Encarta | Ranking The Best And Worst Businesses To Start w/ Billionaire Investor Andrew Wilkinson (#386)

00:00

What are easy businesses that you've you started where you're like? Because I for me, milk road was a way easier business than any business I had ever started.

00:08

What what's been an easy business for you? And where does does that where does the where does agencies rank on the easy to hard scale? I'd say it's medium. I mean, the hardest, let's just say the hardest possible businesses are brick and mortar or where you have to move physical goods and you have a lot of employees.

00:29

Alright, Andrew Wilkinson.

00:31

You're back. What's going on?

00:33

Not too much. Good to be here.

00:37

Sean, did you know that

00:38

that Sah Hill one that we did we had Sahel Bloom on the other day. Two things were interesting to me. One, people thought, well, we were making fun of him that we disliked him. They thought I disliked him, which is not true. And two,

00:50

It was shockingly popular. Did you see that? Well, that part's not that surprising. The first part's surprising. I mean, we were all making fun of each other. I thought. I thought it was a fairly even give and take, but maybe not. Maybe It was a bit of a roast battle.

01:03

But you don't you only do that with people you like. Yeah. Exactly. If you actually don't like somebody, you don't just come out and start busting their balls. It's not really like To be to be fair, the guy is like stupidly handsome. I met him, when I was in New York. Very, very handsome guy. So we got a shit on him. Yeah. He's very heavy. I can turn it off. Down the handsome guys. You want and you the worst part is You wanna hate those guys, but if they're nice, it's almost worse. He was very nice.

01:29

Yeah. The one thing that was really good is he's pretty prone to, like, taking a pretty, like, a cookie cutter response to things because he's, like, he's got, like, a good image. He wants people to generally like him. Like, he's, you know, he's on TV sometimes. He's got his, like, book deals. So he's, like, doing things where, you know, public perception kinda matters, whereas if you're just an entrepreneur,

01:49

who own some business, like, you don't need everybody to like you. But for his things, you know, it's good when people like him. It it's good for business. He came on and he was, like, super honest, super open about everything and was not giving us politician answers, even though I do think he's a future president, He wasn't doing that though. So I thought, you know, mad props to him for, for just being normal. Like, like, if we were normally hanging out, that's how he was on the pot. It was perfect. Do you wanna start? You wanna start with some postmortem stuff? You wanna where where do you wanna go with this? Andrew, Andrew always sends us the best topics in advance where we could just we could just pick a choose, like, what's this word mean? And we could rip off that. But, Andrew, I bet you have a sense of what you think the most interesting topic is. So let's not bury the lead. What do you think is the most interesting topic that you have? When I started my business,

02:32

I was, like, mister business builder, like, I'd say yes to absolutely everything. I'd be in the shower and have the idea of, like, Oh, you know, why doesn't this exist? And then that day, I would start it. And I would just constantly be starting new businesses, like, every single month. And I think it was really good because It was like throwing spaghetti against the wall. Right? So it was like seeing what a good business model is via pain. So it was just constant pain. And then also running an agency, you get to see all of these startups

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make mistakes and learn from them. And

03:04

03:05

had this really painful experience of starting an agency getting really, really lucky that my first business was

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actually profitable because I think one of the things that happens is people

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start their first business and fail and then they just say, I I don't like this entrepreneurship thing. I'm out. And so I was able to keep going and started another

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five to ten other businesses, and almost all of them failed.

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Like, it was incredibly

03:31

incredibly painful.

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And after that, I kind of swore off starting businesses

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And I've only just come back to it over the last three years.

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So I can talk a little bit about my experience in some of those businesses. Sam was texting me before, and he's like, you start all these businesses, you've, like, tweeted out all these businesses what actually happens to them. So I was gonna go through a couple of those. And by the way, for the for the listener, this is Andrew Wilkinson. You you're on he's on the pot all the time, owns this thing called tiny. Although, are you guys do you wanna go by tiny capital now or just tiny? Just tiny. I hate tiny capital. Yeah. I I know you I I know you hated it, but everyone was like using it. But owns tiny, which is, I think one person called you online the Warren Buffett or Berkshire Hathway of internet companies. So you basically buy

04:17

in whole a bunch of internet companies that collectively are now doing a hundred north or hundreds of millions of dollars in revenue, whatever the number is that you say publicly much did you pay your friend to say that about you? I actually it's really funny because there's been all these,

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like, on the cover of newsweek or whatever, it'll be like the next Warren Buffett, and Sam Bancman Freed was one of those people. And so everyone's sharing all these covers from all these things. So being called the next Warren Buffett is not good.

04:46

I and I'm I'm different from Warren Buffett, but I've copied a lot of his ideas. Well Like the the Next Steve Jobs, that was, Elizabeth Holmes from Theranos. So that was a another another one you didn't wanna get tagged with. I think Chimath was calling himself the the the new Warren Buffett or, like, the Brown Warren Buffett or something like that. He called himself that?

05:05

He called himself,

05:07

or don't know if he call. I don't know. I don't wanna put, like, the quote on it, but he definitely insinuated it, and he definitely said we're trying to build, you know, the next Berkshire Hathaway blah blah blah. And so, you know, he he was given that or he named himself that way. My favorite thing about Shamath,

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was that in his annual shareholder letters, he would

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he would compare himself to Berkshire Hathaway. So he would track social capital's results versus Berkshire. And then one year, he just stopped I think it was the one year that he didn't actually beat them. I think I don't recall. That might be unfair characterization,

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but that's my recollection.

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So where are you going with this? You wanna do the postmortem thing? Sure.

05:45

Is that is that where you're going? I don't know. Yeah. Let's do it. We can go through a couple of those. I think it's kind of trusting. Can you start with pixel union? I think that's incredibly interesting.

05:54

Yeah. So,

05:56

was running Metalab,

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and I

05:59

was, like, an early Tumblr user, and I met David Carpenter just

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via Tumblr. Like, he was he was the CEO of Tumblr, and he kind of knew all the early users and stuff

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And I ended up making a Tumblr theme that I wanted to use myself,

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and he was like, hey, this is really, really cool. I would love it if you could create some more of these, and we're gonna make a premium marketplace where other people can pay to buy Tumblr themes. And so I'm kind of thinking like, oh, this is a favor for a friend, and this a really small platform. I'm not thinking of it as a business, but I end up going to a bunch of my designers and saying, hey, look, you know, over the weekend, would you be able to whip up some themes? And so,

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I go to one of my interns, like, like, literally,

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a guy who is like,

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my brother's friend who had, like, just finished, like, doing a I think a philosophy degree. And I was like, hey, like, turn this into whatever you you want. And so we ended up calling it pixel union and it started doing, like, ten thousand dollars a month of revenue, and it was my first taste of automatic revenue. Like, I would go to sleep, and I'd wake up in the morning, and we would have sold, you know, five hundred bucks worth of these Tumblr themes.

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And,

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Shopify noticed what we were doing for Tumblr, and they said, and at the time, they were a tiny company. They're about fifteen people. And they said, hey, can you guys

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also do the same thing for us? And so we got into the theme world,

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for Shopify and Tumblr. Tumblr obviously died post Yahoo acquisition.

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And the business still exists today.

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It's a really interesting story, actually. So we

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so I I started incubated the business, didn't raise any outside capital, spun it out of Metallab became its own independent company.

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We ended up selling it in twenty

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fourteen.

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And

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then

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I stayed on the board. I kept twenty percent of it. And then a couple years ago, I bought it back and then we ended up taking it public, and that became e commerce. What did you sell it for? Like, ten or fifteen million dollars? I think I I read about it publicly.

08:04

I sold it for seven million.

08:06

Seven million dollars. Why would you sell that?

08:08

Well, at the time, I was doing,

08:10

I think,

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five hundred k of net profit.

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And I didn't to be honest, it was one of those things where I didn't know how good the business was. And I hadn't read anything about investing yet. And so I didn't know how to value a business. And so it was a double edged sword because I sold this incredible business for,

08:31

you know, a good amount of money. It allowed me to kind of have a sense of comfort and retirement and all that kind of stuff. But

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Doing so, I suddenly had this pile of cash and I had to learn how to invest it. And so I started reading about Warren Buffett and reading all the investing books, and going, oh my god. I can't believe I just sold that incredible business. You know, it was growing at fifty percent a year. And, you know, I thought it was great to get a fourteen x multiple. But not when it's growing that fast.

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So I regretted it.

09:00

And then what did you guys pay for it when you bought it back?

09:03

So we bought it back for twenty six million.

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And then we,

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did a bunch of acquisitions

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And then we took it public. Is it two hundred when you bought it back? How big was it when you bought it back?

09:17

I think it was doing about

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four million dollars of annual profits. So it had grown a lot.

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And we paid twenty six

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And then we bought four sixty and a couple other businesses,

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and then we took it public at a two hundred and sixty million dollar valuation.

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And when you, you said I didn't know anything about investing and blah blah blah at that time. I think today, people look at you as somebody who knows about investing, and they wanna be like you when it comes to investing or buying businesses.

09:47

What year was that when you said that state when you felt that way? Cause I I'm guessing it wasn't, like,

09:53

that long ago. Is that ten years? Is that twelve? Yeah. It was eight years ago. Twenty fourteen.

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So that's basically eight years, less than a decade going from I feel like I know nothing about any of this to,

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you know, I don't know, what it you know, like, in the top percentile,

10:09

you know, in our in our industry and have had phenomenal success. I think that's just sort of a a nice thing. It's like, if you were willing to put in a decade,

10:17

you can go from literally the bottom to the top, and that's pretty cool.

10:21

Yeah. I think it was, you know, getting obsessed. Right? I think that

10:26

when you there's no better feeling than, you know, picking up a book about something and just desperately reading it. Like, you can't stop going through it. And I spend probably

10:35

two full years just reading every single book I could get on I could get about value investing.

