vendors keeps going.

1:05:06Industry vendors are also a good source. They have a sense of the trends that could drive changes in the market. And finally, or not finally, there's two more. Shareholder activists 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, 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.

1:05:39So he talks about Amorex 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 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 listened to that episode, it was fascinating because that's exactly what he did. He identified a market with valuable but hard to get data and then essentially made a personal treasure map that his entire business rests upon.

1:06:20So 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, Emrex. 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.

1:06:50The main, this is going to blow your mind. The main source of information about the price of oil was a newsletter that came in the mail. And so he talks about, he's like, listen, we're making verbal handshakes with clients in Europe and Asia for 50 and $75 million over the phone with nothing on paper for days. And so this next sentence is a description of the problem. The lack of timely information was a big problem for oil brokers. We made our money by matching buyers and sellers and taking a commission, just like Larry Gagosian. I could see that there was isolated pockets of valuable oil pricing data trapped all over the globe.

1:07:26And 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 their own crude version of the Internet, but it allowed us to do something revolutionary. Every time an AMRX employee learns something useful about a buyer or seller activity or the price of oil, they entered it into our database. Then we could share that information much more quickly with our brokers around the globe. So that process took hours, not days, which was close to instantaneous back then in the 70s and 80s.

1:08:04So it takes something that took days. Now it takes hours. We had created a way to obtain objective insights into global oil supply and demand and pricing trends. And then here is the trends that he identified when he set up United Waste Systems. The Red Bull episode that I did, episode 333, I think. It's pretty wild that, you know, that business is going to make him, you know, his network's between somewhere between like 20 and 40 million dollars. He was paying himself before he died somewhere between five hundred and eight million dollars a year. He identified the opportunity from reading a magazine article and like, hey, the richest guy in Japan, I think was the country, makes these like energy tonics because there was no energy drink market at the time.

1:08:44That's interesting. And that reading the article changed his life forever. Dietrich Mischus, I think is how you say his name. But we see Brad Jacobs coming up with an idea too. He's just like, well, the idea from United Waste Systems. This is fascinating. I remember vividly the moment the industry caught my attention. In 1989, I was reading Merrill Lynch research reports in bed on a lazy Sunday morning. I love that. And came across a report written by the top ranked analyst for environmental services then. The two largest companies in the waste industry at that time were each making about a half a billion dollars a year in profit.

1:09:16Remember, that's why I brought up the Red Bull guy. He's like, what? This guy is paying the most. He's making the most money in this entire country, and he sells energy tonics. And then Brad's sitting in bed reading research reports, right? And he's like, wait a minute. These guys are making half a billion dollars a year in profit in 1989. And I thought, how hard can it be to have trucks pick up trash, deposit 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.

1:09:50So that's trend number one. Trend number two, integration of hauling and disposal. This created an opportunity for end -to -end consolidation. I looked for a way to capitalize on both trends and found it in tech -based truck routing. So think about the entire oil industry kind of operating blind, waiting for this letter in the mail to tell him the prices. He sees a very similar trend or problem in the waste management business. Mom and pop owners were running trash collection companies by the seat of their pants and making money at it. Few companies were planning their truck routes methodically, much less using technology to do it.

1:10:24I think he says they use like a map and like push pins. It's like 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, so 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 with 20 trucks in three days. Our costs kept coming down as our processes improved and our profit margin grew significantly. That is the company that he sells for $2 .5 billion. Then he talks about where he gets his idea for his other company, United Rentals.

1:11:05I 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 because I absolutely love. While the rental industry overall was slow to computerize, the larger regional players were more tech savvy. by 1997 nearly all of them were running on software developed by a company called win systems this is how to get god mode and what i wrote to myself when i was a kid i played a lot of video games and you'd use like cheat codes like game genie and stuff like that uh and you could one of the things that you would try to unlock is something that was referred to as god mode a lot which essentially gives you like omnipresent uh like view of the entire world and like what you want to do you can think of what's happening here this this idea with i absolutely love that he did.

1:12:04He gets omnipresent data of his entire industry. It's almost like operating in God mode in video games when I was a kid. By 1987, nearly all of them, all the larger players in this industry he's in now, were running on software developed by a company called WinSystems. This told me that software was capable of managing hundreds of thousands of pieces of equipment flowing on and off job sites because they buy construction equipment and then they rent them out. It's a very straightforward business. So what does he do? I bought Wynn Systems. He bought the software that all of the main players were using.

1:12:38Owning Wynn 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 does 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 the industry, the rest of our competitors was being reactive.

1:13:21Okay. 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 of one of my favorite sayings that I bring up a lot, that opportunity is a strange beast and that it frequently appears after a loss. What can appear to be a terrible thing actually winds up being a blessing in disguise. And so he gives us some advice. He says, be sure to cover your flank. It's the stuff that comes out of left field that can take a deal down. In 2007, I sold United Rentals to the private equity firm Cerberus. No way I'm pronouncing that right.

