#190 Brad Jacobs — How To Build a Billion Dollar Company: The Unconventional Playbook
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So I look at that, all china said, this is a messed of all chart, which is great for making money, that you can find something that messed up and easy to and mess up who there's your money. There's your opportunity. Make a lot of money.

You've made a few done dollars. What lessons have you learned about money and spending money and living with money that you wish you knew?

And you throw me off bit with the question because when you're look at the the numbers, the real growth has been through eminent with acquisitions. What's been my secrets on acquisition? Here's the just a lot of people have a rigid business plan that spelled out with many years, and that's IT in a very because usually work.

why? Because life changes, markets change, economies change. And if you're rigid, just rigid thinking, you're going to have things come your way to make money for shareholder and feel like it's nice, it's great. It's really not our thing was a bad way.

You said you can get a lot of things wrong if you get the big trend right, what major trend are you most interested in right now?

I'm most interesting because IT is the trend. IT is the number one trend.

Welcome to the knowledge project, a podcast about mastering the best of what other people have already figured out. You can apply their insights to your life. Armie host, shame parish, ed, a quick favor to ask before we start.

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you'd like access to the podcast before everyone else, special episodes just for you, hand edited transcripts or you just want to support to show you love, join at fs dop logue slash membership. Check the show notes for a link. Today, my guest is brad Jacobs, executive chairman at X P.

O. Brad is a career CEO and serial entrepreneurs, a unique track record of starting multi billion dollar companies. I think he's up to seven of by now, which i've created tens of billions of dollars in shareholder value.

His goal with all of adventures is to generate outsized value for shareholders by hiring talented people. Committed to thinking big, he recently wrote a book called how to make a few billion dollars, which is a playboy for creating outsize value. Now, all of that sounds really simple.

So I wanted to sit down with bad for a wide ranging conversation. How exactly does he do? IT? Let's get into the weeds.

We talk about A I trends, human nature, mergers, acquisitions, running meetings, what he looks for when hiring and so much more. Whether you're running a business or working in one, you'll walk away from this conversation with clarity around how to improve your results. It's time to listen and learn.

right? carts. Well.

who wrote the singularity is one of your heroes, and you recently met him. I'm curious what you took away from that conversation and what I was like.

well, I did recently meet him and he was like meeting Alberta einstein or meeting so michelAngelo, because we need look at his context is wide context. He's looking at the history of the universe going back thirteen point, something, billion years, and how we got here, and then looking at those trends and where we're going.

He identifies the most important trend of all, which is homosapien s have created technology, created tools, starting with stones, pebbles, and over couple million years ago, and then fire settlements. And and over last couple hundred years, so much, so much more, so much more in the last twenty years, accelerating, accelerating. And now with A I, it's accelerating even more.

And where's that going? Where's that going? Is the tools that we've created, the technology we've created is becoming more capable than we are at certain of our trades. And we are able to outsource a lot of our activities to our own technology.

And ray predicts a singularity whereby technology becomes more intelligent, more capable than humans, and emerge with technology that we use so much technology in our own, in our own bodies, with wearables and ano bots. So for that in A I and outsource our memory, sensory. And so for that, that you really can't call homosapien s anymore, because the traits characteristic of change so much that will say homo sapiens has become extinct.

This is a new, new species. I think it's probably right. What do you think .

the benefits of that are? And what do you think the drawback ks are?

All the benefits are we should be able accomplish a lot more. So if you look at us as a planet, eight billion people, lot of things we do well, but there a lot of things we don't do well. But i'm early, get along with the other.

And information sharing is not there. Resort sharing is not there. I think with advances in technology, we will be able to distribute resources more intelligently and and and more abundantly in have more resources for more people. And I think medicine will be Better in science. Science will be Better and be able to live longer, will be able to be more in touch with the way we think and to be able to think more constructively because that's one of the places with an area improvement for humans is we don't think rationally a lot of times. And I think with technology and A I vance's, that we will think more rationally, so will be not on stop therapy sort of speak.

How do you think specially when you have all this, the information coming at you from all over the world, you are emotional. You have big swings. I mean, you've lost billions of dollars and in market cap in a day.

I don't always think perfectly rational. I'm not a perfect person. I've paid attention to the way I think over the course of my life. And i've studied with various people who that their specially is, analyzing how you think. And I did a couple of years of therapy for three hours a week for for a couple of years.

So I I have spent a lot of time reflecting on how I think what my automatic thoughts are, what my biases are, what my cogent distortions are. I'm aware of those. And I apply various techniques and tools and tool kit that learn from coding therapy, dialect behavior therapy, positive to to think more rationally, more constructively, more accurately.

And I think that helps me and business quite a bit. In business, you need to keep your head on your shoulder. You need to be calm, you need to be cool, and you collected and to be dealing with lots of changing unplanned circumstances and then capitalizing on those and not being overwhelmed by those, not being beat up, but beat, but utilize what comes in, capitalizing what comes in to create money, to create money for shareholders. So I think the the human capital in in the psychological uh uh sense is very, very important. So I I put energy into that.

You said you can get a lot of things wrong if you get the big trend right. What major trend are you most interested in right now?

I'm most interested in A I because IT is the trend IT. IT is the number one trend whereby our technology is soft, that intelligence will be able to consume so much information much more than we human beings can. Even with one hundred billion brain south, the power of computing is so much greater, and be able then analyzed that, and be able to spit things out and be able to eventually.

I am looking forward to the point where computers become emotional, where they do have emotional when you have empathy, just like we have mire neurons in the front of in the preventible cortex. I'd like to see that trend crooked of materialized, where computers can feel, can have theory of mind, can be sitting here with a conversation with shame, parish and and feeling what you're feeling and and feeling happy about what you're feeling happy about, feeling sad about something you're not feeling happy about. I'm looking forward to that trend a lot.

The thing A I is sort of everybody recognizes A I as being a trend, but you've spotted several trends well before people recognize them. And you were way ahead on the A I curve. Two, as I understand, how do you spot those trends before they become mainstream? What I do spend .

a lot of time thinking about trains. I look, I spent a lunch, I think about the wider context of things, like, okay, here's a situation.

What's the context of that situation? What's its origin? What's his present conditions of characteristics? What are the ways you could go? And what would be the catalans to make a go right or straight or left? So I I intentionally think about trends quite a bit, because in business, in the business world, you ve got to get the major trend right.

You've got ta get the major trend right. And as my main business man tour, make rest in peace little justice. And used to say you can mess up a lot of things, but if you get the main trend right, you going to make a lot of money and conversion.

If you don't get the main trend right, you're swimming upstream. You can do a lot of other things, right? But you, I can make a lot of money. So I intentionally spend time thinking about what's the which always fit in, where could I be going?

What's your research process? Like.

I like people and I like picking people's brains, and i'm shameless about asking people their opinions. And I like to be a student more than a teacher. I find a lot of people make the mistake. As they get older, they get more successfully.

They think they know every start, teaching all the time i'm sharing through the book I wrote and the podcast like this is so forth, the few little things that I think I have insights that I can give back to. But I absolutely view myself as a student of life. I don't feel myself as as a gw, who's figured all out by log shop.

And I think if you keep that that element of profound curiosity of really interesting in being very interested to learn and being involved with the sensory experience, being involved in the intellectual experience, being involved in an analytical capabilities, I think you can learn a lot more. And you can see trends that othe wise, you don't see IT just in IT and you're living IT, but you're not seeing the trend. You just kind of going along a .

lot of people who reach your level of success sort of outsource a lot of this work to other people. And by that, I mean, um do you research on this? Come back to me, give me these points. But you seem very hands on in the weeds, very involved in the detail. Why is that important to you?

I do well, shit. I do have a team that researches things for me, but I also I like to roll out my leaves and getting to IT myself. I'd like to find even like what I do.

Ea, so my teams that i've let have done about five hundred acquisitions. I've been involved in those acquisitions. So I, I, I get into the details of what are we buying and to buy those five hundred companies.

We looked at thousands and thousands of other companies that we didn't buy. And I and I, I love the process. I love studying each company.

Figure out how do I get to the point where now there are millions or hundreds of millions or billions dollars of our revenue and they started from scratch, and how do they do that? Like a miracle of which does. I am very impressed and excited and enamored with entrepreneurs and companies that have created huge growth and huge value.

And I want to understand that. So I want to get into the detail of that, that I want to pick their brains. I I I see a big value and asking lots of questions.

People, now today you're the one asking questions. I'm answer, but Normally it's the role of verse. Normally i'm asking lot of questions. If you go to a managed meeting, i'm usually asking .

a lot of questions. What have you learned about asking questions that you wish you knew?

Five years ago, I take questioning from the therapies. So I wrote the book that the only time my life that i've been depressed, but I was really depressed, was in the mid of thousands, when I had stepped down from being CEO of this big company, you know, rentals. And now I didn't have anything to do.

