Codie Sanchez on How to Become a Main Street Millionaire: The Secrets to Profiting from 'Boring' Businesses

[00:00:06] If my kids ask me, what is the one podcast we should listen to to create financial security, wealth, whatever, this is the one I would recommend.

[00:00:18] Codie Sanchez is so smart and so thoughtful about business and her own success and how she's created her own success and the failures she's dealt with and coming back from those.

[00:00:30] First off, you have to read her book Main Street Millionaire and it's called Main Street Millionaire for a reason.

[00:00:35] Her idea is that it's the most boring businesses that create the most wealth.

[00:00:43] Everyone's chasing, oh, let's create the next AI dot whatever business and fine, that's good for them.

[00:00:52] But the most reliable way consistently for decades in America to create wealth, the way she's created wealth and how she explains it in her book Main Street Millionaire

[00:01:03] and she explains it on this podcast, how to basically buy for little or no money existing successful businesses in the boring industries, which she describes in this podcast, what she means.

[00:01:17] Well, listen to this. If you have any questions, ask me on Twitter. We'll answer everything.

[00:01:23] So here's Codie Sanchez, author of Main Street Millionaire.

[00:01:31] This isn't your average business podcast and he's not your average host.

[00:01:36] This is the James Altucher Show.

[00:01:48] I, you know, I think she caught me in a weak moment, James.

[00:01:52] No, but that's nice of you that you did that.

[00:01:54] I guess so. Yeah. Some virtuous signaling on the internet, but like the dogs are adorable, but they're the Belgian Maldenwein are like very intense.

[00:02:03] So it's not like having a bunch of my little kava poo, which is basically worthless.

[00:02:08] Wait, are those the really smart dogs, the big smart dogs?

[00:02:11] Yeah. They're the one that like the Navy Seals use to eat people's faces off of. They're not nice.

[00:02:17] Yeah.

[00:02:17] Very smart.

[00:02:18] My wife was just showing me a video of like one of those dogs jumping over a river, like, like an entire, like they're like amazing.

[00:02:25] Yeah. Or they can like jump up walls and like grab the ball in the air and just will never let go of the ball. You could like hold them around by it.

[00:02:32] We have a German Shepherd and I, I really can't stand it. Like it's always jump. I never had a dog before in my life and it's always jumping on me. It gets so excited. It pees all over the place when I show up because it's like, because I don't really like the dog that much.

[00:02:50] It is like desperate for my attention and like it senses that the little attention it gets from me, it, it, it, it gets desperate for.

[00:03:01] I feel like this is on brand for you. Like, I would think it was really weird if you had a German Shepherd running around and you're like, God, buddy, my best pal. Like that just doesn't feel like.

[00:03:12] Yeah. Though, I mean the thing about, and then we'll get into the podcast. The thing about being quote unquote on, on brand for me is that I unfortunately have not followed my own advice. I, I, for, for decades I wrote, I'm never sending my kids to college. All of my kids went to college. I said, I'm never going to own a home again. I own a home. I've always written. I don't like pets.

[00:03:33] I have three horses, two dogs and a bird. And I just suck at, at paying attention to myself because I still think I'm right about everything. I just, I guess I said earlier, I can't get talked into anything. I do get talked into everything. I'm a sucker.

[00:03:52] Well, they do say like the best marketers and salespeople are the most easily sold. Like I'll buy all of the things. Like I'll buy any book that comes out.

[00:04:02] Cause I'm like, yeah, I might. It doesn't mean I'll read it, but I'll buy it probably.

[00:04:06] Yeah. Like I totally judge a book by its cover. Like if it's a nice cover, I think this book is probably good and I'll buy it.

[00:04:13] Yeah. I kind of agree with that. I actually was obsessed. Oh yeah. I was obsessed with making the cover really nice. And then I was sort of chuckling to myself cause I'm like, I don't know that anybody actually cares about this, but that I, I want, you know, I knew it would be up behind me forever.

[00:04:29] So I was like, what if it's really ugly? And then I got to look at it for 10 years.

[00:04:33] No, it's nice. And I love the title main street millionaire.

[00:04:37] You do. Okay, good. They told me it's a terrible title at first.

[00:04:41] They're like, no, I think it's very hard to have a good succinct title that is both, you know, clever and just a few words.

[00:04:49] Like I actually, I really don't like subtitles at all. And I know every book has a subtitle. Your publisher makes you do it. How to make extraordinary wealth buying ordinary businesses.

[00:04:57] But I hate, like no one ever remembers a subtitle. No one, I don't read subtitles, but main street millionaire. I feel kind of like, oh, I want to find out what that is. It's, it's different enough.

[00:05:08] I want to open the book and, and like, what is that? What does she mean? Main street millionaire.

[00:05:13] Like I sort of know, but I don't really know what it means. I mean, I do now. I've read the book and know you.

[00:05:18] Well, I think the other thing I was thinking with the book cover at least, and then I'll shut up, but is the, that also somebody could be the thing.

[00:05:25] Like you could be like a main, you could be a main street millionaire. And then you also could read the book main street millionaire. And so I liked that.

[00:05:33] That's a good way to think about it. I like that because I always think of a cover as like a call to action. Like, like for instance, when I wrote choose yourself, that's like a call to action. And then I feel those titles are good.

[00:05:44] Wait, but choose yourself. Wait, what was your other really big one? I read choose yourself.

[00:05:50] I've had, I've had a bunch. I had, uh, uh, my most recent was called skip the line. I also had one that was the power of no.

[00:05:57] Oh yeah. The power of no is not a call to action. That was this publisher called me up and said, we'd love to do a book with you. And I said, let's do the power of now, but take out the W.

[00:06:09] And they said, deal. And so I did that book.

[00:06:12] That's hysterical. I wait. So choose yourself. I think was the big book I read from yours first. And then I read skip the line.

[00:06:18] But back when you wrote choose yourself, I mean, that was like sort of, you know, that was, that was rare or like a lot of people needed to hear that basically.

[00:06:27] Yeah. Like I, I feel like that part of like, like yours is the new type of business self-help, which is, which I really like now, which is just very specific.

[00:06:40] Here's step-by-step what you need to do. Here's what I did to make millions of dollars.

[00:06:45] Mine was kind of, I don't want to say inspirational, but it was, it was a lot of people were still reeling from the great recession and, and, and failure and loss.

[00:06:56] And, and so I described how I came back from that, but wasn't like right now, I feel like the general business self-help book, which is like, oh, how to lead to success or how to find, you know, how to, I don't know, how to, how to change yourself.

[00:07:14] Through charisma. I don't know. Just all these bullshit, like self-help books. Yours is very specific. And I really, I'm going to give, I was thinking, I'm going to give this book to my kids.

[00:07:23] I have to force my kids to read your book because this is what anybody who hates their job should be reading your book.

[00:07:28] Well, thank you. Yeah. Well, I felt like a lot of the inspirational books got written. Like you guys wrote those.

[00:07:33] Like if, if somebody was struggling to leave their job to like go strike out on their own, I would send them yours. Like, I don't need another one, you know?

[00:07:42] And so I think that, say habits, like how many more books on habits do we need? We're not really, we got James Clear. It's like to send him that one.

[00:07:49] So now it's like the next evolution is shit that hasn't been written on, or it's like cult of personality.

[00:07:55] And then the books kind of like go like this and then they die.

[00:07:58] Right. I think that's, I think, I think someone like you would be in danger of writing something like that.

[00:08:05] Fortunately you didn't, right? So everybody feels like, okay, I'm starting to get an audience or I have this huge audience.

[00:08:10] Now I need to have a book to sort of cement it because if all things being equal, the person with the book gets the speaking gig or whatever over the person who doesn't.

[00:08:21] So I was afraid you were going to do something like that. Fortunately you didn't.

[00:08:24] Thank you. Yeah. No, I about die on the inside when there's a book that could have been like a sentence, you know?

[00:08:31] You're like, yeah, the book is the, yeah, it's one thing.

[00:08:35] And I think that's, but there's a lot of great books today too, but there's a lot of books like that.

[00:08:40] I feel like, and now we have like, we have videos and you know, whatever.

[00:08:44] I know. Do you, do you find you read less because of YouTube?

[00:08:48] Not at all. I'm the opposite. I'm so old school.

[00:08:50] I don't think I learned well from watching something.

[00:08:53] Actually a loom video when my employees send me something, I like, that is a huge hack.

[00:08:58] Actually. I'm like, don't schedule a meeting, you know, don't write me a 42 page something.

[00:09:02] Put me a loom on two X with like a one page document.

[00:09:05] I'm happy as a clam, but like, I don't want to watch anybody's YouTube video for an extended period.

[00:09:10] So I read, I like to read books because you can skim them real fast.

[00:09:15] You could like find the one thing you're looking for, you know, the YouTube video.

[00:09:19] I'm like, Oh my God, you know, ah, when do we get to the thing that I want?

[00:09:23] Yeah, no, that's true. I could see that. Particularly if it's like a, an hour long video,

[00:09:27] which I hate five minutes is like my limit on videos.

[00:09:30] Yeah. But I think I'm old. I don't think that's normal. I think people these days want,

[00:09:34] like they love learning from video. I like podcasts. Like I really, I like this.

[00:09:38] I like listening to it. I don't even want to look at both of our faces. I just want to hear our little

[00:09:43] meat lips flapping and pushing out your hair. That's it.

[00:09:46] Your face is fine. I don't want anyone looking at my face.

[00:09:48] That's not true. You got a great face and great hair. We both have great hair.

[00:09:53] There you go. That's the one thing I can hold on to. But, uh, uh, so, okay, let's talk about it

[00:09:58] because I love this topic. I, I believe it or not. I can't stand the flashy tech businesses,

[00:10:06] although it's an exciting thing, AI crypto, all that, but this really is the way to make real money,

[00:10:12] which is I'll just summarize in one line, buying existing businesses that already make a profit.

[00:10:17] And the key of course is finding those businesses, buying them cheaply, expanding them, running them.

[00:10:22] And that's what your book is about. How do you, you know, like, I didn't know so many businesses

[00:10:27] are, are, are basically just shut down as opposed to sold. Maybe we'll start with that.

[00:10:33] Yeah. I mean, I was just, I was just doing research this morning, actually. So this is,

[00:10:36] this is hot off the press, but I was having my team pull together the, uh, numbers of percentage

[00:10:43] ownership of small businesses in the U S and it's pretty staggering. So when the U S was created,

[00:10:49] so let's even like, you know, around 1820, 80% of people were employed by themselves. So we were

[00:10:55] largely employed by 1870, only 33% were self-employed. So that was right after the industrial revolution.

[00:11:02] And then today we would be thrilled if we were at 10%, we're closer to 6%. And the way we know we're

[00:11:08] losing is Canada has beaten us. Can't the Canadians have a higher percentage individual ownership

[00:11:12] than we do. Why is that? What are Canadians up to?

[00:11:16] I don't know. It's the only thing they're more free about than we are these days. Um, but we need to

[00:11:21] dig further into the data. I mean, it might be most small businesses in the U S like more than 60%

[00:11:26] of businesses that are categorized as small businesses are just sole proprietorships,

[00:11:31] individuals that don't have any employees. So like increasingly, you know, we don't own anything.

[00:11:37] It's sort of like that trope that went around a while with the guy who either said it or didn't

[00:11:41] say it about you will own nothing and like it, except like that is what's happening to us. And so

[00:11:46] these small businesses, I think are a chance to push back because if they shut down all over the

[00:11:52] country, then there's going to be like 2% of people that own small businesses in the U S. And, uh,

[00:11:58] if we don't have ownership, I think it's a lot harder to be rich.

[00:12:01] And you know, you make a really good point in, in the book that we've been sort of scammed into

[00:12:07] believing that you could build wealth from a high paying job, like a high paying nine to five job.

[00:12:12] It just is not true. No matter what your salary is, like, I know people will make huge, huge salaries

[00:12:18] at whatever their lawyer, doctor, even CEO, they just can't, they can live well. They're not going

[00:12:25] to build wealth that way though. Oh yeah. I mean, taxes used to be a four letter word for me. I was

[00:12:31] like, ah, I'm just, my brain breaks and I don't want to talk about that. And that seems like that's

[00:12:34] for really rich people. But you know, even if you just look at the tax code, right? You know,

[00:12:39] if you, if you're an employee and you're in California or New York, then, you know, you're,

[00:12:44] you're looking at close to 50% income tax, uh, when you include federal and state. I mean,

[00:12:49] if you layer on sales tax, if you layer on property tax, I mean, we can get crazy with how much we're

[00:12:55] taxed in this country. And really there's only like two ways to push back on taxes and that's

[00:13:00] real estate ownership and, uh, ownership of a business or investments or, or assets. And so,

[00:13:06] you know, even if all things are equal, even if you make a million bucks and your employee versus

[00:13:11] a million bucks and you're an owner of a small business, you are making potentially, you know,

[00:13:16] 25%, 30% more money being a, being a business owner because of the way the government taxes us.

[00:13:22] So like, also if you sell a business, now you're talking about like a 15% capital gains tax,

[00:13:27] as opposed to a 40% income tax. So getting a chunk from capital gains as opposed to income,

[00:13:33] whether it's you sell an investment that you held for a long time or you sell,

[00:13:37] sold a business that I, that's the only way I've ever kind of accumulated money is like in these,

[00:13:42] in a big chunk that is taxed differently than income.

[00:13:45] That's a really good point too, because everybody obsesses on salary. And I think that is a

[00:13:49] really bad way to get rich. They think how much money do I make per year? What they don't realize

[00:13:54] is most people who are rich, they made it in big chunks. They, they had a rollercoaster ride that

[00:13:59] for a lot of it, they were like kind of flat to down. And then at one point they went up high.

