3 Things You Need To Outperform 99% Of Entrepreneurs

27:59Wander is a place where you can go rent beautiful luxury vacation experiences. I'm booking one right now, actually. I have my assistant working on it this morning. So if you go to Wander, they're doing a special deal for MFM people, which is that if you go to wander.com slash MFM, you download their app, sign up. You don't have to book a vacation or anything. You are automatically entered into a luxury vacation getaway on behalf of us. And so they are going to be giving away a stay to one listener, which is amazing. Your odds are actually pretty good. This podcast is not that popular. It could be you.

28:27There's maybe one in a hundred chance. Who knows? So go ahead, download the app and enter to win. And if you download the app, you'll also get $300 off your next stay. So you get a discount and you get into the giveaway. But check out Wander. Dude, I was looking at some of these properties. The problem I have with Wander, I got a bone to pick with Wander, which is the pictures are so good that I started booking vacations to places I don't even want to go. Normally, you're like, I pick a city and then let me find a place to stay. here I went and I was like dude this house is sick I guess I'm going to Naples like where am I going I don't know like I'm going to Florida now I wasn't even trying to go to Florida and so well they're setting they're setting expectations so high so for example have you ever seen um have you ever seen like people who take pictures of the pyramids and then they zoom out and there's like hot dog vendors and there's like you know what I mean Instagram versus reality type of thing like these photos are so freaking good if they zoom out is there gonna be like a trailer right next to the home like how are these so no dude i've had people who use these for like corporate off sites because like some of these places are pretty baller so they they use it to like do a there's like one in sonoma i know my friends did for a corporate off site and they were like no it was sick it was amazing um there might there has to be i mean these photos look so good that there has to be some version of like shoot for the stars and you still land on the moon type of thing But yeah, if it's anywhere near as good as it looks, I'm very excited.

29:54You have on this document, the difference between running a business for growth versus EBITDA versus cashflow. I'm interested. You got my attention. Yeah, this is a CEO school, tactical session. When you were running the hustle, did you, obviously all of these things are good. You want growth, you want EBITDA, you want cashflow. The problem is when you want three things equally, you usually get none. So generally in any business at any point in time tends to be some order of priority. When you were at the hustle, which of these did you focus on? And was there ever a shift in, oh, now we're focusing on this instead of this?

30:34I didn't run the business long enough. We sold like four and a half years in to make the shift. But for the longest time, it was revenue was the number one priority, followed by cash flow, followed by profit. And so what I wanted to do was double revenue every year. So I think we went from like 500 ,000 in revenue to 2.2 to like 5 to 12 or something like that. And we didn't make a lot of profit along the way. I think the year we sold, we did maybe a million in profit, but our cash flow was high. So I was able to add like$2 million to our bank account. And explain to somebody who's like, wait, how do you have a million dollars of profit, 2 million of cash flow?

31:13How does that work in a business like The Hustle? So I'll give you guys a really easy example. So we had this thing called Trends. It was$300 a year. But for the sake of this conversation, let's just say it was$1 ,200 a year. And if a customer paid up front, let's say they paid me on June 1st, $1 ,200 for an annual subscription. My cash flow was$1 ,200. That's how much my business accepted into our bank account. But the way that Gap Accounting, generally accepted principles of accounting, the way that works is that$1 ,200 was really only$100 in June,$100 in July, and$100 each month. And so my revenue was only$100 per month that they stayed with me, even though I collected$1 ,200.

31:55Thus, my profit, let's just say that it cost me$75 to produce the content, my profit was$100 minus$75. So 25 bucks. Exactly. And so I'm in a situation right now. I have a business that my e-com business where We've been running it for maybe four years now. And it's doing really well. It's been... I was only growth-focused. So I was like you. I wanted to double or more every year. And so we did. We went from... Which the reason being is typically, not always, typically, it's harder to grow revenue, but it's easier to, once revenue is grown, to become profitable. Exactly. I think it's the right order of operations.

32:34Actually, there's one pre-step even before growth, which is just product market fit. Meaning, have I made something that people want? Do I feel like if I produce this, that there's a market pull for this? So once we verify product market fit, great. Now it was grow. I think in year one, we did six or seven million. I think in year two, we basically got to 12 something. Year three was bigger than that. Now year four is bigger than that. So we basically been growing by somewhere between 50 and 100 % every year for the four years. But I have pulled out exactly$0 from this business. I have put in my pocket$0 from this business in four years.