I didn't. I am going to doing some art. I was studying art and buying arton.

I was doing things with my family so work, but I didn't have a business. And I learned from that, that everyone has their own thing that makes them excited. Me is running businesses.

I have been a ceos since i've been twenty three years old, and I like being a CEO. I really like that job real a lot. Now I win a CEO.

And I felt a big gap. I felt, I felt depressed, was down and had a lot of unconstructed thoughts and inaccurate thoughts award. And that drew me to meeting a lot of fantastic psychotherapy, and we're fantastic tic at the top of their game.

So there was a psychotherapy in new york city called Albert Alice. He died about ten, fifteen years ago, and he had formed a school of therapy called rational motive behavior therapy, R E, B. T.

But in short, IT was cogent therapy. IT was cogent behavior therapy. Heat together with another site, psychic st actually aren't back. Who's family friends called in tim? I got the privilege, him two and spending time with him, his family tibor iring back and out else for the cofounder ers of cognitive erp y.

And I find that therapies have, of all the different professions, are the best of asking questions and the best of getting a person to relax, giving a person at ease. And to open up, and when I learned from studying those psychotherapy, first is you need, before you start badging someone with questions and inquiring and ask him all these bored things, something personal things with intimate things about private things you need to do, need to create atmosphere. You need to create environment.

That's a safe place. That's a zone where your, it's OK to be vulnerable. It's OK to say what you really feel okay, to take off your mask and show who you really are, words at all. And that's really, really important. And to do that, you need to be listening.

And I learned from study them that the most, maybe the most, maybe the single most powerful thing you can do now relationship with this personal is professional is to give someone you're one hundred per like you're doing up, you're giving me one hundred percent of your attention. I can see that your you're looking at me. You're listening to me.

You're actually paying attention. What i'm saying, and that feels good, by the way, is making me put a little pressure on me to perform Better, give you give good answers, but you're doing something powerful. Your, your doing your attention.

You can give me one hundred percent of your attention. And I find with therapies, that's that's their their little, that's one of their tricks, one of skills, one of their techniques. You have your session for forty five minutes or two hours whatever IT is.

And during that time, they are all yours, they're all listening to you and and they we get all their attention on you and that has a certain effect on the person speaking. And secondly, they're not being judgmental. Um so they're not they're going with you now.

There's not they're not disagreeing with you without first finding a way of agreeing with you joining, then leading, validating than disputing. So even when they are changing, the way you're thinking is that he is a Better way to look at that there. Another way we can look at that, be more constructive before doing that, before that disputing, before that changing, that transforming.

They're first joining the the showing that they understood you, they listen to you, they got you, I got what you said message received. And I find that's really powerful in business. Whether you're dealing with employees or whether you dealing with someone with business you're trying to buy, we're dealing with a vendor, you're dealing with a investor and upset customer. It's it's very good to do that. It's very nourishing and nurturing to give someone one hundred percent of your attention and listen to them nonjudgmentally I call IT non judge mental concentration.

I I think I made up that phrase maybe didn't I forgotten I attribute to someone else with that's a phrase I use non judgemental concentration when you're really taking all your consciousness and giving IT someone and and not judging them, are going with you trying to get into their way of thinking there, their way of feeling even so, not just what are they thinking, but how are they feeling? So what's the emotion is underlying that? And and I used that.

I use that quite a bit in the book. I have a chapter on how to have an electric meeting, how to run electric meeting, which means a meeting that's powerful, A, A meeting that everyone goes away exhilarated, everyone goes away with lots of things to do, that can create a lot of value for the shareholder, not just one of these whole home meetings. An element in that meeting is everyone in the meeting shuts off all their devices and concentrates, concentrates nonjudgmentally, nonjudgemental concentration on the one person speaking at a time, those side conversations, they are talking over each other, one person speaks to time, but everyone in the room is all their attention. Really powerful thing.

I like that a lot is sort of the secret to our podcast in a way, which is, I want to see the world through your eyes. I don't have to agree or disagree. That's not my job as I just want to see what you see, think what you think, smell what you smell, and then that way I can truly understand where you're coming from. And I think that so often listening is transactional in the sense of i'm waiting for you just stops so I can just say something or I I have this point you don't understand IT really listening to you because you are talking about something else. Now I think it's one of the biggest reasons we missed communicate yeah is the work with the the psychotherapy is that where you learned about arranging our brain and thin the mind and the importance of sort of thought experiments and mindset you are talked to me a little bit about?

That was one of the places you know for my my main hobby since as a teenager has been meditation and various forms of meditation, and and for meditation into learned self of nosis. And then then from there I learned all the mindfulness and the positive psychology and cognitive pin so fort. So I have mixed to matched a lot of different schools of thought and customize IT for me, for my own personality, my background and my individuality.

So it's not just one thing. I've had many different influences that i've created, the way I look at life in the way I deal with reality. And a lot of that was my education.

I was a kid was, I started music. I started music in math. But in music, IT is a lot about relationships, less your solo performance.

I was not. I like playing a group by. I like, like a band. I like playing with other people. Interacting with the other folks is part of the magic of making really great music. And that had a big influence on me, too.

I define myself, I self identify as as a musician more than business person, which you might find because i've been a lot of time building big businesses and running large enterprises. But when I think about myself, I I think myself is a music musician who happens. We doing a lot of business and has done well of business.

But I I feel like a musician by that. I mean, my sense of sound is the dominant sense. And I listen very, I listen to sounds. I listen to my heart beat, listen to my breath.

I in the sounds in this room going on right now, I I suffer, quote and quote, I put air quotes on IT because I don't considered suffering, considered fantastic. Uh, tonight is where where have ringing in your year from when I was a teenager, private for listening music too that and I have right now i'm hearing very high pitch sounds. I love IT keeps that interesting is my friend that keeps me in tune that sometimes they get loud or something, they get softer. Now some people have tonight and they and I might be mispronouncing that but you know, i'm talking about, yeah reading there that and they say, oh my god, a terrible thing that drives me crazy and they get upset about the thing I have just the upset attitude I feel i'm lucky to have that I really am lucky and I I wouldn't life would be like without IT and that's part of being musician. Part part of being musician is embracing sounds no matter what they are um no matter what they are and that's that's the reality of the moment and you should be in that reality and and go with that.

What's the relationship if you had to guess between music, math and business?

A lot for me, a lot. So let's start with the business and then that'll show how those other two things related business is about making money for shareholders at at court. The report card for a business is you take money from other people, the form of equity, the debt you pay back, but the equity is dear, and people invest equity into the business.

And now you have to give them back that money when they sell their shares, but much, much more money than they gave you. So in my companies, we've been, fortunately, that we've able to give back thirty two times to anyone. Another company is over one hundred fifty times.

So really, really large, large, large returns like over the top, unusually high returns. That wasn't by luck, that wasn't um queensland to that was queensland. That won't happen five times in a row in large amounts. That was because there was a playbook, because there was A A method to IT. And that method incorporate many, many different elements.

And I talk about quite a bunch them in the book that together give your ability to create what we call alpha in the business world, which is not just beta, which is the markets going up to you going together with the market, but alpha, which exceeds the beta, exceeds the overall uplifted. Pretty much all boats are lifting by the same type. And part of the part of the ingredients to that formula to make huge, huge returns for shareholders.

Involve and political thought, uh, careful analysis of numbers is all the math, uh, making order out of disorder, trying to see where how do this is all IT together and seeing relationships between different things, how to reduce things to simplicity because the great mathematician ans reduce very complicated things to a formula, for example, yeah expressed with a few testers. So that's math. That's mathematics.

That's the beauty of mathematics is seeing the patterns, seeing the, seeing the the how to make sense of this. And on the music side, it's being able to improvise because my training was originally classical. But then I had the fortune to study with um um after american musicians in in back to college no for graves build icm.

And part of that whole training was to be spontaneous and to be improvising and to be in the moment. And there is no wrong note if someone plays a note, that's just a new note, such a wrong note. It's like, okay, we change key.

Let's go with that. Come on, let's kick in or now. So so that ability to go the flow in music, you need to have that business ship.

A lot of people have a rigid business plan that spelled out for many years, and that's IT, and it's very inflexible that are usually work. why? Because life changes, markets change, economies change, people change results.

You get opportunities that you hadn't even been thought of at the beginning. So, so you need to you need to improve SE. You need to capitalize on that into make money from that.

And if you're rigid, if you're just rigid thinking, if you're not a musician, you're not a musical business person, you're gonna lose opportunities. You're gonna onna have things coming your way to make money for shareholder and feel, well, it's nice, it's great, but it's really not our thing. That's a bad way of thinking.

I'll share with you one of the best business deals that I did my life was I bought in two thousand and fifteen a less than truck load trucking company called conway based on in urban michela is a few billion ideal IT was a pipit because this was a hard as a business at tens of thousand of trucks. Rivers was as IT as acid heavy businesses as you're going to get with fix constant. Precision, precision was is not an asset light broker business, which is about how I started.