1:13:55So 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 arrives, private equity firms began welching on deals and Cerebus 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 a $100 million breakup fee, decided not to seek another buyer and eventually got things righted.

1:14:41Today, 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 going to have in common with just the ones that come to the top of my mind. Les Schwab, Sam Walton of Walmart and Jim Casey of UPS.

1:15:23They all prioritize this. And what is this? It's getting data from frontline employees. They want data from the people that are actually interacting with the customers. They all talk about it in their biographies and autobiographies over and over again. So he says, when we buy a company, we discover that the frontline employees, middle managers, and even some senior executives have never been asked, what would you do to improve the company? And this is insane. You would think that the owners would want to know that. And so what Les Schwab, Sam Walton, and Jim Casey would say about this, in Jim Casey's case, anytime he was driving, he'd see a UPS truck.

1:15:58He'd pull over or have his driver pullover 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, over time, they start to filter information too much and they can give you an overly rosy or false positive view of what's actually happening in your company. And so the way you penetrate that... Oh, Bezos did this too. I just remembered he would work... He has everybody in Amazon, including himself, would work customer service in the call centers and actually answer calls directly from customers.

1:16:31So 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, go in stores and you talk to people, the cashiers, you talk to the people at the front door, you talk to the people unloading the trucks. It's 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. like almost what I realized too is like almost at the end of the book he has another uh he has two questions that I thought were genius that I want to add in this section too because I think it ties to what he's saying here and so what he would do it doesn't have to just be in a company you're acquiring to it could be in your existing company so he asks I love these questions he asked two questions what's your single best idea to improve our company what is your single best idea to improve our company?

1:17:25And 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 to everybody in the company. Respond back to this email. What is your single best idea to improve our company? Right? Think of all the interesting data and ideas that 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 uh you know if you're listening to this you're highly likely you're an obsessive person as well and yet i don't want i'm also a dad so like i'm not going to be a shit dad like it's just not an option for me and so it sounds weird that this came to mind but uh my son's too young for this but my daughter's not and so like i solicit feedback from her.

1:18:18I think I've told you this before, but I would literally go, you know, I'm not, like, I was just like, hey, how am I doing as a dad? And I ask questions like this, like, when do I feel, I forgot who told me to do this. I asked her, and I'll text her this too because 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 single best idea to improve our family is another way to think about that, right?

1:18:50Instead 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 because you could bury, the problem is like what I like about the idea of sending it out as a set, like an individual question, right? It just cuts straight to the simplicity, as opposed to putting it in, you know, maybe like a survey where there's like 10 or 12 other questions in there.

1:19:19I 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 what'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 then they're like, there's speed. Oh, there's more speed. It just happens over and over again. And so I mentioned this earlier, it's a hilarious story where his main competitor, the CEO of Hertz, which was the largest, not only did they have the rental car company, but at the time they were the largest equipment rental chain in the country as well.

1:19:57And Brad has this great line here. He's like, yeah, 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 seven years. United Rentals did that in 13 months. And so he gets this invitation, 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 there and see what's up. And it was ridiculous. And the no left myself was a losing strategy. Take your competitor out to lunch and ask him to slow down. And essentially, that's what he did. He's like, you know, you made me change one of my taglines.

1:20:30I 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 them 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. Do not take your competitor out to lunch and be like, please slow down. Please be nicer to me. No. Foot on the gas and foot on their neck.

1:21:02I 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, I made the point that aiming for perfection can be counterproductive. Good is usually good enough. But if you're going to break that rule, you break it for people. Make your hiring choices as perfect as they can be because there are few mistakes costlier than hiring the wrong person.

1:21:44This is so good. Way to remember this. An empty seat is less damaging than a poor fit. Make your hiring choices as perfect as they can be because there are few mistakes costlier than hiring the wrong person. An empty seat is less damaging than a poor fit. this entire section is about the difference between super talented people and what they bring 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 it to you first because I think it sets up what Brad's trying to teach us right here.

1:22:23He says, I think I've consistently figured out who the really smart people were to hang around with. You must find extraordinary people. The key observation is that in most things in life, the dynamic range between the average quality and best quality is at most two to one. Pick anything. It's gonna be basically two to one, right? But in the field that I was interested in, I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to one. Given that, you're well advised to go after the cream of the cream. You can build a team that pursues the A -plus players.

1:23:01A small team of A players can run circles around a giant team of B and C players. So then he's going to talk about how to build a outrageously talented team and what he feels is most valuable. Remember, Steve Jobs said, hey, I think one of the best things I did was I figured out who the really smart people were. I hung around them, tried to hire them. and built incredibly outrageously talented teams. Brad says, screening for superior intelligence eliminates 90 % of all candidates, so that's the first thing I look for. There's just no substitute for smarts. There's no substitute for brains. The CEO trait most closely correlated with organizational success is a high IQ.

