I'm ready whenever you are. I'm in my zone. I'm in my zone, man. Let's start right away, right? I hope we start with this. I love your energy.
I always tell people this when I did an episode about your book, right? And since then, thousands, and I'm not exaggerating, thousands of people have messaged me. But what I try to explain to people when they ask what's different about Brad, I say: 'Well, first of all, how much time do you have?'
Second, he has the best and biggest energy of anyone I've ever been with. So I really appreciate you taking the time and agreeing to this. One of my favorite things is your affection and relationship you had. You had many mentors, but one of the most important, whom you mention about four times in the book, is Ludwig Jesselson.
Right at the beginning of the book, you have a list of principles you learned from other people. The principle you listed for him was to correctly guess the main trend. So if you could talk about your relationship and what he meant to you, I think that's the perfect place to start.
He meant a lot. So Mr. Jesselson, I never called him Ludwig. Mr. Jesselson was significantly older and much more successful than me, so I showed him respect by calling him Mr. Jesselson. Mr. Jesselson was an exceptional person. He was someone who was deep, very thoughtful, and lived life fully and by principles. He was a religious person. I wouldn't say he was ultra-religious.
He rather took the morality of Judaism, what is allowed and not allowed. Ethical behavior, honesty, and so on. And that became the core of his life. That became the core of his personal and professional life. Relationships, deep relationships, long-term relationships, honest relationships, relationships you can constantly return to.
And sometimes one person has the upper hand, sometimes the other. It doesn't matter. You don't abuse it. They are long-term relationships. And he had maybe a few dozen deep principles.
And one of them is the one you just mentioned. And that's because he was a businessman. He ran the world's largest commodity trading firm, Philip Brothers. You have to correctly guess the long-term trend. You can be right about other things. Yes, but if you don't hit the long-term trend, you're in a bit of trouble.
So you have to figure that out. You have to see what's happening here. You need context. You have to see what's happening, what happened, what's happening right now, and what will probably happen in the future, and what are the different future states that could occur and what are the probabilities for each of them. And then you have risk management. So yes, the opposite is that if you don't hit the main trend, you can do 1000 things right. You still lose.
You don't create any excess returns, you don't create any value there. So yes, that was a big lesson from him.
Another thing I love is that you were 23. You had lunch with him very often. As you just said, he's much older. He's one of the most successful people in the world. He was interested in you, and despite that, you weren't afraid to dump all your stresses and problems on him. And he sat there and listened patiently.
And then I love his answer when he just said, yes, business is problems. Like, one of the most important lessons is that they are problems. It's a quote from Henry Kaiser, who was, you know, as famous in his day as, say, Elon today or as you are becoming. And you know, he founded 100 different companies, built the Hoover Dam, built Liberty ships for the Allies in World War II, and I read a bunch of biographies about him because he was one of Charlie Munger's favorite founders. And in the biography, in many of his stories, he said the sentence that problems are just opportunities in work clothes.
And so I read in your book your memories of some lunches with Mr. Jesselson. It was like, oh, he had exactly the same, he basically gave you the same advice.
Yes. So in the book, I talked about a specific episode when I had lunch with him and I was a bit down and grumpy, and he said, 'What's going on?' And I was talking about this problem and that thing. I was just so down, you know. And he said, 'Well, don't stay in business if things like this are going to depress you. These are things that should pump you up.'
Yes, when you have problems, when you have challenges, you have obstacles, solving them is exactly how you make money. Yes, you make money. So the more problems you have, as long as you can solve them, as long as you figure out how to deal with them and eliminate them, you are creating value. That's an amazing way to go through life. First of all, it's a great way to make money because you're not always down, because in business, rockets are constantly flying at you. Yes. You have problems with employees, with competitors, with regulators. I mean, rockets are flying at you all day. You also have great things, but in between, they are punches to the face. And if you let that roll over you, you won't be, you won't be successful. And second, you won't be happy, so you'll go through life all grumpy.
You know, sometimes you see these multibillionaires and they always look like this. Well, what's the point of all that money? Seriously? So I wouldn't want to be one of these rich guys who are always frowning, upset, angry, and depressed. That's much more important for me to be in the right mindset and spend that short time we have in life. Happily.
Reasonably happily. I don't have a perfectionist standard that I have to be in ecstasy and bliss 24 hours a day, seven days a week, but overall happy.
Did you ever meet Sam Zell while he was still alive?
Yes, definitely many times.
Okay, so... great guy. He had it the same way. I had the privilege of a two-hour, very intense lunch with him. He said the same thing, a very similar thing. He just said, I know all these rich guys. He said, you wouldn't believe how many are unhappy. He said it. He said, I wake up every single day.
You have a lot in common in that, for example, I spend time with you. You know, the very first time I met you was at your book launch. Right? Just remember, this guy has incredible energy, and by then I had already read your book. But something you talk about over and over in your book is that problems are just opportunities.
It reminded me of this quote from Jeff Bezos. There are several books about him, but one of his main biographies is a book called The Everything Store. And they said that Jeff, you told him about problems in his business and he got excited.