[00:14:03] And that comes from being able to sell stock investments, a house, a business. And so,

[00:14:10] yeah, we, we do kind of obsess on that. And then actually this is like a little technical,

[00:14:13] but kind of fun that also, I think one of the ways we can push back on ownership today is we think that

[00:14:19] in order to buy a small business, we have to have a lot of cash, but another cool way that you can

[00:14:24] get around taxes for, for sellers of businesses is by doing seller financing. So instead of getting

[00:14:31] a big, huge chunk of cash, when you sell your business to somebody else and you go through a

[00:14:36] bank and you got to pay all the taxes upfront, even though it is capital gains tax at a lower rate

[00:14:42] or, or long-term capital gains likely because you've held a business for a long time.

[00:14:47] If you instead structure out the payments over time and you allow yourself to keep an LLC in order

[00:14:52] to have write-offs across around your business, you can really lower that tax benefit and the buyer

[00:14:58] of the business could use your future profits of the business to buy it. So slightly technical,

[00:15:03] but another way. But important. And we're going to get technical because a key, I think a real key

[00:15:08] aspect of your methodology here is how to buy businesses by having the seller of the business

[00:15:17] finance part of the acquisition. So you could actually pay, let's say a business,

[00:15:22] let's say a laundromat is trying to sell itself for a million dollars or $200,000. You could offer

[00:15:27] actually more for the business, but pay less upfront. So you can actually get control of the

[00:15:32] business and the control of the profit stream and control of managing the business. You could get

[00:15:38] that and do it faster as opposed to paying the whole purchase price upfront. Maybe you pay a little

[00:15:42] bit more, but the seller agrees for you to pay it out over the time from the profits of the business.

[00:15:47] This is a really important method in what you're doing.

[00:15:50] Yeah, you're exactly right. Yeah. There's some cool graphics in the book that, because I think a picture

[00:15:53] is worth a thousand words, right? Especially when you're doing a deal. If you can show somebody

[00:15:57] firsthand what it looks like, if you actually, if you structure the deal the way that is best for both

[00:16:05] you and them to win, then it's way easier to get better price in terms. And so we basically throw the,

[00:16:11] if we show the three different reasons why a seller would sell a business to you for $0 down using

[00:16:17] seller financing. And the first reason is you can, you can pay more for the business because you can

[00:16:22] say, Hey, the bank only gives me a hundred thousand for this business. But if you finance the business

[00:16:27] for me using seller financing, I can pay you 150,000 because we can make sure that the financials are

[00:16:32] real and we can do it over time, tranched investing. So I can pay you more money. And then you can go to

[00:16:37] the average small business loan takes 120 days to close. What if we close in like two or three

[00:16:42] weeks instead? So we can close way faster. I'll pay more. I'll get you your money faster.

[00:16:47] And then three taxes. Do you want to pay a huge check to uncle Sam or do you want to structure it

[00:16:52] out over time? And we can do some smart taxation strategies in order for you to not have to pay at

[00:16:57] all. I never thought about that. The tax part, which is because they can, because you're paying it

[00:17:02] out over time, they have more business costs, whatever they do in their life, they have more

[00:17:06] business costs over time than they could write off. So they do pay ultimately less capital gains on,

[00:17:11] on the business. Yep. That's exactly right. And then, you know, you can also change how you

[00:17:15] structure it over time. You can, if you're buying the business using seller financing, then you don't

[00:17:20] have, you know, you can get more creative with like, what is, this is very technical, but what you

[00:17:24] categorize as intellectual property in the business, which is better for them and worse for you

[00:17:29] as the buyer. You know, you could categorize like goodwill and what would be called like,

[00:17:35] you know, brand separately. And so you can negotiate a lot of this stuff that helps both

[00:17:39] of your tax burdens. But I think if you go to a seller and try to tell them any of this stuff

[00:17:44] straight up, they're going to be like, what are you talking about?

[00:17:48] Right. Like all they're going to hear is like, oh, I wanted half a million dollars and you're

[00:17:51] giving me $50,000. That's not good.

[00:17:53] Exactly. So you have, but, but, but I think, look, it's very interesting that most businesses,

[00:18:00] again, there's all these businesses run by baby boomers, as you point out, like a plumbing company

[00:18:04] or a set of laundromats or a self-storage company. And they just shut, they might be making millions

[00:18:11] of dollars, but they just shut down the business when it, when they're done as opposed to selling

[00:18:15] it. And so it gives you an opportunity to sort of step in there and buy the business. And I want to

[00:18:21] walk through some examples, but I think it's also important, this phenomenon you talk about in the

[00:18:27] beginning, the Lindy effect, that the longer our business has been around, the more likely it's

[00:18:33] to be, it's going to be around the same amount of time. So like if a laundromat's been on this

[00:18:37] corner and successful for five years, it's probably going to be around another five years at least.

[00:18:41] And that's an important concept. It's, there's two types of startups. There's one,

[00:18:46] oh, I'm going to make this new AI thing. That's an AI crypto thing. That's great. And it's

[00:18:50] going to be worth 10 billion, or I'm going to buy an existing business that spins off a profit.

[00:18:57] And which one's more likely to succeed? Obviously the business has been around five years.

[00:19:01] Yeah, exactly. Yeah. I mean, the Lindy effect was actually created in New York,

[00:19:05] which is kind of interesting, but from this exact idea that like, huh, if we took a thousand

[00:19:10] businesses and looked, which of these businesses will be more likely to succeed in the next 10 years

[00:19:16] based on the data over the last 10 years. And you might say, well, Cody's laundromat versus James

[00:19:23] AI startup. And you're like, God, does anybody use laundromats anymore? Why would that still exist in

[00:19:29] 10 years? That's probably going to be taken over by robots. And you're like, James's AI startup,

[00:19:32] AI is hot right now. Everybody's loving it. Well, if Cody's laundromat had been in existence for 10

[00:19:37] years and James AI startup had been in existence for six months, we know that my 10 year business has an

[00:19:43] 80% higher likelihood of succeeding than your six month startup.

[00:19:51] Take a quick break. If you like this episode, I'd really, really appreciate it. It means so much

[00:19:56] to me. Please share it with your friends and subscribe to the podcast. Email me at

[00:20:01] alcatra at gmail.com and tell me why you subscribed. Thanks.

[00:20:14] And this is really interesting. Like everybody always says, oh, don't do a startup. You have a 90%

[00:20:19] chance of failure. This is how people talk each other out of doing a startup. But if you buy an existing

[00:20:24] business, what really is, and particularly your focus is on these boring businesses like a car wash,

[00:20:30] a laundromat, a preschool, whatever, what really is the odds of success in if your startup is,

[00:20:39] oh, I'm going to buy an existing business? Yeah. Well, the way to determine, so if you were

[00:20:44] going to say, Cody, tell me how likely I might've failed if I bought a profitable existing business

[00:20:49] that had been around for at least five years, what would your answer be? Well, I'd say,

[00:20:52] let's go to the SBA loan default rate and let's see what it is at the worst period and the best

[00:20:57] period. Worst period, about 25% of SBA loans defaulted. Okay. So you have a 75% chance of

[00:21:06] success with an SBA loan during the worst years. Best years, there was like a 7% default rate.

[00:21:11] So we're talking about a 93% chance of default. Now, I think those could be a little higher because

[00:21:16] there's something called workout, which is basically the banks may be like, ah, we're going to sell some of

[00:21:21] the assets. We're going to move stuff around, but the entrepreneur still doesn't really get anything.

[00:21:25] So let's say it's like 30% and 15% or even 35% and 20%. We're still sitting at double to triple X,

[00:21:34] what a brand new startup has as a survival rate. And so it's just a totally different way to think

[00:21:40] about entrepreneurship that we're not taught because it seems like only rich people buy businesses.

[00:21:46] Yeah. And to your point, again, I think we've been fooled into thinking, oh, I better get a really

[00:21:52] good job because that's safe. And yet, you know, laundromats in the great risk, it's not like people,

[00:21:58] you know, stop doing their laundry in 2008. Like they keep going. And I think the key is

[00:22:05] avoiding anything that's cool or hot. So on the one hand, we talked about AI crypto, but even like

[00:22:11] restaurants, people buy a restaurant because they, they like food, they want to buy a restaurant.

[00:22:19] It's not because like there's an amazing, that, that is one area where it's just kind of like a

[00:22:23] vanity thing or, or a hotel you mentioned is also like maybe a vanity type of purchase, but something

[00:22:28] like really like, like I'll, the guy I bought this house from, he was in the business of buying

[00:22:36] garbage and sifting through it for steel and then getting the steel, extracting the steel out

[00:22:43] and selling. He made millions of dollars. Like that was his business and made millions of dollars

[00:22:48] doing that. I love that. They're all around, you know, I saw this really sad little post today on

[00:22:52] Twitter that, that hurt my heart. And, uh, as Twitter does sometimes, cause it's been a cesspool,

[00:22:58] but it was, it was basically this, you know, it, this guy says, um, I think my son is embarrassed

[00:23:04] that I'm a garbage man advice. And it talks about how he went to his son's school yesterday.

[00:23:09] And, you know, I told the kids that I was a garbage man that picks up their trash every day

[00:23:13] and that his son seemed a little embarrassed, uh, by the end. Cause all of those other parents

[00:23:18] were lawyers, banker scientists. Well, in the book, actually the first chapter is talking about one

[00:23:22] of my favorite billionaires, which is Wayne, uh, Hazinga who built waste management. One of

[00:23:28] the multi-billion dollar companies, uh, American companies that, uh, he started as like a, he was

[00:23:34] a total fuck up. You know, he, he basically, um, went to school, couldn't get a job, really wasn't

[00:23:40] very good in the military either, got out of the military and ended up driving a garbage truck.

[00:23:45] And his colleagues talk about being like, Oh man, I saw Wayne the other day. You'd see him driving a

[00:23:49] truck. I better go get a gig. Cause it's that hard out here. He can't even get a job.

[00:23:53] And turns out he turned that one little garbage truck into then a $500 purchase.

[00:23:58] of another garbage truck, cheaper trucks back then, obviously to a multi-billion dollar enterprise.

[00:24:03] Then he owned a bunch of sports teams, you know, dated models, all the things. And, um,

[00:24:09] you know, it all started from garbage. And so I think we got to get over ourselves about like

[00:24:14] the titles mattering. It turns out that if you, if you build something that people need and, uh,

[00:24:21] they will pay you for it and you make money for it, you're cool. And so, you know, you're not just

[00:24:26] cool. Cause you have a tech backed startup or went to Harvard, you know?

[00:24:32] Yeah, no, I, I think, you know, even as an investor, I like this. Now this gets technical.

[00:24:37] I like investing in roll-ups like a company that, you know, they're in every region. They,

[00:24:43] they do, you know, air conditioning fixing. Like they buy companies that do HVAC,

[00:24:48] you know, I don't know what you call it, installations and fixing and so on companies

[00:24:53] like that, where it's like the, the more you buy, the more you're able to kind of get these synergies

[00:24:58] at the backend and the profit goes up, the multiple on the profit, uh, goes up as you get bigger.

[00:25:05] It's just like a solid business idea. That's going to work if you have good operators and these,

[00:25:12] these types of investments never fail. They're not going to return like a thousand X,

[00:25:15] but they might return like a solid 10 X, which is still great. And those are like perfect

[00:25:20] investments, but they're boring. You can't convince other people to invest alongside of you. Oh,

[00:25:25] I'm investing in this air conditioning company. You want, you want in? No, no,

[00:25:29] just show me the AI crypto thing. Yeah. Right. Well, I think you and I got burned too many times

[00:25:35] on these startups. Like I've lost millions of dollars in startup land. And the only way I would do

[00:25:42] startup investing again today is in a fund structure where it's like, that's the right

[00:25:46] amount of money. It's, you know, a couple of my millions, millions of other people's or not

[00:25:51] millions of other people, other people's millions too. And it's dedicated to a 90% failure rate.

[00:25:57] We just know it. But like, I think we did a disservice to a lot of humanity by like these

[00:26:02] crowdfunding platforms and saying, Hey, let's all go invest in these startups that have an extremely

[00:26:07] high failure rate before we've even made our first million bucks. It's just probably not a good idea.

[00:26:14] Yeah, I agree. Like, well, tell me, how did you make your first million?

[00:26:18] I worked for other people. I was an employee when I made my first million bucks.

[00:26:23] So you did, so you did build some wealth as an employee, as a salaried employee.

[00:26:26] Yeah. Well, I think that like the cheapest MBA you can get is working for a big corporation.

[00:26:33] Like, I mean, Goldman Sachs and State Street and Vanguard, they spent hundreds of thousands of

[00:26:39] dollars training me when I knew nothing. And I was like a little young idiot, you know, running around,

[00:26:44] not kind of knowing anything. And so, and they even paid for part of my grad school degree.

[00:26:50] And so I think a corporate training ground is incredible. And I think if I went back again,

[00:26:56] I wouldn't stay so long. I stayed for a really long time, like 12 years or something.

[00:27:00] Um, I think, but I think having a first couple of years at really hard jobs where you work for other

[00:27:06] people means that you're not going to lose your money out the gate. You get to learn on their dime

[00:27:11] and you get to get paid to learn. So I'm actually a huge proponent for that. I'm not so huge of a

[00:27:15] proponent for like MBAs. I think this is a really important point. MBAs, you learn nothing the day you

[00:27:21] learn it. It's out of, it's out of date already. The professors are out of date. Like, what do they

[00:27:26] know about running a business today? Cause they became a professor 20 years earlier. And it's

[00:27:32] just, and you're spending like hundreds of thousands of dollars to go to school when, like you said,

[00:27:37] you're, I would say this is an important point. Like you worked at Goldman Sachs.

[00:27:41] Every industry has one or two places that are like the gems of that industry where you look at the CEOs

[00:27:47] of all the other companies in the industry and they've spent time at that gem company.

[00:27:51] So like I also did a similar route. I worked for three years at HBO, which was like the gem of

[00:27:58] the entertainment industry. Like the CEOs of any other entertainment company at that time

[00:28:01] came from HBO. And it was, I learned so much about business. I only did it for three years though,

[00:28:08] which is about what I would recommend. I feel like 12 years is too much.