33:11Wait, really? Yeah, I've taken nothing out of the business. I've reinvested everything, but it's not a, oh, I could have took a ton of money out of this business. It's like, well, like for example, one year, we basically had no profit. We did, you know, eight figures of revenue and we were breakeven essentially. And I was like, what are we doing here? How did this happen? So like the bank, but did the bank account ever go up? Like was your cash position ever good? Well, in e-com, you have one other variable, which is inventory. And so the cash has been pretty steady, but the inventory assets are going up, but they're also inventory that might take a while to move.

33:45It might be slow. It might be whatever. And so I don't want my cash tied up in inventory. That is not actually the plan. That's a byproduct. Unless you can pay your employees and bills and inventory, it sucks. Yeah, exactly. So I've been going through this process where I shifted from where I first was in growth and then I shifted to EBITDA. And so that required a certain set of skills. So I'll share with you some of the lessons learned shifting to EBITDA first. And we've successfully shifted to EBITDA. EBITDA being earnings before interest, tax, amortization, and depreciation. Exactly. Okay, so what did I do to make that shift?

34:22The first thing was, and the reason I'm saying this is because there's probably people out there who are running a business that's been high growth, low cash flow or high growth, low profit. And for some businesses, that's the right move. you want to stay in that mode for a very long time. Maybe it's a winner-take-all market. Maybe it's a land-grab situation. Maybe you're venture-backed and it's a billion-dollar bust. This is not that. This is a business I own. If we sell this business, it might be$100 million or less is where this thing will land. But that's great. We own the business. We have no outside investors.

34:55And so it's no big deal. So anyways, the point of this rant is basically, how do you make that shift? So I first went and talked to people who, so step one, figure out what the right EBITDA target is. So I go talk to people who are in the same space to figure out what EBITDA margin is kind of the low end of what's possible to the high end of what's possible. And then I ended up shooting for somewhere like, you know, the 60 % mark. Like 10 to 25 %? Yeah. So for me, that's like 17 % margin. So the best ones were like, yeah, we have 25%, like the econ ones. But then you dig under the hood, it's like, oh, you don't do any marketing?

35:29like somehow? Well, I do. So that's just not going to happen. But getting to 17, 18 % is like, wow, that would be really great. And then the low end is like 10%. So that's the first thing. Then envelope, create like an EBITDA, what I call an EBITDA budget. So basically you take for every hundred dollars of revenue that comes in, what percentage is going to go to each of the following categories? My overheads, my cost of goods sold, my OPEX, my advertising and marketing, etc. And so you create an EBITDA budget and you basically say, where does the dollars flow today? So you do a last 12 months look back.

36:03On average, every month, we're spending 5 % of revenue on overhead and 12 % on, in the e-com case, maybe it's shipping and fulfillment, whatever. So you create a current status budget. And then you say, well, in order to get my margin, I need to find eight points of extra profit margin somewhere. So where's it going to come from? And so you start to basically pull calories from these different departments. All right, marketing, you're going to have to give me two points here. And shipping, you're going to have to find a way to cut off one point. And you basically find the extra eight points of margin that you're going to need.

36:36And that stuff is, it's not hard to do it in a spreadsheet. It's really hard to track it on a weekly and monthly basis to make sure that it's really hard. So once I did that, now it's time to communicate. So step three, communicate the plan relentlessly. So I then go to the leaders of the company. I say, hey guys, forget everything I said before. Now this is what matters, right? We still want to grow. Sure. Secondary priority. First priority is we're going to grow EBITDA. What's EBITDA? Where are we tracking this today? So I'll show them, hey, here's what it is. Here's what it needs to be. Here's how we get there.

37:09And here's the cadence of how we're going to track this. And now I put the onus on them. I said, you need to find me one or two points of margin in your department, or you need to find me three points over here. How are you going to do it? So come to me tomorrow or in two days with a plan of how you're going to get that extra margin. And also, I want you to create a report that tracks this, you know, the sort of, you know, if you're a cost center or you're a profit center of the business, you need to create a little dashboard and you need to show me how you're going to basically update that every single week or every single month.

37:39So we do that. And every single month, I start hammering people on this. And then the fourth step is tie their incentives to. So I go to my CMO and I say, great, last year, your bonus was based on revenue. This year, your bonus is based on EBITDA. Do you want your, and by the way, I'll actually increase your bonus. You can, we'll remove the cap. You can actually get a bigger bonus if you're able to get even bigger EBITDA. So now it's on you to figure out how that happens. But if we don't hit our EBITDA targets, you get no bonus. Okay. So now incentives are aligned to achieve that thing. And so those are the kind of the first four steps.

