MI322: Enduring Ventures w/ Sieva Kozinsky

25:06He had spent 12 years in that office building. So he'd really started the business there. It was just him and a friend. And then little by little, they grew and they took over this whole two-story apartment in the sunset right off of Judah. I moved into that office. I started sharing with a couple of friends. Eventually, they moved out and I reached out to Sam and I said, Hey, we have space in our office. I know you're starting The Hustle, which was a media company at the time. Do you want to come share this office? And he moved in with me, another group moved in with us, and they eventually moved out.

25:37But Sam and I stayed, and little by little, he grew the hustle, and I worked on Study Soup. And we became closer over that time period. You asked about Tim Ferriss. So Tim Ferriss became an investor in The Hustle. And he showed up in the office one day. And this is pretty early in Tim's journey as a content creator, as being a media mogul. Before? Would this have been before the 4-Hour Workweek came out or right around that time? It was right after the 4-Hour Workweek came out. So obviously, the 4-Hour Workweek was a bestseller. So he was famous for that. But he wasn't as big on his podcast just yet, which I think is his biggest platform now, and his email newsletter as well, which I think now has millions of subscribers.

26:25So he came into the office and I was just lurking around. I wanted to meet Tim. I'd read the four-hour work week. I was fanboying. And he was talking to Sam and I was there just listening in. He shared a few interesting lessons because Sam was obviously in the early stages of building his media company. And he wanted to hear from Tim. Hey, Tim, what did you learn building your company? Where's the value? And where do the economics really accrue for these types of media companies? And Tim shared something interesting that I had not really considered in the past. Because I assumed Tim is selling the four-hour work week.

27:00He's making a bunch of money on his books. That's what's really going to make him famous. So he's going to spend his whole life making books and making money off of those books. But what he actually shared in that office is he said, look, I make some money off of these books that are bestsellers, but I don't make a lot of money off of it. My long-term game is to build up my owned audience. His game was really to build up his podcast and his newsletter. And he said, look, the media does not want to talk about my podcast or my newsletter. They don't care about it. But they do want to talk about my books.

27:38So I'll get invited to do an interview with Yahoo Finance, for example, and they want to hear about the 4-Hour Workweek. And I'll plug my podcast, I'll plug my newsletter. And his book writing process was really the top of the funnel for his podcast and his newsletter. And I think at the time, he had maybe one employee or two employees running the podcast, selling ads, managing all of the operations. So you can imagine if you can run a media business with millions of subscribers, with one or two employees, you can have a really profitable company. And for me, that really set off a few different light bulbs.

28:18One is it imparted the importance of owning your brand and really having an owned audience. And then two, it really opened my eyes to book writing. I never considered writing a book. But all of a sudden, I thought to myself, if it's good enough for Tim, and Tim is using it to build his reputation and build his credibility, maybe I should write a book. And actually, I am now finally, many, many years later, this was like 10 years ago now, I am now finally in the process of writing my book with a business that we bought called Scribe Media, which is a hybrid book publisher that's helping me publish my book.

28:57I want to get into that. I interviewed Eric Jorgensen, who took over as CEO of Scribe. So I definitely want to get into Scribe later. But before we do that. I know that you're a big Buffett and Munger fan. You read Snowball. It's probably a book that maybe you and Sam Parr read in the book study group, maybe. But I wanted to get into some of your lessons from Buffett, Munger, Snowball in particular. And I also wanted to touch on Rick Guerin and you talked about the idea of anti-luck. Let's just get into a little bit about the lessons you've learned from Buffett, Munger, and you now have a holding company that's a baby Berkshire Hathaway?

29:37Yeah, there's so many lessons to share. So I'll think a little bit about where we can start. I read Snowball, which is a book by Alice Schroeder about Warren Buffett. I must have read that book in 2015. In 2015, I was spending a lot of time in India because we were hiring a lot of staff there for my study suit company, both engineers and academics. And I had a lot of time on my hands. I didn't have any friends there. So I was really just working and reading. And I read Snowball. And one of the things that stood out to me was that Warren had this holding company called Berkshire Hathaway. And the way it worked for him is he had a few different businesses that all generated cash flow.