Because he's like, oh, and he talks about shareholders. It's like, oh, these are just problems. If I solve these problems, it will increase the value of the company I'm building. They are actually good things to identify and embrace rather than avoid.
One of the most important things I learned from Brad Jacobs is the importance of working with the smartest and most talented people. Brad says that the most important job of a CEO is recruiting top people. Brad hires the smartest people he can find and says that intelligence cannot be replaced by anything. Steve Jobs also believed this was important. Steve said, 'I think I've always been able to figure out who the really smart people are that are worth being with. You have to find exceptional people.'
The key insight is that in most things in life, the dynamic range between average and best quality is at most two to one. But in the field I was interested in, I noticed that the dynamic range between what an average person can do and what the best can do was 50 or 100 to one. You have to build a team that focuses on the best players. That ends the Steve Jobs quote, and that's exactly what Ramp did. Ramp has the most talented technical team in its industry. Becoming an engineer at Ramp is almost impossible. In the last 12 months, they hired only 0.23% of applicants. That means when you use Ramp, you have top technical talent and the best AI engineers working for you 24/7 to automate and improve all your business's financial operations, and they do it on a single platform. That means the longer you use Ramp, the more efficient your company becomes. This is important because, as Sam Walton said in his autobiography, you can make a lot of different mistakes and still get away with it if you run an efficient operation, or you can be a genius and go bankrupt if you are too inefficient. Ramp helps you run an efficient organization. From a customer's perspective, what does a team of A-players look like? It sounds like this customer review I read: Ramp is like having a teammate you don't have to check on because they've got it handled. Visit ramp.com to find out how they can help your business save time and money today. That's ramp.com.
I have a question about your long-term reputation. Okay. There's this saying. Remember when Buffett got into all those problems with Salomon Brothers.
And he said, listen, you can lose money. That's okay. But if you lose even a little bit of reputation, I'm cruel. I will be absolutely merciless.
That was a very powerful experience for me at your book launch, because first of all, I was the only one who didn't come in a suit, so I made up for it today, right? And everyone else was saying things like, we've known Brad for three decades. Like basically everyone was asking, how do you know Brad? It was like, you know, I was his investor, he made all that money for our pension fund, and so on. And the stories I heard at that launch and then since I released that episode are just, you have a fantastic long-term reputation. Do you have any advice on how you managed to maintain it and how important it was for others to do the same.
Reputation is really important and your personal brand is incredibly important, because based on that, people will want to do business with you or they won't want to have anything to do with you. So every day when you're in the office and doing something, you're either building your brand or destroying it. And that's the main thing you have to work on. You have to make sure your brand reflects integrity, honesty, reliability, and stability, and that people can count on you. That brings us back to Mr. Jesselson.
So Philip Brothers, that was before email, it was before, actually even before faxes. It was more telexes that took a few days to go through, if they went through at all. So you could close a deal for hundreds of millions of dollars with a handshake or a phone call. Written confirmation didn't come for days. In the meantime, the price of what you were trading, oil or copper, could go up significantly.
But the deal had to stand. Otherwise, you know, the whole system doesn't work. So reliability is so... Trust is so important.
How old were you when he gave you this advice? Did you start applying it immediately? So you were focused on the long-term goal even when you were so young?
Yes. I think the older you get, the more you focus on the long-term perspective. I think when you're young, you're just ambitious and you want things right away. You live in the present.
As you age and mature, you gain a broader context. I think life is generally about gaining context, about seeing things in relation to other things.
Can you talk more about that?
Well, you know, since we've talked about this a lot outside of your podcast, I'm into meditation. So I meditate a lot on change, on looking at space from different perspectives, not from the usual one we have right now. So I expand my mind from the earth to the sun, to the solar system, to the galaxy, to clusters of galaxies, to the universe, to the multiverse. I just go very, very high and then I bring it all back down and I go to the molecule, the atom, the proton, and the nucleus, and right into the center of it all, and then to the strings.
And I find that this accordion, when I make my mind an accordion that expands and then contracts, and then I do the same with time, I look at time, I go back to my life over the last decades, and then I go back centuries and millennia and I go further and further into the past, 13.8 billion years to the Big Bang, and then I go forward and imagine the world going forward, forward, forward, forward, forward, forward, forward. This interplay of time and space, at least for me, everyone is different, gives me context. It gives me humility. It gives me modesty. It shows me that I'm just one little piece in something huge that's happening. I'm just one tiny, tiny little piece. At the same time, I'm part of it. So it uplifts me, inspires me, and motivates me. I tell myself, wow, I'm part of something big. It's great. We are all, we are all part of this huge, huge thing.
So I think context is really important. It gives you meaning, it gives you purpose, it gives you understanding, it gives you wisdom. I know you don't like to hear me say this because we've talked about it before. You know I make a living studying exceptional people, right?
Yes, I appreciate that. But think about how crazy it is. The people I study in Founders were so good at their work that someone wrote a book about their life. You're talking about a very small number, but most of their inner monologues, you are different. You have much more positive energy. And you know, it's almost like, well, let me put it in context. A few months ago, we were together in Miami at a mutual friend Rick's birthday party, and at that party, there were a lot of interesting people.
