I Made $50M Buying & Running Boring Businesses

21:36And what if we bleeped it out? What if you tell us and then we bleep it out so it's not on air? Just tell me when to stop. Yeah, yeah, yeah. So what I can – Just bleep. Here's what I would say. So we target – the minimum underwriting that we have is we target a minimum of a 30 % IRR is minimum we underwrite to. And we've historically been pretty significantly above that. Okay. But, you know, we really think about things in terms of cash, right? So I think it was last year that we talked about, you know, our total cash out IRR is in the low 20s. And that's without any marks. That's without anything.

22:10So, you know, you stack marks and the growing, obviously, cash flows on top of that. And the numbers get pretty ridiculous. Marks being the valuation. The valuations of the business. Yeah, that's correct. And so, I mean, if you underwrite, I mean, if you think about kind of the bottom line, if you're buying a business with no debt, right, so take the debt side off of it. You're just buying the business for all cash. And, you know, let's say on average, we're paying between five and seven times for a business, kind of in that range. And let's say that the business is organically growing 7%, 10 % per year, and we're increasing that to sort of call it mid-teens a year, maybe low 20s.

22:46The math gets pretty amazing pretty fast, and that's without using any debt. And so I think that's where it's obvious from the outside looking in. There's gold in the hills, right? If you look at small businesses acquisitions, I mean, this is not a secret anymore. I think when I first started talking about it in 15, 16, I remember going on Patrick's podcast when it was brand new. I remember Patrick being like, oh, hey, I'm thinking about starting a podcast. I was like, yeah, sure, I'll help a friend out. Had no idea it was going to turn into what it is. But I remember going on there and people were shocked at what you could buy these businesses for.

23:15And people say, oh, well, that's not fair. It's an inefficient market. It is inefficient, but it's inefficient for different reasons why people think. It's inefficient not because people are getting taken advantage of. It's inefficient because it's absolutely freaking brutally difficult, and it's so easy to lose a bunch of money. Like, I had a guy reach out last week and say, hey, I want to be honest. I'm looking for a job. My wife and I went all in. He was working at a big private equity firm based out of L.A. as an operating partner. He and his wife went all in on a business, and it failed. And now they're bankrupt.

23:45What attributes make you and others like you successful versus this other guy not successful? Yeah, I mean, I think in the beginning, if the first deal I had done gone south, and there's plenty of opportunities for it to go south. And so I would say a lot of our success is attributable to luck in the beginning. And I mean, look, if you listen to any investor, if they tell you that the early stuff they did wasn't lucky, they're lying to you. I mean, I remember getting to chat with Buffett about this. And I said, hey, tell me about Sanborn Maps and Dempster Mill. And he was like, oh my gosh. Like, he's like, if either of those investments go wrong, There is no Warren Buffett.

24:22No one knows about Berkshire Hathaway. None of that stuff happens, right? And they were that close. Like, that's how he met. When he met Munger, he asked Munger, hey, do you know anybody who could help basically turn around Dempster Mill? Because it's flailing. And if that goes under, like, my future's done. Wait, can you, I don't know the story. Can you tell the story in more detail? So Warren Buffett almost failed at the beginning of his career. What was it? Can you tell the story? Oh, yeah. So he had 70 % of his assets into these two investments. One was called Sanborn Maps and the other was called Dempster Mill.

24:52And this is early days of the Buffett partnership. So this is pre-Berkshire Hathaway. What did those two companies do? So Sanborn Maps was a mapping company. They basically had at the time, think about it as intellectual property for maps, right? If you needed to go build something or if you needed to navigate something, they had all the best mapping technology. And so that business was a publicly traded business. and I think he was a minority shareholder in it, but he was basically the controlling shareholder. That one, I think, turned around independent of him installing new leadership, but Dempster Mill was a completely different story.

25:28He bought into that, took control of it, and the business was just flailing. So Dempster Mill, I can't remember exactly, I think they were building, constructing mills of some sort, hence the name Dempster Mill. And it was basically the biggest headache and he was staring down the barrel like I did. And I mean, I can talk about the early days. Like we almost failed like five different times. So, sorry. So he had 70 % of his assets in these two companies, but those were public companies where he's just a passive investor or he was like owned the majority of those companies where he could make a change in them.