[00:28:11] Yeah. Way too much. At least if you want to be an entrepreneur, I think there are plenty of people

[00:28:16] that are like, you know what? I just want to stay in my job forever. I like what I do. Don't bother me

[00:28:20] about it. I don't need to be a psychopath running a P&L and responsible for everybody. But I still

[00:28:26] think even if you do want to just quote unquote, just still really important, be an employee,

[00:28:31] then at least you should get some skin in the game. So some upside, invest in things on the side.

[00:28:37] What I worry about is like, you know, we saw it happen. Layoffs.io or layoffs.fyi,

[00:28:43] that incredible website where they started tracking all of the tech layoffs. Remember that in 2000?

[00:28:48] Well, I remember fuckedcompany.com.

[00:28:53] Same thing.

[00:28:54] Yeah. And I was always looking for my own company on there.

[00:28:58] Oh yeah. Because it was like a free indicator, right?

[00:29:02] Yeah. Yeah. And people would complain about the company and you'd hear all sorts of stuff.

[00:29:06] But how did you then, when did you start making the leap from a job to,

[00:29:12] like when did you buy your first business?

[00:29:13] So I bought my first business when I was an employee and I had like three kind of failures

[00:29:18] at it first. I bought, first I bought like a marketplace, a tech company that I really didn't

[00:29:24] know what I was doing. It didn't work out very well. It was a-

[00:29:28] Like an online marketplace?

[00:29:29] Yeah. Fashion styling. It was called Threads Refined. Total idiot move. And I didn't lose that much money,

[00:29:35] but I didn't make that much money. Then I bought a consulting firm. I really liked buying a job there.

[00:29:42] I just didn't make very much money doing that job.

[00:29:44] I feel like if you buy a total service business, it's hard to scale.

[00:29:49] Yeah. Well, that one was almost like, it would be like buying one consultant's Rolodex, right?

[00:29:56] It was like one guy doing a thing and I basically bought his clients. And so that would have worked

[00:30:02] okay if I already had a consulting firm, I think, and I integrated it into my business, but I didn't.

[00:30:07] And so it just ended up being a lot of work. But then I ended up buying a laundromat and that one

[00:30:14] actually worked out well for me and turned into a series of other laundromats and then car washes.

[00:30:20] But that was, I mean, I was in finance working a 60 or 70 hour week when I started buying these little

[00:30:27] side businesses and making kind of a lot of money because I just was too scared to leave my job.

[00:30:33] I was like a total wuss. No, it's hard to make that leap. Like I had, when I was working at HBO,

[00:30:39] I started my business on the side and I was going to my startup all night and then back at HBO all

[00:30:48] day. I didn't sleep at all. And I stayed at HBO for 18 months after I started my business because I was

[00:30:53] afraid to take that leap. And also when you're at Goldman Sachs or a really great company,

[00:30:57] you realize people return your calls because you're at Goldman Sachs, because I was at HBO.

[00:31:02] They might not return the calls when you're at just some startup like everyone else. And I was

[00:31:06] really afraid of that. Oh yeah, me too. Well, and I mean, I did all the goofy things early too.

[00:31:11] Like I started a pod, I must've started a podcast in like 2010, which I really should have kept that

[00:31:16] thing going. Maybe that would have been turned out well, but it was so funnily named. It was like

[00:31:20] the struggle isn't real or something like that, which I think was just me trying to manifest the

[00:31:24] opposite of what was going on in life. So I did the Rolodex of like tried a bunch of things. And

[00:31:33] I think a lot of us, I came from immigrants. So my dad in particular and my mom, they just

[00:31:38] really wanted me safe. They wanted me to just make money, be happy, stay in a steady job, be easily

[00:31:46] married, have a couple of kids, just like take it easy. And so I think I tried to stay in their

[00:31:52] sphere for just decades because they thought that I was crazy for leaving a place like Goldman Sachs or

[00:31:58] First Trust or State Street. They're like, why would you do that? And so I do think we often become,

[00:32:03] you know, we build our own prison of other people's expectations of us. And then, you know,

[00:32:08] my friend Bill Perkins says it best. He's like, I remember he said to me, he's like,

[00:32:12] you have zero risk. And I'm like, what are you talking about? I have zero risk. Like I could lose

[00:32:16] all of this right now. Look what I've built. I could lose it at any moment. Like that still

[00:32:19] horrifies me. He's like, so what? You going to die? Are you going to be homeless? Are you going

[00:32:24] to starve? I'm like, maybe. I don't know. He's like, no, that's totally unrational. None of that's

[00:32:29] going to happen with your network and skillset. You could go become a bartender and probably make

[00:32:33] a hundred K a year. Like you need to get over yourself that you have total risk. He's like,

[00:32:38] what you have is ego risk that you want to play the relative game and you don't want to lose your

[00:32:43] relative posture, which is a real mental risk, but not physical risk. And that changed my mind a lot,

[00:32:49] made me take more risk because he's right. And Bill's very interesting. He's been on the podcast.

[00:32:54] He basically built up a net worth of 50 million and then quit. And why that's interesting is everyone

[00:33:01] around him was obsessed with building up a net worth of over a billion. And it's easy to get caught up

[00:33:06] into that mindset because you're, you, we're all in like, we all choose our hierarchies.

[00:33:10] And if the hierarchy you choose is everyone around you is, is you're a failure. If you make only,

[00:33:15] only quote unquote 50 million, you're going to go for that billion. But he pulled himself out of

[00:33:19] that and now he lives the life he loves. So, but, but like in that first laundromat would

[00:33:25] maybe walk us through that. Like, like, did you do seller financing? Like, how did you find it?

[00:33:30] How did you structure it? Cause this is sort of the, the, what people really should be doing.

[00:33:34] Yeah. So the first laundromat I had, I think there's three legs of the stool to buy in a business.

[00:33:39] So I call it the business buying tripod. And so you can basically have money capital,

[00:33:43] you can have experience or expertise, or you can have time, sweat equity. And so for this individual

[00:33:50] deal, I was working a lot. I had no time and I had no expertise. I didn't know anything about

[00:33:54] laundromats. I don't even know how to do my own laundry half the time, like not my area of

[00:33:58] expertise, but I had some cash. I had a hundred K and so a hundred K was not like nothing for me.

[00:34:05] Like I, I, that money was important to me, but it wouldn't bankrupt me if I lost it. So in that deal,

[00:34:12] I used the hundred K outright, didn't do a loan, didn't do anything fancy and bought this laundromat.

[00:34:18] But my leverage was that I found a guy who had run a laundromat before, but inside of his real

[00:34:24] estate endeavors. And so he ended up running it for me. And then I ended up finding some more

[00:34:31] laundromats for us to tack on and he would run them. And then-

[00:34:34] And was it profitable enough, that first laundromat, was it profitable enough that you could pay him,

[00:34:39] pay all your costs and still have profit for yourself afterwards? And did you calculate that

[00:34:43] into the deal? Correct. Yes, we did.

[00:34:46] So you found some laundromat, like some old guy had a laundromat for sale. It's been,

[00:34:51] had been around a while and we could talk about how you find those things in a little bit,

[00:34:55] but you, you made the deal and you found the operator because you didn't have time to operate

[00:35:01] it. And there was enough profits somehow in this mix. And you calculated this out beforehand that

[00:35:06] you could pay the operator, pay yourself and potentially invest a little in growing the business.

[00:35:11] Exactly. Yeah. We basically at the time, I probably wouldn't do this again, but we split it 50, 50.

[00:35:15] So I think at the time, the laundromat was making like $67,000 in profit when we bought it. The profit

[00:35:21] was really the guy's salary for running the thing, right? So $67,000 wasn't like the most amount of

[00:35:28] money for me at the time, although that's a great amount of cash in a deal that you only paid $100,000

[00:35:33] for. But was this, was the $67,000 after paying the operator?

[00:35:37] Sure. That was after, well, he was a little unique because we split the $67,000 like down the middle,

[00:35:45] basically. That didn't end up being what it was by the end of the year, but for illustrative purposes.

[00:35:49] So yeah, so I paid him, let's call it just about $25,000. I took $25,000 and made a little bit less

[00:35:55] than we thought right up front. And, um, and he was willing to only take $25,000 to run it because I was,

[00:36:02] I sold him on this idea of like, let's buy a couple more.

[00:36:05] And one way to think about this, I just, for the, for the listeners is if you have $100,000 or $10,000

[00:36:11] or whatever amount, if you put the money in a savings account, you get 3% interest. If you do

[00:36:16] what you did, you're getting, you invested a hundred thousand, you're getting 25,000 a year out of it.

[00:36:22] And that's 25% interest. So with minimal work, cause you had an operator, I'm not saying you did

[00:36:28] minimal work ultimately, but I, in a worst case scenario, it would be minimal work and you're making

[00:36:33] 25% a year on your hundred K. That's exactly right. And then the part that I think a lot of

[00:36:37] people don't think about is your real goal. The 25 K is awesome, but your real goal is let's make

[00:36:44] the laundromat more valuable so that if I buy the laundromat for, you know, a hundred thousand dollars

[00:36:50] and then I grow the laundromat two or three X. Well, when I sell a laundromat, even though I,

[00:36:56] if I grew up by two to three X, that might also mean that I get to sell it not for two to three X

[00:37:01] more, but maybe for four to five X more. This is a key point that people don't understand.

[00:37:05] Like as you grow a business, it's kind of the calculus of it. The first derivative is, is positive.

[00:37:12] So the more you grow the business, the, the, even more you grow the value of the business.

[00:37:18] So if you grow the business 50%, the value of the business might grow a hundred percent.

[00:37:22] Yeah, you're exactly right. I mean, it's really easy to see with graphs. That's what I tried to do

[00:37:26] in the book is show you like, all right, if you buy it for this and you make this much money on it,

[00:37:31] then versus a saving account, this is, this is how you're doing. You're doing relatively pretty good.

[00:37:35] But if you grow out this much, then you sell it, then you're doing really good. Then you've just

[00:37:39] like, you know, gotten your salary back in two to three years. And then what do you do?

[00:37:42] You take another portion of what you've made, you put it in another business and you do it again

[00:37:46] and again. And so like amateurs always yell at me about that first deal. They're like,

[00:37:50] this is a shitty deal. $67,000 isn't enough for all the headaches that come with laundromat.

[00:37:55] And my point is like, I don't ever say that buying a business is easy. I do say that it's simple.

[00:38:01] And that once you've bought one and you figured out how to scale it, it's super worth it.

[00:38:06] If you can learn this skillset.

[00:38:23] And how did you scale that first laundromat? Like what did you know about scaling laundromats?

[00:38:27] Yeah. Well, thankfully I knew a lot about marketing and sales. So, and my father was in

[00:38:32] commercial real estate, so I probably had an unfair advantage there.

[00:38:34] But laundromats are all really about visibility and notoriety. And so we did the, remember like

[00:38:43] when you go outside of places and you see not the wiggly guy, but they're like a sign that kind of

[00:38:47] like wiggles in the air. So we did those outside, you know, with, with the name on it. We did a little

[00:38:53] bit of a facelift on the front of the laundromat, nothing expensive. We just put these like

[00:38:59] tented signs out front. So people knew we did little things like book.

[00:39:03] Uh, we did like a book, um, event once a month. So it was like, Oh, come for coffee and like a book

[00:39:09] trade. You can have free books. And so it was like community outreach basically just to get more

[00:39:13] people aware of what we were doing. Um, then the other thing that we did, so that was one,

[00:39:17] so more notoriety. Um, the second thing that we did is we increased the, uh, average order value

[00:39:23] of each individual. So back then I probably wouldn't have even known that term very much,

[00:39:26] but basically if, if originally they might only spend, I don't know, three or six bucks with me

[00:39:32] doing a couple of loads of laundry, could I also sell them the soap? Could I sell them the, um,

[00:39:38] dryer, you know, sheets? Could I put a gumball machine in there so that now they're spending not

[00:39:44] three to $6, maybe now they're spending, you know, nine to 12. Um, and so I've maybe done,

[00:39:49] it's not that dramatic, but you know, I've maybe increased my individual order value of each

[00:39:54] customer by like 25%. Well, that's material. Can I, can I, I'm sorry to always interrupt,

[00:39:59] but like each thing is passing. So I want to comment on that a little bit. When, when somebody

[00:40:03] starts a business like this, it's, it's very, I find it's very hard for people to raise prices

[00:40:09] because they feel like they know their customers. They feel like they're betraying their customers

[00:40:12] if they raise prices. But almost every small business that I've given advice to over the past,

[00:40:17] let's say 20 years, the first thing I tell them without even thinking about it is just raise

[00:40:21] your prices because, because I know they have, they're like personally attached to the price

[00:40:26] that they're charging and they always find they don't lose customers and they're able to,

[00:40:31] sometimes they're able to like even double their prices and, and just make double the money. It's

[00:40:36] great. You're, you're so right. You know, the average small business they say is anywhere from

[00:40:41] 30% to 300% underpriced versus what the market is, which is like crazy numbers. Um, and so I think

[00:40:50] you're right on average, we don't realize that for things like, you know, if you ask me like,

[00:40:55] what does it cost to mow the yard? Like I don't exactly know. And so if my lawn man was charging

[00:41:02] me a hundred bucks to mow my lawn every other week, but he increased it to 120 or 125, that is a

[00:41:09] material impact on his business. Probably not that material to me. And so, but you know,

[00:41:14] my landscaping guy for instance, landscaping guy, for instance, he literally James, I have to chase

[00:41:19] him to pay him. He like, doesn't have auto pay. I still give him a check. He's definitely never

[00:41:26] raised my prices. He's never upselled me on anything ever. He's never cross sold me other

[00:41:31] people's products. I mean, he's a perfect example of a business where you're just like, Oh man,

[00:41:36] like all the time I like, Jorge, like, do you want to do my tree trimming? And he's like,

[00:41:40] yeah, sure. I'll do it. I'm like, why don't you tell me that? Like once a year,

[00:41:43] that's like a thousand bucks that you could get. And so it's just a lot of these people are

[00:41:48] tradesmen. They're not businessmen and women. And so, um, you get a chance to get in there and

[00:41:54] potentially help these guys make a lot more money or you buy the business. Right. So, so you have a

[00:41:59] laundromat, you could, as you mentioned, you could do a little bit of marketing to drive in some more

[00:42:04] customers. You could sell them more things. Like I like the gumball machine, just, just put things in

[00:42:10] there to encourage people to spend a little bit more money. You could raise prices. You could sell

[00:42:14] them kind of related items like soap. And you mentioned this in the book, you can even buy

[00:42:19] your own soap company. So you could, you know, you're getting the soap wholesale and you could

[00:42:23] sell it retail. Uh, you could, you could, you know, wash and fold and deliver for them. So you could,

[00:42:30] you mentioned in the book, you could expand by buying a small delivery business of some sort.