One of them was Apolo Ohno. Okay. Apolo Ohno is the most successful American winter Olympian of all time. We became friends. I met him through the podcast, he came up to me, and this is one of the funniest things. And you know, because he has, people think that an Olympian trained from childhood. His father forced him to get up at 5:00 AM and train in the school parking lot. But he's still very positive and has a great relationship with his father. Usually, that doesn't end well in those conditions. So he was asking me. He says he sees a certain pattern when he reads those hundreds of biographies of great entrepreneurs,
that there's something driving them and it's actually negative. It could be insecurity, maybe they grew up in poverty, it could be a bad relationship with family. And he asks if they are all like that. And I, you were about 6 feet from me. I say, 'Do you see that guy?' I ask, do you know who that is? And he says no. I say, 'That's the badass Brad Jacobs.' And I say, I guarantee you that's not what drives him. This is what I mean. You are exceptional even among exceptional people because at least from the outside and from our conversation, it seems that it's part of your unflappability.
The nature you have that business, are problems, they will come, you. What do you think we're doing here? Like it seems like you're not fazed at all. So what is your inner monologue when you're doing these huge deals and all these crazy things? You've built eight separate billion-dollar firms. That's not a fluke. So how do you do it? I'll stop talking now. What is your inner monologue?
I go back to what Mrs. Jesselson used to say, that problems are your friends. You don't just want to tolerate problems, you want to embrace problems, you want to hug problems. Problems are the path to success. You want to run to the fire. You don't want to run away from the fire. Be brave. Have courage. Go for it. I think you can start with anything, with anything.
And in this case, in Apolo's case, he and other people he studied start with negativity, trauma, stress, insecurity, fear, anxiety, and that becomes their motivator. They focus on that and because of that, they run faster.
This is, I don't know, you're like a unicorn.
I don't know if I'm a unicorn. I don't embrace negativity. I'm okay with it, but I don't make a science of negativity. I much prefer to enjoy positivity. I'm an optimist.
But your inner monologue, are you kind to yourself? Your ongoing inner monologue?
I'm, I'm quite kind. Life, yes. I am.
I'm cruel. I sound like, you know, David Goggins is like this.
Uh-huh. Yes. I just... someone was talking about a mentalist talking about... Yes. My inner monologue sounds like David Goggins, where it's just about you're not doing enough. This wasn't good enough. I see problems, so I attack them. It's like, oh, I'll listen to an old podcast or something, anything I've done. It was like, and I only see mistakes. I don't see any good part. So...
Let me comment on that. I think there are two different ways to approach this. So yes, as cognitive behavioral therapy taught everyone, we are born with a schema, a prism through which we see life. And that can be clouded by basic, core beliefs about being incompetent, weak, flawed, unattractive, unlovable, all those negative things.
Now there are two ways you can approach this. You can either argue with those things, first validate them, then challenge them. So tell yourself, well, of course I hear this. I have executives who have reported to me over the years and they have exactly the same schema you just described, where they're always saying, 'Oh, I'm not good at this.' Oh, you know, I am, when people really realize how bad I actually am, I'm just playing. I wear this mask and I do my job poorly. I'll get fired. People hide things from me because they, because they don't respect me. All these negative monologues. It's a complete waste of time, but nevertheless, it's their reality. Their reality is that they have this constant stream of automatic negative thoughts. There are two ways to deal with this.
You can either challenge them, but first validate them. Don't start by challenging right away. First validate and say, okay, yes, of course I have all these negative thoughts because I have, for example, a tough job, I have an important job, there's a lot of pressure, and I'm not perfect, so I don't do everything right and so I mess up sometimes and I make mistakes and all that negative talk, and then you catastrophize those negative things and make them huge, huge problems, although they should be minimized if you put them in the right context. So validate first, but then challenge and say, well, what does the evidence say? Is this really a rational thought or is it just my schema talking? For me, when you say that, it's like, I think you have the gift of stepping outside yourself, what you're saying now. But when I say you step outside yourself, you're like, no. I'm inside myself.
I, I much prefer being inside myself. Okay. I like to return to the center. Okay. I like to find that center. The first time this concept of centering appeared was when I was, I went to a developmental camp at a school over the summer and they gave out a book called Centering. I don't remember who wrote it and there was a picture of someone making pottery.
And in that book, they explained that it's all about finding the center of the pot you're making. So centering, finding that inner peace, finding that zone where you're in the flow. And everyone has it. Everyone has it, you just have to find it. And that is one of life's missions. Find the center, find that zone of inner peace. And then when I went to college and studied music with Bill Dixon, the same concept appeared. I said to myself, I know this. They said, return to the center. So we played improvisation, what he called black music. Some might call it jazz. He didn't like the word jazz. We played, we played with friends and then you have to find the center, return to the center, back to the center, back to the center. So in that music, there would be a center point. In that music, you could go wherever you wanted. You could improvise anywhere, but return to the center and then everyone returns to their common center.
