How to manufacture a billionaire childhood
I got something, Sean. I just had the craziest thing happen to me. One of the craziest things that have ever happened to me. Do you want to hear a story?
Does it have to do with those glasses?
No, but I am a cool guy, so that's why I decided to wear them.
Okay. 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.
I had one of the craziest things happen literally just 45 minutes ago. I was walking down the street. In New York City near my house. And do you know Honey, I Shrunk the Kids?
Yeah, the movie from back in the day.
Of course. Rick, what's his name? I know his first name is Rick. I had to look up his last name. Moriah Woods.
Literally your dad?
Yeah, I saw him walking. I saw him walking down the street and I felt bold and I walked up to him and I said, excuse me, sir, I just like— huge fan. I grew up watching your movies and I kid you not, he was like, what's up, man? I appreciate that. Also, I've seen your videos. You, you're cool. You know, I like MFM. And I was like, are you kidding me? And I go, Rick, I'm here talking to you now. Like, if you know MFM, then you know this, like, is part of the shtick. Like, did you just kill it in the '90s with movies? And he goes, I killed it. I go, really? Like, really good? He goes, do you have a few minutes? I go, yeah, Rick, I got a few minutes. He goes, let me show you something. Brings me up to his apartment, this beautiful apartment overlooking Central Park. Beautiful. I'm like, you really did well, huh? And he was like, yeah. So like, you know, I bought this from Harrison Ford. It's this beautiful apartment. And he's like, look, in the '90s, VHS were just pieces of plastic and they were $25 apiece. Of course I killed it. And I walk and I'm like walking through his apartment and I'm like, Rick, is that an original Salvador Dalí painting? And he goes, he points at it, he goes, Ghostbusters. And he just kept walking.
So awesome.
None of that happened. I did see him walk by though. None of that happened.
He did walk by me though.
And I imagine that that could have happened though.
What a roller coaster of emotions you just took me on.
That was fantastic.
What, so you even see the guy or the entire thing was fictitious?
I saw him. He lives, he lives near me. I did see him. And in my head I went through all these things like, you know, when someone like insults you and you think of a comeback like 30 seconds later, I like thought of all these things that could have happened if I said hi to him, but I didn't, you know, I'll, I'll never know. Turns out though, he, uh, that was an episode of TV.
That was fantastic.
Turns out he, uh, quit acting because his wife passed away and he decided to raise his kids. So, you know, he's just a nice old man now. He's in his 70s. I don't know what you're doing to me.
Today, dude. It's Wednesday morning. Give me a break here. Do you ever watch the TV show Dave?
Of course. I love it.
My favorite show. There's an episode. I don't know if you remember this episode or if you've seen this episode. It's like in one of the later seasons that he— where he accidentally fakes his own death. Have you seen this?
No, I've only seen season 1, but that is something he would do.
Well, basically, they have this janky tour bus. This is not too big of a spoiler. The tour bus like explodes and someone was filming and it's like his face on the side of the tour bus. So it looks like he died and his phone had died. They just have no signal. They're like out somewhere. And so for like, you know, 8 hours or whatever after the tour bus exploded, he doesn't have any signal. So the whole world thinks that he died. And then he logs in, he's like, oh my God, everybody thinks I died. And he's like, I gotta tweet out that I'm okay. And his manager's like, But just wait a minute, because there's all these like memorials, there's like this outpouring of like people saying how much they love him. Like Drake is in his DMs, it's like, bro, like, you know what, I always loved your shit, man, I'll miss you, bro. And he's like kind of reveling in it, but then there's no way out because, you know, he's like, the longer he lets it go, the harder it is to get back to it, to just like come out and be like, just kidding guys, I'm here. 'Cause then you're seen as like the ultimate asshole, but he can't resist because the idea of what it would be like is too intoxicating for him. I feel like you did something like that to me just now.