[00:42:34] And there's all these ways to scale. And then you could, you could take profits and buy the next

[00:42:40] laundromat. And two is going to be, it's not one plus like we were talking about before. It's not one

[00:42:45] plus one equals two. It's one plus one equals three now. Cause the, now it's a chain of laundromats

[00:42:49] with just two. So it's, it's valued more. Yeah, it's exactly right. I mean, I'm, and I met a couple

[00:42:54] of the other day that I just like, you know, when you look in an entrepreneur's eyes, James, and you've

[00:42:59] just like, you're like, Oh shit, you're, you're going through it right now. Like you could just

[00:43:03] look at them and be like, Ooh, how's the business going? Like I can tell. And I was in a laundromat

[00:43:09] the other week and, um, they had started it from scratch, which I just think is a really tough

[00:43:14] thing to do. And I would never advocate for because each machine costs like 30 K in a laundromat.

[00:43:21] Plus you got all this weird build out you got to do with like pipes and water and electricity and,

[00:43:26] um, some zoning stuff sometimes, depending on how you get rid of soap.

[00:43:29] So anyway, it's like kind of an expensive build out. And so I saw this big, beautiful

[00:43:32] laundromat and we were talking to the owners and I was like, you guys just, you know, you

[00:43:36] built this, how you doing? And she was like, Ooh, you know, we, she's like, it was miserable.

[00:43:41] It cost us $2 million to build out this laundromat. It was nine months over, uh, the timeline to

[00:43:48] execution. She's like, we almost went bankrupt. She's like, it's beautiful now, but like, we are

[00:43:52] going to have to, I mean, a $2 million laundromat to build out. Um, you know, if the average

[00:43:59] laundromat makes 15 or 20% profit margins, I mean, we're talking about not getting your

[00:44:03] money back for years and years. And so, um, fully recouping your, your cost of capital.

[00:44:09] And so for her, I was like, if you did one thing differently, what would it be? She was

[00:44:14] like, yeah, we should have listened to you. We should have bought a laundromat instead.

[00:44:17] And I was like, yes, like so many of these legacy businesses already exist. And we're

[00:44:23] getting sold ideas of how to make them like fancy and, and shiny and new, but we could

[00:44:28] do that over time, little by little, like our parents used to redo our houses, right?

[00:44:32] Like, you don't remember like growing up, I remember living in a construction zone, like

[00:44:36] three or four times, like, like a whole part of the house, like tented kind of, you know,

[00:44:41] and they were working on one part. Now, what do we do? It's like, we build a whole new house.

[00:44:46] We totally redo the thing. And I think business is the same way. It's like, how can you be

[00:44:50] just 1% a little bit better every day? And, um, you'll be shocked at how much money, more

[00:44:54] money you make if that's all you do.

[00:44:56] Yeah. And, and I think people, I think people underestimate every aspect of this. Like,

[00:45:03] let's say now you want, instead of doing $2 million on the build out, you could buy

[00:45:07] with that $2 million, you could probably buy several laundromats. Like talk about how do

[00:45:11] you find, like, how do you arrange the seller financing? How do you, what is it? Like, how

[00:45:16] do you convince someone to do it? Why is it beneficial to you? Yeah. And so on.

[00:45:20] Well, we have a couple of things. I was trying to find the book that I had already written

[00:45:24] notes on, but of course I, uh, can't find it. I think my team stole it from me, but the,

[00:45:29] the one that I already took notes on, there's a, uh, there's a segment in here that, uh, I

[00:45:34] think is really important. And it's basically talks about how to find the right

[00:45:37] seller avatar. Yeah. And so for most, for most people going to buy a business, if you're

[00:45:44] going to go buy a business from 30 year old Cody, who's growing her business double digits

[00:45:47] every year, who's only been doing it like three to five years and likes what she does. That's

[00:45:51] a terrible seller financing avatar. And so we have this checklist in there that's like,

[00:45:56] okay, has the person been in business over five years? Is the person over X age? Is the

[00:46:02] person in an area or an industry that is, uh, growing at like three to 5% growth per year,

[00:46:09] which is pretty average for a small business. And do they have some version of the seven D's,

[00:46:14] which are, um, you know, disease, dullness, departure, disagreement, distress, divorce,

[00:46:23] death, death, good one. And, uh, if you have one of those, you often have the perfect seller avatar.

[00:46:30] And so that's what we're trying to look for. And that's because like, let's say someone dies.

[00:46:35] Now the kids have to sell, have to either shut down the laundromat and I'm using a laundromat,

[00:46:40] but it'd be a car wash. It could be any of the number of businesses from the industries you mentioned,

[00:46:44] but let's keep with laundromat as our placeholder. But the kids might've inherited a laundromat.

[00:46:51] Now they have to pay tax on it. They don't want to run a laundromat. They just have to sell it.

[00:46:55] That's exactly right. Yeah. Or there's a fight inside of the, um, business and one kid wants it

[00:47:01] and one kid doesn't, but one can't afford it. And so they got to sell the business outright in order

[00:47:05] to get the cash out or there's a divorce and the, the, you know, the husband can't afford to pay the

[00:47:10] wife, uh, you know, what, what her payout is unless they cash out the business. There's so many reasons,

[00:47:15] but a lot of these days it's really retirement. Like that is the, the number one big one is

[00:47:21] that the entrepreneur is tired. They don't have an exit plan. Their kids don't want to take over.

[00:47:26] They want to move. They're ready for the next adventure. Um, and this is their example. I mean,

[00:47:31] I was just talking to a seller the other week and the business was making right around $400,000 a year.

[00:47:38] They were probably doing two, two and a half, uh, thousand dollars in revenue. Um, so that's a

[00:47:44] healthy business, 400,000 in his pocket every year at the end of the year. And he'd been running

[00:47:49] that business for like 12, 13 years. And before that he had another business just like it that he

[00:47:54] had sold. So like in aggregate, he had actually run a business like this for probably like 30 years,

[00:47:59] but just, you know, two shots on goal. And, um, you know, when I asked him, I'm like, so why,

[00:48:05] why are you looking to sell this thing? You know, you're making nice money. You appear to have a good

[00:48:09] life. You got a good team going on there. He was like, you know, I just realized that this isn't my

[00:48:13] favorite thing to do every day anymore. You know? And so I'm getting a little older,

[00:48:17] you know, he and his son are really into pickleball of all things, which is like a new whatever.

[00:48:22] And so he's like, I can still kind of play pickleball right now. And he's like, I don't

[00:48:24] know how many more years I got without it. Like my son. And then I got a grandkid coming up. And so

[00:48:28] he's like, so I just, you know, I want to spend more time playing pickleball and I want to spend

[00:48:33] more time with my church. And so because of that, I'm kind of ready to sell, but like,

[00:48:37] I'm not in a fire sale. And also I don't actually need the money because I've been making 500 K

[00:48:41] a year for 30 fucking years. So he's actually sitting pretty. And, um, and these are so common.

[00:48:47] Um, but the problem is they're not always listed publicly. They're the ones where you got to go

[00:48:52] find them. Yeah. I think again, it's one of these things, people have a shame factor. Like

[00:48:56] they don't want people to know their son. They don't want their employees to know they're selling

[00:49:00] their business. I don't know. It's like a private thing almost.

[00:49:03] Yeah. I mean, if you think about it also, you get like probably a little nervous that your business

[00:49:08] is going to implode if you tell people. And so for a lot of these guys, this is the first business

[00:49:13] that they've ever run and definitely the first one that they've ever sold. So they've never done this

[00:49:18] before. Anytime you've never done this before, it's scary. And what kind of business was it?

[00:49:22] Can you say? What kind of business did that guy do a home services business? Yeah. He actually had a

[00:49:28] flooring restoration company. So, um, they did cleaning and restoration, I think, because he had a

[00:49:34] recurring revenue component, which was nice. That was his cleaning business. So he would come into

[00:49:39] like corporate centers and he would have contracts just like, you know, to come in and clean, but then

[00:49:44] he would also restore floors. And I don't know exactly what kind of floors, but, um, I see. So it

[00:49:51] wasn't dependent on him necessarily. It's just, he had a process, the business had experience and

[00:49:57] reviews and testimonials and he was able to send anybody in and restore the floor and so on.

[00:50:03] Yeah. And, and, and what kind of deal would you structure with someone like that if you were to

[00:50:07] buy the business? I mean, 400,000 a year profit. I typically go to two to three X. So, um,

[00:50:13] So like you would offer, let's say 800,000. Yeah. And he would probably say no at 800,000 and he

[00:50:18] probably want more like a million for it. I find also seven figures is often like a number that a lot

[00:50:24] of people want when they sell. Um, so he'd probably say no, he might try to push me up to like 1.2,

[00:50:29] 1.3 for it, but I think that would be too much. So I'd probably do something like I'd start at

[00:50:34] 800 K and at 800 K I'd be pretty happy. I'd do a reasonable deal there. Um, but then if you wanted

[00:50:40] a lot higher than that, that's where I'd start layering on some terms. So I'd say, well, I could

[00:50:44] meet you at that price level, but we're going to, we're going to pay X now and we're going to pay

[00:50:49] this other amount. If you hit all your metrics over X period of time, and you're going to have to

[00:50:54] stay on a little bit to make sure that we hit those metrics. And then what's like a typical deal?

[00:50:59] Like let's fill in the numbers. Like what, what's a deal you've done where you were able to pay less

[00:51:03] upfront and do an interesting structure? Yeah. Um, I mean lots, but let's, let's take a really

[00:51:10] tiny deal as an example, and then we could go bigger. So the one that I was proposing to this guy,

[00:51:14] uh, which was actually for a member of our community, I wasn't going to buy this deal. It's a

[00:51:17] little too small for, for me, but, um, for that deal, the proposed structure would be something

[00:51:23] like seven 20. That was the number we got to. And the reason we got to seven 20 on that number is

[00:51:27] because we think that even though he is not really involved all the time, day to day,

[00:51:32] we still need an operator in there. And so we were like, nah, we actually think like we need another

[00:51:37] 150 K ish, give or take for somebody to be involved in the business. So this actually lowers

[00:51:42] your profitability a little bit. We'd be more comfortable at seven 20. So we got to seven 20.

[00:51:45] The guy didn't like seven 20. He's a nice guy though. So I think they still may do the deal,

[00:51:50] which means that the second phase is milestone based. So they put seller financing in front of

[00:51:56] the guy about 20% down on both deals. It's two guys going in to buy this business with him.

[00:52:02] And, uh, they're going to offer him up to 1.1 is what they, they lightly agreed to now.

[00:52:09] But in order to do that, he actually has to hit last year. They did like four 98,

[00:52:14] four 98 or five 98 last year. And then they're down to like four 50 or something. It really ranges

[00:52:19] from like 400 to 500 at the high end. And so they're like, well, in order to hit that 1.1,

[00:52:26] you got to hit those bigger numbers again this year, we got to get back up to 500 K for a couple

[00:52:30] of years. And then we'll be comfortable paying this, this large number. So we'll pay it out over

[00:52:34] time. I believe their term is seven years, um, for the debt.

[00:52:38] So what would they, what would they put down? What would be the first payment? What would they

[00:52:42] put down?

[00:52:42] What's 20% of 720?

[00:52:44] It's like a 150 about 148.

[00:52:47] Okay.

[00:52:48] So they'll probably put something like that, a hundred to 150 K down for that business.

[00:52:54] And would they borrow that or would they just-

[00:52:57] These two guys are going to, they're comfortable up to 200 K down, but I'd be more comfortable

[00:53:01] closer to 150. So, um, so they'll put 150 K down. They'll have another amount

[00:53:08] in escrow. I think the guy wants another 150 K in escrow. So I don't know if they have all

[00:53:13] of that or if they'll have to bring on a third party for it. So let's call that 300 K. So

[00:53:17] it'll sit in an escrow account for a year. Um, and if they hit their 500 K number, then

[00:53:23] another portion of that gets released to the guy. They want to do over a seven year period.

[00:53:28] Um, and I think they, they negotiated quite a nice interest rate on it too. The average loan

[00:53:33] right now at the SBA is somewhere between eight and 12%. But because it's seller financed,

[00:53:38] as opposed to the bank, they're going to get like a five and a half percent loan, I think.

[00:53:42] So he'll make even a little bit more than the number that he wants because they'll pay

[00:53:47] him interest each year on top of it. Um, but I like the interest to be a little bit less because

[00:53:52] we need the cashflow in a business like this. This one doesn't have a lot of, um,

[00:53:56] it doesn't have like, uh, um, a lot of operating expenses. They've got some machines, they've got

[00:54:02] some trucks, but they don't have like construction materials for, for floor refurbishing. It's mostly

[00:54:10] just the machines and labor. And are employees fine with a new operator coming in? Like the,

[00:54:16] like, so you, you, you put out an ad, Hey, we need an operator of this business. And are the existing

[00:54:22] employees like cool with just a new guy coming in and bossing them around?

[00:54:26] Yeah, it's such a good question. I always come back to the, I think it's Maya Angelou quote that

[00:54:30] says they won't remember what you said, but they'll remember how you made them feel. And I think that's

[00:54:35] true in doing deals, but I think it's like worse than that. They'll remember exactly what you said and

[00:54:39] how you made them feel when you do a deal. So I think one of the keys when you take over a business

[00:54:44] is the thing that, that finance guys typically do not do well, which is we kind of want to obsess

[00:54:49] on the team that you're acquiring. Cause those are going to be your, your friends, your homies.