1:23:43Double 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. 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.

1:24:20Can this person think dialectically? That is, are they capable of thinking from multiple perspectives and reconciling streams of information that seem to flow in different directions? And second, second question, are they capable of changing their opinion? Rigid thinkers at any level of intelligence are less valuable because they are mired in their own points of view. More advice. You should hire ambitious people who want to accomplish big things and make a lot of money. More advice. It is better to be slightly understaffed. I find that slightly understaffed teams are more focused and spend less time doing redundant busy work.

1:25:00Brad is big on vibes. I think he calls it the love vibe. And he says, my team and I spend a lot of other an 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 uh is that if you if you hire b players they're likely lead to hire C players. So you got to be very careful with the B players too.

1:25:37But 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 3 ,000 people. And he's like, it's impossible to have a team, have a company with 3 ,000 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.

1:26:11Just by imagining this scenario, I can immediately tell from my own inner response whether this person is an A, B, or C player. If my first thought is, I was going to fire this person sooner or later, so it's no big deal, that's a C player. If my reaction is, I don't like this, but I can live with it, the transition period might be a little bumpy, but we'll find somebody else, maybe even somebody better. We are talking about a B player. But if my reaction is an internal dialogue of panic and it sounds like we're so screwed, how did we get into this situation? There's no way we're going to find somebody as fantastic as this person.

1:26:43That 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. They're a hundred times as good. Think about when Steve Jobs came back to Apple. Apple bought Next for almost a half a billion dollars, right? The way to think about that is Apple paid half a billion dollars to rehire Steve Jobs and they got the deal of the century.

1:27:21It is almost impossible to overpay for talent. And Brad talks about there's 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 like what work to do. They have to find it intellectually challenging. They have to like their team. They also should be paid oodles and oodles of money. So he says there's 174 ,000 employees out of all the three companies that he currently chairs. Not 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.

1:27:50Money animates people everywhere. So he's talking about, it's like, I have employees all over the world. This is not just a United States thing. Money animates people everywhere. That's why I've overpaid, quote unquote, almost every direct report I've 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.

1:28:25Oh, this guy's good. He's an A player. Let me, I can save money. I hate when people try to like, obviously a huge, what's, what's the two biggest themes in the history of entrepreneurship, right? Focus and watch your costs. that's repeated over and over again by the vast majority of the people you and I study. Watching your costs does not count when you're doing talent. That's not, it's like, oh, I have a great A player, but I can hire for the same job. I can hire a B player for $100 ,000 less. No, that's not $100 ,000 less. You lost millions, millions. And in Steve Jobs' case, if they didn't hire him, what if they said they didn't offer him, I think, what was it, 470?

1:29:01What was that deal? 470 million, something like that? They said, no, no, it's only gonna be 200 million or whatever it is. they try to shortchange him by a couple hundred million he doesn't come back to Apple what's 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.

1:29:40And 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.

1:30:21I am extremely proud that our company could be counted on to create value. This is only possible because we operate in free markets where creating prosperity is a virtue. I want to share a personal experience I had with a small business owner whose work ethic and customer focus echo the value system that I instill in my own companies. This 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.

1:31:00Steve is a hardworking, take -pride -in -your -work entrepreneur who puts his customers first. He cares a great deal about doing his job the way it should be done. He told me his self -esteem goes up and down with his customer satisfaction scores. Naturally, he also measures his worth by how much money he's making to support his family. There's a fair amount of criticism being voiced about profit -seeking these days. Some people are embarrassed to talk about the importance of money, but Steve is totally comfortable with it. And in his pursuit of happy customers and a good living for his family, he built a successful business.

1:31:34As a result, customers flocked to him. Steve is the face of the entrepreneurial spirit. I wrote this book with people like him in mind. People who 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's School for the Gifted in Art and Music, a summer enrichment program for kids who'd been nominated by their schools. I wasn't sure what to expect. On the first night, I was captivated by a speech given by one of the leaders.

1:32:09I 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.

1:32:50We have it in our own hands to either make life meaningful or just pass time until we die. That's up to us. I hope you're inspired to run hard at making a few billion dollars or achieving some other big dream. And I wish you the exhilaration of seeing it through to success. and that is where I'll leave it. Highly, highly, highly recommend buying the book. As I said before, I really do think it's a reference. I'd read it through all the way, I'd read it all the way through and then I'd keep it close at hand as a reference. The appendix has a bunch of thought experiments. There's this really interesting history of technology timeline because that's a huge influence in the way Brad approaches his business.

1:33:30He calls it the megatrend 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, 335 books down, 1 ,000 to go. And I'll talk to you again soon.