You Can't Be Rich Without Volatility

0:01My thoughts here, Neil, everyone wants to get rich. We agree on that, right? Yeah. But you can't get rich without volatility. So recently this happened. We were negotiating a deal with an executive to join the team. Right. And it was like, you know, this person wanted equity. This person was complaining about having to make the trip up to drive to meet in person. Right. Was doing the math on that and was basically starting to nickel and dime a lot of things. And you should ask for what you what you think you deserve. Right. And so what had happened was we spent weeks and I had spent thousands on legal fees.

0:32Right. To get to get this deal done and come, you know, let's say recently. last minute this is an individual this is an individual and then basically what happened was this person was still wavering at the end right it's like well i feel like the job's not done i went to put in my notice today blah blah blah i was like you know what first i was like trying to convince this person to stay and then i slept on the next day i texted this person i was like you know what we're gonna go in a different direction i think you should stay there um and the whole thing here is like you know people it's like yes i get that you want to be rich, but you can't get rich without volatility, right?

1:06This person was talking about stability, safety, and all that. It's like, okay, well, you know, if you want stability and safety, when you invest in the S &P 500, like the reason it grows consistently like that is you're not taking a lot of risk, right? And same thing with bonds, right? But if you want to take a lot, like a lot of risk would be like betting on altcoins, right? Which is insane risk, but you get insane returns at the end of the day. And so I think in a lot of situations, people want to be rich, but it's like, everyone wants to win, but nobody wants to put in the work. They don't want to put in the effort.

1:34And they don't want downside. Yeah. They want downside protection in which there are no losses. And I was talking to an entrepreneur who took crazy risks and put all his money. He was at J.P. Morgan, I believe. And he now has an AI startup that's backed by Sequoia, if I'm not mistaken. He ended up putting all his money into NVIDIA and Tesla before both of them boomed. Yeah. And a lot of people are like, oh, yeah, that's great. he made a ton of money you know uh those are obvious choices of course nvidia is going to keep going up i'm like no he made the nvidia bet before the ai boom and the tesla bet before it was booming and at that point people were saying that he was crazy for putting all his money into two stocks and they're like you should put it in the s &p you can get great returns look at nvidia over the years and tesla it's electric car manufacturer other players are going to enter he took the risk and now he has a startup he doesn't need a salary he doesn't care for one but when i meet a lot of potential employees and entrepreneurs um a lot of them want the gains but they they want to mitigate the downside and in essence they understand that there's downside but they all say like oh yeah they're just trying to protect themselves and structure a deal where there's no downside for them.

2:58And it's just like, cool. So I take all the risks. You make all the money, whether I do bad or good. And if I do really good, you want even more money. But when I'm doing really bad, you still want to get paid market rate or above market rate. What's in it for me? Exactly. And think about it this way. The time, the years, the decades we put into business, the millions of dollars, when times don't go well in the business that we have to put back into the business, when it's time, when you might even have to bankrupt the business or whatever, right? When like people don't see that type of stuff.

3:26No. And they, and I just, I don't understand. This is why most people, they want to be rich, but they will never get rich because you can't handle volatility. I'm just telling you, we talked about this a couple of weeks ago. We just talked about in business, you're getting used to getting kicked in the nuts or punched in the face all the time. Right. That is the volatility. And if you can handle that, if you can be resilient, for sure, you will become rich. Yes, I agree. You'll become really rich. And this is just one of those things where it's just like, if you're interviewing someone and they're complaining about downside and they want tons of upside and they're not sure, I'm with you.

3:59Why hire those people? Move on. By the way, the team saw this earlier, too. The team's like, dude, this person's great, right? Very AI forward and all that. But it's like one of my people on the team said, like, but is this person willing to put in the work? And the moment that someone else is asking that question, other people are asking that question, that person, like one of our core values is to be unreasonably resilient, meaning that you don't just get punched in the face. You get punched in the face, knocked out, and then you get back up, right? Yes. Over and over. And you're willing to get punched in the face again and again, and you're okay with it.