So, so I incorporated this concept of centering, finding the center, into my meditation practices, into my business practices, into my life philosophy. So I like to find centers. But let's go back to what we were talking about before. So the negative inner monologue comes. You can take one of two paths. You can go the path of validating and challenging it and seeing it in a correct, rational way. Or you choose the approach of just observing it, just enjoying it, and it is what it is. It's mindful acceptance, that is, accepting that state. And I, I oscillate between these two. Sometimes I do, you asked how I do it. my inner monologue. If negativity creeps in, of course it creeps in. I, I dance with the spirits of my ancestors, just like you and everyone else dances with ancestral spirits. Evolution works very slowly, over generations, over long periods of time. So we always have this set of genes that were good for the survival and reproduction of our ancestors, but not necessarily. Now we still have all these irrational thoughts in the gene pool. So another way to look at it is just, just observe it in a somewhat Buddhist way. Just observe it. Like one of the ways, the simplest Buddhist meditation is just to observe your breath. Just observe your breath. I mean, how simple is that? All you have to do is... We just did it before we started recording. You said, let's do a mini meditation before we start. Like, I never do that. And I probably should start doing it. I just wake up and go and try to throw myself into things that I feel like, and don't get me wrong. Like, I am absolutely obsessed with what I do. I love, I love my work. I work on it seven days a week, but I want to be the best in the world at it. And then it's like, oh, you just see the flaws.
So that sounds like perfectionism to me. So I suffered quite a bit from perfectionism when I was younger. I wanted to be perfect.
Not only did I want to be perfect myself. I wanted everyone else to be perfect.
Not only did I want to be perfect and everyone else. I wanted the universe to be perfect. I wanted everything to go smoothly on my command and order. Well, it turns out that's not reality.
It's not natural. None of these components are perfect.
There's something you said in your book. It's actually in this, this part that I was taking notes on. You said, I'm not surprised when things don't go perfectly. That's the nature of the universe. Big problems can be where the best opportunities lie. And so of course, you know, like whenever I read something, it's not just about reading it. I think about how it relates to every other thing I've experienced and all the books I've read.
I remember I had dinner with Charlie Munger. I spent three hours with him about six or eight months before he died. There's an unfortunate trend where it's like, oh, it's a bit dangerous. Remember? You said, I don't know, I don't know if I'll go to dinner with you. But one of the things I loved was the main takeaway I kept, because as soon as I left there, I just wrote down what I learned. And it said that Charlie has almost complete indifference to problems. Problems should be expected from time to time. This is inevitable, so why let it bother you? And it's one of the things I admired most about him. He was like, 'Yeah, it's part of life. What's wrong with you?' Like, you know, he had decades of life experience. He was much further down the path and clearly much wiser than me.
So, so I have two comments on that. One is, if you go back, go back to the Big Bang. The current construction model of how the universe was created was actually created from imperfection. There was a slight imbalance between matter and antimatter. Just a slight imbalance. There's a lot of debate about what caused it. As a result, everything came from that. If there had been perfection at the beginning of the universe, the Big Bang would not have happened. So we are imperfection. We are children of imperfection. Imperfection is good. Imperfection is not bad. Expecting perfection will cause you stress and tension and it won't work. But when you were 20, you were saying, 'Hey, I want to be perfect.' Not only did I want to be perfect myself, I wanted everyone around me to be perfect. I wanted the universe to be perfect. How long did it take you to understand what you just explained?
So when I stepped down from United Rentals as CEO, I stayed on as chairman. But when I finished as head of United Rentals, I did that for about 10 years and I wanted to do the next big thing. I wanted to do another startup from scratch, you know, I ran a big company. I wanted to start completely from zero. And there was a period of a couple of years where I was trying to figure out what I was going to do and I couldn't find it. And then the great financial crisis came and I was a bit lost, so I was a bit, it was probably the only time in my life that I had depression. I just don't get depressed,
but during that period, I had clinical depression. I took the Beck Depression Inventory and it came back, yes, depression. Wow.
So I found an amazing cognitive therapist and I went to him twice a week, an hour and a half at a time, for two years. It was fantastic. One of the best things I've ever done in my life because what we did was in an environment that was very safe, confidential, and full of trust. With someone who was a professional in psychology, I was able to first identify and then more fully notice my automatic thoughts, those negative thoughts and irrational thoughts, non-constructive thoughts, and then first validate them, then challenge them, first join them and then lead to a more constructive way of looking at things. So that cognitive therapy approach, identifying thoughts and then working with them, was truly a turning point in my life regarding that perfectionism, because after a few sessions, he said, you know, I kind of know what's going on here now. I've already read you. Do you want to hear it? I said, yes, I want to hear it. And he said, you suffer from perfectionism.
Like you want everything to be perfect and it's not. So we have to get through that. We have to limit those demands, those musts, those shoulds, those commands that either I or you or the rest of the world are perfect to, you know, preferences where I would like to be better. I want you to be better. I wish things went better, but they don't have to. I can still be happy and honestly, they won't always go that way. So I have to accept that. I have to radically accept that. I have to be in reality. Not give yourself these. You know, Jeff, you mentioned Bezos. Bezos says a lot of great things. But one of the things he says often is don't fight with reality because reality always wins.