X P, O is as an asset light, non asset based business. But here was an opportunity to buy something really, really cheaply at a small fraction of what IT was worth, and even a small, tiny fraction of what I knew we could make IT be worth within a few short years. This is a company that had a lot of access overhead.

The organization chart was not mathematical connected. Simeon formula thinks that relationship makes sense. I'd like to take, I love all charts.

I just love to geek out on orchard. And orchard should be pretty. All church should be simple.

They should be elegant. They should be geometrical. They should not be really complicated. Like you took some spaetzle through IT, like an abstract art on the canvas.

This this was this a bad or chart? They said three things of the three different hr and three different I T. Organizations and lot of duplications.

And this is to make any sense out of silos and heavy, heavy on the non revenue generating top part of the organization. We should be the lightest part of any organization. The heavy est part should be partial orange ation that make money, the generate revenue that close to the customer to generate sales.

So I looked at that all charge, said, this is a messed up all chart, which is great for making money if you can find something that messed up and easy to you mess up. But yeah, there's your money. There's your opportunity, make a lot of money.

And that was that we just like I got so excited about the opportunity, take this company in, I saw a way we could significantly grow the profit margin, the cash flow that exhibited. I pivoted and graduated the day I got beat up, real that by the market, this is all is to change in. I give me some time.

I remember, remember ei gross, who now runs investment banking for more standing but at the time he was covering me X P O as a transportation, uh, banker and he said, you know, you going to be the dog house here for a while because it's pivot and markets don't like pivots. But assuming you're right, and I know you have high conviction and you deliver the numbers over time, you're going to be hero here and everyone is going to understand what you did. And fortunately, he and I were right.

And you look at that deal, even that was a pivot, was a change, was an improve sation. We bought IT for about three billion dollars. Roughly half of IT was equity that really brought up for a billion half dollars.

But some leverage today, it's worth something like fifteen billion dars. And that's after having taken out many like five billion dollars of net cash from IT. That's after settle all five hundred and fifty million dollars of the truck load business.

That's after taking its warehouse business and supply chain business, which was called mental, and putting that into our G X O subsidy. That was after taking the broker business and putting that with our r EXO. Brokers business.

So this was the gift that kept giving conways been amazing maze, amazing ride. And the returns has been A I can do IT my head with something like twenty bear. Fifteen bear be huge, huge return on investment capital.

And had I not been trained as a musician in a mathematician, I don't know that what a swatch, I don't know. I didn't have the mathematical skills I won't been able to see. Okay, this is a mess, but we can make IT clean.

I know if I would have been able to have the courage to improvise and to change from what the the script was for something that that I had a high conviction. Would be very, very lucrative for our shareholder and in business, the board mine the report card is how much money did you generate for your shareholder? The that's the one it's an examination with one question on IT.

It's how much did you make your stock holder? How much money did you make stock holder? How much how much blessed to give to your investors in terms of return on on, on their capital they invested, knew they trust to do IT.

You are force sharan business. You you're a you have a solum sacred about gate responsibility where you're taking other people's money, that equity, particularly the equity and you're the custodian for that. You're kap dian of that.

You're temporarily using their their money and your job is to multiple that they have a thousand other places. They could put that money, they pick you and they picked you. Now you've got a big, big responsibility. And I think that the training of a mathematician, the training of a musician and then all these experimentations i've done in the meditation and therapy so forth, I think that's been what largely explains this is as far, I can understand why my companies have created so much alpha.

I have so many rabbles to go down there. I think the opportunity hiding in complexity really interesting because the way that I think that doesn't cracked me if you you see that differently, is bad ideas can easily hide in complexity, but they can't hide in simplicity. Wants your reaction to .

that I digested my immediate reaction is, yeah I think I get that because when it's when so so go back to that organza chart that I saw. Conway was just a mess. It's like, wow.

So all over the place, triple that lines squeezes. You have to have different colors and different like that's not a real elegant or yeah, I think I see what you're saying and that you could hide inefficiencies m as supposed to win. It's a clean orgasm chart. Everyone's got clear KPI keep performance indication and when has clear metrix and when has clear goals. And the compensation is tied to that and people rewarded for achieving those goals is hard to hide.

The other thing that I thought was really interesting is you brought up the leverage point. How do you think about leverage and that employing at what point does IT become too risky um and at what point do you think of future opportunity costs you mention take advantage of whatever the world brings, but if you take on too much dead at now for an acquisition, you're reducing your ability to adapt in the future. Should interest raise rise, should a company become available that you really want is a dream that wasn't available。 When you talk on all the that, how do you think about that.

that buda approach to that? Not too much, not too little. I don't think it's an optimal baLance sheet if you have no debt because you can improve the returns by a shrinking year, your share count because you have few shares.

So the same amount of returns is greater per sheriff return. So I think it's good out a little bit leverage. I don't think you should have a lot of leverage, particularly in today's world.

I don't think you should have a lot of leverage because this significant geopolitical risk, the geopolitical risk in the midwest, ukraine, in taiwan, the united states politics is very auto. There's a lot of things that could go wrong real quick. And and A A kind of shocks to the system would would hurt companies that have too much dead because business would slow down.

Look would happen during coit if you were a very highly level during coit, if you had way too much debt and then everything slow down and your revenues went down, you might not be able to make your interest payments or your debt payment payments could go bank rup companies don't go bankrupt safe too much debt, you go bankrupt from nothing to repay your debt. So I don't think you should have too much that in my new company that I formed A Q, X, O, we're going to have, I think our target, healthy target, should be wanted to terms of debt by that. I mean, we take our our eby dog, which is the measure of our cash low and and we say let's have one or two turns to that so far ever dies up being princess in a period of time, for example, billion dollars.

Well, I have wanted two billion dollars that that, that's a comfortable amount, not too much more than that. Now you could have, for short periods of time, you could lever up, like when I bought conway, we levered up about four times, little more than four times. But we very quickly sold off and mentioned that truck, low division for five hundred and fifty million dollars, boom.

We pay down to watch a debt rate from that. We generate a lot of free cash low. We took that free cash flow instead of doing more acquisitions, we paid down debt.

So you can get your lever done to control by one of two ways by improving your profit when increasing your down or a pay down your actual gross amount debt. And I think you can manage that. And that's something good CFO does you've .

sit in the past that you need to be liked and loved and yet you're quite contrary at times. And your approach to things, how do you reconcile these two things?

I think you have to be contrarian. I think if you want to make a lot of money in business, you can just be a conformance to do at what is in in fashion and what everybody else thinks. If you're gonna do what everyone else things, you're gonna get returns that everyone else is, which is by definition, average.

So my companies have not made average returns. My companies have outperformed their indexes not by one or two hundred basis points, but sometimes by five or six times what what index was. So you have to do you have to think differently and take things that are from a different point of view.

So one of my favorite investors in my companies has been orbis out in california and and their conference. They're willing to make a bet and a significant bet if they have a high conviction about a trend or company that the market not seeing something is out of favor, but the market doesn't understand something about a maybe a companies not studied enough is not covered enough. Maybe management is not good at communicating the story and and is dislocated Prices is dislocated and you can get a real good value by find those shares and then being patient, playing IT out the cycle, make real good returns.

And I seen them do that with my companies when something happened in the marketplace that made us, uh, a cheap stock for for sure, period time boom. They came in. They ve vote a lot of shares and wrote him up.

And then so they're really high. I think that contrarian value approach to investing to business is profound. I think that's important. And I remember I remember when I sold my first company, emacs, my old broker company.

We started a company in one thousand nine hundred and seventy nine bunch of broke scrap kids, and we're in the right place at the right time. And the iranian revolution took place and the shogi kicked out and came. Took four hundred hostages and the oil Prices that way, way, way up.

So IT was a great time. IT was sad time for the world, not K O problems. But IT was really good to get in oral business. Oil business was really volatile.

And some Young ripper snapp ers like us could come in and be taken seriously by exxon in mobile and texaco and shell and gulf in the pin, all the customers that became a big customers over time. We built that business up over four quick years to about little under five billion dollars in brokers vine. So IT was really big, rapid, rapid grocer and a good team doing that around the world.

And then I told IT, and I want to start a new business. And I wanted, and I was ambitious. I was single.

I wasn't married. Now kids, I could take risk, I could afford to them. And I was members speaking with my my uncle Howard.

And the may rest pieces is long, long passed away ah and course Michael Howard was born in the ninety twenties, maybe even twenty teens, and grew up in the depression, obviously, and da world during the world, two of thing that was very tough times. So he is very know. He grew up in a time when there's a lot of emphasis towards they, very frugal and very risk averse.