38:09Last step, which is basically actually go do the thing over and over and over again. Somebody gave me some great advice along the way. They go, oh, you're in EBITDA mode. Yes. Called spring cleaning. So here's what you're going to do. You're going to go and you're going to say, there's got to be some low-hanging fruit. You're going to go and you're going to find a bunch of SaaS subscriptions that you should cut off. You're going to find this agency you're paying too much and realize that we don't need that agency, whatever it is. And you're going to feel like, cool, we cut the cost. Schedule a calendar reminder.

38:35In 30 days, you're going to do the exact same thing again. And you're going to feel like, well, we already cleaned it out. But it's just like cleaning a house. You first clean out the surface level mess. Once that's gone, now you start to realize, oh, wait, we never actually dusted this area or this closet and actually stuffed. Now let's start to unpack this closet. And so we've done, I would say, three or four of these spring cleanings now this year, and it's only six months into the year. So I've done it at least three times, maybe four. And each time we go and we unearth more stuff. And you can't do it every day.

39:05That's not the right way to focus on it. But like, you know, on a monthly or every two months basis to go back through and say, all right, let's trim some more fat. Where's more fat? And inevitably you will find more things. But why are you going after EBITDA? because so I'll mention this a little bit, but if people rag on me, I'm not like incredibly well-versed, but I've been looking into like EBITDA might be bullshit. Like, so there's this thing called gap, generally accepted principles, whatever. It's like what we all like abide by. There's a lot of bullshit in there. Why EBITDA versus cashflow?

39:40Cashflow also works. Cashflow required me to do a second big project. So the second big project was, okay, where's that cash going? Why doesn't the cash go in my pocket? Oh, the cash goes into inventory. And so separately, after I did the EBITDA cleanup first, first couple months, I said, okay, great. Now the EBITDA is great every month. But my bank balance is not going up proportionate to the EBITDA. And so first three months of the year, we killed it on EBITDA. Awesome. Where's the money going? Oh, it's going into inventory. How do we get our inventory levels to be right-sized so that this cash flow flows to the owners of the business and not to the warehouse?

40:13Because today it's going to the warehouse, which is a separate challenge and a separate discipline altogether. And it's a three-legged stool. You need all three legs to have an amazing business. You need a growth leg. If you're not growing, the business is not worth very much. You need profit. If you don't have profit, the business is not worth very much. And then you need that profit to result in free cash flow. And if you can get all three, you have a beautiful, amazing business. but in order I kind of wanted to go in in those three because again there's not going to really be much cash flow if you're operating at a net loss so I needed to first be making sure there's a surplus of profit then I needed to make sure that surplus of profit is resulting in free cash flow and you just so happen to be in an industry where those EBITDA and cash flow things they're really hard it's really hard like to figure out the inventory and stuff like that that is a science I am not envious of people to go through this.

41:06My major takeaway is e-com is a terrible business to be in. When is it not a terrible business? If you are winning the game and you still think it's a bad category to be in, that's when you know it's a bad category to be in. Most people, they lose the game. They're failing at it. And then they blame the category. Right? So for example, and the opposite is true too. I was telling somebody about podcasts. Oh man, podcast is great. Blah, blah, blah. He goes, well, yeah, you won the lottery. So of course you love lottery tickets. Like, you know, your podcast is popular. It works. Like, of course, podcasting is great for you.

41:40But for the million podcasts that are not really getting listened to, is it, would you, would it feel the same way, right? Is it winning dependent? And so this one is interesting because our e-com store is winning. And even in winning, I'm like, note to self, this is not the category to be in next time. Beyond that, I would say playing the game on hard mode has a bunch of disadvantages. And I wouldn't put myself in this position voluntarily. However, once you're in a position where you're playing some game on hard mode, there is one big benefit, which is if you ever get to play an easier game, you will dominate.

42:14It's like I was playing pickleball with a guy and it was his first time playing pickleball. He's amazing. I'm like, yeah, why are you doing that? He's like, well, I'm playing college tennis. It's like I played a harder game and I won that game. So like, yeah, I'm pretty good at pickleball. It's not so it's not that hard for me. In the same way, I was listening to Andrew and Chris from Tiny. They were doing like a Q &A. And the guy was like, yeah, I'm in e-commerce, D2C. Would you guys say you don't love that space? Would you recommend I just quit? What should I go do? And he goes, well, one of the things that worked for us was because we ran agencies, which can be low margin, grindy businesses with a bunch of HR problems and hard to scale.

