Brent Beshore: Business Brilliance and Happiness at Home
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My guess today is brunt by shore brand is the founder and C E O. A permanent equity, a private equity from the buys and grows boring businesses. And by boring, I mean the kind of businesses that most people overlook, but that are essential to making the world go around.

Some of these companies include a fence, the largest residential fence and company in texas to ride the leading amusement red manufacturing company in the united states, and pacific air, which has one of the aro space industry's largest election of on hand in mentor. I first met brunt about ten years ago. Now we became friends right away.

I've made a lot of people in my life, and I remember flying home after the first time we met, thinking how incredibly specially was after this conversation. When brand was flying home. I felt so grateful that that chance encounter had turned into a great friendship.

Not only does brunt love the detail, he can talk about any company they own or their competitors at the fifty thousand foot level or the one inch level, but he's also one of the most thoughtful and kind people i've ever met. He's bigger on the inside than the outside. Well, as conversation is one continuous episode comes in two distinct parts.

The first part is about life, and the second part is abo business. And his wisdom is equally profound. In both, we discussed the small changes in mindset shift sees made that have had a profound impact on his personal life.

And I, about forty five minutes, and we switch to business, recover, Operating out of abundance and what that means, why longevity matters, why debt is not a source of return, why not having debt is actually a strong signal of a good business, what IT means to owner business incentives. His first deal, taking outside capital, the advantages of personality testing, and so much more in a world where everyone is chasing the next big thing, brand is focused on finding value in the overlooked and under appreciated. And that's a lesson we can all learn from its time to listen and learn.

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I would say my marriage has changed a lot. My inner life has changed a lot. My physical outer life has changed a lot directly, the business has not changed a lot. It's been interesting how the different seasons do and don't overlap, but there's been a lot of changes about how I approach .

work that changed, but the actual work itself has change like this first.

Yeah well I I think maybe all of IT is um is connected to a walk I went on got some pride pushing now three years ago and um there is a general on this walk who was that like a small gathering of people in colorado. He can pick me out like forty fifty people in the crowd and after SHE said, hey, can I get going to walk with you only sure and he said, hey, can I speak truth your life and he said, I see a lot of shame in you.

I see a lot of fear in you. And I worried that ramada negative and impacting a lot of your relationships. He was more indepth than enemy.

We talk for, you know, another probably twenty thirty minutes about what he saw. I just try to take posh. I mean, I initially when to me said to you, like cut you right? Yeah dare you?

I have great relationships. You know you, you know me for a long time, where time at least ten years, not more yeah. And you I wouldn't said six or years ago that I had bad relationships.

I would have said I had really good relationships. You'd ask me how my marriage was five years ago. I would have said all like a six or seven.

You know, we have our chAllenges, but like we get long. And you know, compared to where d is today, I would say I was like a, like a two. I just didn't know.

You know, I think about this idea of, you know, everything is relative. So like world class is the best you ve ever seen. You know, you ask somebody whose only eat net fast food was their favorite restaurant, the world until you fast food restaurant right?

Um so now the question we have to ask ourselves is like what do we have to compare IT to? And are we talking about relative or an absolute terms? And to be honest, I don't think I had been exposed three years ago what was possible in relationships or what was possible in marriages like I had not seen marriages up close where I was like I was comparing my marriage to what i've seen in other marriages.

I felt like we were doing fine, like we were probably right in the middle, the ballpark. I think what this person did for me was open my eyes to like there was a lot more out there. There was a lot more possibilities that I that I didn't.

No, that was going at a similar moment of, like a warning shot across the bow of, oh my gosh, like, I need to probably go and look and study like, who am I? What makes great friendships? What am I giving to my relationships? How do I think about my marriage? And like, what I doing in my marriage and like how should I be and am I willing to settle for an interior life filled with anxiety and shame and fear and I willing to settle for a marriage where things are being hidden and and there's disconnection and division right?

Um am I willing to settle for friendships that that maybe don't go that last ten percent and create that really meaningful deep connection? And I willing to settle for a physical body that is over, wait out of shape and and likely gonna become diseased. And so I think that was a know that was a major moment and then that LED into, you know, really find finding these different people who who shaped and change my life, including an incredible counsellor, start working with and bringing to the surface a lot of these issues.

I didn't even know we're there. Yeah, I mean, I look back on the person I was even three years ago, and I I was certainly far Better than I was ten years prior. But I was compared to sort of where I was, I felt very shut down and frustrated and irritable and additive.

And I feel a lot of these things myself in terms of competitive, and you know, maybe a bit more anxious than I should be. What was the next step that you tell in this journey that sort of play? okay. Well, I realized something. I feel that now what I don't want .

to see to you and pretend this like software alliance, is the thing that got me through this period of my life, because I felt like IT happened to me and IT happened for me. I didn't feel like that I somehow figured out like outsmarted the world, outsmarted my shame and fear IT felt like I had these sort of people be put into my life in these revelations that started to occur.

That all the sun, I mean, I think there's there's an old edge that like when the student is ready, the teacher appears right. And I think there's very much there's a choice I had to make three years ago that was like, am I going to pretend like I like everything is fine because that's what everything I mean. That's what my fall self wanted to do.

No scare you. You're wrong. You don't know what you're talking about.

Who are you? You just met me. You can.

You don't know. You don't know me. You don't know anything about me. And I was like, I I remember having this very distinct choice to make. And I remember being like, if I if I continue on the path I am on that would have denied know this sort of idea of like self promotion, self protection, right?

That's what our false self wants us to do, go on self promote, self protect, because then we don't have to really be vulnerable, able ah now we also are shut down and we can have great relationships. We can um figure out the real sort of us that comes through. But that was a choice. And I I remember that I was an active surrender of being like I have to take the risk, but i'm going to take a look at myself and i'm not going to like myself very much.

I mean, I mean to admit things to myself that that are ugly and that i've done more wrong, maybe that i'm willing to admit, and that i've heard people that I care about that was the choice that I had to make an I and and I remember very clearly saying, okay, I you know, I surrender and I wanna know. And then things started to change ever so slowly. I mean, there's a weird dip that occurs.

I feel like when you you when you go from denial to um awareness um IT is actually way worse. So like the awareness of your faults and awareness of your shortcomings without the healing of those is actually put you in a far worse position. And so I would say, you know sort of the period of time from three years ago to two years ago was horrible, like IT was.

IT was not a, not a year of joy. In fact, if anything, I felt like harder. My relationships, more string, and I think is because I was becoming acutely aware of how broken they were as a result mostly as a result of me.

I mean, yes, other people's broken us to mostly result of me, but I didn't have me healing in IT. I didn't know how to get healing. Um and you know that season was just an awareness building season looking back on that but is awful if you if you gain awareness without healing its way worse than not.

being air can be an example of something that changed in your friendships. We are talking about one last night actually that's a perfect one. Uh, where you always want to pay the bill? No, talk to me about that and the the revelation behind IT and how I came about.

let's see her about two years ago, maybe we were less than two years ago, I had a friend who really tough times and personally, professionally and a to his, said, hey, you ve got to go to this, got go to this intensive counselling retreat and he can reluctantly he's not a touchy feeling.

He's a finance guy, you know he's he's not a, he's not this one yeah this is not is exactly this is we go his squshy stuff is is not his his ball game and I wash go into that hard and hardened and just sort of like shut down, shut off um again, very protective self protective and he came out of that week like changed like distinctively different and I really think myself like, wow, don't know what happened there. That's incredible. He'd worked with this woman the whole week and he was like, you change my life.

Like, this is incredible. Like, how you know first. Like, never build to repay you. Thank you. You know like, I don't know, think how you who are you and he said, uh, i've got you like his kids and I live columbia, missouri. He's on me is what he said when my best friend lives in colony missouri, I live in club misery and so he said, but on telling you, like you have to go see this person and he was right around this time that I felt like I hit rock bottom of my awareness of, like, my own broken ness.

And like how I didn't really see a path forward, like I kept like sitting in this disable state where you're like aware of how messy everything is, but there's no way to clean IT up and all the self helps stuff like IT. None of IT works like, at least for me, like, I I can only speak end of one here. But like, you know, the self reliant thing doesn't, doesn't work.

And so he said, hey, I think you should meet with her. Like, man, this is true. God's m like, I had no idea that somebody of that calibre, national, international quality calibre was economy measure y started going there and doing these three hour sessions and dredging up things I didn't even know was there.

Um that we're all connected to the behaviors if you if you think about like the way I I think about and now is like we these behaviors that other people see that we can kind of measure right am I doing good or am I not doing good? Um the rehearse is there are so many layers underneath that though that are influencing that behavior right like oh, something terrible happened and I really don't feel anything that's weird, right? Or something very small happened and i'm triggered into this like spiral, not weird.

And what I would do in the past is I would just kind of like shop IT down right? I don't know, get IT but likes weird whatever to go on. Yeah you got ta go on.

And so anyway, through the series of of sessions, and I mean, i've done a lot now, like probably twenty five or thirty days now, three hour sessions. So a lot of time we down to one of the sessions was actually about four, five months ago out of the blues seemly unconnected. We are talking about friendship.

And my council said, joe always pay and I said, yeah, of course I always pay. SHE was like HMM I got over the last hundred times that you shared at a meal with somebody. How many times did you pay? I was like, like one hundred, and you going to SAT back.

And I was kind of proud of myself, right? On a good person. I pay for the bill. I care about people, right? This is like the thing I told myself.

my head, I do the exact .

and yeah and and by the way, those those motivations are, I think, real and true. They're bad but he said, yeah, I wouldn't be your friend and I was being rocked by IT like wouldn't be my friend SHE because I was like, why you like, totally broke my paradigms and SHE said, because in a friendship, in a real relationship, you see control of the other person.

The other person concede ds, control to you is not, you're always controlling the whole point of a friendship is that you can trust and you can be vulnerable and you can seek control. And so paying the bills merely just a form of control that you're exerting over your friends and everyone oh, crap. Absolutely right.

And he goes, yeah. And I I suspect is not just paying the bill. You like to have your environment, you like to have your way of doing things like, yeah, I do force a lot of relationships and again, this is only like five months ago, right? I force a lot of relationships into these boxes.

Works like, I want you to be in my box, I tell myself because I can provide great hospitality, because I can do do these interesting things, right? And i'm caring for them well. And generally, sometimes I expect the same for you, like those are real motivations.

But we are this mixed bag, and I think that's what I realized, is like we we hook the good and the bad together, and then we do things that come after other people very differently and confuse and frustrated. And constraint is really hard for somebody be frustrated at a friend who's always buying them to dinner, whatever IT might be. So what IT does is IT build up resentment and frustration in the other and they don't even understand.

And right like world world confused. It's very hard to see ourselves clearly. We can see each other clearly, right? We can see ourselves clearly. Um I think that we're designed like that because we're designed for relationship like we need one another. No one is an island, no when a sult reliant, right we need one another.

So how do you handle dinner now?

So what I say only five minute, by the way, I don't say this um but if I don't mean I won't say IT now I I say that would give me great pleasure. I would enjoy being able to buy dinner tonight, but if you don't want me to buy dinner, I will respect your choice. I give them the choice and sometimes I buy dinner and sometimes I don't. But if they say, nope, I wanted buy dinner that night, I say, okay.

thank you. And the key there is they have agency. They have agency. And so the resentment doesn't build, even unconsciously .

correct in in kind of psychology circles there's this idea of a of a triangle where you have A A victim in a hero and like a judge or A A prosecutor um and and heroes are those who are without knowing the good like they tell themselves that they want to do good for other people and what they're really doing and by the way, I relate very strongly to this this is this is a lot of action that I see myself having done and do is to cover up my own shame and insecurities and and sort of to to push down the pain that I feel.

It's like want to go external and go try to help somebody almost against their will like they didn't ask me to help course, they didn't ask me to help my response that is so outsized that IT removes agency from them. And so buying dinners like a very small example of this, and i've got unfortunately, a lot of bigger examples of this. You know I probably I probably have really engaged and I was a dramatic Carolyx five or six times in my life where I perceive somebody was in grave danger um they needed my help and I sprung into action and did this dramatic thing for the other person and in my head the thing I get is, oh, thank you so much brand, you're amazing.