He became account and work for the government. And I remember talking to him and saying, yeah, i'm going to i'm going to start in the company instead of being an oil broker. I I don't go to I going to go to adult table, the Kitty table.

I'm going to be all trader because I i've been making all this money for my clients where they're making three, four, five dollars a barrel and i'm making five or ten cents per of course, I know risk, but they were taking positions. So now i'm going i'm going to put my money where my mouth is. I'm going to put my money into into a bank.

I'm going get a letter credit and then actually buy and sell. I suppose you just broker is oh bad. Don't do that. Don't do that.

You should maybe take a small percent of your savings and put into new business, but take the vast majority of your money and just talk IT away, just in case the next thing doesn't work out. And fortunately, I overrule about a lot. I can go with what you said.

I did exactly the opposite. I took a completely contrarian position where I took, I think, was like a hundred thousand dollars, twenty thousand dollars, and I talked that away. I took all the rest of my money.

I deposit IT with bank Perry ba. Now B, N, P. Perry by back, and was Perry ba. And they gave me a billing airline of credit.

And I swan for the fences I I used, sometimes up to nine hundred and ninety nine tours, that line of credit, doing counter trade deals, doing refinance deals, doing border, doing processing deals, that they were very complex, back to the math, very, very complex, but organized. I knew what I was doing and sometimes people look at and say, wow, a lot of elements to what you doing there. You're buying IT.

You're shipping IT. You're refining IT. You're hedging IT. It's a blot a lot of movie part there said, yeah, but I understand each one of these parts and it's just map to me and I actually feel this is low risk this basis to just execution risk.

And i'm comfortable taking on the execution risk, but I don't have market risk even look like I did, but I really didn't. And and as a result of not taking his advice and taking control and position, and having the courage of the guts and the strength to believe in what I wanted to do, that I had a thought. And at the courage second, i'm onna run with this thought.

I'm going to go with this gonna end on myself. I'm going to bend on this idea. We built a really nice old trading company and did very, very well for for ourselves and for our sellers. Where did that .

confidence come from?

Well, I don't know. Probably confidence comes to Young age. I would think so when you ask a question like that, you Normally start think about like, what did your mother say? What your father say? yeah. So if if I had to think about what did my mother say? What my father say, that was very transformational.

The first things that would pop my mind, or with my dad, who I loved and have a lot of pectore, nia was a great dad of very honest person who was very dedicated, good provider for the family. But he was very, very blunt in what he said. He wasn't very diplomatically.

You say, just say what what he really thought. And I remember one time when we were doing, we had been doing arent. We were driving home and he was in the driver's seat, as in the passenger, and to stop light.

And my thought that turned to me, and he's a big guy with a low voice and big laugh and and said bradlee and my mom, that only people ever college bradd anyone knows he calls me brad is bradly. It's really good that you have a really good personality because you're soly back to getting wear with those looks. I really a loud and at that moment was a was a deep moment for me because on the one hand, I was crushed just like thirteen years old.

You don't know whether you're good looking or ugly with thirty years old. Just start is you just our jorge only think about that. But the message was getting from my father was, you know, I may not be such a good looking guy.

okay. On the other hand, the other message was given me was, but you have leadership skills and you have personality. Your Christmas, you can, you get people to follow you, you can become the present in your clash, you can become your group leader, you can be the the leader of your band and so forth, you can be president of student council.

And somehow another, despite your your what he considered that not pretty appearance, not beautiful parents, you are able to be a leader and accomplish things and get stuff done, and get form teams to get people, I think, in a very, very, very paradox kind of way. My father and selling me on that gave me confidence. That gave me confidence.

So, okay, so maybe I don't have great all american good looks. Who cares? I've got something else. I've got something in terms that have been able to to lead.

So maybe that that help give me conference because that's that's a an experience that i've relived many times of my life. My father is a big deal. What your father thinks of you, your mother thinks you. On my mother side, if I had to think what was something that gave me a lot of conference, my mother, okay, so so my mom passed away about ten, seven years ago.

And you know, from the book, one of the questions I like to ask people, because I learn this from my celeBrant, the father positive psychology is what's what's the happiest moment of your of your day supposed to how did your day go and just have a little different angle to that question. And we'd like to be validated. We like to feel we appreciated.

We recognize, understood were proved up, particularly from our parents. And my mom was was on her death bed, and my brother and sister and I, we're hanging out on her death bed for good couple weeks. And animal, he's been around.

People have died, but they sort of dying. And then suddenly they wake up and like talking you like, everything is going no problem. And and then they lie down and start doing IT.

And they go in and out this kind of half dying and have not dying. So and my mother in line there that breathing funny when when they're dying. So it's really strange way of breathing is not Normal way, brings irregular breathing, and then they are not breathing for periods of time. And a very a bizarre death and you know we didn't quite know whether this was IT like we never been talking again.

She's done and she's suddenly ly like a set up SHE looked all three years in the eye and said, i'm really happy each if you turned out so well and smile with with a mother's love and and then just kind of Graceful light down and continue the dying process but that moment that might be the happiest phone in my life when when my mother, my mom, the person whose body I came out of the person took Carry me from Young right from day one, even before day one, nine months before day one, approved of me and validated me and and gave me a stamp of approval and uh that given me conference, even though that later in life that give me a boost that was ready at the beginning of starting expo logistics, which of all different companies I ve started, that was the one that was the the biggest for the most most successful. So I would say that confidence later in life came from that boost that my mother gave me of just approving of this. I've learned something from that.

I ve learned something from that. And I try to learn from all these things, how I can apply this to business. Come a business person trying to make money for shared ders.

That's my goal. life. So all these things that i'm going through life learning about, i'm then trying to take them and apply them to business to make money for share others.

So what did I learn from that? I learn that the relationship between apparent this case, my mom and me, and the other example of my dad, me, it's an important experience as a big influence on the person, what the authority figure thinks about the person. And when you're in business, quickly view the C.

E. O. You're the thirty figure. You're all kind like a dad. You are kind like the mom of, in my case, one hundred fifty thousand employees and you have to be careful what you say and it's not just what you say say you can just be you can take in and if you don't like someone to disagree with, somebody like say, oh yeah, aren't you great is because because people are smart.

People realized when you're be asking them, they just know that they know when it's phony and they know when it's real, too. So what i've learned is you've got to arrange your brain, go back to the book. You've got to arrange your brain, your way of thinking so that you are positive about people. And nobody y's all good, and nobody y's all bad. No, I know this.

And if you can train yourself to see the real good in someone and to reflect that to them and to make sure when you're doing change part, the improvement part, when you give you an constructive feedback of how they could be doing a Better job, do they had second, how do that first? First thing is be like my mom and say, you know, i'm just so happy how how well will turn out. Say that first, you know, when I do performance of praises, when I do performance views, my direct suborners, my reports, my drug reports, I always start out with a positive stuff I don't start right off with.

Okay, here's some things that you're messing up. You need to be doing Better. It's important to have that part of the conversation too, because you need to help the person achieve more and do Better.

But you want to start a conversation with I really want to congratulate you for X, Y, Z. I really want to appreciate, I want, I want to express my appreciation because you've done one, two and three, but it's GTA be sincere. IT can be phony baloney, false flattery. That is like you Better flash anything and do then giving phony compliments.

But you should I try to arrange my brain? So I appreciate a person to say, well, why I hired this person in the first place? What did I love in this person? What did I admire? What did I respect? What did I would really got me? Made them real high in my estimation.

And then translate that to, okay, how is that materialized and what theyve done and what concrete things that they have done, not have components that are just like general components, but have very specific concrete compliments of, you know, you did this, this in this kudos. Tip the hat. Good, good job on that.

And that goes back to the the psychology of validate, then dispute, join, then lead. I play that to business. I do that with with customers in in the world of business, you know we've had millions, million, million of customers.

They're not always happy because we have no service is perfect. Once the want you mess stuff up and you have you have a difficult conversation with the customer, maybe they are not trained and rearranging your brain and they go right into the insults. Skip the all part about, hey, we really like what you're doing here.

There's just go right to do that. You have been laid on this damaging matter. You invoice things, mess up or whatever is.

And what I learned from all that answer question is i've got to empathy with that. I've got a first understand. I have to put my mind in their mind. I've got to put myself in their shoes. I've got to, i've got to say, i've got to really on, I got a picture.

Clearly, how much what we did messed up their supply chain, or cost them money, or cost all a job or whatever, just cost one annoyance or just made a difficult chew up their timer and and and made him frustrated. Whatever, whatever. I have to feel out what's upsetting them going back to, what are they saying and what are they feeling.

So I got, i've got ta get in tune without their feeling and i've got to show them. Then i've heard them, I felt them. I've both heard understood them what he said, and i've also felt the emotion that you're feeling in and and that I I get that and that and that I have a an action plan to solve IT. So that is a sequence told that I like your .

human centric approach to this. There there's a lot of people who sort of take for granted maybe positive feedback and so they offer, uh, negative feedback to the people who who they work with. Is that a blind spot?