26:00Yeah. So I think that he had, he may not have had a controlling stake in Sanborn, but I know he had enough shares where he could basically throw his weight around in that one. I think Dempster Mill, I think he actually did buy a majority of it and have control of it. And so those companies, they're not doing well. And you said he goes to Munger and asks him something? Yeah, so we just met this guy, Charlie Munger, who had been back into town in Omaha. And he had kind of gotten a matchmaking by a mutual friend who said, hey, you guys are the two nerdiest dudes we know. You should know each other.

26:28It was like bromance, like love at first sight. They get to know one another. And I think it was actually Charlie who said, hey, well, like Warren, what's your biggest problem you're facing? And he said, well, I've got these two problem children, especially Dempster Mill. And do you know anybody? and Munger said, actually, I do know this guy. His name's Harry Bottle and he's an accountant out here in LA. We should go talk to him. And so they took Harry Bottle to lunch and pitched him on moving his family to the middle of nowhere, Midwest and running Dempster Mill. Harry Bottle reluctantly agreed, turns it around, makes Dempster Mill a fortunate surprise on the upside.

27:06And again, he starts stacking geese as we talked about. So everyone in the beginning. I mean, look, you don't get to be successful by not taking risks. Like all investing is taking risk. And so the question is just how much risk are you willing to take? And when you're younger and you don't have much, I mean, the only way to get ahead is by taking more risk. When you are doing all this research, are you an expert in the pool business or are you just an expert in looking at financial statements? Are you an expert in understanding how leadership thinks and how to find winners? What are you great at?

27:41I think I'm pretty good at seeing the big picture. So taking all those pieces, like I'm not the best financial analyst. The joke is I can barely open up Excel. Like I'm not an Excel guy. I've never had the skillset. I've never learned. I never worked at another firm. Like I never took a finance class in my life. So I don't have a lot of the, what I would call like hard skills that you learn as being an associate or an analyst at a firm. You know, I think that I'm pretty decent at putting the puzzle pieces together and then negotiation. I think, going back to Buffett, he talks about I'm a better investor because I'm an operator.

28:12I'm a better operator because I'm an investor. That's true. And I think operating and investing are two sides of it. But I think there's a third leg that's not talked about a lot, which is the deal-making side. And I think that deal-making side, especially as you get into more inefficient markets, becomes really the dominant skill set. So understanding how to put the puzzle pieces together. And like in that pool business, I saw a business that had a clear track record of growth. They were in a durable business. I mean, we kind of joke that until people stop dipping their bodies in water for pleasure, we'll be fine.

28:44It's been happening for a couple thousand years. I think it'll keep going. Like we try to have these like very simple theses for everything. And so if you look at somebody who already has a dominant market share in a market, they've had it for a long time, the business is growing, the market's growing. You look at the business model of it and you say, okay, look, we're an asset light business. They're not investing in a ton of equipment. It's a very simple business model. It's find customers that want pools, do it better than they could do it themselves, and take a rip on that on the upside. You know, you start then looking at, okay, who is the leadership and how do you structure a deal and how do you make sure everyone's interests are aligned?

29:19How do you continue to find talent to build the business? I mean, those are all – I say this to sound – I make it sound simple. It's not simple. It's very difficult. It's just not complicated. You gave one answer to the question. I think the real answer just was based off of how you were answering it. You are a really good storyteller. You are very persuasive. And you have, I could just tell you're a good leader because of how you dumb things down to be relatively simple and easy to understand. Right, Sean? I mean, just him explaining that, you're like, oh, okay, that's, you're actually, you're.

29:53Yeah, you don't get stuck on the midwit mountain, right? Like the middle part where it's an over analysis, overthinking, over thesis out. You're like, do I think the people are going to stop dipping their bodies in water for pleasure? Exactly. All right, cool. That's great. Do I think we're going to get like, do I think tech, is AI going to take us out of the pool business? Nope. Okay, cool. So this is an enduring business. Great. We got that. Seems like this guy's been paying himself a lot of money every single year as the operator. Great. We'll probably be able to do the same. Also seems like this guy doesn't do any marketing.