He's like, he's like, he tweets or his manager tweets out like, you know, Dave RIP. And he's like, he's not dead. I just want him to be, have peace. Rest peacefully. Rest in peacefully. Um, all right. I have a, I have one interesting thing that I could, that I could bring up. Let's do it. Billy of the Week. We haven't done that in a minute. I have an interesting person.
Well, it's the Billy of this week. It's just we don't do it every other week. Have you heard of a guy named Jim Ratcliffe? Sir Jim Ratcliffe?
No, I don't know who that person is.
Okay, so listen to this. Here's a story of this guy named Jim Ratcliffe. He's really interesting to me. So he's born in Manchester, England, which is sort of like a blue collar— it's kind of like the Boston of America, of England. It's like, you know, white, blue-collar, you know, hardworking, kind of poor. He studies chemical engineering. He becomes a chemical engineer at an oil company. But like, things are only going okay. And then he has a background in accountant accounting. He studies accounting and chemical engineering in college, and he gets a job at a PE firm at the age of 35. And he's like, this is pretty amazing. Like, you know, this is a great way to make money. I like making money. But at the age of 40, he was like, all right, I've worked for another guy for long enough. I want to try and do this on my own. He doesn't have a ton of money. I think he had a home that he owned and he had like $100,000 or $150,000 to his name. And this was in the late '80s. And so he partners up with a guy and they're like, okay, we've been buying companies for our employer, our, our, the, the firm that we worked for. Let's try and do it on our own. And they convince some of their old clients, some of their old LPs to invest in them. And they spend about a year looking for a company. And so with £3 million in equity, they buy an $80 million— I'm going to say dollars, but I mean pounds— but $80 million company that is a spinoff of BP. Basically BP, the oil company, owns a chemical division which basically makes like chemicals. So like the commodity that let's say like your toothpaste has like, you know, fluoride in it. Well, someone like has to get the fluoride, right? Uh, whatever it is, the chemicals that make like plastic packaging, whatever. They buy that unit from BP for $80 million, of which $3 million was equity and the rest was debt. So like a really heavy, uh, debt thing. And he mortgages his home. He uses 100% of his money. He has 2 kids and a wife. And they're like, my, he was like, my wife, like, we talked about it for 6 months. Like, should we do this? Is this like, you know, this can ruin us, this is going to ruin our careers. This is going to— we're going to use all of our money. But you know what? We have to take a risk. And so he does that in 1990, I believe. And by 1997, it works. This $80 million company is now worth like $1.5 billion. And that's how he makes his initial money. And over the years, he's kind of kept that one thing. I think it's called INEOS is the name of the company. It's a chemical company that you probably have never heard of. But to this day, or today, it does about $40 billion in revenue, employs many tens of thousands of people. It's one of the largest chemical companies in the world at this point. And basically the way that he's grown is a combination of PE and his chemical engineering background. So he understands chemicals, but his whole shtick was finding like spinoffs that conglomerates didn't want to own anymore because it was a distraction. He would buy it for, whatever he would pay for. And his goal was to double the EBITDA in 5 years. That's like sort of standard stuff. That's kind of the boring thing that he did. But now at this point, he's, I think, the number 1 or number 2 or 3 richest person, person in England. Amazing. But the more interesting part, in my opinion, is what he has done with his money. So check this out. Do you remember the 2-hour marathon with Eliud Kipchoge that Nike did like 4 years ago?
Yeah, recently, right?