I'm so grateful, free and if you hear even the thoughts of my head is all about me. So actually not about the other person. Yes, I can justify IT based on really about me.

Yeah, five, five, six, eight or six times IT has been met with initial, oh, man, thank you so much. Like this is incredible. Well, I like blown away your generosity, and I like I got all the good feelings and and then I end up not having a very good relationship with those people.

And IT shocks me, and IT almost feels like a slap in the face, like, how could they? How could they do that? How could they not be Better friends with me as a result of this? And then when I started doing the sessions and started working with her, um IT became clear this like, oh, heroes create victims because you're removing all agency from them and you are telling them that they can't help themselves, that they are helpless.

And when you do that, you are creating somebody who who is diminished and insulted. And now now again, in the moment, that's not how IT feels, but that's where we we are constantly chewing on and assessing our environments. A great example of this and this is not a close personal relationship I remember my wife and I when Christmas um we had a public school teacher who we knew and got to be friends with and um we kind of sending around the dinner table one night and he was sharing he was like heart breaking she's like of these kids around Christmas that I work with, particularly poor school district.

You know they don't have any Christmas present. They don't any Christmas. There's no joy and I really like touched my when I really like, oh like what if we do this dramatic act and anonymously of course we bought like thirty thousand dollars worth of Christmas gift for like every kid in that school and in our heads we were like, this is amazing.

This is wonderful. Um these kids, you know, you can imagine the kids were like all we wouldn't have Christmas, but now we have Christmas. And wow, somebody cares for us and loves us. Like that's what we are hoping to have done and and so we did IT and the response from know small gg people that knew about IT was like, this is incredible. You are so generous back pat on the back we're feeling great word or in the Christmas spirit of what joy you know all the stuff and then is about a month later and I I followed up with um the teacher and I was just like, hey, how do how do I go and SHE was like, IT was really good, you know ever was a grateful you know, whatever there's a few people who who has some chAllenges and chAllenges with us giving giving guess he said. Well, some of the parents of the .

kids felt .

felt really insulted by an. And then IT like IT me and I even like i'm trying to get emotional about, like hit IT cut me so deeply because I realize what i've done. But we had done my life.

I done. We had taken away the dignity of those families. And yeah, they couldn't buy their kids, Christmas kids. They want to do something for them, whatever they could do for them.

And instead, like any kid, you you get a kid at present, he is like, amazing, you know? But then I start asking me all kinds question working, you buy me that present? Do you not love me? What do these other people care more for me than you do? Kids don't understand how money works.

They don't understand how some people have, more than ten people have last. They don't understand anything about that. And so what I didn't vertu done when I was trying to be kind and generous was I didn't put myself in the position to understand what the the real consequences were going to be in the second, third order consequences.

Yeah, kid, we've had you know less toys to play with a Christmas. That's not the point of Christmas. I miss. I missed the plug. The point of Christmas is to show love and care.

And in doing what I did, I short circuit the ability for those families to experience love and care, and I hurt them. There's a great book out there called when helping hurts and afterwards actually somebody gave IT to me and I read IT and I mean you talk about being cut deeply. It's a book about when you try to help and IT hurts people. Um it's one of the one of the best books i've read on sort of philanthropy, how to think about um caring for those who you don't have a relationship with.

I think that's the bottom mine is like IT all comes down to we we can go wrong if we in deep relationship with somebody and we are respecting what their needs are um where if somebody asked me for help you are a hero of somebody ask you for help and you rise to meet the need has called me a good friend where you become a hero and you create victims is when you don't know somebody don't know needs um they never asked you to do something and you rise to meet a need they don't have and in in turn you take away agency and dignity from them so things like that that I mean these are these are deep waters, right? These are things that are chAllenging so that we don't talk about a lot. But this is the stuff that i've like. It's been a joy and it's been awful in some ways to explore the stuff in me and to see how frequently I am engaging in this, my adaptive behavior under the name of goodness and virtue, and all these things that we tell .

ourselves at the story, we tell ourselves to justify sort of what were doing. Because we want to be the here, or in a way, unconscious ly, and a lot of is right, like we're not consciously trying to save somebody. We see a friend in need that we we wanted jump in and help them. Once last time you ask somebody for help you this morning.

i'm asking i'm learning this a new learning behavior though um because in all the years i've known here this is like this is a different reason this is different I yeah I would I would always be the one who would be eager to help but rarely ask for help. And again, that that that destroys relationships.

There's there's no way to have a real relationship with somebody unless is by directional IT can be you helping somebody and never needing help because then again, it's exact same principle you're creating sort of of uh hero victim dynamics of power dynamics in any relationship or supersensitive and where we have best relationships were on equal footing, different but equal right so um I was think about IT as like you know the x men or whatever you know you have everyone s got different powers. But everyone can like fight the battles together right um and you respect the other's opinion right, you respect the other person skills and talents. But if somebody is always the one who can shoot laser beams and you blow stuff up, mixed up, happen and the other person is just, oh, thank you.

I appreciate that. Thank you for helping me. It's not a real friendship.

I had never thought about any of this until dinner last night this year and I stayed up late last night just going over all the different ways that I I do this in my own life with my friends from you know um always offering like still not been offering to pay for your dinner. It's like all race up to the waiter, you know, everybody is sitting down, go to the bathroom to make sure that I and I D really like I was just replying this stuff in my head. I like, oh my god, this is crazy.

I went an apology tour after, had that realization to a lot of people, and I said, I am really sorry, I did this to you. And of course, people are kind of caught of parks because everything they realized IT. But when I said that to him, they were like, yeah, thank you.

And so now, like my close friends, like I, we have this understanding, and often times I still unable to buy lunch, E R, dinner, whatever, right, because I enjoy IT, and they know I enjoy IT. Like I love hospitality. I love to be a provision and provide care for people like a core part of my personality.

But I sometimes they say, thank you. But no, thank you. And do you know what? I feel super loved and that I feel super love.

So, right? So the cool parties, before I didn't feel love either way, if somebody else bought a meal, I would feel frustrated. And sort of your table about IT and they took something away from me, right? And if I just .

how everybody else feels when you .

do IT right exactly and vice versa, right? If I did buy the meal, IT was a little bit like you start playing the ideas and oh, and my only a jack book do people really like me? It's like, well, you're the one who insisted on buying dinner and you're like, what but the other person who insisted on buying dinner more, you know, you start getting into this like weird psychology, right?

The old allegation arms and so now it's like the inverse of that and I think this is like, uh, got good metaphor for a life like I think that the more than I mean what i'll call elders so there are difference being elders and elder lee, elder leader, like self focused in curve black pet place, has called, called and curvy, rather curved on themselves um they're ira able all life is all about them and what they need and they are scared and fearful and you got elders for the inverse of this, right, who are awarded focused, right? The more I meet these types of elders that are like genuinely Carrying a loving, the more that I see them exhibiting this type of behavior, the more that I see them like, no matter their circumstances, in good circumstances are in bad circumstances, they live with a joy and a lightness and a freedom. And then you see elder lee insert of, now I can pull back and see in my life, but like, no matter my circumstances, like a living in fear and shame and in hiding.

And so it's like I think that's the that's the the thing are really talking about here is like these are all even like maybe the second tear down or the third tear down, like at the basement of all the stuff. At the very core of all the stuff is they're really only two ways to live. You're going to live out of fear, or you're going to live out of genuine love and care for others and loving care of yourself.

And like, that's IT like everything else rises between those two. Like, like fear driven is scarce. IT is the way of the world.

IT is a um uh a famous author in the seventies. Uh he said the the the nature is read in tooth and cow, right? It's like this idea is like there is nothing but here they're going to be a predator.

You're going to be pray. Everything is a battle. Everything's battle.

Everything's about competition, right? And and blame like that. When I am at my worst, that too I am.

And by the way, the world loves my false self. The world loves that fear driven off. I can get an the ordinarily incredible amount done in that time. H A friend of mine calls IT clean fuel versus dirty fuel, like it's a very difficult to see, like the car looks like the car from the outside, and very difficult understand is a clean fuel or dirty fuel that's Operating the car. And I can I mean, that car can go fast IT can take a lot of people with IT if i'm on dirty fuel and something dirty fuel as a for me, i'd learned through my life to be is a more potent fuel in the short term for me like I I get more stuff done quicker. And he usually in sometimes with higher excEllence out of dirty fuels than I do clean fuel that .

fears like higher routing.

The problem is got all kinds of containment and IT, and you eventually torture yourself, and the car breaks down and you go off the rails and buller yourself up, whatever. And now you you, anna, use. And so getting back to the original question, like what's changed? Like I think that more and more, i'm trying to Operate on clean fuel, on trying to be self unconcerned. I'm trying to become an elder.

I think people listening resonate a lot with this. So i'm curious what other ways you found yourself suddenly controlling your relationships, whether be your marriage with friends? The paying is an example, but i'm sure you've got other ones.

You get older and you get Better at hiding your motivations, right? You into rapping them, sometimes consciously, sometimes unconsciously, and these maybe good packages. But the reality was, was like I was demanding control. I was demanding care of, demanding people to see me and sort of praise me.

And so how do I do that on a daily basis? IT was um and by IT this is not like it's Victory declared or whatever means this is this is like an ongoing battle, I would say on an hour by hour, minute by minute basis is I can tell so quickly in my Operating out of fear, love and the test is why piece or not and my anxious are on and when i'm anxious and fearful and when i'm I have tensity catastrophes, the future and always be running down all these different rapid holes of what if might happens and I haven't i've been given an incredible capacity to do that. Which makes me like my daily job is an investor is really useful because I can run down a tremendous number of scenario.

My personal life is terrible and I I I hate IT. Um it's the dark side of creativity, right? When you have vision and creativity, you can envision a future that is beautiful and bright and loving and wonderful or you can vision a terrible future, destroy an future.

And so, yeah, I mean, examples of this. I mean, I would go in the meetings, and I would, I would need to take over the meeting to get praise. And by the way, i've been given a gift to be able to say things and think quickly on my feet.

The people genuinely we're praising me. It's not like I hope I mean no one's perfect, but like I we create an organization and promote c with like very um kindly confrontational about ideas like we want to be uh we want a lot of friction. And so the last thing the world I want to do is create an organza of a yes men or yes women right like we we want divergent thinking.

We want a lot of uh variety. And so I don't think that they were doing that. This is like, boss, you're so good, you know that type of like, no, this type type thing. I think that was genuinely like in my fall self when i'm really charged up.

Like I have a capacity to envision a future that a lot of people like I know internally though my my vision of the future is really driving my need to be liked, my need to be respected. I need to be praised. And so, uh, and I would have would have this high anxiety in these meetings, right? And then I get out of things like, I mean, i'm so wired up so much cortisol in my system because I craved that, I needed that.

That was like my sort of my drug of choice in that, in that setting, to the degree that I almost lost my right eye as a result of access coras all my system. That's how stressed and I wasn't stressed in the sense of yes, like what I call Normal stresses like mean, there was always going to be a sickness ness and death. And as we grow as organization, there's just a lot of a lot of people and a lot people, a lot of broken ness.

But I would say the vast majority of the stress of his experiencing was shelf duced was because I was okay and I knew I was in OK, but I didn't know how us to cope with IT. Rather than try to get praise, try to grab things from other people, right? Was I was incurred as boys past called, say, I was the one who was inwardly focused and focused on my needs.

And what I wanted, I was not on the path to being and older. I was on the track being elderly. And the inverse of that, as I get more freedom, as I as I know the stuff kind of comes out in relationships and friendships, in my marriage, in counselling sessions know, is this stuff kind of comes up.

Now there's healing around IT that I find myself sitting in meetings and like letting other people talk. Imagine that not having to always be the leader of everything, not having to have my identity based on short term winds, not being competitive. Competitive ess is the opposite of relationship, is the antithesis of relationship.

I can more competitive with somebody. I win and you lose. That's horrible, especially when you you you're dealing with my profession doesn't have to be competitive.

When I go out and play tennis, pick ball, somebody like I don't have to win but IT before I had to win because i'm a winner. Winners win, right? Like.

and if I don't win A A loser.

if I don't in a loser, I don't win. I'm not okay if I don't win. All that stuff gona bubbled up from the basement.

