I Made $50M Buying & Running Boring Businesses

So that was the first golden goose. And then you said you started stacking geese like a rapper, you know, at the club.

So what, what's the second?

Stacking geese.

I hope that becomes a term that we can use.

Stacking geese. Yeah, stacking geese. We, we gotta get some shirts made.

Dude, where's my merch guy?

Hey, merch guy.

I feel like I could rule the world. I know I could be what I want to.

I put my all in it like no days off on the road. Let's travel.

Yeah, we could do the light stuff. And then you also, you've got the— we call it the Aw, shucks, Warren Buffett attitude where you've got a list of one-liners. You write amazing annual reports. You're a great writer. So we have a bunch of one-liners that we want to ask you about as well. Sounds good. What can you tell me? What's the— what do you buy and what are the biggest companies you buy? Like pool companies and HVAC companies?

Yeah. I mean, we typically— we've got everything from a children's clothing brand to a military recruitment firm to manufacturing, construction, business services. I mean, it's really the 16 companies. It's a, you know, it looks like the Island of Misfit Toys for us. They're companies that we love, the people who we get to work with. They're in industries that we feel like are not going to be changing. And we can talk about how some of them maybe look like high change, especially like the children's clothing would seem high change on the surface, but it's actually not. And yeah, we try to partner with them for a long time.

What's the biggest one in terms of revenue and profit?

Let's see, our— in terms of revenue and profits, probably our fencing business out of Dallas, Texas is probably the largest. So we, we have a big market share in the Dallas market. And yeah, it's a, it's a, it's a pretty sizable business.

I was going to ask you a similar question. Like, you know, people are always like, you can't pick a favorite kid. And as an investor, you can. You have this portfolio and like some are better than others and that's okay. It would be weird if all of your companies were equally successful investments. I wouldn't believe you. And so what's like the golden goose for you? So which one is like, like I know in my portfolio, right? I have like, I have like a mini version of what you do where we have like 4 or 5 companies that we kind of have either bought or own a big stake in. And I could tell you, I'll be like, oh, this is like for us, like the somewhere.com business was like my golden goose, partly because I got in on a great price, but also the business tripled since we bought it. And it's just this business that just spits out cash flow and it's like the market keeps growing for this. People need this. And so for us, that's been the golden goose. It just keeps laying a golden egg every single month for us. What's the golden goose in your portfolio?

Yeah, well, we've been fortunate to actually like, we've kind of stacked golden geese on one another is how I would describe it. So the very first business I bought is called MediaCross, is a military recruitment firm. Bought that in very early 2010.

Explain in layman's terms, what does that even mean? Military recruitment firm?

What's happening? Yeah. So we at the time worked with two branches of the military. Now we work primarily with one. We had two contracts. One was to recruit civilian mariners into a division of the Navy called Military Seal of Command that resupplies the ships that never come into port. So it's about 1,400 to 1,800 civilian mariners a year recruited into that division. That's our responsibility. So we do all of the marketing and recruitment efforts and then the processing to bring them into that branch of the military.

Does that mean like you're out, you're out on the street with people, or does that mean you're running ads and you own like a lead gen website?

All of that stuff. Yeah, we're doing, we're doing lead gen. We have a whole processing center. We're actually doing qualifications for these people. So it's a complete soup-to-nuts operation.

And the government just pays you per recruit, or how does that work?

Yeah, we're on a fixed contract that escalates every year based on the staffing needs of the business. So we— it's basically a staffed contract and then we have, you know, sort of a built-in profit margin that's on top of that.

What do you get per recruit or per referral for one of these things?

Oh gosh, I don't even know because we're not— we're not based on that. Right. So we've done this for— the contract is we've had it as a business for 30-ish years now. Um, it's been forever. Um, and, uh, I mean, we're so deeply embedded into what they do. We know exactly what it takes. We, I mean, we are the outsourced function of that piece of the military. That's insane.

And why is that business great? Is it because you got this cash flow, but you have this contract, so you have the certainty and defensibility with that? Is that what's great about that business?

Yeah. Yeah. I mean, so like for the most part, we know what our profitability is going to be in 3 years from now. Right. And so once you get that business optimized and you get great people in place and the leader of that business we've had, I mean, she's been with the business since the very beginning. So we're 15 years into the relationship. She's doing a great job and it just, it clicks. So that was a, that was, I would call the original golden goose that allowed me to pay back the SBA.

I've heard you say you accidentally bought your first business. Is that what you meant when you say you actually, what does that even mean? How do you accidentally buy a business?

Did you know anything about digital marketing?

Yeah. I mean, we had— we did digital marketing work back then.

You have a marketing agency, you stumble into this business, you're like, maybe somebody tells you there's a chance to buy it. You're like, all right, I could try. He says no to the first price. He comes back. You're not even following up. He comes back and says, hey, still interested, but you don't have a lot of money. You're 24 years old. So you go to the SBA and you get an SBA loan for this thing.

