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Unknown A
So that was the first golden goose. And you said you started stacking geese like a rapper, you know, at a club. So what's the stacking geese?
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Unknown B
I hope that becomes a term that we can use stacking geese.
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Unknown A
We gotta get some shirt. So Brett runs permanent Equity. You start off as a founder, started buying companies, and you then started raising money to buy companies. So you raised like something like 50 million bucks for your first fund. You started buying companies with that. Then a couple years later, you raised about $250 million to buy more companies. And now you own, I don't know, something like 16 companies that do over $350 million a year of revenue. And I believe what you said was $50 million of free cash flow out of the portfolio now, which is pretty incredible. So that's who you are. That's what you're bringing. TABLE and I think, Sam, what do we want to go with this? Because we could ask you about buying businesses. I have some questions around that. But I kind of want to start with something light before we go into like, hey, can you teach me how to be private equity, please?
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Unknown C
Yeah, we can do the light stuff. You also, you've got the, we call it the offshocks, Warren Buffett attitude where you've got a list of one liners. You write amazing annual reports. You're a great writer. So we have a bunch of one liners that we want to ask you about as well.
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Unknown B
Sounds good.
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Unknown C
What can you tell me? What's the. What do you buy and what are the biggest companies you buy? Like pool companies and H vac companies?
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Unknown B
Yeah, I mean, we typically, we've got everything from a children's clothing brand to a military recruitment firm to manufacturing, construction business services. I mean, it's really the 16 companies, it's a, you know, it looks like the island of misfit toys for us. They're companies that we love. The people who we get to work with, they're in industries that we feel like are not going to be changing. We can talk about how some of them maybe look like high change, especially like the children's clothing would seem high change on the surface, but it's actually not. And yeah, we try to partner with them for a long time.
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Unknown C
What's the biggest one in terms of revenue and profit?
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Unknown B
Let's see, our. In terms of revenue and profits, probably our fencing business out of Dallas, Texas is probably the largest. So we, we have a big market share in the, in the Dallas market. And yeah, it's a, it's a, it's a pretty sizable business.
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Unknown C
All right, my friends. So a lot of you guys who listen to the show, you listen because you want to start a company, but you're not sure what idea to choose, or you may not even have an idea. And you like our pocket as my first million because we've done a lot of the work for you on researching all these business ideas. Well, my friends, we've made life a lot easier for you because HubSpot, they just put together an entire list of all the resources that you can use to find a market opportunity to validate for your next business idea. So if you're looking for a market size calculator or tools to identify market trends or a huge list of ideas to get started. So if you're interested, there's a link below. Click it and you can have access to the whole thing. It's completely free. Now back to the show.
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Unknown A
I was gonna ask you a similar question. Like, you know, people are always like, you can't pick a favorite kid. And as an investor, you can. You have this portfolio, and, like, some are better than others, and that's okay. It would be weird if all of your companies were equally successful investments. I wouldn't believe you. And so what's like, the golden goose for you? So which one is like. Like, I know in my portfolio, right, I have, like. I have, like, a mini version of what you do where we have, like, four or five companies that we kind of have either bought or own a big stake in. And I could tell you I'd be like, oh, this was like, for us, like, the somewhere.com business was like my golden goose, partly because I got in on a great price, but also the business tripled since we bought it.
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Unknown A
And it's just this business that just spits out cash flow. And it's like the market keeps growing for this. People need this. And so for us, that's been the golden goose. It just keeps laying a golden egg every single month for us. What's the golden goose in your portfolio?
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Unknown B
Oh, we've been fortunate to actually, like, we've kind of stacked golden geese on one another is how I would describe it. So the very first business I bought is called Mediacross as a military recruitment firm. Bought that in very early 2010.
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Unknown A
Explain in the layman's terms what does that even mean? Military recruitment firm, what's happening?
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Unknown B
Yeah, so we at the time worked with two branches of the military. Now we work primarily with, uh, we had two contracts. One was to recruit civilian mariners into a division of the Navy called Military Seal of Command that resupplies the ships, never come into port. So it's about 1400-1800 civilian mariners a year recruited into that division. That's our responsibility. So we do all of the marketing and recruitment efforts and then the processing to bring them into that branch of the military.
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Unknown C
Does that mean, like, you're out, you're out on the street with people, or does that mean you're running ads and you own like a Legion website, all of that stuff?
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Unknown B
Yeah, we're doing. We're doing Legion. We have a whole processing center. We're actually doing qualifications for these people. So it's a complete soup to nuts operation.
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Unknown A
And the government just pays you per recruit, or how does that work?
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Unknown B
Yeah, we're on a fixed contract that escalates every year based on the staffing and needs of the business. So we. It's basically a staffed contract. And then we have, you know, sort of a built in profit margin that's on top of that.
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Unknown C
What do you get per recruit, per referral for one of these things?
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Unknown B
Oh, gosh, I don't even know because we're not. We're not based on that. Right. So we've done this for the contract is we've had it as a business for 30ish years now. It's been forever. And I mean, we're so deeply embedded into what they do, we know exactly what it takes. I mean, we are the outsourced function of that piece of military.
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Unknown A
And why is that business? Right. Is it because you got this cash flow, but you have this contract, so you have the certainty and defensibility with that? Is that what's great about that business?
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Unknown B
Yeah, I mean, so like, for the most part, we know what our profitability is going to be in three years from now. Right. And so once you get that business optimized and you get great people in place, and the leader of that business we've had, I mean, she's been with the business since the very beginning. So we're 15 years into the relationship, she's doing a great job, and it just. It clicks. So that was a. That was, I would call the original golden goose that allowed me to pay back the sba.
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Unknown A
I've heard you say you accidentally bought your first business. Is that what you meant when you say, what does that even mean? How do you accidentally buy business?
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Unknown B
Yeah, I got a call from a guy and he was like, hey, I want to introduce you to this guy. He's at your. He's in your industry. You Know, he said, marketing. Marketing. I'd launched a. Call it an ad agency for all intents and purposes before then. And he was like, he's in your industry. You should get to know him. And I said, okay, great. He's like, oh, by the way, the guy's. He's gotten left at the altar for the second time trying to sell his business recently. And I was like, oh, okay. I guess I could take a run at it. I had no idea what I was doing. I was 24 at the time. No idea what I was doing. And I sat in front of this guy, and, you know, we talked about it and we negotiated, and he said, I've never selled you for the price you ask for.
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Unknown B
And I was like, that's fine. No problem. And I didn't talk to him for seven months. And then seven months later, he called me up out of the blue and said, just renewed, our largest account. Business is in great shape. I'm exhausted. I'll give it to you for the price you asked for, but you got to close all cash 60 days from now. And it was one of those where you kind of, like, you make the sale and, you know, they go down the elevator and you say, oh, shit. It was. It was like that, right? I remember getting off the phone, and I was like, oh, crap. Like, I just obligated myself to go buy. Like, buy a business. I have no idea what I'm doing.
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Unknown C
Did you know anything about digital marketing?
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Unknown B
Yeah, I mean, we did digital marketing work back then.