42:51Because we did e-commerce, once we went into easier businesses, we just cleaned up. We could buy a software business that was running at 10 % margins and get it to 40%. just because that guy wasn't really, he wasn't really ruthless with pricing. He was not negotiating with vendors. He was not taking care of all these little things that we had to do to survive in these other categories that in a softer category, you're not as on the hook for. Who do you think is winning in e-commerce and what attributes do they have? Shopify? Facebook? No, I mean, of course, of course, of course. Retailers, DTC, whatever you want to call it.

43:30I think right now, the retailers that are taking advantage of TikTok, the TikTok flywheel, are cleaning up. And what I mean by that is there is a very specific moment of time right now where you can create content on TikTok, either yourself as a brand or even better, you use an army of affiliates and UGC creators. And whether it's with TikTok shops or people just hear about the brand so much on TikTok, they go Google search it and they find your Amazon or they find your DTC shop. That flywheel, I'm invested in a couple of companies that are doing this. That flywheel is pretty unreal right now.

44:08But only for certain categories, I would imagine. Is it only for things where young people are using? Nope. That's amazing. That's ridiculous. Right? Let's move on. I've said too much.

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45:20Mercury is a financial technology company, not a bank. Check show notes for details. All right. I want to talk about one thing that you actually had on here that I have no idea. Like it's way out of character for you. Your dream house or do you want to do painted chickens? Well, I don't have much to say about the dream house except for, dude, look at this sick house. That's the entire topic, but let's go there. It's an amazing house. This is a house that this guy on my team sent me and I can't believe it. It's the most beautiful house I've ever seen in San Francisco? It's 11 ,000 square feet, estimated market value, $23 million.

46:01And it's on the ocean in San Francisco. I mean, there's just a few photos. So this house is first to get an 11 ,000 square foot home in San Francisco is very, very hard to do. Every view is like the Golden Gate Bridge. You're right on the water. You're right on the ocean. But even if you didn't want to go in the ocean, well, guess what? You have an infinity pool in the back that just is spilling over into the Pacific Ocean. On top of that, there's one photo in here that I just have to show you. I see a beautiful porch that's overlooking the San Francisco Golden Gate Bridge. Next photo. 24? Like a wine cellar that is big enough that it was bigger than my childhood bedroom.

46:3725? A huge home theater that looks like they're just watching some type of nature documentary. So awesome. And here it is. The reason I want this home to begin with. 26. A half-court basketball court with all windows where you can see the Golden Gate Bridge. This is awesome. Is this floor-to-ceiling, like 25-foot ceiling, all glass window. You're looking at the ocean, the breeze. There's a glass door that's open. You see the Golden Gate Bridge, and you have a beautiful basketball court inside your home with all this light wood that I just love. Oh, my God. This is crazy, dude. This house is unreal.

47:18I must buy this house. It's not for sale. So that's the first problem. But besides that, I now have a target. I now have a desire. I thought I had enough money. Now I have a desire. I need to be able to drop 30 million bucks on this house. Dude, in order to buy a$30 million home, oh, check this out. Okay, so it was owned by Sharon Stone. Before that, or after that, do you know who owned it? A dentist. A dentist owned this house. What the hell? Yeah, it says this guy was a dentist. In order to buy a$30 million house... I'll tell you how much money I need. $28 million. And then I'm going to borrow two.

47:54And I'm going to buy this house with every dollar I own. And that's it. No, I think you need$100 million to buy a$30 million house. Would you say that's accurate? Probably at minimum, yeah. At minimum. Because the maintenance, the taxes on a house like this is going to be pretty insane too. Your carrying costs are going to be, what, half a million to a million bucks a year? Yeah, it could be. No, it doesn't. Well, it could be that it would be that high, probably because you're on the coast and you got to see taxes alone in San Francisco of this on this house is going to be like quarter million to$300 ,000 a year.