[00:54:53] And a lot of times in the beginning of taking over these businesses though, there's a lot of

[00:55:00] positive upward momentum because these businesses have only been growing by three, 5% per year,

[00:55:05] if at all. And so nobody's making more money over time. Everybody's kind of like just doing exactly

[00:55:10] what they're, what they've been paid to do. There's nobody really driving anything forward.

[00:55:14] So, you know, we have a little protocol we do in the first 90 days for how to get people on board.

[00:55:19] But suffice to say, it's really important. I think when you get in there to immediately rip

[00:55:25] the bandit off, Hey, I'm here, I'm in charge. Uh, but number two, I'm not here to like, you know,

[00:55:32] cut away all the fat and make this a miserable business. I bought it cause I like this business

[00:55:36] as is, all I want to do is make it better for us. And then you got to get rid of the cancer.

[00:55:41] So there will be like one or two people who are just not going to be a good fit.

[00:55:44] You need to move them out quicker rather than later.

[00:55:48] And it's sort of like, tell me if I'm wrong. It's sort of like you have to bring someone in

[00:55:51] because I would, I would be worried that existing employees might know ways to kind of steal from the

[00:55:58] company or to charge customers and not let you see what they're charging. I don't know. There's

[00:56:04] like lots of ways you could get cheated and you describe in the book being cheated on several

[00:56:07] occasions. But I feel like if I bring in my own operator slash bookkeeper, it's a little harder for

[00:56:12] them to do that. It's not that I'm distrustful as a person, but you got to always look at the

[00:56:17] worst case scenario when you're doing a financial transaction. It's a great point. Um, you know,

[00:56:24] I've done both. Uh, it really is like personality driven. I found a lot of times the founder types

[00:56:29] are the ones that will justify stealing from you. Um, the ones where you have like a GM who works in the

[00:56:35] business, who you're elevating to the next level. I found they often just want help. Like those aren't

[00:56:40] the people that have cheated me. The people who've cheated me are like people that I thought were

[00:56:44] really strong operators and they were going to crush it for me. And they were all charisma and

[00:56:49] bullshit. And so, um, I'm sure it's also happened quite a bit where the accounting team steals from

[00:56:55] you because they, they actually could at a base level. So we do always have our, like I have a third

[00:57:00] party look at all the financials of our businesses, but, um, I've had plenty of businesses

[00:57:04] where I kept operators from inside the company. And I even promoted some of them because,

[00:57:10] you know, they were just, they were underutilized under the last person who was in charge.

[00:57:15] Like, how do you know with this cleaning and restoration, uh, business, the employees aren't

[00:57:20] going into the corporate building and doing some cleaning. And then the, the building manager says,

[00:57:27] Hey, I heard you guys do restoration also. Can you do that for me? And they just do the job on

[00:57:30] their own without the, you know, the business behind them.

[00:57:33] They certainly could. I find that it's hard to lie consistently over time. Uh, and at some point

[00:57:39] you get caught. Basically what I use it as a barometer is we use a 13 week cashflow report.

[00:57:45] So every single week I want to know what is the average amount of money we make every single week?

[00:57:49] What is our margin every single week? What are the amount of deals we have outstanding each week?

[00:57:54] And if I start to see that dip or move, that's how you can decide fraud. Like I had a guy who

[00:57:59] stole a bunch of money out of one company and it was because we were doing, we were in a period

[00:58:03] where I couldn't quite understand what was happening. There was like build out of a product set we were

[00:58:08] doing. So there were more inflated costs. He was like, no, no, no, we're going to be profitable

[00:58:11] later. We're going to be profitable later. But if you buy a boring, stable business, you should

[00:58:16] already know what the profit margin is, how much we make each month. And when there's moves on one

[00:58:21] side or the other, that's your job. You investigate it. It's really interesting that the subject of

[00:58:27] cheating is sort of universal across almost every activity, whether it's sports, business,

[00:58:33] games, I don't know, elections that basically people tomorrow are going to pretty much do the

[00:58:41] same thing they did today. So like if someone is in a sport and they run, you know, a marathon

[00:58:47] in three hours, that's probably what they're going to do tomorrow. Also, like they're not going to

[00:58:52] suddenly do it in two hours or some phenomenal thing. Uh, you know, in, in, um, it's like,

[00:58:59] it's like in school, if somebody gets C's on every test and then suddenly he's getting A's on every test,

[00:59:04] they're probably cheating. And so you could, you could, you could kind of tell from the numbers that

[00:59:10] improvement is gradual. It's, it's very rarely like a sudden leap, unless like we were talking

[00:59:15] earlier, like you just double prices, but in general, if the business is roughly the same tomorrow,

[00:59:21] everything else, all the money you make, the money you lose and so on should be the same.

[00:59:24] Yeah, I think that's true. Also, you know, the, the more simplistic people are in their

[00:59:29] explanations, I usually find the less likely they are to steal from you. So like, you know,

[00:59:35] if they can't really explain stuff and you're getting confused and they're over, you know,

[00:59:39] complicating it, like that's usually a red flag for me. Um, you know, if they're like, oh, um,

[00:59:45] you know, we're down 20% this month because, uh, we lost a big corporate contract and I can like

[00:59:51] check that out. It's probably checks out. Um, but if it's like, well, what happened is,

[00:59:55] you know, that, that fulfillment was bad. And then because fulfillment was bad,

[01:00:00] that's often like a red flag, either they're inept, they're not really involved or working

[01:00:05] that hard because they can't explain it or they're trying to confuse you.

[01:00:23] Let's say someone's listening to this and they're like, okay, well I can't,

[01:00:27] how am I going to find a business? I'm not, I don't know any laundromats. I don't know any

[01:00:30] car washes. What are some other industries? I keep saying laundromats and car washes.

[01:00:34] I know. Well, let's talk about like 10 of my favorite businesses to buy right now.

[01:00:37] One of the ones I'm kind of obsessed with today, uh, is addiction recovery centers,

[01:00:42] small ones. I mean, single family homes where you put, uh, people recovering from

[01:00:48] addiction in them, huge growing industry needed overall tons of government grants,

[01:00:53] not that expensive to start. Also grants for you to buy your own property. If you're going to do this,

[01:00:58] that one's interesting. Similar vein, uh, senior care homes, again, not a big center,

[01:01:03] but one-off individual homes, huge demand for it in the U S simple business.

[01:01:08] Do you get worried about liability with stuff like that?

[01:01:11] I think if you're properly covered from an insurance perspective, um, it's very insurable.

[01:01:17] It's just expensive to have that kind of business.

[01:01:19] So it's basically like buy in a case of like a senior facility, you're basically like buying a

[01:01:24] piece of real estate that has, uh, maybe added income streams as opposed to just,

[01:01:29] quote unquote, as opposed to just rent.

[01:01:31] Exactly. Yeah. So oftentimes the incomes are like two to three acts typical room and board,

[01:01:37] um, which means you have a nice little profit margin, but you do have to provide some additional

[01:01:41] services. So those are cool.

[01:01:44] I once owned part of a, um, for, for teenagers, uh, uh, an addiction recovery facility where it was

[01:01:51] for, it was like teenage girls. And so, uh, they, you know, our business was limited basically

[01:01:56] in the number of rooms that we had. So we'd always try to buy like abandoned hotels just to,

[01:02:02] and then get them regulated by the state and then build out the business. And then we sold to a roll

[01:02:07] up that didn't have a presence in our state, which was Connecticut. And, and, uh, it was a great

[01:02:14] deal, but these are like great businesses.

[01:02:16] They're great businesses that nobody talks about. They're also not that complex. It's pretty simple

[01:02:20] if you're willing to do the dirty work. Um, I also really like home services businesses. So like

[01:02:26] window cleaning, we own a window cleaning company. We own a painting company. I almost like window

[01:02:31] cleaning better than painting because it has recurring revenue. Like you can do commercial

[01:02:35] contracts continuously with window cleaning, painting commercial contracts are a little bit harder

[01:02:40] unless you're in a really harsh state with like winter or like Phoenix, you know, your paint cracks

[01:02:46] every year. Um, we also, I really like, uh, we have a handyman business and I really like the handyman

[01:02:54] trades because I think people will pay subscription, uh, help for handyman continuously. But right now

[01:03:01] that's service people don't really offer. Um, it's all, and you don't think it's that's personality

[01:03:05] based. Like, Oh, you get used to your handyman. Oh, I know I can trust, you know, Charlie comes every

[01:03:11] week to fix everything up. Oh, what do you mean? There's a new guy coming. I'm just going to look

[01:03:16] around now. Is there a moat around that? Yeah, I think there could be as, but I think if you brand

[01:03:21] the company as opposed to the individual, uh, then you're a lot better. I also think that there's

[01:03:28] insurance that helps a lot with handyman companies. So most handymen are not insured tradesmen.

[01:03:34] And if you are a homeowner, you actually kind of want that. Um, it's also, there's a lot,

[01:03:40] also a lot more about like safety, security, timeliness, follow-up. Um, you know, often we keep

[01:03:45] cards on file so they'd have to like cancel that to go with this guy. So sure, there's going to be

[01:03:51] some churn, but I think less than we anticipate anything that makes it easier for us as humans

[01:03:55] to like get things done will probably mean we stay with the company more consistently. Um,

[01:04:02] we also have a roofing company. Roofing companies are kind of interesting. Um, really depends where

[01:04:07] they're located. They can be kind of scammy and like insurance claim oriented, especially in Texas.

[01:04:12] There's lots of people who like chase hailstorms to fix roofs. So you need to be careful about that,

[01:04:17] but, um, it's a great business to be in because, uh, people need roofs on a consistent redoing of

[01:04:23] routes on a consistent basis. And you can also get pretty big commercial contracts. Um, what else do

[01:04:29] I like recently? I mean, we did a really interesting video on a garbage man business. I didn't know this

[01:04:34] existed, James, but apparently there are still, I thought like every city township, whatever had a big,

[01:04:41] huge corporate garbage company that went around and covered them and that you didn't get to choose.

[01:04:47] Like I can't choose where I am in Austin to get a different garbage company. It's like the city

[01:04:51] provides it. I have to pay for it. I don't know. But in a lot of HOAs and municipalities,

[01:04:56] you have these third, third party providers that you can use. And so, um, you know, a friend of mine,

[01:05:01] Spencer just got really annoyed at his HOA, uh, garbage company and spun up his own garbage company.

[01:05:07] And now they're doing, you know, multiple six figures a year in revenue. And so.

[01:05:11] So wait, he started up his own garbage company. He got his own HOA to, to use them as opposed to the

[01:05:16] existing company. And then he expanded out to other HOAs.

[01:05:20] Yeah. And he, he did it even smarter than that. He was like, he posted a picture on Facebook, um,

[01:05:25] like neighborhood or marketplace, whatever that thing's called where like everybody goes and talks

[01:05:28] to their neighbors. So on his, his Facebook neighborhood page and also on like a neighborly

[01:05:34] and basically said, Hey, is anybody else super annoyed at how terrible our garbage service is?

[01:05:40] Uh, if I started my own, who would sign up for it? And he had like hundreds of people respond.

[01:05:45] And so we just started DMing them a link to prepay for a monthly service prepaid. Like,

[01:05:51] I don't remember how much, I think it was like $15,000 he did in prepay. So then he was like,

[01:05:56] all right, here's my startup capital. He went, got a loan on a truck, uh, bought a bunch of used

[01:06:01] garbage bins, slapped some logos on top of them and then made some like cute merch. He calls it

[01:06:07] Lone Star Trash. And so, um, you know, he, he basically grew the business from that. And he used

[01:06:15] to be a software guy. And now he jokingly like goes to his kids, uh, school every day and says like,

[01:06:20] I'm your garbage man. I rode around the truck with him. It was actually like, plus I thought the dump

[01:06:24] would be gross. You know, I was like, this has got to be disgusting. And it's not like,

[01:06:29] you don't touch garbage at all. It just has these clampers and, um, the people at the dump are super

[01:06:35] nice and it's kind of fun driving the huge truck and, um, everybody's super nice to you. And yeah,

[01:06:43] it, it was not what I thought it was going to be for sure. I mean, and, and these are the ways

[01:06:50] people all over the country are making millions of dollars. And so you talk about the, I think it's

[01:06:55] the four A's, how you find deals because the average person maybe doesn't know how to find a

[01:07:01] garbage company that's for sale or a laundromat that's for sale. Yeah. Well, there's lots of ways

[01:07:06] that we can find a company first. I mean, I like to break it down from off-market and on-market deals.

[01:07:10] So off-market deals would be people like, um, Spencer, who maybe you find out about his business.

[01:07:16] You're like, Hey, do you want to sell this thing? Cause you've got it started, but I want to grow it.

[01:07:19] So this is like our center of influence strategy. It's who do you know? Who do your parents know?

[01:07:25] Who do your kids, friends, parents know, uh, that might have a small service business that you could

[01:07:30] just start a conversation with. These are off-market deals. They don't even know that they want to sell.

[01:07:35] We call them the quiet sellers. Um, the second way is on-market deals. This is traditionally big,

[01:07:40] huge sites like biz buy sell existed. I didn't love that site. So we started our own called biz scout

[01:07:46] actually bought the marketplace first and then I built it. Um, trying to follow my own medicine.

[01:07:51] How'd you find, uh, uh, this, this marketplace for sale?

[01:07:55] Found it on Twitter. Uh, there was a guy on Twitter that basically was talking about how he got annoyed

[01:07:59] trying to find deals and he, he built originally just an off-market deal scraper, which still exists.