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So, yeah, I think was intensive time. You can do it. And the nice thing is There's that great buffet quote where he says, I'm a better businessman

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because I'm an investor, and I'm a best better investor because I'm a business man. And Chris and I, we were natural

10:56

investors within our own business. We knew how to allocate capital within the business to drive growth and profits and margins and all that kind of stuff. So when we became investors,

11:06

we were much better at it. I think because we had the operational lens. We could look at a business and say, oh, that's really hard. Or, hey, they're not doing these three easy things that we did at our company. And I think one of the big problems with investors these days is they're often what I call spreadsheet investors. They look at a business like a spreadsheet, and they go, oh, it's easy. We'll just increase margin by twenty percent, not realizing that in order to do that, you have to convince a hundred people to change.

11:32

What, let me let me get you back off that real quick. So, have you did Sam, did we talk about this Warren Buffett seize candy letter? I know I had it on our list. If we ever did it on the pod. Did we did we talk about this? You it's been on your list. You've never you've never just brought it up. So, Andrew, you're like a, you know, Warren Buffett So you you probably know this, but may maybe not. I had never seen this before. So there was a letter in nineteen seventy two that Warren Buffett wrote to the CEO of Cs Candy after they had bought Cs candies. And, have you read this before? If not, I just put it in the in the chat because it's kind of amazing and I I wanna talk about it. This was this was very surprising to me. So I put it in the chat here on Riverside, but

12:09

Okay. So I think of Warren Buffett as this, like, kind of like what I see today. There's this guy who's super smart, really, like, you know, likable storyteller.

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He's an investor. He's, you know, he's not doesn't look like an operator. He's like a geyser. Right? He's just sitting there at his at his at his table and he reads all day. You know, he makes investment decisions. He's He's a capital allocator.

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But when you read this letter, you realize, like, how

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detailed and in the weeds he was and how business So I actually wanna read out parts of this real quick so that, you know, people who aren't reading it can Dude, this is this is terribly I mean, sorry. This is incredibly well written. He's he's he's got such a good voice. He goes, dear Chuck.

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I was at Brandy's a couple days ago and have a few strong impressions to pass along. So he visited the store and here's his here's his She goes,

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people are going to be affected not only by how our candy tastes, but obviously what they hear about it from others as well as the retailing environment in which it appears.

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This means like the class of the store, the method of packaging, the condition it appears, the surrounding merchandise,

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just like the New Yorker creates a different editorial environment

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for Lord and Taylor ad than it does for village voice. So do the surroundings of our candy, affect the way that our potential customers, mental, and gastronomical impression of our quality. You know, of course, you know, of course, you, of course, know this better than I. Right? So that that was the first piece. So she's basically talking about, like, you know, the the store environment, you know, like, the way that Apple know, sort of recreated the the retail store. He's already thinking about this and sending this, like, more like an operational

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and almost like, It's like a design note. Right? He's not talking about margin. He's not talking about, like, you know, debt. He's talking about the the the merchandising of the store and how it feels and how that's gonna affect how people taste, taste the stuff.

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Then he goes and he talks about,

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let's see. What's the next, good bit? So he's like Number three. Yeah. He goes, at Brandy's, our product suffers in comparative way against stovers. He goes, they have extremely well organized, well displayed, attractive area, put it, featuring nothing but their candy.

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We've taken a number of our boxes, put them on the counter with twenty five other offerings operating cheap, bulk candy, and other run of the mill products And they, you know, and so he's talking he's, like, basically comparing this to store design. And then if you go down, he goes,

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So he's talking about the merchandising for a while. And then he goes,

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he's like, we may well wanna have a have descriptive material. Maybe our own little booklet. Called the most famous kitchen in the world or something of that sort. Coors gets a lot of mileage out of the fact that all their beer comes from one brewery And I do think there's certain there's a certain mystique attached to products with a geographical uniqueness.

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Maybe grapes from a little part of Italy or France.

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Are really the best in the world, but I've always had a suspicion that ninety nine percent of it is just in the telling about it and one percent is in the drinking. Right? So he's talking about, like, you know, like, sort of this marketing psychology

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about, you know, giving them like ideas for catchphrases and slogans. This is way more active and sort of like the brain switched on in terms of operating that I had thought. What is this a was this a surprise for you too, Andrew, or is this something you knew about? That's one of the things I found really inspiring about Buffet is everybody

15:17

I, like, to be honest, my impression was always like, okay, entrepreneurs are the people that do the work, the investors or people that shuffle paper around on Wall Street. And what I realized with Buffet is that he actually was someone who Yes. He owned the businesses, but he influenced the businesses massively,

15:33

and he made them grow and, you know, brought them together and did acquisitions. There's so many ways where he built value, right, which you can't say about a lot of people. Like BlackRock

15:44

doesn't build value. They just index. They own a bunch of pieces of paper, Warren Buffett had actually grow stuff. What's fascinating though, and I'd be curious to know whether he would still write a letter like this is Chris and I had dinner with Charlie Munguer a couple years ago, and we asked him, how involved do you get with the CEOs? And he really said,

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I'll never figure this. He goes, I've never been able to change someone's mind. If someone has us, an idea about something they wanna do,

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I've never been able to talk them out of it. And so, you know, he said there's always opportunities within their businesses to tweak them and make changes and all that kind of stuff. But it's just very hard to actually get CEOs to do stuff. CEOs are not puppets. They have their own brains and they wanna do their own things. And, you know, to a man with a hammer, everything looks like a nail. Do you ever get bored just being an investor?

16:33

Yeah.

16:34

Very. That's why he starts all those businesses.

16:36

Yeah. Exactly. I dude, it's so boring. I that's why I don't really it's so boring. I told you. It's like,

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it's like, yeah, it's like imagine if, you know, someone

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came along and was like, hey, look, you don't have to and you can have all this free time and just read all day. And it sounds like a luxury when you're a stressed out entrepreneur, but actually doing it in practice

16:57

you have to find new things to fill your time with, and you don't get your hands on the tools. Right? So you don't get the sense. So, like, for example, You know, we bought Arrow Press and when we first bought it, I helped drive the redesign of the website, which, you know, I was proud of. But I very quickly had to let go of it. I knew I couldn't keep, you know, holding on to the business. And so I, you know, we hired a CEO and I had to pass in the baton and let go. And, yes, I get a sense of, like, pride of ownership,

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but as the business progresses, I don't feel the lifts. I don't feel the gains. Can can we talk about that acquisition?

17:33

Sure. So the background here is aeropress for like it's almost like a coffee snob product.

17:39

I I owned it. I loved it. It was basically like a more convenient

17:43

French press that you could travel with. I love owned.

17:48

I I still own. I I own two of them. I have one that I I have one that I travel with and I have one that just stays in the cabin. I use it every morning.

17:56

I love it, but it was only sold. I'm almost positive. I would only see them in mom and pop coffee shops. And maybe Amazon. I don't even know if they're on Amazon, but, like, I so the retail wasn't that great.

18:08

But, like, it was clearly like a good product. One of those products that like consumers can buy for twenty bucks, but even the coffee snobs are like, this is the best way to do it. And and you guys purchased it recently, which it's not exactly an internet business, but you're trying to make it a little bit more internet related. But, are you happy with this deal? I know you guys paid. It seemed like a lot of money. You paid a premium for it.

18:28

Absolutely. I mean, I think,

18:31

when I look across all the businesses that we own and I think about what business could exist in fifty years, there's a very, very small number. I mean, most businesses die,

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and I think that Arrow Press is something that has

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potential lasting impact and can be around for decades.

18:49

And it was just an incredibly unique business. I mean, When do you get the opportunity to buy a way of making coffee? It's like, how do you value buying kleenex? Right? The word for the way of making coffee that's written on grinders

19:04

and is a verb almost.

19:07

No. I think it's sick, man. Sean, did you see he bought this?

19:10

Yeah. I'm not a coffee guy. Like, I literally don't drink coffee. So even though I had heard of the brand, it didn't I didn't know enough about it or didn't sort of

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didn't have too much of a, you know, opinion on it.

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Because it's not my thing. But it does remind me of, like, I was looking at soda stream, and I was, like, I really love this type of this category of product. I think it's a fantastic category where

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it's a thing that get another device that gets in that can get into every kitchen

19:37

and has, like, this sort of consumable, you know, refillable component to it. So that's great. And then if you become the defacto device, like you said, I think you just said, like, the verb, basically. Like, if you could become a verb, I just read this recently with someone who was like, you know, I learned twenty five years ago, something becomes a verb, just invest. And, you know, it's it's pretty true. Right? Google it. Will Uber there. You know, like, you you you realize that these verbs tend to become, like,

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defacto winners of, of of their category. And so I definitely

20:07

definitely,

20:08

think it's a good idea. I just don't drink coffee myself. So it's not If they'll make business that I own that people, like, when I tell people, and, you know, you know, if I'm in tech and you say, oh, yeah, we own dribble and they're a designer. Like, they know who that is. They think it's cool. They might, like, give me a little nod or something like that. But if you tell, like, I'll talk to, you know,

20:28

the carpenter working at my house and say, oh, yeah. I own aeropress.

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And if they know what it is, they are passionate about it, and they're excited about it. And that is very rare. So,

20:39

it's a really amazing business. I remember reading, about this in priceonomics. The guy who created it, he was like this you know, now now he's quite quite old. I think I think he's in his eighties and he was like an inventor. He was like a wacky scientist inventor, like stereotype guy, where he also and create created, like, the frisbee or, like, what was the frisbee there? Irrobee.

21:01

You remember those commercials? Or it was, like, we could throw this frisbee over football field or something like that. And he created all this amazing stuff, and he just had owned aeropress that he created,

21:10

but it he wasn't like a business guy. Wasn't he just wasn't this kind of just sitting?

21:14

Kind of just like on autopilot?