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Unknown A
You have a marketing agency. You stumble into this business, you're like, somebody tells you there's a chance to buy it, you're like, all right, I can try. He says, no. The first price, he comes back, you're not even following up. He comes back and says, hey, still interested. But if you don't have a lot of money, you're 24 years old, so you go to the SBA and you get an SBA loan for this thing.
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Unknown B
Yep. Correct. Yeah. I asked my newly married wife to sign a personal guarantee. And she was like, what's that? I was like, I don't worry about it. No big deal.
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Unknown A
You're like, good news and bad news. Good news, no prenup. But you do have to sign this other thing.
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Unknown B
Exactly. She's like, what happens if this doesn't go well? I was like, it's probably not going to be great. So, yeah.
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Unknown A
So for somebody's never done an SBA loan. Can you explain? Just, like, you put down X, you get Y, what's how it all works.
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Unknown B
Yeah, back then. So the requirements have changed a little bit. I think it's like 5 or 10% you have to put down now, and I think you can actually qualify with seller financing. I'm not an expert anymore in sba. I've only done the SBA one time, and that was literally 15 years ago. Back then, what I did was I leveraged the accounts receivable from the existing business as the down payment and then got the rest of debt through the sba. And so, I mean, I put very little cash into the deal.
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Unknown A
So you put basically zero down.
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Unknown B
I mean, it was. It was a lot of my money, but it was just tied up in other assets. But yes. I mean, in terms of actual cash that's going to be in my pocket was not a lot. I didn't have a lot of cash. And so, yeah, I ended up asking my buddy at the sba. He was part of the SBA lender. I said, hey, did you guys do, like, expedited SBA loans? He was like, not really. We don't do that. And I was like, well, I need it in 60 days. And he was like, that's really not possible. And I was like, can we make it possible? Like, let's try.
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Unknown C
How much. How much are you talking that you had?
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Unknown B
It was a million bucks. Yeah, it was a million dollars.
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Unknown A
And was this, like, your Ses candy? Like Buffett bought seas candy?
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Unknown C
Exactly.
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Unknown A
Returned like, a billion dollars in free cash flow or more than that to the headquarters over the last. Whatever, 50 years or whatever.
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Unknown C
It's.
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Unknown B
Yeah, it's like a 20x er. Yeah.
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Unknown A
So that's amazing. So that was the first golden goose, and you said you started stacking geese like a rapper, you know, at the club. So what's the stacking geese?
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Unknown B
I hope that becomes a term that we can use.
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Unknown A
Stacking geese. We got to get some shirts. You know, like, Rogan has, like, Jamie. I kind of have this, like, fictional studio in the room. I'm like, pull that up. Merch guy. Get on that. Like, there's merch guy.
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Unknown B
Yeah, Merch guy. Yeah. I mean, I knew. I knew so little back then. I remember my lawyer said, okay, we got to start due diligence. I literally typed into Google, do diligence. Like, I had no idea what it was. And I was, like, reading about it as he was talking. I was like, oh, yeah. We just ask questions like, how hard can that be? So anyway, it was quite the adventure.
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Unknown A
That's amazing.
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Unknown B
Another. Another anecdote on that deal was a week before closing. I said, okay, so I take all of my money and I give it to you. You take all the money out of the business. Like, how do I make payroll? And the guy was like, well, you obviously got a line of credit on the business, right? And I was like, no, I didn't. I didn't do that. And he was like, well, the business is going to go under immediately. And I was like, yeah, that's not good. What do we do? And he was like, well, you got to figure this out because you're getting ready to close on the business. I was like, can I get a loan from you? So he actually lent me money as a line of credit to keep the business operating, because I didn't even, I didn't even think about it.
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Unknown B
I didn't think about, like, oh, well, he's going to take all the money and there's not gonna be cash to operate the business.
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Unknown C
I was, I was with this guy this weekend and he was like, hey, should I start my own business? You know, I'm 28. I don't think I have enough experience, though. And I was like, yeah, I'm pretty sure, like, a lack of experience isn't, like, hasn't stopped a lot of people. You can kind of be like a. Kind of a dummy and get into it, and you'll probably learn in like, 6 months. And you are a good example of that. You don't really need to know much.
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Unknown B
Huge dummy. Exactly what you think about myself in.
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Unknown A
Like, the lean manufacturing part, like, kind of philosophy, they had this idea, like, just in time, right?
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Unknown C
You. You.
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Unknown A
You do things just in time versus doing everything ahead of time. And so just in time learning is basically what you did. It's like, oh, when I need to close, then I figure out what due diligence is. Then when I need to take over the business, I learn what working capital is. And you just, you learned each of the core concepts as you needed them, which is actually the real way that people learn rather than, I'm gonna learn everything up front. So then I'm. Then I'm fully prepared to now go do this. And like, in reality, that's not how. How life works. Yeah.
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Unknown B
And sometimes it doesn't work out. And I, you know, I joke that I'm forced up private equity for a reason.
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Unknown C
So what else do you own? That's awesome.
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Unknown B
Yeah. So the next business we bought was a. Was a pool business out in Arizona, and that was just with again, started accruing cash and started building it up and bought that business. And again, that one turned out to be a great investment as well.
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Unknown A
You say, you say that nonchalantly, like, oh, a pool business. But it's also like, dude, that would be really random. I don't think about full businesses. Nobody shows me a full business. So what were you doing? You're talking to brokers. Where does that deal come from, like, for you at that time?
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Unknown B
Yeah, so it was about. So let's see. So I had no idea I was doing. After I bought the business, the mini cross, in 2010, I was like, oh, that worked. I should do more of what works and less of what doesn't. At the time, there wasn't a lot of writing on the Internet about this. So, I mean, there's a little bit of stuff out of Harvard, a little bit out of Stanford around search funds, but there was very little activity online. And so I was like, well, I need to ask around. Like, are there other people doing this? I didn't even literally know that there was a thing called private equity. That's how little I knew. I mean, I started. Somebody was like, oh, you did a private equity deal? And I literally googled private equity. And I was like, turns out there's a whole industry people who do this, like, why would they not do it, like, in smaller companies?
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Unknown B
And that was my foray into it. And so at that point we said, okay, well, if we're going to go find other businesses, I mean, how hard can it be? This one just came to us. There must be just tons of businesses out there just floating around ready to be ready to be bought. And so we started reaching out to people and developed deal pipeline. And one of the deals that took us so that. That pool deal we first saw in 2012, I want to say, and it took us about three years to get the deal done. And it was just hanging around the hoop. And they actually went with two other buyers before us and ultimately had a good relationship with them.
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Unknown A
And so the between deal one and deal two was three years.
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Unknown B
It was five years.
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Unknown C
Sean, isn't it crazy how long things take? Like, Brent's, like a. Brent's a big shot right now. Like, you know, people know you and you, like, you're talking about hundreds of millions in revenue, but you started this in like 16 years ago. Like, that's. I mean, it's a huge success and everything, but it like, really goes to show you that, like, you have to grind for at least be consistent for a decade plus.