[01:08:05] We just upgraded it. So if you're like, if you're like James, I want to go buy, um, child care

[01:08:12] centers and nurseries in Piedmont, North Dakota, uh, then I can go on my off-market deal scraper on

[01:08:18] biz scout and search for that. Or if I'm like, huh, I want to buy a garden and nursery center

[01:08:23] in Scottsdale, Arizona. I can go find all of those. It pulls in all the contact information

[01:08:28] we can humanly find on the owner and the business. So you can reach out to them individually on

[01:08:32] LinkedIn or maybe Twitter or get their email address and paying off market deals. And then

[01:08:38] we layered on top of that on market deals. So those are from, I think we have like 52 different

[01:08:43] data sources now, um, where we pull businesses from other websites. Uh, and then we're about to

[01:08:49] add proprietary listings. So obviously I have a big following and a bunch of people are telling me all

[01:08:53] the time I want to sell my business. Let's put them on there so people can find them. And that's,

[01:08:57] I think most people will buy businesses through a site like that, but right now it's not.

[01:09:03] So you've been doing an interesting strategy too, of not just sort of like,

[01:09:08] you know, Oh, let's do this, buy a bunch of businesses, combine them together, sell it,

[01:09:13] do it again. You've been really building a social media presence for yourself to a,

[01:09:19] that's a business in its own right. And B probably it gets, you know, more deal flow to you. People

[01:09:24] know you're in this industry. So you, they call you with deals. Yep. Yeah. I mean, my idea,

[01:09:29] when did you start building the social media site? Well, that was 2020 is when I realized

[01:09:35] that I didn't want to be a partner with anybody else in a private equity firm. So I exited that

[01:09:39] partnership. And, um, at the same time I thought about just going and buying a ton more businesses.

[01:09:44] We already own quite a few, you know, 25, 26 or something now individually. And I was like, well,

[01:09:50] we could go try to become the next BlackRock or KKR, our version of it. Um, and then I was like,

[01:09:55] God, I hate private equity owned companies. Like I, I can tell, I can tell when I walk into a joint,

[01:10:02] if it's been bought and, um, in a way. How can you tell? Yeah. Like small things like, um,

[01:10:08] super corporate every single time. Uh, everything's private equity is all like systems and processes

[01:10:14] and profit, uh, maximization and revenue, uh, maximization and expense cut. And so,

[01:10:22] you know, you can kind of go into Starbucks and go, yeah, it's definitely not locally owned.

[01:10:26] You know, there's no local, there's no like board in there that says what's going on in the local

[01:10:31] community. Like you can't get to the owner. Um, there's nothing, um, there's like lost its soul

[01:10:38] somehow. And, um, and I feel that a lot in businesses. And so I was like, what makes you

[01:10:45] different from private equity though? When you go in and buy, let's say a car wash that you don't

[01:10:49] really, you know, you're the new person. You, you don't really know anything about the business.

[01:10:53] Like how is it different from private equity? I think my point was if I kept going,

[01:10:57] I would have been just like them. Like if I started to own 300 car washes across the country

[01:11:03] and built it into a huge conglomerate at some point that we're probably not that different.

[01:11:09] At least still, if you're the owner of that one business and like, that is all you do,

[01:11:14] then you can still become obsessed with that one thing. I think when you start creating a private

[01:11:19] like you just, it's financial maximization. And at some point, like, you know, you just,

[01:11:25] you don't care individually, culturally about each individual company. And so I was worried that that's

[01:11:31] what I was going to become. And at some point, I mean, I've done pretty well. I've made a decent

[01:11:34] amount of money. So I was like, I want to, I want to be happy with the thing I built. Um, and so,

[01:11:39] but I still want to build a billion dollar company, but my idea was like, all right,

[01:11:43] instead of just doing roll-ups everywhere, uh, let's let other people do that. Let's like help

[01:11:48] more people own their individual companies and all build businesses that haven't existed before,

[01:11:54] but they'll leverage my unique talent. So that was like, all right, let's build this business

[01:11:57] buying and selling marketplace. Like that would be really hard for an individual to do at scale

[01:12:03] everywhere. It actually gets net better the more users that are on it and the more consolidated it

[01:12:09] gets. So that's right. It has the, it has the network effect. Exactly. And do you, so do you also,

[01:12:15] uh, I think you do, but I'm not sure. Do you do an online course on how to build a business?

[01:12:21] We do. We have what we call, uh, the contrarian academy, which is we have two communities. Um,

[01:12:28] we have, and we're working on a third and a fourth. So we have one for buying a business.

[01:12:32] Then we have one for you've bought the business. Now do you scale the business? Then we're going to

[01:12:36] have a third for now you've scaled the business to like 10 figures plus. Do you want to create a

[01:12:42] portfolio of business? And then finally we're going to have exit. So now you want to sell your

[01:12:46] business. And the idea is like, could we create our own little financial MBA program, but like

[01:12:51] one, one hundredth of the cost, uh, for people who want to build up small businesses. Um, and then can

[01:12:57] we have events sort of all throughout the country doing the exact same thing? And I'm going to try to

[01:13:02] not be elitist about it and like limit participants, um, artificially. It'll be like, if you qualify

[01:13:08] and it's like an appropriate right fit, then you should come into the academy. Um, and then the

[01:13:13] third leg that we have there is we invest in the venture capital companies that support small

[01:13:18] business. So again, like economies of scale are real. If you have the best laundromat software out

[01:13:25] there, we invested in one called sense, um, that aggregates data across the entire laundromat

[01:13:30] industry. It has like the CRM and the backend and the order flow processing, et cetera. And so I'm

[01:13:36] trying to do the same thing. I tell people, which is like, take the one thing you're good at and then

[01:13:39] build like a satellite of companies around you, um, which allow you to diversify your revenue streams

[01:13:45] for your business too. And I would say you're really exceptionally good at building a social media

[01:13:50] following. Like, like you said, you started this in 2020 and you've also, you've already built this

[01:13:55] enormous platform. You're, you're a great writer on social media. You, you, you, you present great

[01:14:01] content. Like I just saw a tweet, I think it was yesterday from you where I didn't know

[01:14:06] this about you at all. You were a journalist covering the border at some point and you described

[01:14:10] all this horrific stuff. And somehow I guess you did that in between before or before Goldman Sachs.

[01:14:17] I don't even know, like you were like the James Bond of the border for a while.

[01:14:22] Hardly. Well, that was, yeah, that was, I was still in college. I, uh, the last year of college

[01:14:27] at Arizona state, I got something called the Howard Buffett foundation grant, which is Warren

[01:14:31] Buffett's son to cover border issues across the U S Mexico border. And so they gave us money.

[01:14:37] And, um, I, I didn't graduate fully a year early, but my last year was for my thesis. Um,

[01:14:43] I was in the honors college. And so we got to go live and work on, on somewhere along the border

[01:14:48] covering stories. And so I chose Alaprieta, which is a little border town and this other town called

[01:14:54] El Paso and Juarez. And at the time, you know, you're young and dumb when you're young and dumb.

[01:14:58] Um, I really didn't think very much about covering border. In fact, I thought it was really cool.

[01:15:04] I thought it was super cool to like go and cover border issues. And, um, that was like,

[01:15:10] that would have been 2007, 2008 period of time. And that was like some of the worst, uh, cartel

[01:15:17] violence along the U S Mexico, Mexico border. I think, I think they were saying in that three year

[01:15:21] period, something like 10,000 people died in Juarez. Um, so it was, it was awful. Um, but it was

[01:15:28] fascinating as a journalist. Like, you know, we were covering things where I remember vividly,

[01:15:34] there would be two newspapers, uh, every day in Juarez and they would both have body counts every

[01:15:39] day, but the body counts would be different. And so one was supposedly managed by the cartel.

[01:15:44] The time the big fighting was the Sinaloan and the Sonoran cartel. And then the other, uh,

[01:15:50] newspaper would be the government. And so you would kind of be able to triangulate like who was

[01:15:54] fighting who and like what was happening through the, the two newspapers. But, um, yeah, I mean,

[01:16:00] I think I'm similar to you. You like to write, right? Oh yeah. That's, I would say that's my main

[01:16:07] interest. I am actually not as much a fan of business. I've just been lucky that I'm good at it.

[01:16:15] And I, and also out of necessity, I had to get good at it, but writing is like the thing I love to do.

[01:16:20] I'm the same. So I think whenever I get pissed off, I usually do my best writing. I don't know.

[01:16:25] Like what, yeah, it's like, uh, but this is why probably you're a good content creator. Like

[01:16:30] people don't realize writing and content creation is, I hate using the phrase content creation. So

[01:16:36] writing is a skill. It's a skill that's developed over years. Everybody thinks, oh, they can write a

[01:16:41] LinkedIn post and they can make a tweet. They're a writer, but you, the way to build a social media

[01:16:46] following as you've done is create good, is write good stuff. Yeah. And I think actually live your

[01:16:53] life, you know, the best content creators or the best artists or whatever have been through some

[01:16:58] shit, you know, like heavyweights the best of all time. Why? Because his life was fucking bananas.

[01:17:03] And he could just understand the full spectrum of the human experience. And he, he did things that,

[01:17:08] you know, are wild, you know, from, from catching the biggest fish to being in war zones,

[01:17:13] to going to Africa, to big game hunts. And so, you know, a lot of-

[01:17:18] And that, and that informed his writing style in the sense that he realized he didn't need to have

[01:17:23] flowery prose. He didn't, he didn't want any of the prose to get in the way of the, of, of the

[01:17:29] experience that had happened to him. So that's how he developed his minimalist writing style, which,

[01:17:34] which, you know, was really great. And so many people mimic today, but he really mastered it.

[01:17:40] Yeah. I mean, and I got, I mean, if you've ever read, did you ever read, um,

[01:17:45] uh, uh, his story about the Indian, uh, is like Indian wife or Indian.

[01:17:52] I don't think so.

[01:17:52] I'll have to send it to you afterwards. You just read it and you're like,

[01:17:55] ah, it's so short. It's so poignant. And like the last line, you're like, oh my God, I,

[01:18:01] I was thinking I understood this whole thing. And the whole thing is the opposite of what I,

[01:18:05] what I thought. And so, um, you know, some of my experience today in business and otherwise,

[01:18:10] is I think influenced by the fact that like, I've seen what happened to people who have no money.

[01:18:15] They have no power and terrible things happen to them and they can't push back and nobody gives a

[01:18:20] fuck. And so I get really mad thinking about people not having money because money is freedom.

[01:18:29] And the less you have of it, the more other people take advantage of you. And, uh, and that I think

[01:18:35] just was carved into my soul while I was, uh, a journalist for that very first, you know, short

[01:18:41] period of time. And, um, is why I get annoyed too when I, when people don't talk about money and when

[01:18:46] people try to make it seem this really big, difficult, terrible thing, it's like, it's, it's hard,

[01:18:52] but it's not rocket science. And I think more people could have more of it than they imagine.

[01:18:56] I mean, every aspect of money is there, there's psychology, there's shame, there's fear, there's

[01:19:19] ego. There is so much involved that it's really, it's like how someone makes money. You know, like

[01:19:26] for instance, you worked at Goldman Sachs, most banks, maybe Goldman Sachs is one of them, maybe not,

[01:19:33] but most banks are basically run by total scumbags. Like in everything they do is, you know,

[01:19:39] in some gray area against their customers, against their employees, against shareholders. Like it's,

[01:19:44] it's really hard to figure out what the motives of some of the things they do are. And yet that's

[01:19:49] totally respectful. It's the most respectable thing. Oh, I worked at Goldman Sachs. But if you do

[01:19:53] something like, for instance, you know, I, I sell a financial newsletter and had a business for,

[01:20:00] for many years, which I sold, but, but doing that, that's all it's shameful. You know, it's,

[01:20:05] that's a schlocky thing or whatever, even though I might legitimately, you know, I am legitimately

[01:20:10] like interested in helping people out, you know, do a better job investing. Don't make the mistakes

[01:20:16] I initially made and so on. But it's a little bit more of a shameful industry.

[01:20:20] Well, I think you were just ahead of the curve. I think in 20 years that flips, you know, I was

[01:20:26] reading a tweet yesterday and I can't remember who said it, but I was like, yep. It's like

[01:20:32] contrary and take, you pay $200,000 to a traditional university, you will be in debt.

[01:20:40] But anybody who spends $200,000 and applies what they do, uh, what they learn to a technical school

[01:20:49] or a, uh, online system like you and I have, like many other people we know, likely to cover the

[01:20:56] costs. I mean, think about it for a second. Absolutely. Like it, it, it,

[01:21:00] the ROI on it is so real. And so of course people are calling you schlocky and saying it's

[01:21:07] shameful or whatever, because you are disrupting an entire industry that has been built for decades

[01:21:12] on the idea that you don't need to know. I know, give me your money. I'll take care of it. I'll

[01:21:19] take two and 20 or I'll take 1% and you know, see you later. Bye. And so. Yeah. The whole two and

[01:21:25] 20 thing is ridiculous. Like hedge funds charge 2% of assets and 20% of their profits. And then

[01:21:30] you look at their holdings and their sec filings, they own Microsoft, Exxon, Google, Tesla. They

[01:21:36] own the same things everyone can just own without paying 2% of assets and 20% of the profits. Like

[01:21:42] it's a total scam. And yet, Oh, these are respectable billionaires. Like we have to listen to them.

[01:21:48] They're going to tell us what to do. Well, also, I mean, you think about it for a second,

[01:21:51] you can have unlimited upside on your education, unlimited. Like if you keep learning,

[01:21:57] you can keep earning, you have a limited upside on what you can earn from any type of investment.