So reality is that nothing is perfect. Like literally nothing is perfect, at least that I've found so far. He has another quote. I think it relates to this. It's similar to the idea from your book where he says if you don't want to be criticized and you don't want stress, then do nothing.
Exactly. It's just like that. Sit in a room, watch Netflix, and order food, but you won't do anything you could be proud of. So that's another irrational thought that you see in people. I used to have that often, but not anymore because I went through that therapy and it flipped a switch in my brain. It's the demand that everyone likes me, everyone respects me, and everyone only says great things about me, that I have good publicity and good reviews, and that the stock goes up every single day. Well, that's not going to happen. That's called perfectionism.
That's not reality. So you just adjust it to, well, of course, like anyone else. I would prefer people to speak well of me than badly, but I basically don't care. If people speak badly of me, fine. Maybe there's some truth to it. Maybe it's something good I can learn from. Or they're just off and don't know me and are just projecting their distorted ideas onto me. But does it change who I am? Not at all. If someone says something bad about me, does it really matter? It doesn't matter at all. And again, we come back to context. In the broader context of things, most problems actually don't matter.
They just don't matter. Maybe they seem that way in the moment and maybe we blow them out of proportion and make them huge catastrophes and dramas. But most problems are actually not a bad thing. I always say that opportunity is a strange creature. It often appears right after some loss.
There's always something to do. Always. Regardless of what happens, and that brings us back to the conversation with Jesselson. Whatever they throw in your face. At that moment, it may seem ugly and bad, but there's always a move. There's a way to use it. There's a way to leverage it. A way to embrace it and turn it into success. Everything can be turned into something positive and successful, even if it starts from a bad place.
When you were talking, something came to mind that is also unusual, because most people whose biographies I read go through several different companies before they find their life's work, but usually they work on something for a very long time. Why? Why do you keep founding so many companies? Like, what's going on?
That's my thing. Everyone has their thing, so everyone, you're a great podcaster, you have a talent. Your superpower is that you can absorb a huge amount of information and then distill it into, boom. Here are the key insights. It's, it's truly genius. That's your thing. That's why you do it, right? Because you're good at it. You don't play professional baseball, you don't, you know, you don't act, you don't sing or anything. You do what you're good at. In this, I'm good. I'm good at figuring out which industry is right for consolidation.
And second, I have a toolkit and it's the same toolkit. It's not... You told me about this last time. Can you explain it? I like how you described the toolkit and your approach to building companies.
So first, I find the right industry. I find something that's big. I find something that's growing. I find something that's fragmented. I find something where we can buy at reasonable prices. I look for areas where technology could be applied. It's not a very technologically advanced industry. I look for things that AI and automation won't disrupt in the near future. So I look for industries that have certain characteristics. Whether it was waste, construction, transportation, or logistics, and now distribution. They all have the same characteristics, the same traits. So that's point number one. Point number two is that I then assemble an amazing team. I assemble a team of people who are generally smarter than me and more talented in what they do.
I have a great HR director who knows everything about HR, compensation, and recruiting. I have a great M&A team that knows how to close deals without unnecessary drama. I have great finance and accounting people who understand everything from A to Z about managing a fast-growing company and clean accounting and so on. And so I put that team together. Then I solve the compensation issue. I make everyone on the senior team my partner and give people huge equity stakes, but there's a catch.
They can earn it, but they can't sell it for five years and most of it vests in the last two years. So they're all committed, which brings us back to long-term relationships.
Sure, people come and go for personal reasons or they burn out and so on, but generally, most of the team stays for a longer time and you work together as one team.
And then I have certain rules for how we will communicate with each other. Very respectfully, but in a way that encourages looking at things from different angles. So we disagree and argue. Argue is too strong a word. We present different perspectives on the situation that partly overlap and partly contradict each other, and then very scientifically figure out how to adjust the risks and what is right. It's a scientific experiment, a constant process of trial and error and A/B testing all day.
And this culture we create gives us strength. It gives us the strength to attack the market in a certain way without all the noise that management teams usually have. A very cohesive team like a superorganism, like a brain, like a highly organized group.
And then we have experience among all those people in our main job, which is buying companies at reasonable prices, where there's a spread between what we acquire capital for and how we invest it.
And then we have the skills to improve the companies we buy. Those are the two main things we're good at.
Is buying companies a disciplined approach? If the price is too high, we don't go in. If the price is reasonable, it doesn't have to be necessarily cheap. We're not trying to steal those companies. If the price is reasonable, we go in with enthusiasm. And second, another talent our team collectively has is that we know how to improve those companies. We know how to improve pricing, purchasing, HR, compensation systems, technology, the whole technology stack, basically everything from A to Z. We're simply good at transformation. We know how to take a company with $1 billion in EBITDA profit and double that profit in three to five years.