30:28And he could take money from all of those businesses and pull it up to the holding company and reinvest in the best growth opportunities. Sometimes that meant new businesses. Sometimes that meant his current growth businesses. And right around 2015, I was starting to think of StudySoup. I was starting to see the writing on the wall for StudySoup. Maybe this was actually 2014, now that I think about it. But I was seeing that StudySoup had gone from doubling or tripling in size year over year. And all of a sudden, we hit a ceiling and the business was still growing, but it was growing at like 10 % or 15 % per year.

31:05It was no longer requiring the type of investment that we were making into it previously. So I'm looking at Warren Buffett's situation and he has multiple businesses where he can reinvest capital however he sees fit. And then I'm looking at my situation and I think to myself, man, this little business that I have, it can generate cash flow pretty predictably. But I don't want to reinvest it back in this business. I wish that I had multiple other businesses where I could reinvest this capital, because that would be the best thing for me to do as a capital allocator. And this was the first time that my brain went from I'm an operational CEO to I'm actually a capital allocator.

31:51And my job is not only to make sure that the business is running properly, that the trains are running on time, and that we're profitable. But my job is to figure out, once we have that profit, what is the best thing to do with each incremental dollar? And I think it unlocks something in my head that I was able to access many years later when I did decide to start Enduring Ventures, which is largely inspired by Snowball, largely inspired by Warren Buffett. But it really started my thinking. Things didn't change for me immediately, but I do remember going through that thought process while reading Snowball.

32:30Let's get into Rick Guerin. First of all, I'll let you describe who he is. And then I know you've had a lot of lessons from him as well. Yeah. It's a really interesting story. I think one of my favorite takeaways from the Berkshire Hathaway journey has been the focus on incremental growth and patience. And I'm not naturally a patient person. I can be fairly impatient. People say I have a pretty relaxed and sheldemeanor, which I think is helpful of what I do. But at times, I can be fairly impatient. And I think that reading about the growth of Berkshire Hathaway, reading the letters that weren't published over the years, has really taught me to take my time, not to try to accelerate the desire to make a lot of money today.

33:16Because I think that's how most humans are wired. If we look at incentive plans, if we look at the public stock market, and we think about, okay, there's reporting schedules every quarter, and executives are incentivized around stock price, and they're incentivized around that reporting cycle. So our entire economy downstream is incredibly short-term minded. People are trying to squeeze the most profits in the short term in order to benefit personally. So nobody's acting maliciously, but their personal incentives are tied to these quick growth schemes, basically. And we see the same thing in private equity.

33:52So private equity makes a lot of money by purchasing a business with as much leverage as they can and flipping it two, three, four years later for profit. The more leverage they can apply, the more profit they're going to... the more proceeds they're going to get personally because of the way promote structures work. So Warren Buffett is like a light amongst the darkness. He writes about this idea of growing slowly, limiting the amount of leverage you apply to things, really trying to grow in a way that is indestructible and is defensible because the markets are going to grow, the markets are going to crash.

34:32That is the only thing that's predictable, right? You can't predict the future. You can't predict how the market's going to go, but you can predict that there will always be recessions in the future. There will always be downturns, similar to what we're experiencing in the office market today, right? Nobody could have expected the Fed raising interest rates so much and cities getting wiped out, places like San Francisco, where it was considered grade A style commercial real estate is now 50%, 60 % vacant. We can't predict what's going to happen, but we can predict that something is going to happen.

35:06And that's probably a key learning that I took from those guys is really grow slowly. Don't over leverage things. Don't ever put your holding company at risk of failure. Even if it means you have to grow a little bit slower, even if it means you have to delay gratification or delay wealth till later on, as long as you continue making good decisions and not losing money for yourself and your investors, eventually things are going to work out for everyone. And that brings us to Rick Gurren. So when I talk to people, everybody, of course, knows Charlie Munger, who passed away this year, and Warren Buffett.

35:43They are the two heads and the figures that led Berkshire Hathaway for the last 60 years. Now, Rick Curran was the third partner of Berkshire Hathaway. And it's a really interesting story. So Rick first started working with Charlie Munger in his partnership because Warren was over here running Berkshire Hathaway. Charlie had his own partnership early on. And Rick and Charlie would do deals together. And one day, Rick discovered blue chip stamps. Basically, blue chip stamps, what they were doing is when you would go to the grocery store, you would receive these little coupons or gift cards. And you could add up these tokens and eventually you could cash them out for money, for gift cards, for prizes.