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Unknown B
Oh, absolutely. No, I mean, I say to people all the time. Like, if I'd been given $50 million to invest in, like, 2010, I, like, I would have lost all the money. Like, it just took so long to build up, like to make a bunch of mistakes. Make a bunch of mistakes that were low stakes. Felt like high stakes at the time that were low stakes in order to be able to warrant having more resources. And so, yeah, so at some point.
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Unknown A
Somebody did give you $50 million. How'd you get somebody to give you $50 million to go buy companies? Because I'd like that.
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Unknown B
Yeah, well, so funny story. I met this guy named Patrick on the Internet and literally he put out a tweet. Patrick O'Shaughnessy put out a tweet. And this is when he was like an analyst at his dad's firm. And he put a tweet about capital allocation. I responded, I was like, yeah, I can hop on the phone and talk about capital allocation. I didn't really understand what he was even asking. He was asking about public markets, like capital allocators and public markets. But I. I didn't know much. And so I just reached out and said, yeah, sure, let's talk. We get on the phone. He's like, so what are you doing? I was like, oh, I buy these, these small businesses. He's like, well, how much do you pay? And I was like, I don't know, like between three and five times. And he was like, what?
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Unknown B
Like, are these businesses going out of business? Like, are these, are these going under? Are these distressed? I was like, no, these are healthy businesses. He's like, I've never heard of this. What is this? And so we talked like two or three more times. And he said, well, can I come visit you in Columbia? And I said, sure. So we flew to Missouri and we spent a day together. At the end of it, he said, like, I want my family to invest in what you're doing. Like, I believe in what you're doing. And I said, sorry, like, we don't take outside capital. Like, I'm not going to do a two and 2010 year fund. Life looked at that. Don't want to do a Holdco and value the current assets and, you know, get saddled with a bunch of partners out on who they are. Like, life's good.
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Unknown B
Like, we're making a bunch of money and compounding and like, everything's fine. And he asked me the question no one else had asked me because we flirted with some family offices at that point. And he said, well, what would it take for you to take our capital. And I said, well, I don't know. He said, why don't you figure that out and get back to me? I'll tell you if we can do it or not. And so I whiteboarded out our current structure, which is like kind of the opposite of traditional private equity. So we take no fees of any kind, no reimbursements, any kind. There's no cash that comes from the portfolio companies or from the LPs to the GP outside. If we take a percentage of free cash flow above a hurdle as we return cash back, you got to redo.
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Unknown C
That last 20 seconds. Can you dumb that down a little bit?
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Unknown A
I got you, Sam. He's the guy working in Cinnabon that doesn't touch any of the Cinnabons. So he's in an industry where everybody's like, feeing up everywhere. They're just getting high on the sugar. And he's like, I'm good, I don't need that.
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Unknown C
Can we only do Cinnabon references or analogies? Because that was much easier than talking about hurdles and sprinting and whatever.
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Unknown B
Yeah, cool.
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Unknown A
Me too.
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Unknown B
Yeah. Well, so, okay, so traditional private equity, you raise a fund and you get 2% ish of the. Of the amount every year.
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Unknown A
20 every year, by the way, you get 2%, which is actually like getting 20% of the total correct.
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Unknown B
Every year for 10 years.
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Unknown C
Which is kind of insane, right?
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Unknown A
It's insane.
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Unknown B
I mean, people in private equity get paid well, because it's hard to do and not many people can do it. And it's a rare skill set. And yeah, I mean, it seemed high to me when I first looked at it, but I was like, okay, well, that's the market for it, so whatever. And I said, I don't need the fees and I'm already paying for the team and the overhead and everything. And so I don't need the cash flow from the fees. Just I want to be entrepreneurial. If we make money, like we want to share that making it together. And so that's our model. And we don't use debt, and we hold it for a very long time. So we have a 30 year initial term on our capital. Typically, a private equity firm will have 10 years. And most private equity firms use a lot of leverage, put a lot of debt on the businesses at closing.
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Unknown B
We typically use no debt. And so we're kind of in some ways the opposite of traditional private equity. And yeah, so I went back to and I said, hey, this is the structure I think would work that we would take capital and he and Jim, his father said okay.
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Unknown A
So I think I missed it. What did you do as the carry then? So you said okay, no on the 2% fees. But what did you do for the profit share?
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Unknown B
Yeah, so we get 40% of the, of the free cash flow businesses as we return back to the investors.
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Unknown A
So you don't, you don't have to return all the money upfront first. You just start participating from day one with 40%.
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Unknown B
Correct? Correct. But it's only on what we return back.
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Unknown A
Only on what you return back. Okay, great. And then you said you use no debt, correct?
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Unknown B
Yep. So these are completely unlabber, just buying all cash.
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Unknown A
All cash deals using equity from day one. Why don't you use like a little bit of debt? Like a little bit debt.
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Unknown B
Just a little icing on top of the Cinnabon.
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Unknown A
You don't do seller notes like nothing.
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Unknown B
We will occasionally do some seller notes, although we found that having the people that you work with be your creditors is not an ideal situation often. So we've really shied away from that as well. Yeah, no, we typically just close all equity and try to keep things super simple. And we think that the transitioning small businesses is difficult and it's pretty stressful on everyone. We can always lever them up after, you know, after we close. Although we haven't really done that.
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Unknown C
And if that's strictly like a lifestyle choice, you're just saying that just helps you sleep better at night.
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Unknown A
Yeah. Is it a financial decision or a peace of mind decision to not use debt?
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Unknown B
I think it's both. What I would argue is that the optionality that we have in doing some pretty interesting things with these businesses to grow them is much better when you don't have debt, when you're not paying all the cash to a bank. I'll give you an example. So we bought an aerospace business in 2019 called Pack Air. I don't know if you guys know this, but the aerospace business never goes down. It always just goes up in the history of the industry, never really has a problem. And I remember when we were closing that deal, one of the advisors to the seller said, are you guys idiots? Like this business doesn't ever go down. Why wouldn't you guys leverage thing up with debt? And we said, hey, here's our philosophy all stuff. Well, it's not like we actually knew what was coming down the pipe, but 2020 hits and we were literally the only business out there without debt on it.
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Unknown B
Like literally. And so we were able to Take all the cash flow that we were generating. We're still generating cash flow even though the business was down a lot and we were able to go out and basically make 10 years of progress in two years. And that business now is 7ish times the size is when we bought it. And everyone else that had debt is, you know, maybe grown a tiny bit from 2019, but not much. And so it's really been a transformative experience. We've had that happen over and over again in these businesses. Like, we never know what the future is going to hold. We know that there's me options to invest in really interesting things. If the cash flow is all going to the bank, you don't have that option.
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Unknown A
Right, right. I'm still using a little bit of debt, but I think that's good question.
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Unknown B
Never heard anybody.
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Unknown A
We've had a bunch of people come on this podcast and I'm always like wowed by their insights, their personality. I feel this way about you and so many people that have come on this podcast where I walk away being like, that guy's the man. Like, that person's a master of what they do. They're kind of a master of the universe. This is great. And it's so easy and it's so easy, but. And forget the easy part for a second. I'm just like, wow, that really works. And it makes sense what they said. They're kick ass. And then if you look at people over like a 20 year period or you know, like a longer period, 10, 10 to 20 years, there's this base question which is like, if you just put money in the S and P, you get some rate of return. Right. So like Sam loves to put money into the index and he's like, cool.