21:16

I wouldn't say it was on autopilot. He had a really great president who was running the business side, but They were both older guys, and they were really focused on the retail channel, which you can see. There's a reason why if you walk into

21:28

ninety five percent of gourmet coffee shops anywhere in the world, they sell aeropress.

21:33

But, when we looked at it, just a very, very small percentage of sales, were online. It just wasn't a focus for them. So we came in and there's just a ton of best practices. And Sean, it's funny you mentioned sodastream, we actually hired the president of soda stream US who grew the business to two hundred million in the United States. That's the new CEO of Aeropress. So For sure.

21:55

Yeah. I read about that person because I was researching soda stream, and I was like, oh, damn, this person was like, you know, they they were, I don't know, the driver the trigger of a lot of a lot of growth that happened for soda stream because so didn't soda stream sell a couple times?

22:08

Like, it's owned by who Pepsi now, something like that? I think it's owned by,

22:12

What is it?

22:13

Oh my god.

22:15

I think it's it's an Israeli company. I don't know if they've sold. They might have sold to JAB Holdings or someone like that. I forget. Yeah. I think they have. So Yeah. No. No. It's a a soda stream was acquired for three billion in twenty eighteen by Pepsi.

22:30

But maybe now it's owned by somebody else had it out. There was there was some story like that where it had kind of like the cans I thought.

22:36

And I I was thinking that there should be, like, more competition for this. Like, there's a there's so many D to C brands, and I feel like the D to C showed a stream competitor

22:45

should win. I know I know there's a few of them out there, but,

22:48

I'm surprised I don't hear about these more. I'm surprised there's not a hundred million, you know, a D to C soda stream competitor that's doing, you know, north of a hundred million in sales. I feel like that's a, like, that should be a thing because soda stream is very not D to C. Totally. Should we talk about some of the terrible businesses?

23:04

Yes.

23:05

Those are more fun. So and then I've I wanna talk about a new business I'm starting, actually, because I got yet another one because I'm a glutton for punishment.

23:13

Okay. So some of the early stuff that I did. So,

23:18

I had the idea

23:19

that,

23:21

cat I had cats, and I was like, okay. All cat furniture is hideous. Like, it just ruins your house. It looks horrible. And so I went out and I found a couple, like, kind of mom and pop brands that we're doing this. And I said, Hey, I'm gonna start an online store for Kat Furniture

23:37

called H. J. Mews. Spent a whole bunch of money designing an e commerce website.

23:42

And I,

23:44

you know, poured probably

23:45

three hundred grand into it, which at the time was a lot of money for me. You know, my whole business was maybe making

23:51

eight hundred grand of profit a year. And I just learned how brutal a business e commerce was

23:57

that, you know, I was based be eking out these razor thin margins. Whereas in my agency or in pixel union, I was making

24:05

thirty to fifty percent EBITDA margins. I was making, like, two or three percent. And the amount of work required to move physical goods around

24:13

by inventory, I realized that while on paper, I was profitable

24:17

I was constantly taking my profits and putting them into buying more inventory.

24:21

And so I ended up shutting that business down and losing I think I lost all the money I put into it. But it was a great lesson in in just hard businesses.

24:29

I didn't realize that

24:31

different businesses were,

24:34

harder than others. Right? Like, you kind of just when you when you you're inexperienced in business, you stumble into these things. And I always go, like, god, I'm so lucky. I didn't start a restaurant as my primary first business, right, because it's so brutal. Right? It teaches you so much, but it would be so easy to tap out just think you don't like entrepreneurship. A restaurant was my first business.

24:56

So what And then he went into e com. And then now we have e com.

25:01

The road less traveled, baby.

25:03

So so what, what are easy businesses that you've you've started where you're like? Cause I, for me, milk road was a way easier business.

25:10

Than any business I had ever started.

25:13

25:34

BC, where I live. And I bought it because I'd my my brother had grown up working there. It was a neighborhood place, the owner wanted to sell. And, I've owned it for about five or six years. And, I mean, they have to have about forty or fifty employees, someone has to wake up at two in the morning and go into the basement of the bakery

25:53

and bake croissants,

25:54

And the amount of coordination that has to go right, where if a couple people are sick, how messed up the business can be, is just night and day compared to any internet business. Dude, if the if the if the manager of that bakery bales, are you gonna who's gonna go out and find a new manager?

26:10

I have I have a restaurant group, like a food and hospitality group. So I have a guy who runs that now. Before I was me, I mean, they would text me and say, Andrew, the deep fryer's broken. I need an approval to buy a new one or whatever it is.

26:23

So I've put people in place between there.

26:26

In the medium camp of challenge, I would say agencies.

26:30

So agencies are beautiful in that they are asset light. So, really, you you don't even need an office these days, but you really just need an office and internet connection and a keyboard.

26:40

And,

26:41

you can hire generally

26:43

the people as you need them. And so you don't really need any investment.

26:47

They're they're

26:49

scalable.

26:50

But they're hard in that you're constantly balancing supply and demand. So Metallab, for example,

26:56

if Metallab was to do all the work that came to it at any given time, it could probably be five times bigger.

27:03

But in order for us to get five times bigger, we would have to grow the company too fast and we would ruin the culture. And so I would say that agencies are a little bit like a law firm or an accounting firm or an or consulting firm where you've got this kind of flat linear growth that happens over time.

27:20

So I think they're great businesses, but there's feast or famine. Right? And you really have to be prepared for a downturn.

27:27

And you need to be, unfortunately,

27:29

ready to make radical changes in the business at the drop of a hat if your pipeline is not looking good and that kind of stuff. So it's just very,

27:37

very difficult in that way.

27:39

Of course, every agency owner I know wants to own a SaaS software company and every SaaS software company owner I want, or or, that I know wants to own, like, a consulting business or something that grows really fast. So,

27:52

grass toys greener. The easiest business that I own,

27:56

is a company called WeWork remotely.

27:58

This is a job board that we bought from Jason Freed and David Hinemeyer Hansen at Basecamp.

28:04

They had started it,

28:06

and it was like the remote job board

28:09

they had written a book about remote, and they had great SEO. They ended up ranking number one for remote jobs.

28:16

And as you know, remote work has taken off over the last five years. And so we bought that business from them, and it really was just kind of sitting idle. And so with some very simple best practices and a very, very small team, we're able to build it into a very large business.

28:32

And what what about SAS? Where would you put, you know, SAS businesses that you've run?

28:37

Well, I've lost a lot of money doing SAS. I mean, I think a lot of people know the story of Flow, the project management software that I built where I basically poured ten million dollars into it because I was competing with Asana and didn't understand the dynamic of when you're competing against,

28:54

you know, you're fighting an army that has unlimited budget. It's like, Fiji fighting the United States. Right? And I'm going like, I'm gonna win this. It's ridiculous.

29:03

And so I lost ten million dollars, doing that, and that was a great lesson. But,

29:08

incredibly painful, and I wish someone

29:11

like me had tweeted and I could have read it instead of losing all that money. How many agencies

29:16

do you own right now?

29:19

Or partially owned? Probably own ten ten or twelve.

29:23

There was,

29:24

there was, what's the guy's name? Who's the richest black guy in America, Robert Smith, I think his name?

29:30

V is it Visa equity? Vista equity. Vista equity. So basically, Vista equity is a PE firm that owns they're they're mainly SAS.

29:39

And I think if I remember correctly, the article said that they own

29:43

two hundred million sorry.

29:46

Was it a hundred billion? I whatever it was, it was it was north of a hundred billion of of SaaS revenue. I think it was second only to Salesforce in terms of their reach. And he had this, thing where he was saying, look, on our companies, we're actually only seeing a twenty percent decrease from where we thought we would be this year, meaning, like, only a twenty percent.

30:08

He's like, we're growing at twenty percent a year. We thought we were gonna grow at twenty five percent. So we're seeing a small decrease in the growth that we expected. Therefore, we actually are pretty bullish on the economy.

30:19

With your agency, since you mostly sell to big companies like Slack and whoever else you sell to, are you seeing a slowdown from American companies buying services?

30:28

Yeah. Absolutely.

30:29

I think we're seeing softness over the next six months, and things are definitely slowing down. Or If they're not slowing down, people wanna achieve the same things, but for less money.

30:39

And so there's these pressures, you know, like I said, it's the supplier demand problem. And you've got the labor market where people are demanding more and more pay, and then you've got your clients crunching you down. Right? So right now,

30:53

you know, I think that it's unclear.

30:56

So the other problem is it's really hazy. And so you get into these situations, like, when COVID hit, we had a brutal

31:03

three month period where the pipeline dried up, and then everything was fine. It really depends on what the market sentiment is. Whereas if you own a SaaS business, What are the odds that someone's gonna take, especially a sticky one? What are the odds they're gonna rip it out of their company and retrain everyone on that? And plus they're only being reminded they pay for it once a year. Right? It's I always think it's better to have ten thousand people paying you a small amount of money than a hundred people paying you a lot of money.

31:29

And what, what's famous original?

31:33

So,

31:34

I would say the theme for me is that I will often do the wrong business before I find the right business. So for example,

31:42

I started a I I always I'm a designer, and I always fetishized the idea of having brick and mortar businesses.

31:49

I was so sick of doing all these internet things. I wanted to do something in my own city. And so I came up with this restaurant concept of, like, bar in pizzeria called Famous Original.

32:00

And me and some friends did it together.

32:02

And

32:03

we basically learned the hard way that restaurants are brutal. You know, we were, like, super egotistical. We're like, oh, we're great entrepreneurs. We're gonna be able to nail it in restaurants. And Sean is, I I've definitely heard you talk about your experiences here.

32:17

And not it along. We just learned it was the most brutal business in the entire world, and we were shocked by how much money we could lose And so we, you know, hired the wrong management.

32:28

We got the incentives wrong.

32:31

We overspent on the build out to the point where could never get our money back.

32:35

You know, labor shortages.