48:24That's just the property taxes. So all the maintenance, all the insurance, all the all the cleaning, all that stuff on top of this thing is got to be at least another quarter million. So at least half a million bucks. Yeah, that's insane. That's insane. This is a it's a sick house. The the last thing I wanted to ask you about, you said you wrote some essay. Yeah, your boy's getting his Paul Graham on. I started writing essays. Why? I told you, I'm just in a creative season, and I wanted to do different things. I like writing, and I was like, well, what do I want to write about? And I realized I want to write about the stuff that I'm curious about, or whenever I feel like I have a golden insight.

49:02So something that, anything that feels insightful to me, I want to be able to write it down. And why do I care about that? You want to spread your seed, baby. You got to spread that seed. Well, that's part of it. But actually, the bigger part is I've known there's this feedback loop that happens, which is once you have to deliver something, you start to look for it. Meaning, when we start this podcast, and let's say every week we got to do this podcast, and when you show up to this podcast, you got to have three interesting business things to say, right? You need to have three interesting business topics.

49:30And in order to do that, your brain starts to now go find interesting business topics, starts to ask a few more questions, starts to write a few more notes, starts to pay a little more attention. and this wonderful feedback loop gets built where you start getting smarter about business more because you have this outlet where you got to go put it and you're on the hook to go put it somewhere every so often. So in the same way, one of my favorite things is to learn something new, right? I'm just kind of like a learning junkie, right? Well, by having a place to go, right? I now am hunting for more insightful things.

50:01I'm reading more. I'm talking to people more. I'm having more connections between two different ideas that are disconnected. And so that's the real reason because the thing I shared with you, I haven't even published yet. I'm going to publish all these on my website, just SeanPeru.com. But right now, this one's on a Google Doc. I'll throw it up after this so that it's at least online. So the essay is called Painted Chickens or Painted Chicken. And the reason it's called Painted Chicken is because have you ever been inside of a Subway? Do you eat Subway? When I was a kid, yeah. And so I like Subway, I admit it.

50:31But Subway, the quality has gone like way down since I was a kid. And I can't tell has the quality gone down or have our taste gone up. No, the quality's gone down. You know, I know this. Do you know all the controversy with Chipotle right now? No. No. Dude, like Gen Z hates Chipotle. Why? So basically the thing started trending on TikTok. There's like Chipotle gypping you on quantity. Okay. Or just like, you know, basically like the way that this, like Chipotle used to be bomb. Now it sucks. Here's why. And different people have different reasons why. The taste. But one of the big ones is like they're just skimping on the thing.

51:09And so then the CEO came out and did this hilarious thing. You didn't see this? No. It's so funny. The CEO came out and he goes, oh man, look, if you go into a Chipotle and you want a little bit more, our guys are great about this. Just, you just give them the look. And he does this like stupid look. You do that. Our guys are great and girls and girls. Our guys and girls are great at hooking you up with this. And so there's all these memes now of people being like, yeah, when I go into a Chipotle and I make this face. Like, their reaction, which is like, they're not like, I got you, bro. Let me hook it up.

51:43And they're like, also impersonating him where they're like, when you go into a Chipotle and you give the look, our guys and girls and trans and black people too. They're all great at doing this and people are making fun of this CEO for like, you know, flubbing this speech that he gave. So anyway, Chipotle is under the microscope right now. Well, now they all like Kava, which I just went to. It's awesome. Yeah, they like Kava. Well, one of the reasons, So then the founder of Chipotle, I think, came out or somebody who was like the ex-CEO came out. And he said two things. He goes, it's insane that people think we would tell our staff to skimp on portions.

52:17That's terrible for business. We've tested this. The thing you do for business, if you want to grow revenue and grow profits in a store, is you give people bigger portions, which makes them love the place to come back. Sales go through the roof. And waste also goes down because you're giving them the food versus throwing it away. if you actually want to save on food waste, it's not by doing less portions. It's by having more customers first so that you sell through all your food. That's the way you reduce food waste. It's not by skimping to customers and then they don't come back because they're angry, right?

52:46At least that would be counterproductive. The second thing that came out was the guy said, basically when Chipotle had all those E. coli scares, they had to change their whole supply chain. I don't know if you remember this. Like there's a couple years ago where like two, three times, like whoops, whoops again. Oh, E. coli again. Sorry about that. So they changed all of their operating procedures. So what they used to do was in the store in the back, that's where they would chop the veggies right there. They would do whatever. Now it all comes pre-bagged, sealed from like a central headquarters where they can have really tight food safety, vacuum seal it or whatever, ship it to the store.

