0:00

All investing at the end of the day

0:02

is the assumption of risk. The ideal investment

0:04

scenario is you are assuming a risk

0:07

that is knowable, you are being paid more

0:09

to assume that risk, and you

0:12

have some ability to mitigate that risk.

0:14

So we all have three basic moves

0:16

in conflict. It's called move against, which

0:18

is like the

0:20

second one is... And then the third

0:22

one is... And so if you

0:24

watch, all of your conflict will follow that

0:26

pattern. Let's talk about incentives. How do you

0:29

set incentives for the CDOs? I think

0:31

the ideal system is... What have you learned

0:33

about hiring people that most people miss? I

0:35

think that's probably been the biggest leap forward.

0:37

What most people get wrong is most people

0:40

don't understand. What's the playbook when

0:42

you take over a company? So

0:44

we are... Welcome

1:04

to the Knowledge Project Podcast. I'm your host,

1:06

Shane Parrish. In a world where knowledge is

1:09

power, this podcast is your leverage for mastering

1:11

the best of what other people have already

1:13

figured out. If you're listening to

1:15

this, it means you're not a supporting member. Members

1:18

get early access to episodes, my personal reflections

1:20

at the end of every episode, which a

1:22

lot of people now say is their favorite

1:24

part. No ads, exclusive content,

1:26

hand edited transcripts, and so much

1:29

more. Check out the link in

1:31

the show notes for more information. My

1:33

guest today is Brent Beschor. Brent

1:35

is the founder and CEO of Permanent Equity,

1:37

a private equity firm that buys and grows

1:40

boring businesses. And by boring, I mean the

1:42

kind of businesses that most people overlook, but

1:44

that are essential to making the world go

1:46

round. Some of his

1:48

companies include Ace Fence, the largest

1:50

residential fencing company in Texas, Chance

1:53

Rides, the leading amusement ride manufacturing

1:55

company in the United States, and

1:58

Pacific Air, which has one of the aerospace... industry's

2:00

largest selection of on-hand inventory.

2:03

I first met Brent about 10 years ago

2:05

now and we became friends right away. I've

2:08

met a lot of people in my life and

2:10

I remember flying home after the first time we

2:12

met thinking how incredibly special he was. After

2:15

this conversation when Brent was flying home,

2:17

I felt so grateful that that chance

2:19

encounter had turned into a great friendship.

2:22

Not only does Brent love the details,

2:24

he can talk about any company they

2:26

own or their competitors at the 50,000

2:28

foot level or the one inch level,

2:31

but he's also one of the most thoughtful and

2:33

kind people I've ever met. He's bigger on

2:35

the inside than the outside. While

2:37

his conversation is one continuous episode,

2:40

it comes in two distinct parts. The

2:42

first part is about life and the

2:44

second part is about business and his

2:46

wisdom is equally profound in both. We

2:49

discussed the small changes and mindset shifts

2:51

he's made that have had a profound

2:53

impact on his personal life. About 45

2:55

minutes in, we switch to business. We

2:58

cover operating out of abundance and what

3:00

that means, why longevity matters, why debt

3:02

is not a source of return, why

3:04

not having debt is actually a strong

3:06

signal of a good business, what it

3:09

means to own a business, incentives, his

3:11

first deal, taking outside capital, the advantages

3:13

of personality testing and so much more.

3:16

In a world where everyone is chasing the next

3:18

big thing, Brent is focused on

3:20

finding value in the overlooked and

3:22

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3:25

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Message and data rates may apply. Bank of

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America and a member FDSE. What's

5:38

changed in your life in the past two years?

5:41

I would say my marriage has changed a lot.

5:43

My inner life has changed a lot. My

5:46

physical outer life has changed a lot. Ironically,

5:49

the business has not changed a lot.

5:53

It's been interesting how the different seasons do

5:55

and don't overlap, but there's been a lot

5:57

of changes about how I approach work that have changed, but the

5:59

actual work itself has not changed. Let's dive

6:01

into that. What's changed in your marriage? What's

6:04

changed in your exercise? Let's tackle exercise first.

6:06

Yeah. Well, I think maybe all

6:08

of it is connected to

6:12

a walk I went on, gosh,

6:14

I'm probably pushing now three years ago. And there

6:17

was a gentleman on this

6:19

walk who was at a small gathering

6:21

of people in Colorado. He kind of picked me out.

6:23

It was like 40 or 50 people in

6:26

the crowd. And afterwards he said, hey,

6:28

can I go to a walk

6:30

with you? I'm like, sure. And he said,

6:32

hey, can I speak truth into your life?

6:34

And he said, I

6:37

see a lot of shame in you. I see

6:39

a lot of fear in you. And I worry

6:41

that that's dramatically negative and

6:43

impacting a lot of your

6:46

relationships. It was more in depth than that. I

6:48

mean, we talked for another probably 20,

6:50

30 minutes about what he saw. And I just tried

6:52

to take posture. I mean, initially when somebody says something

6:54

like that to you, like cut you, how

6:57

dare you? I have great relationships. You've

6:59

known me for a long time now. We were talking about

7:01

this at least 10 years, if not more. And

7:04

I wouldn't have said six

7:06

or seven years ago that I had bad

7:08

relationships. I would have said I

7:10

had really good relationships. If you'd asked me how my

7:12

marriage was five years ago, I would

7:14

have said, oh, I guess six

7:17

or seven, we have our

7:19

challenges, but we get along and

7:21

compared to where it is today, I would

7:24

say it was like a two. I

7:27

just didn't know. I think about this idea

7:29

of everything's relative. So world-class is the best

7:31

you've ever seen. You ask somebody who's only

7:33

eating at fast food, what's their favorite restaurant

7:35

in the world? They're going to tell you

7:38

a fast food restaurant. So the question we

7:40

have to ask ourselves is like, what

7:43

do we have to compare it to? And are we talking

7:45

about relative or an absolute terms? And

7:47

to be honest, I don't think I had

7:49

been exposed three years ago

7:51

to what was possible in relationships or what

7:53

was possible in marriages. Like I had not

7:56

seen marriages up close where I was like I

7:58

was comparing my marriage to what I'd seen in other

8:00

marriages and I felt like we were doing fine. Like we were

8:02

probably right in the middle of the

8:04

ballpark. I think what this person did for me was

8:07

open my eyes to like, there was a

8:09

lot more out there. There's a lot more

8:11

possibilities that I didn't know.

8:13

That was like a seminal moment of like

8:16

a warning shot across the bow of,

8:19

oh my gosh, like I need to probably go

8:21

and look and study like, who

8:23

am I? What makes great friendships? What

8:26

am I giving to my relationships? How do I think about

8:28

my marriage? I'm like, what am I doing in my marriage?

8:30

And like, how should it

8:32

be? And am I willing to

8:35

settle for an interior life

8:37

filled with anxiety and shame and fear?

8:39

Am I willing to settle for a

8:41

marriage where things are being hidden and

8:43

there's disconnection and division?

8:45

Right? Am I

8:47

willing to settle for friendships that

8:49

maybe don't go that last 10% and

8:53

create that really meaningful, deep connection? Am I

8:55

willing to settle for a physical body that

8:58

is overweight and out of shape and

9:01

likely gonna become diseased? And so I

9:03

think that was a major moment. And

9:05

then that led into really finding these different

9:07

people who have shaped and changed my life,

9:09

including an incredible counselor who I started working

9:12

with and bringing to the surface a

9:14

lot of these issues that I didn't even know were

9:16

there. Yeah, I mean, I look back on the person

9:18

I was even three years ago and I was certainly

9:20

far better than I was 10 years prior, but I

9:22

was compared to sort of where I was now. Very

9:24

shut down and frustrated

9:27

and irritable and

9:29

competitive and... I feel a lot

9:32

of those things myself in terms

9:34

of competitive and maybe a

9:36

bit more anxious than I should be. What

9:38

was the next step that you took in

9:40

this journey that sort of like, okay, well,

9:42

I realized something, I feel it, now

9:45

what? I don't wanna sit here and pretend this

9:47

like self-reliance is the thing that got me through

9:49

this period in

9:51

my life because it felt like it happened to me

9:54

and it happened for me. It didn't

9:56

feel like that I somehow figured

9:58

out like... outsmarted the

10:01

world, outsmarted my shame

10:03

and fear. It felt like I had

10:06

these sort of people be put into

10:08

my life and these revelations that started to occur

10:11

that all of a sudden,

10:13

I mean, I think there's an old adage that

10:15

like when the student is ready, the teacher appears.

10:18

And I think there's very much, there's a choice I had

10:20

to make three years ago. It

10:23

was like, am I going to pretend like

10:27

everything's fine? Because that's what everything in me,

10:29

that's what my false self wanted

10:31

to do. No, screw you, you're

10:33

wrong. You don't know what you're talking about.

10:35

Who are you? You just met me. You

10:37

can't, you don't know me. You don't know anything about me.

10:40

And it was like, I remember having this very distinct

10:42

choice to make. And

10:45

I remember being like, if I continue on

10:47

the path that I'm on that would have

10:49

denied, you know, it's sort of this idea

10:51

of like self-promotion, self-protection, right? That's what our

10:53

false self wants us to do. Go around

10:56

self-promote, self-protect, because then we don't have to

10:58

really be vulnerable. Now we

11:00

also are shut down. We can't have great relationships. We

11:02

can't figure out the

11:04

real sort of us that comes through. But that

11:06

was the choice. And I remember kind of, it

11:09

was an act of surrender of being like, I

11:12

have to take the risk that I'm going to take a

11:14

look at myself and I'm not going to like myself very

11:16

much. I'm going to admit things to myself that are ugly

11:20

and that I've done more wrong maybe than

11:22

I'm willing to admit. And

11:24

that I've hurt people that I care about. That

11:27

was the choice that I had to make.

11:29

And I remember very clearly saying, okay, I

11:32

surrender and I want to know. And

11:35

then things started to change ever so slowly.

11:37

I mean, there's a weird dip that occurs.

11:39

I feel like when you go from denial

11:41

to awareness, it's

11:48

actually way worse. So like

11:50

the awareness of your faults and

11:53

awareness of your shortcomings without

11:56

the healing of those is actually

11:58

puts you in a far worse position. And

12:01

so I would say that, you know, that sort

12:03

of the period of time from three years ago

12:05

to two years ago was horrible. Like

12:08

it was not a year of joy. In

12:12

fact, if anything, it felt like harder. My

12:14

relationships felt more strained. And

12:17

I think it was because I was becoming acutely aware of

12:19

how broken they were as a result,

12:21

mostly as a result of me. I mean, yes, other

12:23

people's brokenness too, mostly result of me, but

12:25

I didn't have any healing in it. I didn't know how

12:27

to get healing. And,

12:29

you know, that season was just an

12:31

awareness building season, looking back

12:33

on that. But it's awful. If you

12:35

gain awareness without healing, it's way worse

12:38

than not being aware. Give me

12:40

an example of something that's changed

12:42

in your friendships. We were talking about one last

12:44

night. Actually, that's a perfect one, where

12:47

you always want to pay the bill.

12:49

Yeah. Talk to me about that

12:51

and the revelation behind it and how it

12:53

came about. Let's see here, about two years

12:55

ago, maybe a little less than two years

12:58

ago, I had a friend who was going

13:00

through some really tough times and

13:02

personally, professionally, and a

13:05

mentor of his said, hey, you got

13:07

to go to this intensive counseling

13:10

retreat. And he

13:12

kind of reluctantly, he's not a

13:14

touchy feely, he's

13:16

a finance guy, you know, he's not a-

13:18

This is voodoo. Yeah,

13:21

this is not, exactly. This is

13:23

ooey gooey squishy stuff is not

13:25

his ballgame. And I watched him

13:27

go into that hard and hardened and

13:29

just sort of like shut

13:31

down, shut off. Again,

13:34

very protective,

13:36

self-protective. And

13:38

he came out of that week, like

13:41

changed, like distinctively

13:43

different. And

13:45

I remember thinking to myself like, wow, I don't

13:48

know what happened there. That's incredible. He'd worked

13:50

with this woman the whole week and

13:52

he was like, you changed my life. Like, this is incredible.

13:54

Like how, you know, first of all, I never be able

13:56

to repay you, thank you. You know, like, I don't know

13:58

anything about you. Who are you? you?" And

14:01

she said, I've got, you know, I've got

14:03

these kids and whatever. And I live in

14:06

Columbia, Missouri. He's Columbia, Missouri? What? He

14:08

said, one of my best friends lives in Columbia, Missouri. I

14:11

live in Columbia, Missouri. And

14:14

so he said, Brent, I'm telling you, like,

14:16

you have to go see

14:18

this person. And it was right around this time

14:20

that I felt like I hit rock bottom in

14:22

my awareness of like my own brokenness and

14:25

like how I didn't really see a path

14:28

forward. Like I kept like sitting

14:31

in this dismal

14:34

state where you're like aware of

14:36

how messy everything is, but there's

14:38

no way to clean it up. And

14:41

all the self-help stuff, like none

14:43

of it works. Like at least for me, like I can

14:45

only speak in a one here,

14:48

but like, you know, the

14:50

self-reliant thing doesn't work. And so he

14:52

said, hey, I think you should meet

14:54

with her. And I'm like, man, this

14:56

is a true godsend. Like I had

14:58

no idea that somebody of that caliber,

15:00

national, international quality caliber was in Columbia,

15:02

Missouri. I started going there

15:04

and doing these three hour sessions and dredging

15:06

up things I didn't even know was there,

15:09

that were all connected to the behaviors. If you

15:11

think about like the way that I think about

15:14

it now, it's like we have these, we have

15:16

these behaviors that other people can see and that

15:18

we can kind of measure, right? Am I doing

15:20

good or am I not doing good? The reality

15:22

is there's so many layers underneath that though that

15:25

are influencing that behavior, right?