What do you think of that? I think mistake I think it's a mistake to give only positive feedback or only negative feedback. So for example, right now, i'm in middle of performance surprises and where each person is writing three things that they're really proud of, that they accomplished in the last few months and that they really feel good about and they're achievements definitely a plus on a negative.

But also three things that you know could have done Better or we will do Better going forward, things that we didn't quite achieve, that we hope to achieve. So the baLance, three good things is three bad things. But when I run meetings, I like to make IT like an oil cookie.

I like to make the good stuff, the negative stuff, but then end on the good stuff is very important. How you end the meeting, for whatever reason, psychology, how you and me meeting makes a big difference in how that person leaves the meeting. So ideally, even if we've had a tough meeting, where to look, these numbers are in the red.

They're not in the black. These numbers are down. There are not up and we need to up our game.

And here's our action plan and here's how we're going to hold yourselves s accountable and here's how we're going to take with compensation in order to reward people for doing Better and to not and take hit their bonuses and maybe eliminate their bonuses if they don't get Better. Fast as tough conversations that that you have to have. But I like to end on that.

yeah. I like to end on exercises along lines of having everyone in the room. Okay, now we've done all the, all the, all the tough stuff to work hard on the business. He know. Put that aside. Take a breath.

Now I just talk about who ask you to prog go around the room is also have a dozen people in the meeting and i'll say, tell me something so we have dish been meeting for two hours. We are working hard, capable some, we identified some really important problems we need to solve, and that if we save them, we're going to create a lot of money for our showers. So good job, team who was top of good job with a good rivers process, and you worked hard. And a lot of a lot of imperfections came up during the meeting, and that was was humbling in a lot of ways.

But now I want to ask something, after working two hours, collaborative, a meeting like this difficult meeting, who starring up and why, who said something, that they maybe already held him in highest steam, but even you hold him even higher steam now as a result of the way that they thought they're thinking process, or maybe the elegance and Grace with which they expressed a difficult subject, or the way they tackle something from an innovative way, someone who contributed to the magic of creating alpha, creating money for our showers, how do they do? Or they they handle the situation of conflict because you have conflict in business in a way that was nice, that was kind hearted, that was not mean spirit. So whatever, tell me every I go around the whole room and say, tell me someone in this room who said something or did something or didn't say someone or didn't.

政治 上面 应该 made their startup why。 And people feel really good about that. And I have a whole series of exercises and questions. I do like that.

One of I do is when we have long meetings, simply have like ten hour meetings, even twelve means we have people coming in from around the world and doing a quarterly Operating. If you were really covering lots and lots of material, we take a few breaks. We'll keep going at IT, going at them.

So people are tired into that been a long, long day, even going from seven and more and seven and nine, for example, with just a few quick ten or fifteen, nine breaks. We work right through lunch with right back through dinner. I like to end with sometimes with getting everyone at the end of all that we stand in a circle and and I don't want to say anything.

I just want, I just want to spend five full minutes, five minutes, a long time, to be standing to circle with fifty and twenty other people, not saying IT work. And I want, I want everyone to look at each person, and I want them to do two things. I wanted to think to themselves, think to themselves, I really respect this person because, or I really admire this person, or i'm so grateful that this person is on my team, is on the team with us, this or this, this person as X, Y, Y qualities that are so noble, so fantastic tic.

So positive regard of that of each person, each person, one by one. I want them to look around, look around the circle. And the second thing I want them to do is I want them to say, not only my grateful for being on the same team with this person, I really wish this person a lot of success.

I hope this person has a fantastic future at this company. This person has a fantastic career. I hope they knock him out of the park. In terms of their numbers, in terms of profit, the generation they're going to do.

And and I find those that two handed experience of gratitude, of praise grade the gratitude that comes from honest praise of a each person, and then the wish, the well wishing to each person. And just everyone goes away from the media figure tally flying on here. You'll go away with a really good feelings, feelings counting business in business.

I have I write about this in the book of the love that you want to love, that you don't want to hate, that you want. You want a good vibration going around in the company. You want people feeling good about themselves, good about the company, good about the people they're working with, good about the customers, good about the vendors. You want to be like one big happy family, and you have to work at that. That doesn't happen just by itself has done a natural event that something that requires effort, that requires intentionality, requires some skill.

You've made a few billion dollars. What lessons have you learned about money and spending money and living with money that you wish you knew sooner?

You throw me off a bit with the question because I don't to find myself as in terms of how much money I made like this like just not like the big deal for me, but it's it's a report card. But it's not it's not who I am and it's not might be all in and all I happen to be in a business that makes a lot of money. So I make a lot of money, and my occupation is making money for shareholder.

I would look at my motivation. If you want to understand, I can stop how I look at the world, look at myself. It's really I if you take the psychological test I score very high on, need to be appreciate.

So how does that translate into being A C, E. O? With that translate into what I could be? Perfect example. Last week we had a call with my seventy five co investors in my company, Q X O. So my wife and I are putting in nine hundred million dollars and then sqa.

And a few thousand friends and family, like really friends and like my sister, my brother and my niece and nephew, uh, are pointing another hundred million or so. I I got a cool one billion dollars even putting into this company. And I told him at the end of the calls, and our calls give them updated when i'm working on, I thank them not for the hundred million dollars.

I didn't need one hundred million dollars. I could four hundred million million. But I thank them for for giving me motivation, giving me inspiration, giving me a purpose, because I want to please them.

I want to make them happy. I want to make them a lot of money. I like being happy. I like being feeling good about myself. I like looking in the mirror and like who am saying and how I define that is pleasing the people that I love. And those are my investors, my co investors, my my close friends and family, and the people who have been good to me over the years. And I give back to them.

Let's deep dive on ava. How do you think about IT at a high level? And then specifically walk me through your process for not only evaluating companies but beginning to end, including integration?

Amy has been a big part of my business career, not in the first ten years. In the first ten years, from nineteen seventy nine and nine hundred and eighty nine, I was in the oil business that was all organic. We need to one single acquisition, so trading and brokering and building up a business organically.

But since nineteen eighty nine, i've been doing roughly about five hundred acquisitions. I've got a lot of em. I love M A. I love M A.

As a way to create value for shareholders because I don't know of another way on a risk adjusted basis, on a certainty level that is more likely to create massage errol's value than doing sensible. In order to understand how to create value, I have to understand how I can scale up the business. I, I, I only know how to create tremendous shared value by growing a business tremendously.

That's how I know how to do IT. And of course, it's are organic, and i've had very good organic growth of the companies. I've let her been well performing companies that have had good market share and growing market here.

And we've taken customers or we've taken business away from our less not our competition, warn, manage as well. But the real when you look at the the numbers, the real growth has been through ea, through acquisitions. What's been my secrets and acquisitions? I'll try to be concise ed because I did our on half podcast in the kinsey couple of years ago and the west, that was the only question.

Ask one question I that will on from our hp. It's still a big people still watch that. The podcast I really tell everything about IT. Here's the just that just is you first have to select an industry you can just do.

M, so I spent the last year going around studying dozens of industries, looking at hundreds of hundreds of acquisition opportunities, mostly with global sax, Morgan, stan and other equality, and some friends freking out. Could I apply my playbook to this industry? Is the industry big enough? Is the industry fragmented enough? Is there emanate to do? Is bigger, Better? It's not always the case.

Are the economies of scale you have Better advantage by being bigger? Is there way apply technologies? My companies have always been tech forward to the industry because industry is a little sleeping on.

Technology is the way I run a business, the way I do the intake of people in the culture, in the we interact with each other. And so what is that? Something that will work in this inner is applied since story is that is something related to something I know about.

Industrial services for most of my companies since nineteen nine have been industrial services. And I look at many, many different trees. And I settled on the one that checked every single backs, which was building products, distribution.

And then in my companies, going be cox, al and ema will be a big, big component of what we do. There are is eight hundred billion dollars of distributors in western europe and in north america, which is where I want to plant my flag. I want to build a company that's caught fifty billion dogs.

I can do that if there an eight hundred billion dollars size. I can take six percent of that through acquisition and through organic growth. I can get to fifty billion doors.

There's many other industries that are nice, but i'm not be able to get fifty billion doors. I want to get to fifty billion. So this industry, there's a clear path of how I can do that.

Now I can't just button. And there's roughly about seven thousand distributed turns on the stage, is about almost twice that amount in western europe. So rough, about twenty thousand.

And distributors, you've GTA be very careful about who you buy. There has to be a reason why you're buying that company. There has to be a strategic a compelling strategic reason of wire buying that company.

What what what makes sense for that? Why is that good for customers? Why is that going to make our business a Better business? Why is that fit with the other things that we ve already bought and put together, how we're gona integrate? Well, I like to look at the multiple that I pay for an acquisition.