32:37

We had slippage. There was there was tons of issues, but what I learned from that was what does a badly run garbage restaurant look like?

32:46

And then when the deli and bakery came up, I was like, Oh, oh, this is a good one. Like, this has been around for twenty five years, stable earnings, great general manager. What type of food do you sell?

32:58

Pizza.

33:00

You could screw up a pizza place. I would have thought that'd been one of the easier places to easier of the hard. Yep. Yeah. Because, like, you don't need it's like pretty simple ingredients.

33:10

I I wouldn't have thought you were gonna ruin that one.

33:13

No. We managed to do it.

33:18

Our software is the worst. Have you heard of HubSpot?

33:22

See, most CRMs are a cobbled together mess, but HubSpot is easy to adopt and actually looks gorgeous. I think I love our new CRM. Our software is the best. HubSpot,

33:32

grow better.

33:33

You have a couple on this list you got things you did in the past. You have things new businesses you're doing now, but I'm curious.

33:40

Do you have I guess, like, we haven't talked to you in a while. Have you have you had any ideas for businesses that you're not starting currently but you're like, someone could do that or someone should do that or I wish someone is, you know, good to capitalize on this opportunity or trend.

33:56

Is there anything that that comes to mind, for ideas that you're not currently acting on? So I might have talked about this idea in the past, but I've had this idea for a long time.

34:06

I like the idea of a service that allows you to get on one person's radar.

34:12

Right? So I choose let's say that I let's say I wanna sell my company

34:18

in the next two years, and I think the right

34:21

buyer is this, you know, this ex let's say HubSpot, right? I wanna target Dharmesh. So everywhere Dharmesh goes on the internet, I want him to see stuff about my company, and I want him to think we're huge. There's I forget where the quote comes from, but there's this idea that if someone sees you five times, they think you're everywhere. If you're on five podcasts they listen to, they deem you a huge celebrity in this success or whatever it is. Right? So I think I want that but hyper targeted, and I think it's worth a lot of money. So I would pay ten thousand dollars a month to be on Darmesh's radar everywhere he goes. And so I don't know how it gets done. It's like a advertising

34:59

sniper rifle essentially, but I really like the idea of something like that. So I have a story about this. So my best friend, his name is Jack Smith. He sold his company called Vungal for eight hundred million dollars right before the pandemic

35:11

when he was like twenty nine years old. The way that he started it was he,

35:16

was in England, living in England as a college student, and he had this idea

35:21

and he wanted to go to a accelerator

35:24

called what was it called, Sean? Do you remember? Angel pad? Is it Angel Angel pad?

35:29

And the guy who run it run ran it was his name Thomas and Jack missed the deadline to join the incubator. And so what he noticed LinkedIn. He goes, let's advertise just to Thomas, and he said, on LinkedIn, the way it worked is you could advertise to, like, it said, like, only show this to people

35:45

like, a hundred people a day. And he's like, wow, you can go to a hundred people a day. What if I just moved it to, like, ten people a day? And they allowed him to. And it says, alright. Only show this to ten people a day. But make it so they have to work in San Francisco and they have to work at Angel Pad. And the ad said, hi, we're trying to reach Thomas.

36:03

Please tell us to contact us and he did that, and it worked. And they let him into the incubator. And six or seven years later, the company sold for eight hundred million dollars. And we at the house wrote an article about this. It went viral and LinkedIn changed how they did it. You can't actually advertise. They won't tell you how many people you're gonna reach per day or something like that. Totally. Something like that would be amazing, or even just figuring out, like, okay, what let's let's just do this. So so I get Darmesh's email and I run it through some sort of database And I go, what email newsletters does he subscribe to? Or what podcast? Like, how do you I don't know if it's possible, but what is his information diet? And then how do I here and all those things. That's crazy. Yes. I think that would work wonderfully. Yeah. There's a I I would love it. If someone wanna start that business, please email me because I think it's a great idea.

36:49

But, yeah, there's I mean, again, like, I come up with tons of ideas, but that one has stuck with me for three years. So I feel like it's something good Yeah. What could go wrong? Just,

37:00

targeting somebody wherever they go,

37:02

everywhere they look.

37:05

What can go wrong here? Okay.

37:08

She's buying a billboard by his house.

37:10

So that's one. What about some other ones? I know you got more. Let me let me talk about the new thing that we're doing. So and this has been something that's been driving me crazy forever. So do you guys know what investment bankers are?

37:22

Yeah.

37:23

I know a lot of people call themselves that. Yeah. Right. But a lot of people kinda go like, oh, that's like a stock broker.

37:29

Or, you know, they work at a bank. Confusing.

37:32

Investment bankers are realtors for businesses.

37:35

They go and they represent you and they sell your business for you or they raise capital for you. And

37:42

I didn't really understand that world at all. So like I, like I said earlier, I I've only understood finance for eight years. And I would say really only over the last two or three years have I actually tap the world of finance, like gotten proper banking,

37:56

credit, learned how to sell businesses, learned how to use investment bankers.

38:00

But I think those That stuff is not really accessible to founders.

38:05

And frankly, they don't speak the language of investment bankers. The investment bankers are the spreadsheet business people. Right? They look at your business as a spreadsheet,

38:15

and they want something that's simple and easy to understand. And frankly, like, I was kind of allergic to them because I didn't speak their language. They would come and talk to me and they would use terms like EBITDA and, you know, gross margin and all these things I didn't really think about as a founder. And so

38:31

I have been looking for a firm for

38:35

years

38:36

that I can use to either sell small businesses. And when I say small, I mean, like, kind of one to five million dollars of EBITDA,

38:44

or help founders do secondaries or all these sorts of things, or even just finance

38:49

M and A. And I'm yet to find someone. Everyone seems to specialize in larger businesses or they're too small.

38:57

And so,

38:58

last year, Chris and I met this young investment banker And he was just a normal person. Like, we had him out for lunch, and he was not wearing a suit, and he was saying how miserable he was and how much he hated

39:11

you know, his his old job doing it. And we we kept saying like, look, like, you should quit your job and come work with us and we'll start a modern investment bank for founders,

39:22

really focused on bootstrap founders because they don't know how to access capital. And so we we're starting this business called tenzing. We started, like, a month ago. What's tenzing? And the idea is tenzing Norgay is the most famous Sherpa of all time. So he helped Edmund Hillary climb Mount Everest.

39:39

And so, basically, the idea is,

39:42

you can go to him and say, look, What are all my options? Right? I, you know, can I get credit from the bank?

39:49

Can I raise debt to do M and A? Can I do a secondary?

39:52

Can I sell my business? And they can basically walk you through all of that stuff in a way that's aligned and not fee driven and more long term focus. So we're basically starting our own little investment bank.

40:04

Is that gonna work?

40:05

Dude, because if you are a if you're if you're a startup

40:09

and you're in the if you use the word bank right now, I hate you.

40:12

No. It's not I mean, it's not They're not taking the money. I I mean, I could just call it business we're starting a business realtor firm, but the term is investment bank. There's no banking. We're not holding anyone's money. There's no tokens. I'm not going to Argentina.

40:31

Yeah.

40:32

Yeah. Do you like billions of

40:34

dollars or not?

40:36

I think, like, I don't know if you guys have experienced this, but, like, even here in Canada. So,

40:42

for, like, five years, I wasn't aware of this, but the government will actually pay thirty percent of your r and d when you're a small company.

40:49

And I just didn't know about that. And so

40:52

I literally lit a million dollars on fire. I could have gotten a million dollars of these tax credits, and I didn't. Right? I could have used a credit line to buy ads for my SaaS business. But I didn't know how to do that. I could have sold businesses that were working, but I didn't really want that just kind of died. Like, I let them die. Right? So I think it's about, like, how do you get how do you get the most out of what you have,

41:18

and giving people tools to do that? And it's just wish this had existed when I was starting out.

41:24

Yeah. I I totally agree. You know, most, investment bankers don't work with startups.

41:30

Because they're too small or the deals are too small or whatever. So how are you gonna get it to how do you get how are you gonna get the numbers to work? Because I don't think they're doing it because they discriminate. I think they're doing it because the money's not there So how do you make that work?

41:42

Well, it's not small businesses. Right? I mean, like, we're really focused on bootstrap businesses because that's where we come from. And these are companies that are doing,

41:52

you know, two, three million dollars, maybe five hundred k of profit, Some of them are actually bigger. So we've talked to founders that are like, hey, I've got, like, a, you know, ten million ARR business. I'm doing three million dollars of profit. I was thinking I wanna sell thirty percent of my business, and we kind of go, okay. Well, we have the network. We've gone and, you know, raised all these funds and met all the people in finance. Let's connect the dots between these people and be the financial translators.

42:18

What's I just linked you guys to the website as tenzing dot co

42:22

but you can kinda see what we're doing.

42:25

What's been the biggest oh, dude, I thought you said you hated these graphics. You have the graphics of, like, the people with like the funny arms and funny fingers.

42:33

If I remember correctly, you tweeted out if you see another page like this, you're gonna kill yourself or something like that. No. No. No. It was the

42:40

the, like, weird Russian looking ones that Dropbox was using for a while, they were, like, so weird and depressing.

42:48

What? Oh, dude, I know you I know these folks. I've met Rob before. Rob is in our world. I don't that's funny. It's such a circle jerk world that we live in. Do you just like call you just collect people on Twitter is what you do?

43:00

Rob actually lives in Victoria, so I've known him for a long time. He he runs, outweigh the sock business That's right. And they just launched a custom they just launched a custom sock business. You guys should get some, MFM socks made. We did. Where, I've gotten them for this other thing, but What, what's been the biggest business that you've sold so far? Was it the, fitness thing or the meal plan thing?

43:21

Yeah. Yeah. We bought a business called Millime.

43:24

And we sold it to Albertsons.