15:27

Like, oh, something

15:29

terrible happened and

15:32

I really don't feel anything. That's

15:34

weird, right? Or something very small

15:37

happened and I'm triggered into this

15:39

like spiral. That's weird. And

15:41

what I would do in the past is I would just kind

15:43

of like shove it down, right? Like, oh, I don't know. I

15:46

don't get it, but life's weird and whatever.

15:49

Got to go on. Yeah, you got to go

15:51

on. And so anyway, through this series of sessions,

15:53

and I mean, I've done a lot

15:55

now, like probably 25 or 30 of these

15:58

now, three hour sessions. So a lot of time. And we

16:00

got down to one of the sessions and it was actually probably

16:02

about four or five months ago out

16:04

of the blue, it was kind of seemingly unconnected.

16:06

And we were talking about friendship and

16:09

my counselor said, do you always pay? And

16:12

I said, yeah, of course I always pay. She

16:15

was like, hmm, I got out

16:17

of the last hundred times that you shared a meal

16:19

with somebody. How many times did you pay? And I was like,

16:22

like a hundred. And she kind of sat

16:24

back and I was kind of proud of myself, right?

16:26

Like I'm a good person. I pay for the bill.

16:28

I care about people, right? This is like the thing

16:30

I told myself in my head. I do the exact

16:32

same thing. Yeah. And

16:34

by the way, those motivations are I think real

16:37

and true. They aren't bad. But she said, yeah,

16:39

I wouldn't be your friend. And

16:41

I remember just being rocked by it. Like you wouldn't

16:43

be my friend. She goes, I was like, what? Why?

16:46

Like totally broke my paradigms. And she said,

16:48

because in a friendship, in

16:50

a real relationship, you

16:53

cede control to the other person. The other

16:55

person concedes control to you. It's not you're

16:57

always controlling. The whole

16:59

point of a friendship is that you can trust

17:02

and you can be vulnerable and you can cede

17:04

control. And so paying the bills merely just a

17:06

form of control that you're exerting over your friends.

17:08

And I remember being like, oh crap. Absolutely

17:11

right. And she goes, yeah, and

17:14

I suspect it's not just paying the bill. You

17:18

like to have your environment. You like to have

17:20

your way of doing things. And

17:22

I was like, yeah, I do force a lot

17:24

of relationships. Again, this is only like five months

17:26

ago, right? I force a lot of relationships into

17:28

these boxes where it's like, I

17:30

want you to be in my box. I tell

17:33

myself because I can provide great hospitality or because I

17:35

can do do these interesting things,

17:37

right? And I'm caring for them well. And

17:39

generally sometimes I suspect the same for you. Like

17:42

those are real motivations, but we are this

17:45

mixed bag. And I think that's what I

17:47

realized is like we hook the

17:49

good and the bad together. And then we do

17:51

things that come off to other people very

17:53

differently and confuse and frustrate and

17:55

constrain. It's really hard for somebody to be

17:57

frustrated at a friend who's

18:00

always buying them lunch or dinner

18:02

or whatever it might be. So

18:04

what it does is it builds up resentment

18:06

and frustration in the other and they don't

18:08

even understand, right? Like we're all confused. It's

18:11

very hard to see ourselves clearly. We can see each

18:13

other clearly, right? We can't see ourselves

18:15

clearly. I think that we're designed like

18:17

that because we're designed for a relationship. Like we need

18:20

one another. No one is an island. No

18:22

one is self-reliant, right? We need one another. So

18:24

how do you handle dinner now? So

18:27

what I say, only if I mean

18:29

it, by the way, sometimes I don't say this, but

18:31

if I don't mean it, I won't say it now. I say

18:34

it would give me great pleasure. I

18:37

would enjoy being able to buy dinner

18:39

tonight. But if

18:41

you don't want me to buy dinner,

18:43

I will respect your choice. I

18:45

give them the choice. And sometimes I

18:48

buy dinner and sometimes I don't. But if they say,

18:50

nope, I want to buy dinner tonight,

18:52

I say, okay, thank

18:54

you. The key there is they have agency

18:57

now. They have agency. And

18:59

so the resentment doesn't build even

19:01

unconsciously. Correct. In kind of psychology

19:03

circles, there's this idea of a

19:05

triangle where you have a

19:08

victim and a hero and like

19:10

a judge or a prosecutor.

19:15

And heroes are those who

19:17

are without knowing the good, like they

19:20

tell themselves that they want to do good for other people

19:23

and what they're really doing. And by the way, I

19:25

relate very strongly to this. This is

19:27

a lot of action that I see myself

19:29

having done and do is to

19:32

cover up my own shame and

19:34

insecurities and sort of to

19:36

push down the pain that I feel. It's like,

19:38

well, I'm going to go external and go try

19:41

to help somebody almost against their will. Like

19:43

they didn't ask me to help or if they did ask me to

19:45

help, my response to them

19:47

is so outsized that

19:49

it removes agency from them. And

19:53

so buying dinner is like a very small example of

19:55

this. And I've got, you know, unfortunately, a lot of

19:57

bigger examples of this. You know, I probably, I probably.

20:00

have really engaged in, I would say,

20:02

dramatic heroics five or six times

20:04

in my life where I perceived somebody was

20:07

in grave danger. They

20:10

needed my help and I sprung into

20:12

action and did this dramatic thing for

20:14

this other person. In

20:18

my head, the thing I'm going to get is, oh,

20:20

thank you so much, Brent. You're amazing. I'm so grateful

20:22

for you. Now, if you hear even the thoughts in

20:24

my head, it's all about me. It's actually not about

20:27

the other person. Yes, I

20:29

can justify it based on the other person, but really it's about

20:31

me. Five out of five or six

20:33

out of six times, it has been

20:35

met with initial, oh, man, thank

20:38

you so much. This is incredible.

20:40

Wow. I'm blown away at your

20:42

generosity. I'm like, oh, I got all the

20:44

good feelings. Then

20:46

I end up not having a very good relationship with

20:48

those people. It shocks me

20:51

and it almost feels like a slap in the

20:53

face. How could they do

20:55

that? How could they

20:58

not be better friends with me as a

21:00

result of this? Then

21:02

when I started doing the sessions and started working

21:04

with her, it became clear

21:06

that it's like, oh, heroes create

21:08

victims because you're removing

21:11

all agency from them and

21:13

you are telling them that they can't help

21:15

themselves, that they are helpless. When

21:20

you do that, you

21:22

are creating somebody who is

21:24

diminished and insulted. Now,

21:28

again, in the moment, that's not

21:30

how it feels, but

21:32

that's where we're constantly chewing on and

21:34

assessing our environments. A great example of

21:36

this, and this is not a close

21:38

personal relationship. I remember my wife and

21:40

I one Christmas, we

21:42

had a public school teacher who we knew and got to

21:45

be friends with. We were sitting

21:47

around the dinner table one night and she was

21:49

sharing. It's heartbreaking. She's like,

21:51

these kids around Christmas that I work

21:53

with in this particularly poor school district,

21:56

they don't have any Christmas presents. They don't have

21:58

any Christmas. There's no joy. And

22:00

it really like touched my wife

22:02

and I were like, wow, like,

22:06

what if we did this dramatic act and

22:08

anonymously, of course, we bought like

22:12

$30,000 worth of Christmas gifts for like every kid

22:15

in that school. And

22:17

in our heads, we were like, this is amazing.

22:19

This is wonderful. Um,

22:22

these kids, you know, you can imagine the kids who

22:24

were like, oh, we wouldn't have had Christmas, but now

22:26

we have Christmas and wow, somebody cares for us and

22:29

loves us. Like that's what we were hoping to have

22:31

done. And,

22:33

and so we did it. And the

22:35

response from the small

22:37

group of people that knew about it was like,

22:40

this is incredible. You all are so generous, you

22:42

know, pat, pat, pat on the back. We're feeling

22:44

great. We're in the, we're in the Christmas spirit.

22:46

Oh, what joy, you know, all this stuff. And

22:48

then it was about a month later and I

22:50

followed up with, um, the teacher and I

22:52

was just like, Hey, how did that, how did that go? And

22:55

she was like, it was

22:58

really good. You know, everyone was grateful,

23:00

you know, whatever. There's a few people

23:02

who, who had some

23:04

challenges. And I was like, had

23:07

challenges with us giving, giving gifts. She

23:09

said, well, some of

23:11

the parents of the kids, uh,

23:14

felt, felt really insulted by it.

23:19

And then it like hit me and I even like,

23:21

man, I'm trying to get emotional that it, it like

23:23

hit, hit, it cut me so deeply. Cause I realized

23:25

what I had done, but we had done

23:27

my life. I had done, we had taken

23:30

away the dignity of

23:33

those families and

23:35

yeah, they couldn't buy their kids, Christmas gifts, but they were

23:37

going to do something for them, whatever

23:39

they could do for them. And

23:42

instead, like any kid, you

23:44

give a kid a present. It's like amazing, you know, but

23:46

then it started asking all kinds of questions. Well, why can't

23:48

you buy me that present? Well,

23:51

do you not love me? Why do these other

23:53

people care more for me than you do? Kids

23:55

don't understand how money works. They don't understand how

23:58

some people have more than some people have less. They don't

24:00

understand anything about that. And so what

24:02

I'd inadvertently done when I was trying

24:04

to be kind and generous was

24:07

I didn't put myself in the position to

24:09

understand what the real consequences were gonna be,

24:11

the second, third order consequences. Yeah, a kid

24:14

would have had, you know, less

24:16

toys to play with at Christmas. That's

24:19

not the point of Christmas. I

24:21

missed the plot. The

24:24

point of Christmas is to show love and care. And

24:27

in doing what I did, I short circuited

24:29

the ability for those families to experience love

24:31

and care. And I hurt them. There's

24:35

a great book out there called When Helping Hurts. And

24:38

it afterwards, actually somebody gave it to

24:40

me and I read it and I mean, you talk

24:42

about being cut deeply. It's a book

24:44

about when you try to help and it hurts

24:46

people. It's one of

24:48

the best books I've ever read on sort of

24:51

philanthropy and how to think about caring

24:53

for those who you don't have a relationship with. And I think

24:55

that's the bottom line is like, it

24:58

all comes down to we can't go wrong

25:00

if we're in deep relationship

25:02

with somebody and we are respecting

25:04

what their needs are. Where

25:06

if somebody asks me for help, you're not a hero

25:08

if somebody asks you for help and you rise to meet the need.

25:11

That's called being a good friend. Where

25:13

you become a hero and you create victims is

25:17

when you don't know somebody, don't know

25:19

their needs. They

25:21

never asked you to do something and

25:24

you rise to meet a need they don't have.

25:26

And in turn, you take away agency and dignity

25:28

from them. So it's things like that. I

25:30

mean, these are deep waters, right? These are things

25:32

that are challenging and stuff that we

25:34

don't talk about a lot. But this is the stuff that I've

25:36

like, it's been a joy and

25:38

it's been awful in some ways to

25:40

explore the stuff in me and to see how frequently

25:43

I am engaging in this maladaptive

25:46

behavior under the name of goodness and virtue

25:48

and all these things that we tell ourselves.

25:50

Yeah, the story we tell ourselves to justify

25:52

sort of what we're doing, because we want

25:54

to be the hero in a way, unconsciously

25:56

in a lot of ways, right? Like we're

25:58

not consciously trying to save somebody. We

26:00

see a friend in need and then we want to jump in and

26:03

help them. When's the last time

26:05

you asked somebody for help? This morning,

26:07

I'm asking. I'm learning. This is a

26:09

new learned behavior though. Because in all

26:11

the years I've known you, this is

26:13

like, this is different recently. Yeah, this

26:15

is different. I would

26:18

always be the one who would

26:20

be eager to help, but rarely ask for help.

26:23

And again, that destroys relationships. There's

26:25

no way to have a real relationship with

26:28

somebody unless it's bi-directional. It

26:30

can't be you helping somebody

26:32

and never needing help. Because then

26:34

again, it's the exact same principle. You're

26:37

creating sort of a hero victim

26:39

dynamics, the power dynamics in any

26:41

relationship are super sensitive. And

26:44

where we have best relationships where we're on equal

26:46

footing, different but equal, right?

26:48

So I always think about it

26:50

as like, you know, the X-Men

26:52

or whatever, you know, you have everyone's got

26:54

different powers, but everyone can like fight the

26:56

battles together, right? And

26:58

you respect the other's opinion, right?

27:00

You respect the other person's skills and talents. But

27:03

if somebody is always the one who can shoot

27:05

laser beams and, you know, blow stuff up and

27:07

make stuff happen. And the other

27:09

person is just, oh, thank you. I appreciate that.

27:11

Thank you for helping me. It's

27:14

not a real friendship. I had never

27:16

thought about any of this until dinner last

27:18

night with you. And

27:20

I stayed up late last night just

27:22

going over all the different ways that

27:24

I do this in my own life.

27:27

With my friends from, you know,

27:30

always offering like to the not even offering

27:32

to pay for dinner. It's like I'll race

27:34

up to the waiter and you know, everybody's

27:36

sitting down and go to the bathroom to

27:38

make sure that I and I'd

27:40

read like I was just replaying this stuff

27:43

in my head going like, oh my god,

27:45

this is crazy. Yeah, I went

27:47

on an apology tour after I had that realization

27:49

to a lot of people and

27:51

I said, hey, I'm really sorry I did this to you. And

27:54

of course, people are kind of caught off guard because I don't even think

27:56

they realize it. But when I said it to him, they were like, yeah,

27:59

thank you. And so now like

28:01

my close friends, like

28:03

I, we had this understanding and oftentimes

28:05

I still am able to buy lunch

28:07

or dinner or whatever, because I enjoy

28:10

it and they know I enjoy it.