36:27So Blue Chip Stamps was the purveyor. They were the one that supplied the stamps that people collected. And what Rick found was that this business had, I think it was like a 50 % or 70 % redemption rate, but they were required to keep all of this cash on their balance sheet as a liability, even though they knew a large percentage of it, people would never redeem. They'd been around for many, many years. So they knew what the pattern was. They knew how much of that was actually true cash as opposed to a liability. They had it all listed as a liability because that's what you're required to do with things like gift cards and prizes and future prizes.

37:03He also noticed that they had like$100 million in public securities. So they were stockpiling cash and investing in bonds and securities. But the stock was trading at something like 60 or 70. The market cap of the company at the time was like$60 million. So they have all of this cash on their balance sheet that they're holding back and they're marking as a liability. And they have all of this money in securities. And he can now buy this business or 50 % of this business for$30,$35 million. Little by little, him and Charlie bought into this business. And once they did, well, once they got to above a majority, they were able to control the balance sheet of the company.

37:43So they spent$30,$35 million to control something like$100 million of capital for this business. And then they got warned to invest alongside of them as well into this strategy. And then they used the capital from Blue Chip Stamps to invest in a few of what became pretty standout companies for them. They invested in one insurance company. Then they invested in the Buffalo newspaper, which they funded for years out of blue chip stamps, which eventually became a business that was generating somewhere between$30 to$50 million per year of free cash flow for them. And then they sold it for around$500 million.

38:25And then they also invested in Seize Candies. And everybody knows about Seize Candies, but at the time, they paid, I think, $25 million. They paid$30 million for the newspaper. They paid$25 million for Seas Candies. They put in$30 million into this insurance company. And Seas Candies became a juggernaut for them. That business to date has produced about$2 billion of cash flow for them over the years, which is just incredible. These guys paid$25 million for a business that has generated$2 billion of cash for Berkshire. This was all Rick's idea. He found this. He's an incredible investor, really smart guy.

39:08And eventually, they agreed to merge the two partnerships. So Rick ends up with something like 5 % Berkshire Hathaway. Charlie ends up with something like 10 % to 15%, 10 % maybe at the time. And Warren ends up with the vast majority of it. I don't know if those are exact numbers there, but they're within a few percentage points, I'm sure. Now, 1972 rolls around and Rick Gurren is highly levered on his stock portfolio. And towards the end of 1972, there is a stock crash. 1972, 1973, there's a stock crash. And because Rick is levered on his portfolio, he gets margin called, which means he has to liquidate most of his portfolio in order to pay down the leverage that he was taking.

40:00So he ends up selling his shares back to Warren Buffett for something like$43 a share. All of them get liquidated and sold to Warren. Today, if you fast forward the clock, I think Berkshire is trading at over half a million dollars a share. And his piece of the portfolio would have been worth somewhere like$7 billion. dollars. What's the lesson there? The lesson is really... And actually, Warren got asked about Rick Gurren just a few years ago in an interview. They said, hey, you guys used to have a third partner named Rick in the early 70s. What happened to him? And Warren shared this incredible lesson.

40:39He basically says, Rick Gurren was just as smart as Charlie and I. He's an incredible investor. But Rick was in a hurry and he had these loans out on his portfolio. He was in a hurry to get rich. That's why he had these loans out. He wanted to get maximum leverage to get maximum returns. So when he got margin called and he's had to sell all of his shares back to Warren, he lost everything. And that really is the lesson, right? You can be an incredibly smart investor. You can be incredibly hardworking. But if you have a systemic risk in your portfolio, which is usually too much debt, it can take you down.

41:17So my takeaway is, take your time, never apply systemic risk to your holdings. You can use leverage thoughtfully. For us, we have zero leverage at our holding company. But occasionally when we buy a business, we'll use a little bit of debt at those businesses. Because we think to ourselves, we're going to do whatever it takes to protect those businesses. But if a few things go wrong, and it doesn't work out, we don't want to harm our greater portfolio of businesses.

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45:11All right, back to the show. That brings me to my next question. We're talking about Warren and Charlie, I wanted to get into your business partner and the importance of picking the right business partner. So talk about Xavier, if you would, and then whether or not, if somebody is listening to this and they're considering starting a company, whether or not they should pick a partner or go it alone. I wanted to hear your thoughts on that. Yeah, it's a complicated question. So Xavier is an incredible entrepreneur that I met probably 10 years ago now. I was working on my little business, my little Stunny Suit business.