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Unknown A
I like that because I do no work and I'm going to. Do you want to get 8, 9%, something like that?
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Unknown C
I would be very happy with 8% per year.
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Unknown A
Okay, so 8% a year. And so to be smart and do a bunch of work, you got to beat that. And so we've had people come on this podcast that when they talk, they sound absolutely brilliant. And then later you look at the returns and it's like, oh, they kind of don't beat the index, actually. And I don't even think that's really like a knock on them or I don't even view that as like, they're not like a charlton. I just think it's really hard to beat the index, actually. So what do you try to do in terms of like your Rate of return and what. What's your score? So if the S and p is doing 90% of your compounding, what are you doing out of. Out of permanent equity?
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Unknown B
Yeah. Well, so I'm under all kinds of SEC regulation, so I can't actually talk a ton and I would love to talk about. But I can tell you what's been put in the letters or annual letters.
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Unknown C
What are you, what are you not allowed to say?
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Unknown B
I can't say anything that would be future looking. I can't say anything that would be inducing investment. I can't say anything that, that considered marketing because we're like top level, registered SEC finra, all the stuff.
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Unknown A
And what if we blink to that? What if you tell us in the weekly fit assets not. It's not on air.
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Unknown C
Just tell me where to stop.
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Unknown B
Yeah, yeah. So. So what I can. Here's what I would say. So we target the minimum underwriting that we have is we target a minimum of a 30% IRR is minimum we underwrite to. And we've historically been pretty significantly above that.
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Unknown C
Okay.
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Unknown B
But you know, we really think about term things in terms of cash, right. So I think it was last year that we talked about, you know, our total cash out IRR is in the low 20s and that's without any marks. That's about anything. So you stack marks and the growing. Obviously cash flows on top of that.
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Unknown C
And the numbers get pretty marks being the valuation.
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Unknown B
The valuations of the business. Yeah, that's cor. Correct. And so I mean if you, if you underwrite, I mean if you think about kind of the bottom line, if you're buying a business with no debt, right. So take the debt side off of it. You're just buying the business for all cash. And you know, let's say on average we're paying between five and seven times for a business kind of in that range. And let's say the business is organically growing 7, 10% per year and we're increasing that to sort call it mid teens a year, maybe low twenties. The math gets pretty amazing pretty fast. And that's without using any debt. And so I think that's where it's obvious from the outside looking in. There's gold in the hills. Right. If you look at small businesses, acquisitions, I mean this is not a secret anymore.
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Unknown B
I think when I first started talking about it and 15, 16, right. I remember going on Patrick's podcast when it was brand new. I remember Patrick being like, oh hey, I think about starting podcasts. I was like, yeah, sure, I'll help a friend out. Had no idea it was in turn to what it is. Right. But I remember going on there and people were like, shocked, you know, at like, what you could buy these businesses for. And people say, oh, well, that's not fair. It's an inefficient market.
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Unknown C
Is.
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Unknown B
Is inefficient. But it's inefficient for different reasons why people think it's inefficient, not because people are getting taken advantage of. It's inefficient because it's absolutely freaking brutally difficult. And it's so easy to lose a bunch of money. Like, I got to reach out last week and say, hey, I want to be honest, I'm looking for a job. My wife and I went all in. He was working at a big private equity firm based out of LA as an operating partner. He and his wife went all in on a business and it failed, and now they're bankrupt.
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Unknown C
What attributes make you and others like you successful versus this other guy not successful?
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Unknown B
Yeah, I mean, I think the, the in the beginning, if the first deal I've done gone south, and there's plenty of opportunities for it to go south. And so I would say a lot of our success is attributable to luck in the beginning. I mean, look, if you listen to any investor, if they tell you that the early stuff they did wasn't lucky, they're lying to you. I mean, I remember getting a chat, chat with Buffett about this, and I said, hey, tell me about Sandbourne Maps and Dempster Mill. And he was like, oh, my gosh. Like, he's like, if either those investments go wrong, there is no Warren Buffett. No one knows about Berkshire Hathaway. None of that stuff happens. Right? And they were that close. Like, that's how he met. When he met Munger, he asked Munger, hey, do you know anybody who could help?
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Unknown B
Help basically turn around Dempster Mill because it's, it's flailing. And if that goes under, like, my future is done.
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Unknown A
Wait, can you, can you. I don't know the story. Can you tell the story in more detail? So Warren Buffett almost failed at the beginning of his career. What was it? Can you tell the story?
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Unknown B
Oh, yeah. So he had 70% of his assets into these two investments. One was called Sanborn Maps and the other was called Dempster Mill. And this is early days of the Buffett partnership. So this is pre Berkshire Hathaway.
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Unknown C
What do those two companies do?
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Unknown B
So Saint Born Maps was A was a mapping company they basically had at the time that think about as intellectual property for maps. Right. If you needed to go build something or if you needed to navigate something, they had all the best mapping technology. And so that business was a publicly traded business. And I think he was a minority shareholder in it, but he's basically the controlling shareholder. That one, I think turned around independent of him installing new leadership. But Dinster Mill was a completely different story. He bought into that, took control of it, and the business was just flailing. So Dumpster Mill, I can't remember exactly. I think they were building, constructing mills of some sort, hence the name Dempster Mill. And it was basically the biggest headache. And he was staring down the barrel like I did. And, I mean, I can talk about the early days, like, we almost failed, like, five different times.
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Unknown A
So. Sorry. So he. He had 70% of assets in these two companies, but those are public companies where he's just a passive investor, or he was, like, owned the majority of those companies where he could make a change in them.
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Unknown C
Yeah.
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Unknown B
So I think that he had. He may not had a controlling stake in Sanborn, but I know he had enough shares where he could basically throw his weight around in that. I think Dempster Mill, I think he actually did buy a majority of it and have control of it.
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Unknown A
And so those companies, they're not doing well. And he said he goes to Munger and ask him something.
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Unknown B
Yes. We just met this guy, Charlie Munger, who had been back into town in Omaha, and he had kind of got a matchmaking by a mutual friend who said, hey, you guys are the two nerdiest dudes we know. You should know each other. It was like bromance, like love at first sight. They get to know one another. And I think it was actually Charlie who said, hey, like Warren, what's your biggest problem you're facing? And he said, well, I've got these two, you know, problem children, especially Dempster. You know, Dempster Mill, and do you know anybody? And Munger said, actually, I do know this guy. His name's Harry Bottle, and he's an accountant out here in L. A. We should go talk to him. And so they took Harry Bottle to lunch and pitched him on moving his family to the middle of nowhere Midwest and running Dempster Mill.
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Unknown B
Harry Bottle reluctantly agreed. Turns it around, makes Dempster Mill a, you know, a fortunate surprise on the upside. And, you know, again, he starts stacking geese, as we talked about. So at all times in the beginning, I mean, look you don't, you don't get to be successful by not taking risks. Like all investing is taking risk. And so the question is, just how much risk are you willing to take? And when you're younger and you don't have much, I mean, the only way to get ahead is by taking more risk.