43:27

So that was

43:29

I thought you started it. No. We bought it. So there's a guy,

43:34

up in Nanaimo. He's a developer,

43:36

and,

43:37

he,

43:38

started this business with two co founders.

43:40

And his two co founders after the first year didn't wanna be in the business anymore. And so we they owned seventy percent. We came in. We bought them out. And Mitch, the founder was basically like, look, guys, like, I'm already growing this business. I know exactly what I wanna do. Just leave me alone. Like, we tried to write the Warren Buffett letter and say, like, oh, you should do this on growth or whatever. And he basically just said, leave me alone. And so we said, okay. Fine. We'll leave you completely alone.

44:06

And a couple years later, Albertsons came and they bought it for tens of millions of dollars. And, it was a great deal for everyone.

44:13

And, yeah, worked out really well. Do you think that in the future you're gonna sell anything, or you're just gonna keep on buying and keep on holding?

44:20

I mean, do because because you don't wanna sell, do you?

44:24

No. I don't like selling. And I think that, it's really hard to predict what's gonna end up being large and how large it can be. And then,

44:32

also, if you think about it, like,

44:35

if you have a business and it's dying, it's hard to predict how quickly it will die and how much profit will come out of it. And usually when a business is dying, you can't sell it for much. Right? Let's say that business is on a major downslope,

44:47

you might get like one times profit. And so you're basically making a bet that it's gonna die before a year, which very few businesses die that quickly. And so, usually, it's better off just to hold forever I've found.

45:01

You know, you will see, like, Warren Buffett sold off as newspapers.

45:05

I think that was partly because the writing was on the wall, but also because it's, like, unions and a lot of complexity and they wanted to get out of that.

45:13

But no. I mean, I I don't ever wanna sell businesses. As someone And the only reason we sold me lime was because Mitch wanted to sell the business. He came to us and said I want this exit, and we weren't gonna hold him back because he was the founder. We,

45:26

we just did this thing on the FTX

45:29

Saga. And I know that you, like, have historically been I don't know if you call yourself anti crypto, but you're definitely not pro crypto, and you're for sure not pro NFTs and all that other bullshit of which I agree with you. What what's been your take so far in watching all this drama?

45:44

I think it's really, really bad for crypto. I think that you know, Sam Bankman Free is somebody who I certainly had thought, oh, maybe this is one of the good guys, and I'd seen him

45:55

do the podcast circuit,

45:57

and he seemed like a smart eye.

45:59

And I think that when the number two, you know, if you think about these, like, banks, it's like that's the equivalent of, like, JP Morgan going out of business. Just suddenly, and everyone losing their money.

46:09

So I think it

46:11

probably

46:12

has a lasting negative effect on crypto and trust.

46:17

And it's been fascinating watching the price of crypto

46:20

not react the way you would think where, you know, inflation

46:23

you'd think would drive the price of Bitcoin up. It doesn't appear to have done that.

46:29

To be honest, I'm not I was saying this to a friend of mine. I think I've probably said it on the show before, but

46:34

if you came to me and you said, Hey, I think,

46:37

British pound sterling. I'm super bullish on them because

46:41

x y z macro event was happening. I would just say, Why are you currency trading? You're a tech entrepreneur,

46:48

and I think that Bitcoin is currency trading. Right? Like,

46:53

just buy great businesses. Do the thing you know. And I think everyone is just speculating on this stuff, and there's a ton of fascinating

47:01

arguments for it and I follow it, but I have just fully steered clear. And,

47:07

I'm sure that we'll invest in a crypto business at some point, but for now. I'm just waiting for it to play out more.

47:14

One important reminder is if you

47:17

if you missed Amazon,

47:18

you had until twenty ten to invest in it. There's a lot of time to wait and sit and watch

47:24

to find these great businesses.

47:27

Two things. One,

47:30

that thing you just said reminds me of, something Kevin Van Trump pulled us once he goes

47:36

we go, what, you know, you've been trading for twenty plus years.

47:39

You know, what are the biggest lessons or something like that? And I asked him some some stupid question like that. And he goes, Well, you know, there's no less of blah, blah, then he goes, one thing.

47:49

There's always a second chance on the train. He goes, even when it's a winner, even when it's a good thing, always get a second chance on the train.

47:57

And, you know, so so that sort of takes away a lot of the fomo

48:01

when you realize that. That, you know, there there you do get these second opportunities. You know, it happened. With Amazon, it happened. With Facebook, it happened with many, many businesses where even if you weren't early and correct,

48:13

these things go up and down. Now the hard part is,

48:16

it's when they go down that you have the least conviction. So Could be that that right now is the right time. You know, now might be the second time to get on that train because prices are down, but now is when people are the most scared on and the most hesitant to act on. If you were hesitant before, you probably triple hesitant now. And so I think that's the hard part for to to get to try to get back on the train when, when there is a dip. The second thing is we talked about red flags and fraud. I think on the last time you were on here, we talked about people who were lying or or partners who had screwed you.

48:47

With the FTX thing. Did you hear of anything or or was there anything red flaggy that you had heard either along the way or once it started to come out that you're like, Oh, that sounds pretty bad, actually. That's that was a bit of a tell now in either in hindsight.

49:01

No. I mean, I like you guys.

49:04

49:05

49:07

I just haven't fall. I I guess I hadn't followed it super closely, and I hadn't really spent a lot of time on that particular business.

49:15

I was quite shocked

49:17

that he

49:18

was known for risk management, and he had been talking, you know, was very

49:23

assertive about talking about the security of the balance sheet, and it seems like there's a lot of,

49:29

loans going on between related party businesses where he's bailing out his own business and stuff. So very sketchy. What I find fascinating is, is this a bad actor? Right? Is he a psychopath who's building a ponzi scheme or is he just somebody who got in over his head and used too much leverage

49:48

and messed up. And I I don't really have an assessment of that yet. And to be honest, I'm not following it super closely. I'm kinda waiting to read the book. I find like waiting for this stuff to all blow up and wait four months for like, you know, the Atlantic or New Yorker or someone to write like an amazing on it is always more interesting than following the day to day. My favorite,

50:07

Twitter feed autism capital who's been covering this whole story has said that Michael Lewis, the guy who wrote the big short, has been, like, embedded with him for the past six months writing a book and that he's still involved.

50:19

And so I have a feeling we're gonna we're gonna It was meant to be positive.

50:23

It was meant to be, like, the blind side. It was meant to be this, like, you know,

50:26

this, like, rag, you know, sort of, like,

50:29

this was, you know, wonderful. The blind side? Style story. What's that? You said it's supposed to be like the blind side? Yeah. Like a positive story. Right? Big Short was basically like, here's, you know, this thing that was, you know, destined to fail. I think he was following him, not FTX is destined to fail, but thinking, you know, these are the challengers, you know, and look at look at the crazy craziness that's going on, but like not I don't think he was following him and I don't think SBF led him in because Michael Lewis was thinking it's just a matter of time until this blows up and this will be the big fraud in the big scandal, like, just like the big short part part two.

51:00

You know, so so I think that that's the interesting part. It's like, well, here's your Here's your surprise twist ending,

51:06

that you got here. I will say there's this one guy, Jason Choi, that wrote a Twitter thread that is the best Andrew, if you wanna read the equivalent of the book or the the New Yorker piece, like, I wouldn't wait for them because,

51:18

a, the New York Times put out a piece on on SBF that was supposed to be the,

51:23

you know, the sort of, like, the recap, and it was, like,

51:27

utterably soft on him. It was sort of just made him out to seem like a good guy. And, you know, some oh, some bad things happen to happen. And, this guy Jason Choi wrote out this Twitter thread. That's very clear, and it has all of the evidence in a timeline,

51:40

that we know so far. And it is, it's pretty compelling. You you should check that one Have you guys pulled it up? Have you guys ever come have you guys ever had contact

51:49

with someone who's now famous fraud?

51:51

I've I've never I've like never met someone who, like, was a blatant liar,

51:57

about things that, like, kind of became well known.

52:00

I've told the story about the guy who worked with, the king of coal in Indonesia who ended up in jail and and passed away in jail and But he he wasn't a fraud, was he? He was just a criminal.

52:10

I mean, he did better. He, like, he he, like, like,

52:14

like tomato, tomato. Why? Like Well, no. No. No. It's way different. It's, like,

52:18

someone, you know, who's like, like, what do you do for a living? Well, I've I've fucking robbed people versus like Bernie Madoff, who's like, why? I run a bank? People who steal tend to lie.

52:30

And and, you know, so I think that, yeah, this guy was bribing people, but it wasn't just let's say, bribery, you know, there was obviously gonna be other things in an organization in an organization like that where your if your primary agenda is to make as much money as possible as quickly as possible,

52:45

and you have great success doing it.

52:48

But you're not doing a ton of the value creation yourself. You know, there's There's often a,

52:54

you know, both. There's often both going on. And, you know, I I was able to see a little bit of it. What I what I saw mostly was just the sort of like the the fact that, okay. I guess that's the way you do business in these countries. You kinda gotta grease the the the guy in the middle And that's how you get the thing. You know, the the sort of bribery corruption is very common in India and Indonesia and a bunch of different places. And so that part was known It was an open secret.

53:20

But I'm, you know, it's not like if you'd if you'd ask me at that point in time, is there anything else going on? I wouldn't have been able to tell you anything specific. But I would have bet a lot of money that there was something else going on. And it's part of the reason why I wanted to to leave eventually.

53:31

So so I, most of the frauds that I've met have always been small time. So it'll be like, I meet someone,

53:38

and I ask around about them. And someone's like, hey, like, you know, they've

53:43

gone through the city and got, like, ten thousand dollars from all these investors and, like, defrauded them, but it's small time enough that they get away with it Charlie Munguer calls them the rats and the granary. You can't really do anything about them because they're too small. They're always gonna be there. And if you

53:59

you know, you hammer them once they're just gonna come back in some other form.

54:04

I met a guy.