The Price that I pay for an acquisition is very, very important because when I look at the levers of how we create shareholder value, what contributes to that? The biggest left, the biggest component, is the differential between what I raised capital at during my relationships with mostly institutional investors and because of the track rapper, and what I can deploy that that on doing acquisitions. The second biggest level is how much can I improve the businesses that I buy those there many, many levels, but those are the two biggest levels.

So I pay close. When i've studied all these different industries, i've studied historical acquisition multiples. And one of the reasons I like building Price distribution is I believe that i'll be able to buy companies at lower multiple of their profit, then i'll be able to raise capital.

And that's going to be a big that decides you that spread that difference, that delta is going to create value. Boom, just right away, right the first day. Now you asked about integration.

Integration is extremely important. Anybody can buy something. It's not that heart. You write, you send a while, you sign a document, its few dozen pages, lawyers have going over written, you worry the money and you know IT. So that's not the hard part.

The hard part is after you've select to the right industry, after you've selected the right companies within that industry to buy, after you had disciplined so that you don't so that you pay the right Price for all those, then you have to integrate them. I've never run companies that have like hundreds of different companies, all running separately with different names in different different systems and different back. There is some level of decent realization where you need to be close to the customer.

But I have a very strong appetite for standardization, standardization of the E R P system that you close the books, uh, you close the box promptly right after the closing of the month, and then you can have standardize dashboards. All the managers have the same format of the numbers. They're looking at the KPI, and I see them graphically, very easy to understand.

I like to see. So they can benchmark every couple, every location to every other location, every district, other district, every region to other regions. And for that, you need standardization.

I'd like to have a standardize H R I S. Human resources system where all the people in the organization and will build, build this company that will have hundreds of thousands of employees. I need to have a standardized data system for all our employees.

Everyone's on the for four one cape the same exact way, doing all the benefits of the same, all the performance of races, the same compensation I can see right away. I need to have transparency in the information, but I need have the organza charge very accessible right away. And every time we do an acquisition, I need to pull that information up right away.

While we're studying IT quickly, we have a competitive advantage against other bitterness to see what will the synergies be. So I need standardized H R. Technology through throughout everything. I need to standardized C, R, M. Custom relationship management system like salesforce dock come this several this as well.

And for that to be able to make sure we're looking at customers, the attractive ess of those customers, the profitability of those customers, the size of their spend. So therefore, the potential of those customers going forward, all the interactions we've have with those customers, I need to see that the standardize way all across the globe, everywhere, every country, we're functioning IT. So I need to standardized technology for customer relation, mate, for sales manager.

So i'm giving I need to standardize internal social media. I happen to like, i've used a workplace by facebook. It's not the only one, but I like that one really well.

So I think the interface is really, really good. So I like to have everyone on the same work because I like to have one company with one culture where everybody can pink each other. I like I don't want to have these silos of companies.

Like sometimes you see these companies roll up many different companies, but it's all, miss marsh, all separate. I I don't like that at all. I you see a lot of these middle market private equity firms do that.

They roll up. These small companies are doing in five, ten, twenty million dogs. He just buy a bunch and up to hundred million and twenty million, they just get a bigger mouth because they're bigger.

But it's a mess. Wherever by those, wherever by those company is a lot of work to be done. You have now standard zed everything and integrate everything, opportunity to improve them, both a lot of cost and time to fix all.

I step up. So I I integrate from the moment that we agreed to buy a company. We're starting the integration process and the day we close the acquisition, give up, we're in there and and we're standardizing everything as much as we possibly can.

And we're communicating and communicating quite a bit. A big part of the success for M. N.

A is forming the relationship with people and making sure we get off on the right foot and making sure that we don't lose the great talent and making sure we are the the same time identifying the weak layers and Gracefully and generously extending them. So there's a lot of different components to ema. I'm summarizing a lot of different factors. Each one of those things we can talk for hours just on that, that block, but those are the kinds of things that go through my mind in my approach to eminent.

Yes, some unique questions when you interview sort of the top ten, fifteen people as part of the diligence process, can you walk me through what at least two or three of those questions are where you get the most useful information? yes.

So you see some companies, when they negotiated by a company, do this very lengthy and detail and bureau tic diligence process, and they hire a firm and they write this big, huge memo that nobody reads and someone with that nobody important reason. and. Especially is to cover their budd, i'm not trying to cover butts.

I'm trying to make money for shareholder goal is to make money for shareholder period. And so what i'm looking for, intelligences, I wanted know how they make money. I wants to know the history of this company.

I wants to know the current state of this company. I want to ask those people, I like to interview the top fifteen or so people want. I want I an hour half.

And like to ask him, if this was your money, would you buy this company? And what would if you did by IT? What would you change? What would you do differently? Whether the opportunity do something differently than been done? And I like to ask them, okay, if you were bought buying this company, what would you not change? What we are so good about this company that making a successful that attracted a big bitter like ourselves that we should make sure we be crazy to change that.

So I like to ask questions like that, questions that give me insights into how the business got to where IT is, what what's the future of this company, how can we improve the company going forward? Where where are the things that have been blind spots of the current where the companies been run that we could fix? And one of the things that are working well that maybe we could have more resources into where we not in spending enough money, where we were not investing enough money into something that could be a good return on investment.

On the other hand, where have we where has the company been wasting money? Where has the money have been gone into things that why we doing that doesn't really help customers, that does not delight customers, doesn't make customers happier, doesn't improve our our customer business reviews. So why are we even doing IT? That's I like to asked those questions .

and they're really reveal the first person who I talk to who adds questions like that was cat call, who is the vice president now at athletic Greens when he turned around in ban, that's what he would do. SHE won't worked in the stores and asked the employees what they would do differently. And IT was so .

revealing in terms of what they ended up changing. I find so many times in corporations, people don't ash those questions. And i'm big and asking those questions.

I'm big at serving using town hall one on one interviews, small group interviews, asking questions about how are we gonna in, how are we gonna win? What are we doing wrong? what? What can we doing Better? What are we doing right? We should be more up.

And I find IT very valuable, very, very valuable. Yells great return on time. And as I write about in my book, there's only two things, the manager, manager return on capital and return on time. And I believe that asking the import and getting them involved in the process is a great return on time.

a great return on capital. What's the role of a board in uh, a strong founder LED company like Q X O, when you're you're investing one hundred million of your own money, you're the founder, the C E O, larger shareholder. What role will that play? Does that change the role of a board? Especially when IT comes to i've really .

fortunate to have fantastic boards, boards that are very strong, comprised to people who are really competent people, have invest in the company, are leaning in. They take the job seriously. They they are passionate about the company.

And my relationship with the boards little bit different than most, most boards. We're completely transparent, completely open. Any board member can reach out to any person in the company anytime they want and ask them anything they want.

And there's no supervision or people have a company number, none of that. So I want board members be very, very informed. I want board members to get copies of the customer service I want is a good and the bad.

I want them to see that I want and I want them to see the analysis. I want them to see the analysis of the customer surveys of we were doing well. We are falling short.

I want them to know that I want the board members to have all the employee service and see all the word d word cloud analysis that we do, all the trend analysis and all the bencher marking we do. I want them to see where the pain points are of employees. I want them to see where employees are happy.

I want them to see the trends of employees. I want the a directors to be invited to every Operating view and every monthly Operating view, a record Operating view of any part of the company that ticals fancy. I want them.

The more they invoke, the Better off were benefiting from them. So I like to have born members that are very involved, very knowledgeable, and we have good conversations about the important stuff. And I don't run board meetings the way most four to five hundred company boards are run, most fourteen, five hundred company board members.

Board meetings are kind of they're scripted and sometimes even rehearsed. And there's a careful store that's being told by management and it's done by powerpoint, is done by rehearse presentations that come up and just a complete waste, almost a complete waste of time. But you could do that whole thing is by sending them a document is no reason.

Convene a meeting for that is a is just a good bookie dance. This is that I like to have real board meetings, where ahead of time, everyone's read all that data. And between board meetings, theyve been in the business through what i've been talking about.

And they come to the meeting and we bring in over the course of a day somewhere is between ten and twenty managers, executive, sometimes senior ones, sometimes midlevel managers, sometimes front level exact managers, employees and and I I go around the room and I like every single director to ask whatever they want to ask. I don't want to do. I don't want them to tell me I had a time when they going to ask, and I don't want them to tell the the managers who they are interviewing to know what the questions ahead of time.

I don't want our executives or on front line employees to waste time and using the word waste, deliberately preparing for the meeting, some speech, some script, some sometimes phony baloney sale story about how great things are. I wants to ask real questions. I want to including the tough ones, and I want people to answer them honestly and potentially in the moment and completely so that those I love our board being.

So i'm now chairman at the moment of three different companies. Uh X P O, G X O and R X O. And so we tend to have our board meetings every three months around the same time, around the same two year period and some of my favorite meetings the whole year because I have highly engaged directors who are knowledgeable about the business and who asked really good question.