And i'm onna feel terrible. I used to literally lose in tennis and feel terrible for days. Another thing, I would fight with my wife and would go to budget email.

Interesting behavior. Well, why would I do that? Well, because I get praise for doing email. I got a love in the activity. H, hey, thank you so much for that.

Oh, wow, it's eleven o'clock night on a friday night and just had a blood fight with my wife. I'm going to go and do some emails because people can be like how look at hard. You work friday night, you working so hard.

Social media was leading to me. When you look at the peak of my social media, sort of addiction IT IT, was probably five years ago to three years ago. why? Because I can go online and tickle the years of people.

And they would tell me, oh, this a really insightful thing. This is really cool. Wow, you're so great. Know.

ideation, validation, praise how many likes that I get, right?

But I found myself, my, my personal relationship. People, are we optimizing our lives for the people who know is best, or the people who know is least as a question that I haunts me. I've watched a lot of people up close and personal who the more you got to know them, the less you like them.

And I mean, that's honestly the lie that we all engaging, right? If people really knew me, would they love me? Would they like me, right?

There are people, a lot of people that i've come in contact with, they're bigger on the outside and they're on the inside like I want to be somebody that was me by the week, like I you know, I mean, I think we all have the temptation, right? The instagram pic of all my life, just a vacation. Everything's amazing, right? twitters.

But the sort of the intellectual version of that, all, I think, is these great thoughts. Yeah, yeah. Have all this wisdom so wise? No, let one might like, marriage is disaster, right? Business disaster.

Always like up. But I can spout plate to on twitter and people praise me for right? Like that's the lie, that's the trap healing the court.

It's like i'm on social media less not because like I actually like genuine want to help people and I something to say be helpful when I was engaging conversation like I go on Michael aging IT, but like I don't feel the need now to like hour by our check and see how many people have liked whatever in my marriage. I'm trying to be somebody who's focused purely on the good for the other, focus on the good of my wife. Like, how can I serve her and love her with no expectation of reaction? Like that sounds born.

I was that foreign me like the view we have of every relationship, sort of in that fear based, scarcity based mindset is like, okay, well, like this stock call IT self IT interest ghi understood, right? Which is like, I do things for you. You can do things for me like, that's not true love and care, that's loving yourself.

There's a rabbi who calls at fish love, right? He says, we treat our marriages like we do, uh, a good fish dinner, right where you're like, oh, I love this fish because IT taste good because that makes me feel warm. Because if you know satisfies the need that I have, a desire that I have, you're consuming IT and your consumer of that thing.

And I think that without a shift in mindset, and the default assumption of the world is we are all consumers of one another. We are all eating one another, including in our marriages and and personal relationships. And it's poison, strike poison. I want to .

spend a lot of this conversation on investing instead of running a business. But before we sort of transition, one of the things that you said to me last night that I found super interesting was that you'd stop drinking unless it's the celebration.

Tell me about that. Well, yeah, the last couple years have been an exploration of interior index interior um and I think a lot of our exterior lives reflect the accumulation of our interior lives for me. IT certainly did.

I can remember the first time I was called a fat kid. I was ten years old, and that was an identity that I adopted. I always was just a little more overweight than everyone else.

I wasn't like morbidly obese, but I was just a care life way that was athletic. But I, but I was little but heavier. You know, when I became an entrepreneur, IT was all consuming.

I mean, my twins were filled with, I had to win at all costs. I had to, I had to put every biv energy into being successful. I felt that that was going to make me OK.

So I know my twins were filled with, uh, single minded pursuit of achievement. And I put on fifty plus pounds in my twins. I I tip the scales at one point two fifty two.

I member up on the scale. I was like, well, I got big. I started, uh, beginning of last year at uh, two thirty five fish.

So I was down for my peak, but he was just a battle i've didn't engaged in like a decade long battle with like try this diet or that diet. I'd tried to work out some. I make a little progress.

I look back. I was kind of like had this set range I really couldn't couldn't get outside of IT kind all part of the same transformation occurring at the same time, right? Like I found out that food was something I celebrated with, was something I turn to for comfort, was how I have expressed love and joy and care.

As my council said, that sounds like you eat when you're sad and you eat when you're mad and you eat when you're happy. I think you're onna probably be always eating like, yes, I am always eating guy always have a pull towards food because I, because I was using food, and by the way, like there are more maladaptive behaviors, right? IT just happened to be one that you can hide very well.

But I was using food to to do a job for me. And sometimes that job was, you know, in concert with joy and care and sometimes that that was in concert with pain. Um but food was like the tool of choice that would make me both feel out of control and in control the same time.

And so as as those started, things started releasing and the the junk that was underneath them that cause that pain started releasing, like I fall the real freedom, you know you I I argo publicly my my annual letter this year, like you had a huge impact on me. It's funny how we don't often I don't think when you said that you realized like how and impact IT was was gonna be. But I was like a lighting boat.

You told me, I complained you I think was maybe january forth or fifth of last year yeah and you told me that you know, you're working out of room oh man, yeah like i've got a news resolution drops some watered and just really hard to work out. And I feel kind of defeated about IT because it's like, you know when you know when you're headed, the failure. And IT like sort of that thing about dieting and that's the thing about these like short bus of like nears resolutions is like they had towards failure yeah because it's not sustainable.

And so I remember you saying is one thing to me that completely shifted internally how I thought about health. And you said, why just work out every day is part of my identity. I know the choice. If I want to work out, I just have a choice what I do.

And I remember he hit me like a tony brakes, like, oh my gosh, you how you're right and around that time another good friend of hours, Patrick um I was on the phone with him and um you the best friends tell you the real truth, like the pinna of friendship is to tell each other the real truth, the hard truth, the truth that the truth that you gain nothing from and you have everything to lose because that is true vulnerability that is truly giving the other person l and i'm a patch, took a risk and I said something. I I used to make jokes about being a fat kid, right? This is that identity that was imprinted upon me.

And they are funny. People laugh at jokes about being fat, right? Self self facing all the stuff.

And he goes, would you not that shit off? And was like a very stern voice. He was like, not okay. I've heard you say this over and over again. You'd made jokes.

You not OK like you got to quit that you're not a second is like, what do you do that to yourself? And it's, again, this idea like, we can see each other. We can see each other clearly.

We can see ourselves clearly that really flip to switch me. But I was like, i'm not a fat kid. I'm going to be healthy. I'm going to be a healthy person whose part of their identity is i'm going to work out every day now not putting my salvation in that i'm not putting my goodness in that I don't think that people who work out are Better than people who don't work out.

But i'm going to make IT a core part of me that i'm like honor this body that's been given to me like i've got one container in this life and it's important. But I say basically every day, like I am now, I work with a couple people on the fit, decide and like their biggest problem with me is that I work out too much now like literally is not like a blaggers thing. This is like, I love IT so much now.

And this mean, I hate a door cut. I hated IT. I would dread IT. I was out of shape. I mean, I hate IT working out.

And so now it's like I feel the joy and I feel privileged that I get to work out, like I have an opportunity to move my body and to like experience this world. And so whether it's going to run or a biker playing of sport, I love pick binti. And um or you can you want a higer walk with a friend? Um I love IT.

The greeks have this very like it's like body versus soul. Like do alala tic view like we are in body, the creatures like we are one in the same. That's not the proper view.

Like our physical health impacts our mental health and vice versa, right um and so i've seen this like wonderful, like I have more energy to play with my children and the relationships are Better. And like I can I can I feel feel Better just in general. So like you know when you feel Better, you can move Better all this like it's like this virtuous upward loop, right, an inverse doward loop when those things start to fail.

And so the alcohol thing very long one way of saying IT um I just noticed when I drink alcohol, things felt hard and turns out, uh, alcohol one of a men, especially one of the bigger inhibits of testosterone and we think testosterone is like the libido, you know, hormone where right IT is but like that's not the the point. Like I wasn't like I was like, oh, well, drink. I was a basically drinking almost every day.

I was doing a lot like I got the point I like drink to say this. Even now I would never a million years have defined myself as like with any sort of addiction yeah and like I could not drinking and be OK, but I was drinking like three or four, five drinks at night every night. Like, you know, you get home and you open up bottle White.

You're making dinner. We cook all the time. We love cooking my life. And I is a kind of a core part what we do. And you're making this meal, you know though, you know open you know another bottle wine, maybe red, you have a little of that and then it's like, oh, me and you will be really great, nice.

Have a little age to quila or some konya or something and you know, before long, it's like that really adds up and IT affects sleep. And and for me, I just noticed like in testosterone one the best doesn't. I've heard of testa stran.

What IT does is IT makes hard things seem easy. And so when I drink hard, things seem hard. And when I don't drink hard, things seem easier, like I can very clearly tell.

And so I just is not work and try to come up with other alternatives and how to get the ritual of IT in the special. It's 那个 no， you can mark your days or item. I went for a lot of my life.

I was like alternative between, like, caffeine was one part of my day and alcohol was another part of my day. And now I don't drink, Kathy and I don't drink alcohol for very different reasons, but both of the health are related, and my life is a way Better for IT. And I saw, so my, my, my excuse. Now I should excuse me the way I think that is like when I celebrate the only time I let myself drink.

The interesting thing to me, we're talking last night, as you mentioned, you use the work rule, which I thought was really interesting. And do you have any other rules that you've adopted in the last couple years that have really helped to you sort of unlock the next level?

Yeah, this is actually a huge part of a lot of these changes i've made my life as well. What how we spend our days is how we spend our lives like our habits are who we are and habits are very sticky and hard to change. Uh they require a tremendous amount of focus um is very difficult.

Add multiple habits at at once is what I found um i'm also not a personality that loves habits. I I don't love structure. I I really enjoy um the variety of life and so in in many ways like habits grade on me but i've really come as I get older to to appreciate the value of good habits. And so the habits I try and I would say as I these are most days um almost all days um I get up and the first thing I do really pray um the I always try to tell my kids, my wife, but I see them and I know them and I love them and there's nothing they can do to ever move outside of my love for them one of the questions I love asking my kids now is what do I do when you feel most loved and I really try to focus on doing those things for them. Um that's one of the magic question that unlocks a tremendous amount of .

intimacy with anyone.

really any friendship. If you asked the same question, you, you'd be shocked. I think what the answer you get, please, in my marriage and in my friendships, in my relation of my children to some degree, like I used to try to love them ah the way I wanted to be loved and I .

didn't work very well because .

really what you're doing is your loving yourself by doing that. And then I kind of want to your face as I kay will love them the way they should want to be loved. That didn't really.

Why don't they love IT?

Why don't they love IT? And then I started really being like OK. I'm in a pretend like I have no preconceived notions of how somebody wants to be loved and just gonna them how you can ask him and you know is something that most people both can tell you pretty quickly.

A bit shocking to them what comes out of the routh oh, interesting. So most people don't actually know how they want to be loved. Like the same thing they think about, mean, you can use this analogy at work too, right? Like, you know, question activities, like when you really feel seen and appreciated. But this is the question we all try to ask, is like how do we want to be loved like really getting down on some boy's level with them and getting in that real relationship.

Let's switch gears and talk about business little. But I think that a good segway question is how do you baLance love with Operating and you're one of the best Operators i've ever met my life. How do you baLance those two things where were taught to come out everything from a competitive point of view, which you do exceptionally well or did exceptionally well for a number reviews, and that made you a huge success. And then how do you get the same results or Better results Operating out of love?

What I think the lie that we tell ourselves is that if we don't act out of scarcity, that there won't be enough.

And what .

that does is IT isolates us and IT shuts us down。 And IT isolates. And just on everyone, I mean, anxiety is contagious. Scarcities contagious.

As soon as you mean, look at the game theory of scarce, be soon as one person act scarce, the fear ripple through the entire crowd. And love is fragile. Care is genuinely fragile. This either this fear mindset of the abundance mindset, love mindset, IT requires a tremendous amount of protection in order to engage in. And well, i'm not going to sit here and pretend that I would often make the same decisions if I weren't art in a position of success.

You're Operating out of a position of .

strength orality. Yeah, i'm coming often times where i'm already coming from position strength that I do think though I would hope if I hit hit reset and I could go back knowing what I know now life is just way Better no matter how you slice Operating from a position of abundance and love and care, no matter if you have resources or not. But money makes you more of what you are.