28:12

Like I love hospitality. I

28:14

love to be a provision and

28:16

provide care for people. It's like a core

28:18

part of my personality. But sometimes they say,

28:21

thank you, but no, thank you. And

28:23

you know what? I feel super loved in

28:25

that. I feel

28:27

super loved. So the cool part is

28:29

before I didn't

28:31

feel love either way. If

28:34

somebody else bought a

28:36

meal, I would feel frustrated and sort of

28:38

irritable about it. And they took

28:40

something away from me. Right. And

28:43

if I bought... Just how everybody else feels when you

28:45

do it. Right. Exactly.

28:47

And vice versa, right? If I did buy the meal,

28:49

it was a little bit like you start playing with

28:51

ideas in your head. Oh, am I

28:53

only a checkbook? Do people really like me? And it's like,

28:56

well, you're the one who insisted on buying dinner and you're

28:58

like, well, but the other person could have insisted on buying

29:00

dinner more, you know, and you start

29:02

getting into this like weird psychology. You didn't

29:04

fight back enough. Right. You hit the old

29:06

alligator arms, you know? And

29:09

so now it's like the inverse

29:11

of that. And I think this is like a good metaphor

29:13

for life. Like I think that the

29:16

more that I meet what I would call elders.

29:18

So there's a difference between elders and elderly. Or

29:22

like self-focused incur...

29:25

Blaise Pascal would call it incurvature. Right. They're

29:27

incurred on themselves. They're irritable. It's all... Life is

29:29

all about them and what they need and they're

29:32

scared and fearful. And you got elders who are

29:34

the inverse of this. Right. Who

29:36

are outwardly focused. Right. The more

29:38

I meet these types of elders that are like

29:40

genuinely caring and loving, the more that I see

29:42

them exhibiting this type of behavior, the

29:45

more that I see them, like, no

29:48

matter their circumstance, in good circumstances

29:50

or in bad circumstances, they look like they're living with

29:52

a joy and a lightness and a freedom. And

29:55

then you see Elder Lee and sort

29:58

of now I can pull it back and see in my life. that

30:00

like no matter my circumstances, like

30:03

I'm living in fear and shame and

30:05

hiding. And so it's like,

30:08

I think that's the thing that we're really

30:10

talking about here is like, these are all even like maybe

30:12

the second teardown or the third teardown, like at

30:14

the basement of all this stuff, at the very

30:16

core of all this stuff is there are really

30:18

only two ways to live. You're

30:21

going to live out of fear or you're

30:23

gonna live out of genuine love and care for others and

30:27

love and care for yourself. And like that's it, like

30:29

everything else rises between those two. Like

30:31

fear driven is scarce, it

30:34

is the way of the world, it is a famous

30:38

author in the 70s, she said that

30:40

nature is red and tooth and claw, right?

30:43

It's like this idea that it's like there's nothing

30:45

but you're either gonna be a predator

30:47

or you're gonna be prey. Everything is a

30:49

battle. Everything's a battle, everything's about

30:52

competition, right, and

30:55

believe me, like that's when I am at my

30:57

worst, that's who I am and by the way,

30:59

the world loves my false self, the world loves

31:01

that fear driven self. I can get an extraordinarily

31:04

incredible amount done in that time. A

31:06

friend of mine calls it clean fuel

31:08

versus dirty fuel. Like it's very difficult

31:10

to see, like the car looks

31:12

like the car from the outside, very difficult to

31:14

understand, is it clean fuel or

31:16

dirty fuel that's operating the car? And

31:19

I can, I mean, that car can go fast, it can

31:21

take a lot of people with it if I'm on dirty

31:23

fuel. And in some ways, dirty fuel is a, for

31:25

me, I'd learned through my life to be,

31:28

it's a more potent fuel in

31:30

the short term for me. Like

31:32

I get more stuff done quicker

31:35

and usually even sometimes with higher excellence out of

31:37

dirty fuel than I do clean fuel. That fear

31:39

is like a heck of a moment. It's higher

31:41

octane, almost. It's higher octane. The problem is it's

31:43

got all kinds of contaminants in it and you

31:46

eventually like torch yourself and the car breaks down

31:48

and you go off the rails

31:50

and blow yourself up, whatever analogy you wanna use. And

31:53

so getting back to the original question, like what's

31:55

changed? Like I think that more and more I'm

31:57

trying to operate on clean fuel. I'm trying to

31:59

be, self-unconcerned. I'm trying to

32:02

become an elder. I think people

32:04

listening resonate a lot with this.

32:06

So I'm curious what other ways you

32:09

found yourself subtly

32:12

controlling your relationships, whether it be your

32:14

marriage or your friends. The

32:17

paying is an example, but I'm sure you've

32:19

got other ones. You get older and you

32:21

get better at hiding your motivations, right? And

32:23

you end up wrapping them sometimes

32:25

consciously, sometimes unconsciously in these

32:28

maybe good packages. But

32:31

the reality was, it was like I

32:34

was demanding control. I

32:36

was demanding care.

32:39

I was demanding people to see me and sort of

32:41

praise me. And so how

32:43

do I do that on a daily basis? It was, and

32:45

by the way, this is not like it's a victory

32:48

declared or whatever. I mean, this is like an

32:50

ongoing battle, I would say on an hour by

32:52

hour, minute by minute basis is

32:54

I can tell so quickly, am I

32:56

operating out of fear of love? And

32:59

the test is, do I have peace or not? Am

33:01

I anxious or not? And

33:04

when I'm anxious and fearful and

33:06

when I'm, you know, I have

33:08

a tendency to catastrophize the future

33:10

and always be running down all these different

33:12

rapid holes of what ifs might happens. And I

33:14

haven't, I've been given an incredible capacity to do

33:17

that, which makes me like my

33:19

day job as an investor. It's really

33:21

useful because I can run down a

33:23

tremendous number of scenarios. My

33:26

personal life, it's terrible. And

33:28

I hate it. It's

33:30

the dark side of creativity, right?

33:33

When you have vision and creativity, you

33:35

can envision a future that

33:37

is beautiful and bright and loving and wonderful,

33:39

or you can envision a terrible future, dystopian

33:41

future. And so, yeah, I

33:45

mean, examples of this. I mean, I

33:47

would go into meetings and I would

33:49

need to take over the meeting to

33:52

get praise. And

33:54

by the way, I've been given

33:56

a gift to be able to say things and

33:58

think quickly on my own. my feet that people

34:01

genuinely were praising me. It's not like, I

34:03

hope, I mean, no one's

34:05

perfect, but like we create an organization

34:07

of permanent equity that's like very kindly

34:11

confrontational about ideas. Like we want to

34:13

be, we want

34:15

a lot of friction. And so the last thing in

34:17

the world I wanna do is create an organization of

34:20

a yes-men or yes-women, right? Like we

34:22

want divergent thinking, we want a lot of variety.

34:26

And so I don't think that they were

34:28

doing it because it was like, oh boss,

34:30

you're so good. You know, that type of

34:32

like, you know, sycophant type thing. I think

34:35

it was genuinely like in my

34:37

false self, when I'm

34:39

really charged up, like

34:41

I have a capacity to envision a future

34:43

that a lot of people like. I

34:46

know internally though, my

34:49

vision of that future is

34:51

really driving my need to

34:53

be liked, my need to be respected, my need

34:55

to be praised. And so, ugh, and

34:59

I would have this high anxiety in these meetings, right?

35:01

And then I get out of it and it's like,

35:03

I mean, I'm so wired up, I have

35:06

so much cortisol in my system. Cause

35:09

I craved that, I needed that, that was like

35:11

my sort of my drug of choice in that

35:14

setting to the degree that I almost lost my

35:16

right eye as a result of excess cortisol in

35:18

my system. That's how stressed,

35:20

and I wasn't stressed in the sense of, I

35:23

mean, yes, like what I would call normal stresses,

35:25

I mean, there's always gonna be sickness

35:28

and death. And as we've grown as an organization, there's

35:31

just a lot of people, and a lot

35:33

of people are a lot of brokenness. But

35:35

I would say the vast majority

35:37

of the stress that I

35:39

was experiencing was self-induced, was

35:41

because I wasn't okay, and

35:44

I knew I wasn't okay, but I didn't know how

35:46

else to cope with it, rather than try to get

35:49

praise, try to grab things from other people,

35:51

right? So I was

35:53

encouraged, as Blaise Pascal would say, I was

35:55

the one who was inwardly focused and focused

35:58

on my needs and what I wanted. I

36:00

was not on the path to being an elder.

36:03

I was on the track to being

36:05

elderly. And the inverse of

36:07

that is I get more freedom as I,

36:09

you know, this stuff kind of comes out

36:11

in relationships and friendships, in my marriage, in

36:13

counseling sessions, you know, as this stuff kind

36:15

of comes up now and there's healing around

36:17

it. I find myself sitting in meetings and

36:19

like letting other people talk. Imagine

36:22

that. Not having to

36:24

always be the leader of everything. Not

36:26

having to have my identity based on

36:28

short-term wins. Not being competitive. Competitiveness is

36:31

the opposite of relationship. It is

36:33

the antithesis of relationship. Like when we're competitive

36:35

with somebody, it's I win and you lose.

36:38

That's horrible. Especially when you're dealing

36:40

with, like

36:42

my profession doesn't have to be competitive.

36:46

When I go out and play tennis or pickleball with

36:48

somebody, like I don't have to win, but before I

36:50

had to win because I'm a winner. Winners

36:52

win, right? Like- And if I

36:54

don't win, I'm a loser. If I don't win, I'm a loser. If I don't

36:56

win, I'm not okay. If I don't win,

36:59

all that stuff's gonna bubble up from the basement and

37:01

I'm gonna feel terrible. I used to literally lose

37:03

in tennis and feel terrible for days. Another thing,

37:06

I would fight with my wife and I would

37:08

go do a bunch of email. That's

37:10

an interesting behavior. Well, why would I do that?

37:13

Well, because I get praise from doing email. I

37:16

get a lot of interactivity. Oh, hey, thank you so

37:18

much for that. Oh, wow, it's 11 o'clock at night

37:20

on a Friday night and just had

37:22

a blowout fight with my wife. I'm gonna go and do

37:24

some emails because people are gonna be like, look how hard

37:26

you work Friday night. You're

37:28

working so hard. Social media was

37:31

deadening to me. I mean, if you

37:33

look at the peak of my social media sort of

37:35

addiction, it was

37:37

probably five years ago to three years ago. Why?

37:41

Because I could go online and tickle the

37:44

ears of people and they would tell me,

37:46

oh, this is a really insightful thing. This

37:48

is really cool. Wow, you're so great because,

37:50

you know, whatever. Validation. Validation. Yeah. It

37:53

was praise. How many likes did I get? But

37:55

I found myself my personal relationship to people. Like,

37:58

are we optimizing our lives? for

38:00

the people who know us best or the people who know us least. That's

38:03

a question that haunts me. I've

38:05

watched a lot of people up close and personal

38:08

who the more you got to

38:10

know them, the less

38:14

you liked them. And I mean,

38:16

that's honestly the lie that we all engage in. People

38:18

really knew me, would they love me?

38:20

Would they even like me? There

38:22

are people, a lot of people I've come

38:24

in contact with. They're bigger on the

38:26

outside than they are on the inside. I'm

38:29

like, I want to be somebody. That was me,

38:31

by the way. Like I, I mean, I

38:34

think we all have this temptation, right? The

38:36

Instagram pic of, oh, my life's just a

38:38

vacation. Everything's amazing, right? Twitter's sort of the

38:40

intellectual version of that. All I

38:42

think is these great thoughts. Yeah, yeah. Have

38:44

all this wisdom, so wise. Now,

38:46

let alone my like marriage disaster, my business

38:48

disaster, all this stuff. It's like, well, yeah,

38:50

but I can spout platitudes

38:53

on Twitter and people will praise me for it, right?

38:56

Like that's the lie, that's the trap. Yeah, as this healing

38:58

has occurred, it's like I'm on social media far less, not

39:00

because like, I actually like genuinely want to help people and

39:02

like, when I have something to say that I think could

39:04

be helpful, when I'm engaging conversation, like I'll

39:06

go on and like I'll engage in it, but like, I

39:08

don't feel a need now to like hour

39:10

by hour, check and see how many people

39:13

have liked whatever. In my marriage, I'm trying

39:15

to be somebody who's focused purely on the

39:17

good for the other, focused on the good

39:19

of my wife. Like how can I serve

39:21

her and love her with no expectation of

39:23

reciprocity? Like it sounds foreign, it would sound

39:25

foreign to me. Like the

39:27

view we have of every relationship sort of

39:29

in that fear-based scarcity-based mindset is like, okay,

39:31

well, Alexis Dokker called it self interest rightly

39:33

understood, right? Which is like, I do things

39:35

for you, so you can do things for

39:37

me. Like that's not

39:40

true love and care, that's loving yourself.

39:42

There's a rabbi who calls that fish

39:44

love, right? He says, you know, we

39:46

treat our marriages like we do a

39:48

good fish dinner, right? Where you're like,

39:50

oh, I love this fish because it

39:52

tastes good, because it

39:54

makes me feel warm, because it satisfies

39:56

a need that I have, a desire that I

39:58

have. You're consuming it.

40:02

You're a consumer of that thing.

40:04

I think that without

40:07

a shift in mindset and the default assumption of

40:09

the world is we are all consumers of one

40:11

another. We are all eating one another, including in

40:13

our marriages and personal relationships. And it's

40:15

poison. Straight poison.