Well, someone actually just broke 2 hours recently, but like 4 years ago or 3 years ago, there's this amazing runner named Eliud Kipchoge, and they set up like the world's perfect setup for him. So they had like a pace car that was like perfectly in front of them. That went on pace for an hour, 59 minutes. They had, they did it on an F1 track, so it was perfectly flat and they let him wear shoes, or he decided to wear shoes that weren't technically allowed in sanctioned races. But he was like, you know, this is just a spectacle, let's do it. And so he broke 2 hours in the marathon. Well, Jim Ratcliffe is a huge sports nut. He's run 50 marathons. He's gone to the North Pole, the South Pole. He's climbed all these mountains. He's like one of these crazy guys. And he was the underwriter of that. He paid for the whole thing. Just because he also owns a ton of different sports leagues. So he owns Team Sky Cycling. So this is a team that won the Tour de France 8 times. He has— he owns 1/3 of Mercedes' F1 team. He owns one of the best America's Cup sailing teams. He owns 25% of Manchester United soccer team. He used to own Chelsea, which is, you know, a big soccer team. But the really cool thing that he's done recently, have you heard of a car? I think it's called the Grenadier. Have you seen this car? Google this car and tell me if you've seen this. It looks like a G-Wagon or a Defender.
Yeah. Yeah, it looks a lot like a G-Wagon.
Okay, so check this out. So in 2016, this guy Jim, he loves Defenders. Now, the thing about Defenders is Land Rover, and I think Land Rover is owned by Jaguar. So Jaguar still makes the Land Rover, but the real famous ones are the old ones, the ones from like the '80s and late '90s. Those are really cool. They're really boxy. But although enthusiasts love them and they pay sometimes hundreds of thousands of dollars for these cars, you can't really buy new parts anymore because Jaguar just quit manufacturing it. And he is a huge enthusiast of this, of the Defender. He loves it. And he's a rich guy. So he was able to get a meeting with someone high up at Jaguar and they go to a bar called the Grenadier Bar. And the Jim's like trying to persuade them like, hey, you know, I'll even help pay for the tooling. Is there a world where like, I think it could be for shits and giggles, it would be fun. Let's remake some of the parts for the Defender. Defender, because the Defender, it's the most comfortable off-road car. But unlike a lot of new cars, it's still got a little edge on it. You know, it's got like, it's like it feels not too luxurious. It feels like a proper off-road car. And they're like, no, man, this doesn't make sense. We're not going to do it. So he's like, you know what, fine. I'm just going to create a car company. That's what we're going to do. And so within his chemical business, they create this thing called the Grenadier. It's an SUV that you just saw. I think it sells for like $80,000 or $90,000. It has a small cult following in America. I think it's pretty big in Europe as well., and he's like, screw it, we're going to make a car company just because I love these cars so much, but they don't make them anymore. So I'm going to make what I think it should be, the way it should be done. And so there's this famous line where, just to give you an idea of what he's like, he said, it's the most comfortable off-road vehicle bar none. And the journalist says like, yeah, but like those late models, they don't like fit, they don't like fit the environmental standards of today, nor are they really that safe. And he was like, What's wrong with that? And he's like, he goes, what's wrong with that? They're effing great cars. And so he starts making these cars and that's where we are now. So these cars have a huge cult following in America. A bunch of like my car nerd buddies like them. They're known for being like kind of sparse on the interior. So if you look at the interior, they got these like the switches look like switches from like a tank a little bit. Like it's like all mechanical stuff. And they're kind of a pain in the ass. And the truth is, is that it's a horrible business. Since 2018, he has lost $2 billion on this car company. Last year, the company was negative $300 million in profit. Not going so good, but it's awesome.
All right, let's take a quick break. This podcast is called My First Million, and it's probably the question we get asked the most. How do I go from zero to making my first million? And so I did an episode a little while back where I broke down exactly the sort of philosophy and frameworks that I would use. So things like finding your white belt business or identifying your bear on a unicycle advantage, the core way that your two skills can overlap, or why maybe starting a service business is better than starting a software business for your initial businesses to make that first million. And so the team at HubSpot has created a guide that took the stuff I said in that episode. They laid it all out for you. You can get it for free in the description below. Just click that link. And it's all yours. All right, back to this episode. What do you love most about this guy?