53:21Store just has to open it. They're not doing the food prep on site. Well, the result of that is the food tastes less fresh. And the result of that is that they cut down the number of suppliers they were working with because it was too much risk. so instead of local farms for the meat, they now started going to a few vendors that are now shipping out much farther distances and maybe are more mass production, less taste so the taste actually has gone down, not just the taste but because of the supply chain changes. They need to bring back E. coli or whatever Yeah, dude, let's roll the dice, let's live a little right?

53:54The food's got to taste good. Who cares if you get sick once a year? Which is insane if they serve millions of customers when it's like four people, you know, that is that's like statistically insignificant, I would imagine. Which is always the worst argument. Like whenever one of the social networks are like, dude, do you realize like they're getting hammered by Congress? And all they want to say is there's two billion monthly active users. How many people are in your state? How many murders are there in your state per day? Do I blame you? No, I run a state 100 times bigger than yours. Like they can't say that.

54:23But that's the reality is the law of large numbers. if you're Facebook, literally anything that can happen is going to happen on your platform every single day. That's just the rule of statistics. Even the most like oddest, strangest, most screwed up behaviors are going to happen because it's so many people. It's insane. Yeah. And so now they've had to change this whole thing. But what was your essay about that? So my essay is about I call it painted chicken because if you go to Subway, Subway's motto was eat fresh. And if you go into Subway, it's just hilarious to hear eat fresh and then literally he's opening up a bag of chicken and you see the chicken and the chicken has grill marks on it but you're like how come all the grill marks are so uniform what kind of grill do they use if you go look it up that the grill marks are painted on they don't grill the chicken that's not what those grill marks are the grill marks the grill marks are literally painted on the chicken and so i i love this analogy because in every business there are there's always lip service you know every business has these stupid things that they say go go read the website of like BP and BP will be like, we care about communities and the environment.

55:26And they're like spilling oil into the ocean, right? Like everybody has their, their version of eat fresh, which is you say eat fresh and then you just, you're painting on chicken. And so what I, what I wanted to talk about was what are the few examples where there's not painted chicken? Meaning what are the examples where a company has values that they actually live by and they actually mean something? because I think anybody would agree that like a value system is very, very important. I remember in my first business, I was trying to make a decision and we asked our mentor, we're like, oh, we were doing a sushi restaurant thing.

55:58I was like, should we use the eco-friendly packaging? But it's more expensive and it's kind of like the paper straw, it disintegrates, but it's good for the environment. Or should we use this one that's cheaper, bad for the environment, and it's super durable, it's actually good packaging. And she was like, well, you're asking the wrong question. You're asking the question of which packaging should we use. But the question is, what do we value more? the environment or the convenience and affordability? There is no right answer. It's just a question of what you value more. And you should just, all your decisions need to come upstream, move your decision-making upstream.

56:28Once you know your value system, everything becomes obvious after that. And this is just a good life, a good bit of life wisdom. If you're in a situation where you don't know what to do with somebody, oh, should I, they treated me this way, but I should, should I respond kindly? Should I be mean back? Should I, should I ignore them? What should I do? Well, if your value system is I'm a kind person, And that's what I do. I don't change my behavior based on other people. Well, then the answer is obvious. Just be kind and move on, right? Like, that's it. So what I started to look at was, what are the company values that I actually remember that meant something to not only me, but the people who worked in that company?

57:02And the first one that comes to mind is Facebook's move fast and break things. Yeah, I loved it. You, like, I think you've heard that. Everybody's heard that phrase by now, right? So I said, hmm, move fast and break things. Like, okay, that's great. Is that popular because Facebook is popular? Maybe it's just a popular value because Facebook was so popular. All right, that's theory one. Well, Sam, what's Microsoft's core value? What's Microsoft's Move Fast and Break Things? No idea. I have no idea. Twitter, Lyft, Uber, pick any of these companies. Do you know any of them? We don't know any from any of them.

57:33In fact, the only other one that I could remember, like Move Fast and Break Things, was Google's. Do you know what Google's is? Do you know evil? Yeah, don't be evil. Exactly. Don't be evil. But then it got silly because they maybe did a little evil. Well, exactly. So then I was thinking, well, what is it to learn from this? The first thing I learned is maybe these are memorable because they're catchy, right? Maybe that's the first thing, which is that instead of just saying integrity, you should say, don't be evil. Don't be evil is more provocative. It's more catchy. It's more interesting than integrity or honesty or be good, right?