45:50And I got invited to a conference for entrepreneurs in Utah. It was an invite-only event. There was 150 people. I got lucky. My friend's dad is a well-known angel investor. He said, hey, you're getting started in business. Why don't you come to this conference? I certainly didn't belong there amongst the people that were there. I was kind of the bottom of the totem pole as far as entrepreneurs are concerned. That was Summit? Summit Series. Yeah, exactly. So I went there and I showed up and I'm sitting in the house where I'm spending the weekend talking to some of the people who I'm sharing with.

46:27And this guy comes in with long hair, he's wearing a suit. He just flew in from Africa. His name is Xavier. And over the course of the weekend, we become friendly, we get dinner together, we ski together. We had a really nice time. We always joke that we met in a hot tub because we went hot tubbing that day. But yeah, so what I learned about him is that he's an entrepreneur. He's built a couple of businesses. He built one of the largest book retailers on the internet called Better World Books, which he sold. They were processing millions of books per year. And then he started this company in Africa called Zola Electric or Off-Grid Electric at the time.

47:06And basically what they were doing is they were lighting the homes of millions of people that were off the grid using solar. really, really cool stuff. And they had built this off-grid, decentralized grid technology. Just really, really impressive guy, really impressive company. And we became friends. I used to host this founder's dinner in San Francisco with a guy named Sean Puri, who's Sam Parr's co-host now on My First Million. And we used to host this thing called Junto, where once a month or once every two weeks, we would get together with an interesting CEOs, people that were building cool companies.

47:44And it was really our way to get close with people that were further than us in their career who have built cool things and wanted to meet other interesting entrepreneurs. So we would meet once a month. And Xavier, I invited Xavier after that weekend. I thought to myself, wow, this guy's great. He's super kind. He's an incredible entrepreneur. I love the way he thinks. I want to be closer with him. So I invited him to this event that we had in San Francisco. And he started attending, he became a regular with a few other guys that I'm close friends with today. And then many years later, when he had hired a CEO at his company and decided he was going to go pursue a new project, he reached out to me and we started talking and he said, yeah, let's definitely work on something together.

48:29And this idea for doing a holding company came about, which frankly, he came up with. And that's how we got started. Your question was, should everybody have a business partner? And do I recommend having a business partner? Xavier is an incredible business partner. I could have not accomplished everything that we've accomplished to date without him. There's no way. He's really, really special. But I don't recommend business partners for everyone. Xavier and I knew each other for many years. I knew how he thought. I knew what made him tick. I knew what got him frustrated. I knew how he behaved in difficult situations because we were meeting and talking about these very intimate elements of each other's businesses.

49:14So by the time we worked together, I knew that he was someone that was incredibly fair, that he was kind, he was very hardworking, he thought in very unique ways. And that was a good basis for our relationship. That was a good basis for my partnership. The challenge with most founders that I see is that somebody meets somebody in college or business school, or they're maybe co-workers for a few months together, and they decide to start a business together. And they said, I need a co-founder because they're scared and they need someone's help, which is reasonable. And they picked this semi-random person that they're friendly with.

49:51The challenge is you are basically married to your co-founder. You are oftentimes spending more time together than you are with your own spouse. You should really approach it in the same way that you would in selecting your spouse. And you would never spend a few hours... Most people, I can't say never, because some people do, but most people will not spend a few days together and immediately propose and decide to have children together immediately. And that's what you're doing when you're picking a founder that you maybe had a couple of classes with or you've known for a few months. In those scenarios, what I recommend people do is they play it slow.

50:30Don't make any commitments to be co-founders with this person. Maybe they're great. Maybe they're not great. But you need more information. So the best thing for you to do, if you can, is to start the business yourself, get things going, get the momentum moving, talk to this person that you're considering working with, suggest that you guys work together in an unofficial capacity for the first six months to get to know each other. If they need a bit of pay, maybe you can pay them as a consultant. And then only after you've known each other for six months and you've worked together on projects, then you can talk about being co-founders or partners in the business.

51:09I love the idea of the Junto too that you mentioned earlier. That's a page out of Ben Franklin's playbook, I think, right? Didn't he have something similar? Yeah, that's exactly right. But yeah, his version of Junto was not just focused on entrepreneurs. He was bringing in entrepreneurs like industrialists and also local politicians to talk about what was going on with society and their town. But yeah, that's the idea. It's a similar idea. You and Xavier Connect, you create Enduring Ventures. Talk to me a little bit about the portfolio. I want to get into Scribe. I think that was a pretty recent acquisition, last three months or so, four months, I think.