Yep, correct. Yeah, I asked my newly married wife to sign a personal guarantee and she was like, what's that? And I was like, I don't worry about it. No big deal.

You're like, good news and bad news. Good news, no prenup, but you do have to sign this other thing.

Exactly. The opposite of a prenup. She was like, what happens if this doesn't go well? I was like, it's probably not going to be great. So yeah.

So for somebody who's never done an SBA loan, can you explain just like you put down X, you get Y, what's how it all works?

So you put basically zero down.

I mean, it was a, it was a lot of my money, but it was just tied up in other assets. But yes, I mean, in terms of actual cash that was coming out of my pocket was not a lot.

A lot.

I didn't have a lot of cash. Um, and so, um, yeah, I ended up asking my buddy at the SBA, who was, he was part of an SBA lender. I said, hey, do you guys do like expedited SBA loans? And he was like, not really, uh, we don't do that. And I was like, well, I need it in 60 days. And he was like, that's really not possible. And I was like, can we make it possible?

Like, let's try.

How much, how much are you talking that you had to borrow?

It was a million bucks. Yeah, it was a million dollars.

And was this like your See's Candy? Like Buffett bought See's Candy.

Exactly what I was gonna ask.

It returned like a billion dollars in free cash flow or more than that to the headquarters over the last, whatever, 50 years or whatever it's been.

Yeah, it's like a 20xer.

Yeah.

So that's amazing. So that was the first golden goose. And then you said you started stacking geese like a rapper, you know, at the club.

So what's the second geese? I hope that becomes a term that we can use.

Stacking geese. We got to get some shirts made.

Hey, merch guy.

You know how like Rogan has like Jamie? I kind of have this like fictional studio in the room where I'm like, Pull that up. Hey, merch guy, get on that.

Like, there's nobody here.

Merch guy.

Yeah, yeah, merch guy. Um, yeah, I mean, I knew, I knew so little back then. I remember, uh, my lawyer said, okay, we got to start due diligence. And I literally typed into Google D-O diligence, like due diligence. Like I had no idea what it was. Um, and I was, I was like reading about it as he was talking to me. I was like, oh yeah, we just ask questions. Like how hard can that be? Um, so anyway, uh, it was quite the adventure.

That's amazing.

Yeah. Another, another anecdote on that deal was a week before closing, I said, okay, so I take all of my money and I give it to you. You take all the money out of the business. Like, how do I make payroll? And the guy was like, well, you obviously got a line of credit on the business, right? And I was like, no, I didn't. I didn't do that. And he was like, well, the business is going to go under immediately. And I was like, yeah, that's not good. What do we do? And he was like, well, you got to figure this out because you're getting ready to close on the business. And I was like, Can I get a loan from you? So he actually lent me money as a line of credit to keep the business operating. Cause I didn't even, I didn't even think about it. I didn't think about like, oh, well, he's going to take all the money and there's not gonna be any cash to operate the business.

I was, um, I was with this guy this weekend and he was like, hey, should I start my own business? You know, I'm 28. I don't think I have enough experience though. And I was like, yeah, I'm pretty sure like a lack of experience isn't like, hasn't stopped a lot of people. Uh, you can kind of be like a kind of a dummy and get into it and you'll probably learn in like 6 months. And you are a good example of that. You don't really need to know much.

Huge dummy is exactly the way I think about myself.

Yeah. And sometimes it doesn't work out. And I, you know, I joke that I'm a forced comp private equity for a reason.

So what else do you own? That's awesome.

Yeah. So the next business we bought was a pool business out in Arizona and that was just with, again, started accruing cash and start building that up and bought bought that business. And again, that one turned out to be a great investment as well.

You say, you say that nonchalantly, like, oh, a pool business. But it's also like, dude, that would be really random. I don't think about pool businesses. Nobody shows me a pool business. So what were you doing? You're talking to brokers? Where does that deal come from? Like, yeah, for you at that time?

Yeah. So it was about— so let's see. So I had no idea what I was doing. After I bought the business, the Medi-Cross, in 2010, I was like, oh, that worked. I should do more of what works and less of what doesn't. At the time, there wasn't a lot of writing on the internet about this. So, I mean, there was a little bit of stuff out of Harvard, a little bit out of Stanford around search funds, but there was very little activity online. And so I was like, well, I just need to ask around. I was like, are there other people doing this? I didn't even literally know that there was a thing called private equity. That's how little I knew. I mean, I started— somebody was like, oh, you did a private equity deal? And I literally Googled private equity and I was like, turns out there's a whole industry of people who do this. Like, why would they not do it? Like in smaller companies. And, uh, that was my foray into it. And so at that point we said, okay, well, if we're going to go find other businesses, I mean, how hard can it be? This one just came to us. There must be just tons of businesses out there just floating around, ready to be, uh, ready to be bought. And so we started reaching out to people and developed deal pipeline. And one of the deals that took us— so that, that pool deal we first saw in 2012, I want to say. Um, and it took us about 3 years to get the deal done. And, um, it was just, hanging around the hoop and they actually went with two other buyers before us and ultimately had a good relationship with them.