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Unknown C
When you are doing all this research, are you an expert in the pool business or are you just an expert in looking at financial statements? Are you an expert in understanding how leadership thinks and how to find winners? What are you great at?
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Unknown B
I think I'm pretty good at seeing the big picture. So taking all those pieces, like I'm not the best financial analyst. The joke is I can barely open up Excel. Like, I'm not an Excel guy. I've never led the skill set. I've never learned. I never worked another firm. Like, I never took a finance class in my life. So I don't have a lot of the, what I call, like hard skills that you learn as being an associate or an analyst at a firm. You know, I think that I'm pretty decent at putting the puzzle pieces together and the negotiation. You know, I think, you know, going back to Buffet, he talks about I'm a better investor because I'm an operator, a better operator because I'm an investor. That's true. And I think operating and investing are two sides of it, but I think there's a third leg that's not talked about a lot, which is the deal making side.
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Unknown B
And I think that deal making side, especially as you get into more inefficient markets, becomes really the dominant skill set. So understanding how to put the puzzle pieces together. And like in that pool business, I saw a business that had a clear track record of growth. They were in a durable business. I mean, we kind of joke that, you know, people stop dipping their bodies in water for pleasure will be fine. It's been happening for a couple thousand years. I think it'll keep going. Like we try to have these, like very simple feces for everything. And so if you look at somebody already has a dominant market share in a market, they've had it for a long time. The business is growing, the market's growing. You know, you look at the business model of it and you say, okay, look, we're an asset light business.
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Unknown B
They're not investing in a ton of equipment. It's a very simple business model. It's find customers that want pools, do it better than they could do it themselves, and take a rip on that. On the upside, you know, you Start looking at, okay, who is the leadership and how you structure a deal and how you make sure everyone's interests are aligned. How do you continue to find talent to build a business? I mean, those are all I say. This is how to make it sound simple. It's not simple. It's very difficult. It's just not complicated.
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Unknown C
You gave one answer to the question. I think the real answer just was based off of your. How you were answering it. You are a really good storyteller. You are very persuasive and you have. You're. I could just tell you a good leader because of how you dumb things down to be relatively simple and easy to understand. Right, Sean? I mean, just him explaining that you're like, okay, that's. You're actually, you're.
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Unknown A
You don't get stuck on the midwit mountain, right? Like the middle. The middle part where it's an over. Over analysis, over, overthinking, over thesis out. You know, you're like, do I think that people are gonna stop dipping their bodies in water for pleasure?
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Unknown C
Exactly.
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Unknown A
All right, cool. You know, that's great. Do I think we're gonna get, like, do you think tech, you know, is AI going to take us out of the pool business? Nope. Okay, cool. So this is an enduring business. Great. We got that. Seems like this guy's been paying himself a lot of money every single year as the operator. Great. We'll probably be able to do the same. Also seems like this guy doesn't do any marketing. He does that. He doesn't have any ads anywhere. If we did a little bit, probably would help, right?
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Unknown C
All right, cool.
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Unknown A
Thesis done. Check, check, check. Right? So, like, not. Not overcomplicating things is a skill. I would also say, like, it seems like you have a good amount of level 2 luck, which is the action luck. Like you were talking about that Patrick O'Shaughnessy example. I thought it was a great luck example because you were like, you didn't have any investors. You're just doing this with your own money. This guy tweets out, hey, I'm looking for somebody, whatever, to talk to me about equities and capital allocation. So you reach out, right? And you reach out. You don't have some, like, imposter syndrome or insecurity that prevents you from reaching out. You take some action. And you've probably taken a thousand actions like that, you know, cheap lottery tickets where the downside is very low. The upside, if you made a valuable connection like you did, was pretty high, actually.
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Unknown A
So you filled Out a thousand of those scratch off tickets. And then he had luck on the other side, which was perception, because he's like, oh, you're buying this company for four times profit. That means, like, if you put in $100, you're gonna get 25% yield every year, even without growing the business. And wait, I'm in the stock market buying things at 25 times earnings and you're buying them at 4. So like, something is good. That makes a lot of sense. So he had that third level of luck, which is like, you, you could spot it, you could spot good luck when it shows up at your door. And that's why, you know, that was good on his part. So I think that's impressive to me. And a good reminder of like, you got to take action to get that action. Luck. And then when you know something and you spot something, what he did a great job was he flew out to Missouri, he got to know you, he pitched you, you said no.
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Unknown A
And he's like, he asked the magic question, what would it take? Whereas, like, you know, 10 other people could have done most of that and not gotten the result that he got.
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Unknown C
You want to spend more time talking about why you're successful?
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Unknown A
Let me ask you a different question. So I have, I have this goal. I want to retire my sister. So my sister has worked hard, she's got her own business, blah, blah, blah. And she wants to just have an easier life. So she wants to spend time with her kids, she wants to travel. Like, her business is brick and mortar. So she's stuck in a certain location where those businesses are. She can't really take her eye off the ball in that way. So I want to buy her a business. And I'm like, buying businesses sounds great. You buy a business that's already working, it's cash flowing. You hire a CEO or you promote somebody internally in the company to be the CEO. But I know there's obviously a lot of ways that can go wrong. And so if you're me and you want to retire my sister, where do you start?
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Unknown A
Like, what is your thought process around buying that first business that's going to get you to 300 to $500,000 a year of free cash flow. What would you. Where would you orient somebody who's trying to do that?
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Unknown B
Yeah, I think it's all about constraints, actually. I wrote a piece called how to buy your first smaller company. Like, literally, because this is a question. I get a lot from people, and I can remember I had no idea when I first got Going. And I mean the thing is everyone's got different constraints. Where do you want to live? How much do you want to travel? What do you actually know about, what are you, what are you good at? Right? So somebody with a very different personality type than me should be buying things that are very different than what I bought. Somebody who wants to live in LA should be buying things that are very different than, you know, living in Missouri. People who don't want to travel a lot or who want to drive to the, to the place. Like that's a very different constraint.
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Unknown B
Capital constraints. How much cash do you have available to be able to invest? I mean look like, you know, if you have, you can buy really, really high quality business assets. They're smaller for like 7, 8, 10 times. So if you want something to be more hands off, it's incredibly durable business model. You can get something that's either software, software adjacent. You can get something that has recurring revenue. Like the more you pay up into the value chain, I mean you're going to have decreased, I think total returns. But ultimately like there are easier businesses to run. So like there are like level 10 difficulty businesses. Like I would not recommend buying into your local restaurant. Like that would not be something I would recommend doing. Especially if you want to quote unquote, have an easier life. Like it depends on if you want the role of a hybrid investor operator, which really is you're going through a short season of investment and then really what you're doing is you're buying a job.
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Unknown B
Like that's one very specific type of way to leverage your time against your money. If you really just want to be in the investor seat, it's very difficult to only occupy the investor seat in the world of small businesses. It can be done. It's very, very difficult. The first three to $500,000 of cash flow coming from small businesses are very likely going to require a lot of sweat equity in exchange for that money.