54:06

This is a bigger one. So

54:09

In in the Canadian stock market, there's tons of fraud, and there's very little enforcement.

54:15

And,

54:16

often what you'll see is something will get hot. So, like, you know, oh, vertical farming is hot. So they'll find some, you know, guy with, like, five employees who's a vertical farming business and some investment banker in the public market will say, Hey, let's dress this up as the next great thing. And then what they do is they dump it to retail investment So they go to mom and pop and the investment banker calls them and says, Hey, I've got this amazing deal. We're gonna IPO it. It's gonna pop. Whatever, and they hand the candy out. And often what ends up happening is, you know, as the trend goes, so, you know, as marijuana

54:50

stocks or fake meat or

54:53

cubic farming or whatever it is. It pops and then it drops.

54:57

And what happens is the investment bankers often make killing because they get paid in warrants, and they get paid a percentage of the money they raise. So if they raise a hundred million dollars, they might get paid five million dollars plus warrants. And if it pops, maybe those warrants end up being worth ten million dollars. And this is all legal. This is totally legal. And so it's basically legal stealing. Right? So they go out. They raise all the money from a bunch of, you know, grandmas and doctors and normal people.

55:27

Stock pops, they sell, and then it goes to zero. And all the employees get laid off and the company goes bankrupt, or it's kind of a shell of its former self. And I met a guy

55:38

at a party,

55:40

you know, last, last summer,

55:42

And he was bragging to me about this IPO that he had done and how much money he made. And I started digging into it, and it was literally a the equivalent of taking a corner store public. This was like a two location

55:56

business,

55:57

and he dressed it up to match a trend much did they make from it? Probably made. I don't know. I could probably do the math, but it's I would argue probably five to five to twenty million dollars doing this. And, you know, he's bragging about it, and the stock is down, I think, to, like, ten cents or something. Right? It just, it turned into nothing. And so it's crazy because it's literally legal. It's legal stealing. Right? Like, everything he did is technically legal. They do all the right documents.

56:27

When they take it public, they disclose all the details, they just write it in the right way. And it doesn't hurt his reputation because he's behind the scenes and like, you know, no one knows.

56:36

And lots of people flipped the stock too. Right? So many of his early investors probably just sold when it peaked out to, oh, you know, what are called bag holders in in the industry,

56:47

and then those people lost all their money. And so it's they hurt, let's say, ten thousand people in a very small way. And so it's just not the sort of thing that gets a lot of attention from regulators.

56:58

So I find that kind of gross and crazy And there's a ton of that up here in Canada. So I, tweeted this out. Let's see. When was this?

57:07

This was basically last year, February twenty twenty one.

57:10

And I said, e sport investments are a joke. There's so much no money in the space. Look at this billion dollar publicly traded company in Canada. And e sports is another one of those, like, kind of hot industries that that you're talking about. And the ticker is e g l x. So I showed this graph and I was basically like, look at this thing. It's trading at eight dollars and fifty nine cents.

57:30

So I said,

57:32

you know, it's basically, it's a holdco of random assets. It's got like a website for the sims.

57:37

They own a minority stake in the Overwatch team of Vancouver.

57:41

It's not necessarily a bad company, but it's definitely not a billion dollar company.

57:44

And so it's like here's some of the things that they bought. They bought luminosity, the team, the esports team. They bought it for one point five million in cash, seven million in stock. What's the company called again? I wanna look it up. I'll tell you the second because, the

57:57

the prediction came true. Here's the spoiler. So, e g l x is the ticker. So it was eight dollars and fifty nine cents when I wrote this. It is now trading at what?

58:06

Eighty three cents. Point

58:08

eight four. Oh my gosh. So, you know, what's the market cap? So it's down ninety percent, since I wrote this thing. One hundred and twenty six million. How does it even have a hundred and twenty It's not worth a hundred guests a spoiler. It's gonna go down another ninety percent from here. It's my guess.

58:23

Not to pick on these guys, but just like there's a lot of this happening. I met other people, you know, who who are doing the same thing. And it seems to happen on these small exchanges in Canada and stuff like that. So they bought Lummanasse for a million a million and a half in cash, seven and a half million in stock. They bought some agencies for thirteen million in stat cash, some more stock.

58:40

And, they started trading on the TSX and then they were up four four x in a year. And it's basically an ad agency,

58:47

and then they own, you know, a couple niche websites.

58:51

And like, you know, if you add in all of the things that they bought, you know, they did thirty million in revenue with fifty million in expenses, you know, they lost twenty million dollars this year, and they call themselves a, you know, billion dollar company.

59:03

And so, you know, like I said, people wanna invest in a rocket ship, and this is a sparkler They have eight million of cash left in the bank. It looks like they're gonna need to raise more money if they wanna keep this going. And so, you know, I didn't even remember that till you just said, this thing you said, I was like, I think I saw some bullshit esport thing in Canada and sure enough this was it.

59:22

Yeah. There's endless numbers of these. I mean, it happens in the states too. You guys saw Nicola. Yep. Where, you know, even the name, you're like, okay, Tesla, Nicola, Tesla, like, you're just trying to grab on to this trend and they, you know, basically faked that they they had this,

59:37

what is it? I forgot hydrogen powered,

59:41

electric semi truck And it turned out they were just rolling it down the hill and turning the camera. So it looked like it was driving on a flat surface.

59:48

Complete fraud.

59:50

Complete fraud. Like Is that really what they do with, like, commercial?

59:53

Yes. I'll I'll link you guys to,

59:56

so there's this amazing guy named Nate Anderson.

59:59

He has a a short selling,

01:00:01

hedge fund called Hindenburg Research, and he writes these amazing research reports where he takes down these companies. And it's just facts. Right? It's like All he does is just basic diligence,

01:00:11

and he'll find, like, oh, like, it turns out Trevor Milton, the guy who is the CEO of, Nicola,

01:00:18

was accused of all these crimes. And if you just do basic research on this guy, obviously, this guy's a fraud,

01:00:24

and he'll write these amazing research reports. Here I'll send you guys one.

01:00:29

No, this guy his his stuff was good. He's he's he I mean he's a short seller so obviously he's gonna be a hater, but his stuff is usually well researched and fun to read.

01:00:38

Yeah. I mean, I think there's

01:00:40

there's crappy

01:00:42

short sellers who are gonna, you know, make stuff up or, you know, hint at stuff and then there's short sellers that are basically journalists that just share what's going on. Do you guys do you guys remember bird? Sean, do you remember bird in San Francisco? Yeah. Of course. Scooter company. Okay. So Scooter company that I don't remember how much they raised but I I believe it was a two point five billion dollar valuation and I bet they've raised

01:01:03

north of four five hundred I think I think they've raised over a billion dollars. Let me see. They've they've raised over a billion dollars. Yeah. They I they're they've raised more than it's currently worth. And I think it's currently worth. So listen to this.

01:01:14

Listen to this. Google what it's worth right now. So they took it public at a three billion dollar valuation, I think. It's currently trading right now at seventy million dollars. Seventy okay. They raised eight hundred eighty three million.

01:01:28

Is that crazy?

01:01:29

This company is is is the market cap is seventy three, I think, million bucks.

01:01:34

With which company? Bird. Birds scooters. Do you guys think they have to have at least seventy million of of scooters.

01:01:40

Well, and how much secondary how much secondary did the founders see that too? Which I I don't know. I can't blame them to be honest because it was so hot, but still But but I don't know how much he took, but I always like stick with like the best way to figure out,

01:01:54

you know, how wealthy someone is is by looking at how expensive their home is because it's kind of hard to like get a fake mortgage that way.

01:02:01

And Travis, the guy who founded it. If you Google his name and like house, you'll see like, you know,

01:02:07

tech entrepreneur selling ten million dollar home in Santa Monica or tech entrepreneur buying twenty million dollar home in

01:02:14

Miami. So he's but he bought

01:02:16

he's I think he's bought two houses that are worth tens of millions of dollars. So he's definitely There's there's something I've got a really quick thing if we have time. Yeah.

01:02:25

So,

01:02:26

do you guys remember I did this thing called a non binary term sheet a couple years ago? Yeah.

01:02:31

So You're you're on that non binary train before everyone else was new. Exactly.

01:02:35

Exactly.

01:02:36

So so I've always found I've found venture really tricky, right? Because someone will come to you and they'll say,

01:02:43

you know, I am going to revolutionize

01:02:45

y z industry, and I'm gonna create a billion dollar business. And I always say, okay. Well, if you don't create the billion dollar business,

01:02:53

then I lose all my money. Right? And to me, that a, it sucks for the founder because if they,

01:03:00

you know, get a bunch of money at a valuation that's too high, they can never make their investors happy, and it sucks for the investor because it's binary. Either they lose all their money or,

01:03:10

or it goes. And so I was raising money for Supercast a couple years ago, I wanted to get what the market rate was for valuation.

01:03:20

But I also wanted it to be fair because for me, I didn't wanna feel like shit if the business didn't pan out. I knew that If the business didn't pan out to be a huge business, it could actually be a good smaller business. And so, we raised at a ten million dollar valuation, which time was kind of a good,

01:03:39

you know, angel angel round valuation,

01:03:42

but it was structured so that within two years, If the business doesn't do a million dollars of revenue, that turns into a five million dollar valuation.

01:03:50

And so it ended up we'd we did

01:03:53

close to a million dollars, but we didn't hit it. And so I crammed myself down by fifty percent to make it fair. Now I know a lot of founders wouldn't wanna do this because why would you do this,

01:04:05

you know, other than to be a boy scout and, you know, have a sense of fairness if no one else is doing it and if VCs expect this. But I think it's a really interesting structure, and we've been offering it to more and more founders as the environment changes where we say, look, we'll invest,

01:04:21

but it has to be structured so that if you don't deliver on what you say you're gonna do, we can still get our money back. Do you guys think about that?