And so the time between deal one and deal two was three years.

It was five years.

Sean, isn't it crazy how long things take? Like Brent's like a— Brent's a big shot right now. Like, you know, people know you and you like you're talking about hundreds of millions in revenue, but you started this in like 16 years ago. Like that's— I mean, it's a huge success and everything, but it like really goes to show you that like you have to grind for, or at least be consistent for a decade plus.

Oh, absolutely. No, I mean, I say to people all the time, like, if I had been given $50 million to invest in like 2010, I like, I would have lost all the money. Like, it just took so long to build up, like, to make a bunch of mistakes, make a bunch of mistakes that were low stakes, felt like high stakes at the time that were low stakes, uh, in order to be able to warrant having more resources. And so, yeah.

So at some point somebody did give you $50 million. How'd you get somebody to give you $50 million to go buy companies? Because I'd like that.

Yeah. Well, so funny story. I met this guy named Patrick on the internet and literally he put out a tweet. Patrick O'Shaughnessy put out a tweet and this is when he was like an analyst at his dad's firm and he put out a tweet about capital allocation. I responded. I was like, yeah, I can hop on the phone and talk about capital allocation. I didn't really understand what he was even asking. He was asking about public markets, like capital allocators in public markets, but I I didn't know much. And so I just reached out and said, yeah, sure, let's talk. We get on the phone. He's like, so what do you do? And I was like, oh, I buy these, these small businesses. He's like, well, how much do you pay? And I was like, I don't know, like between 3 and 5 times. And he was like, what? Like, are these businesses going out of business? Like, are these, are these going under? Are these distressed? I was like, no, these are healthy businesses. He's like, I've never heard of this. What is this? And so we talked like 2 or 3 more times. And then he said, well, can I come visit you in Colombia? And I said, sure. So he flew to Missouri and we spent a day together. And at the end of it, he said, like, I want my family to invest in what you're doing. Like, I believe in what you're doing. And I said, sorry, like, we don't take outside capital. Like, I'm not going to do a 2 and 20, 10-year fund life. Looked at that. Don't want to do a holdco and value the current assets and, you know, get saddled with a bunch of partners. I don't know who they are. Like, life's good. Like, we're making a bunch of money and compounding and like, everything's fine. And he asked me the question no one else had asked me because we flirted with some family offices at that point. And he said, well, what would it take for you to take our capital? And I said, well, I don't know. And he said, well, why don't you figure that out and get back to me and I'll tell you if we can do it or not. And so I whiteboarded out our current structure, which is like kind of the opposite of traditional private equity. So we take no fees of any kind, no reimbursements of any kind. There's no cash that comes from the portfolio companies., or from the LPs to the GP outside of we take a percentage of free cash flow above a hurdle as we return cash back.

You gotta redo that last 20 seconds. Can you dumb that down a little bit?

I, I got you, Sam. He's the guy working in Cinnabon that doesn't touch any of the Cinnabons. So he's in an industry where everybody's like feeing up everywhere. They're just getting high on the sugar and he's like, I'm good. I don't need that.

Can we, uh, only do Cinnabon references or analogies? Cause that was, uh, much easier than talking about hurdles and spreadsheets. Sprinting and whatever.

Yeah, you're a runner. Cool.

Me too.

Yeah.

Well, so, okay, so traditional private equity, you, you, you raise a fund and you get 2% of the, of the amount every year.

20% every year, by the way, you get 2%. So which is actually like getting 20% of the total.

Correct. Every year for 10 years, which is kind of insane, right?

It's insane.

And he and Jim, his father, said, okay, wait, so I think I missed it. What did you do as the carry then? So you said, okay, no, no on the 2% fees, but what did you do for the profit share?

Yeah. So we get, uh, 40% of the, uh, of the free cash flow of businesses as we return it back to the investors.

So you don't, you don't have to return all the money upfront first. You just start participating from day one with 40%.

Correct. Correct. But it's only on what we return back.

Only on what you return back. Okay, great. And then you said you use no debt.

Correct. Yep. So these are completely unlevered assets.

You're buying all cash, all cash deals using equity from day one. Why don't you use like a little bit of debt? Strong with like a little bit of debt.

Yeah, just, just a little bite.

It's a little bit of a little bit of buds. Just, just a little icing on top of the cinnabon.

Yeah, exactly.

Just this one time.

You don't even do seller notes? Like nothing?