51:52Talk to me a little bit what the portfolio looks like today, and then I'll go from there. So today we own a portfolio of about 20 businesses. We've started a few small companies, but the majority of what we do is we acquire cashflow in businesses from owners, from the people who started them. So I guess our world is really split into two. On one side, we're buying good, stable cash flowing businesses at three to six times earnings. And on the other side, we have distressed or distressed technology businesses that could be profitable, but they have a bad balance sheet, or they're not profitable, but they have good revenues and they have good product.

52:37They just need to be made profitable. On the value side of the business, on the cash flow side of the business, we own companies in swimming pool construction, plumbing, HVAC. We have an auditing and accounting product for retailers and a few other businesses as well. On the distressed side of the business, we have acquired a couple of businesses that were venture-backed that had raised anywhere between$30 to$60 million. They'd gotten to$10 plus million of revenue, but they were not profitable. They were both not profitable and they were not growing fast enough to be considered the next Uber or Airbnb.

53:21So they're kind of in this in-between space where it's hard for them to raise venture capital, further venture capital, but it also doesn't make sense for them to shut down. And in those cases, we'll come in, we'll buy the business, we'll take it over, our team will parachute in and turn that business profitable. For example, one of our first acquisitions is a company called upcouncil.com, which we turned profitable and another company called abstract.com, which we run profitably today. And you asked about Scribe. So Scribe kind of straddles both of those categories. Scribe was once a very profitable business that hit some hard times.

54:01And for context, Scribe is a hybrid modern book publishing company. So what that means is, if you want to publish a book, Patrick, and you don't want to self-publish, you want a really high-quality, good-looking book that's been edited by top editors, you want to get it out into the world and really be proud of it, you could use Scribe to do so. And they'll even provide a ghostwriter that'll write in your voice. So they'll do everything for you end to end, everything from helping you figure out what is the exact idea that's going to be compelling for your audience, helping you actually write the book, edit the book, create the design for the product, and then produce it into the world.

54:47So they've actually published the books of over 2 ,000 people now. These people are CEOs of Fortune 500 companies, they're coaches, they're lawyers, they're accountants, anybody who's looking to build their credibility and put out a high-quality product, their voice into the world. Because a book is one of these things that it lives on forever, first of all, but also it's a constant sales tool. So for example, I went to a conference two weeks ago. One of the gentlemen there handed me a book, and now that book is on my living room table. So I've forgotten most people that I met at that conference, but I know who he is, and I know what he does, and I know what his business is.

55:34So it's this incredible perpetual sales tool for business professionals. On the other side, there's customers, there's famous influencers, famous writers, like David Goggins, who wrote Can't Hurt Me and sold over 5 million copies using Scribe, Nassim Nicholas Taleb, Chris Voss, and many others. And the reason they use Scribe is because if you work with a traditional publisher, that publisher will keep 80 % of your winnings, 70 % of your winnings. But these guys already have an audience and a reputation. So by using Scribe, they get to control their full IP and they get 100 % of the upside. So David Goggins, for example, made many, many millions of dollars more by using Scribe and putting his book out into the world using Scribe.

56:23So that's kind of the story of what Scribe is. I'm happy to talk a little bit about the acquisition if you'd like as well. Well, I just interviewed Eric Jorgensen, and he's the CEO now of the company. He wrote one of my favorite books, actually, which is The Almanac of Naval Ravikant. I love that book. You guys produced it. Just came out with one on Balaji. And then it sounds like you also have plans to write a book and I'm sure you'll use Scribe. So I actually wanted to get into your idea for your book and some of the thoughts that you have on it. Have you started writing it? Yeah, definitely.

56:59Well, I don't want to give all the juicy details away just yet, but I can share what I'm thinking about and what gets me interested in the world. And that will guide what the book is going to be about. I read a weekly newsletter called the Business Academy, which you can find at sievakosinski.com, just my first last name.com. And the things that I write about are really investing topics, lessons learned in business. And then I do profiles of what I think are interesting holding companies or interesting businesses. So my day-to-day is learning as much as I can from other investors, from other company owners, talking to private company founders, public company founders, and really understanding what has led to the success of the business, what makes their business tick, and building up my internal repository, really sharpening my tool set as an investor so that I can become better and sharper, identifying what is the difference between a good business, a bad business, an outstanding business.