01:04:30

I don't love it for two reasons. One is what you just said, which is, like, why would a founder do it Like, if I think about it from the founder's perspective,

01:04:38

if I don't have to do that, I'm not gonna I'm not gonna do that. Right?

01:04:43

Like, traditional venture would just be a better deal for me as a as a founder in that case.

01:04:48

And then the other thing is I think it creates weird incentives like

01:04:52

I like the concept behind it. Like, I like the spirit of it. But then I'm like, okay, who's gonna set these benchmarks? And then what happens when the thousand different things can happen in business? And, like, you said it yourself, like, we got close, but we didn't get there. And then there's, like, this crazy urge to, like, do something to nudge it over the top, and now you're doing something that may not be long term.

01:05:10

You know, right for the business. And so you create some weird dynamics. I wouldn't say it's worse dynamics than it currently exist.

01:05:18

It's just more like If I'm the founder, I would rather,

01:05:23

I'd rather and I also think I'd rather take the venture path where I'm getting a higher valuation and selling less of my business I would also say

01:05:30

there is a sort of, like, we're going for it or we're not. Like, you would if you're running a pro like, my e commerce business, we run to maximize EBITDA.

01:05:38

Like, yes, we wanna grow it, but it's like this thing needs to make profits every year, whereas one of you did venture things, it was like, we don't think about that. We think about you know, how are we gonna grow users to let alone revenue? Let forget about profits altogether.

01:05:52

And so there is, like, sort of, like, a There is a benefit

01:05:56

in knowing which path which blueprint of business you're trying to build and then being able to go all in on strategy that's aligned with that versus a strategy where you're hedging. But you're like, maybe we should -- Yeah. -- try to have profits, those type of things. Sorry. Go ahead. But Andrew, that My whole, like, I've seen all these. I think there's this, like, I've seen this, like, this thing called, like, hustle fun and a few other funds, and they're like, we're trying to do things differently. In my opinion on that is why? Like the game isn't broken. The game works as it should. The the the thing that's broken is people who are joining and playing the game, and they maybe shouldn't be playing the game. But it works perfectly fine. Like, we are getting our desired outcome. Example, Sam of where that's not true. No. That's necessarily. There are certain businesses that are good businesses, but they're not good venture businesses.

01:06:42

And then they have they have a lack of access to capital. So I forgot the guy's name, I feel bad now. He's kind of like it's kinda like an NDC thing they're doing. They created Tyler. Is it Tyler that was it called the seal agreement or this something like that? They have like some new type of dock that's like the nine not non binary term sheet. But that's not But that's not VC. Right? I mean, you would con that's almost like PE. That's a different category.

01:07:04

Yeah. But I guess what I'm saying is it's a funding it's a funding option. It's an it's an alternative funding option for a technology business. Right? You could Right. That's what I'm saying. It's alternative to VC. What I'm saying is venture capital as we know it I think it works perfectly fine. Like, it's the the way it's supposed to work is,

01:07:22

some get it.

01:07:23

Most don't. The and the some that do get it most fail and very few become huge life changing things. And, but don't, but don't you think, like, okay, so Sean, let's say that you got really bullish about your e commerce concept,

01:07:37

and you'd raise ten million dollars. Like, let's say, like, in the age of Casper, when e commerce is super hot and DDC is crazy and the valuations are high, and you go out and you raise ten million dollars.

01:07:48

And now you're stuck where you're going, you know, what I really want is to pivot this into a lifestyle business because that's what's logical for what you want. And imagine if there's a structure where you didn't have to feel feel like a piece of shit because you can never get your investors money back. Right? And what I've seen is the incentive

01:08:06

creates this situation where the founder is sitting on a business that could make them happy and give them a great lifestyle. But they have a gun to their head and so they continue down the venture path even when it's actually futile and won't work and they drive the business into the ground. So it's worse for the employees It's worse for the founders. It's worse for the investors as well because the investors just go to zero instead of at least making a reasonable return.

01:08:29

So and it is kind of like private equity, but you gotta remember private equity doesn't take risk on what could be. Right? Private equity invests in what is. They they will say, your business does ten million dollars EBITDA. I'm gonna assume it's gonna be eleven,

01:08:43

twelve, thirteen, fourteen, not venture, which is your business does two hundred k revenue, you're assuming you're gonna get to two and then twenty over the next three years. Right. Right. So it's a different form of capital in my But isn't the problem, like, let's say I take that ten million and I take it where I sell, let's just say, ten percent of the company in that round. And what you're saying is that in the event that things don't grow as fast two years now, from now,

01:09:08

that ten percent becomes thirty percent for the same million dollars. It becomes whatever. It's just numbers like that. Totally. So,

01:09:16

but isn't the problem that they probably have burned the ten million along the way trying to get the thing to grow.

01:09:22

Hiring people, marketing, whatever else they're gonna do. And now they still need money, and now they have all these people. So you're gonna have basically like a combination of things. It's like We're gonna have to lay off a bunch of people probably as we shift strategies to more of the lifestyle type of business to be more profitable.

01:09:36

We're gonna wrap it up those investors who go from ten percent to thirty percent. The ten million is gone, so I still need money to run the thing. Most likely, I need to maybe raise some additional capital. So I'm gonna raise more money but on those lower terms dilute everybody, it just becomes kind of like

01:09:51

it's like it's a sad rainy day. Now, or am I thinking about only that's it. I think I just fundamentally have a problem with founders who raise money at

01:10:00

a very, very high valuation

01:10:02

with the knowledge, especially from people who are not VCs.

01:10:07

Right? So, you know, you've seen a lot of this.

01:10:10

There's lots of people,

01:10:12

in our world who have raised very, like, on businesses that, you know, we've looked at, and would value it, like, maybe five or ten million dollars. And they've gone on crowd funding platforms or something. Can you give an example? I raised tons of money. No. I don't have trading names.

01:10:27

No. But there there's lots of people. And there's I I'm not singling anyone out. Literally, there's like ten or twenty examples I can think of. And frankly, it's, like, it's opportunistic. I get it. You know, you wanna raise on great terms, but I have a fundamental problem with taking money from someone when I know I can't give them turn or there's like a five percent chance.

01:10:46

And positioning it as, you know, you're investing in this super solid awesome thing that's gonna be huge or as cash flowing or whatever, And you're basically just taking someone from it's like going to someone in real estate and selling them on your tech startup. That we would all know as a bag of garbage, but because they're in real estate, they go, oh, this looks great. Yeah. I I actually, I I agree with you a hundred percent. And I I've really, really disliked that. I tweeted something out that I wanna get you guys' reaction to. So I tweeted something that

01:11:15

kind of,

01:11:17

I don't know, ruffles some feathers, I guess. So I go

01:11:20

I go one lesson. Let me pull it up exactly. Yeah. I like this one. I don't say it wrong, but,

01:11:26

I don't understand how this ruffled feathers, but go ahead. I go this year. I learned there is no, quote, smart money. Andres in Sequoia, Chima, Hager, tribe, Co two SoftBank paradigm,

01:11:37

Alameda, FTX,

01:11:39

they all made terrible financial decisions at huge size, and yet most will get richer.

01:11:45

They play a rigged game.

01:11:47

Jamath made money off of a bunch of his shitty specs because he's the promoter. And these funds manage billions of dollars and they'll make hundreds of millions in fees along the way as a reward, even if they lose their investors money.

01:11:59

They don't invest they didn't these aren't just companies that they invest in that start to underperform.

01:12:04

These are huge bets on fundamentally flawed assets. It's crazy. But the lesson for me, remember to think for myself,

01:12:11

don't use the justification that the big name is investing as any sort of signal. And remember that the smart money is just as dumb as me. I tweeted this out and I did it really fast. I probably should have worded it differently, but a bunch of people from these firms didn't really like what I was saying. I think Did they DM you or comment?

01:12:27

DM.

01:12:28

There oh, come on. The courage to comment and get into a tip about this. No way. There there's no way they're gonna they're gonna take that chance.

01:12:36

You know what? And I think the the I think part of it is I worded it poorly. I think they thought I was saying,

01:12:42

These people who are supposed to be smart are dumb and evil. And I think it's because like I said, like, you know, they play a rigged game. I stole that from Chris Sacca, who was a VC. He goes venture capital is a rigged game. You make money on the fees regardless of whether you get returns or not, and then you get their carry on the returns too down the seven to ten years later before, you know, before anyone figures out if you're any good at this or

01:13:03

but, you know, I think they people thought I was calling them dumb and evil. And actually, no, I think they're very smart.

01:13:08

My point was actually that even the very smart people are doing some really dumb things because it's a really hard game. And,

01:13:17

and I gotta remember to, like, you know, not use their conviction in something. To override my own

01:13:23

either cluelessness

01:13:24

or lack of conviction in something and be like, yeah, this is a good this is, I guess, it's a good idea. These guys are doing it. Guess I should put money and these guys are doing like the FOMO investing,

01:13:33

style. You know, I got burned on it.

01:13:36

I think this is one of the dirtiest things in our industry. So,

01:13:41

you know, if you're in private equity or you run a hedge fund,

01:13:45

you know if you're an idiot or a genius. In months or years. Right? When you're playing venture, you can take ten to fifteen years to see what a fund really does. And, yeah, there's markups and all this other stuff. But at the end of the day, to see realized gains takes a very, very long time. And so what you'll see is, you know, someone raises a hundred million and then five hundred million and then a billion And on a billion, they're getting a two percent management fee. So they're getting twenty million dollars a year. And let's think about what are the costs to run a venture capital firm? You've got someone as a custodian

01:14:16

managing your fund. You could if you wanted probably have three or four employees. I know benchmark manages three billion plus with like twelve or fifteen people. So these are not expensive businesses to operate. And I think that,

01:14:30

they make money

01:14:31

guaranteed

01:14:32

every year. And by the time that investors realize that over a ten year period they've underperformed,

01:14:38

they've already made

01:14:40

hundreds of millions of dollars. It's just absurd for taking very limited risk themselves and they win no matter what. And so I think this is something that will go away in the long term, and I'm frankly shocked that when you raise a venture fund, you don't have to Say, this is my budget. I'm gonna hire three associates, and my salary is this. That's all I'm charging you in fees. Instead, they get this thing where it's like, you get twenty million dollars of fees. And if you spend two million dollars a year in the office, you make eighteen million dollars a year. It's total hustle.