You are right. And so you look at people with tremendous of resources who made that money through scarcity, through high competition and through, uh, stepping on people on the way up when they get to the top, they continue to exhibit that behavior. I think there are a number of people who experience to that. And I by the way, that was.

Me and my toys, my twins were filled with uh doing whatever took to to make IT now I would hide IT you know I do IT in a more gentle way um but that my heart was scarce and I still battles on a daily basis now so it's not like again, that there's no Victory declared here. But what is sustainable long term is not a sort of mexican stand off with everyone in your life mean, that's how most businesses done. It's like there's power structures and it's like, well, i'm going to make myself in dispensable so you can get rid of me, right? And it's like, oh, well, I wish I get rid of that guy, but I can't and it's like that's a horrible, like confrontational, competitive, scarce mindset to be in business.

I feel like this is the norm, unfortunate, it's really the norm in the finance world. I mean, I I feel like I I I fell backwards in the finance um joke on the force cup of private equity and IT is the scarce that gets I mean IT is all zero sum is house treated as we've moved towards opposition of abundance, as we move towards the ability to try to treat people with honor and care and create win win relationships. And that's really we're trying to do.

Um you know one of our mentors, both of us Peter cohen, talks a lot about this right, is like the only sustainable long term path is that everyone has to win or IT more work. There's any losers in a system IT sounds sustainable. So I think that's just something that we've really try tried to pursue.

And so what does that practically look like? I think this is a question, right um IT looks like not protecting yourself always all the time, but giving people the ability if they want to ask scarce to do so but in like lower stakes ways. So like one of my favorite things to do is is be almost open myself up to being taken advantage of early on in a relationship.

So if they do, then you're like, okay, great. Like by the way, there's no judgment in this is not like how dare you or and somehow Better you know whatever. It's just, hey, I just don't think you're in a position right now.

I was there before, but not not a position right now to be able to engage in our system because our system requires a tremendous amount of mutual trust and care OK. We're imperfect. We grow all the time.

We're asking for forgiveness all the time. We say sorry all the time is not I don't paint this picture of like idealistic, like we've got IT altogether. We've got a lot of things to work on, right? But I think most of the people are trying to Operate on a position of under most of us are trying to work towards wins for everyone.

We're trying to be thoughtful with not just the buyer and the seller private equity. So we buy businesses. We're not trying to just think about the buyer in the sellar, buyer being a seller being the person or selling this this thing.

We're trying to be thought ful about the the executive leadership teams that these companies were trying, be thought ful about the employees, the rank compile trying to be responsible and and be forever towards our customers and our vendors in the communities, maybe even regulators, depending on the situation. What is a win look like for a community that we purchase a business in? I don't know.

It's an interesting question. I think it's different for every business. What is a win look like for the construction worker on a job business? We bought siting questions to ask, right? We can't make anybody happy, we can make anybody fulfill.

But we certainly concrete an environment that that allows more for them to be happy, free, fulfilled. This is where I think, for the rest of my career, the engaging part for me. And that's something that money for a long time, like thankfully, that was like I ve not had to worry about money for a while now for me.

I like how what if when we buy a business, not only is the work environment Better, maybe we allow them provide the environment um maybe shows them a Better way. This idea of like everything's relative, right maybe we can show them a Better way where their marry just get Better and their friendships get Better and their relation, their children get Better. They're more engage people, they're more I don't want people who are working eighty one hundred dollars a week at right now.

Look, there are weeks where I work hundred you know one hundred thousand weeks um sometimes you get get stopped done, right. So there's no shame in that. There's no but if that's your norm, like you just cannot sustain healthy lifestyle, healthy relationships, healthy physical body working that much consistently, just no way there's one of time in the day to do IT. And so like I don't want people who are sustainably like like the whole finest world is full of just know chewing people up and spitting the mount. They use people's objects right then they thrown away when the object doesn't become useful.

I mean my fancy and maybe look at delusions, grander illusions of grander a is could we show people Better way that actually you create higher returns long term by treating people well um you create higher returns over time by using little to no debt as where does that is in the finance world and blame I know all the people are watching. I get the math. You don't have to send me the math.

I understand how leverage works. I can do the I can do the math do, but I think there's a real value in in examining why why is IT that we have a system, especially in the leverage by world private equity, where the norm is by lever, strip and flip, right? I'm going ever this business to the moon.

I am trying to use as little equity as I can. I'm going to try to sell IT as quickly as I can to generate the higher return I can. There's no way to make good long term decisions with short term capital, with short term time present. There is no way. And by the way, what are we doing if all there's no way to create long term enjoyable, sustainable life by having a series of short term transactional relationships that you move your life through. That's where you end up with these people who can buy anything, who've made hundreds of millions and not billions of dollars, who are miserable like i've meet these people like they have their irr in edged on their tombstone, like knowing gives a shit one cares at the end of the day, like the books I think caused them like you logie virtues yes, like no one at some. His ology was like he was a great man, made IT on the money, hated his life, he, his wife.

but he got twenty six point .

five percent right? I but that that net I are oh boy.

let me tell you, yeah, he is one one of the best.

Yeah yeah. I mean, and look, we admire greatness like where we are, a society that worships outliers. And so you're not wrong to play that game.

That is a game to be played. There is a game there and IT does lead to certain things that are good. IT also makes you lose you. So and also I don't want to give the impression like we are trying to absolutely shoot the .

light out of returns yeah just in a different way. How you go about IT your your way is more sustainable. And there's a couple things I want to follow up on that we talked about that are going back to the first part, allowing people in opportunity to almost take advantage of you after I find that the first request by somebody is very telling or the first offer, here's what we want.

Here's what we need from you. And if that doesn't come across as fair, it's like the biggest signal in the world that it's like out. This is probably not a relationship that is going to be win, win. I'm going to have to work, try to make a win, win you. You've given me this valuable piece of information on day one without even intentionally doing so.

And but I also, I is the slight to send me to that is and give Grace that like, I will fall down, you will fall down and make offers to people even though maybe we actually are like in a heart space most of the time that's not transaction yeah this happens me all the time where I will fall down and do something transactional totally.

And so it's like what I often do in that situation say, hey, maybe this was unintentional, maybe you're having a bad day, whatever the reason this came across to me as transaction, if I misinterpreted IT, may could not understand what actually that some and underneath IT. But IT feels short term, feels transactional, feels extractive in what you offered. Did I misunderstand? And usually that reaction, the more offensive they are, the more kind of like, what are you talking about, right? Like the water we swim in culturally is transaction extractive.

IT removes control, IT says. He says, you will be OK if you can build your own kingdom. So like it's perfectly Normal for that to be the way people interact and transact. Like that is the norm. So like I just want to be careful with how stepped in that somebody is and how much we've realized that, that maybe that there's a Better way.

And what I don't want to do is I don't want to I don't want to come across as judging them or condemning them, of course, based on that, which is a real danger, right? Because it's self pretty quickly. The signal right is just a signal, if anything, even if they are highly transactional in out of my like I have this like it's like a weird feeling that rises up and me is like a uh like H I don't know.

right?

It's that I think it's like a protective thing. We're like, okay, I can feel myself rising in in competitiveness, rising in their city and meet their scarcity. Know my cool. I don't like that. That's that dirty fuel.

I feel like it's almost like a direct injection yeah of dirty fuel in the my system and on my whole yeah and then it's like, okay, even if I say, hey, I don't think we're in a position right now to probably do something on this or like I don't I don't think the system you would work for you engaging in the system right now, try to show a Better way and encourage them, don't contain them, right? I think that's the thing that we try to do now often times, I think people don't take IT as such. I mean, if if someone makes you offer you decline, there's rejection in that.

And again, I totally get this because I feel this way is when you get rejected IT things that are way deeper than just that mere surface level rejection. So when IT travels down and starts punching around and hitting all those things down below, that's where you get these outside of reaction, outsized reactions to things. And and again, the response.

You want to have is when you see something to have an outsize reactions to be a can feel stupid but little them conflict pattern is something that I uh really have enjoyed studying um so we all have three basic moves in conflict um and and actually if you watch this, it's fun. Like now is like whenever I engage in conflict, I like I know my pattern and i've very much to know my wife pattern and I like I tried to guess then other other people patterns are you can watch people that go through these phases but there's uh, as called move against which is like, no, you're wrong, screw you. I wanna make you submit to me, right? Like it's it's like very much like a force submission, right? This is something who gets up in your face, who's yelling or who's like, kind of like talking down to you, like a very, very confrontational, right? Just kind of like one face.

And by the way, again, we do all three of these. We just depends on the order. But we all have an order to how we do these things.

And then by the way, how they interact with one another is super interesting as well. Um the the second one is is move towards the person. So the first one to move against, second one is move torr's ve towards this.

We need to be OK. I'm not OK less. We're okay.

Let just gloss over whatever happened. It's OK IT will be fine. You know this is water, the bridge.

This is move on to a well.

it's avoiding a way that is IT feels very relational, but it's actually not because it's not for the good of the other is actually for they're good, they want to to to have things be OK, but IT actually doesn't address the underlying issue at all. And the third one is, move away. This is island. And if you watch, all of your conflict will follow one. We will follow that pattern.

Talk to me about dead near your thoughts on dead, the optionality IT gives you and when it's appropriate.

when it's not appropriate, that is not a source of IT is an amplifier return. So IT makes good things be great. IT can take mediocre things and destroy them. And of course, IT takes bad things and nux them. The hire your confidence in the predictors of the future.

The more that you can use, I I can use, not should use in a perfect world of perfect information where uni on a business and we're like it's a recurring revenue business. Um we are for sure going to make unlevel. We're going to make two million dollars this year, three million dollars of following year, four million dollars of following year.

And I will go up exactly one million dollars in free cash flow every year into the future. Mathematically, you can create a formula to know exactly how much debt you can maxim on that business. You pull out the equity, the equity returns to look out of this world.

incredible. And because you know exactly the futures, there's no risk connect. So businesses that have high predictability of revenues and incomes and feel like that they are um relation to feel, in this case, we're creating scare.

They know that outside events are really going not affect them. Then they can lever a tremendous amt and IT makes complete perfect best sense. Um the reality is that um the world, I believe, is largely unknown and unknowable.

The future is is is markey. And so IT is a form of pride, of hubris to use more debt than you should. Now I am this very broad.

This is like sixty thousand foot because everything's related, right? How much dead should you use in the world? I plane, we are buying bluely functioning disasters that sometimes to make money.

I mean, these are small to medium size businesses. Call IT three million to twenty million knowledge of free cash flow. No, my general view, after looking behind the thousands and thousands of businesses is that all businesses are loosely functioning astors.

Like whether it's not for profit, for profit, government institution, like people are messy. When you get multiple people together, that mess compounds. When you get large groups of together, together, that mess compounds even further is exponential and the volatility of that messiness is tremendous.

And so when you get to smaller into the market, these are four profit companies that are making between three and twenty million dollars free cash flow. The volatility of them is tremendous. Um and hence the Price that we pay is on average less than because we're paying to accept that risk.

All investing at the end of the day is the assumption of risk. The ideal investment scenario is you are assuming a risk is no um you are being paid more to assume that risk and you have some ability to mitigate that risk. That's were trying to do in our business.

We're trying to find things that are highly risky, right? Because we wouldn't pay the Price that we paying for them. They weren't highly risky, but that we have talents and relationships and systems that we can diagnosed with the resort, properly analyzed the probability in the magnetite to that risk and and then worked to mitigate.

And that's where returns come from. The math, to me, is far less clear that over the long term, dead makes you more money. I'll give me example this.

We bought in the ero space business in the fall of two thousand nine. I don't know if you know the shame that airspace never goes down. It's always flat or goes up.

We were told by by some of the people advising us on that deal. They were like, are you guys did you guys get dropped on your head? Is a child? There's something like you're not putting any debt on an airspace business.

Like what is wrong with you? Like this is tons of assets, highly livable, like banks will be happy to provide and predictable, predictable. Look at the history of the of the business.

And we said, yeah, we don't feel like that's a responsible thing to do. Again, dead only helps the buyer and solar. IT doesn't help the leadership team.