30:27He does that and he doesn't have any ads anywhere. If we did a little bit, probably would help, right? All right, cool. Thesis, done, check, check, check, right? So like not over-complicating things is a skill. I would also say like, it seems like you have a good amount of level two luck, which is the action luck. Like you were talking about that Patrick O'Shaughnessy example. I thought that was a great luck example because you were like, you didn't have any investors. You're just doing this with your own money. This guy tweets out, hey, I'm looking for somebody, to talk to me about equities or capital allocation.

30:58So you reach out, right? And you reach out. you don't have some like imposter syndrome or insecurity that prevents you from reaching out. You take some action and you've probably taken a thousand actions like that, you know, cheap lottery tickets where the downside is very low. The upside, if you made a valuable connection, like you did was pretty high actually. And so you filled out a thousand of those scratch off tickets. And then he had luck on the other side, which was perception luck. Cause he's like, oh, you're buying this company for four times profit. That means like, if you put in a hundred dollars, you're going to get 25 % yield every year, even without growing the business.

31:31And wait, I'm in the stock market buying things at 25 times earnings and you're buying them at four. So like something is good. That makes a lot of sense. So he had that third level of luck, which is like you can spot it. You could spot good luck when it shows up at your door. And that's why, you know, that was good on his part. So I think that's impressive to me and a good reminder of like, you got to take action to get that action luck. And then when you know something and you spot something, what he did a great job was, he flew out to Missouri. He got to know you. He pitched you. You said no.

32:01And he's like, he asked the magic question. What would it take? Whereas like, you know, 10 other people could have done most of that and not gotten the result that he got. You want to spend more time talking about why you're successful? Let me ask you a different question. So I have this goal. I want to retire my sister. So my sister has worked hard. She's got her own business, blah, blah, blah. And she wants to just have an easier life. So she wants to spend time with her kids. She wants to travel. Her business is brick and mortar, so she's stuck in a certain location where those businesses are.

32:31She can't really take her eye off the ball in that way. So I want to buy her a business. And I'm like, buying businesses sounds great. You buy a business that's already working. It's cash flowing. You hire a CEO or you promote somebody internally in the company to be the CEO. But I know there's obviously a lot of ways that can go wrong. And so if you're me and you want to retire my sister, where do you start? What is your thought process around buying that first business that's going to get you to$300 ,000 to$500 ,000 a year of free cash flow? Where would you orient somebody who's trying to do that?

33:05Yeah, I mean, I think it's all about constraints. Actually, I wrote a piece called How to Buy Your First Smaller Company, like literally, because this is a question I get a lot from people. And I can remember I had no idea when I first got going. And I mean, the thing is, everyone's got different constraints. Where do you want to live? How much do you want to travel? What do you actually know about? What are you good at, right? So somebody with a very different personality type than me should be buying things that are very different than what I bought. Somebody who wants to live in LA should be buying things that are very different than, you know, living in Missouri.

33:39People who don't want to travel a lot or who want to drive to the place, like that's a very different constraint. Capital constraints, how much cash do you have available to be able to invest? I mean, look, Like, you know, if you have, you can buy really, really high quality business assets that are smaller for like seven, eight, 10 times. So if you want something that's going to be more hands-off, that's an incredibly durable business model, you can get something that's either software, software adjacent. You can get something that has recurring revenue. Like the more you pay up into the value chain, I mean, you're going to have decreased, I think, total returns.

34:11But ultimately, like there are easier businesses to run. So like there are like level 10 difficulty businesses. Like I would not recommend buying into your local restaurant. Like that would not be something that I would recommend doing, especially if you want to quote unquote, have an easier life. Like it depends on if you want the role of a hybrid investor operator, which really is you're going through a short season of investment. And then really what you're doing is you're buying a job. Like that's one very specific type of way to leverage your time against your money. If you really just want to be in the investor seat, it's very difficult to only occupy the investor seat in the world of small businesses.

34:46It can be done. It's very, very difficult. The first$300 ,000 to$500 ,000 of cash flow coming from small businesses are very likely going to require a lot of sweat equity in exchange for that money. Yeah, you should go to that blog post. He has a good Q &A. He goes, the question is, how hard will I have to work? Harder than you've ever worked before. The opportunity in the small business market is dressed in overalls and likes hard work. Dude, you're poetic when you're right. I love the way you're at. I've told you this before. Yeah, yeah, that's great. You have some one-liners that are pretty cool.