40:18

I want to spend a lot

40:20

of this conversation on investing and

40:22

running a business. But before we

40:24

transition, one of

40:26

the things that you said to me last night

40:28

that I found super interesting was that you'd stop

40:31

drinking unless it's a celebration. Tell

40:33

me about that. Well, yeah, the last couple of years

40:35

have been an exploration

40:37

of interior

40:40

and exterior. And I think

40:42

a lot of our exterior lives reflect

40:45

the accumulation of our interior lives. For

40:47

me, it certainly did. I

40:50

can remember the first time I was called a fat kid,

40:52

I was 10 years old. And

40:54

that was an identity that I adopted. I

40:57

always was just a little more overweight than everyone

40:59

else. I wasn't like morbidly obese, but I was

41:01

just I care a lot of weight. I was

41:03

athletic, but I but I was a little bit

41:05

heavier. You know, when I became an entrepreneur, it

41:08

was all consuming. I mean, my 20s were filled with

41:11

I had to

41:13

win at all costs. I had to

41:15

I had to put every bit of

41:17

energy into being successful. I thought

41:19

that that was going to make me OK. So my

41:21

20s were filled with a single

41:23

minded pursuit of achievement. I

41:27

put on 50 plus pounds in

41:29

my 20s. I tipped the scales at one point at 252.

41:32

I remember I'll be on the scale and I was like, whoa, I've

41:35

gotten big. I started beginning

41:38

of last year at 235 ish. So

41:42

I was down from my peak, but it was just

41:44

a battle. I've been engaged in like a decade long

41:47

battle with like I'd try this

41:49

diet or that diet. I'd try to work

41:51

out some. I'd make a little

41:53

progress. I'd slip back. It was kind of

41:55

like I had this set range. I really

41:57

couldn't couldn't get outside of it. Kind of

41:59

all part of the same. transformation occurring at

42:01

the same time, right? Like I

42:04

found out that food was

42:08

something I celebrated with, was

42:10

something I turned to for comfort, was

42:13

how I expressed love and joy and care. As

42:15

my counselor said, it sounds like you eat when

42:17

you're sad and you eat when you're mad and

42:19

you eat when you're happy. I think

42:22

you're going to probably be always eating. And I

42:25

was like, yes, I am always eating. I always

42:27

have a pull towards food, right? Because I was using food. And by

42:29

the way,

42:34

there are more maladaptive behaviors, right? It just happened

42:36

to be one that you can't hide very well.

42:38

But I was using food to do a job for

42:40

me. And sometimes that job was in

42:43

concert with joy and care. And sometimes that

42:45

was in concert with pain. But

42:48

food was like the tool of choice that would make

42:51

me both feel out of control

42:53

and in control at the same time. And

42:55

so as those sort of things started releasing and

42:57

the junk that was

42:59

underneath them that caused that pain started releasing,

43:01

like I felt a real freedom. You know,

43:04

you, I wrote this publicly in my annual

43:06

letter this year, like you had

43:08

a huge impact on me. And it's

43:10

funny how we don't often, I don't think when you said it, you

43:13

realized like how impactful it was going to be, but it was like

43:15

a lightning bolt. You told me I was complaining to you. I think

43:17

it was maybe January 4th or 5th of

43:19

last year. And you told me

43:21

that, you know, you were working out or everyone's

43:23

like, Oh man, yeah, like I've got a news

43:25

resolution. I'm gonna drop some weight, you know, whatever.

43:28

And it's just really hard to work out. And

43:31

I felt kind of defeated about it. Cause it's like,

43:33

you know, when you know, when you're

43:35

headed to failure and

43:37

it like sort of, that's the thing about dieting.

43:39

And that's the thing about these like short bursts

43:41

of like New Year's resolutions is like, they

43:44

head towards failure because they're

43:46

not sustainable. And so I remember you

43:48

saying this one thing to me that

43:50

completely shifted internally, how I thought about

43:53

health. And you said, well, I just

43:55

work out every day. It's part

43:57

of my identity. I don't have a choice.

44:00

If I'm gonna work out, I just have a choice what I do. And

44:03

I remember it hit me like a ton of bricks. I was like, oh

44:05

my gosh, yeah, you're

44:08

right. And around that

44:10

time, another good friend of ours,

44:12

Patrick, I was on the

44:14

phone with him and the best of friends

44:16

tell you the real truth. Like the

44:19

pinnacle of friendship is to tell each other the

44:21

real truth, the hard truth, the truth that, the

44:23

truth that you gain nothing from and you have

44:25

everything to lose. Because that is

44:27

true vulnerability. That is truly giving the other

44:29

person control. And I remember

44:31

Patrick took a risk and I'd said something about, I

44:34

used to make jokes about being a fat kid, right?

44:36

This is that identity that was imprinted upon me. And

44:38

they're funny, people laugh at jokes about being fat, right,

44:40

self-effacing and all this stuff. And he goes, would you

44:42

knock that shit off? And

44:44

it was like very stern voice. He was like, not

44:47

okay. I've heard you say this

44:49

over and over again. You've made jokes about you and me, like not

44:51

okay. Like you gotta quit that, you're not

44:53

a fat kid. He's

44:55

like, why do you do that to yourself? And

44:58

it's again, this idea, like we can't see each other. We

45:01

can see each other clearly, we can't see ourselves clearly. That really

45:03

flipped a switch in me. That I was like, I'm not a

45:05

fat kid. I'm gonna be healthy. I'm gonna be

45:07

a healthy person who's part of their identity is

45:09

I'm gonna work out every day. Now I'm

45:11

not putting my salvation in that. I'm not

45:13

putting my goodness in that. I don't think that

45:15

people who work out are better than people who

45:17

don't work out. But I'm gonna make it a

45:19

core part of me that I'm gonna like honor

45:21

this body that's been given to me. Like I've

45:23

got one container in this life and

45:27

it's important. When I say basically

45:29

every day, like I am now, I work with a

45:31

couple of people on the fitness side and like their biggest

45:33

problem with me is that I work out too much now.

45:35

Like literally this is not like a bragging thing.

45:38

This is like, I love it so much now. And

45:40

this is something I hated to work out. I hated

45:42

it. I would dread it. I

45:44

was out of shape. I mean, I hated working out.

45:46

And so now it's like, I feel

45:48

the joy and I feel

45:50

privileged that I get to work out. Like

45:53

I have an opportunity to move my body into like

45:55

experience this world. And so whether it's going on a

45:57

run or a bike or playing, I

46:00

love pickleball and tennis and or just getting

46:02

me on a hike or a walk with a friend. I

46:05

love it. You know, the Greeks had this

46:08

very like it's like body versus soul, like

46:10

dualistic view. Like we are embodied creatures. Like

46:12

we are one in the same. That's not

46:14

the proper view. Like our physical health

46:17

impacts our mental health and

46:20

vice versa. Right. And

46:22

so I've seen this like wonderful, like I

46:24

have more energy to play with my children

46:26

and the relationships are better. And like I

46:28

can I can I feel better just in

46:30

general. So like, you know, when you feel better and

46:32

you can move better, it's all this like it's like

46:35

this virtuous upward loop, right? And

46:37

inverse downward loop when when those things start

46:39

to fail. And so the alcohol thing, very

46:41

long winded way of saying it. I

46:43

just noticed that when I drink

46:45

alcohol, things felt hard.

46:48

And turns out alcohol is one of men,

46:52

especially one of the biggest inhibitors of testosterone.

46:55

And we think of testosterone as like the libido hormone

46:58

and it is. But like, that's

47:00

not the point. Like I wasn't like I

47:02

was like, oh, well, I'm drinking. I was

47:04

basically drinking almost every day and I

47:06

was drinking a lot. Like I got the point. I probably

47:09

drank to say this even now, I would never in a

47:11

million years have defined myself as like with

47:13

any sort of addiction. Yeah. And

47:16

like I could not drink and be OK, but I

47:18

was drinking like three or four or five drinks a

47:20

night every night. Like you know, you get home and

47:22

you open up in a bottle of white and you're

47:24

making dinner. We cook all the time. We love cooking.

47:26

My wife and I, it's like kind of a core part of

47:28

what we do. And we're making this meal and you know, you

47:31

know, open, you know, another bottle of wine, maybe a

47:33

red, you have a little bit of that. And then

47:35

it's like, oh man, you know, it'd be really great

47:38

tonight. Have a little H tequila or some cognac or

47:40

something. And you know, before long, it's like it really

47:42

adds up and it affects your sleep. And

47:45

for me, I just noticed like, you

47:47

know, testosterone, the best definition I've heard of testosterone

47:49

and what it does is it makes hard things

47:51

seem easy. And so

47:53

when I drink, hard things seem hard. And when I

47:55

don't drink, hard things seem easier. Like

47:57

I can very clearly tell. And so I just.

48:00

just said it's not worth it

48:02

and try to come up with other alternatives and how

48:04

to get the ritual of it and the specialness of

48:06

it. It's kind of like a, you know, you can

48:08

mark your days, right? I mean, I went for a

48:10

lot of my life. It was like alternating between like

48:12

caffeine was one part of my day and alcohol is

48:15

another part of my day and now

48:17

I don't drink caffeine and I don't

48:19

drink alcohol for very

48:21

different reasons, but both of them health related and

48:23

my life is way better for it. And

48:26

I, so I, so my, my, my excuse now, I

48:28

shouldn't say excuse my, the way I think about it

48:30

is like when I celebrate, it's the only time I

48:32

let myself drink. The interesting thing to me

48:34

when we were talking last night is you

48:36

mentioned you use the word rule,

48:39

which I thought was really interesting. Do you

48:41

have any other rules that you've

48:43

adapted in the last couple of years that have

48:45

really helped you sort of unlock the next level?

48:47

Yeah, this is actually a huge part of a

48:50

lot of these changes that I've made my life

48:52

as well. What, how we spend our

48:54

days is how we spend our lives. Like

48:57

our habits are who we are and

49:00

habits are very sticky and hard

49:03

to change. They require a

49:05

tremendous amount of focus and

49:07

it's very difficult to add multiple habits at once

49:09

is what I found. I'm

49:12

also not a personality that loves habits. I

49:16

don't love structure.

49:18

I really enjoy

49:20

the variety of life. And

49:22

so in many ways, like habits great on

49:25

me, but I've really come

49:27

as I get older to appreciate the value

49:29

of good habits. And so the habits I

49:32

try and I would say as I, these are most

49:34

days, almost all days I

49:37

get up and the first thing I do is read and pray. The

49:41

I always try to tell my kids and my wife

49:43

that I see them and I know them and I

49:45

love them and that there's nothing they can do to

49:47

ever move outside of my

49:49

love for them. One

49:53

of the questions I love asking my

49:55

kids now is what do I do

49:57

when you feel most loved? really

50:00

try to focus on doing those things

50:02

for them. Um that's sort of the

50:05

magic question that unlocks a tremendous amount

50:08

of intimacy with

50:10

anyone really. Any friendship if you ask that same

50:12

question, you'd you'd be shocked. I think what the

50:14

answers you get because in my marriage and in

50:16

my friendships, in my relationship with my children to

50:19

some degree like I used to try to love

50:21

them uh the

50:23

way I wanted to be loved. Mm. And

50:26

it doesn't work very well because really what you're doing

50:28

is you're loving yourself by doing that and

50:30

then I kinda went through a phase where I was like, okay,

50:32

Wama, love them the way they should want to be loved. Mm

50:35

hmm. That doesn't work

50:37

well either. Why don't they love it? Why don't they

50:39

love it? Yeah. Right. And

50:41

then I started really being like, okay,

50:43

I'm gonna pretend like I

50:45

have no preconceived notions of how somebody wants to be

50:48

loved. And you're just gonna ask them. I'm just gonna

50:50

ask them and do you know

50:52

what it's interesting is most people both can

50:54

tell you pretty quickly but a bit shocking to them what

50:56

comes out of their mouth. Oh, interesting.

50:58

So, most people don't actually know how

51:00

they wanna be loved. Like it's not something

51:02

they think about. It I mean, you can use this

51:05

analogy at work too, right? Like, you know, a question

51:07

I'll ask somebody is like, when do you really feel

51:09

seen and appreciated? But this is the question we're

51:11

all trying to ask is like, how do we wanna

51:13

be loved? I'm like really getting down

51:15

on somebody's level with them and getting in

51:17

the muck in the mire with them. Like

51:19

that's real relationship. Let's switch gears and talk about

51:22

business a little. But I think that a

51:24

good segue question is how do you

51:27

balance love with

51:29

operating and

51:31

you're one of the best operators I've ever met

51:33

in my life. How do you balance those two

51:35

things where we're

51:37

taught to come at everything from a

51:40

competitive point of view, which you do

51:42

exceptionally well or did exceptionally well for

51:44

a number of years and it

51:46

made you a huge success. And then

51:48

how do you get the same results or

51:50

better results operating out

51:52

of love? Well, I think the lie that

51:55

we tell ourselves is that

51:57

if we don't act out of scarcity that there

51:59

were no won't be enough. And

52:02

what that does is it isolates us

52:06

and it shuts us down and it isolates

52:08

and shuts down everyone. I mean, anxiety is

52:10

contagious. Scarcity is

52:13

contagious. As soon as you look at the

52:15

game theory of scarcity, as soon as one

52:17

person acts scarce, the fear ripples

52:19

through the entire crowd and

52:22

love is fragile. Care is genuinely

52:24

fragile. This either this fear mindset

52:26

or this abundance mindset, love mindset,

52:28

it requires a tremendous

52:30

amount of protection in order to engage

52:32

in it. And

52:35

look, I'm not going to sit here

52:37

and pretend that I would often make

52:39

the same decisions if I weren't already

52:41

in a position of success. You're operating

52:43

in a position of strength already. Yeah.