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Unknown C
He, you should go to that blog post. He has a good Q and A. He goes, the question is how hard will I have to work? Harder than you've ever worked before. The opportunity in small business, in the small business market is dressed in overalls and likes hard work.
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Unknown A
Dude, you're poetic when you write.
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Unknown B
I love it.
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Unknown A
Yeah, yeah, that's great. You have some one liners that are pretty cool. Can we just get you, can I read you a one liner that you've said and you just kind of rant on it? So just basically kind of like make your case for this Thing. Why? Why you think this is true? Why you believe it? Why you think people should pay attention to this idea?
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Unknown B
This is a lightning round, right?
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Unknown A
It's a lighting round. Here we go. All businesses are loosely functioning disasters. Some just happen to make money.
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Unknown B
Yeah. Anybody who's ever operated business knows this is true. The only people who have issues with this are consultants. So if any time I've said this publicly, the only people who come at me are people who either got lucky the first time or have never done it. And, I mean, look, every business I've ever been involved in, it doesn't matter how profitable the business, how big the business. I got a pretty good view into some very large businesses. They're all highly dysfunctional. Why are they dysfunctional? Because they're full of people. People are messy. When you get a bunch of people together, that messiness compounds like. It is not a complicated concept. And so I just think that people should lower their expectations and understand what to expect when they get into a business. It's going to be hard. It's gonna be hard in different ways.
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Unknown B
Like, you know, the first time you put somebody through rehab, your guy doesn't show up to man the warehouse because there's been a domestic violence dispute and he's in jail. I mean, literally, like, these are things that we're having to deal with, these things that everyone's having to deal with. Now, they may come in different flavors depending on how professional the business is, but the reality is, these are things that happen.
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Unknown C
Sean, have you watched the Landman? I have. It's really good. It's a. For those listening, it's a show with Billy about Thornton, and it's about, like, the oil industry. And there's this great quote. It says, our business is one of constant crisis interrupted by brief periods of intense success.
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Unknown A
Yeah.
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Unknown B
How good is that? Yes, Yes. I have a. I have a quote on my wall, and it says success is founded on a constant state of discontent interrupted by brief periods of satisfaction upon the completion of a job particularly well done.
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Unknown C
All right, how about this one? The more humility a leader has, the more their business can grow. What's an example?
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Unknown B
Yeah, so look, what is humility? Humility is acknowledging reality for what it is. Um, and if you don't acknowledge reality, you can't get better. And so lack of humility is basically a defense mechanism.
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Unknown A
Right.
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Unknown B
This usually is one of two forms. It's either self protection or self promotion. And people are usually doing a combination of both when they're in some form of pride. Or arrogance. They're usually terrified, fearful. I mean, I can say this from experience. When I get prideful, it's because I feel like I'm not enough and I'm not gonna be enough. And I'm worried that I might not have enough. And so what is humility is laying that down and saying, hey, I want to see reality for what it is so I can learn and grow and become better. And that's the only way to do that, is to get feedback from the world around you.
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Unknown A
I like that. Lack of humility, self protection or self promotion. That was strong. Charlie Munger says this thing, he says, every time you see the word ebitda, you should substitute it with bullshit earnings. Do you agree or disagree?
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Unknown B
Yeah, for sure, I agree. I mean, like, look, EBITDA can be a useful tool in some very limited circumstances, but for the most part, it is dressing up something that is more than, than often obfuscating reality. So when you see ebitda, especially in the small business world, there usually comes a ton of capex, a lot of reinvestment needs that are on the back end of that. And what you have to really do is you have to figure out, okay, just in a steady state, what is the business actually producing in free cash flow? Like, we look at businesses all the time that are making, quote, unquote, making seven, eight, nine million dollars a year, that you ask the owner how much money they've taken out of business, and they're taking out maybe a million bucks a year, maybe 2 million bucks a year. I got news for you.
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Unknown B
For the most part, you don't have a business that's quote, unquote, making $7 million a year. You have business making one to $2 million a year. That's the reality.
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Unknown C
Have you guys, Sean, have you ever learned the history of the idea of ebitda? Do you know that's like a new ish thing?
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Unknown A
No.
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Unknown C
So basically, John Malone, I believe. Is that right, Brent?
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Unknown B
Yeah, Malone invented it.
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Unknown C
So John Malone, his nickname is like the greatest nickname. He's one of the cable cowboys. So John Malone, you would know him now as like the guy who owns or founded Liberty Media, which owns F1 and all this other amazing stuff. But basically he. He owned a cable company. It was like a small cable company. I think when he took it over, it was like 5 or 10 million revenue, something like that. Like relatively small. And he needed to get loans because he found that if he could just acquire way more cable companies, cable companies were incredibly sticky. And it was recurring revenue. I Should go out and buy a ton in order to go and get more cable companies, I need to borrow lots of money. And for some reason he came up with this idea that EBITDA was an amazing metric to convince banks to loan him money.
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Unknown C
And so he coined the term EBITDA because for his business he had lots of depreciation, lots of things like this. So he's like, no, no, just give me like the earnings before all of this. And I'm convinced banks to loan me against that. And that I think it was the 80s, the mid-80s became like the term. And I've hated EBITDA, I think, even as really stupid. But what I think that, like, is kind of insane is that we've all collectively agree that this is like the metric. And I always thought it was like, weird, but I never had the courage to say, like, this is stupid. And then I would like read about Buffett and all these guys and I.
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Unknown A
Was like, God, it's stupid, dude. I take the opposite. I'm like, this is genius. I need this in my personal life. I need this. I need the husband version of ebitda. It's like, you know, my, my behavior before, you know, before football, before taking up the trash. If you ignore all those things, I'm great. I'm amazing, actually.
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Unknown C
Well, it's crazy that, like, you don't pay your personal taxes on ebitda. You pay your personal taxes on cash FL or, you know, on a cash base. It's just there's so many reasons why this is insane. And also, you know what's the most insane thing? Adjusted ebitda. What the hell does that mean?
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Unknown B
Means wherever you want to be.
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Unknown C
It's. That's insane.
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Unknown A
You have another one, another quote. You said you either operate with high authority, top down, or delegated authority. Hell is in the middle.
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Unknown B
Yeah, so this is hard earned because I would say is I think everyone's temptation is to be high authority when you think there's something wrong, and then low authority when you want to be lazy. And that that combination just makes a mess of everything. And so there's really two ways to be involved with company. You either say, hey, this is what we're doing, this is how we're doing it. You need to get in line. I need people to go and execute this vision. Or you say, hey, I want to be supportive and helpful. It needs to be your vision and I'm not going to intervene even when I think that something's wrong. I'm just going to go along for the ride. And be helpful and very, very, very lightly intervene. And so you just have to choose. And I think there's both can work. I think both come with certain upsides and downsides.
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Unknown B
But you can't do the middle, because if you do in the middle, what you end up doing is you end up saying to the leadership team, hey, you're responsible, but I'm basically telling you what you have to do. And so it removes all agency from them, and ultimately, everything that goes right is going to be their fault, and everything goes wrong is going to be your fault.