Double EBITDA. That's the main criterion I look at for a company, the purchase price. And second, can we double the profit in three to five years? And most of my major acquisitions have done that. So XPO, Norbert Dentressangle, and other companies were great companies. Everyone said they were doing well. Three years later, we doubled the profit. Yes, because we use our toolkit and game plan, the same strategy in one industry after another. That strategy here and...
It improves a bit, but at its core it's still the same. So when you say, this is just what I do, I think you've already figured out who you are as a person.
I have a strange theory that I can't prove, but I believe in. You know, there's this myth about the genius young entrepreneur. And I say, if you study business history intensely, you'll find that people mostly do their best work after many decades of their career.
There are all sorts of reasons for that. They say they have more experience, they're wiser, they have more resources, they have more practice, and I don't dispute that. That's all true. But I have this strange theory that they also know themselves much better.
And I think the key to being a great entrepreneur is building a business that is, I used to say, building a business that is authentic to you. And then I read a great autobiography of Michael Dell, and he had a better sentence. He said he built a business that was natural to him.
And there's a great story. I'll want to hear your opinion in a moment, but there's a great story about how Michael started the company when he was 19. He's in his early 20s and doing amazingly, but he realized, hey, I need an adult, I need some help here. So he hires a guy, I think his name was Lee Walker, if I remember correctly.
And he's about 20 years older than Michael. He'd already started a bunch of companies. He was rich, you know, he didn't have to work anymore. But he saw in Michael an unusual talent that comes along once in a generation and decided to help him. He lasted about four years.
I read the book and when I wanted to do a podcast about it, I looked up what happened to that guy. I found an interview with him. He's in his 80s now and talks about that period. And he gave me one of the best contexts to really understand this story.
And Michael's story is actually a story about you and about all of us. And all those people are basically very similar to the people we study. And he just, you know, Michael starts a company with $1,000 and says he's going to beat IBM from his dorm room. IBM was the most valuable company in the world at the time.
At that time, which I didn't even know, it was the first company to reach a market capitalization of $100 billion, which is insane. And he, you know, had the audacity to go for it. And he says, 'For the first few years, we just went up against this colossus, and I lasted four years. My hair started falling out, my back hurt, I couldn't sleep, I was unhealthy.'
And he says, 'But Michael was energized by it. He built a business that was natural to him, because, you know, this is what I want to do, my hair isn't falling out. I'm not, you know, depressed, my back doesn't hurt, I can't sleep. I just wake up every day and go for it.'
So that's how you feel about what you do. It might sound weird, because it is, but not in a derogatory sense. It's not weird in a negative sense. I don't know anyone else who has founded eight separate billion-dollar companies, so you just can't help yourself.
That's what I do and that's what I know how to do. So it's natural for you. It's just, yes, I've done this many times before, and over those decades I've made every possible mistake and learned from those mistakes, refined it, and now I have a winning recipe. I know how to execute it and my team knows how to execute it.
I don't want to underestimate the team. One thing about being a CEO and founder is that you get all the credit. But there are a lot of people in the team who are doing those things and achieving.
Yes. In your book you have a great sentence that I often see. You said that the main job of a CEO is recruiting top people.
Exactly. They are your people.
So my question is, what would make you stop?
Well, I don't know, because I'm not planning to and I don't see it in the near future. I just started this company a few months ago. That's it, right? But generally, I liked this about most of the people I admire. I always remember, you know, I put it in my maxims: If you love what you're doing, your exit strategy is death. You should be working on something.
As I was told, you know, Sam Zell said he would do deals until he died. And he did deals until he died. Munger the same. I met him right after the Silicon Valley Bank crash. It was happening. He was like a kid in a candy store. He just thought it was fun. Of course he didn't want people to suffer, but he said, you know how many financial panics I've been through? Of course, this is nothing new.
I remember I was just at dinner. I remember where it was, at Harry's Pizzeria in Miami in the Design District. And you know, I was supposed to be paying attention to my wife on our date, but I was thinking about the podcast and all the things I was reading.
And then I took a bite of pizza. And I'm thinking, people say if you love your job, you'd do it for free. And I say no, there's another level. If you love your job, they couldn't pay you to stop. Exactly. I was thinking, how much money would you have to give Steve Jobs to not work at Apple? That's not why he does it. That's just not why they do it.
Enzo Ferrari, Estée Lauder, Edwin Land, Coco Chanel, and all these people. They just can't. Michele Ferrero, the Michelin brothers, this story keeps repeating, and I have the same feeling about you. It's like if I said, hey, for what price would I pay you and you can't work. You have to stay home, you can't. There's just no price.
Everyone you named, those successful people, they went all in. They were 100% engaged. It wasn't like they were partially engaged. They're in it, they're in it, they're in it 100% and completely and purposefully focused on executing the plan. And that's also important. And in your team, you want to have people who share that passion, that determination.
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That brings me to another great one of yours. I don't even think you consider it a maxim, but it's the way you distinguish between A, B, and C players, where you say, I'll just summarize it and you can jump in anytime. But you imagine, you do another thought experiment, yes, that okay, you want to find out if you have the absolute best people on your team, just imagine they come into your office and say, 'Bret, I'm quitting.' Yes.
So what happens in this scenario then?