52:45

I'm coming oftentimes where I'm already coming

52:47

from position strength. I do think though,

52:49

I would hope if I hit

52:52

reset and I could go

52:54

back knowing what I know now, life is

52:56

just way better no matter how you slice it. Operating

53:00

from a position of abundance and love and care, no

53:03

matter if you have resources or not, but

53:06

money makes you more of what you already are. Right?

53:09

And so if you look at people with

53:11

tremendous amount of resources who made that money

53:13

through scarcity and through high competition and through

53:16

stepping on people on the way up, when they get to

53:19

the top, they continue to exhibit that

53:21

behavior. I think there are a number of people

53:23

who experienced that. And by the way, that was

53:26

me in my twenties. My twenties were filled

53:28

with doing whatever it took to

53:31

make it. And I would hide it and I

53:33

do it in a more gentle way,

53:36

but that my heart was scarce and

53:38

I still battle this on a daily basis now. So it's not

53:41

like, again, there's no victory declared here, but what

53:43

is sustainable long-term is

53:46

not a sort of Mexican standoff with

53:48

everyone in your life. I mean, that's

53:50

how most business is done. It's like there's

53:52

power structures and it's like, well, I'm going

53:54

to make myself indispensable so you can't get

53:57

rid of me. Right?

53:59

And it's like, oh, well, I

54:01

wish I could get rid of that guy, but I can't. It's

54:04

like, that's a horrible, confrontational,

54:08

competitive, scarce mindset to be in business.

54:10

I feel like this is the

54:12

norm. Unfortunately, it's really the norm in the finance

54:14

world. I mean, I feel like I've, I've, I

54:17

fell backwards into finance. I've

54:19

joked on the Forrest Gump of private equity, and it

54:21

is as scarce as it gets. I

54:23

mean, it is all zero sum is

54:26

how it's treated. As we've moved towards

54:29

a position of abundance, as we've moved towards

54:31

an ability to try to treat people with

54:33

honor and care and create win-win relationships. I

54:35

mean, that's really what we're trying to do.

54:38

You know, one of our mentors, both of

54:40

us, Peter Kaufman talks a lot about this,

54:42

right? As like the only sustainable long-term path

54:45

is that everyone has to win or it won't work.

54:48

If there's any losers in a system, it's

54:52

not sustainable. So I think that's just something that

54:54

we've really tried to pursue. And so what does

54:56

that practically look like? I think is a question,

54:58

right? It looks like

55:01

not protecting yourself always all

55:03

the time, but

55:06

giving people the ability, if they wanna

55:08

act scarce, to do

55:11

so, but in like lower stakes ways. So

55:13

like one of my favorite things to do is be, almost

55:16

open myself up to being taken advantage of early

55:19

on in a relationship. So

55:22

that if they do, then you're like, okay, great. By

55:25

the way, there's no judgment in this. It's not

55:27

like, how dare you, or I'm somehow better, whatever,

55:29

it's just, hey, I just don't think you're in

55:31

a position right now. I was

55:33

there before, but you're not in a position right

55:36

now to be able to engage in our system

55:38

because our system requires a tremendous amount of mutual

55:40

trust and care. Now

55:42

again, we're imperfect, we screw up all the time. We're

55:44

asking for forgiveness all the time. We say sorry all

55:46

the time. It's not, I don't wanna paint this picture

55:49

of idealistic, like we've got it all

55:51

together. We got a lot of things to work on, right?

55:53

But I think most of the people are

55:56

trying to operate out of

55:58

a position of abundance. Most of us are trying. We're

56:00

trying to work towards wins

56:02

for everyone. We're trying to be thoughtful with

56:05

not just the buyer and the seller, private

56:07

equity, so we buy businesses.

56:11

We're not trying to just think about the buyer and the

56:13

seller, buyer being us, seller being the person who's selling us

56:15

this thing. We're trying to be thoughtful about the executive leadership

56:17

teams at these companies. We're trying to be thoughtful about the

56:19

employees, the rank and file. We're

56:21

trying to be responsible and be thoughtful towards

56:23

our customers and our vendors and

56:25

the communities, maybe even regulators, depending on the

56:28

situation. What does a win look

56:30

like for a community that we purchase a business in?

56:33

I don't know, it's an interesting question. I think it's different for every

56:35

business. What does a win look like

56:37

for the construction worker on a job, business

56:40

we bought? Which

56:42

is an interesting question to ask, right? We

56:44

can't make anybody happy. We can't make anybody

56:46

fulfilled. But we certainly can

56:49

create an environment that allows more

56:51

for them to be happy, free,

56:53

fulfilled. This is where I think for the rest

56:55

of my career, the engaging part for me, it's

56:57

not about money for a long

56:59

time. Thankfully, I've not

57:01

had to worry about money for a while. Now for

57:04

me, I'm like, wow, what if when

57:06

we buy a business, not

57:08

only is the work environment better,

57:10

maybe we allow them, provide the

57:12

environment, maybe show them

57:15

a better way, this idea of everything's relative,

57:17

right? Maybe we can show them a better

57:19

way where their marriages get better and

57:21

their friendships get better and their relationship with their children get better.

57:24

They're more engaged people. They're more active.

57:28

I don't want people who are working 80, 100 hours

57:30

a week every week. Now look, there are weeks where I work 100,

57:33

100 hour weeks. Sometimes

57:36

you gotta get stuff done, right? So there's no

57:38

shame in that. But if that's your

57:40

norm, you

57:42

just cannot sustain a healthy lifestyle,

57:45

healthy relationships, healthy physical body,

57:48

working that much consistently. Just no way. There's not enough

57:50

time in the day to do it. And so I

57:52

don't want people who are sustainably

57:55

the whole finance world is

57:57

full of just chewing people up. spitting

58:00

them out. They use

58:02

people as objects, right? Then

58:04

they throw them away when the object doesn't become useful. I

58:06

mean, my fantasy, and this may be, you know, I

58:09

look at delusions of grandeur, illusions of grandeur,

58:12

is could we show people a better

58:15

way that actually you create higher returns

58:17

long term by treating

58:19

people well. You create

58:22

higher returns over time by using little to

58:24

no debt, as weird as that is

58:26

in the finance world. And believe me, I know all the people

58:28

who are watching this, I get the math, you don't have to

58:30

send me the math, I understand how leverage works, I

58:33

can do the math too. But

58:35

I think there's real value in examining why

58:37

is it that we have a system, especially

58:39

in the leverage bioworld of private equity, where

58:42

the norm is buy, lever,

58:45

strip, and flip, right? I'm

58:49

gonna lever this business to the moon, I'm gonna try

58:51

to use as little equity as I can, I'm gonna

58:53

try to sell it as quickly as I can to

58:55

generate the highest return I can. There's no way to

58:58

make good long term decisions with short term capital,

59:00

with short term time rises, there's no way. And

59:04

by the way, what are we doing if

59:06

all, there's no way to create a long

59:09

term enjoyable, sustainable life by

59:11

having a series of short term transactional relationships that

59:13

you move your life through. That's where you end

59:15

up with these people who can

59:18

buy anything, who've made hundreds

59:20

of millions and billions of dollars who are miserable,

59:22

like I've met these people. They

59:25

have their IRR etched on their tombstone, no

59:28

one gives a shit, no one cares. At the

59:30

end of the day, David

59:34

Brooks I think calls him eulogy

59:36

virtues. Yeah. No

59:38

one at somebody's eulogy was like, he

59:40

was a great man, made a ton of money,

59:43

hated his life, hated his wife. But

59:46

he got 26.5%. Right.

59:49

IRR. But that net IRR, woo, boy,

59:52

let me tell ya. He

59:55

was the one, one of the best. Yeah.

59:57

I mean, and look, we admire greatness. Like

1:00:00

we're, we're a society that worships

1:00:02

outliers. And

1:00:04

so you're not wrong to play that game. That

1:00:06

is a game to be played. There is a

1:00:08

game there and it does lead to certain things

1:00:10

that are good. It

1:00:13

also makes you lose your soul. And

1:00:17

also I don't want to get the impression.

1:00:19

Like we're trying to absolutely shoot the lights out in

1:00:21

returns. Yeah. Just in a

1:00:23

different way, how you go about it, your way, your

1:00:25

way is more sustainable. And there's

1:00:27

a couple of things I want to follow up on that we talked

1:00:29

about there, going back to the

1:00:31

first part, allowing people an opportunity to

1:00:34

almost take advantage of you. Often

1:00:36

I find that the first request

1:00:38

by somebody is very

1:00:41

telling or the first offer, here's

1:00:43

what we want. Here's what we need from you. And

1:00:46

if that doesn't come across as fair, it's

1:00:49

like the biggest signal in the world that

1:00:51

it's like, Oh, this is probably not a relationship

1:00:53

that is going to be win-win. I'm going to

1:00:56

have to work to try to make it win-win.

1:00:58

But you've, you've given me this valuable piece of

1:01:00

information on day one without even intentionally doing so.

1:01:02

Amen. But I would also, I would say is

1:01:05

the slight twist I'd make to that is and

1:01:07

give grace that like, I

1:01:10

will fall down, you will fall down and

1:01:12

make offers to people, even though maybe we

1:01:14

actually are like in a heart space most

1:01:16

of the time. That's not transactional. This

1:01:19

happens to me all the time where I will

1:01:21

fall down and, and, and, and do something transactional.

1:01:23

Totally. And so it's like what I often do

1:01:25

in that situation is say, Hey, maybe this was

1:01:27

unintentional. Maybe you're having a bad day. Whatever

1:01:30

the reason this came across to me as

1:01:32

transactional. If I misinterpreted it, maybe I don't

1:01:34

understand what you're actually that cement underneath it,

1:01:37

but it feels short-term feels transactional,

1:01:40

feels extractive in what

1:01:43

you offered. Did I misunderstand? And

1:01:45

usually that reaction, the more defensive they

1:01:47

are, the more kind of like, what

1:01:50

are you talking about? Right? Like

1:01:52

the water we swim in culturally

1:01:54

is transactive, extractive,

1:01:58

it removes control. It says it's. says you

1:02:00

will be okay if you can

1:02:02

build your own kingdom. So

1:02:05

like it's perfectly normal for that to be

1:02:08

the way people interact and transact. Like that

1:02:10

is the norm. So like I just want

1:02:12

to be careful with how steeped in that

1:02:14

somebody is and how much they've realized that

1:02:16

maybe that there's a better way. And

1:02:19

what I don't want to do is I don't

1:02:21

want to, I don't want to come across as

1:02:24

judging them or condemning them based on that, which

1:02:26

is a real danger, right? Because I mean you

1:02:28

can get self-righteous pretty quickly. It's just a signal.

1:02:30

Right. It's just a signal. If

1:02:32

anything, even if they are highly transactional and

1:02:35

sort of my, like I have

1:02:37

this, like it's like a weird feeling that rises

1:02:39

up in me. It's like a, like, I don't

1:02:41

know. Your Spidey sounds. Right. It's

1:02:43

that I think it's like a protective thing

1:02:46

where you're like, okay, I can feel

1:02:48

myself rising in, in competitiveness, rising in

1:02:51

scarcity to meet their scarcity. And I'm

1:02:53

like, Oh, I don't like that. That's that dirty fuel.

1:02:56

I feel like it's almost like a direct injection of

1:02:59

dirty fuel into my system. And I'm like,

1:03:01

Ooh. Yeah. And then it's like,

1:03:03

okay, well, even if I say, Hey, I don't think we're in

1:03:05

a position right now to probably do something on this or like,

1:03:07

I don't, I don't think the system it would work for you

1:03:09

engaging in the system right now. Try

1:03:12

to show them a better way and encourage them. Don't condemn them. Right.

1:03:15

I think that's the thing that we try to do now. Oftentimes I think people don't

1:03:18

take it as such. I mean, look, if

1:03:20

somebody makes you an offer and you decline, there's rejection

1:03:23

in that. And

1:03:25

again, I totally get

1:03:27

this because I feel this way is when

1:03:29

you get rejected, it touches things that are

1:03:31

way deeper than just that mere surface level

1:03:33

rejection. Totally. So when it travels down and

1:03:35

starts ping ponging around and hitting all those

1:03:37

things down below, that's where you

1:03:40

get these outside of reaction, outsized reactions to

1:03:42

things. And again,

1:03:45

the response that you want to have is when you

1:03:47

see somebody have an outsized reaction is to be, I

1:03:49

can feel stupid, belittle them. Your pattern

1:03:51

is something that I really have enjoyed

1:03:53

studying. So we all

1:03:56

have three basic moves in conflict. And

1:03:59

actually, if you. watch these, it's fun. Like now,

1:04:01

it's like whenever I engage in conflict, I

1:04:04

know my pattern and I very

1:04:06

much know my wife's pattern. And

1:04:09

I try to guess then

1:04:11

what other people's patterns are. You can watch people

1:04:13

go through these phases, but it's

1:04:16

called move against, which is like, no,

1:04:19

you're wrong, screw you,

1:04:21

I want to make you submit

1:04:24

to me. It's very much like a forced submission,

1:04:26

right? So this is somebody who gets up in

1:04:29

your face, who's yelling, or who's like, kind of

1:04:31

like talking down to you, like a

1:04:33

very, very confrontational, right? That's

1:04:35

kind of like one phase. And by the way, again, we

1:04:38

do all three of these. We

1:04:40

just depends on the order, but we all have an

1:04:42

order to how we do these things. And then by

1:04:44

the way, how they interact with one another is super

1:04:46

interesting as well. The

1:04:48

second one is move towards the person.

1:04:50

So the first one's move against. Second

1:04:52

one's move towards move towards is we

1:04:55

need to be okay. I'm not okay unless we're okay. Let's

1:04:58

just gloss over whatever's happened. It's okay.