IT doesn't help the employees. IT does not help the communities. IT doesn't help the regulators, doesn't help your customers, doesn't help your vendors. There's all these stakeholders at the table that IT doesn't help. But IT does help in certain circumstances, the buyer and the seller, which again, if you sort of play short term games, win short time Prices, area of scarcity, non record, that head iwin tells you lose. There's a lot of incentives to use dead irresponsibly. You know, I think that most private equity firms look at they are the gas and the bankers of the breaks, and we'll just do whatever the bankers allow them to do and it's sort of up to the bankers to say no. And so our air space business um you know we were called idiots.

I mean actually even on twitter, I think when we came out our annual letter that year, people were like like finance brows were like you guys are morons like maybe and often times we are morons and which is good to be called that ford but like in this particularly case, I don't think we were and this is obviously way before we knew that there is a be a pandemic um and you know this idea of like do we get lucky? Do we get good? I think you can know that things are not going to play out the way you want them to and prepare for them not playing out and keep optionality open, which is going to decrease your returns and any given year but give you the beauties survive over decades.

So pandemic roles around and we're worried um you know demand in the industry uh in our segment went off at one point by eighty eight percent. We started to struggle and we look at and we're like OK, let's in in, by the way, the the leadership team there, an incredible job of maintaining positive cash flow every single month through the entire pandemic. Everyone else was negotiating with their banks.

Everyone else was firing people, and we were the only one firing. And we were building systems and we were taking risk and we were able to do that because we have any debt. Everyone else is tied up, didn't we were not tied up.

And the alternative is we d lever the thing up. And for, I don't know, four, five months, we get a Better return and then we negotiate with the bank. Hopefully, we saw the year.

Maybe we have inject more equity and down the road, uh, where shirts have not hiring or not buying part packages for pennies on the dollar or not setting up for ten years of future success and growth. We're not implement new, new ear peace systems. We're not implementing new process ordering.

This is the whole thing was basically gave us two years to completely rebuild that business from the ground up and to see the first that is astounding, mean the business is dramatically worth more. Then IT was when we bought IT. In spite of having a pandemic and dramatically decreased demand.

we can predict the future. When I was talking to Chris Davis, who's on the border picture he he mentioned is a strong signal if you're looking for a good business that they don't have any that or they have very little that uh because that mass, so many things and the vigiLance involved is just off the charts and people don't realize the rest are taking.

And there's the also a world of difference between dead, you know, two percent, if you can get long term data, two percent verses, uh sort of now seven, eight, nine even higher uh, depending on the circumstances. And when people enter into a det transaction, they just assume that the world is gonna a stay. The exact name that IT is today, i'm going to make the same revenue.

The interest rates aren't going to go up there will only positively surprised me to the downside. And then you find out that that's not the case. And then you're your all of your free cash will effectively starts getting consumed by that.

That s takes a five percent downturn in percent al reasonable cycle to then throw the decision .

and chaos.

Yeah like I I went. I can't imagine being an Operator. And by the way, we've never seen a business that we want to purchase ever in the history.

The firm that has det on IT like when we buy IT that has dead on IT like no families get wealthy by being like, oh yeah, we have this great Operating business like let's pull a bunch a bunch of income from the future into the present and lever up because that would be awesome. So we can increase our consumption temporaries. We can buy a bigger house like no one does that.

And for very good reason, like IT didn't make any sense. But somehow we got ourselves as an industry in the finance industry into this position. Works like that makes no sense how.

Families build businesses. By the way, every business starts as a small business. Every business starts as a family and business that they then take a business that has been Operate a certain way for a very long time.

Gone through rubin down, survived for twenty, thirty, fifty, one hundred years maybe. And then all the sudden, like actually what we want to do now is completely got how the business Operates. Tes and runs we need to hit with the steroid needle we're going to get.

We're onna jack IT up with the dead. We're onna strip IT of a bunch of cost structure. We're going to hire a bunch of new people who are going to do amazing things in a short period of time, and they're onna flip IT to somebody else.

And and by the way, once you get on that remote, like once you sell the private equity, traditional private quality, do a leverage bio that that business is forever going to be flip to the next person, or eventually might get sold as strategic. But IT IT forever is relegated to a lack of independence. IT will never be an independent ongoing concern for very long after that.

There is no no examples to this. So for for us, like you know, I don't think we're smart. I don't think we're trying to be genius.

We just look at like, okay, the whole world is built on an entrepreneur or small group, people, entrepreneurs in together, creating something that the world needs. It's hard they built to over long period time. They inherently acknowledge the fragile ity of IT.

We just want to continue to honored them, their legacy, honor them all, the stakeholders. And i'll try to win together the long term. And I couldn't imagine a worse thing to do than to put dead on.

And I think people miss over the long term, the lack of that actually works out Better. But over the short term, and I have the saying, which is lack of patients changes the outcome. And so when you lover up to get your your immediate returns and then you're like sort of like playing with house money, uh, you can sort of justify almost any any behavior.

And when you think long term like a family, thanks business and you sort of go well, we can do that because what we want is auctioning. You miss the fact that what you guys did, you had a period of two years where you made more progress than you would have in probably ten or twenty uh or you're strong and you're Operating from a position of strength and it's almost painting on easy mode in the way right. It's like, oh like now we can expand our business.

A people are probably discounting parts uh, at these fires sale Prices. We can stock up on them uh and our margins gone to expand because of that. We know the businesses eventually going to come back.

I mean, I think that depends on how you look at our roles. Are we owners? And i'm not talking about legal definition here. I am talking about mindset. Yeah, you owe something IT is your property to do with that whatever you want, anything you want with IT.

So like the push back to everything, if I was a strong man, the opposing argument is, who are you to tell me what the risk take, how you can? Who who are you to tell me how how to work my business like I own and I do everyone I used to feel that way, big shop for me was becoming a steward. It's the idea of stewardship and not ownership.

So the way I look at IT is families are entrusting us to be stewards of their company. It's a responsibility that we have, yes, we get benefits from being a stood, yes, we to share in the fruits of the labor and progress of the company. Put at the end of the day, my job is to make sure that these businesses remain attacked, are healthy.

And when you look at IT from that position, the world becomes a lot clear what's in the the best centre of of everyone else, but also me. I mean, I don't want to do things that harm m us. If we align sense properly, things that help us should help everyone else and vice versa, like we will be taking care of if we take care of our people, we will be taking care of if we take care of our customers, like it's not a complicated thing. But I think again, are we owners, are we sters .

or I think often families take a starship mind set of ownership but it's the exactly um it's interesting to me. I try not to judge other people for what they do or what they choose. I mean, we're each playing our own game or each sort of like doing what rationally makes sense for us given everything going on in our life.

And if we switch shoes, we'd probably see the world like very definitely that we do. But people, I think they just under appreciate the fact that you are not thinking about really what you're doing over a longer period of time. And if you structure your thinking, start chip is a great example.

Over a longer period of time, you eliminate a lot of poor behavior that you would others always get or a lot of things that can take you out of the game. Yeah for sure. Let's talk about and senate.

So how do you SAT and center for the six years of these businesses? How do you think about them? Uh, walk me through one in detail, for example.

yeah. Well, so the I think the ideal system is everyone's eating at the same table, right? There's not different tables that the food falls under one and then falls on the other, right? Everyone's everyone's incentives are aligned to, to achieve the same goals.

And for us, when we look at traditional private equity and the traditional two and twenty model, right on the amount capital you have either gotten to investor of invested, depending on the the terms of the agreement with your a limited partners, you get a two percent fee ah annually that goes to covering your overhead costs and expenses of the Operations of the firm, the seeking out they are doing in the deals, the oversight and governance post close. And then you want to pay them back with a return to um sixty eight percent, maybe ten percent to pay on the situation. Then you get to share in the outsides of that and the L P S, the people supplying you with the money um provide you that capital for usually in private equity.

Ten years, roughly ling, which again goes back to time horizon. Ten years sound like a long time chain. Isn't that plenty of time to buy a business and hold IT? Maybe I think if you've talk to most private people, they would say it's not the deals that they did that, that really, really hurt, that they did that went poorly.

The ones that hurt the most of the ones that they were doing great and they could see a long future compounding that, they just had to sell the business you like. But ten years is a long time, but the reality is that takes time to find a business, get the transaction done. There's a sort of initial phase again to know the business when you buy, you really never know what would you actually buy, matter how much do diligently y you do.

You don't really know until you get into the the weeds post close. There's a period orientation, then there a period of international private growth and trying to hit some sort of metrics to then sult somebody else, which by the selling takes time to. So you ve got to buy IT takes time.

Get to Operator IT takes time. You get to sell takes time. So they are really at max.

If you if you hit perfectly in the fun life cycle, maybe you get five years. Five years at most. Most private quality firms now are targeting, but they like is to the three years.

So from the time we buy something to the time we sell IT is two, three years again, maybe four, five. If you get past five, it's really distressed at that point like you you're trying to look for you, trying to get rid of that. You can't when we think about snakes, uh, in information, private equity would be chained.

I'd like for you to come on. I'd like you to run. Do a, do a tour duty right tourists of you come the way the the the leadership has done in traditional privately ally one tour dd is gonna to three years.

Look, you not see your family much. You're going to work a tail off um but there's this pot of gold at the the rainbow. If you can get us our returns and get our investors our returns, then you get to share on the upside. Uh of that is a highly lever bt of a sort of your time intention, and we think that doesn't make much aligned. This is where you see private equity detonating companies.

This is where you see lots of problems, something private equity, you know, as an industry, when I tell somebody i'm in private equity, like we look up to lawyers and reputation these days, you know lawyers have a Better reputation than we do and for very good reason like there's been a lot of bad behavior in, by the way, the incentives our for the bad behavior, all the polls of traditional private deck will eat leverage bio model is tours bad behavior. Short termism, treating people poorly yeah cutting yeah all these things that hurt your damaging. When you fire somebody, you are hurting not just them, but their entire family, their friend group like you.

You're hurting communities now is also not heavy to keep somebody in the role that they're in because you want to fire and that's not healthy either. That's that kind. Yeah, nice.

That's my kind. We talk about that at several point for what we are trying to do. So is we're trying to have a complete perfect alignment between R, L, P, S, us and the people who Operate these businesses on a date basis.

So we're trying to all from the same table, trying to use the same matrix practically. Does that look like we are, I used to say, unusual in our fee model. Uh, now it's unique.

I mean, we couldn't even get out of the right of the gate because no one knew what to do with us. We take no fees of any kind, no reimbursement of any kind. There's no cash that comes from either R, L, P, S or the companies to us.

Zero guaranteed revenue. Would you like how do you run the firm? Thankfully, we started the firm again. We were Operators. So we came in with cash flowing with businesses and fell backwards into this whole thing of private equity.

I remember um the first deal I did, I I use close to accidentally st you could buy a business I bought IT my lawyer. Um he was like, we just got to do diligence. I attached to google D O diligence with cross.

He was media cross so long today I remember doing that deal done. And I called up a friend who was like my one finance friend from. Okay, I did this thing like I think it's a good deal.

I don't know he is oh, you did a private equity, al, I literally google private equity. I almost my cagle um when I started studying and i'm like what this doesn't make any sense, like all the incentive are off. And so what I said was we came in and we had up taking outside capital for the first time two thousand seventeen.

I was like I don't need your fees. Like I don't want your fees. I don't want the incentive together more and more capital, which forces you go up market. We can talk about that.

Um I said and I don't want I don't want to be able to have win when you lose like I want to win win or a lose lose situation like I am willing to take the race. I want interpreter ur because I was my background, like I was an entrepreneur. And so we have a model where we take no feeds of the a kind, no embracements of any kind from the port for companies or from L P.

We get a percentage free cash flow as we return cash back. That's how we share with our with our industry. Well, turns out what that does for us is IT gives us the perfectly aligned ability to if there are high return, high probability projects to reinvest in the portfolio, we would be idiots not to take the cash, the first gratification and reinvested, often pretax, at highway tes, to return with high probability.

That's what the family would do, right? That's what we do. That's our investors want. They they wanted defer gratification. We wanted to for gratification.

And the same thing we wanted incentivize our our leaders to do the exact same thing so often times the metrics that they're measured on is on free cash flow. But again, it's not free cash low in a short preter time. It's free cash low over a long preter time.