4:29Yeah. Anyway, that was top of mind for me. I know we just had a pre-conversation that kind of triggered the thought around volatility. Yeah. Yeah. Dude, and the earlier conversation Eric and I were having is one way to grow your business or even your marketing is debt. So there's a lot of, I don't know, is it ClearBank is one of the lenders for advertising? Is it ClearBank? Yeah, with a C at the end. Bank with a C, right? B-A-N-C. It's something like that. It's like a husband-wife couple where they'll float your advertising. There's revenue-based financing companies too that look at your just overall accounts receivable.

5:08Nathan Blackcutt's company. Yeah. And in marketing, a lot of companies go that route. And Eric and I were talking before this call. I've talked to a lot of banks over the years. And some of the banks that we've talked to that can help float us and let us grow faster. because in the marketing world that people don't realize with ad agencies, rarely, but when this happens, it costs a lot of money. Some accounts you won't win unless you're floating their media. Media is very expensive to float. And sometimes you get paid interest on it. Sometimes you don't. And it's just funny on some banks will be like, we'll make you a personal guarantor.

5:53You guys can float the media. We'll float a little bit of it. and we'll cut off all your distributions, and you can't take any of the profits. And I'm like, so what's the downside for the bank? The downside for the bank is nothing, because based off of our cash flow and everything, they get their money back no matter what. What's the downside for us? Oh, they just restricted the business even more, and we can't grow anymore, and it's just a business now run by a bank. You know what's crazy too? But in this situation, I bet you they can get this deal done sometimes because the bank has leverage, right?

6:25Meaning that in a negotiating situation, If someone desperately needs the cash, they might be able to get it through, but you don't desperately need the cash, right? No, and I don't need it. And our cash flows are fine. And I was talking to Eric right before this and I told him, I'm like, dude, if I ever want to cheat money, I would just take a mortgage out on my house. I have a small mortgage, but for the value of my house, you know, for what my mortgage is, you know, I think I'm seven on, I don't know what the value that appraisal will come in, but let's call it 30. Maybe appraisal comes in lower, but I think the market rate is at least 30.

7:00You know, I can probably go up to 50 % leverage and amortize over 30 years, way cheaper. But guys, again, this is volatility. You gotta be able to stomach volatility. And that's what the game of business is. Yes. And you had to be willing to do stuff that others aren't. And I look at this in marketing too. If you look at a reason why a lot of startups are so successful with their marketing is because they're doing stuff that large corporations won't do or they're just playing the risk game where they don't want to take on any risk and they're legal stopping them. And a great example of this is when you look at a lot of the AI tools for marketing, a lot of the workflow tools, not just creating creatives and running ads, but also leveraging AI to do some of the work.

7:44So you're passing in data. Maybe some corporations don't want to pass in the data. Then having AI systems or software call your leads and then following up with them, all the ones that humans can't get a hold of. We're starting to do a lot of things like that. That's how you see growth. But a lot of larger organizations see that as risky. But that's the advantage of a startup. Yeah. By the way, speaking about volatility, when it comes to content creation, going back to Cluely again, I was watching some of their videos, right? So they're very good at being more, causing controversy with their videos, right?

8:15But their CMO, who's a 21-year-old guy, so they basically all live in a house, right? And so imagine you and I - clearly team lives in a house. I think the executives all live in a house and then they wake up in the offices right there and then people are there working, right? They'll sleep at like 2, 3 a.m. or whatever, wake up at like 11 a.m. and then you'll see the CEO sleeping and they'll like vlog the thing. It's like, I just woke up right now. I'm going to go find the CEO, right? So it's like the whole thing is like a spectacle. And then you see the engineer sleeping on the couch and everything.