35:23Can we just get you, can I read you a one-liner that you've said and you just kind of rant on it? So just basically kind of like make your case for this thing, why you think this is true, why you believe it, why you think people should pay attention to this idea. This is the lightning round, right? It's the lightning round, yeah, here we go. All businesses are loosely functioning disasters. Some just happen to make money. Yeah, anybody who's ever operated a business knows this is true. The only people who have issues with this are consultants. So if anytime I've said this publicly, the only people who come at me are people who either got lucky the first time or have never done it.

35:54And I mean, look, every business I've ever been involved in, it doesn't matter how profitable the business, how big the business, I've gotten a pretty good view into some very large businesses. They're all highly dysfunctional. Why are they dysfunctional? Because they're full of people. People are messy. When you get a bunch of people together, that messiness compounds. Like it is not a complicated concept. And so I just think that people should lower their expectations and understand what to expect when they get into a business. It's going to be hard. It's going to be hard in different ways. Like, you know, the first time you have to put somebody through rehab, your guy doesn't show up to man the warehouse because there's been a domestic violence dispute and he's in jail.

36:31I mean, literally, like, these are things that we're having to deal with. These are things that everyone's having to deal with. Now, they may come in different flavors depending on how professional the business is, but the reality is that these are things that happen. Sean, have you watched The Landman? I have. It's really good. For those listening, it's a show with Billy Bob Thornton. It's about the oil industry. And there's this great quote. It says, our business is one of constant crisis interrupted by brief periods of intense success. Yeah. How good is that? Yes. Yes. Yeah. So I have a quote on my wall.

37:06And it says, success is founded on a constant state of discontent interrupted by brief periods of satisfaction upon the completion of a job particularly well done. All right. How about this one? The more humility a leader has, the more their business can grow. What's an example? Yeah. So look, what is humility? Humility is acknowledging reality for what it is. And if you don't acknowledge reality, you can't get better. And so lack of humility is basically a defense mechanism, right? This usually is one of two forms. It's either self-protection or self-promotion. And people are usually doing a combination of both when they're in some form of pride or arrogance.

37:44They're usually terrified, fearful. I mean, I can say this from experience. When I get prideful is because I feel like I'm not enough and I'm not going to be enough. And I'm worried that I might not have enough. And so what is humility is laying that down and saying, hey, I want to see reality for what it is so I can learn and grow and become better. And that's the only way to do that is to get feedback from the world around you.

38:09All right, let's take a quick break because I got to tell you a story. Let me tell you about the first time I tried to run payroll for my team. I was using a traditional bank and you know the type. It's got a janky interface. It's built like a 2002 tax form and it was open only during business hours. And I hit send and it froze. They flagged the transaction. They locked my account. They put me on hold for 45 minutes. And then they told me I got to visit my local branch. And that was the day I started looking for a new banking solution. After asking a few founders what they were using, I found out about Mercury.

38:35And so now my payroll is two clicks. I can wire money. I can pay invoices. I can reimburse the team all from one clean dashboard. That's why I use it for all of my companies. And so do 200 ,000 other startup founders. And so if you're looking to level up your banking, head to Mercury.com and apply in minutes. Mercury is a financial technology company, not a bank. Banking services are provided through Choice Financial Group, Column N.A., and Evolve Bank & Trust members, FDIC. I like that. Lack of humility, self-protection or self-promotion. That was strong. Charlie Munger says this thing. He says, every time you see the word EBITDA, you should substitute it with bullshit earnings.

39:10Do you agree or disagree? Yeah, for sure I agree. I mean, like, look, EBITDA can be a useful tool in some very limited circumstances. But for the most part, it is dressing up something that is more than often obfuscating reality. So when you see EBITDA, especially in the small business world, there usually comes a ton of capex, a lot of reinvestment needs that are on the back end of that. And what you have to really do is you have to figure out, okay, just in a steady state, what is the business actually producing in free cash flow? Like we look at businesses all the time that are making, quote unquote, making seven, eight, nine million dollars a year that you ask the owner how much money they've taken out of the business.