So when we don't have things to do with the capital, high probability, high return reinvestment, the dumas possible thing you do is keep a bunch cash. I call the bladder a problem, right? The more money you have, the more likely going to piece IT away yeah, this where you see these businesses being run in ways you're like they are.

They're murdering money. They are destroying capital. How in the world are they getting away with this? Sound like what they are. Kingdom building, you are building. Their incentives are built.

A bigger business is, by the way, you hear the compensation consulting to tell you, well, yeah, the team, the same team and they haven't really made a great return, but the business is bigger. And by the way, bigger businesses command higher salaries. So you play the game.

The bigger business is higher salary, more come like their in senator of the firm who bought them there two and twenty by lover, strip and flip their incentives and the leadership teams incentives often are missile. L, P, S, are missile, everyone up and down. The value chain of the traditional private equity structure is now there's so much money flowing through the system and there's enough safeguards and there's enough development over a longer period of time at all.

China has worked. You can make an argument that when rates are continually decreasing for the Better part of two and a half decades, interesting, weird distortions happen in the market. We just want a perfect alignment.

So we want that Operator in the business to say, the first thing I want to do is keep a healthy business with strong cash will keep the golden goose crank addicts. Second, we want to take the proceeds free, cash low and look for high return, high probability projects in the companies. If we can find them specially pretext fantastic, read less cash.

They wanna reince cash, because now they reinvented one hundred dollars, and now they've got twenty five more dollars every other year following them. We love that too. We would be happy to defer.

We're getting twenty five dollars as well ourselves. Now our our investors are like, of course, keep the capital. You've got great things to do to keep IT. So up and down, the value change were completely aligned when we should hold cash we do and reinvested. And when we don't anything good to do with that.

we send IT out. So is that a simple sort of like to variable formula for all your six years or in terms of free cash flow and invested capital?

Yeah, everyone is just and on that and .

then do the the c years get a compensation on the cash distributed in p often .

times yeah I mean IT depends on the situation where sometimes having these C E S are rolling forward a uh quite a bit equity depending on the situation. So sometimes they're getting you know equity or getting cash kickers on top of that. But often times there you know ten, fifteen, twenty percent owners in these businesses.

And so the incentive is naturally big. Ten, we love that, don't want to buy a hundred percent of the company. I think we have our choice. We're buying fifty one percent to seventy percent of the business. And we want we don't allow non strategic actors yeah, we want people who are actively engaged in the business to own the remainder.

How do you think about hiring and firing sea here? How do you know the right C E O, and how do you know when it's time to to move on?

It's hard. It's hard, messy. The answer is, were talking about comparing us to traditional private decor.

I have says one of the things that traditional private decor has gotten done Better than us in some ways is held people accountable. I think they go they go too far in n one direction. I think we've reactionary gone too far in the other.

You know in terms of the performance of of permanent equity is a you know, I would say in absolute terms, we're not doing as well nearly as well as we could. And this is an interactive learning for us just being honest and and transparent about. We've been tolerant of a lack of performance to a degree that is unhealthy, not only for the companies in the returns, but also for the people that are engaging in that behavior.

And this is an activity or of discussion right now in the firm. I mean, i'm i'm i'm giving you up like a real live view of what we're discussing and ultimately failure on my part like i'm the C. E.

O. I'm responsible setting the tone and I differ red too much early my career to the promises and to the optimism that things would get Better when things weren't great. And if you look at where we have really succeeded is working with people who were doing well and making them Better.

Where we've really fAllen down as a firm is when things get dici, uh, we tend to defer to relationship and we tend to trust people that we have even when there are mini warning signs that things things are not okay. And I would say this is the nice versus kind principal that we've screwed up being kind to somebody is saying, hey, I think you're in the wrong role and they are stressed out. Their lives are not they're enjoying life, are not enjoying their role, their fear based, right? When you get to know position where things are not going well and don't know why, don't know how to get out of, it's terrifying.

And part of what our role is is to help people we look fundamental is like we our job is to serve and help others. If we can serve and help others succeed, we're gonna succeed. Our L, P, S are going na succeed.

And to be honest, we screw this up. We have not done a good job of getting people the help and moving people into roles they should be in or or having the move on to outside roles. And we need you Better. And does that ever work to change?

I I mean, I don't have a of experience with this working out. Maybe you do where you change your role like, hey, your CEO, but you'd really make a great C T. O. In the same company because then you create all these internal politics of like who are report to and my loyalties to the person who hired me. And or is that just easier to have like transition to move on?

I mean IT without be wonderful to be able to do that. I think that a lot of people's careers benefit if they had the humility to to be able to do that. Fundamentally, we all struggle with pride ah and we can see yourselves clearly like we are a mystery to ourselves and what we how we see ourselves in our talents and our weaknesses is often different than how other people see this.

This is why we need each other. This is the same point of relationship. This is the value and this is the the terror of where we've gone. As a side note, with social media being so isolated with with not having in person relationships like this is no wonder that deaths of despair and suicide attempts and societies through the roof, right?

We would love to be able to take to somebody, hey, you're in the CEO role, or maybe the CFO role or whatever is, and we need you to take a step back, you know, in order to move forward. Careers often die by suicide, not by homicide. Like it's not that .

a click on them .

over and over and over again. I've watched this tragedy happen, which is the Peter principle. Someone rises and they rise beyond their abilities, and then they can take a step back there.

They're pride, their ego, that their identity is rooted now in their title, in their position, and use that to them. We love you. We think you're awesome.

We'd love for you to continue to be with us. The role you're currently in is hurting you and hurting those around you and hurting the company. And they'll acknowledge that.

And then you'll say, great. Could we get you into this role? No absolute. People fight, call for territory, kingdom, building. Hard to go from being king.

So maybe an important person in the kingdom, but you're not the king anymore. It's target. IT. Be hard for me too.

Would I be OK with R, L, P is coming to me and saying, brand, I I don't think you're the right person to be permanent equity. I don't lie and be like, i'll that be a great conversation half. I hope that I would meet IT with curiosity. I hope I would meet with soft reflection and say, I really want to hear, I mean, I think I disagree, but I want to meet IT with curiosity and see what they have to say and see if I could discern out a bit. Maybe i'm not in the right role.

What if you learned about hiring people that most people miss? Well.

another journey i've been on speaking of of these like added tools and tool kit is i've really become much more from there with different personality testing. And um specifically like i've looked at a bunch of them. I really like the combination of Myers brigs and in agrium.

If you think about our business as um you know, we we take money and we turned into more money. I think you miss the most important thing that we really do, which is our whole business is predicated on predicting the behaviors of people. I think we can predict the behaviors of people.

There's no way to lose. And when we don't predict behaviors of people, we are almost certain to lose like an increase in incredible volatility into the system. If I think about my job is CEO, I need to be helping our team to be the most thoughtful, well educated, up to speed on predicting human behavior.

I mean, this is where the knowledge project is been super helpful. The work that you've done collecting the best of what other people have figured out, getting IT, distilling ling IT, right? I mean, this is what we're all trying to pursue, and specifically around the wisdom of clicking over these lenses of these personality test, provide and giving you a framework to to create empathy and create predictability and relationships.

I think that's why we been the biggest reform. What most people get wrong is most people don't understand why people are doing what they're doing, don't understand how they should think about incentives based on the person themselves and not just the financial ourselves, and don't have much empathy for how other people react. So take things personally that aren't personal, you know, everyone acts rationally in the moment.

This is the like the hero attack whose choosing heroin over eating a meal or you leaving their family in that moment believes they're doing the right thing for them, believes it's rational to to pursue that hit versus do everything else. So the question to ask yourself is why? right? And same thing in companies, same thing with leadership in these firms, like the questions, why? Why do we think? Why did that person go off the rails? Or how did that person suddenly disintegrate before our eyes? Or why is that person performing so incredibly well? And so these different personality testing IT IT doesn't know in the box.

No one is a you know in the sixteen type of mires brags or whatever might be there. There's no grouping that will perfectly describe anyone. That's not the point. The point you have. You've missed IT.

If you think that you're going to put somebody into a box and it's going to predict a hundred percent of behavior, that's why like having multiple of these that kind of give you A A three d look at people. I mean, my experiences IT was opening. I assume that everyone else Operated the way I people want to. What I wanted turns out I am weird. So are you.

So is everyone you meet there? They're weird because there they're mixtures of all these different access of how we sit on these things, right? And how we how do interplay interact with one another? But I can tell you, as an example, once I understand for the four aces of mires brags, so where do you gather your energy is the first one.

So this is introverted. Extroverted does not how you show in the world. This is where you gather energy. So introverts can appear extroverted, extroverts can appear introverted. That's where this like sort that you get these very um basic ideas about how the world works.

And you sort of here like a little bit of these things and you get misperceptions what they actually mean. That's really important. understand.

Are you getting your energy from inner life, or you more solar powered, right? Getting your energy from from other people in from the world. The second one is hard process information.

Are you intuitive? Are you high sensing? This tells you a lot about where somebody starts in, how they think about life.

So sensors think about life in the present. They are present oriented. They walk from the present into the future.

They're very practical. They're very reasonable. The very rational people, intuitively, mini acts like me. We start into the future, and then we walk back into the present. So we get excited about ideas. We're like all we have vision, this, this, this future.

Oh, what might that be? How might that work? What might we do? Who could come along with us? right? And then somebody says, a sensor comes long, says, excuse me um i'm i'm glad you're ten years in the future right now you have these new grand dio visions of where you're going.

Um we got to make payroll l this week and by the way, that that's on fire and that's on fire and like we need to be here. You need both, right? That's the beauty.

None of these like paying introverted extraversion. They're just strings and weaknesses, right? There's always upside in downsides to each one of these.

But once I can tell, okay, where somebody powered from, right, how does somebody process information? The third one is, how do they make decisions? This is a really important one.

So thinkers and feelers to basic categories. Thinkers all about ideas and about truth. They're seeking truth.

They're seeking ideas. They're very, uh, achievement. They want to get things ordered up and easily packaged. That's how make decisions.

So they're making decisions based on what is truth and how I seeking IT feels on the other end. By way, by the way, most men are thinkers. So seventy person of minor thinkers, thirty percent feelers.

Seventy percent of women are feelers. Thirty percent of fingers when we go back up to the sensing and intuitive, it's about seventy five, twenty five sensing do intuitive. So seventy five percent people are present orient.

Twenty five percent of future are intend. And so i'm like the super recombination, right where i'm external focused on an extrovert who is intuitive. So right there i'm in the twenty five percent, right uh introvert extravert fifty fifty um in twenty five percent and then i'm in the thirty percent of men that are feelers.

So feelers bed everything on relationships and values. So we feel our way to decision making is how to impact the world around me, how to impact my relationships, how to make people feel. Now again, it's not like I don't have a rational side.

I can consider ideas and IT doesn't mean a thinker can't feel anything. That's not the point. The point is, which is the primary lens that you look through in life, right? And the last one which is really interesting is lifestyle.

This is A J versus A P, A judge versus a perceiver. And it's really about how you like to move through the world. Uh, do you move through the world in sort of an orderly way? You like structure.

Do you like to you, you have a decision to make, you gather information, you make a decision. Move on, right? You, you like things structured.

Or are you a many ACC like me, who is a perceiver who is kind of open for whatever I loop on things? I need forced I need to be forced to make a decision. Uh, I need a deadline um to to do things.

And so again, if you understand people based on these these four parameters, then you can really have a lot of empathy like my wife and I did this um personally testing together in each other other's presence and i'll never forget my uh we we're going to be listed like are you more like this or you more like this, you know ever and she's like, of course this like only an maniac would be back and i'm like, yeah on the other one and the literally at one point he looked over and and I could tell the local local faces like I have children with this man like what IT who is this right? But again, we're all in our own heads. We think that the world works the same way.

But for us, I created a tremendous amount of empathy like SHE the how I made decisions and how he makes decisions by we were opposite on every single category. You can imagine that my creates vict and marriage. Same thing in work relationships, right?

U. S. Of people mostly get wrong. I think we get wrong as we assume everyone like us.

And so if you have a certain attribute set, you tend to want to look at the whole world through that attribute set and say, oh, well, everyone I hire should have that attribute set yeah and if they don't, they're bad. They're bad fit yeah. Just totally not true.