We will occasionally do some seller notes, although we found that having the people that you work with be your creditors is not an ideal situation often. So we've really shied away from that as well. Yeah, no, we typically just close all equity. And try to keep things just super simple. I mean, we think that transitioning small businesses is difficult and it's pretty stressful on everyone. We can always lever them up after, you know, after we close, although we haven't really done that.

And is that strictly like a lifestyle choice? You're just saying that just helps you sleep better at night?

Yeah. Is it a financial decision or a peace of mind decision to not use debt?

Right? Right. I'm going to still use a little bit of debt, but I think that's good. I can ask a question.

Never heard anybody—

we've had a bunch of people come on this podcast and I'm always like wowed by their insights, their personality. I feel this way about you and so many people that have come on this podcast where I walk away being like, that guy's the man. Like, that person is a master of what they do. They're kind of a master of the universe. This is great.

And it's so easy.

And it's so easy. But, and forget the easy part for a second. I'm just like, wow, that really works. And it makes sense what they said. They're kick-ass. And then if you look at people over like a 20-year period or, you know, like a longer period, 10 to 20 years, there's this base question, which is like, if you just put money in the S&P, you get some rate of return, right? So like Sam loves to put my money into the index. And he's like, cool, I like that because I do no work and I'm going to get— Sam, what do you want to get? 8, 9%, something like that?

I would be very happy with 8% per year.

Okay, so 8% a year. And so to be smart and do a bunch of work, you got to beat that. And so we've had people come on this podcast that when they talk, they sound absolutely brilliant. And then later you look at their returns and it's like, oh, they kind of don't beat the index actually. Um, and I don't even think that's really like a knock on them, or I don't even view that as like, they're not like a charlatan. I just think it's really hard to beat the index. Actually. So what do you try to do in terms of like your rate of return and what, what's your score? So if the S&P is doing 9% a year compounding, what are you doing out of, out of Permanent Equity?

Yeah, well, so I'm under all kinds of SEC regulations, so I can't actually talk a ton, and I would love to talk about that, but I can tell you what's been put in the letters or annual letters.

What are you not, what are you not allowed to say?

I can't say anything that would be future-looking. I can't say anything that would be inducing investment. I can't say anything that, uh, that would be considered marketing because we're like top-level registered SEC, FINRA, all the stuff.

And what if we bleeped it out? What if you tell us and then we bleep it out so it's not, it's not on air?

Just tell me when to stop.

Okay.

Um, but You know, we really think about things in terms of cash, right? So I think it was last year that we talked about, you know, our total cash-out IRR is in the low 20s, and that's without any marks, that's without anything. So, you know, you stack marks and the growing, obviously, cash flows on top of that, and the numbers get pretty ridiculous.

Marks being the valuation.

What attributes make you and others like you successful versus this other guy not successful?

Yeah, I mean, I think the, the, in the beginning, if the first deal I had done gone south and there's plenty of opportunities for it to go south. And so I would say a lot of our success is attributable to luck in the beginning. And I mean, look, if you listen to any investor, if they tell you that the early stuff they did wasn't lucky, they're lying to you. Um, I mean, I remember, uh, getting to chat with Buffett about this and I said, hey, tell me about Sandborn Maps and Dempster Mill. And he was like, oh my gosh, like, he's like, if either of those investments go wrong, there is no Warren Buffett. No one knows about Berkshire Hathaway. None of that stuff happens, right? And they were that close. Like, that's how he met— when he met Munger, he asked Munger, hey, do you know anybody who could help basically turn around Dempster Mill? Because it's flailing. And if that goes under, like, my future's done.

Wait, can you, can you, I don't know this story. Can you tell the story in more detail? So Warren Buffett almost failed at the beginning of his career. What, what was it? Can you tell the story?

Oh yeah. So he had 70% of his assets into these two investments. One was called Sanborn Maps and the other was called Dempster Mill. Um, and this is early days of the Buffett partnership. So this is pre-Berkshire Hathaway.

What did those two companies do?

So Sanborn Maps was a, was a mapping company. Um, they basically had, uh, at the time that think about as intellectual property for maps, right? If you needed to go build something or if you needed to navigate something, they had all the best mapping technology. And so that business was a publicly traded business. And I think he was a minority shareholder in it, but he was basically the controlling shareholder. That one, I think, turned around independent of him installing new leadership. But Dempster Mill was a completely different story. He bought into that, took control of it., and the business was just flailing. So Dempster Mill, I can't remember exactly. I think they were building, constructing, uh, mills, uh, of some sort, uh, hence the name Dempster Mill. And, um, it was basically the biggest headache and he was staring down the barrel like I did. And I mean, I can talk about the early days, like we almost failed like 5 different times.

So sorry. So he, he had 70% of his assets in these 2 companies, but those were public companies where he's just a passive investor or he was like owned the majority of those companies where he could make a change in them.