58:08If they just said be good versus don't be evil, none of us would remember that Google's value is be good. but a lot of us paid attention when they said our value is don't be evil so i think there's something to lesson one is if you make it provocative you make it memorable if you make it memorable people might actually use it so that's the first first little takeaway the second is well there are other catchy rhyming thing you know there's you could just try to be catchy like the the quicker picker upper that's it's cool but why does why does move fast and break things have a little bit more weight to it i think it's because it you have to pay the price right so you got to pay the cost to be the boss.

58:41And what I thought was interesting was if I went to 100 CEOs of Fortune 500 companies and I said, hey, we think that the company should move fast, that speed is an important value. Speed is important, right? Moving fast, would you say that's a value for your team? Of course. 100 out of 100 would nod their head and say, yep, of course, definitely. We value speed. Awesome. And if you said, well, when you move fast, like naturally, sometimes things might go wrong. You might bump into some things. You might break some things when you're moving so fast. So let's agree that it's actually, it's going to be move fast and break things.

59:19How many out of the 100 would now agree? And the reality is that 99 would be chicken shit and they would be like, well, no, no, no. We're not trying to break things around here. Depends. It's speed without breaking things. And once you go to speed without breaking things, you're now Subway eat fresh painted chicken. You're bullshit, right? It's now an unusable, non-useful value. It might be something you put on your website, but it's never going to have any weight. You're never going to be one of these generational type of companies that operates differently and is known for how they operate. And so I went and read this quote from Zuck, and I want to read this to you.

59:50So he says, the value is actually move fast. But my theory on values is that most organizations have a lot of values that don't mean very much. They're just table stakes. Like if you say, just be honest, of course, you're going to be honest. You should be honest. Everybody agrees with that. Everybody knows that it means nothing. It's not an option to not be honest. That's automatic. So he goes, I think the defining principle for a company, meaning your company is going to have one thing that you guys really do is your A plus strength should be something more interesting that has a trade-off. So move fast is interesting for us because we had to give something up to get it.

1:00:24So the question is actually, what are you willing to give up? Values are not free. Nothing is. Dude, that's insane. I mean, what an insightful person to, I mean, he's just like an eloquent guy for how young he was. I mean, that's a really good quote. And so if I think about other great values that have like had resonance and stuck with people and meant something to people, you know, for example, Nike's, this is more of a slogan, but just do it. If you think about the phrasing of just do it, is Nike's just do it as powerful if it just said, do it or do things? it's very different, right? The word just changes it because just implies there's a cost.

1:01:07Just implies that it's, don't hit the snooze button. Don't shy away from it. It's going to hurt. It's going to be painful. It's going to be uncomfortable, but just do it. And so I thought there's something to learn in that. That's kind of inspiring for me. So my essay was basically, if you want your culture, your values to mean something. And my friend Siki has this great phrase. He said, culture is, there's many ways to define it, But the best way is, what do people do when the boss isn't around? I love that. I thought that was pretty powerful. It's your default behavior. And if you want your default behavior to mean something, to be different, to be a defining characteristic of your company that is different than the way other companies in your space operate, here's the three-step formula, which is you choose one thing, not 10 things.

1:01:50So for Facebook, it was moving fast. For Apple, it's thinking differently. For Nike, it's action. Then you make it real by acknowledging the cost or the trade-off. And lastly, you make it catchy. you make it provocative you phrase it in a way that's going to turn heads so that's my that's my essay called Painted Chicken first that's awesome second have while you're on this little like value driven mission driven company quest have you heard of this company called Brunello Cuccelli you probably haven't because it's not your shtick but they make opera singer who is that no it's this Italian company that makes really expensive cashmere clothing and their most their most famous thing is like sweaters so it's I'm wearing a free t-shirt made out of 100 % polyester from a YouTuber, bro.

1:02:33Yeah, that's why I knew it wasn't your shtick. But it's not my shtick either. But it kind of is becoming it because I like it so much. But Brunel Cuchelli, the founder started it because he was like an expert at, I guess, Kashmir. Like he was, I don't know what the term is, but he knew how to put together clothing. And he basically was like, you know, my dad worked his ass off. He was working seven days a week and I wanted to create a humane workplace. And so we're going to do that. by creating these amazing sweaters where we hand stitch and it's done perfectly. What do you say? It's done beautifully.