[01:22:04] I mean, the best businesses in the world, maybe if you're Tesla, Elon Musk, I guess you have unlimited

[01:22:08] business upside. Or maybe if you get really lucky in Amazon, you have almost unlimited upside and

[01:22:13] getting in really early in the stock. But by and large, you're better off investing in your knowledge

[01:22:18] than you are investing in any sort of investment. And I think that's the other thing that they don't

[01:22:25] want us to realize is until you've really mastered, Hey, how can I learn how to buy a

[01:22:30] business the best, like the best way possible? How can I really make sure that I understand real

[01:22:36] estate investing? And then you go invest, you're going to make way more than if you throw cash

[01:22:41] immediately at a deal, or you throw it in a mutual fund. And I wish that more people talked about that

[01:22:47] too. I mean, people say that to me sometimes with our academy or whatever, like, Hey, you know,

[01:22:52] should I do this or should I just go buy the business? I'm like, honestly, if you have to ask

[01:22:56] that question, you should just go buy the business and see what happens. Because what's going to

[01:22:59] happen is you don't actually know what you're doing yet. You have to learn and you can either learn by

[01:23:06] doing it, but that means you're putting cash into it, or you can learn with a group of other people

[01:23:11] that are doing it all at the same time and you can steal their 10,000 hours. And so it'll be

[01:23:15] interesting. Did you say that?

[01:23:16] That's totally true. Like, like, and look, the time, let's say, let's take writing as a great

[01:23:20] example too, of like getting skill acquisition is so important. And again, there's, there's this

[01:23:27] idea, well, you need to put in 10,000 hours or, or, or a thousand hours or 500, you know, some amount

[01:23:32] of time you have to invest and perhaps some amount of money to get a skill, but skills pay off. And

[01:23:39] other things like going to college, you don't necessarily get a skill. You might learn a couple of

[01:23:44] things that you're, you're going to forget 98% of, but you don't really learn a skill. Whereas,

[01:23:49] you know, there's a saying better to be better to be the only than the best. So if you're the only

[01:23:54] person who's talking about real estate investing, but you also happen to be like a great writer,

[01:23:59] you're going to build a huge social media empire because you're going to have this skill that no one

[01:24:04] else has you, you're competing with. Yeah. I think you're, I think you're totally right. I mean,

[01:24:08] I think, I imagine in the next 10 or 20 years, the way that university accreditation happens right now

[01:24:15] will be completely flipped, especially, especially under this next administration. He already came out

[01:24:20] with a tweet yesterday saying he's going after the university accreditation system. And I think we

[01:24:25] should, because I think it is right now a mafia. And I think we assign accreditation and we mandate

[01:24:34] that schools continue to raise prices, but you know, you've seen the inverse curve. It's basically

[01:24:39] like schools continue to be more expensive to go to than ever, but their return for individuals

[01:24:46] continues to decline on a relative basis. And so that to me means that we have an entrenched industry

[01:24:53] with a bunch of incumbents and lobbyists that want to keep status quo. So of course they're going to

[01:24:58] hate people on the internet who are providing value at, you know, one, one hundredth of the price.

[01:25:03] Um, but I've never really cared that much about what other people, it used to bother me that people

[01:25:07] didn't like, um, education businesses or the people didn't like influencers or people didn't like

[01:25:13] people with newsletters. And now, you know, God, the election, I was part of this think tank, James,

[01:25:18] like one of the more preeminent think tanks in the world. And it's on the conservative side. And

[01:25:24] I would go to all these events and- Can you say the name of the think tank?

[01:25:27] I don't want to talk. I'm talking about to talk a little shit. I'll tell you later.

[01:25:30] Um, and, uh, they, I would go to these events and they were really talking badly about podcasters

[01:25:37] like Tucker and Joe. And this was right prior to the election, like six months prior to the

[01:25:43] election. And they were like, you know, these guys, blah, blah, blah. And mind you, this is a

[01:25:46] conservative think tank. And I was sitting there listening and thinking, you guys are so out of

[01:25:52] touch because I thought that this election would be decided by podcast because you and I have one and

[01:25:57] we understand the power of it. So I was like, nobody cares about the mainstream media anymore.

[01:26:01] They're late. They're slow. It's not relevant. We get updates on Twitter. And, um, and so I thought

[01:26:09] that was going to be the case. And so I remember that to them saying like, you know, don't you guys

[01:26:13] think that you're slightly behind the times that you are, you are legitimately going against these,

[01:26:17] these podcasters because you think they're lesser than the mainstream media because of like

[01:26:21] credentials or something. I don't even know why. And, and I remember they kind of laughed at me and I

[01:26:26] was like, all right, I don't know. Maybe they're right. Maybe I'm wrong. And then this election

[01:26:29] happened and I was like, huh, it's the old institutions don't want to change and they

[01:26:36] are going to push back, but they're losing. You're, you're totally right. Like this was the

[01:26:39] whole philosophy around my book, choose yourself, which I wrote 10 years ago, which is that, Oh,

[01:26:45] maybe I'm not going to work at Goldman Sachs, but I could actually be a one man Goldman Sachs by

[01:26:51] writing a newsletter about the finance industry and then giving advice to some businesses and

[01:26:56] helping people invest or help people meet businesses that they can invest in or whatever.

[01:27:02] And it's the same thing with education. Okay. Maybe I don't need to go to Harvard, but I can

[01:27:07] on YouTube there's, or Coursera or Khan Academy, there's a million places. Or I could start my,

[01:27:12] if I have an expertise or something, I could start my own education site. It's going to be much better

[01:27:16] than Harvard for what the specific things I'm teaching are. Like there's always an opportunity

[01:27:21] like media. I'm not going to be a television star, but that's okay. I can start a podcast,

[01:27:27] which has more listeners than the average TV show has viewers. So there's always an opportunity right

[01:27:33] now to do your own thing. Yeah. I mean, and you were way ahead of the curve there because you're

[01:27:39] exactly right. I mean, we see it, we see it everywhere. And I guess that's, it's all the ideas sort

[01:27:44] of conversion on this reality that we as individuals are, are more capable than we give ourselves

[01:27:49] credit. And that certainly then society wants us to be. And, and why? Because on average,

[01:27:55] when institutions and individuals get power, they don't like to give it back. Um, and not because

[01:28:01] they're evil, nefarious geniuses, but because, um, they think they know better than other people.

[01:28:06] And this is probably why we've gone from like, I don't know, 70% of people being self-employers

[01:28:12] to 2% because there's that momentum that keeps people down more and more.

[01:28:19] A hundred percent, not to mention massive government regulation, which makes it harder

[01:28:22] to start your own small business, harder to be profitable, helps incumbents. Big companies can

[01:28:27] afford regulation, little companies, it destroys them. And so, I mean, one of the things that,

[01:28:33] you know, I was talking to the administration about is we need to change how the SBA runs.

[01:28:38] Like right now, the SBA, we could solve a lot of issues in this country if we allowed business

[01:28:45] owners who are currently 60 plus to sell their businesses to an individual, not a corporation,

[01:28:51] in the next generation. And, uh, we gave a tax write-off to the business owner for selling the

[01:28:58] business to the next generation. And we had an incentivized structure for the small business,

[01:29:03] the small business buyer to be able to sell the business owner, um, with creative financing.

[01:29:08] And what if we could actually standardize the mechanism for seller financing? Why do we need

[01:29:13] middle men? Why do we need banks? Why do you need a title company for God's sake? When you do a

[01:29:19] mortgage transaction, it makes no sense at all. It's like a fake one in a million need. That's a huge

[01:29:27] industry.

[01:29:27] Right. And you need like title insurance. It's like crazy, all the things you need.

[01:29:31] And I would even go one step further with SBA. I would make it an opportunity for it to be peer

[01:29:36] to peer. Like, let's say I want to invest. I, I, on the stock market, I can't invest in a laundromat.

[01:29:41] And let's say I'm not interested in running a laundromat. What if I want to invest in like

[01:29:45] 200 laundromats around the country? Oh, I could put a hundred dollars and contribute to an SBA loan

[01:29:52] where I'm getting like eight to 12% interest as opposed to 3% of my savings account.

[01:29:56] Like they, they should allow peer to peer participation in the SBA.

[01:30:02] A hundred, a hundred percent. I mean, there's so many small things that we could do like this,

[01:30:07] you know, an education process to notify small business owners that they can actually sell

[01:30:11] their business, you know, an awareness campaign to actually bring both people to the table,

[01:30:16] uh, and get them to think about how to do deals, you know, standardization of term sheets,

[01:30:21] similar to what Y Combinator did with, um, standardizing the standard VC term sheet.

[01:30:27] Let's standardize the standard business selling or buying term sheets. So people don't have to pay

[01:30:32] $20,000 to get it done individually when most of the deal terms are the same.

[01:30:37] Well, why don't you do it? It'd be like kind of, um, legal zooms, the sequel.

[01:30:41] We're going to try to do everything possible. I'm going to try to use BizScout as a mechanism for

[01:30:46] all of this. And you know, these days, if you want to get something done with the SBA,

[01:30:50] I'm just going to start tweeting about it and say, Hey, if I was in charge,

[01:30:53] here's the policy decisions that I'd make. But similar to you, I don't want to be in charge.

[01:30:57] I want, I'm, I'm very happy to assist and, uh, not have any positions of, of power in the

[01:31:03] political sphere. What if they offered you a position of power?

[01:31:07] I'm so busy building right now that that's, it's just not on my radar. I think it'd be a

[01:31:12] disservice, but I would happily help them find somebody who I think was better suited to it.

[01:31:17] I think like public policy, public politics, like you should go into it after you've done

[01:31:22] like some decent contribution to society. Uh, and then you should go into it for like four to eight

[01:31:29] years and then peace out, which is what I would, I would want to do. I have no desire to be a career

[01:31:34] politician.

[01:31:36] Well, that's good because I think it would, it would ruin your excellent, you know, I enjoy

[01:31:42] reading your stuff every day. Whenever you put out a newsletter, whenever you put out a tweet,

[01:31:45] it's always something interesting that I'm going to learn from. And that's why I was so happy a few

[01:31:51] months ago when I heard you were putting out this book, Main Street Millionaire, I knew this was going

[01:31:56] to be the perfect book people should read about essentially making wealth. This is, this is

[01:32:02] definitely an avenue I feel is people are unaware of how successful this strategy for building wealth

[01:32:10] is. It's much more successful, I think, than any other strategy for building wealth, hands down.

[01:32:15] I appreciate it.

[01:32:16] Unless you're like a super software guy and you've been living in Silicon Valley for 20 years. So,

[01:32:21] you know, everybody like, you know, Silicon Valley is all a game. Like you have to kind of live there,

[01:32:26] know everybody. And then, oh, you're going to get a billion dollar valuation when your company's not

[01:32:30] better than the company that got a $3 million valuation for doing the same thing.

[01:32:34] It's so true. And it's such a, it's such a club. Like now that we run a venture capital fund and I've

[01:32:40] met a bunch of these people, with all due respect, it's all a game of who you know and like, oh yeah,

[01:32:46] let me make that intro for you. Let me make that intro for you. And you're like, what do you do?

[01:32:50] You're a professional intro or like they're not builders. And so.

[01:32:54] I mean, I was a VC for a while. I was so bored. I couldn't. And then everybody comes in with

[01:33:00] their pitch deck and it's exactly the same pitch deck. Everybody's got the kind of right-handed

[01:33:06] smile. It's like, oh, zero revenues within a trillion in revenues when we sell a refrigerator

[01:33:10] to every other person in China. And I had a Defender arcade machine in my office and I would just like

[01:33:17] leave a meeting in the middle and just play Defender for the rest of the meeting until everybody left.

[01:33:22] I want to ask your opinion on something. One thing that I think I'm struggling with with the book

[01:33:27] is what I really want people to realize is that even if you don't want to buy a business,

[01:33:34] you should learn how to do deals and how to talk terms. And like, you should understand,

[01:33:42] it's like the language of money is deals and deal terms and structuring. It's negotiating your salary.

[01:33:49] It's getting equity in the business you work for. It's like buying a business. And so I'm trying to

[01:33:53] think right now about like, how do I explain this to like the normal person who's like,

[01:33:57] I will never buy a business in my life because that's too crazy and I don't want to.

[01:34:03] But they still-

[01:34:04] Right. I think it's impossible.

[01:34:05] Right.

[01:34:05] They think it's too big a task or you need too much money. And look, there was one example you gave in

[01:34:11] the book that was really a great example where you could start off with like zero money and talk to

[01:34:18] your cleaning lady and turn that into a potentially a huge business. Like you have a, you walk people

[01:34:24] through a great example of the simplest possible way, like the minimal viable business one can start

[01:34:30] in some sense. And this is possible. And the fact that, like you said, this is like the language of

[01:34:35] money, understanding that things work on profits and work and how do you scale things? Like, oh,

[01:34:43] you could scale this way. You could scale this way. These are ideas, scaling could apply to anything.

[01:34:48] It could apply to your, you know, how you scale your work at your job or how you scale some,

[01:34:54] a book that you're writing or like all these things that you wrote about in this book could

[01:34:58] apply to other industries, other endeavors in life. You know, I think, I think it's important.

[01:35:03] People just don't know this.

[01:35:05] Yeah. Okay. Good. Cause I didn't know if I was, you know how you have confirmation bias

[01:35:10] because it's the thing that made me a lot of money and you know, we have this academy.

[01:35:13] So I've seen 3000 people go through it. I'm like, this works for people. Everybody should know it,

[01:35:17] but I'm not delusional that thinks that everybody should own their own business. Always. I am

[01:35:22] delusional in that thinking that if you don't understand money at all, I'm not sure you're

[01:35:27] going to make it ever. Um, and so I do want more people to understand deal-making. Like I made my

[01:35:33] mom read the book, you know, she's a 30 year special education teacher, but I'm like, I want

[01:35:37] you to understand, you know, why right now with your house, you're sitting all this money because

[01:35:43] their house is totally paid for. They have like no debt anywhere. Um, and, uh, and I'm like,

[01:35:49] this asset isn't being used very well. And so like, let's talk about what that means and why.

[01:35:53] Um, I don't think we can afford to not know this stuff anymore.

[01:35:58] Yeah, I agree. Because like you said, nobody is really, particularly if you don't have a lot of money,

[01:36:04] nobody is looking out for you. Like the government is not looking out for you, even though you would

[01:36:08] like it to your college that you went to is not looking out for you. Even your family is, is not

[01:36:13] looking out for you. They want you to make a lot of money so that they don't have to worry about money.