I learned a lot. I learned a lot at the board meetings. I don't dominate the board meeting with on the person speaking all the time, all the time.

You find that the the chairman of the C. E. O is like making a whole big deal about themselves. Board meeting should not be about the chairman and the C E O or the chair. Cy on the board meeting should be about the directors getting the information they need to get, they want to get. They should be getting a .

be focused on problems or what's going well or how do you think about that from a board level? And then I want to get into more specifically management meetings. But like at the board level, how would you organize that around? How do you craft an agenda for them?

I don't craft the agenda. So I know what I craft is I figure who the right people to bring in, but even that terms of that management we should bring in. I don't do that all by myself.

I get input from the leading pendent director. I get input from the vice chair. We come up with something together with the CEO, and then I distributed around to the whole board.

And what you think, how does this look? How many changes? People usually have changes.

People say, that's great. But I D also like to have a section on H. R. Just even yesterday we're preparing for board. Meaning in one, one of my vice chairs said, you know, that's that's good, but I want to have A A section on human capital and people manager so we we rearranged things and we really to match our force.

So my goal is to get the right people in the room in front of the directors and and then let the directors ask what they feel is right to ask. I don't want to a micro o managed the agenda cause that's my agenda. I want I am never going to be smarter then the sum of all the directors that never gonna make or you .

have the wrong directors right very much.

yes. And I I like directors who were smart and who are engaged and really want to prove the company. They want to play their role. They want to take their producer duty very, very carefully. They have a strong duty of loyalty there, a strong duty of care.

When you think about decision making, how often our decisions made by committees in the companies is iran verses made by individual?

Well, I hate the world committee. Period committee is just like a bureaucratic red tape, low of low energy kind of word that I just can't stand the words like try not call things committees just turn no, my glatch. However, there are sometimes when a group, people will have to make a decision because it's more than one discipline that's required to get to the right decision.

They might be attached that we have that has a financial elements. You need someone from financial counting that certainly has an Operational an element to. You need off person there, but often have big people element.

So I need nature, our person there. And so I could have if it's a big decision with big impact, then i'm gonna have c level over the C O O, the C F O, C H R O. That's a big decision.

Am I going to waste those very important people's time with small S F P N? A financial planning analysis plays a big role in my company, more than most companies. The F P N A people are the ones who are turning all these in a meeting.

They listening all these ideas, and they're turning him into numbers. They are turning him into forecasts. The turning him into projections, they're turn name me to probabilities.

They turn him him to look, look, we we have these these ten things were going to work on to create alphabet holders. They're attaching probabilities to one of those. I got ninety percent chance of this is in the bag.

Was onna happen? This is a long shot. This is like a ten twenty percent change happening, but zero percent.

Ten, twenty percent and it's got a high return if we achieve IT. So it's worth putting the effort. But i'm not going to give ten or twenty percent.

They were going to give less credit than that. And and they're also doing budgeting, constant energy budgeting. We don't do budgeting once in a while. We do budgeting every day, every single day where we've got our our our but our our numbers.

That plan is our plan and where are we tracking versus the plan? And the fpa people are are are are really good at figuring out who's sandbagging and who's exaggerated that. What I mean by that is you have some managers who just do their personalities of whatever reason, or maybe they are playing games with their bonus.

They want to lower expectations so they come out looking like heroes. Well, that's not good because we want to know the real so like likely outcomes so we can plan around that. On the other hand, you have some people who are um overly self confident and I think this is definitely gona happen and i'm onna grow this.

But if you look at their history, if you look over last three years, they've missed their predictions by three to five percent, like pretty much every year. So they were discount them based on the past, predicting the future likely to succeeding. So the fp people play a big, big role in that.

Figure out what is the highest, lowest and likeliest outcome for all these different endeavors that we've got. And they also playing a big role for allocating capital. So we talk before about the two big things that senior executive do is, is decide what kind of ways you're going to spend money, allocate capital is is finite, even with billions of dollars, is not trillions because this is billions is final capital.

How we're going to best invest that capital of all the different ways we can invest, what's the highest, best uses of that capital and how we're going to manage time, how we've going to get everyone focus on the things that really matter and not waste their time on the silly stuff that really doesn't matter, is not going to create massive value for our shareholders, which is what our mission is. The F P. Eight people help with understanding that putting into numbers because sometimes you can get very inspired, motivated and a really really create a fantastic um inspiring project comes up.

But when you analyze the numbers are really is not a really good return on time or return capital. So maybe we shouldn't be spending so much time on that. So we're also managing how much time are we spending as an organization on what kind of projects you find a lot of time in corporate america.

Somehow another they get lost, managed me, gets lost on these tangent that are not central to the remain mission of creative valley for shareholder and the fp a people keep track of that, that is score keepers to keep everyone honest. So how are investing capital? How are the returns on that capital versus what we expected IT to be? We planned on how we spending our time is how we're spending our time proportion onate to what has the highest impact of power spending our time. And this is a very important role. So F, P, A ends up being kind of only present throughout the organization anytime we're making big decisions because they're really good at getting all this down to to reality, to real numbers.

And they report the CFO is that the structure and internally.

A F P A has has the two lines. One is to the CFO on and they have a dia line to Operations and to me, so I I rely on my F, P, A person like every day. I want to know for two reasons. I want to know internally how we doing on the projects, that word where attaching high priority too. I also want to know how we do not a commitment to share others investors.

When you're A C E O of a public company, you have a really important mission in that you've promised what your numbers are, are going to be in the in the future, how much your profits going to be, how much your revenue girl is going to be, how much modern's is going to be, which you return in capital is going to be, what a free cash flow is going to be. And now you've got you've got ta promise out there, they've got a guidance, you've ve a forecast and and you're working really hard to achieve that. I need to know and F, P, A is the best place to know that how we tracking against that.

And if we are tracking higher than that and significantly higher that, there's a big deviation from that. Well, I will talk to to legal and we will talk to I R in the invest relations and will say so we update the the investment community ahead of the quarter, ahead of when we Normally produce our results. And equally importantly, maybe even maybe more importantly, I want to know, got forbid, if we're tracking below our estimates.

And once I know that, then I have a meeting and I say, wow, were me of our of our six or seven top metrics that we've promised to our investors. We're doing well on these five or six from these one or two. No, no, no, it's not doing very well. What are we gonna to get back on track? So constantly using our sensing, information gathering and then getting back on track, getting back on track.

Do you do the forecasting time because you're going to be going to the capital markets for for capital at some point in the future with an acquisition strategy? Or would you not do that if you knew you weren't going to raise additional capital?

Well, I am a big user capital markets because all my companies have grown through acquisitions and I i've need a capital to grow those acquisitions. We raise money from the largest southern wealth friends in the world and some of the largest pension funds in the world, some of the largest long only funds in and dams and a lot of different people whose money we've taken and give them back a lot more money than they gave us in order to do that.

You've got ta hit that. You've gotta meet your promises. You results matter. Results matter. They are very, very important. So even if we weren't raising capital, the fact that we've taken capital, sometimes we've gone for years without raising cat what we've maybe refinanced debt to take advantage of changing interest, something like that. But in just a rising equity, which is the deer thing, raising equity, sometimes we've done some acquisitions like in two thousand and fifteen, we did two big acquisitions and then we digested them. And we integrated and optimized and double and trouble to profit without doing any acquisitions during that year of time, we didn't need to raise equity and we didn't.

So but even though we weren't raising equity, even though we weren't not going to back the couple market change, we still paid extremely rigorous attention to how we doing on the numbers, that our job our job as executives, as managers custody to this business is to produce results and that manured ultimately in financial results. So also produce in in Operating results is also concerned of customer satisfaction, mpl yee satisfaction. But all those things lead to financial metrix, and you've got to stay focused.

You have to have the whole organization focused on delivering those financial metric. And I thought you deliver them. It's a conscious intention and a sense of honor and a sense of I need to do this. This is, this is what we need to do. This is our promises, promises made, promises kept.

When people tell you they're not motivated by money, you get suspicious why?

Well, I actually respect people highly if they are not motivated by money. Uh, I know a lot of artists, I know a lot of decisions. I have um friends and relatives who are professors or retired professors and academia. It's not into money.

I mean, there's none need to money they don't think about they know with the wall street turn al, they're just that whatsoever and and I respect that they have a higher calling in a way they are they are focused on some deeper parts of life. Um but that's not who what I want in my company. I want my company.

People are absolutely motivated by money for raw capitalist with people who want to make money for themselves and their families, and that we can figure out away that by being part of our company, they can help us make money for shareholders so that we can pay them more money here, they can make somewhere else. I've never had people on the senior level make many, many people make become millionaire, multi millionaires. I had people become tens millionaire.