Yeah. So I think that he had— he may not have had a controlling stake in, in, in Sanborn, but I know he had enough shares where he could basically throw his weight around in that one. I think Dempster Mill, I think he actually did buy a majority of it and have control of it.

And so those companies, they're not doing well. And he said he goes to Munger and asks him something.

Yes. We just met this guy, Charlie Munger, who had been back into town in Omaha, and he had kind of gotten a matchmaking by a mutual friend who said, Hey, you guys are the two nerdiest dudes we know. You should know each other. It was like bromance, like love at first sight. They get to know one another, and I think it was actually Charlie who said, hey, well, like, Warren, what's your biggest problem you're facing? And he said, well, I've got these two, you know, problem children, especially Dempster, you know, Dempster Mill. And do you know anybody? And Munger said, actually, I do know this guy. His name's Harry Bottell, and he's an accountant out here in LA. We should go talk to him. And so They took Harry Bottel to lunch and pitched him on moving his family to the middle of nowhere Midwest and running Dempster Mill. Harry Bottel reluctantly agreed, turns it around, makes Dempster Mill a, you know, a fortunate surprise on the upside. And, you know, again, he starts stacking geese, as we talked about. So at all times, everyone in the beginning— I mean, look, you don't, you don't get to be successful by not taking risks. Like, all investing is taking risk. And so the question is just how much risk are you willing to take? And when you're younger and you don't have much, I mean, the only way to get ahead is by taking more risk.

When you are doing all this research, are you an expert in the pool business or are you just an expert in looking at financial statements? Are you an expert in understanding how leadership thinks and how to find winners? What are you great at?

I think I'm pretty good at seeing the big picture. So taking all those pieces, like I'm not the best financial analyst. The joke is I can barely open up Excel. Like I'm not an Excel guy.

I've never had the skill set. I've never learned. I never worked at another firm.

You gave one answer to the question. I think the real answer just was based off of your— how you were answering it. You are a really good storyteller. You are very persuasive and you have— you're— I could just tell you're a good leader because of how you dumb things down to be relatively simple and easy to understand. Right, Sean? I mean, just him explaining that, you're like, oh, okay, that's— you're actually— you're—

You want to spend more time talking about why you're successful?

Uh, no, let me, let me ask you a different question. So I have, I have this goal. I want to retire my sister. So my sister has worked hard. She's got her own business, blah, blah, blah. And she wants to just have an easier life. So she wants to spend time with her kids. She wants to travel. Like her business is brick and mortar. So she's stuck in a certain location where those businesses are. She can't really take her eye off the ball in that way. Um, So I want to buy her a business. And I'm like, buying businesses sounds great. You buy a business that's already working, it's cash flowing, you hire a CEO or you promote somebody internally in the company to be the CEO. But I know there's obviously a lot of ways that can go wrong. And so if you're me and you want to retire my sister, where do you start? Like, what is your thought process around buying that first business that's going to get you to $300,000 to $500,000 a year of free cash flow? What would you Where would you orient somebody who's trying to do that?

He, uh, you should go to that blog post. He has a good Q&A. He goes, uh, the question is, how hard will I have to work? Harder than you've ever worked before. The opportunity in small business, uh, in the small business market is dressed in overalls and likes to, and likes hard work.

Dude, you're poetic when you write. Uh, I love the way you write.

I've told you this before. That's my main skillset.

So yeah. Yeah. That's great. Uh, you have some one-liners that are pretty cool. Can we just get you, could I read you a one-liner that you've said? And you just kind of rant on it. So just basically kind of like make your case for this thing. Why, why you think this is true or why you believe it, why you think people should pay attention to this idea.

This is the lightning round, right?

It's a lightning round. Yeah. Here we go. All businesses are loosely functioning disasters. Some just happen to make money.

Sean, have you watched The Landman?

I have.

It's really good. It's a, for those listening, it's a show with Billy Bob Thornton on. It's about like the oil industry. And they, there's this great quote. It says, our business is one of constant crisis interrupted by brief periods of intense success.

Yeah. How good is that? Yes. Uh, yeah. So I have a, I have a quote on my wall and it says, success is founded on a constant state of discontent interrupted by brief periods of satisfaction upon the completion of a job particularly well done.

All right. How about this one? The more humility a leader has, the more their business can grow. What's an example?

Yeah. So look, what is humility? Humility is acknowledging reality for what it is. And if you don't acknowledge reality, you can't get better. And so lack of humility is basically a defense mechanism, right? This usually is one of two forms. It's either self-protection or self-promotion. And people are usually doing a combination of both when they're in some form of pride or arrogance. They're usually terrified, fearful. I mean, I can say this from experience. When I get prideful is because I feel like I'm not enough and I'm not going to be enough. And I'm worried that I might not have enough. And so what is humility? Is laying that down and saying, hey, I want to see reality for what it is so I can learn and grow and become better. And that's the only way to do that, is to get feedback from the world around you.