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Unknown C
But to make the lazy. When you say the lazy approach, I'm like, yeah, that sounds great. Sign me up. Yeah, but that's hard. How do you make that work? You have to find the right person. And what attributes does that person have? And, you know, Buffett and Munger always said that, like, incentivizing manager was the number one goal of. Of what's their number one job. Is that true for you?
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Unknown B
Yeah, absolutely, 100%. If you're going to try to truly be investor, not an operator in the business, it all comes down to somebody has to do the work, and somebody has to exert judgment. And if you're not going to be the person to do the works of judgment, somebody else does. And you got to be interested, got to be aligned with that person. And so, yeah, when I say the quote, unquote lazy approach, I mean, ultimately, this is the only way you scale.
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Unknown C
Right?
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Unknown B
I mean, if you look. If you look again, we keep coming back to Berkshire. It's a good thing to think about, because when people say, hey, let's talk about how, you know, Berkshire, like, buys businesses and leaves them alone, that was not how they operated for a vast majority of the time that they've done it. Like, they had to do that eventually because they got to such a scale, they literally couldn't intervene anymore. If you go back and look at Buffalo News, like, Buffett and Munger were literally living in Buffalo.
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Unknown C
Dude, they're writing headlines. They're writing, like, have you ever read that, Sean? They bought a newspaper and they would literally, like, they were news guys. Like, they liked the news, and they were like, here's. I want this many ads on the page. I think the headline should be like, this. Like, they. Yeah, know this.
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Unknown A
This is amazing.
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Unknown B
Yeah, I was just saying, like, Buffalo News is a good example of, like, basically their. Their mode of operation until the call it early 80s, mid-80s, when they got to have so much money, they literally couldn't be involved in the stuff that they were doing was to be highly interventionist. I mean, they would be involved in the smallest of details. They would set the tone, they would help on marketing strategy, they would replace leadership. They, I mean, they were doing all the stuff that I'm doing. They would do all the stuff that anybody has to do. Because when you're small, you can do it. When you've got less capital and more time, you can do stuff like that. And by the way, the returns are higher when you can leverage your time against your money. It's an advantage, right? It's not a disadvantage. It's an advantage.
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Unknown B
But eventually you have a limited amount of time and attention. And as the money grows and your attention stays the same, that ratio gets thrown all off and you have no choice but to say, okay, I'm going to spread a much more thinly layered amount of judgment over a much wider thing of grouping of things, which means you have to step out of the day to day operations and then you have to hire people who can exert great judgment. And so Buffalo News, I mean, there's a great quote from Munger saying, hey, like, I'm down to my last, like, million bucks that I can put into Buffalo News. Like, after that, I'm calling uncle. Like, I'm out. I mean, it was. There's been various times in Berkshire's history, they've gotten. It's gotten very hairy. It was not a guaranteed success. And even when they had a lot of success, it still gets hairy in various points.
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Unknown B
And I think every business has that, though. That's like, what should be expected. Like, it should be an adventure.
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Unknown A
There's a great letter that you can read. It's from. It's in 1972, and it's the Buffett Letter to the Seas candy CEO. If you Google that, Buffett Letter to See's candy CEO. And he says, and because I went into this, I haven't, like, studied Buffett in depth the way that you would if you're gonna do private equity. And he. I just thought that, oh, he's this, aw, shucks, he sits at the table, he drinks his Diet Coke. He just allocates the capital and he hires great people and they just do magic. And this letter, I was like, oh, Buffett had the mind of an operator, right? Because he goes, dear Chuck, I was at a Brandy's a couple days ago. I have a few strong impressions to pass along, number one. And he basically, he starts talking, like details about the stores, because people are.
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Unknown A
People are going to be affected. Not only by how our candy tastes, obviously, but what they hear about from others as well, the retailing environment in which it appears, this class of the store, the packaging, the condition, like this is like Steve Jobs talking about the Apple Store, right? Like a product oriented person. And he just goes through, like, step by step, kind of like things that he thinks could be improved on, you know, in the store experience. And I thought, wow, this is different than what I kind of the impression you get when you hear about Buffett just sitting in his room reading all day, you know, making investment decisions off of, you know, financial, financial sheets.
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Unknown C
This is a great letter, by the way. How awesome is this that this was like a typewriter letter? Does that make it. Doesn't. Doesn't that make it so much more substantial?
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Unknown A
Totally. He licked an envelope for this one.
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Unknown C
I mean, I kind of want to like start sending letters like this. It just makes it feel like more authoritative.
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Unknown A
Let me ask you something, Brent. I have, like I said, we kind of. My business is a little bit different than yours, which is I create content. On the front end is the mullet. So I have content on the front end, which is what I love to do, what I'm great at. But media and content's not a great business model. So my back end is I basically start or buy businesses that I know I can, like, turbocharge. And we've done this maybe four or five, six times now, and it's going really well. But one thing I've noticed is if I drew a pie chart of what makes it work, it's basically like 60% of the battle was just the initial market selection. When we picked a project that was like the winds were blowing against us, it didn't matter how much effort we put in or how great the operator was.
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Unknown A
It was always just an uphill battle. And sometimes we pick these markets that are just like, it's a pull market. You're being pulled in. It's just a sweet spot. The people just need this. It's, you know, it's shooting fish in a barrel type of thing that creates a big part of it, the second part of it. The next, you know, I'll say like 30% is the quality of the CEO that we picked who's going to run the business. And when we pick a sort of limited CEO, we get limited success. When we pick an unstoppable CEO, we get like massive success. And the last 10% was just luck, like the ball bouncing our way on one or two things that could have easily not happened, but that they happened or you know, when the ones that didn't, maybe we missed out on something that we didn't see.
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Unknown A
I got a question about that second piece, which is hiring the CEO or evaluating the CEO, Evaluating the operator. I want to get better at that. If you sit down with somebody, you're recruiting an exec, maybe it's a. You're interviewing somebody who's maybe in the business that's going to become a CEO or you're taking somebody external to come run this company. What are you doing to. What are you doing that's like not obvious to get that assessment? Is there any little tips and tricks, anything that you've picked up that. That helps you find the right operators?
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Unknown B
Yeah, well, so actually I think this is a probably a pretty underappreciated aspect of being involved in small companies is all about the people, right. And so the better you can be at the people, the better it's going to be for the business. And, you know, we've really deep dived into, I would say all personality testing is wrong. Right. It just depends on what you're trying to get out of it. And so we have actually a huge battery of personality testing that we do for people to try to get as close to a 360 view of who they are.
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Unknown C
What do you use?
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Unknown B
Yeah, so we're doing a combination of Disc, Myers Briggs and something called Habit Story, which kind of has them see, like what are the habits that they built in their life and how are they kind of supporting who they are with the structure and apparatus around them. And I personally also do a lot of study of Enneagram. And so I think actually if personally for me, when I meet somebody, I'm instantly categorizing them is what I think their Enneagram number is. And I'm automatically categorizing them across the four main Myers Briggs.
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Unknown A
This is crazy to me. I thought that shit's just horoscopes for dudes. Like, do you really use this as like a core. Your core thing? That's amazing.
