We have Brad Jacobs, the author of How to Make a Few Billion Dollars or a Few More Billion Dollars. But you also wrote the first book. Brad, tell us what is the secret to making a few billion dollars.
Is having good relationships with powerful people like you, Craig.
Well, we're going to clip that one and put that as a permanent record for FreightWaves today. We're so happy to have you, Brad. You built eight companies worth more than a billion dollars, which is very remarkable. Maybe the best run in business history. Certainly the best in the industries that you're involved in. Is there something—I've read both your books. I'd love for our audience to sort of boil down. You have a playbook that you like to talk about on really how you sort of exercise both business but also life. Is there a couple of sort of core points that you have that really drive your decision-making?
Yeah, there is. So, my approach to business starts here. It starts with your mindset. It starts with figuring out how you get in the zone and how do you stay in the zone when you get kicked out of the zone. I have two chapters in the second book all about that. I think it's really important. I think the most important thing to succeed in business in a big way is to keep your head in a good place because there's always stuff coming in—there's incoming missiles all day long, all year long. You got to stay cool and you got to think very rationally and very intelligently with some wisdom and some big picture and long-term thinking. So that's where it starts—in the mind. Now in terms of my particular way I've applied the toolkit to the business, it's through M&A and then integrating and optimizing the businesses I've bought. That's what I did in all my companies and that's what I'm doing here. So first of all finding good companies to buy, but good companies that can be even better, and then improving them largely with technology and removing a lot of inefficiencies and a lot of waste, and also paying attention to the human quality of the organization. Making sure everyone's happy, make sure they're very engaged, make sure they bleed the color of the company. The mindset is very, very important collectively and individually.
One of the things that I think you talk about is rearranging your brain. And what I love about your books is again it's not just about business. This is not just a business biography, but it's really a playbook for everything in someone's life, their family life, how they think about decisions. We live in a very noisy environment, particularly in the industries that we cover, which is the goods economy and freight. There's a lot of noise out there, Brad. How does someone really hone in? You've talked about meditation being a core part of your life, but how does someone really get started in rearranging their brain?
I think it's a different answer for every person and only each person can answer that for themselves. And the only way they figure that out is through trial and error. You got to experiment. You got to find some me time, find some time for yourself all by yourself, and just figure out what works for you. What gets you into a calm state of mind? For some people that's prayer. Some people that's meditation. Some people that's some physical exercise. It's different for different folks. For some people it's complex thought experiments. For some people it's feeling love and gratitude and those kind of things. So I think it's different for each person, but it's important you find out what that is and then do a lot of that. And then the second thing that is important is you're not going to enter some nirvana state and be in bliss all the time. That's not realistic. You're going to get thrown off now and then. How do you detect that? How do you sense that? And then how do you come back to the center? And again, that's different for different people. For me, I did a couple years of cognitive therapy back like 20 years ago. And I still remember all the things they told me. I remember all the tools and the techniques and the little psychological tricks they gave me. And that works great for me.
Well, I clearly am going to need to read this book and figure out how to get my life in order.
There's the first one, and there's a sequel that works a little better, but yes.
All right. Well, add that to my very short list of things to do.
You know, you can only read one of them. Read the second one. Read the green one. The first one, I was still learning how to write a book. The second book, I was getting in my mojo.
Um, you mentioned looking for good companies that could be great and creating efficiencies and leaning in on technology. Can you talk a little bit more about that? The role of AI and how the technology platforms you guys use at QXO help as you acquire those other companies?
Well, AI, robotics, automation collectively is the biggest trend ever. And in the book, I talk about the 108 most consequential inventions and tools that humans have created. And I call that technology because that's what it is. Technology is outsourcing things we do ourselves so we can do it better, starting 2.8 million years ago with stone tools that were able to eat better and fight better and survive better. And then I trace all the way up until the last 25 years when there was a huge amount of inventions culminating with the internet and now with AI, the LLMs, and all the robotics—all the humanoid robotics and the other forms of automation that you see in the industrial world. This is taking us to a whole new level. So the speed of change, the speed of progress is accelerating in a big, big, big way and the consequences for humanity is very, very significant. So yes, AI is going to affect everything that we do in our business. It's going to affect pricing. It's going to affect procurement. It's going to affect transportation. It's going to affect logistics, the warehousing of it. It's going to do everything with workforce planning. There's really no part of the business that AI is not going to touch and improve. It's all for the positive.