1:05:00

It'll be fine. You know, let's just

1:05:02

water to the bridge. Let's just move

1:05:05

on. Right? Well, it's avoidant in a

1:05:07

way that is, it feels very relational,

1:05:10

but it's actually not because it's not for the good

1:05:12

of the other. It's actually for their good. They want

1:05:15

to have things be okay. But

1:05:17

it actually doesn't address the underlying issue at all. And then

1:05:19

the third one is move away. So this

1:05:22

is isolate. And so if you watch

1:05:24

all of your conflict will follow one

1:05:26

of like, we'll follow that pattern. Talk

1:05:28

to me about debt and your thoughts

1:05:30

on debt and the optionality it gives

1:05:32

you and when it's appropriate, when it's

1:05:34

not appropriate. Debt is not a

1:05:36

source of return. It is an amplifier

1:05:38

return. So it makes

1:05:41

good things be great.

1:05:44

It can take mediocre things and destroy them. And

1:05:47

of course it takes bad things and nukes them. The

1:05:50

higher your confidence in

1:05:52

the predictability of the future,

1:05:54

the more debt you can

1:05:57

use. I say can use

1:05:59

not should use. in a perfect world

1:06:01

of perfect information where you and I own a business. And

1:06:04

we're like, it's a recurring revenue business. We

1:06:07

are for sure going to make, unlevered,

1:06:10

we're going to make $2 million

1:06:12

this year, $3 million the following

1:06:14

year, $4 million the following year. And it

1:06:17

will go up exactly $1 million in free

1:06:19

cashflow every year into the future. Mathematically, you

1:06:21

can create a formula to

1:06:23

know exactly how much debt you can maximize

1:06:25

in that business. You pull out

1:06:27

the equity, the equity returns look out

1:06:30

of this world, incredible. And

1:06:33

because you know exactly the future is there's

1:06:35

no risk in that. So businesses that have

1:06:37

high predictability of revenues and incomes, and feel

1:06:40

like that they are, well,

1:06:42

I shouldn't say feel, in this case,

1:06:45

since we're creating scenario, they know that outside

1:06:48

events are really going to not affect them.

1:06:50

Then they can lever a tremendous amount. And

1:06:53

it makes complete perfect math

1:06:55

sense. The reality

1:06:57

is that the world,

1:06:59

I believe is largely

1:07:02

unknown and unknowable. The future

1:07:04

is murky. And

1:07:07

so it is a form

1:07:09

of pride, of hubris, to

1:07:11

use more debt than you should.

1:07:14

Now, this is very broad. This is like 60,000 foot because

1:07:17

everything's relative, right? How much debt should you

1:07:19

use? In the world I play in, we

1:07:22

are buying loosely functioning disasters

1:07:24

that sometimes make money. I

1:07:28

mean, these are small to medium sized businesses,

1:07:30

call it 3 million

1:07:32

to $20 million of free cashflow. You know,

1:07:34

my general view after looking behind the curtain

1:07:36

at thousands and thousands of businesses

1:07:38

is that all businesses are

1:07:41

loosely functioning disasters. Like whether it's a

1:07:43

not-for-profit or for-profit or government institution, like

1:07:45

people are messy. When

1:07:47

you get multiple people together, that mess

1:07:50

compounds, when you get large groups of

1:07:52

together, groups together, that mess compounds even

1:07:54

further, it's exponential. And the volatility of

1:07:56

that messiness is tremendous.

1:08:00

And so when you get to

1:08:02

smaller end of the market, these

1:08:04

are for-profit companies that are making

1:08:06

between three and $20 million a

1:08:08

year free cashflow, the volatility

1:08:10

of them is tremendous. And

1:08:13

hence the price that we pay is

1:08:16

on average less than,

1:08:18

because we're paying to accept that

1:08:20

risk. All investing at the end of

1:08:22

the day is the assumption of risk. The

1:08:25

ideal investment scenario is you are

1:08:28

assuming a risk that is knowable,

1:08:31

you are being paid more to

1:08:34

assume that risk and you have some ability

1:08:36

to mitigate that risk. And

1:08:38

that's what we're trying to do in our business.

1:08:40

We're trying to find things that are highly risky,

1:08:43

right? Because we wouldn't pay the price that we're paying

1:08:45

for them if they weren't highly risky. But

1:08:48

that we have talents and relationships

1:08:50

and systems that we can

1:08:53

diagnose what the risks are, properly

1:08:56

analyze the probability and the magnitude of that

1:08:58

risk, and then work to

1:09:00

mitigate it. And that's where our

1:09:02

returns come from. The math to me

1:09:04

is far less clear that over the

1:09:07

longterm debt makes you more

1:09:09

money. I'll give you an example of this. We

1:09:11

bought an aerospace business in

1:09:13

the fall of 2019. I

1:09:16

don't know if you know this, Shane, but aerospace never goes down.

1:09:19

It's always flat or goes up. We

1:09:21

were told by some of the people advising us on

1:09:23

that deal, they were like, are you guys, did you

1:09:25

guys get dropped on your head as a child or

1:09:28

something? You're not putting any debt on an aerospace business.

1:09:31

What is wrong with you? This is

1:09:33

tons of assets, highly leverable. Banks

1:09:36

would be happy to provide. Predictable. It's

1:09:38

predictable. Look at the history of the

1:09:40

business. And we said, yeah, we

1:09:43

don't feel like that's a responsible thing to do.

1:09:46

Again, debt only helps the buyer and the

1:09:48

seller. It doesn't help the leadership team.

1:09:50

It doesn't help the employees. It doesn't help the

1:09:52

communities. It doesn't help the regulators. It

1:09:54

doesn't help your customers. It doesn't help your vendors. There's

1:09:57

all these stakeholders at the table that it doesn't help.

1:10:00

But it does help in certain circumstances,

1:10:02

the buyer and the seller, which again, if

1:10:05

you sort of play short-term games,

1:10:08

win short-term prizes, area of scarcity,

1:10:10

non-recourse debt, heads I win, tails you

1:10:12

lose, there's a lot

1:10:15

of incentives to use debt irresponsibly.

1:10:17

I think that most private equity

1:10:19

firms look at, they're the

1:10:21

gas and the bankers of the breaks and

1:10:24

they'll just do whatever the bankers

1:10:26

allow them to do. And it's sort of up to the

1:10:28

bankers to say no. Our

1:10:31

aerospace business, we were

1:10:33

called idiots. I mean, actually even on Twitter, I think when

1:10:35

we came out with our annual letter that year, people were

1:10:38

like finance bros, were like,

1:10:40

you guys are morons. I was like,

1:10:42

maybe. And

1:10:44

oftentimes we are morons, which is good to be called out

1:10:46

for it. But in this particular case, I don't think we

1:10:48

were. And this is obviously way before we knew that there

1:10:51

was gonna be a pandemic. And

1:10:54

this idea of like, did we get

1:10:56

lucky? Did we get good? I think

1:10:58

you can know that things are not gonna

1:11:00

play out the way you want them to and

1:11:03

prepare for them not playing out and keep optionality

1:11:05

open, which is going to decrease your returns in

1:11:07

any given year, but give you the ability to

1:11:09

survive over decades. So

1:11:12

pandemic rolls around and we're

1:11:14

worried. You know, demand

1:11:16

in the industry in our segment

1:11:19

went off at one point by 88%. We

1:11:22

started to struggle and

1:11:24

we looked at it and we were like,

1:11:26

hey, let's, and by the way, the leadership team

1:11:28

there did an incredible job of

1:11:30

maintaining positive cashflow every

1:11:32

single month through the entire pandemic. Everyone else

1:11:35

was negotiating with their banks. Everyone else was

1:11:37

firing people. And we were the only ones

1:11:39

hiring and we were building systems

1:11:41

and we were taking risk. And we were able to

1:11:43

do that because we didn't need debt. Everyone else is

1:11:46

tied up. We didn't, we weren't tied up. And

1:11:48

the alternative is we lever the thing up. And

1:11:50

for, I don't know, four or five months, we

1:11:53

get a better return. And

1:11:56

then we negotiate with the bank. Hopefully we salvage it.

1:11:58

Maybe we have to inject more out. equity in down

1:12:00

the road. We're sure

1:12:03

as heck not hiring, we're not buying parked packages

1:12:05

for pennies on the dollar. We're not

1:12:07

setting up for 10 years of future success

1:12:09

and growth. We're

1:12:11

not implementing new ERP systems.

1:12:14

We're not implementing new process

1:12:17

and ordering system. The whole thing basically

1:12:19

gave us two years to completely

1:12:21

rebuild that business from the ground up and

1:12:25

to see the fruits of that is astounding. And

1:12:27

the business is dramatically worth more than

1:12:30

it was when we bought it in

1:12:32

spite of having a pandemic

1:12:35

and dramatically decreased demand.

1:12:38

We can't predict the future. When I was talking to

1:12:40

Chris Davis, who's on the

1:12:42

board of Berkshire, he

1:12:44

mentioned it's a strong signal if you're looking

1:12:46

for a good business that they don't have

1:12:49

any debt or they have very little debt

1:12:52

because that masks so many things

1:12:54

and the fragility involved is just

1:12:56

off the charts and people

1:12:58

don't realize the risks they're taking. And there's

1:13:00

also a world of difference between debt at

1:13:02

2%, if

1:13:05

you can get long-term debt at 2% versus

1:13:08

sort of now seven, eight, nine,

1:13:10

even higher, depending

1:13:13

on the circumstances. And when people enter

1:13:15

into a debt transaction, they just assume

1:13:17

that the world is gonna stay the

1:13:20

exact same that it is today. I'm

1:13:23

gonna make the same revenue. The

1:13:25

interest rates aren't gonna go up. They'll only

1:13:27

positively surprise me to the downside. And

1:13:29

then you find out that that's not the

1:13:32

case. And then all of

1:13:34

your free cashflow effectively starts getting consumed

1:13:36

by debt. And it doesn't take much.

1:13:38

It takes like a five to 10%

1:13:41

downturn in the business, which is a

1:13:43

perfectly normal- Business cycle. Reasonable cycle to

1:13:46

then throw the business into chaos. Yeah. I

1:13:52

can't imagine being an operator. And by the way, we've

1:13:55

never seen a business that we

1:13:57

wanna purchase ever the

1:14:00

firm that has debt on it. Like

1:14:02

when we buy it that has debt on it. Like

1:14:05

no families get wealthy

1:14:08

by being like, oh yeah, we have this great

1:14:10

operating business. Like let's pull a bunch of a

1:14:12

bunch of income from the future into the present

1:14:14

and lever up because that would be awesome. So

1:14:16

we can increase our consumption temporarily. So we can

1:14:18

buy a bigger house. Like no one does that

1:14:21

and for very good reason. Like it doesn't make any sense, but

1:14:23

somehow we've gotten ourselves as an

1:14:25

industry in the finance industry into this position where

1:14:27

it's like, it makes no sense how families

1:14:30

build businesses. By

1:14:32

the way, every business starts as a small business. Every

1:14:34

business starts as a family owned business. They then take

1:14:37

a business that has been operated a certain way for

1:14:39

a very long time, gone through ups and downs, survived

1:14:41

for 20, 30, 50, a hundred years

1:14:44

maybe. And then all of a sudden it's

1:14:46

like, actually what we want to do now

1:14:48

is completely gut how the

1:14:50

business operates and runs. We need to hit it with

1:14:52

the steroid needle. We're going to get, we're going to

1:14:54

jack it up with debt. We're going to strip it

1:14:57

of a bunch of cost structure. We're going to hire

1:14:59

a bunch of new people who are going to do

1:15:01

amazing things in a short period of time. And then

1:15:04

we're going to flip it to somebody else. And

1:15:06

by the way, once you get on that treadmill, like

1:15:08

once you sell the private equity, traditional private equity, do

1:15:10

a leveraged buyout, that business is forever

1:15:12

going to be flipped to the next person

1:15:15

or eventually might get sold to a strategic, but it

1:15:18

forever is relegated to a lack of

1:15:20

independence. Like it will never be an

1:15:22

independent ongoing concern for very long

1:15:24

after that. There's just no, no examples

1:15:27

of this. So for for us, like, you know, I

1:15:29

don't think we're smart. I

1:15:31

don't think we're trying to be geniuses. We

1:15:34

just look at like, okay, the whole

1:15:36

world is built on an

1:15:38

entrepreneur or small group of people,

1:15:40

entrepreneurs getting together, creating

1:15:42

something that the world needs. It's

1:15:45

hard. They built it over a

1:15:48

long period of time. They inherently acknowledge the

1:15:50

fragility of it. We just want to continue

1:15:52

to honor them, their legacy, honor the, all

1:15:54

the stakeholders, and all try to win together

1:15:56

the longterm. And I

1:15:58

couldn't imagine a worse thing. do than to

1:16:00

put debt on that. And I think

1:16:03

people miss over the long term, the

1:16:05

lack of debt actually works out better,

1:16:09

but over the short term, and I have the

1:16:11

saying, which is lack of patience changes the outcome.

1:16:15

And so when you lever up to

1:16:18

get your immediate returns and then you're

1:16:20

sort of playing with house money, you

1:16:23

can sort of justify

1:16:25

almost any behavior. And

1:16:28

when you think long-term, like a family thinks of a

1:16:30

business and you sort of go, well, we can't do

1:16:32

that because what we want is optionality.

1:16:34

You miss the fact that what you guys did,

1:16:36

you had a period of

1:16:39

two years where you made more

1:16:41

progress than you would have in

1:16:43

probably 10 or 20, where you're

1:16:45

strong and you're operating from

1:16:47

a position of strength. And

1:16:49

it's almost playing on easy mode in a way,

1:16:51

right? It's like, oh, like now we can expand

1:16:53

our business. People are

1:16:55

probably discounting parts at these fire

1:16:58

sale prices. We can stock up on them

1:17:00

and our margin is going to expand because

1:17:02

of that. We know the business is eventually

1:17:04

going to come back. I mean, I think

1:17:07

it depends on how you look at our

1:17:09

roles. Are we owners? And I'm not talking

1:17:11

about legal definitions here. I'm talking about mindset.