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Unknown B
Yeah. Well, so all of it tells you something about the person, right? So if you think about so Enneagram, most people don't understand this. So Enneagram basically tells you who you are at your worst. And there's. There's nine numbers and basically everyone falls into a number. And then you have what's called wings, which is kind of. Where do you tip from that number? So for me, I'm a three and I tip two. So a three is they call the achiever my Biggest insecurities is that I'm not enough, and I want people to like me. And so, again, if you. If anybody's proud of their enneagram, it means they don't understand Enneagram. Like. Like, it's not a good thing. Right?
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Unknown C
This.
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Unknown B
This basically tells you what are your deepest fears and what. What is your areas of greatest weakness. But if you can know that about somebody, you can see them, how is that playing out in their life? Right? So, like, I. When I'm in my least healthy, I'm a people pleaser. I say yes to way too much stuff. I don't tell people the truth. It's really unhealthy. It's highly destructive behavior. Right. I'm very focused on hierarchy. And my guess is that you guys have different enneagrams, right? I won't guess your enneagrams, but can you do it?
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Unknown A
That's great.
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Unknown C
Yeah, keep going.
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Unknown A
Do it. I can't wait.
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Unknown B
Yeah, yeah, yeah. My guess is, Shauna, you're a three. My guess is Sam's an eight. But what's three?
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Unknown A
And what's eight?
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Unknown B
The three is the achievable. So threes and eights both achieve, but for very different reasons. So. So threes achieve because they want people to love them. It's, like, less about the thing itself, and then eights really want the thing itself. So, like, as a three, like, I don't want money to just, like, want the. Want the money. I want the money because I want people to love me. Eights really want the money because they want the security and they want the power that comes with the money.
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Unknown A
So I want to learn the. I want to roll over so that I get pet and my tail can wag Sam just dog treat.
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Unknown B
Yep, that's exactly right.
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Unknown A
Sounds right.
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Unknown B
What do you think?
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Unknown C
Yeah, well, like, he's. He's describing everything in, like, the most positive way. So, like, yeah, it sounds great. I like that. And then I looked up who other eights were, and it's like Winston Churchill, Martin Luther King. I'm like, yeah, okay, cool. Yeah, for sure what you did. But you. Well, this is, like, crazy fascinating. You said, like, five different things, so can you give us the exact. So you said Myers Briggs, and then you said this other test. What's, like, the exact stuff that you're using?
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Unknown B
Yeah. So there's two things. One is, when I first meet somebody, I can walk you through what I do. And then I would say is separately from that, in a hiring process, we use that once we get serious about a candidate. Then we put them through a huge battery of testing to make sure we try to understand them. Right. For me, personally, when I first meet somebody, it helps me so much to be able to categorize them to what I expect based on just kind of how they're showing up in the world. In Myers Briggs, right? So you have. You have I and E. So are they introverted? Are they extroverted? Right. Are they S or they in. Which is. Are they. Are they in the present? Are they sensing or are they in the future? Right. Then are they a thinker or are they a feeler?
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Unknown B
Right, so they. Are they primarily excited about ideas or are they primarily excited about sort of the people themselves? Right. And then the last one is T and P, which is. Are they. Or, excuse me, J and P, which is. Are they very focused on rigid schedules and on creating order, or do they like to go and test and try a whole bunch of things? Right. And how all these, like, sort of stack up and combine really gives you a much more holistic view of who somebody is than when you then pair with enneagram. I think gives you probably those two together, I think, creates the most, the quickest and the most holistic view of who somebody is, where if you can get like a pretty good idea quickly of who they are. Like, how I would talk to somebody who's present oriented is very different than how I talk to somebody who's future oriented.
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Unknown B
And oftentimes, you know, we assume the whole world operates like the way we do. Like, my wife and I are literally the opposites in every single one of these areas. So you can imagine our marriage, like how she shows up and how I show up is so different. It creates all kinds of miscommunications. We've been married now for 16 years, and it really. We went through personality testing together about, oh, three and a half, four years ago. It was game changing in our marriage. It was, it completely explained a ton of behavior for her and for me that had been bothering us for a long time. And it was just largely how we're wired. So that's how we do it. That's how I think about doing it in the moment. That helps me relate to people a lot more.
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Unknown C
It's crazy. By the way, Sean, 16personalities.com is like, these websites are huge that are doing these tests.
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Unknown B
Yeah, yeah, yeah, they're really big. I mean, this is an important piece. I would say Five Voices is a really interesting one. They. So it's just the number five voices dot com, I think yeah, those guys have created. Steve Cochran and Jeremy Kubecheck are the two founders of that business. They've created an overlay for Myers Briggs that simplifies it. I think a lot of their stuff is incredible, and, yeah, we definitely use a lot of their work.
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Unknown A
Then we finish off with a quick tarot reading just to see how the future is going to go, and then we're all set. This is amazing.
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Unknown C
This is so good.
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Unknown B
You.
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Unknown A
You also have one thing I read that I really loved. You go. You have this, like, asshole test. Like, we don't know who wants to work with assholes. How do we sort of filter for that? Nobody's trying to present as an asshole in a job interview. And you said, like, you could eat with them, see how they treat staff. You could see them interact with their significant other. That'll tell you a lot in their home environment. And then you said, the most telling environment is travel with somebody. It is impossible to fake it. When you're at the airport, you're grinding through security, and if there's a delay, your true colors will come out. I thought that was great.
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Unknown B
Yeah, yeah, it's fun. I mean. I mean, honestly, the business we're in is predicting people's behavior. Like, that's what we're trying to do. And because of all these businesses are predicated on the people who run them. They're all going to have the risks. The primary risk of all these businesses are going to be the people. And so we're trying to get to know people.
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Unknown C
Have you guys ever been out with someone and they've actually been an asshole to the wait staff, though? Whenever people say about this, this asshole test, I'm like, I've never been around anyone. That's, like, rude, dude.
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Unknown A
You don't remember the dinner we were at where this happened?
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Unknown C
Yeah, but that was like, one out of a thousand.
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Unknown A
Yeah, yeah, it's true.
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Unknown C
This guy Sean, I went out with someone, and he was, like, shooing the waiter when he was like. It was. It was like. It was.
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Unknown B
It was.
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Unknown C
I was. I was ashamed I left that dinner.
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Unknown B
I'd be like.
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Unknown C
I felt like. Like I had just, like, participated in, like, a porno. Like, I felt like I was like, I'm so ashamed. Like, if people find out about this, like, I'm gonna be so embarrassed.
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Unknown A
That's rough. Wow, dude. What a fun episode. This is great.
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Unknown B
Oh, yeah. I really enjoyed hanging out with you guys.
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Unknown A
Built Brent, thanks for coming on, man. If you haven't, go check out his blog and his annual letters are pretty great. Follow him on Twitter. What's your Twitter handle? Brent Be Sure.
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Unknown B
Just Brent Be Sure. Yep.
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Unknown A
All right. Good seeing you, dude.
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Unknown C
Thank you. That's it. That's the pod.
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Unknown B
SA.