So I'm in constant contact with my head of HR and we go over talent and make sure everyone is happy and motivated.
What percentage of your... How much?
A lot. I spend most of my time on people and talent issues.
No, no, no, not the absolute most, but if I made a pie chart of how I divide my time, the largest percentage is personnel issues. And there's a funny story that goes with this. And I don't want to interrupt you, but I have to, I have it in me and all these stories have to come out because I find them fascinating.
So at Stanford, there are two MBA students in the late 90s, and in '97 they interview 16 tech company founders, since they're in Silicon Valley at the time, and they publish this book called 'Inside Silicon Valley,' with Bill Gates and Steve Jobs and all the others. And they say to Steve, 'Well, you're the founder, of course you don't have time for recruiting.' And Steve says, 'What? No, it's the most important thing.'
It sounds exactly like what you wrote in the book. It's the most important thing, and he illustrates it brilliantly. He says, let's say you're starting a company, right, you're in Silicon Valley, that's what you do here. You pick a co-founder, you should think long and hard about it. Your co-founder represents 50% of the company at that moment.
And then he goes on and on, but it goes on. Now you have to hire the 10th person. That person is 10% of your company and you say you don't have time. Like, what else are you doing? It's all about people. It's all about people. You know, systems and technologies, budgets and customers and sales. All these things are really, really important, but you can't achieve perfection in these things without fantastic people, without fantastic leaders.
And I spend a lot of time, especially with those few dozen key people. I want to make sure they're all fully in it to win, that they're all fully, fully engaged. And I do this mental exercise where I imagine that person coming into my office and saying, 'Bret, I'm quitting.' This is not a conversation where you give me a counteroffer. I'm done. I've moved on. It's behind me. This conversation is about how to make a proper transition, because I respect you and I don't want to leave you in the lurch.
And then I try to empathize and imagine what my reaction would be if that person came and gave their notice. If my reaction to that is, yes, I don't want to smile, I don't want to pretend I'm happy about it, but you know, nobody likes firing people and I was just, you know, I kept putting off firing that person. I didn't, but I was doing it. And this is great. I don't have to pay severance.
And you know, that solves the problem. No problem at all. We'll replace them. That's a C player. That's someone you really should have the courage to get off the team right away. And then there's the second category. If my reaction to that is, you know, it's a bummer, you know, I'd rather the person stayed, but it's not the end of the world. We'll hire a headhunter, find someone just as good, maybe better. And you know, it'll work itself out. That's a B player.
But if I imagine that person leaving and my reaction is pure horror and absolute panic, like someone took a baseball bat and hit me in the stomach and then punched me in the face, I think, oh my god, I'll never find anyone as good as her again in any case, or I'll never have someone as talented as that person. I'll never have anyone who brings their specific superpower.
And I don't even hear what they're saying anymore because I'm having this internal panic dialogue. That's called an A player. So I want to be surrounded by all A players. I want people whose relationship with me I value so much that if it ended, I would be lost. And I want them to feel the same way. I want mutual relationships. I want people who love being part of the team, the company, and that we're all in it together to conquer the world. I think that's what I called it. It's been two years since I wrote that book, but I think there was a chapter on how to crush the competition instead of each other.
And it's quite funny, but it's a serious title. You don't want a dysfunctional management team. One of the most important things that allowed us to create tens of billions of dollars in value is that the management team is unified. We have the right people in it and we have rules for how we will treat each other with respect, which still encourages dissenting opinions.
First of all, I like how you described it, because everyone says, clear, hire A players. It's really hard to distinguish what that actually means. And I think this thought experiment is perfect. It's like, we're screwed. If this person leaves, that's an A player. That's how you can think about it. But that also relates to your gift and why I think I've learned so much from you. First, partly it's your ability to think clearly and then communicate it in a memorable way.
You were just talking about the relationships you have with the people you work with. In the book you have a sentence where you say a company is like a party. You only want to invite people who improve the mood.
With my team, we spend a lot of time together, so it's important that we get along. Yes, I agree with that.
Who said that? That was really good. A great sentence. I think in the shareholder letters. Life is too short to work with people you don't admire. It's the same situation. You're the one in charge. You can choose. Again, it comes back to the gift of being a CEO, being an entrepreneur. It's rare that you can literally choose who is around you. And I love this idea that an organization is just like a party. You want people, you only want people who improve the mood.
David, it's all about people. It's about people because people then create all those processes, workflows, transformations, everything else.
That's fascinating, because business is obviously people, right? Not just the people who create the product, but the entire business. The best definition of business I've ever heard was from Richard Branson. He says business is an idea that improves someone else's life. Right, and there are infinite of them. That's why there are always more opportunities, because there are infinite ways. We think technology will change things, but it usually just opens other ways to improve people's lives.
So focus on that if you're looking for an opportunity, how can I serve other people. Another sentence related to that is from Henry Ford, where he says money comes naturally as a result of service. I think these two ideas go together. The reason I was thinking about that is the best description of what you were saying. It's about people. Work with the best, with A players. We're going to talk about your sentence that nothing replaces brains.