39:48And they're taking out maybe a million bucks a year, maybe two million bucks a year. I got news for you. For the most part, you don't have a business that's, quote unquote, making seven million dollars a year. You have business making one to two million dollars a year. That's the reality. Have you guys, Sean, have you ever learned the history of the idea of EBITDA? Do you know that's like a new-ish thing? No. So basically, John Malone, I believe. Is that right, Brent? He invented it. Yeah, John Malone invented it. So John Malone, his nickname is like the greatest nickname. He's one of the cable cowboys.

40:15So John Malone, you would know him now as like the guy who owns or founded Liberty Media, which owns F1 and all this other amazing stuff. But basically, he owned a cable company. It was like a small cable company. I think when he took it over, it was like$5 or$10 million in revenue, something like that, like relatively small. and he needed to get loans because he found that if he could just acquire way more cable companies, cable companies were incredibly sticky and it was recurring revenue. I should go out and buy a ton. In order to go and get more cable companies, I need to borrow lots of money.

40:46And for some reason, he came up with this idea that EBITDA was an amazing metric to convince banks to loan him money. And so he coined the term EBITDA because for his business, he had lots of depreciation, lots of things like this. So he was like, no, no, no, just give me the earnings before all of this. and I'm going to convince banks to loan me against that. And that, I think it was the 80s, the mid 80s became like the term. And I've hated EBITDA. I think EBITDA is really stupid. But what I think that like is kind of insane is that we've all collectively agreed that this is like the metric. And I always thought it was like weird, but I never had the courage to say like, this is stupid.

41:22And then I would like read about Buffett and all these guys. And I was like, God, he's stupid. Dude, I take the opposite. I'm like, this is genius. I need this in my personal life. I need this. I need the husband version of EBITDA. It's like, you know, my behavior before, you know, before football, before taking out the trash. If you ignore all those things, I'm great. I'm amazing, actually. Well, it's crazy that like you don't pay your personal taxes on EBITDA. You pay your personal taxes on a cash flow or, you know, on a cash base. It's just there's so many reasons why this is insane. And also, you know, it's the most insane thing.

41:56Adjusted EBITDA. What the hell does that mean? It means wherever you want it to be. That's insane. You have another one, another quote you said. You either operate with high authority, top down, or delegating authority. Hell is in the middle. Yeah. So this is hard-earned because I would say is I think everyone's temptation is to be high authority when you think there's something wrong and then low authority when you want to be lazy. And that combination just makes a mess of everything. And so there's really two ways to be involved with the company. You either say, hey, this is what we're doing.

42:31This is how we're doing it. You need to get in line. I need people to go and execute this vision. Or you say, hey, I want to be supportive and helpful. It needs to be your vision. And I'm not going to intervene even when I think that something's wrong. I'm just going to go along for the ride and be helpful and very, very, very lightly interviewing. And so you just have to choose. And I think both can work. I think both come with certain upsides and downsides. But you can't do in the middle. Because if you do in the middle, what you end up doing is you end up saying to the leadership team, hey, you're responsible, but I'm basically telling you what you have to do.

43:04And so it removes all agency from them. And ultimately, everything that goes right is going to be their fault and everything that goes wrong is going to be your fault. But to make the lazy, when you say the lazy approach, I'm like, yeah, that sounds great. Sign me up. Yeah. But that's hard. How do you make that work? Do you have to find the right person and what attributes does that person have? And, you know, Buffett and Munger always said that, like, incentivizing manager was the number one goal of, was their number one job. Is that true for you? Yeah, absolutely. 100%. If you're going to try to truly be an investor and not an operator in the business, it all comes down to somebody has to do the work and somebody has to exert judgment.

43:45And if you're not going to be the person to do the work and exert judgment, somebody else does. And you've got to be interested, got to be aligned with that person. And so, yeah, when I say the quote unquote lazy approach, I mean, ultimately, this is the only way you scale, right? I mean, if you look, again, we keep coming back to Berkshire, it's a good thing to think about because when people say, hey, let's talk about how Berkshire buys businesses and leaves them alone. That was not how they operated for a vast majority of the time that they've done it. They had to do that eventually because they got to such a scale, they literally couldn't intervene anymore.