1:03:06And he makes these really high-end sweaters. And the clothing is great, whatever. But what's more interesting is this guy, the founder. And I just saw that someone shared this photo of his schedule. 6 a.m., wakes up at his countryside home, slowly gets dressed, goes to the office at 8.30. And then he says, at one, I walk home for lunch. Then I take a 30-minute siesta. At three o 'clock, I go back to work. At 5.30, the whole company stops working and takes the late afternoon walk because we believe that rest is super important to being soulful and personal studies important as well. He has light supper at 8pm and from 9pm, he heads out to the cafe to meet friends where they discuss politics, philosophy, religion and other subjects late into the night.

1:03:47And I was like, is this guy legit? Is he the real deal? He is. So this company, this sweater business, it's a publicly traded company. I didn't realize that. It's a publicly traded company with a market cap of like$4 billion. He's building his company to build a great workplace and to create great products, not to make money first. And just because of that, I want to give him more money and he's going to make more profit. Yeah, I'm on the website right now. And it's just from a swipe file. There's so many little things that they do in their brand and marketing that is completely congruent with everything you just said.

1:04:23one of the great marketing lessons I learned a long time ago was somebody said, yeah, it's got to be Epoch. I was Epoch. What's Epoch? E-P-O-C. They said every point of contact. So they said, once you decide what you're all about, every point of contact, meaning when somebody hits you on your, if you're all about luxury, but then your customer service hotline is like some janky old web form, it's not every point of contact. I'm looking at, for example, one of the little gifts on the site for, you know, he's just like, go, go click on the sweater section or whatever. It's this guy and it's a model, but the model he's peeling an orange and he pops like an orange slice into his mouth.

1:05:01He's just kind of wandering. He's like walking a little slightly aimlessly. He's just sort of like, he's chilling. He's not trying too hard. He's enjoying himself. He's right by the water. And I'm like, man, the creative direction to say, cause you know, normally what you said is you have the founder who's got their beliefs. Then you have the revenue team that's trying to jack up revenue and they're adding pop-ups on the website, trying to make it improve conversion. They have the creative director who's not even invited to the meetings and they're trying to do one thing over here and it is not congruent at all.

1:05:29And people, whether they can see it or not, they feel it. And you could feel when something is congruent. It's the same reason that the Apple store looks the way it does and the iPhone looks the way it does and the packaging looks the way it does and the commercials look the way they do. It is congruent when it's done well as a brand. it but it's very rare to see that to be honest yeah these guys are on top of it now i like them uh i don't know if i want to spend like i'm looking at 1500 for a polo uh i don't know if i'm there yet but uh i'm definitely thinking about it uh maybe i'd buy it maybe i'd buy a two thousand dollar sweater but like everything they have is high end like it's one of those he wants to attract a good customer and i think he's repelled me successfully i would not be a good customer of this, but you know what's cool?

1:06:14You've said his schedule, light supper, light supper. I don't think I've ever had a light supper. I'm eating heavy dinners over here. And I just realized just changing the words. If I said, if I just changed my words, I said, okay, what am I going to have for my light supper tonight? I bet that would fix my diet. Just that one, you change your words, you change your life. I bet you, if I just changed that one word light supper wasn't even in my goddamn vocabulary until just now. Thank you. I'll be taking that. Is that it? Is that the pod? That's it. All right. That's the pod. I feel like I can rule the world.

1:06:50I know I could be what I want to. I put my all in it like no days off. On the road, less travel, never looking back.

1:07:02All right. This episode is brought to you by Mercury. They are the finance platform of choice for over 200 ,000 companies. Shouldn't be surprised because I use it myself for not one, not two, but I have eight different Mercury accounts. I have seven for different companies that I'm a part of. And then I have my own personal account because now they have personal banking, which is a really cool feature. I highly, highly recommend it. Like I said, I use it myself. And the reason why is because the way that Mercury works is beautiful. It's very intuitive. And you could tell that it's actually made by a startup founder.

1:07:30It's an entrepreneur. You could tell it's made by somebody who used other banking products in the past and didn't like all the different rough edges and annoyances and decided to actually fix it himself. And really, any type of entrepreneur you are, let's say you're an agency, well, one of the things every agency has to do is be able to send invoices, easily create them, send them to customers, and stay current on your balances with all your customers. Well, you can do that inside Mercury. And so I think that Mercury is great. I highly recommend you check it out. And thank you for sponsoring the show.

1:07:55For more information, check out Mercury.com. Mercury is a financial technology company, not a bank. Check show notes for details.