I like that. Lack of humility, self-protection, or self-promotion.

That was strong.

Charlie Munger says this thing. He says every time you see the word EBITDA, you should substitute it with bullshit earnings. Do you agree or disagree?

Have you guys— Sean, have you ever learned the history of the idea of EBITDA? Do you know that's like a newish thing? No. So basically, John Malone, I believe. Is that right, Brent?

He invented it.

Yeah.

John Malone invented it.

I take the opposite. I'm like, this is genius. I need this in my personal life. I need this. I need the husband version of EBITDA. It's like, you know, my, my behavior before, you know, before football, before taking out the trash. Like, if you ignore all those things, I'm great. I'm amazing actually.

Well, it's crazy that like you don't pay your personal taxes on EBITDA. You pay your personal taxes on a cash flow or, uh, uh, you know, on a cash base. It's just, there's, So many reasons why this is insane. Uh, but, and also, you know, it's the most insane thing. Adjusted EBITDA. What the hell does that mean?

Means wherever you want it to be.

It's, that's insane.

You have another one, uh, another quote you said, you either operate with high authority, top down, or delegated authority. Hell is in the middle.

But to make the lazy, when you say the lazy approach, I'm like, Yeah, that sounds great. Sign me up. Yeah, but that's hard. How do you make that work? You have to find the right person. And what attributes does that person have? And, you know, Buffett and Munger always said that, like, incentivizing manager was the number one goal of— was their number one job. Is that true for you?

Yeah, absolutely. 100%. If you're going to try to truly be an investor and not an operator in the business, Uh, it all comes down to somebody has to do the work and somebody has to exert judgment. And if you're not going to be the person to do the work and exert judgment, somebody else does. And you got to be interested, got to be aligned with that person. And so, yeah, when I say the quote unquote lazy approach, I mean, ultimately this is the only way you scale, right? I mean, if you look, if you look at, again, we keep coming back to Berkshire. It's a good thing to think about because when people say, hey, let's talk about how, you know, Berkshire like buys businesses and leaves them alone. That was not how they operated for a vast majority of the time that they've done it. Like they had to do that eventually. Because they got to such a scale, they literally couldn't intervene anymore. If you go back and look at Buffalo News, like Buffett and Munger were literally living in Buffalo.

Dude, they're writing headlines. They're writing— like, have you ever read that, Sean? They bought a newspaper and they would literally, like, they were news guys. Like, they liked the news and they were like, here's— I want this many ads on the page. I think the headline should be like this. Like, they—

yeah, I did not know this. This is amazing.

Yeah, I mean, I would just say it's like Buffalo News is a good example of, of like basically their, their mode of operation until the, call it, early '80s, mid-'80s, when they got to have so much money they literally couldn't be involved in the stuff that they were doing, was to be highly interventionist. I mean, they would be involved in the smallest of details. They would set the tone. They would help on marketing strategy. They would replace leadership. They, I mean, they were doing all the stuff that I'm doing. They would do all the stuff that anybody has to do because when you're small, you can do it when you've got less capital and more time. You can do stuff like that. And by the way, the returns are higher when you can leverage your time against your money. It's an advantage, right? It's not a disadvantage, it's an advantage. But eventually you have a limited amount of time and attention. And as the money grows and your attention stays the same, that ratio gets thrown all off and you have no choice but to say, okay, I'm going to spread a much more thinly layered amount of judgment over a much wider thing of grouping of things, which means you have to step out of the day-to-day operations. And then you have to hire people who can exert great judgment. And so Buffalo News, I mean, there's a great quote from Munger saying, hey, like, I'm down to my last, like, million bucks that I can put into Buffalo News. Like, after that, I'm calling uncle. Like, I'm out. Um, I mean, it was, there's been various times in Berkshire's history they've gotten, it's gotten very hairy. Uh, it was not a guaranteed success. And even when they had a lot of success, it still gets hairy in various points. And I think every business has that though. That's what should be expected. Like, it should be an adventure.

There's a great letter that you can read. It's from— it's in 1972, and it's the Buffett letter to the See's Candy CEO. If you Google that, Buffett letter to See's Candy CEO, and he says— and because I went into this, I haven't like studied Buffett in depth the way that you would if you're going to do private equity. And he— I just thought the, oh, he's this aw shucks He sits at the table, he drinks his Diet Coke, he, he just allocates the capital and he hires great people and they just do magic. And this letter, I was like, oh, Buffett had the mind of an operator, right? Because he goes, dear Chuck, I was out at Brandy's a couple of days ago and have a few strong impressions to pass along. Number one. And he basically, he starts talking like details about the store. So he goes, people are, people are going to be affected not only by how our candy tastes, obviously, but what they hear about it from others as well. The retailing environment in which it appears, the class of the store, the packaging, the condition. Like, this is like Steve Jobs talking about the Apple Store, right? Like a product-oriented person. And he just goes through like step by step, kind of like things that he thinks could be improved on, you know, in the store experience. And I thought, wow, this is different than what I had kind of the impression you get when you hear about Buffett just sitting in his room reading all day, you know, making investment decisions off of, you know, financial, financial sheets.