1:17:13

Yeah. If you own something, it

1:17:15

is your property to do with it, whatever you

1:17:17

want. You can do anything

1:17:19

you want with it. So like the pushback to everything,

1:17:21

if I was going to strong man, the opposing argument

1:17:23

is who are you to tell me what risk

1:17:25

to take? Oh, you can take it. Who are you to

1:17:28

tell me how to run my business? Like

1:17:30

I own it. I can do whatever I

1:17:32

want. I used to feel that way. Big shift for me

1:17:34

was becoming a steward, right? It's this

1:17:36

idea of stewardship and not ownership. So

1:17:39

the way I look at it is families are entrusting

1:17:41

us to be stewards of their company. It's

1:17:43

a responsibility that we have. Yes,

1:17:46

we get benefits from

1:17:49

being a steward. Yes, we get to

1:17:51

share in the fruits of the labor and

1:17:53

progress of the company. But at

1:17:55

the end of the day, my job is

1:17:57

to make sure that these businesses remain

1:17:59

intact. are healthy. And

1:18:02

when you look at it from that position, the

1:18:05

world becomes a lot clearer. What's

1:18:08

in the best interest of everyone else, but also me.

1:18:10

I mean, I don't want to do things that harm

1:18:12

us, but if we align incentives

1:18:15

properly, things that help us should help everyone

1:18:17

else and vice versa. Like we

1:18:19

will be taken care of if we take care of our people,

1:18:22

we'll be taken care of if we take

1:18:24

care of our customers. Like it's not

1:18:26

a complicated thing, but I think again,

1:18:29

are we owners or are we stewards?

1:18:31

Or I think often families take a

1:18:33

stewardship mindset of ownership. It's the, it's

1:18:36

interesting to me, I try

1:18:38

not to judge other people for what they do or

1:18:41

what they choose. Cause I mean, we're each

1:18:43

playing our own game. We're each sort of

1:18:45

like doing what's rationally makes sense for us

1:18:47

given everything going on in our life.

1:18:50

And if we switch shoes, we'd probably see the

1:18:52

world very differently than we do, but

1:18:55

people, I think they just under

1:18:57

appreciate the fact that you are

1:19:01

not thinking about really what

1:19:03

you're doing over a longer period

1:19:05

of time. And if you

1:19:08

structure your thinking stewardship is a great

1:19:10

example over a longer period of time,

1:19:12

you eliminate a lot of poor behavior

1:19:15

that you would otherwise

1:19:17

get or a lot of things that

1:19:19

can take you out of the game. Yeah, for

1:19:21

sure. Let's talk about incentives. How do you set

1:19:23

incentives for the CEOs of these businesses? How do

1:19:25

you think about them? Walk

1:19:27

me through one in detail, for example.

1:19:30

Yeah, well, so the, I think the

1:19:32

ideal system is everyone's eating at the

1:19:34

same table. Right. So

1:19:36

there's not different tables that the food falls

1:19:39

onto one and then falls onto the other,

1:19:41

right? Everyone's, everyone's incentives are aligned to, to

1:19:43

achieve the same goals. And

1:19:46

for us, when we look at traditional

1:19:48

private equity and the traditional two

1:19:50

and 20 model, right? So on

1:19:52

the amount of capital that you have either

1:19:56

gotten to invest or have invested, depending on the

1:19:58

terms of the agreement with your. limited

1:20:00

partners, you get a 2% fee

1:20:03

annually that goes to covering your overhead

1:20:05

costs and expenses of

1:20:07

the operations of the firm, the seeking out,

1:20:09

the doing of the deals, the oversight

1:20:12

and governance post-close. And then once you

1:20:14

pay them back with a return, typically

1:20:16

a 6% to 8%, maybe 10% depending

1:20:18

on the situation, then you get to

1:20:21

share in the upsides of that. And

1:20:23

the LPs, the people supplying you with

1:20:25

the money, provide

1:20:28

you that capital for usually

1:20:30

in private equity 10 years, roughly,

1:20:34

which again goes back to time horizon. 10 years sounds

1:20:36

like a long time. Shane, isn't that plenty

1:20:38

of time to buy a business and

1:20:40

hold it? Maybe. I

1:20:44

think if you've talked to most private equity people, they would say,

1:20:48

it's not the deals that they did that

1:20:50

really hurt that they did that went poorly. The

1:20:53

ones that hurt the most are the ones that they were

1:20:55

doing great and they could see a long future of compounding

1:20:57

that they just had to sell the business. You're

1:20:59

like, but 10 years is a long time. But

1:21:02

the reality is it takes time to find

1:21:04

a business, get the transaction

1:21:06

done. There's a sort of initial phase

1:21:08

of getting to know the business. Once you buy, you

1:21:11

really never know which you actually buy. No matter how

1:21:13

much due diligence you do, you don't really know until

1:21:15

you get into the weeds post-close. There's

1:21:17

a period of orientation, then there's a period of in

1:21:19

traditional private equity growth and trying to hit some sort

1:21:21

of metrics to then sell it to somebody else, which

1:21:23

by the way, selling takes time too. So you've got

1:21:25

to buy it takes time, you got to operate it

1:21:28

takes time, you got to sell it takes time. So

1:21:30

they're really at max, if you

1:21:32

hit it perfectly in the fun life cycle,

1:21:34

maybe you get five years, five

1:21:37

years at most. Most private

1:21:39

equity firms now are targeting what they'd

1:21:41

like is two to three years. So

1:21:44

from the time we buy something till the time we sell it

1:21:46

is two or three years. Again, maybe four

1:21:48

or five. If you get past

1:21:50

five, it's really distressed at that point. Like you're

1:21:53

trying to look for, you're trying to get

1:21:55

rid of it and you can't. When we think about incentives, incentive

1:21:58

for traditional private equity would be Shane,

1:22:01

I'd like for you to come on. I'd

1:22:03

like for you to run, do a tour of duty,

1:22:05

right? The tours of duty is kind of the way

1:22:07

that leadership has done in traditional private equity.

1:22:09

Once your tour of duty is gonna be two to

1:22:11

three years, look, you're not gonna see your family much.

1:22:13

You're gonna work your tail off. But

1:22:15

there's this pot of gold at the end of the rainbow. If you

1:22:17

can get us our

1:22:20

returns, you can get our investors our returns, then

1:22:22

you get to share in the upside of that.

1:22:24

It's a highly levered bet of sort of your

1:22:26

time and attention. We think

1:22:28

that that doesn't make much

1:22:30

alignment. And this is where you see private equity

1:22:32

detonating companies. This is where you see lots of

1:22:34

problems. I mean, private equity, you know, as

1:22:37

an industry, when I tell somebody I'm in private equity,

1:22:39

it's like we look up to lawyers and reputation these

1:22:41

days. You know, lawyers have a better

1:22:43

reputation than we do. And for a very

1:22:45

good reason, like there's been a lot of bad behavior. And

1:22:48

by the way, the incentives are

1:22:50

for the bad behavior. All of the polls

1:22:52

of traditional private equity, leverage buyout model is

1:22:55

towards bad behavior. Short-termism,

1:22:59

treating people poorly, cutting

1:23:01

all these things that hurt. I mean,

1:23:03

you're damaging when you fire somebody, you

1:23:06

are hurting not just them, but their entire

1:23:09

family, their friend group. Like you're

1:23:11

hurting communities. Now, it's also not healthy to keep somebody

1:23:13

in the role that they're in because you don't want

1:23:15

to fire. Then that's not healthy either. That's not kind. Be nice,

1:23:17

that's not kind. We can talk about that as a separate point.

1:23:20

For what we are trying to

1:23:22

do though, is we're trying to

1:23:25

have a complete perfect alignment between

1:23:27

our LPs, us,

1:23:30

and the people who operate these businesses on a

1:23:32

day-to-day basis. So we're trying to all leave from

1:23:34

the same table, trying to use the same metrics.

1:23:36

Practically, what does that look like? We

1:23:38

are, I used to say unusual in

1:23:41

our fee model. Now it's unique.

1:23:43

I mean, we couldn't even get audited

1:23:45

right out of the gate because no one knew what to do

1:23:47

with us. We take no fees of any kind, no

1:23:50

reimbursements of any kind. There's

1:23:52

no cash that comes from either our LPs

1:23:54

or the companies to

1:23:56

us. Zero guaranteed revenue,

1:23:58

which are like high. you run the firm.

1:24:01

Thankfully, when we started the firm, we were operators.

1:24:03

So we came in with cash flow and with

1:24:05

businesses and fell backwards into this whole

1:24:07

thing of private equity. I

1:24:09

remember the first deal

1:24:11

I did is I was close to accidental

1:24:13

as you could buy a business. I bought

1:24:15

it. I remember my lawyer, he

1:24:18

was like, we just got to do diligence. I

1:24:20

typed into Google, DO diligence. Was this media cross?

1:24:22

Yeah, it was media cross. So long as today,

1:24:24

I remember getting that deal done. And I called

1:24:26

up a friend who was like my one finance

1:24:29

friend from undergrad. And I was like, Hey, I

1:24:31

did this thing. Like, I think it's a good

1:24:33

deal. I don't know. And he goes, Oh, you did

1:24:35

a private equity deal. I literally Googled private equity. I

1:24:37

almost my career to Google. And

1:24:39

when I started studying it, I'm like, what, this doesn't make

1:24:42

any sense. Like all the incentives are off. And so what

1:24:44

I said was when we came in and we were, you

1:24:46

know, we ended up taking outside capital for the first time

1:24:48

in 2017, I was like, I don't need your fees. Like

1:24:50

I don't want

1:24:53

your fees. I don't want the incentive to

1:24:55

gather more and more capital, which forces you

1:24:57

to go up market. We can talk about

1:24:59

that. I said,

1:25:01

and I don't want to, I don't want to be able

1:25:04

to win when you lose. Like I want to win, win

1:25:06

or a lose, lose situation. Like I am willing to take

1:25:08

the risk. I wanted to be entrepreneurial because that was my

1:25:10

background. Like I was an entrepreneur. And so we have a

1:25:12

model where we take no fees of any kind, no reimbursements

1:25:14

of any kind from the portfolio companies or from our LPs.

1:25:17

We get a percentage of free cashflow as

1:25:19

we return cashback. That's how we share with our,

1:25:21

with our investors. Well, turns

1:25:24

out what that does for us is

1:25:26

it gives us the perfectly aligned ability to,

1:25:30

if there are high return, high probability projects

1:25:32

to reinvest in the portfolio, we would be

1:25:35

idiots not to take

1:25:37

the cash, defer gratification and

1:25:39

reinvest it often pre-tax at

1:25:42

high rates of return with high probability. That's

1:25:45

what any family would do. Right.

1:25:47

That's what we do. That's what our investors want.

1:25:50

They want to defer gratification. We want to

1:25:52

defer gratification. And the same thing.

1:25:54

We want to incentivize our leaders to do the exact same thing.

1:25:56

So oftentimes the metrics that they're measured

1:25:59

on is on. cash flow. But

1:26:01

again, it's not free cash flow in

1:26:04

a short period of time, it's free cash flow over a long period of time.

1:26:07

So when we don't have things

1:26:09

to do with the capital, high probability, high

1:26:11

return reinvestments, the dumbest possible thing you

1:26:13

could do is keep a bunch of cash. I call

1:26:15

the bladder problem, right? The more money you have, the

1:26:17

more likely you're going to piss it away. This

1:26:20

is where you see these businesses being

1:26:22

run in ways that you're like, they are

1:26:24

murdering money. They are destroying capital. How in

1:26:26

the world are they getting away with this?

1:26:28

And it's like, well, they're kingdom building, they're

1:26:31

feeding their incentives are build a bigger business.

1:26:33

Because by the way, you hire the compensation

1:26:35

consultants that tell you, well, yeah, the team

1:26:37

that same team and they

1:26:39

haven't really made a great return, but the business

1:26:41

is bigger. And by the way, bigger businesses command

1:26:43

higher salaries. So you play the game. It's a bigger

1:26:45

business. It's higher salary, more comp. It's

1:26:48

like their incentives are off the firm

1:26:50

who bought them, they're two and 20 by

1:26:52

lovers, strip and flip their incentives. And the

1:26:54

leadership teams and setups often are misaligned. LPs

1:26:57

are misaligned. Everyone up and down the value

1:26:59

chain of the traditional private equity structure is

1:27:01

misaligned. Now there's so much money flowing through

1:27:03

the system and there's enough safeguards and there's

1:27:05

enough discernment over a long enough period of

1:27:08

time. It all kind of has worked. You

1:27:10

can make an argument that when rates are

1:27:12

continually decreasing for the better part of two

1:27:14

and a half decades, interesting,

1:27:17

weird distortions happen in the market. We just want

1:27:19

a perfect alignment. So we want that operator in

1:27:22

the business to say, the first thing I want

1:27:24

to do is keep a healthy business

1:27:26

with strong cashflow, keep the

1:27:28

golden goose cranking out eggs. Second, we want to

1:27:30

take the proceeds for

1:27:33

cashflow and look for high return, high

1:27:35

probability projects in the companies. If

1:27:37

we can find them, especially pre-tax,

1:27:41

fantastic reinvest cash.