58:03And everything we've done so far with Enduring Ventures, everything that I've done so far building my businesses has compounded and led to this. The intent of the book is to be a synthesis of some of those lessons through the eyes of some of the businesses that I also have explored. Can I use this as a way to teach as many people as possible to become better at identifying great businesses, to become better at running good businesses, to become better investors, etc. You're a great writer. I've connected with you on Twitter. I love your Twitter tweets, X, whatever it is now. Talk to me a little bit about the actual, what Twitter has done for your career.

58:46And a little bit about just like your creative process in terms of writing and just creating really great content on a consistent basis. It's not easy to do. Yeah. Twitter has completely changed my career, the trajectory of our company. And it's been incredible. And for people that don't understand or don't participate, I think it's hard to grasp, right? Twitter seems like a silly tool and Elon gets a bunch of bad press around it. People are like, what are you doing there? Why are you wasting your time posting and sharing information? And I can share some of the success that I've had and I will hear in a moment.

59:23it. But for me, it really started to share content and share my learnings through Twitter, through LinkedIn, through my newsletter, was really inspired by other great investors. The way I live my life is I think to myself, where do I want to go? Who do I want to become? And I try to learn as much as possible about them and then pattern my life around them. Because these are people that have been doing it for 50 years. They've tried and tested different methods that work that didn't work. And there's a reason that 50 years later, they're doing certain things. So for the last 50 years, Warren Buffett has written an incredibly detailed, thoughtful, and thorough newsletter to the public.

1:00:07He doesn't write it in financial terms. He's not writing it for analysts. He's writing it for people like me, people like my sister, people like my friends, who can read his writing and learn as much as they can. And if you think to yourself, why is he doing that? Why is Howard Marks producing a podcast? Why is Bill Ackman all over Twitter? These guys are world-class investors and they are world-class content creators. So at some point in their journey, they determined that being a content creator, building an audience is beneficial and gives them an edge in what they're doing. And it's absolutely true.

1:00:49If you think about if you've got a big business that does 100 million EBIT down, a family business, and you want to sell it to someone, who's the first person you're going to call? You're going to call Warren Buffett, right? And that is an incredible advantage. That's an incredible price advantage because you could call any private equity firm, you could call any strategic, but he's always going to get the first call because he has spent the time and the energy building his reputation through content. So that's what really inspired me to get started. And that's what really what's encouraged me to keep going.

1:01:23Even though at times it feels like, what am I doing? Why am I posting on Twitter? Why am I posting on LinkedIn? Aside from that, I get a huge kick out of people reaching out to me and saying, hey, you really inspired me to take the jump and start a company or you really inspired me to go out and buy my business. I learned so much by following your journey. And I love that. I get a lot of joy from that. For me, creating content has led to a lot of unique opportunities. It has brought businesses our way for investment. For example, Scribe came through Twitter from Eric, actually. And if I hadn't been posting on Twitter, there's no way he would have known who I was.

1:02:00We've raised a lot of capital through those channels. We've never posted to say, hey, you should send us your money and you should invest with us. But people see what we're talking about and they reach out proactively and say, hey, I like what you're talking about. I want to invest with you. You know, it's really been an incredible tool. And as we grow, and as our audience grows, and as our experience gets better, all of this compounds. I have more people who know what we're doing than I did when I had 10 ,000 followers. And we have more experience as investors. We have more capital to deploy.

1:02:34And if we just keep going, we keep growing along those different vectors, I think good things will continue to happen. So I highly recommend it to anyone who's thinking about building nonprofits. You mentioned a little bit about the idea of cloning and just basically copying the playbooks of people that have already been doing this for 30, 40, 50 years in the case of like Buffett and Munger. I know you're a big fan of Manish Prabhai and did a thread recently on the Patels, who own I think over 50 % of the hotels, motels in the US. He's got this idea of heads I win, tails I don't lose too much.

1:03:14Is that a concept that you guys do when you're buying and acquiring businesses? And I'm curious how Monish has affected your thought process in investing. Yeah. The Dando Investor, which is the book you're referencing, is an incredible book. In it, it talks about the Patels, which is, they're not family members. It's a group of people who all come from, I think it's called the Gujarat, or I don't know how to say a region of India. And many of the people, let's say most of them are named the Patels and are named Patels. I think the last name is used as a signifier of what region you're following.