This is a great letter, by the way. How awesome is this that this was a, like a typewriter letter? Does that make it, doesn't that make it so much more substantial?

Totally.

He licked an envelope for this one. Dude, how many times have you licked an envelope?

I kind of want to like start sending letters like this. It just makes it feel like more authoritative.

Let me ask you something, Brent. I have, like I said, we kind of, um, my business is a little bit different than yours, which is I create content on the front end. It's the mullets. I have content on the front end, which is what I love to do, what I'm great at. But media and content is not a great business model. So my back end is I basically start or buy businesses that I know I can like turbocharge. And we've done this maybe 4 or 5, 6 times now and it's going really well. But one thing I've noticed is if I drew a pie chart of what makes it work, it's basically like 60% of the battle was just the initial market selection. When we picked a project that was like the winds were blowing against us, it didn't matter how much effort we put in or how great the operator was. It was always just an uphill battle. And sometimes we pick these markets that are just like, it's a pull market. You're being pulled in. It's just a sweet spot. The people just need this. It's, you know, it's shooting fish in a barrel type of thing that creates a big part of it. The second part of it, the next, you know, I'll say like 30% is the quality of the CEO that we picked. Who's going to run the business. And when we pick a sort of limited CEO, we get limited success. When we pick an unstoppable CEO, we get like massive success. And the last 10% was just luck, like the ball bouncing our way on one or two things that could have easily not happened, but that they happened. Or, you know, in the ones that didn't, maybe we missed out on something that we didn't see. I got a question about that second piece, which is hiring the CEO or evaluating the CEO, evaluating the operator. I want to get better at that. If you sit down with somebody, you're recruiting an exec, maybe it's, you're, you're interviewing somebody who's maybe in the business that's going to become a CEO, or you're taking somebody external to come run this company. What are you doing to— what are you doing that's like not obvious to get that assessment? Is there any little tips and tricks, anything that you've picked up that, that helps you find the right operators?

Yeah. Well, so actually, I think this is probably a pretty underappreciated aspect of being involved in small companies is all about the people, right? And so the better you can be at the people, the better it's going to be for the business. And, you know, we've really deep-dived into— I would say all personality testing is wrong, right? It just depends on what you're trying to get out of it. And so we have actually a huge battery of personality testing that we do for people to try to get as close to a 360 view of who they are.

What do you use?

Yeah, so we're doing a combination of DiSC, Myers-Briggs, and something called Habit Story, which kind of has them see like what are the habits that they've built in their life and how are they kind of supporting who they are with the structure and apparatus around them. And I personally also do a lot of study of Enneagram. And so I think actually, personally for me, when I meet somebody, I'm instantly categorizing them as what I think their Enneagram number is, and I'm automatically categorizing them across the 4, uh, main, uh, Myers-Briggs, uh, crazy to me.

I thought that shit's just horoscopes for, for dudes. Like, do you really use this as like a core, your core thing? That's amazing.

Yeah. Well, so all of it tells you something about the person, right? So if you think about, so, so Enneagram, most people don't understand this. So Enneagram basically tells you who you are at your worst. And there's, there's 9 numbers and basically everyone falls into a number. And then you have what's called wings, which is kind of where do you tip from that number? So for me, I'm a 3 and I tip 2. So a 3 is, they call the Achiever. My biggest insecurities is that I'm not enough and I want people to like me. And so again, if you, if anybody's proud of their Enneagram, it means they don't understand Enneagram. Like, like it's not a good thing. Right? This, this basically tells you what are your deepest fears and what, what is the, your areas of greatest weakness. But if you can know that about somebody, you can see them, how is that playing out in their life, right? So like I, when I'm in my least healthy, I'm a people pleaser. I say yes to way too much stuff. Um, I don't tell people the truth. Um, it's really unhealthy. It's, it's, it's highly destructive behavior, right? Um, I'm very focused on hierarchy and, and, and my guess is that you guys have different Enneagrams, right? I won't guess your Enneagrams, but, uh, no, no, do it.

That's great. Yeah.

Keep going. Do it. I can't wait.

Yeah. My guess is Sean, you're a 3 and my guess is Sam's an 8.

Uh, but what's 3 and what's 8?