I had one person who made over hundred million dogs. I have couple people now who are on track to make very large amounts of money. This is a good thing.

This is a, this is an outgrowth of success because we've tied everybody's compensation. We ve been very thought ful about compensation plans. We've tie their compensation to contributing to our big goals.

And the only way they can make all this money is if they're making money for shareholder. So I love compensation plans for the senior executives that have a big component of equity that's tie is dependent on T S R, totally the return. So we look at what is the how does our stock perform versus called S M P five hundred and what percent till we if were less than call the fifty fifty percent.

I'm not so sure that you get any that I don't not sure that accurate. Best I could argue that if we're only getting roughly half roughly, we're middling in the results we're giving. That's not why people invest enough.

People gave us the southern wall funds are pension. The big investors they've given us money is expected to be much, much higher returns in the average company. So I like to have people bet on themselves so that if if our if our share holder returns are less than fifty five percent or so, I don't want you to best.

If it's sixty five percent IT vest some. If it's seventy five percent, IT vest more. If, if, if it's eighty five percent, ninety percent and ninety five percent, I wanted to, I want to make.

I wanted to double best. I want to make twice as much as as they would. So I want their interest aligned with the shareholders. I wanted to be so that the shareholder are saying, wow, I really hope senior management team makes a fortune because the only way they going to make a fortune if where beating all the competition turns the returns with our investment. So I like I like that to happen.

One thing I liked about gold's access compensation plan that I took for them a years and years ago when they were partnership, a big, chunky their compensation plan. I'm up up to date their compensation point out back when they are private partnership. A big chunk, like a significant percent of their cup was based on.

How many other partners said that they help them with what they were working on? Yeah, in the words, I didn't just work on what I was trying to work on, but I helped you shame with your cust with your client and that group effort going back to being a superorganism. So if we can have people on the front line in the middle, vel management be rewarded financially because that's the biggest reward, only reward, but financially, financially rewarded for helping other people achieve their goals, that's a good thing too.

So we have all these spoke compensation plans that are well designed that a lot of thought going into that result in the magic, meaning creating outside returns. But that's that's how we do IT. Now we also do just general recognition as not as powerful as as financial rewards, but IT is still a good thing.

So we have all the usual things of people getting awards and rewards and trips to the places and president clubs and employee in move those kind of things where people feel good about themselves because they're recognize for going above and beyond. But if I had a pick, just one or two, the feel good stuff or the money and going on the money, I like powerful motivation. I like everything's .

tired to sort like win, win and everybody wins, right? It's not one of those places for you. You can get outside compensation even if shareholders lose.

That's a terrible thing, is an unfair thing that, that should never happen. You should you, you you should have a complete alignment between how shareholders do with their investment, the company and how the employees do IT. Either both of those groups should be making a lot of money or not a lot of money.

Now the shareholder can control that. All there are two ties, invest their money. The employees control that.

If the employees are selected well, are working together in a good culture, well, are using technology, you're using ways they they can succeed or have good feedback loops. And they're they're making good decisions and being held accountable. Those decision, they're exceeding them and delivering the numbers.

And the share Price reflects that. Share Price goes up. That's great. The share always should make a fortune and the employees should make a fortune.

Neither one should make a lot of money at the expense of the other. That's not fair. That's just not .

it's not right. What CEO do you think are underappreciated capital allocators?

When I look at um the companies that have uh taken money and and had small amounts of money and turn IT into a huge amount of money immediately, i'm thinking mike morat koa, he was chema capital. Now he's retired from that is its heritage senior advisor square heritage.

But if you look at his career, everything he's done over the decades and I studied my very, very well for many, many decades, he was one of my first outside investors as score a capital came into my, you know, the wave system is way back in one thousand eighty nine, nine hundred and ninety. And what to see the, what to see the, he's the genus of taking small amounts of money and turning them me to usually some money. So you look at at google, at yahoo, at netscape, at sun micro, always companies that he invested relatively small amounts of money and and end up being what like ten billion much.

That's that's good capp allegation, that's really, really intelligent capital location. So I I immediately think of I think of a make more its for something like that. I think in the industrial sector, there's also people who who have gone through the same kind of processes i've gone through and been disciplined at how the allocate capital and achieved high R I C.

As a result of that. You think of the academy level CEO over the years. Dave code, for example, when he was honeywell alth, was very, very regressed. This very mathematical, very dismissive, ate very intelligent about, okay, guys, this is how much money we got, where we're going to get the biggest returns, allocating IT very, very carefully there. So the most the people come .

to my of top of my head, talk to me about the relationship between .

quality and speed, both. So you see, companies sometimes be really good equality, but oh my god, they take forever. So it's really not achieving what you trying to achieve. You see other companies that more real super fast, but it's at the sacrifice of of Q A, Q C, of q quality control. The real golden mean is hurry, move fast, but move fast intelligently so that you're not sacrificing quality. In fact, you're moving fast and improving quality the same time that goes back to mathematic, that goes back to engineering, that goes back to planning, understanding the lay of the land, understanding what exactly is the inefficiency that were trying to take out of the system.

What's the biggest lesson you've learned from the past year?

You could pick any time frame with last twelve month left, ten years less my whole life, and asked me what's the biggest lesson i've learned? For sure, i'm going immediately to fall to something with people. It's first, i'm going to involve the people they going to fault to technology.

These are the two things because these are the two biggest needle moves. These are the two biggest categories of things that make a difference. So in the last year where I learned about people, okay, one thing i've learned about people is i'm working with a team now at my my new company that's largely the same.

They were on my teams before they were the X P O, or one of the exos. And what i've learned is it's great to have the band back to you. It's great to work with people that you know, that you blind in the battles with, you share the glories, you share the pain.

It's great to be, work, work with people who we've been in the dark days together, we've been in the strong days together. We've one together. We've Victorious together.

We can complete each other sentences. We get each other. We know each other spouses.

We know other kids. That sets a beautiful thing. I haven't always had that. I have brought some people from company to company, usually an initial founding management for Q, X, L, or all EXO people.

And one thing i've taken away from that is I really love these people. These are people I really disrespected, mire. And I, I just, i'm just so thankful that I get to work with them like I feel, and I think we all feel this way.

I think all of us feel that each of us is getting the long end of the stick by working with the rest of this team that very hard to find a team, a group of people this size that all love each other, that they will expect each other, that all admire each other, is professional and personal characteristics and trades. And that's that's a beautiful thing. I that's a big takeaway for me.

Now i'm going to go for two for on this. What's my biggest taking when on technology? In last twelve th, on technology, what I learned was I went through this process of studying dozens of industries, and I went through the checklist.

And one of the checklist, one of the things on the checklist was, can I play? Can I take technology, apply our tech forward mentality and our willingness investing technology, put our money where mouths, and put money in technology in an, in an industry, we'll get a competitive vantage. And I found an industry building products distribution that I can do that.

I found a company, an industry that got twenty thousand companies in this, about six or seven that are doing really cool things in technology, and that's pretty much yet. I hate to say that so negatively, but I think that's an objective assessment of IT. I think there's half a dozen.

So cup companies, the bigger ones that are a couple of of medium size companies, but most of the biggest ones who are approaching technology in the same spirit that we pro technology. Now we're going to double down on that and spend a lot more money and have the best technologies involved like we always have our companies. But if you look at the ninety nine percent of all the other companies, there were other industries were twenty years ago.

Now i'd like that in. I like going into industry where I got something I can bring to the industry that's going to help, but I can be transformational. I can be a catalyst to improve the quality of the industry. I'm happy to get everyone all excited to share the vision about investing in technology.

We always uh or I guess I always end with the same question, what is success for .

you on the professional level is very simple. It's continuing my tradition of generating superlative shareware returns, like of a charge great returns for investors. That's my report card that is success perd.

There is a lot of other things that build up to that. I have to have been engaged workplace, I have to have relation with my local communities, have to do all those good stay holder stuff. But then of the day, the report card is one question, what is my share Price performance versus the benchmark? And not only relative but absolute terms as well.

So it's it's about stock hold appreciation for sure. Professionally, all the things i'm doing of hiring people and putting in technology, all the things we will be talking about last couple hours, that all comes down to to making money for sure others. If you're not making money for sure others is just jb jaber, just talk.

So for me, success is defined by how is my stock Price performance for everybody else. So that's that's clear for me. It's very clear my mind personally, about my families, about my friends, it's about my relationships with them, it's about can I create ways where in the limited time, I don't have as much time as most people, some really into the business, but in the limit time I do have, can I make those enriching experiences? Can I make those experiences where there's a lot of love in the room, there's a lot of good stuff going on, there's a lot of positive lives in race, syn biotic, wonderful relationships where i'm helping the people I I love and they're helping me. And if I can achieve.

that's success. amazing. Thank you so much your time today. This was an fascinating and wide ranging conversation. I really .

appreciate the opportunity.

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