44:15If you go back and look at Buffalo News, Buffett and Munger were literally living in Buffalo Dude, they're writing headlines. Have you ever read of that, Sean? They bought a newspaper and they would literally, they were news guys. They liked the news. And they were like, here's, I want this many ads on the page. I think the headline should be like this. I did not know this. This is amazing. Yeah, I mean, I would just say, Buffalo News is a good example of like, basically their mode of operation until the, call it early 80s, mid 80s, when they got to have so much money, they literally couldn't be involved in the stuff that they were doing, was to be highly interventionist.

44:55I mean, they would be involved in the smallest of details. They would set the tone. They would help on marketing strategy. They would replace leadership. I mean, they were doing all the stuff that I'm doing. They would do all the stuff that anybody has to do because when you're small, you can do it. When you've got less capital and more time, you can do stuff like that. And by the way, the returns are higher when you can leverage your time against your money. It's an advantage, right? It's not a disadvantage. It's an advantage. But eventually, you have a limited amount of time and attention. And as the money grows and your attention stays the same, that ratio gets thrown all off and you have no choice but to say, okay, I'm going to spread a much more thinly layered amount of judgment over a much wider grouping of things, which means you have to step out of the day-to-day operations.

45:38And then you have to hire people who can exert great judgment. And so Buffalo News, I mean, there's a great quote from Munger saying, hey, like I'm down to my last like million bucks that I can put into Buffalo News. Like after that, I'm calling uncle, like I'm out. I mean, it was, there's been various times in Berkshire's history. They've gotten, it's gotten very hairy. It was not a guaranteed success. And even when they had a lot of success, it still gets hairy in various points. And I think every business has that though. That's what should be expected. Like it should be an adventure. There's a great letter that you can read.

46:11It's from, it's in 1972 and it's the Buffett letter to the C's candy CEO. If you Google that Buffett letter to C's candy CEO. And he says, and cause I went into this, I haven't like studied Buffett in depth the way that you would, if you're going to do private equity. And he, I just thought the, oh, he's this, oh shucks. He sits at the table. He drinks his diet Coke. He just allocates the capital and he hires great people and they just do magic. And this letter, I was like, oh, Buffett had the mind of an operator, right? Because he goes, dear Chuck, I was out of Brandy's a couple of days ago and have a few strong impressions to pass along.

46:46Number one. And he basically, he starts talking like details about the store. So he goes, people are going to be affected not only by how our candy tastes, obviously, but what they hear about it from others as well. The retailing environment in which it appears, this class of the store, the packaging, the condition. This is like Steve Jobs talking about the Apple Store, right? Like a product-oriented person. And he just goes through step-by-step things that he thinks could be improved in the store experience. And I thought, wow, this is different than what I had kind of the impression you get when you hear about Buffett just sitting in his room reading all day, making investment decisions off of financial sheets.

47:26This is a great letter. By the way, how awesome is this that this was like a typewriter letter? Does that make it, doesn't that make it so much more substantial? Totally. He licked an envelope for this one. Dude, how many times have you licked an envelope? I kind of want to like start sending letters like this. It just makes it feel like more authoritative. Let me ask you something, Brent. I have, like I said, we kind of, my business is a little bit different than yours, which is I create content on the front end. It's the mullet. So I have content on the front end, which is what I love to do, what I'm great at, but media and content's not a great business model.

48:01So my backend is I basically start or buy businesses that I know I can like turbocharge. And we've done this maybe four, five, six times now. And it's going really well. But one thing I've noticed is if I drew a pie chart of what makes it work, it's basically like 60 % of the battle was just the initial market selection. When we picked a project that was like the winds were blowing against us, it didn't matter how much effort we put in or how great the operator was, it was always just an uphill battle. And sometimes we pick these markets that are just like, it's a pull market. You're being pulled in.

48:35It's just a sweet spot. The people just need this. It's shooting fish in a barrel type of thing. That creates a big part of it. The second part of it, the next, I'll say like 30 % is the quality of the CEO that we picked who's going to run the business. And when we pick a sort of limited CEO, we get limited success. When we pick an unstoppable CEO, we get like massive success. And the last 10 % was just luck, like the ball bouncing our way on one or two things that could have easily not happened, but that they happened. Or in the ones that didn't, maybe we missed out on something that we didn't see.