Uh, the 3 is the achiever. So 3s and 8s, uh, both achieve, but for very different reasons. So, so, uh, 3s achieve because they want people to love them. It's like less about the thing itself. And then 8s really want the thing itself. So like as a 3, like I don't want money to just like want the, want the money. Like I want the money because I want people to love me. Uh, eights really want the money because they want the security and they want the power that comes with the money.

Uh, so, so I want to learn the tr— I want to roll over so that I get pet and my tail can wag. Sam just wants the dog treat.

Yep. That's exactly right.

Um, right.

What do you think, Sam?

Yeah. Well, like he's, he's describing everything. It's like the most positive way. So like, yeah, it sounds great. Uh, I'm, uh, I like that. And then I looked up who other eights were and it's like Winston Churchill. Martin Luther King. I'm like, yeah, okay, cool.

Yeah, for sure.

What you did— but you—

what—

this is like crazy fascinating. You said like 5 different things. So can you give us the exact— so you said Myers-Briggs and then you said this, this other test. What's like the exact stuff that you're using?

Yeah. So, so I— well, there's 2 things. One is when I first meet somebody, I can, I can walk you through what I do. And then I would say is separately from that, in a hiring process, we use that once we get serious about a candidate, then we put them through a huge battery of testing to make sure we try to understand them. Right. For me personally, when I first meet somebody, it helps me so much to be able to categorize them into what I expect based on just kind of how they're showing up in the world. In Myers-Briggs, right? So you have, you have I and E. So are they introverted or are they extroverted? Right. Are they S or are they N? Which is, are they, are they in the present? Are they sensing or are they in the future? Right. Then are they a thinker or are they a feeler? Right. So they, are they primarily excited about ideas or are they primarily excited about sort of the, the the people themselves, right? And then the last one is T and P, which is, are they— it's, or excuse me, J and P, which is, are they very focused on rigid schedules and on creating order? Or do they like to go and test and try a whole bunch of things, right? And how all these like sort of stack up and combine really gives you a much more holistic view of who somebody is. Then when you then pair with Enneagram, I think gives you probably those two together, I think creates the most, the quickest and the most holistic view of who somebody is. Where if you can get like a pretty good idea quickly of who they are, like how I would talk to somebody who's present-oriented is very different than how I talk to somebody who's future-oriented. And oftentimes, you know, we assume the whole world operates like the way we do. Like my wife and I are literally the opposites in every single one of these areas. So So you can imagine our marriage, like how she shows up and how I show up is so different. And it creates all kinds of miscommunications. We've been married now for 16 years. And it really, we went through personality testing together about, oh, 3 and a half, 4 years ago. It was game-changing in our marriage. It was, it completely explained a ton of behavior for her and for me that had been bothering us for a long time. And it was just largely how we're wired. That's how we do it. That's how I think about doing it in the moment. That helps me relate to people a lot more.

It's crazy. By the way, Sean, 16personalities.com is like, these websites are huge that are doing these tests.

Yeah.

Yeah.

Yeah. They're, they're really big. I mean, this is a, it's an important piece. I would say Five Voices is a really interesting one. They, they, um, so it's just the, the number fivevoices.com, I think.

Yeah.

Those guys, uh, have created Steve Cochran and Jeremy Kubitschek, uh, are the two, uh, founders of that business. They've created an overlay for Myers-Briggs that simplifies it. I think a lot of their stuff is incredible. And yeah, we definitely use a lot of their work as well.

Then we finish off with a quick tarot reading just to see how the future is going to go. And then we're all set. This is amazing.

This is so good.

Yeah. Yeah. It's fun. I mean, you just want to get, I mean, honestly, the business we're in is predicting people's behavior. Like, that's what we're trying to do. And because if all these businesses are predicated on the people who run them, they're all going to have the risks. The primary risks of all these businesses are going to be the people. And so what we're trying to do is get to know people.

Have you guys ever been out with someone and they've actually been an asshole to the waitstaff though? Whenever people say about this, this asshole test, I'm like, I've never been around anyone that's like rude.

Dude, you don't remember the dinner we were at where this happened?

Yeah, but that was like 1 out of 1,000. Yeah, yeah, it's true. This guy, Sean and I went out with someone and he was like, shooing the waiter when he was like— it was, it was like, it was, it was— I was, I was ashamed. I left that dinner, I'd be like, I felt like, uh, like I had just like participated in like a porno. Like, I felt like— I was like, I'm so ashamed. Like, if people find out about this, like, I'm gonna be so embarrassed.

That's rough. Wow, dude, what a fun episode. This is great.

Oh yeah, I really enjoyed hanging out with you guys. That's what we guys built.

Brent, thanks for coming on, man. If you haven't, go check out his blog and his annual letters are pretty great. Follow him on Twitter. What's your Twitter handle?

Brent Beshore? Just Brent Beshore.

Yep. All right. Good seeing you, dude.

Thank you. That's it. That's the pod.

I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off.

On the road, let's travel, never looking back.