1:03:53Basically, what happened is, I think like 16 years ago, the first Patel gentleman came to the US and bought a motel. And he used a combination of personal equity and debt to buy his first motel. And he lived in that motel with his family. His wife did the cleaning. He handled the business operations at the front desk. His kids would handle the front desk when he couldn't. And because his family was running it, he was able to operate the lowest cost motel with the highest profit margin relative to their peers, which meant that more often than not, his motel was filled. Eventually, he paid off his debt and he went and he bought another motel.

1:04:40And he bought another motel. And when he bought the other motel, he realized, okay, now his family can't run it. So he needed his cousins or his friends from his hometown to come run it. So he invited his buddies from India. He said, hey, I'm going to buy this motel. I need you to run it. If you run it for a while, and you help me pay off some of the debts, I will fund you to go buy another motel yourself. So it became this daisy chain reaction of this group of people, or this group from this one region in the world, that built incredible wealth in the US through motels and hotels. They own something like a trillion dollars worth of real estate in the US.

1:05:23And I went to a hotel conference called the Asian American Hotel Association recently. And 99 % of the people in that room were Indian Americans. I was one of the few tall white guys in there. And I met a lot of people link hotels. It's a thing. It's a real thing. So anyways, in the book, the Down to Investor, he talks about this storyline, how this group of people came to this country with very little to no money. and through sweat effort, a bit of smartly placed debt, we're able to build lasting personal wealth. And very specifically, he said, look, to buy a hotel, you could invest$80 ,000. You could take an SBA loan for the other, let's say$920 ,000.

1:06:07So now you own a million dollar hotel. That million hotel, if you bought it at a 10 cap, let's say, was producing$100 ,000 a year of profit. Now you're running it with your family. So maybe you're making$150 ,000 or$200 ,000, $200 ,000 a year of profit. So maybe in five years, you can pay off 100 % of the debt, or a little bit slower if you want. Now you outright owe a hotel that's creating$200 ,000 of cash flow for you. That's a lot of money for somebody that has no American degree, probably very little English, and is now cash flowing this sum of money and owns a property that's worth a million dollars.

1:06:49So the real focus there is small. Where can you make thoughtful investments where the downside is limited? But if you are successful, the upside is transformative into your life. And it's very much how we think about our business, right? We don't want to risk our full capital base on any individual investment. And when we're looking at individual investment, we're really thinking to ourselves, okay, our downside is, of course, the cash that we put in. But our upside is XYZ, right? Where can this business grow? What is the brand value of this business? What are the cash flow distributions? And we're really looking for cash on cash returns of 20 plus percent.

1:07:33So yes, very much so. Madish has inspired how we think about our business. Yeah, I love it. I love that guy. He's got some great talks that he's done on YouTube that I highly recommend along with the Dando Investor. Definitely worth checking out. There's so much more I'd like to ask you, but we are out of time, unfortunately. Is there anything that we didn't discuss that you wanted to touch on at all? You know, I think this has been a great interview. You asked a lot of thoughtful, interesting questions. So we've covered a lot of ground. I would just say this for people listening. The lower middle market of acquisitions has unlimited opportunities.

1:08:12There's so many small to medium-sized businesses out there. And because of the large volume of opportunities out there, you're going to find what I call mispriced gems. It's much harder to find a mispriced gem in the public markets because you have tens of thousands of investors looking every day for opportunities. Everybody has all of the information. You also have bonds and you have mutual funds. You have all of these things that are fighting for good prices in the public markets. But at this scale, there's not a lot of buyers. There's a lot of sellers and people are starting to retire at a higher rate as the baby boomer generation retires.

1:08:53So building a skillset and building experience in the lower middle market is certainly not easy. It's going to be full of challenges ahead. But if you can figure it out, it's an incredible way to invest and to get good returns as an investor. Yeah, it's such a good point. We'll have to wait till your book comes out to learn more about it. But I'm looking forward to that. What's the best way for our listeners to find out about you and get in touch? Just my first and last name. It's unique enough that it's easy to find anywhere you go. I'm always the first Google search for Twitter and LinkedIn, and you can sign up to my newsletter.

1:09:32Thank you so much, Patrick. Yeah. Thanks, Eva. Really appreciate your time today. Thank you. This has been great. Okay, folks, that's all I had for today's episode. I hope you enjoyed the show, and I'll see you back here real soon.

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