[01:36:17] So it's, it's, it's important to understand the language and psychology of money, particularly the

[01:36:22] psychology of money is so difficult and everybody has troubles with it. But yeah, you know, I, in any

[01:36:30] case, Cody, I think it's a great book. Um, this is the one book I'm going to make sure my kids read

[01:36:36] like, Oh, you got to tell me if they do tell them to tell them to reach out to me if they end up

[01:36:41] buying, buying a business. I feel like they would. Cause you're, they're your kids. They probably have

[01:36:45] already started one and then now they need to buy it. No, not, not yet. Not yet. They have to go

[01:36:52] through, like, I didn't want to do what my parents did. And so I rebelled for a while until ultimately

[01:36:57] they were both computer people. And then ultimately I got into computers, but my kids still

[01:37:03] rebel in this way a little bit, but, and like I said, they went to college when I didn't want them

[01:37:09] to go to college. And well, I understand why kids go to college. It's fun. Yeah. It's fun. And you,

[01:37:15] you socialize and you don't have to do any, anything serious for four years. And then everybody

[01:37:20] complains now when they go to work, Oh my God, I have a commute and I, I'm not making enough money

[01:37:24] to live and I have to have a huge commute. Like everybody, I'm not saying my kids do that, but I see

[01:37:29] on, it's like the latest thing on TikTok is all these 24 year olds complaining about their job.

[01:37:34] Like I lived on a futon, like three hours away from my first job. Like it's hard. Being young

[01:37:40] is hard. Being young is, it's supposed to be hard. Yeah. It's so hard. And I wish, and, and I always

[01:37:45] like try to remind people that it's not hard because like, you're like, Oh, this, this work is so hard.

[01:37:51] I can't figure out this work. It's hard because it is mind numbingly stupid, low level work that you

[01:37:56] feel like you could do when you're asleep often. And that persists for years.

[01:38:03] Right. That's why they give you the job because you're useless and everything else.

[01:38:07] Yeah, exactly. We should be, we should really be motivational speakers for young kids.

[01:38:12] We need to be booed on. You guys suck.

[01:38:14] Just be throwing stuff at us. Oh, but I will say though, everybody always says,

[01:38:19] Oh, this next generation is not as good as the last gen or my generation or whatever.

[01:38:23] Their kids are lazier now, but actually like you go on Instagram or TikTok, these kids have like

[01:38:29] superpowers now. They're like climbing up walls and it was amazing musicians. Like they have so many

[01:38:35] talents that I didn't know anybody with these talents when I was a kid. Like the each generation

[01:38:40] gets better, I think, but, but somehow it doesn't seem that way at first. Like they,

[01:38:45] they get better and worse at the same time, but then it all comes together.

[01:38:49] Yeah, me too. No, I think, I think we're at like a little bit of an American

[01:38:53] Renaissance here. We're at the edge of it with a lot of technology, but I also think, I mean,

[01:38:56] we had a guy in our group that is night, he was 19 years old when, when he joined, uh, we,

[01:39:02] we had started like three years ago. So whatever, what is he 22 now or something like that. Um, and he

[01:39:10] bought his first business when he was 20 and has just sold it. I'm like, Oh my God. You know,

[01:39:17] when I was 19, I don't remember what I was doing. It was a multimillion dollar business,

[01:39:21] uh, and an agency, uh, marketing agency for real estate agents and, uh, sold the business at like

[01:39:28] a perfectly timed moment is now looking for his next deal. And he's about the nicest kid in the

[01:39:31] world. But every time I see him, I'm like, you think you have an excuse that kid's 22 and he's

[01:39:36] already sold the business. And did he start with nothing? He started with nothing. He negotiated the

[01:39:41] deal to get a percentage. He grew the business. So he negotiated the deal to get a percentage of all

[01:39:47] net new sales in the marketing agency that did really well. So he ended up owning 20, 30% of

[01:39:53] the business, both distributing. So distributions, distributing equity and just equity in the business.

[01:39:58] And then the founder of that business had a few agencies and real estate was like his lease. It

[01:40:04] was his smallest one. So he basically was like, let's just sell our finance that you're killing it.

[01:40:09] Take over for this business. He seller financed the business. The other guy kept a portion of it

[01:40:13] and they both made money when they sold. So that is awesome. And look, that is people just need to

[01:40:18] know that that's possible. And just knowing that will inform other areas of their life. I think

[01:40:24] that's a valuable thing in your book as well. And there's, there's a lot of techniques also you

[01:40:28] write about in the book that we haven't even talked about. Like the whole process of, I think you call it

[01:40:32] like a hundred dash 50 dash 30 dash whatever, uh, like a hundred days to research something,

[01:40:40] 50 days to identify a business that's possible 30 days to then negotiate. I forget the exact things,

[01:40:46] but there's a lot of parts of this book that people need to read to understand this. And again,

[01:40:52] you know, instead of being, instead of having some crappy job for 30 years, like this is a,

[01:40:57] a better way to make money. I also think like, you know, I was a day trader for a long time and I

[01:41:04] thought, Oh, I'm going to get rich quick day trading. I wish I had done this instead. Like

[01:41:08] it was such a waste of my time for years and years day trading instead of being out there actually

[01:41:14] looking for something that really creates value and makes profits and it's fun.

[01:41:19] Yeah. One of my cousins was so funny with day trading. He was trying to tell me,

[01:41:23] this was like kind of during the hype, but when everybody's really getting excited about

[01:41:26] day trading, he's younger, younger, young man, he's super smart and he's super entrepreneurial,

[01:41:30] but he gets caught up sometimes in those get rich quick schemes. And so he was scheming and he did

[01:41:36] some day trading and he's like, look at how much I'm up. Like I am so rich. You know, I started from

[01:41:41] this and I now at this, I'm like, that's amazing. And I kind of wasn't paying attention that much.

[01:41:45] The next day he came to me and he's like, Oh my God. He's like, I lost everything. I'm like,

[01:41:49] that was fast. How that happened. He's like, well, I didn't realize all the fees that they were

[01:41:53] charging too. And so between fees and then the market moved, I now owe some money. And I was

[01:41:59] just like, Jesus Christ. Yeah. It's, it is a brutal way to live. I don't know why. I thought it

[01:42:05] would be, this is going to be fun. It's going to be easy. It is not. No. And I made a living at it.

[01:42:12] I did well, but I probably lost several years of my life doing it. It's so stressful.

[01:42:17] Well, and you really need a big brain like yours. You have to have like a big mathematical ability

[01:42:22] often to, to be able to do any sort of quantitative trading. And then even to like analyze the company.

[01:42:29] I mean, and you're just competing against the smartest people in finance.

[01:42:32] That's just it. Like you have to, you mentioned this in, in the book and it made me think of

[01:42:38] Peter Thiel's book, Zero to One, where he says essentially the same thing. Competition is bullshit.

[01:42:42] You do not want competition for what you do. You want to figure out how to, how to, you know,

[01:42:49] structure your life. So you're not competing with anybody if you can.

[01:42:51] Yeah. Yeah. It's so true. And even, you know, the game they, they don't tell most people is that

[01:42:56] the game of hedge funds and asset management is by and large, just management fees. You know,

[01:43:01] it's raise a ton of money, make money on holding the money and like, yeah, perform kind of well over

[01:43:07] time. And, and you know, you'll do well, but, but just making money from your own money is real,

[01:43:13] real hard. I mean, God, who are the, who are the only people that have really done that over time?

[01:43:17] Like Renaissance maybe? I mean, we're like, well, yeah. Renaissance and look, but they initially

[01:43:23] started making money off the fees. And then finally when Jim Simons had billions, he's able to

[01:43:28] just say, okay, everybody else take your money. I'm just doing it on my own. Warren Buffett's the same

[01:43:31] thing. He didn't have any money himself. He made money on the fees, but he was doing really well.

[01:43:36] And he kept pouring his fee back into his, his, he didn't take a, he didn't take a, uh,

[01:43:42] a management fee to his credit. He just took a fee on profits, profits above a certain percentage.

[01:43:47] I think it was above like six or 7%. He would take 15%, I believe on profits above 7% each year and no

[01:43:55] management fee. And then he would roll all his, uh, the money that he was making back into the business.

[01:44:00] So it would kind of grow over time. So I would say Buffett is the closest example of a

[01:44:06] financial manager who generated a billion dollars from his own investing.

[01:44:11] Yeah. And I mean, rare, and I certainly don't profess to be smarter or harder working or better

[01:44:16] connected than that guy. Like incredibly well connected to from a governmental perspective.

[01:44:22] Yeah. But he compounded his, his connections and his network and his, in the value he created

[01:44:27] over 70 years.

[01:44:30] I love that quote. He's like, what was it? Bezos asked him like, why do you tell everybody

[01:44:34] your secrets if like they work so well? And he's like, because nobody wants to get rich slowly,

[01:44:39] which is just so true.

[01:44:41] I also think there's a, uh, a right place, right time sort of thing. Like he kind of came of age in

[01:44:46] the early fifties after world war II when, you know, finally depressions and wars were over and

[01:44:53] America, the American stock market went on this enormous boom that's still kind of continuing.

[01:44:58] And so he was, he, and he was, you know, 20 years old, right at the beginning of that. So he was able,

[01:45:04] he was definitely at the right place in the right time. And people, you know, in everything,

[01:45:09] like, you know, Malcolm Gladwell has spoken about how people like Bill Gates, Steve jobs,

[01:45:14] all those guys were basically the same age because they were in their early twenties when

[01:45:19] the computer started to be big and they were able to benefit from that. So you sort of have to also

[01:45:24] find where you can be the right place at the right time. But that's also the benefit of your book is

[01:45:30] that laundromats are always in. Everybody needs plumbing, no matter what, like if your toilet is

[01:45:36] clogged, you will spend your last dime to unclog it. Like, so stuff like that is, is important.

[01:45:42] You know, I wonder about though, uh, there are some businesses, I wonder if, if robotics or,

[01:45:49] or whatever, well, like, like car washes, will car washes always be necessary when every,

[01:45:55] every car is self-driving and you probably won't need as many cars on the road. I don't know.

[01:45:59] Yeah. I mean, certainly could be, I don't think we're at, the other thing about car washes that's

[01:46:04] unique though, is that, um, their real estate plays too. So typically your car wash over the

[01:46:08] longterm isn't going to be the best land use for the real estate. So often you can use them as a

[01:46:15] landhold. So, um, maybe they're not necessary forever, but like, think about how hard it is

[01:46:20] to find a car wash in an urban center. So I think as we become more and more urban, you know, maybe

[01:46:26] that looks differently, but, um, yeah, I mean, we could play a game too, thinking about all the

[01:46:31] different ways that robotics could change to, could change boring businesses. But I think the

[01:46:35] flip side is they're just going to take over our accounting, our legal, our finance, our graphic

[01:46:41] design, um, you know, our PowerPoint presentation jobs so much faster. Like I think all about like

[01:46:48] gold, I mean, remember back in the day when we all had to do decks and stuff for finance,

[01:46:53] like we did the decks ourselves. Like we, we did the, we did the Excel spreadsheet. We did the

[01:46:58] miserable, uh, you know, work actually coding it properly. We did the PowerPoint presentations.

[01:47:03] Now a couple of my friends that are at the big firms, they're like, Oh, we come up with the idea

[01:47:07] broadly. We kind of like throw it in there and then we send them to India and they like redo them

[01:47:10] every night overnight for us. And then they like send them back. I was like, God, that would have

[01:47:15] been nice back in the day. But that means that like this many fewer people now have those jobs,

[01:47:20] those really high paying analyst associate jobs where we were totally overpaid. And then in the

[01:47:25] future, like even less we'll have it because we'll have India and we'll have like really smart AI doing

[01:47:30] those, those jobs. And here's the thing. It's not like, so everyone's worried, Oh my gosh,

[01:47:35] AI is going to take jobs faster than industry will replace them. But I feel like people always say

[01:47:40] that and it's never happened now. We never, we don't know what jobs the old typewriter makers

[01:47:45] eventually got. They probably weren't making computers, but they did eventually find jobs. Like they

[01:47:50] did. It wasn't like all everybody in the typewriter industry was on the breadlines,

[01:47:54] like in homeless, like people just find new jobs, you know, naturally at some point.

[01:47:59] Yeah. Well, like industries evolve.

[01:48:01] Yeah. I mean, what about like right now in like record unemployment still? Um, although a lot of

[01:48:06] that seems to be government jobs growing. So maybe that's numbers, not totally real, but, um, but I so

[01:48:11] appreciate you reading the book and having me on today. Every time we get to chat, I, uh, I always

[01:48:16] leave with a couple ideas. So I always like to do what you, you tell us back in the day, which is one,

[01:48:20] one, ask for advice to, uh, I'm going to send my list of my recommendations to the SBA. Like you

[01:48:28] always say to do, to give other people free ideas. So I'm going to do that too.

[01:48:31] Yeah. Just send them, send them to Trump, send them to Elon Musk, like post, like post it on a

[01:48:35] Twitter thread and, and address like Elon Musk and Donald Trump and maybe like one other,

[01:48:41] like third or fourth level person underneath them.

[01:48:43] I'm going to, I'll, I'll send it to you when I do it and say this was inspired.

[01:48:47] Oh yeah. CCB on it too. Yeah. Well, thank Cody. Thanks once again. You're always a welcome guest

[01:48:54] on the podcast. It's such a pleasure. And I really enjoyed the book. I, again, I'm serious. I'm going

[01:48:59] to get my, my kids to read this at gunpoint. I will force them and we'll see what happens. And I'll

[01:49:06] let you know if they buy a business.

[01:49:07] I love it. All right. Well, when it launches, uh, December 12th or something, if they're in New

[01:49:12] York, we're going to do some fun things. So if they're in New York, I'll, I'll have to tell them

[01:49:16] to come and you can tell them that you'll give them an extra a hundred bucks if they go learn

[01:49:20] something about finance. You know, I've tried financial incentives for them and it doesn't

[01:49:25] work, but I'm going to, I'm going to try it again. We'll see. All right. You're the man. Thanks for

[01:49:29] having me, James.