49:07I got a question about that second piece, which is hiring the CEO or evaluating the CEO, evaluating the operator. I want to get better at that. If you sit down with somebody, you're recruiting an exec, maybe you're interviewing somebody who's maybe in the business that's going to become a CEO, or you're taking somebody external to come run this company. What are you doing to, what are you doing that's like not obvious to get that assessment? Is there any little tips and tricks, anything that you've picked up that, that helps you find the right operators? Yeah, well, so actually I think this is a, probably a pretty underappreciated aspect of being involved in small companies is all about the people, right?

49:47And so the better you can be at the people, the better it's going to be for the business. And, you know, we've really deep dived into, I would say, all personality testing is wrong, right? It just depends on what you're trying to get out of it. And so we have actually a huge battery of personality testing that we do for people to try to get as close to a 360 view of who they are. What do you use? Yeah, so we're doing a combination of DISC, Myers-Briggs, and something called Habit Story, which kind of has them see like, what are the habits that they've built in their life and how are they kind of supporting who they are with the structure and apparatus around them?

50:28And I personally also do a lot of study of Enneagram. And so I think actually, personally for me, when I meet somebody, I'm instantly categorizing them as what I think their Enneagram number is. And I'm automatically categorizing them across the four main Myers-Briggs. Dude, this is crazy to me. I thought that's just horoscopes for dudes. Like, do you really use this as like your core thing? That's amazing. Yeah, well, so all of it tells you something about the person, right? So if you think about, so Enneagram, most people don't understand this. So Enneagram basically tells you who you are at your worst.

51:02And there's nine numbers. And basically, everyone falls into a number. And then you have what's called wings, which is kind of where do you tip from that number? So for me, I'm a three and I tip two. So a three is what they call the achiever. My biggest insecurities is that I'm not enough and I want people to like me. And so again, if anybody's proud of their Enneagram, it means they don't understand Enneagram. Like it's not a good thing, right? This basically tells you what are your deepest fears and what is your areas of greatest weakness. But if you can know that about somebody, you can see them, how is that playing out in their life, right?

51:38So when I'm in my least healthy, I'm a people pleaser. I say yes to way too much stuff. I don't tell people the truth. It's really unhealthy. It's highly destructive behavior. I'm very focused on hierarchy. And my guess is that you guys have different Enneagrams. I won't guess your Enneagrams. But can you get - No, no, do it. That's great. Yeah, keep going. Do it. I can't wait. Yeah, yeah, yeah. My guess is, Sean, you're a three. My guess is Sam's an eight. What's three and what's eight? The three is the achievable. So threes and eights both achieve, but for very different reasons. So threes achieve because they want people to love them.

52:17It's like less about the thing itself. And then eights really want the thing itself. So like as a three, like I don't want money to just like want the money. Like I want the money because I want people to love me. Eights really want the money because they want the security and they want the power that comes with the money. So I want to learn the, I want to roll over so that I get pet and my tail can wag. Sam just wants the dog treat. Yep, that's exactly right. That sounds right. What do you think, Sam? That's exactly right. Yeah, well, he's describing everything in the most positive way. So yeah, it sounds great.

52:50I like that. And then I looked up who other eights were, and it's like Winston Churchill, Martin Luther King. I'm like, yeah, okay, cool. Yeah, yeah, for sure. But this is crazy fascinating. You said five different things. So can you give us the exact, so you said Myers-Briggs, and then you said this other test, what's like the exact stuff that you're using? Yeah, so there's two things. One is when I first meet somebody, I can walk you through what I do. And then I would say is separately from that in a hiring process, we use that once we get serious about a candidate, then we put them through a huge battery of testing to make sure we try to understand them, right?

53:26For me personally, when I first meet somebody, it helps me so much to be able to categorize them into what I expect based on just kind of how they're showing up in the world. In Myers-Briggs, right? So you have I and E. So are they introverted or are they extroverted? Are they S or are they N, which is are they in the present? Are they sensing or are they in the future? Then are they a thinker or are they a feeler? So are they primarily excited about ideas or are they primarily excited about sort of the people themselves? right? And then the last one is T and P, which is, are they, or excuse me, J and P, which is, are they very focused on rigid schedules and on creating order?