01:15:12

And this is why, like, our rolling fund and our private fund, we don't have we don't do any management fees whatsoever because I am allergic to this. I find it really gross. Yeah. That is crazy. The first two years of my fund, I took zero management fees. And then as I hired people, then I added the fund, but also my fund is so small. That two percent management fee of my fund is two hundred thousand a year. It's less than what I'm paying people to doing. I am I am taking a loss on my on the salaries,

01:15:39

you know, with that manager fee. But two percent of a billion dollars every single year is two hundred million dollars over the life of that fund. That you got as risk free reward, which is insane.

01:15:50

And so and then, you know, the other point I was trying to make was that, like,

01:15:54

There are times that you bet on something that's a business that's doing really well, a really healthy business

01:16:00

that, hey, you know, it didn't achieve the maybe it didn't get as far as we thought it would. So it was a two x instead of a twenty x or the something in the market dynamic changed a competitor or relation or the economy slowed down, and then they slowed down, and they they didn't end up, you know, achieving the dream that they had.

01:16:17

Versus,

01:16:18

like, the the investors are invest in FTX. If you're putting, like, like, paradigm, paradigm is the number one, like, you know, crypto

01:16:25

VC, crypto focused VC, and they put two hundred ninety million dollars into FTX, right, three hundred million dollar bet.

01:16:33

And they came out the other day, they go. We are writing our investment down to zero. We wanna assure you that this was a small portion of our overall funds.

01:16:41

And we had no idea what was going on. Like, we didn't know about this.

01:16:45

And you you think about it, you're like, first of all, the fact that a three hundred dollars a million bet is a small portion of your overall thing, like, That's true. I'm not saying that that's not true because you have a three billion dollar or whatever fund.

01:16:56

But, man, when people when when an outsider that f t that paradigm puts three hundred million at the at the f t. If they assume a couple things, f t x is probably a good business. And that paradigm, the smartest guys in the room are probably doing diligence to say, Hey, is this guy literally funneling customer money into his, like, his own trading hedge fund and, like, going and gambling with that money or not? Right? Like, he would hope somebody's doing the diligence.

01:17:18

And so,

01:17:19

you know, I I think that that's that's the and not to pick on paradigm. I still think these guys are really smart.

01:17:25

It just sort of shows in general that

01:17:27

the amount of diligence you would assume happens on large bet sizes like that is actually,

01:17:33

you know, nowhere near what it what it could or probably should be. And secondly, like, you have people like, like Shamath when he was doing his back for Metro. Right? Like, You know, we've named, basically, a couple businesses that all in pod. I think these guys are super awesome. I love the podcast.

01:17:47

They're super smart and successful. That's there's no no doubt about that. But you talked about bird. You know, David Sachs was the lead investor. I think at bird for, like, multiple rounds.

01:17:56

If I'm if I'm not mistaken,

01:17:58

And, you know, bird now is a seventy million dollar company, but, you know, these guys cashed out at the IPO probably, you know, over a billion dollars. And, you know,

01:18:06

You know, there you go. You're done. These guys were months ago laughing about Salana and how they, you know, just received all the Salana at the super low price, and they can't wait to dump it. And,

01:18:16

you know, now they're, you know, finger pointing at other people in crypto for doing the same that for doing the same thing, but not acknowledging it. Or, you know, Chamat took,

01:18:26

Friedberg's company Metramile Public through his back and said, Buffet had GEICO I had Metro My, a better business in all these ways. And, like, I don't know, less than a year later, Metro My sells for a third of what it went public for,

01:18:39

you know, it's to lemonade.

01:18:41

And so you, you know, you see this stuff and you think, are these people lying? No. I don't think that they're lying. It's just that investing in business is a really, really hard game and even the smartest people in the room are making really dumb things, really making really dumb decisions or dumb bets.

01:18:55

And in some cases, they have unfair advantages that you don't have. So it was a reminder to myself and to many other people out there who don't have those unfair advantages.

01:19:04

That,

01:19:06

you cannot take their backing or their involvement in a project

01:19:09

as a signal that this is a a winner or a good thing. That's my rant. When you just think about how much more powerful it would be if Shamath,

01:19:17

like, I would have a lot of respect if he had said Look, you know, we took Metro Mile Public. I thought it was my guy co. I put two hundred million dollars, twenty percent of my net worth into this business, and I lost it alongside of you.

01:19:30

Or I invested my warrants into equity and I I'd locked it up and I held it for three years or something like that. But, no, there's nothing like that. There's no alignment. And I think so often this comes down to alignment of incentives.

01:19:44

You know, they're they're incentivized

01:19:46

to do the bad thing. What was the general sentiment of the DM, Sean?

01:19:50

Like, fuck you or, like, you're right. Like, semantics, little stuff first. Like, we wait. We weren't an FTX. Like, dude, I'm not talking about FTX. I'm talking about these other three shitty bets. If you need me to name the names, I'll I'll do it that, you know, this thing you invested that made zero sense, you know, blah blah blah. So it's like some was we didn't make this mistake and then the other one is Look, this is just the nature of the game. It's venture. You should know this, but you have a venture fund. Like, you know, you're gonna have a bunch of zeros. And I said, I totally agree. You know, I I invest in seed

01:20:18

you know, startup ideas that are, you know, summer routine, a pitch deck, a prototype, or, you know, early stage product. I know a lot of these aren't gonna work out. It's very different than I put fifty or a hundred or three hundred million dollars into a business that was fundamentally like, you know, fraudulent or was, like, doing something that was,

01:20:36

you know, sort of self dealing, that's that's very, very different than, you know, we bet on this technology and it turned out the costs weren't in in a custom workout or that traction wasn't a it didn't grow as fast as we had hoped or whatever. There's there's different ways to lose in the same way I I would say in our business, like, There's errors of action and errors of inaction. If you're trying really hard and you make mistakes, totally acceptable.

01:20:59

If your error is that you didn't think about it or you didn't do anything, you forgot. You just dropped the ball on it. That's where I have trouble. And the same thing in investing. When he you can you can misjudge a business and think it was gonna grow faster or You know, it it got sideswiped by something else versus,

01:21:16

you need to put something into you put money into something that you should have diligence and you did.

01:21:21

To me, this is, like, yeah, if a sixteen z on average delivers value. Right? So as a portfolio,

01:21:29

They've created all this innovation. They've invested all these great companies. And, yes, there's gonna be some colossal

01:21:35

mess ups where they're gonna lose a ton of money I think that's great. What makes me sad is when you take the,

01:21:41

holistic result of an entire firm and you go, wow, over a ten year period,

01:21:46

they made tons of money and all their investors

01:21:49

lost a bunch of money or all these businesses were were zeros. That, I think, is the hard part. And again, This is a decades game. Right? Shamath,

01:21:58

we won't know if Shamath has actually built value for another ten or twenty years. And frankly, like his it's all very, like, secret because I think a lot of his stuff is private. So we really have no clue how much money he has, how much money he made,

01:22:12

what's been successful, what hasn't. There's a bit of a smokescreen there.

01:22:16

And I I, you know, I've talked to Shamaz before. I think he's like a super nice charming smart guy. And I'd like you. I listen to all in, and I I like those guys. And at the same time, I go, you know, wow. There's some there's some games. Yeah. And, again, I'm not saying that they do a bad job or that they did anything bad. I'm just saying the reminder to myself was just because this really smart person who you respect and is generally successful and has made money and probably will continue to make money is in something.

01:22:43

Like, you can't outsource your conviction. Like, you can outsource a lot shit, you can't outsource your conviction. So that was really what I was trying to say. I think I got a little too heated up and made it sound like they were dumb or evil, but that really wasn't what I was trying to say. It was actually they are smart But even the even though they're smart, they're gonna make some colossal mistakes along the way. They will probably end up fine, but you gotta make sure that you know that. You go in eyes wide open that smart person can do dumb things. And it sounds so simple, but it's, like, a reality is we all do this. We all take mental shortcuts. Oh, if these guys are in, we're in. If this if they say it's good, it probably is good. Right? And you have to do that to some extent, or you can't function. I can't sit here and diligence every business on earth. But, you know, you have to be, you have to At at the end of the day, you have to the reminder was to myself. Make sure if I bet on anything, and I wasn't an investor in FTX, for example. But, like, let's say I let's say I was or an investor in crypto or, you know, promoted Sam as a smart guy, like,

01:23:37

you have to try to,

01:23:41

Try to not lean on other big names as

01:23:44

your source of conviction.

01:23:48

Totally. I I remember I read, Howard Mark's book. So he's like a famous billionaire,

01:23:53

investor, value investor, and specializes in distressed debt. And I read his book and I went, wow. This guy's amazing. What a great investor.

01:24:01

And I realized there is ways to see what they were buying. So you can find out what all your favorite investors buy in the stock market. And so I went, well, I totally trust this guy. I read his book. It's incredible.

01:24:13

I'm gonna buy into this weird Greek shipping company that he just bought, you know, fifty million dollars of equity in. And so I put, like, a hundred grand into it and it goes out of business. And what I didn't understand was two things. One, he has thousands of positions, right, or hundreds at least, And for him, it's just a tiny little roulette chip that he's put down. And two, he's a distressed debt investor. So he might buy the equity, but he's buying mostly focused on the debt and expecting it to go out of business. So I actually screwed myself by not understanding it and just blindly going along with it. And I've made that same mistake, you know, hundreds of times.

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