Brad, you're one of the most optimistic people that I know and I think that's probably driven so much of your success as you look at the opportunities. You're also a very quick study of a business and you've talked about the M&A playbook is sort of vetting out what is legitimate and what is not. Tell us a little bit about how you sort of vet the deals that are what they say they are versus—there's so many deals out there. Most of them don't make sense. How do you really filter out the ones that are going to have the best outcomes?
You got to study it real closely. And you can't buy a pig in the poke. You really have to understand and know what you're buying before you buy it. You can't get hustled in some kind of investment banker process where you get a four-hour management presentation and a data room, and even the management presentation, they're just saying what the script says. I've never bought a company like that because I wouldn't know what I'd be buying. I don't know how that would work. So you have to really study it carefully, very deeply, and you have to talk to its customers and its vendors and the employees, particularly the former employees, its competitors. You got to search all social media and see what's out there. You can find tons and tons of stuff about a company just surfing around social media. So I think in this day and age when information is so wide all over everywhere, you should know what you're buying. If you don't, it's your own fault.
Yeah. I think especially with things like Claude or whatever LLM you're using, it makes it so much easier to do research because it can consolidate those feedbacks, those social media posts, that make it a lot easier. So there's really fewer and fewer excuses, as you mentioned, to sort of know that. But then how do you sort of filter? What's the primary filtering mechanism? Is it talent? Is it unit economics? Is it market? How do you think about what is the single most important thing that you're focused on as a business decision when you go to look at M&A transactions?
Uh, it's not a single thing. It's a group of things. But first and foremost is how does this company make money? Like what do you have to believe in order to believe this company is going to get better and better over time? So, one of the reasons I picked building products distribution is I really do believe that in five years and in 10 years from now, there's going to be a lot more demand for building products. There is right now. You got population growth. The industry is underbuilt. There's a big four million unit shortage of housing. The buildings that are out there, both commercial and residential, very old—40, 50, 60 years old. That's old. They got to get replaced. They got to get remodeled. They got to get upgraded. So you want to get into an industry and a company that's levered to some growth trend so that even if you mess some stuff up, the trend's in your favor. You got tailwinds propelling you so that you have pricing growth, you have volume growth, you have margin expansion opportunities. That's what you want to see. So the overall picture is number one.
Now the second thing is the company itself. How is it positioned? What are its strengths and weaknesses versus the competition? What makes it a winning company and what opportunities are there to grow it more? What are they underinvesting in? A lot of times you can buy a company from private equity and, you know, they have a short time frame so they're not really investing in the business, and you take that business off their hands and you invest in the CapEx, you invest in the technology, invest in the people, and you staff it right and invest in the facilities, and suddenly it's a lot more profitable with higher margins and generating a lot more free cash flow. So what's going to make that business better? But it usually comes down to what's going to affect price and what's going to affect volume. Those are the two big ones. If you can win in the marketplace on price and volume, you're going to make a lot of money. And in order to do that, you've got to have a strong value prop to the customers. The customers are those folks who wire money into your bank account. They're very important. So you have to understand why are the customers doing business with that company, and then is there a way to elevate the customer experience so that the customer sees your experience as a breath of fresh air dealing with you and gives you more business. And that's what happened in transportation and LTL. Old Dominion was the first one to crack that nut like 20 years ago. They got a superior, differentiated quality of service and therefore they got better volume. They could pick which freight they wanted and they got better pricing too. Now XPO has caught up with them and so they got a little competition, but there's plenty of business to go around. And that's why XPO has been outperforming so much is because at core, the most important reason is they elevated the customer experience—fewer damages, more on time—and as a result of that, by focusing on the customer experience, they got more price, they got more volume, therefore you make more money.