54:11Or do they like to go and test and try a whole bunch of things, right? And how all these like sort of stack up and combine really gives you a much more holistic view of who somebody is. Then when you then pair with Enneagram, I think gives you probably those two together, I think, creates the quickest and the most holistic view of who somebody is, where if you can get like a pretty good idea quickly of who they are, like how I would talk to somebody who's present-oriented is very different than how I'd talk to somebody who's future-oriented. And oftentimes, you know, we assume the whole world operates like the way we do.

54:43Like my wife and I are literally the opposites in every single one of these areas. So you can imagine in our marriage, like how she shows up and how I show up is so different and it creates all kinds of miscommunications. We've been married now for 16 years and it really, we went through personality testing together about, oh, three and a half, four years ago. It was game-changing in our marriage. It completely explained a ton of behavior for her and for me that had been bothering us for a long time. And it was just largely how we're wired. So that's how we do it. That's how I think about doing it in the moment that helps me relate to people a lot more.

55:18It's crazy. By the way, Sean, 16personalities.com is like these websites are huge that are doing these tests. Yeah, yeah, yeah. They're really big. I mean, this is an important piece. I would say Five Voices is a really interesting one. So it's just the number fivevoices.com, I think. Yeah, those guys have created. Steve Cochran and Jeremy Kubitschek are the two founders of that business. They've created an overlay for Myers-Briggs that simplifies it. I think a lot of their stuff is incredible. And yeah, we definitely use a lot of their work as well. Then we finish off with a quick tarot reading just to see how the future is going to go.

55:56And then we're all set. This is amazing. This is so good. You also have one thing I've read that I really loved. You go, you have this like asshole test. It's like, nobody wants to work with assholes. How do we sort of filter for that? Nobody's trying to present as an asshole in a job interview. And you said like, you can eat with them, see how they treat the staff. You could see them interact with their significant other. That'll tell you a lot in their home environment. And then you said, the most telling environment is to travel with somebody. It is impossible to fake it when you're at the airport.

56:26You're grinding through security. And if there's a delay, their true colors will come out. I thought that was great. Yeah. Yeah, it's fun. I mean, honestly, the business we're in is predicting people's behavior. Like, that's what we're trying to do. And because if all these businesses are predicated on the people who run them, they're all going to have the risks, the primary risks of all these businesses are going to be the people. And so what we're trying to do is get to know people. Have you guys ever been out with someone and they've actually been an asshole to the wait staff though? Whenever people say about this asshole test, I'm like, I've never been around anyone.

56:57That's like rude. Dude, you don't remember the dinner we were at where this happened? Yeah, but that was like one out of a thousand. Yeah, yeah, it's true. This guy, Sean and I went out with someone and he was like shooing the waiter when he was like, it was like, I was ashamed. I left that dinner I felt like I had just like participated in like a porno like I felt like I was like I'm so ashamed like if people find out about this like I'm gonna be so embarrassed that's rough wow dude what a fun episode this is great oh yeah I really enjoyed hanging out with you guys it's the one we guys built Brent thanks for coming on man if you haven't go check out his blog and his annual letters they're pretty great follow him on Twitter what's your Twitter handle Brent B.

57:42Shore? Just Brent B. Shore. Yep. All right. Good seeing you, dude. Thank you. That's it. That's the pod.

58:02Hey, let's take a quick break because there's a quote that I love I want to read you. It's that we shape our tools and thereafter, they shape us. And as an entrepreneur, if you're using a bank that was built in the 90s, you're operating like you're in the 90s. And trust me, I've been there. Clunky portals, random holds on your money,$50 wire fees, and then being told, please visit your local branch. Well, that's why I switched to a different type of banking solution, Mercury. It turns your financial chores into a smooth workflow. You can do wires, invoices, cards, reimbursements, two clicks, and I'm done.

58:32If you're already using Mercury, respect. If you're still using one of the old big banks, I got questions for you. So go visit Mercury.com and give it a test drive. Mercury is a financial technology company, not a bank. Banking services are provided through Choice Financial Group, Column N.A., and Evolve Bank & Trust members, FDIC.