But before that, the way I've heard it best described, I think, is from Ed Catmull, the founder of Pixar. Right, he went around giving lectures and talking about it and was shocked when he asked the audience what's more important, people or ideas. He says every time people were wrong and said ideas. And he says no, it's people. He has a great sentence where he says, 'Listen, if you give an average idea to a brilliant team, they'll either fix it or throw it out and come up with something better, something new. But if you give a great idea to an average team, they'll mess it up.' So it's clear. Ideas come from people. So it's people.
Exactly what I'm trying to say. What he said. He said it in a great way, but in the book you have very clear advice that's interesting, where you look for, nothing replaces brains. Looking for above-average intelligence eliminates 90% of all candidates. It's the first thing I look at. Brains can't be replaced by anything. The CEO trait most correlated with company success is high IQ. Bet on the smartest.
Yes, you want intelligent people, and I mainly want people who are smarter than me. I want people who lift me up, who teach me. I don't want to be... Do you want them specialized? Because you mentioned you want them smarter, but also better in their specific...
The vast majority of them are specialized.
Okay, they're financiers, they're investors, they're strategists. They have something, for example, technicians, what they bring, what they're narrowly focused on, but they go deep. But you also want them to have certain human qualities that go beyond their specialization, and those are equally or more important than technical skills.
Well, you mentioned wisdom. You want people who are honest. You want people who are hardworking? You want collegial people who are really into it? On the question of work-life balance, it's work. And their life is largely their work and they enjoy it. I don't have to stand over them like a teacher with a stick to make them work long hours or come in early on weekends. They want to do it. They enjoy doing it. Their work, their career, their success, the shared success of the company is an important part of their overall setup. It's a really important part of their being and their purpose.
Was there ever a time. I don't want to interrupt you, but this is fascinating. It's almost selfish to conduct this interview because I can ask you questions and learn from you. Was there ever a time when work wasn't, when you were more balanced? When were you last in balance?
So, you started your first company at 23. Me? Yes. And since then I've been completely out of balance. I work seven days a week.
Yes. Because you took it to, I don't know, a few billion dollars in four years. It was an insane story.
But for me it's not work. For me it's like, I really enjoy it. For me it's a craft. It's a skill that I have, that I do. Were you always honest with yourself that it was the highest priority? I think so. I have to be honest with myself. On the way here I was talking to a friend and I think I'm lying to myself. So I'll give an example. You know, in many cases, when you read biographies of these people, it ends up as a cautionary tale, you know, because they sacrifice everything for professional success, their health, relationships, everything else.
Well, I disagree with that.
No, no, no. You're still married, you're a good father, you have everything else. Yes, definitely. But your main... It's not like you have a bunch of hobbies outside of work, from what I know.
Meditation, music, everything.
That's it. So I've long said about every person I've read about. Okay, I even named an episode 'My Personal Plan,' which was, right, I'll summarize it briefly, but Craig, the first person who invented the quantitative hedge fund. You found, you know, the ability to count cards in Blackjack. In the 60s he wrote a book called 'Beat the Dealer,' you know, he made more money than he could ever spend. But if you read his book, you'll find at the end. It's like he was much more balanced.
Right, he also came from an academic background and maybe that played a role, but he basically lived an adventurous life because he truly loved what he did. When he made more money than he could spend, he stopped trading time for money.
He had a good marriage until his wife died of cancer. He took care of his health, but more like, let's say there are five important things. And he divided it up. Maybe work was 50%, but the other four are the other 50%. And I said to myself, that's something like my personal plan. And on the way here I said to myself, no, I'm lying. It's like 90% of what I think about and how I spend time is just work. That's the beautiful thing.
So all the people you've mentioned so far, all these very, very successful people, I guarantee you. Probably every single one of them, with a few exceptions, if any, went all in. And what they did was their passion and they were simply so excited about it. They were in the right flow. They were in that flow where you're so absorbed in something that you lose track of time and the rest of the universe just disappears. You're just in it. You're really engaged in something you do well and with people you like. And you'll probably be successful because you're doing what you do.
When I was thinking about all the research you do and that you explain, before you enter an industry, before you start a company, it's like, I describe your book this way. Buy it, read the whole thing, and then I think you'll keep it close to your desk because it's a reference manual, because you can pick it up anytime and read one chapter, which takes 10 minutes, and get good ideas from it.
You know I'm writing a sequel? Last time you told me you only had one book in you, that you had nothing else. So I wrote that book and got so much feedback on what people think about it. And people asked, 'Well, you should talk more about this, this, and this.' At first I said I'd never write another book.
Writing a book takes a lot of time and I don't have a lot of that time, but so many people asked me about similar things. Okay, I'll write a sequel that will address exactly these questions. You know what it will be called? The first one was 'How to Make a Few Billion Dollars.' This one will be called 'How to Make a Few Billion More.' Isn't that great?
Yes. Please give me one of the first copies. You were very kind to send me an early copy of that book. I think what ties all your research, your approach to life, people like Steve Jobs or Jeff Bezos, is that mediocrity is invisible until passion reveals it.