He's got a fuck you attitude that I really dig. I really like— if you Google him, you'll see that he's wearing a barber wax jacket, which is sort of like an adventurer's, like, jacket. It's like what, like, kind of like rough and tumble blue collar, like, guys wear. It's like workwear. And I appreciate that he still has a little bit of edge to him, even though I think he's like the 90th richest man in the world. And so I really appreciate that. And I also appreciate that he does shit just because.
Yeah, there's something great about the— I don't know if you want to call it side quests or the just because or the F-you attitude, but I think both of us love that. I have this thing that I keep running called the Side Quest Hall of Fame, and it started because Palmer Luckey was On Joe Rogan, you know, Palmer created Oculus. We created the leading VR headset, sold it for a few billion to Facebook. Then he created Anduril, the leading, you know, the first kind of like significant tech company that was doing defense stuff. It's worth like whatever, $100 billion, whatever it's worth right now. And he goes on Rogan and he says, oh, you know what I want to do next? And I'm expecting him to say a company, like another startup. And he's like, um, I want to create like a privately funded version of The X-Files. He's like, I just want to go hunt for aliens. And he's like, I'll fund it and we'll go find them. We'll figure out what's going on. He's like, I feel like the government's not telling us everything. I was like, well, that would be an epic use of this person's talent and money. And, you know, since then he's done, uh, he did this thing where he like basically brought back the Game Boy.
I own one. I was about to bring that up. He's done N64 and Game Boy.
Yeah, he's got Mod Retro and so he's just, he just does cool shit. And then, you know, he's kind of like these, you know, dresses eclectically, all this stuff. And I saw this video recently that it was, I thought, a more endearing side to him. Did you hear the video about why he wears the Hawaiian shirts?
No. Would someone make fun of him one time and he like was going to do it out of spite?
Well, he was like, we grew up, he's like, I grew up really poor. And so I didn't have any— we didn't have any money for new clothes. So I had to wear my dad's old Hawaiian shirts every day. Like, that's just all I had. My wardrobe was like 7 of these, and I wore them and I got made fun of, but that's all I had. So I wore them. And he's like, and then when I sold my company, uh, you know, he says something where it's like, I got, like, I got some money and I tried to change, like, I tried to change. And then he's like, basically reverted. He was like, actually, I'm just gonna wear the shirts that, like, I like and I know. And like, this is what I'm all about and I don't need the fancy clothes to like validate me as like I've done it.
And I love that.
I just think he carries that fu energy with him pretty much everywhere.
A thing that he has that I don't find him to be a hardo. I don't find him to be insufferable. I find him to be someone who's confident in his opinion and you could challenge him and he's open to new ideas, but he's very confident. I find him like at a very young age. I mean, when we talked to him, I think he was 33 and he was like saying, like, here's the thing about defense contractors, they're doing this wrong. That's a very bold thing to say, right? And I appreciate that about him. And I used to meet these people and I used to think, how do I become like that? But now I think, how do I raise children that are that way? How do you raise kids that are that confident at such a young age, but not in an insufferable way? And also in a way where I think they've backed it up by studying whatever they're going to say. Have you ever thought about what do you think his parents were like? I guess you said he was raised poor, so he had a not a wealthy family, and yet they still were able to, like, instill the sense of, like, you can do it and you can figure this out.