8:41And then maybe at like 8 a.m. only one person is working. And so it's like entertainment to me at the end of the day. Yeah, that is entertainment. You have to have guts to do that. I would be super irritated at this age now. I probably would be okay with it at age 21, but I don't think I can stomach this at this age now. I think you would have done it at age 21. Yeah, 21 for sure. But you and I, you know, I'm 40, you're 39? 39, yeah. Eric and I just won't do it. We're too old. I like my life though. Yeah, I like my space. My life is fine, yeah. Yeah, I'm like, I can't do all this stuff. Yeah, yeah.

9:11By the way, so I don't know if you want to pick another one here, but I had a thought here on talking about, we talked about someone selling, you know, people selling their agencies, right? So let me ask you a question. Let me have a quick discussion here. Do you think agencies are a low status business in the business world, right? So for example, you have agency, you have like e-commerce, you have SaaS, right? Like you have crypto. Where do you think - You have all these AI companies. Yeah, AI companies. Where do you think agencies fall in that stack? Probably close to the bottom. I think it's at the bottom.

9:41There's a lot of other businesses, but yeah, I would say like when people look at furniture selling businesses, that's not that ugly or sexy. I think people look at agencies like selling couches, like as in a really ugly foreign business. I actually look up to selling couches. You know, like Nebraska Furniture Company, that one gal that I think she lived like 100 or so and she sold the business to Warren Buffett. So, yeah, I respect that. You and I look up to it, but I don't think most people look at furniture companies as sexy. You know, I told you I've tested this before. I've gone to conferences where I'll lead with agency and then sometimes I'll lead with software.

10:14Whenever I say agency, the wind gets sucked out of their sails and I look to have another conversation somewhere else. This is a long time ago. And then whenever I say, oh, yeah, you know, we do software. I'll test it, right? Like, oh, yeah, tell me what you do, right? And so I think a younger version of us, maybe I'm speaking about myself right now. It is low status, but I don't care now that I'm older. And also at the same time, I know it's not just agency. I know it's like you have software. I have software, too. Yeah, but it is low status. I see it people all the time. They look down and they think what I'm doing is just a waste of time.

10:43I don't think you've ever cared. I used to care a lot more when I was younger. What's interesting is if I have a conversation with people and they ask like, well, what do you do? I'm like, oh, if I tell them like I have a boring company, which I usually tell them, not boring like Elon's company, but like a boring business. Yeah. Like, oh, okay, what do you do? I'm like, dude, it's boring. We're in like 20 something countries. We have a thousand plus people. Oh, yeah, if you do that. And then I say, like, what is it? I'm like, oh, it's a marketing services company, like an agency and we have some software solutions.

11:13Yeah. They don't look down upon me as much. Well, of course. As much. They still a little bit. But you're smart about that. If you go global and we're in 20 different countries and then we got some software solution and you're very humble about it. Yeah. But if you lead with ad agency, it's like, oh, okay, I'm off to the next conversation. But most people know who you are too. It depends what country and region, but yes, or what category. I'm talking to people like it's entrepreneur. Sure. And I tend not to do that. But if I'm talking to someone that could be a potential customer or know someone, I will usually go with that spiel first because it makes them more likely to refer business and think of us in a better light than if I just started off with I have agency.

11:53Because they don't want to hear anything more after I say that. I think one thing that's underrated about Neil is Neil used to go to like Neil. I think I think you've been very intentional about the way you speak. Like you used to go to Toastmasters when you're younger. But I do think you think about how you say things. It's like you don't say I. It's like we do things a certain way, right? And it's like we're a global company. I do think you think about it. And I think it's important that you think through how you pitch yourself to people. One thing before we choose one of yours, because we're talking about agencies right now.

12:20Remember we talked about that one company that spent$12 million on a domain. They raised a lot of money from founders funds. So Peter Thiel, they raised from Saquon Barkley, the running back from Philadelphia Eagles. They just became an agency. No, they became an agency. So this is Icon. This is the AI ads company, right? So recently, someone just published what they said in Slack. It's like, hey, we were hiring a lot of internal creatives, and you don't have to use the SaaS anymore. We're just going to help you create the creatives. And everyone's like, dude, Peter Thiel and all these people invested in this money.