1:27:44

They want to reinvest cash because now they

1:27:46

reinvested a hundred dollars and now they've got 25 more

1:27:49

dollars every other year following that. We

1:27:52

love that too. We'd be happy to defer. We're

1:27:55

getting $25 as well ourselves. Now our investors are

1:27:57

like, of course, keep the capital. You've got great

1:27:59

things to do. to do with it, keep it. So

1:28:01

up and down the value chain, we're completely aligned. When

1:28:04

we should hold cash, we do

1:28:07

and reinvest it. And when we don't have anything good to

1:28:09

do with it, we send it out. So

1:28:11

is it a simple sort of like two

1:28:13

variable formula for all your CEOs then or

1:28:16

in terms of free cashflow and invested

1:28:18

capital? Yep. Everyone's just

1:28:21

incentivized on that. And then do

1:28:24

the CEOs get a compensation on

1:28:26

the cash distributed? Yeah, oftentimes. Yeah.

1:28:29

I mean, it depends on the situation where

1:28:31

sometimes having the CEOs are rolling forward quite

1:28:34

a bit of equity depending on the situation.

1:28:36

So sometimes they're getting equity or

1:28:38

getting cash kickers on top of that. But

1:28:40

oftentimes they're 10, 15, 20%

1:28:44

owners in these businesses. And so the incentives

1:28:46

naturally baked in. We love that. We don't

1:28:48

want to buy 100% of a company.

1:28:51

Like if we have our choice, we're buying 51% to 70%

1:28:54

of the business and we don't allow

1:28:57

non-strategic actors. We

1:28:59

want people who are actively engaged in the business to

1:29:01

own the remainder. How do you think about hiring and

1:29:03

firing CEOs? How do you know you have the right

1:29:05

CEO and how do you know

1:29:07

when it's time to move on? It's

1:29:11

hard and it's messy is the answer. Since we're

1:29:13

talking about comparing us to traditional private equity, I

1:29:16

would say is one of the things that traditional

1:29:18

private equity has gotten done better than us in

1:29:20

some ways is held people accountable. I think they

1:29:22

go too far in one direction.

1:29:24

I think we've reactionarily gone too far in

1:29:26

the other. In terms of the performance of

1:29:28

permanent equity as a firm, I would

1:29:32

say in absolute terms, we're not doing as

1:29:34

well, nearly as well as we could. And

1:29:37

this is an area of active learning for

1:29:39

us. I'm just being honest and transparent about

1:29:41

it. We've been tolerant of a lack of

1:29:43

performance to a degree that is unhealthy, not

1:29:45

only for the companies and the returns, but

1:29:47

also for the people that are engaging in

1:29:49

that behavior. And this is

1:29:52

an active area of discussion right now in the

1:29:54

firm. I mean, I'm giving you a real live

1:29:56

view of what we're discussing and it ultimately it's

1:29:58

a failure on my part. I'm

1:30:00

the CEO, I'm responsible for setting the

1:30:02

tone, and I deferred too

1:30:05

much early in my

1:30:07

career to the promises and to

1:30:09

the optimism that things would get

1:30:11

better when things weren't great. And

1:30:14

if you look at where we have really

1:30:16

succeeded is working with people who were doing

1:30:18

well and making them better. Where

1:30:20

we've really fallen down as a firm is

1:30:22

when things get dicey, we

1:30:25

tend to defer to relationship and

1:30:28

we tend to trust the people that we

1:30:30

have, even when there are many

1:30:33

warning signs that things are

1:30:35

not okay. And I would say this is the

1:30:37

nice versus kind principle that we've screwed up. Being

1:30:39

kind to somebody is saying, hey, I think

1:30:42

you're in the wrong role. And

1:30:44

they're stressed out. Their

1:30:47

lives are not, they're not enjoying life. They're not enjoying their

1:30:49

role. They're fear-based, right? When you get into a position where

1:30:51

things are not going well and you don't know why and

1:30:53

you don't know how to get out of it, it's

1:30:56

terrifying. And

1:30:58

part of what our role is is to help people.

1:31:01

We look fundamentally at like we, our job

1:31:03

is to serve and help others. If

1:31:06

we can serve and help others succeed, we're

1:31:08

going to succeed. Our LPs are going to succeed.

1:31:11

And to be honest, we screwed this

1:31:13

up. We have not done

1:31:15

a good job of getting people

1:31:18

the help and

1:31:20

moving people into roles that they should be in

1:31:22

or, or having them move on to outside roles.

1:31:25

And we need to do better at it. Does it ever work to change? I

1:31:28

mean, I don't have a ton of

1:31:30

experience with this working out. Maybe you do

1:31:32

where you change a role like, Hey, you're

1:31:35

CEO, but you'd really make a great CTO

1:31:37

in the same company because then you create

1:31:39

all these internal politics of like, who do

1:31:42

I report to and my loyalties to the

1:31:44

person who hired me and, or

1:31:46

is it just easier to sort of like transition and

1:31:48

move on? I mean, it would, that would

1:31:50

be wonderful to be able to do that.

1:31:52

I think that a lot of people's careers

1:31:54

would benefit if they had the humility to

1:31:56

be able to do that. Fundamentally, we all

1:31:59

struggle with pride. And

1:32:01

we can't see ourselves clearly. Like we

1:32:03

are a mystery to ourselves. And

1:32:06

what we, how we see ourselves in

1:32:08

our talents and our weaknesses

1:32:10

is often different than how other people see us. This is

1:32:12

why we need each other. This is the whole point of

1:32:15

relationship. This is the value. And this

1:32:17

is the terror of where we've gone as

1:32:19

a side note with social

1:32:21

media being so isolating with not having

1:32:23

in-person relationships. Like this is no

1:32:26

wonder that deaths of despair and suicide

1:32:29

attempts and anxieties through the roof, right?

1:32:31

We would love to be able

1:32:33

to take to somebody, hey, you're in the CEO

1:32:35

role or maybe the CFO role or whatever it

1:32:37

is. And we need you to take a step

1:32:39

back, you know, in order

1:32:41

to move forward. Careers often

1:32:43

die by suicide, not by homicide.

1:32:47

Like it's not- Double click on there.

1:32:49

Over and over and over again, I've

1:32:51

watched this tragedy happen, which is the

1:32:54

Peter principle. Someone rises and

1:32:57

they rise beyond their abilities and

1:33:00

then they can't take a step back.

1:33:02

Their pride, their ego, their identity is

1:33:04

rooted now in their title, in

1:33:06

their position. And you

1:33:10

say to them, we love you. We

1:33:12

think you're awesome. We'd love for you to continue to

1:33:15

be with us. The role

1:33:17

you're currently in is hurting you and

1:33:20

hurting those around you and hurting the company. And

1:33:23

they'll acknowledge that. And then you'll say, great,

1:33:25

could we get you into this role? No,

1:33:28

absolutely not. People

1:33:31

fight, claw for territory, kingdom

1:33:34

building. It's hard to go

1:33:36

from being king. Still

1:33:39

may be an important person in the kingdom, but you're not

1:33:41

the king anymore. It's hard. It'd

1:33:43

be hard for me too. Would I be okay with RLP's

1:33:46

coming to me and saying, Brent, I don't

1:33:49

think you're the right person to lead permanent equity. I'm

1:33:52

not gonna lie and be like, well, that'd be a great

1:33:54

conversation to have. I

1:33:57

hope that I would meet it with curiosity. I hope I'd

1:33:59

meet it with... self-reflection and say, wow, I

1:34:01

really wanna hear, I mean, I think I

1:34:03

disagree, but I wanna meet it

1:34:05

with curiosity and

1:34:07

see what they have to say and see

1:34:10

if I could discern out of it. Maybe I'm not in the right role. What

1:34:13

have you learned about hiring people that most

1:34:16

people miss? Well, another journey I've been on,

1:34:19

speaking of these like added tools

1:34:21

and toolkit is I've really become

1:34:24

much more familiar with different personality

1:34:26

testing. And

1:34:29

specifically, like I've looked at a bunch of

1:34:31

them, I really like the

1:34:33

combination of Myers-Briggs and Enneagram.

1:34:37

If you think about our business as, you

1:34:41

know, we take money and we turn it into

1:34:43

more money, I think you miss the most important

1:34:45

thing that we really do, which

1:34:47

is our whole business is

1:34:49

predicated on predicting the behaviors

1:34:52

of people. Like

1:34:54

if we can predict the behaviors of people, there's

1:34:58

no way to lose. And when we don't predict the

1:35:00

behaviors of people, we're almost certain

1:35:02

to lose, like an increase in incredible

1:35:04

volatility into the system. If I think about my

1:35:06

job as CEO, I need

1:35:08

to be helping our team to

1:35:10

be the most thoughtful, well-educated,

1:35:14

up to speed on predicting human

1:35:16

behavior. I mean, this

1:35:19

is where the Knowledge Project is been super helpful.

1:35:21

The work that you've done, collecting the best of what

1:35:24

other people have figured out, getting

1:35:26

it, distilling it, right? I mean, this is what

1:35:28

we're all trying to pursue. And specifically around the

1:35:30

wisdom of clicking over these lenses that

1:35:33

these personality tests provide, and

1:35:35

giving you a framework to create empathy

1:35:38

and create predictability in relationships. I think that's probably

1:35:40

been the biggest leap forward in what most people

1:35:42

get wrong, is most people don't

1:35:45

understand why people are doing what

1:35:47

they're doing, don't understand how they

1:35:49

should think about incentives based on

1:35:51

the person themselves, and not just

1:35:53

the financial incentives, and don't

1:35:56

have much empathy for how other people

1:35:58

react. So take things personally that aren't... You

1:36:00

know, everyone acts rationally in the moment. This

1:36:02

is the like the heroin addict who's

1:36:05

choosing heroin over eating a

1:36:07

meal or, you know, leaving their family.

1:36:10

In that moment. Believes

1:36:12

they're doing the right thing for them,

1:36:15

believes it's rational to pursue

1:36:17

that hit. Versus

1:36:19

do everything else. So

1:36:21

the question you have to ask yourself is why? Right.

1:36:24

And same thing in companies. Same

1:36:27

thing with leadership in these firms. Like

1:36:29

the question is why? What do we think? Why

1:36:32

did that person go off the rails? Or how did that person suddenly

1:36:35

disintegrate before our eyes? Or why is

1:36:37

that person performing so incredibly well? And

1:36:40

so these different personality testing, it

1:36:43

doesn't know in the box. No one is

1:36:45

a, you know, in the

1:36:47

16 types for Myers Briggs or whatever it might be. There's

1:36:50

no grouping that will perfectly

1:36:52

describe anyone. That's not the point. The point

1:36:54

you've missed it. If you think that you're

1:36:56

going to put somebody into a

1:36:58

box and it's going to predict 100% of their behavior. That's

1:37:01

why I like having multiple of these that

1:37:03

kind of give you a 3D look at people. I

1:37:06

mean, my experiences, it was an eye-opening. I assume

1:37:09

that everyone else operated the way I operate. I

1:37:11

assume people wanted what I wanted. Turns

1:37:14

out I am weird. So

1:37:16

are you. So is everyone you meet. They're

1:37:18

weird because they're mixtures of all

1:37:20

these different axes of how we sit on

1:37:23

these things. Right. And how we, how they

1:37:25

interplay and interact with one another. But

1:37:28

I can tell you as an example, once I

1:37:30

understand sort of the four axes of Myers Briggs.

1:37:34

So where do you gather your energy is

1:37:36

the first one. So this is introverted, extroverted.

1:37:39

This is not how you show up in the world. This is where

1:37:41

you gather energy. So introverts can

1:37:43

appear extroverted, extroverts can appear introverted. That's

1:37:45

where this like sort of you get

1:37:47

these very basic ideas about how the

1:37:49

world works. And you sort of hear

1:37:51

like a little bit of these things and you get misperceptions

1:37:53

of what they actually mean. So it's really important to understand.

1:37:56

Are you getting your energy from inner life or

1:37:58

are you more. or solar powered, right?

1:38:01

Getting your energy from other

1:38:03

people and from the world. The second one

1:38:05

is how do you process information? Are

1:38:07

you intuitive or are you high sensing? This

1:38:10

tells you a lot about where somebody starts in how

1:38:12

they think about life. So sensors

1:38:15

think about life in the present. They're

1:38:18

present oriented. They walk from the

1:38:20

present into the future. They're

1:38:22

very practical. They're very reasonable.

1:38:24

They're very rational people. Intuitives like

1:38:27

maniacs like me, we

1:38:29

start into the future and then

1:38:31

we walk back into the present. So we get

1:38:33

excited about ideas. We're like, oh, we vision this

1:38:35

future. Oh, what might that

1:38:37

be? How might that work? What might we do?

1:38:39

Who could come along with us, right? And then

1:38:41

somebody says, a sensor comes along and says, excuse

1:38:44

me, I'm glad that

1:38:46

you're 10 years in the future right now. And you

1:38:48

have these grandiose visions of where you're going. We've

1:38:50

got to make payroll this week. And by

1:38:53

the way, that's on fire and that's on fire. And

1:38:55

like, we need to be here. So you need both,

1:38:57

right? That's the beauty. None of these like being introverted

1:38:59

or extroverted, they're just strengths

1:39:01

and weaknesses, right? There's always

1:39:03

upsides and downsides to each one of these. But

1:39:06

once I can tell, okay, where's somebody

1:39:08

powered from, right? How

1:39:10

does somebody process information? The third one is how do

1:39:12

they make decisions? This is a really important one. So

1:39:15

thinkers and feelers, two basic categories. Thinkers

1:39:18

are all about ideas and about truth. So

1:39:22

they're seeking truth. They're seeking ideas. They're

1:39:25

very achievement oriented. They

1:39:28

want to get things ordered up

1:39:30

and neatly packaged. That's

1:39:33

how they make decisions. So they're making decisions based on

1:39:35

what is truth and how am

1:39:37