And so we think about a lot of the stuff as we are recruiting. We think about a lot of like key, what are the things that we're asking this person to do and what type of person would be good for that. And then the the other one that I ve really enjoyed as any agram, because IT IT really shows you what is your underlying in security and what are your primary drives.

So there's nine numbers, and each one has a very different set of polis minister string to witnesses. And so when you're able, again, none of them were perfect. You're not is like oya so be person I am a three two OK right which an integram means i'm an achiever and i'm like a kind of a people pleaser.

Er I I like to serve um which I sounds oh he's an achiever and likes to serve people like that again like we look at no that comes huge downside. Like my worst spheres is i'm not enough. Mist sphere is that people knew me.

They wouldn't me. I'm adaptive to other people. And so it's like, do I know the real me? Like my my serving of others quickly turns .

into the people pleasing do you give people personal ali test .

as part of the recruiting products? Yeah do yeah. We the way we automatically ask people as part of that is not like we're like, oh, if they don't fit this exact personality.

But what IT does is that allows us if we're getting no, it's usually when we're pretty serious with a candidate, right? We're trying to make sure that were. We don't want to do is we don't want to project onto them what we think they are and then come to find out later that they're not actually capable. And so when we get really serious kind of down to the final, like three to five candidates is just when we start testing and they often learn things about IT and sometimes we ash, this happened recently. So I was like, I don't think based on the testing that I went through and all that, that actually would be good for this job.

They opted that I wanted switch to acquisitions. So I think you could read IT to dive into the subject is what's the playbook when you take over a company so you you go through a process internally, uh, you come to a decision do you guys write memo is internally yeah what's in that memo?

So we are um describing the what i've called the overall situation of the business. Um who are they what business are they in? How does that work? We also think about like what is the core action of the business.

So often times things our favorite deals are ones that look weird or different on the surface. There may be a little very fuzzy things on the deal or the misunderstood and hints the Price in the connection between the the Price in the values is, is off, right? So we're trying to look for misPriced opportunities.

And so in order to be this Price means that something about IT is either risky that we can do you just right know I M correct how? Not always correct, but were trying, uh, means that there's a divergence between the risk and our ability to mitigated and other people's ability to mitigated, right? Or there's a lack of information that the other parties have based on their ability to dive in to the um weeds on a deal.

And so uh, we like things that our mission should. I'll never forget. Um the second large deal I did was on A A poll business that we still on. I would never sold anything. So I mean, we still never actually keep out out that is like to anything.

So um but the people never talking about with you back in the day and you know most pool builders get big because they partner with development firms and they go through these massive boom bus cycles， massive and bus yclad and it's faster famine all the time. The other thing they do that they're tempted to vertically integrated and do all the work themselves, right because you make more money at every step, you know, in the more margin. But you're constantly then in the boom, you're hiring a tremendous of people, which create cultural issues, tremens liability, all kinds of which is madness.

Margins end up not being nearly good as you ever think they should be. And then in the bus cycles, you're going to let go of how much people who are you want to keep, but you have no choice because the business loved, right? And there are two unusual things.

When I first got the deal memo on this, remember thinking to myself like uh poll builder, big poll builder, like larger largest single location poll builder in the country. So like at the time to really large and I was like, yeah they partner with they're party very clean agree and party partner with um development firms and like that just not you know that isn't what we want to do. And then I start asking you a few questions.

I was like, k, can you tell me what percentage of your revenue is direct to consumer? Yeah, I was expecting you to be ten percent of fifteen percent. IT was ninety seven percent.

And then I said, oh, interesting. Like what is your capex capital expendable on the in your basis? And IT was like microscopic. I was like, weird tiny capex, good free cash flow drug consumer like when it's a really durable business that's example of like the risks we were taking and the way that the company appeared, like the core action of that businesses. They are in the business of marketing pools, selling pools and then handling the logistics.

But there, you know they're subbing out the actual construction, the hiring, the firing, the risk of the things, the OOM in the bus to other people. And that what that creates a very capital light, highly efficient, high cash flow hyder beauty business. Again, everyone also was looking at as a concrete construction business.

So other people that may be an interesting that were turned off, they're like not I want that because that I put that in the bucket of construction. I don't want take that to a you know my senior partner to here to the to the investment committee and say, um hey guys, I think we should buy a mom and pop construction business and phoenix s there me like the world ong with you right? Versus we look at that and we're like, oh, that's really attractive yeah so those types examples were put all that into them them we're trying to put all in the memo of the things that we think you're holding you back.

So first principles like let's go to the first principles on on in a business that we would require. So this is a business that long ten year um the Better around for on average a long time and they're still very, very small. So something is holding IT back.

We think of is the kind of lids on the business, and we're trying to figure out why they are not bigger, right? There's something. So by definition, there is product market fit. If we be if requiring IT, by definition, there's some sort of mote. So a mote being defined as you can generate above average returns on a Justin capital, there's something unusual about the business.

There's allowed them to get in the business, build the business into a successful and minimum or three, three million dollars free cash flow, not a hard val, done some smaller deals, but but on average, for for for new platforms were you know three million. That means there's something special about the business is really good in some ways. And on the flip side, if it's not bigger and it's been around for a long time and there's something holding IT back, holding you back.

And so our job is through those memos to collect all the findings of where's the mode, why do we think it's transferable, how durable do we think IT is? And on the flip side, what do we think the opportunities are for growth and make sure that all of that tranquil lakes with Price, of course, um I um had the privilege and time of buffet at one point and I ask him this like battery of questions and he kind of that I think at some point at ruster with me um being was probably be annoyed and he said Prices, my diligence and he was kind like that the show stopper like drop the mike moment he was like because I was asked him all kinds like how do you think about this think about this that I use Price as my major dudleigh's filter. So that was brilliant, like this simple hero tic.

Like the higher the Price you pay for IT, the more your pricing into perfection, the more things have to go right. The lower the Price, the more you can absorb things. And so you know we are uh because of the nature of these being smaller companies, their messy.

They've got some weird stuff going on usually in these things, they're not bigger. So there must be some lids on these things we're trying to figure out and we're trying to corporate the Price. And the cool part is, after closed, like all the problems are merely opportunities.

I tried to remind our team of this all the time. Did you get in these Operating situations? H, there's a lot going on like sometimes relationships are very strained. There's we're powered dynamics, all this stuff s going on and I said to him, yeah, it's hard, but this is what we get paid to do like we're in the business of shaving for do .

you have projections in this moment?

Yeah, we are. Um you d like .

do three scenarios like base upside downs or how do you how do you think about yeah .

we're trying to stress test where we think based on the history, the business, uh, it's going often, assuming for most of the deals we do that there is no growth. So we want to get the business to underwrite with no change in trajectory.

Um if you can stand on someone like we're not big on centage es， we're not big on trying to do this master change like a you if the business been Operating a certain way on a certain trajectory for thirty years, IT is nothing but hubris to come in and think that within a short period, you can completely change change to the business. IT can happen. There are some tricks in some outside perspective that you can kind of look and see and run a playbook from time to time.

But for the most part, like there's no easy solutions like I I was talking with a uh harvard educated searcher of the other day, uh actually three days, probably year and half ago and um bad of business and at all these Green plants. And he was going to, he was going to introduce all this technology, all these like changed systems. That was an old school business he was going to revolutionized with technology is kind of like if you go on twitter, the, you know, anyway, we call IT forever the group of people they're trying to do this S M B E land or whatever.

Um this is often the dominant narrative of people who haven't done IT, right? So people who haven't actually been in the weeds, who haven't bought business, who haven't tried to change IT is like, this is super simple. You buy things for cheap, huge amount of upside. You go and you transform them.

These guys are idiots. Yeah, yeah.

these guys are idiots. I don't know what you're doing is like, dude, yeah, you may have been to harvard. You may be well educated. That guys been working in the business for thirty years, do not think that he knows that everything you know, and far more course not.

So anyway, guy came in who had all these grain plans, and I talked him about, I don't know, year later, like six month ago, and I was like, as all I go on and he was like, oh my gosh, I hadn't done anything that I wanted to do. I say, oh, interesting. Tell me about that and look, the business actually doing well like he's lady bought IT yeah 不 how IT went post closed was not filled with oh man， this is perfect.

Now we can hit this huge growth trajectory whatever he's like yeah our servers went out like the second day on the job, but the phones don't work. We have all these issues. Um the head of sales left shortly there after had to reply, you know, it's like this constant fire fighting more.

It's running a business. The only people who think buying a business and Operating IT are easy. Most of people never done in there is a small group, people who got lucky the first time yeah, and usually the second and third time they get smoked.

I mean, look, we took the Better part of a decade toiling way of security doing things like, you know, joke that like we running the word smallest family office for a good one of time there, just slowly compounding, trying to learn systems, trying to get you mean we were just getting snacked around constantly, but that then allowed us through that decade to get good at this. And then we were able to scale. Like, if I had been given fifty, one hundred million dollars right at the gate, I would have lost every penny.

yeah.

And this market is so inefficient, which is, by the way, good and bad and efficiency being defined. This can you make a lot of money or lose a lot of money depending on skill, right? Like argument is, if I give you a million dollars to invest in the stock market, I said, hey, i'm to let you keep everything you lose, right? So loses much money.

You can yeah we'll give you sixty dates to try. Loses much money. You can in the the stock market IT be really difficult for you to lose a lot of money yeah, that you might not making money in the private markets like give me forty eight hours and I can lose a million dollars like it's super easy, right? Which means still really matters.

Which means if you want to have IT as a career, there's a lot of value in honing your skill set. So to me, that's the ultimate mode is it's very simple. What are trying to do is just really, really hard and judgement matters.

And so that's the reason why we put everything on the internet like we really have an entire playbook on the internet, like you go on the permanent actually website and you can see our entire due diligence tool IT. Like not only just the questions we asked with a why underneath each question, how would we do that? Doesn't that Spark a bunch of competitors?

Doesn't that help a bunch of people? Yeah, sure. Helps that everybody, helps everyone. yeah. And we're stewards and we're unconcerned .

this abundance. Do you go back a year later? Or is our milestone and like a predictable milestone where you go back and you review this memo and now you ve on the business for a while and like working, we learn.

yeah we actually do this quarterly. So every single quarter we have um we come baseball cards. They're like one pager s maybe a little bit longer than one pages that explain the overall strategy, the overall purchase Price, the rate of return so far, where we've done well for the wrong reasons, where we ve done well for the right reasons. bicycle. So it's like the entire memo is a constantly updated living document of every single investment we ve ever made .

and how we're doing. Almost like value for .

your businesses yeah for sure. And like here's things, how would do we do any other way like if we, in the business of investing, of buying small private companies, trying to make them Better, we've gotta learn we got ta get Better. Like, how do we know if we, we were getting Better or not? How do we know?

How do we learn if we weren't doing a look back? So I mean, to me just, of course, obvious. And I mean, look, if we're not good at what we do, we should do something else. I don't wait this life doing things that you aren't good add for that says, I, god, be terrible.

Do they see years make that baseball card? Or does the cause you guys what's your structure? You have a almost like a ortons lime manager in charge multiple c years.

Yeah we right now our structure is we have a good hook in structure post close where our financial team and their financial team hope together OK. And we're constantly getting feedback loops of i've call information from that. So our our goal with our financial team is keeping scores the easy part.

The hard part is getting actionable real time information to all the stakeholders to make good decisions. So that's their primary rules to help those companies, which by way, this idea is completely foreign. We come in, in most of these small businesses and they're like, yeah, we give all our stuff to this account and account tells us how we did like sure.

That's not always talking about at all. Over talking about is on a day to day, we two week basis, what are the matrix year looking at? How accurate today, how updated? How can you make decisions, right? So we got that group that working with them to try to increase the quality of those feedback loops.

And then we've got, you know what to call like a order directors in a box model where there's one point person for person equity, that the access is all the resources, the process is the super, the guide for the person internally. So oh, you got an issue with marketing. You need help with that.