12:49They spent$12 million on the icon domain, and now they just became an agency. What do you think? Did they raise more money? No, but they raised a lot already. I don't think they raised more money. How much did they raise in the first place? I was looking at it yesterday, but I think they raised$25 and they spent$12 of it on a domain. It was just crazy. Yeah, but imagine if you spent that$12 on really smart people to help develop your product. It would have made way more money. Yeah, but now you have to kind of make this pivot. I think that means something they're doing isn't working out, in my opinion, because I don't see founders fund investing in an agency that's goals to automate.

13:27Maybe I'm wrong, but they try to invest in revolutionary stuff. They don't try to invest in agency type of stuff. The only time I see spending that much of your cash on a domain name is worth it is if you're rich like Dharmesh Shah. He bought the domain name, I believe it's chat.com. Chat.com. And he sold it to OpenAI for equity, made a killing. I don't know what he made. I think he got 16 on it. That's what I heard. 16x? No. So I think he bought that domain for like, call it 10. And then I think he sold it for like 16 in equity. I could be wrong. At a much lower valuation. So he's probably up at least three, four X's.

14:06They just opened it. I just raised another 300. At 300. I think they did seven or 8 billion that they just closed at 300. Yeah. And then they're at 13 billion ARR now. Yeah. They were 12. New York Times said they're closer to 13. And New York Times estimated that they'll, or they mentioned how they'll be probably close to 20 by the end of the year, which is ridiculous. Now the valuation of$300 is all starting to make sense. At first I was like, man, a few billion in revenue, giving them$100,$200. I'm like, ah, this is crazy. Little do I know. I always thought they could grow into it. It wouldn't make sense for us.

14:36Still, our business is a better bet. For us, no, but we also are investing in what we know because it's lower risk. Speaking of marketing in general and agencies, forget stock prices of Google, Meta, Amazon. I know Amazon just tanked. But when you look at their revenue, Amazon's ad business jumps 22 % year over year in a bad market to$15.7 billion. I'm assuming that's quarterly. If you look at Facebook and Google, they're doing extremely well on the ad side. And the search volume on Google is up. I know they're not the talk of the town these days. But what's interesting is most agencies have actually, the ones at scale are either declining or they're flat.

15:28So if you look at where marketing dollars are being spent, there's a restriction or contraction on services. There is more being spent on ad dollars for the platforms. and I will post this on in the next few days. We're not really seeing startups to mid-sized companies really spending a ton on AI marketing. And when I mean AI marketing, I'm not talking about optimizing for chat GPT or anything like that. I'm talking about you spending a ton of money on tools to automate and cut staff. We're not seeing that transition yet, but we are seeing companies just be more restrictive in this environment because people are just very pessimistic.

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18:30Dude, unemployment data, I think today it came out. it's constantly being revised negative. And so things aren't looking at us. And then people are saying in Vegas, tourism is like 11 % down. So I think starting to see some cracks. Dude, the employment numbers were so bad. So just to give people some context here, the June previously stated numbers were 147 ,000. And they ended up revising it to, what was it number? 14 ,000. And May, they just revised that as well. They originally said it was 125 ,000. They revised it to 19 ,000. So if you look here, this is a 90 plus percent correction. June was 90 plus percent.

19:15May was not as high percentage wise, but it was still a big difference. They're both the numbers were 100 plus thousand. And it's just like, how the heck is your data so off? because ADP released numbers beforehand before the government ended up releasing the numbers and ADP's numbers were doom and gloom and then the market's like, oh, this could cause them to cut and the Fed's like, no, our numbers are great. And then it's like - Dude, they have two dissenters. Now it's up to date. Today it's 75 % chance they're going to cut in September. The other day it was 45 % chance, right? They got a cut.

19:49That's my opinion. It's not a political podcast, guys. But I'll tell you what's good in the political realm. Triple H is in the White House. That's what's good. That's cool. The reason I think the government's going to have no choice is because of AI. You mean the Fed? Oh yeah, the Fed. Yeah, the Fed will have no choice is because with AI, I think jobs are going to get even worse. Because if you look at like the IBM, I was looking at your story on Instagram. You see it blew up. It blew up. I was looking at all the comments on people in HR getting fired and replaced with AI. So many of the comments were so happy and they're like, screw HR.

20:24I didn't expect that, that the company is so anti-HR. Yes. And I'm not anti-HR. I think we see utility with HR. There is utility with HR. It just has to be run right, just like any other organization. Well, I think if you're coming from an employee standpoint, if you think about HR, you're like, HR is next because HR is holding the line. They're usually there to fire people or put you on a pip or whatever. So most people, I think if you work for a company, you're not looking favorably upon HR. But if you run a company, there is utility with HR. but this is where I really see jobs being impacted like when you look at marketing we have an enterprise division which allows us to offer almost anything a corporation wants because they usually have budgets like when you're dealing with large corporations they'll all say they don't have money and yes you got to fight for that money but if they want to create a Super Bowl commercial and spend six or ten million dollars just on the creative side they can afford to do it when they're making 10 billion a year in profit.

21:19They may say, again, they don't have the budget, but when you have 10 billion a year in profit, you do have money. It's the question of, do you want to end up spending it? On our S &B side of our agency, it's really hard to do things like really full blown custom creatives, because when someone's spending 10, 20 grand a month on ads, they don't have, you know, another 10, 20 grand to just go spend on creatives every few months but with AI there's a lot of solutions out there Google has amazing solutions some people are leveraging their technology like arc and arc ads arc ads is pretty good it is pretty good yeah and I think it's like a hundred and something bucks a month for like 10 creatives I forgot the exact pricing on how it is don't quote me on it but you can now offer a lot of stuff to smaller businesses that you weren't able to before and you don't necessarily need to bad headcount for it.

22:15And I think, you know, when you look at marketing, people are like, oh, there's going to be a ton of jobs being cut. I don't know if there's going to be a ton of jobs being cut. I think we're going to actually see a shift in which people are just getting more done with the amount of people they have and the budgets they have. I think that's what we're seeing more of than actually the cuts, but that's leading to less people being hired in the future still. So here's a good setup for you. If you talk about the anthropic, how much they raised, it can lead next into my next topic, which actually covers what we're talking about right here.

22:50Yeah. So anthropic, and most people don't talk about anthropic because theirs is Claude. Their LLM is Claude. Yes. But people don't really talk about Claude that much. They talk more about ChatGPT, Perplexity, Copilot, and you got Gemini, and you got a few others. But I don't really hear are too many people talking about Claude. I'm assuming you agree with this statement. My entire week has been Claude, so it's a little different. Yeah, but most people are not talking about Claude, correct? It's ChatGVT. Yes. And very few people also talk about Grok, unless you're really heavily on Twitter. If you're super Team Elon, you talk about Grok a little bit.

23:24But even perplexity is not even an LLM, from what I see. Yeah, but you can use perplexity for a lot of similar things you can use ChatGVT for. It's good for research, yeah. But even then, a lot of people don't talk about it, and their usage is lower. Yeah. But here's what's interesting. They're raising money and their revenue is growing fast at a hundred plus billion dollar valuation, potentially led by Iconic. I believe the amount was five-ish billion. Raised five billion on 170? It was something like that. I have it written down. I just don't have the number in front of me. Oh, five billion.

23:56Yeah, 170. You're right. And when you look at that, a lot of marketers tend to forget or assume attention equals valuation. So as marketers, we look at a lot of these LLM platforms as like, oh, this is where we should focus. These are the ones that are worth the most, and this is what's getting mentioned. But for marketers, there's a lot more use, and you can do a lot of cool things with Claude that can actually help you become much more efficient as a marketer. But it may not be sexy from the standpoint that you can drive a lot of revenue from the aspect of generating visitors from Claude and a lot of revenue versus ChatGPT.