Like we ve got external internal resources recruiting external internal resources, legal extern internal. We got all these in sort of um helpers that we have and that person's job has help direct them as the business. Those are updated based on the constant feedback loops of the business over that quarter, uh, in concert with leadership teams. But but we're mostly doing the authorship of them.

And then you don't step in and like start issue interactively want the finance plug in and you want the matter that they're looking at or you specific matrix for you both. We want .

information every which way the most high signal. We're trying to separate the signal from the noise, right and dancing information being thrown off these businesses. That doesn't matter. We're trying to get down to a handful of matrix that we can agree on that the leadership team and us, the working in concert to understand what they're telling us. Um that's actually one of the most difficult things post close is just getting on the same page about what matters and win does that matter.

And and again, we're coming in hopefully with high humility, saying you are the experts were not yeah but were asking questions like, okay, well, if that's the business model when that that makes sense, that this would be like a leading indicator and that sometimes will be like, no well oh interesting tells why, right? We try to come out from that prospect like instead just telling them what we want to see. Like, do you think this would be helpful? Are you like, what are you looking at? why? Yeah, why are you looking at this? Why are you looking at this? How does this work? Again, this is not rocket science, like this is like three people's humans, be humble, be kind, be long term.

Things usually work out. Do you, uh, do anything within the business from otherwise from the first day? Or you're just sort of what's the reporting? Hadden, back to you as IT is a weekly, monthly.

quarterly yeah so we are usually in touch on a weekly basis um depending on if if we're going through periods of negative change or positive change, then were more active and helpful, being supportive, being corrective. Maybe if we need to be if things are in the box, smooth sAiling, no storms on horizon, then we can be a lot less hands on. Um we always tell our leaders like we're always available.

Everyone is yourself like yeah you can get in contact. We're the easiest people the world get in contact with. Yes, your business is lonely.

yeah. If you've never run a business, if you've never been in the C. E, O.

Spot, you could look up from the organza. And IT looks rosy. Oh, look, that person gets paid a lot more with all the freedom they have.

Oh, I want to be the one to set vision. And where looking down from that position, there's usually no one to share sorrow with. There's no frustrations like you, you, you're isolated.

So one of things we do is just try to be relationship connected and often to be a released fall for the very natural human tendencies we have to be seen and heard and blow off steam and consult on difficult situations. Um you know again, uh it's interesting going back like the personality typing we try to understand for our CEO if they are internal or external processors, that's a really important peace. If you're C E O, an internal processor, then you can, you can go away with your thoughts and be fined.

If you're an external processor and you're the C, E O, you've no extra process or you creating inappropriate relationships with people who work for you. Yeah so that's fraught. So that's one of the things that we can do is if we're a dept. That and understanding the people, then we can say, hey, that person's actual processor.

hey, give me somebody talk to you.

Come talk us. Let's work through things. The only things I says were aggressive about post clothes in the short term is if there's just any laws being broken um which is sounds funny to say.

My guess is eighty percent of the small businesses out there or or either knowingly or should know that they're breaking some sort of rules. There's a lot of government regulation paying on the state or in and often, by the way, federal regulation, state regulation and local regulation will often times conflict with one another. And IT requires a tremendous amount of background of understanding to know 嗯 how to be in compliance。 Um I wish .

simplify this. I mean it's the the amount of stuff you have to keep up worth is just in same yeah why don't you do a totally hands off model like buffer?

This IT would miserably fail in .

the scale of business to dealing with.

Why would that now people get divorced, people have health issues, people die um, people lose interest. Things are constantly changing. The ability to self replicate is unbelievably rare. Mean, the reason why we are in the position were in to be able to buy these businesses because we are the best option for the business of transition.

Um often times there isn't a family member who has the capacity uh or a the financial action or talent capacity to build to do IT or some combination of both. And these businesses are not ones that you can just like leave alone, like there's there's no passive income in working in small business land. Another way to think about is like you a sort of buying in index of small businesses, right? I mean, from time of time is like people come of oh, what if you just put like a thousand dollars with, you know, a thousand of these small businesses and created like a index?

The realities are alone. To present that index zero, like it's really hard. The governance of these things is difficult, like the the norm for most small businesses is entropy, is decay, is dying, slow death and being wound down, like that's that's a norm in the small business role you to fight to grow.

IT takes dynamic leadership. IT takes a vision. IT takes risk, king IT takes capital. IT takes mitigating risk. You're doing all these things.

And so yeah the the ability um to do that is is not existent in our the market. And by the way, having spent time with both both in monger, they would say the same thing. Go deeper on that.

So when you look at them early on in their journey, so this is like let's go back to the buffet partnership, let's go back to actually win buffet first met monger buffet was invested in sambol maps and demonstrate those are the two primary investment. I think this represent seventy or five percent of the assets of the buffet partnership. One of the things that buffer I are connected very early on about was struggling businesses was struggling he was having with those two businesses.

Um they have the story I think it's been told a number of times, but is you not often remembered because where they are now, there's been like five seasons of picture yeah and where they are now now bears a zero resembLance to where they were in the early days where they really, really this is where we are. We d like to play. And this is where, again, by the way, they said they generate the higher returns, right? Small amount of capital, high returns being access, small companies.

But a desk, a meal was a disaster like buffer. I got sideways with relationship with people um and he was kind of desperate yeah and he met this guy, charlie monger, who we started developing relationship with. I means they actually talked about the anal meeting this year um can how they got together and they had a family, they brought them together and when they met each other a hundred they stayed in touch in one of things that monger asked buffet was, you know what problems are you facing my buff IT was like, oh, i've got this business that like, I don't know what were going to do.

It's it's upside down. Same where maps as a whole different story. And I was that kind of upside done a different way that worked out.

But dsr meal was just a mess. My key needed somebody to go to the middle of aoa. He was aoa, and fix this company and get IT fixed up and make money at that business. And he is like he didn't have anybody because he was say, you know, stock investor, business investor and become activist and active in that business by the nature. How much to stocky ball.

And again, this is where you what the baLance sheet was, stuff like that a lot of resources, low free cash ful yield, all these things that we get access as well in our the market, he got access to them in his area. The market right things just don't work out. And so you get sideways Operating issues, the value, the business that starts to go pair shaped.

Um and so he got touch monger and monger said, hi, I know this guy Harry bottle yeah this is the famous Harry bottle story. May convinced Harry bottle to move family from los Angeles to the middle of nowhere, middle of the heart land. Harry bottle fixed the business.

They ended up selling IT. And that, I mean, buffet said, without Harry bottle, without chilly monger, without a few, these things going a different way early on. There is no pressure, there is no warm buffer.

There is no institution. The way is today. One is, is good to acknowledge just how much luck plays a role in all the stuff totally. I mean, like a big part of humility is just acknowledging like we're far less and control that we really think we are also when things do happen and you do see a need, talk about IT voice and see how you can access people on resources. And so um I would I would just argue that um no one can take a business that small, loosely functioning sometimes makes money and lead IT alone. Uh these are highly variable assets with very difficult attributes about them and it's a nice fight.

The other stories is like burch hardway right if you think he was hands off and not thought I think he was welcome, chase you to get over yeah like they were talking daily um and he he really wouldn't let him reinvest in the business. But he knew the numbers Better than and chased IT. He's still more than numbers Better than I would imagine a lot of the Operating .

cees here for sure. I mean, buffalo news, like they were buff in among ger were very, very active in many of their situations. Now as they gotten into massive businesses that are you you're hiring really high powered, really paid, high paid Operators like they are going to be Better Operating than they are.

So if you have a certain point like IT flips and you have such a access to capital and such a need for size that some of those problem secure and ourself, now you got the other problem, which is the fact the burger hasn't beat the market in twenty years, twenty five years. Now why? Because is so freaking big.

yeah. So you got to mean there's problems either way and there's plus minus is either way. You just get to choose which one you want to engage.

Where do people go wrong doing what you're doing as they scale?

They try to go too fast, uh, too soon, assuming they know too much. So we uh from the time i've bought the first business at the time I about the second business was four years, four years of toiling away and correcting and learning and try to get good foundation of capital and in the position to do the next deal.

Now we were looking for deals in between, but it's hard buying one business, one small medium size business, negotiating IT, documenting IT, closing IT, Operating IT and having some sort of either through distributions or through a sale. Positive outcome one time is brutally difficile is a brutally difficult thing to do. Now IT gets do that again and again and again.

Now by the way, this is an interest dip that happens where so now you've got to say you done the three times, three brutally difficult. And you you just now cash for of them. So you you so retain them.

So now you get a portfolio of three companies. Well, now you can be A C, E, O. Three companies, I guess, unless your elon mask can you know somehow he's figured out to do this.

But most Normal people can even Operate one business well, little on two or three. So you have to make a choice. okay?

Well, now i'm going to take my free cash flow from three these companies, and i'm going to build a layer of overhead to be able to then scale and manage. So somebody is going to be out there looking for deals, interacting with capital partners. Diligence really matters.

Legal diligence, financial diligence, technology diligence. Some is going to be managing all of that, documenting IT, negotiating that process, hold the way through. And then I horse post close Operating things, right.

A lot to worry about. Only by the way, you get regulators all mixed in there as well. There's a lot of places to hit a pohle.

And so you say who i'm working one hundred dollars week every week and yeah, we're making a bunch of money. Things are going great. I'm making up a scenario.

Um but now you gotta basically take all of your earnings, all the free casual of your business and and go to zero again. So you started zero or very little. You invested.

You do well. You do well. You do well. You run the gotland two or three times.

Now you got to go back to zero because you ve got to take all your free cash for, and you got to reinvest in, in that next layer. That's brutally difficult. Now you ve got a hold other side issues.

Now you ve got meta problems at the head level. Now you've got personal issues, now you've got culture problems, now you've got technology issues, and now you ve got an Operating business that's trying to Operate businesses. And you've got the same issues in the Operating business.

The parent co, as you do in all the smaller businesses, is bitterly difficult. And then you go through another phase, really like, okay, now we ve got to take group of people to small group. Now we got three or four, five companies, maybe six.

Well, now you got to build a much larger organization. You got to go through the whole cycle again. So every time on the way at the cycle up, you ve got to pass through this gotland of over.

over.

over and over and over again. I mean, IT is a miracle that permanent equity has fifteen companies. A miracle, the miracle that we have a team that for the most loves each other and cares by each other and wants to do good things like IT a little you D A day goes by where I don't think the miracle and by the way, the future is not secure, like we might screw up badly and so is always work to be done. There's no free lunch, nothing easy.

So why do you do what you do? Given all of that.

I think I the best job in the world I get to um meet extraordinary people from very different cultures round the nine states. Um one day will be doing a dinner in new york and emission and start restaurant. The next day we're eating at hearties in the libo hio.

Um we will go from organ to florida to new mexico is the cultures are different, the foods different, the people are different, the the business is are all different. I mean, I can't imagine. I think we have a blast doing what we do and is hard and is stressful and is tiring. Um why do I do IT? Because I feel called to help families transition.

I feel called I mean like um you know in in my paradise as a jesus followers, workers prefer work is for are good work is something we should engage in deeply um this is our cocreate that we get to do um and I feel that like I feel that on daily basis in their fiscal and dorns and is difficult and is fAllen and is broken and it's messy and so that's life though like that's what we get to do and like I can't imagine a Better job than getting to serve the families and the institutions to give us capital. The trust is with a capital for thirty years. They want to trust that they have with us to give something capable for thirty years.

There's nothing you can get back thirty years. I don't take that lightly. That's incredible.

I feel honor if someone would trust us that much. I want to serve them. I want to serve them well. The families that sells their life's work, sometimes generational work like that, is a heavy burden in some ways, and what an honor in other ways. And then all of the people who we get to work with, who are trying to be as excEllent, they can their craft. I I I get to interact with so many interesting uh, people and we get to do such interesting things and I don't know, I said I think that word child world.

we all isn't on the same um question which is what is.

Uh, success would be to be an ambassador .

of the kingdom.

I've got my life transformed when I became a follow jesus and I uh i've been rescued and and the thing that I want to do most of were called up love and serve people around us um we worship a god who condescended himself into the physical realm as the author who wrote himself into the ultimate book of reality and came to serve not to be served and to um to rescue I want to with that same love that i've been given, give give that to other people and serve more what a beautiful .

way to end this conversation. Thank you.

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