Well, I'm not sure how much it is watering the plant versus the soil you grow up in. So, for example, there's a reason that the most successful people on Earth typically come from disadvantaged backgrounds. You go look at why is dyslexia so common amongst successful people? It's like, it's disproportionate. You would expect it to be the proportion of dyslexia in the population, but no, it's a higher percentage in successful people. Or why are so many athletes come from poor families and single mother homes and things like this? You know, they don't have all the training and the advantages and the best gear and the best anything, right? But like, they have the one thing that can't be bought, which is like this sort of insatiable hunger. And so I think that confidence is a byproduct of the adventure and adversity you've faced in your life. So you don't just say, be confident. Actually, the advice to somebody who wants to be confident is go have more adventure and adversity. It will make— you will get hardened by confidence over time. Because the more adventure you do where you put yourself in unfamiliar situations or the more adversity you face and you come out still surviving, even if you didn't win, you survived, then the next thing doesn't seem all that scary. You sort of think to yourself, well, I did all those things. Of course I can go into this new unfamiliar situation and thrive as well. And so I think that the confidence is not so much like, you know, as parents told you, but, but like, you know, the environment. Like if you grow up and you're poor but you're tinkering or you're nerdy or you have access to certain books, You know, it's kind of amazing how these very small things make a difference. There's a story I read this morning, actually, about Dan Brown. You know who Dan Brown is? The author? He wrote The Da Vinci Code and like—
Oh, okay.
A bunch of other like thriller adventure books. Yeah, yeah, yeah. Where a hero goes on a quest, there's sort of a puzzle, they got to figure it out. Growing up, Dan did not find Christmas gifts under his Christmas tree as a child. His father, Richard Brown, a math teacher, instead put a treasure map under the tree. And Dan would have to follow the treasure map for a trail of clues all over the house and sometimes all over the neighborhood until he finally found the present. This sparked a deep love of solving puzzles, cracking codes, and hunting treasures. He channeled this into The Da Vinci Code, Angels and Demons, and other thrillers that have sold more than 200 million copies, all about cracking ciphers, untangling coded messages, which is, which is the heart of his books. A lesson from this: a childhood obsession can be a source of infinite inspiration. If you want to seek a meaningful quest as an adult, look towards the childhood toys and games that you couldn't get enough of. There may be clues in there.
It's so funny. That's the— that sounds like a cute thing, but there's been so many times, and I wonder if there's actually like research that verifies this, but there's been so many times we had Robert Greene on MFM a while ago, and that was really great. And he said to find the thing that you want to dedicate your life to, you have to do something that sounds easy but it's really challenging, which is you have to revert back to what you were like as a 12-year-old before you had people who put pressure on you, before you realized that something was stupid or uncool and before you got jaded and when you were excitable. And you have to ask yourself, what was that thing? And I've heard people talk about this constantly of like, in order to be great as an adult, you have to do this challenging thing of pretending to be a kid.
And where are you weird as a child?
Yeah.
What would it be for you? So if you think back to that era, what were you doing? You're 12, 13, 14. Let's take this window, 8 to kind of 14 years old.
Skateboarding a ton. I was skateboarding a ton and I was always taking apart remote control cars and building them back to building them in interesting ways to get out doing chores. For example, I spent a whole 6 months trying to rebuild a remote control car so I had a mop on it because I hated sweeping the floor. And I distinctly remember doing that and being obsessed with it and building model airplanes, like assembling things that had clear instructions. I love doing.
So, I mean, in a way, you're— you chose to build things instead of do a 9 to 5, instead of do a job.
Yeah. Well, I also loved— I had a huge passion for selling CDs. I remember I used to make like $30 selling like $3, you know, burned CDs. And I loved doing that. And for the longest time, I thought I was going to be in the entertainment industry. My hero was Ari Gold from the TV show Entourage. And I went to Belmont University because they had this degree called a music business degree. Which I made it through 3 years and then I was like, I'm going to drop out of school. Just give me like the easiest degree I can get, like with the credits that I got. So I didn't get to complete that degree. But the reason I got into media and the reason why I probably enjoy doing this and working in the content game is because I wanted to work with entertainment people. But then I realized that Hollywood is full of idiots and I hated them. But I can build my own little world like that.
Yeah, I don't know how much of this is, like horoscopes or whatever, where you just sort of, you try to backtest and fit anything into it. But I just was in Austin yesterday and I did a podcast with, uh, Mohnish Pabrai. Mohnish has this thing where he tells these stories about Buffett and he says, uh, his, his theory is basically that a huge percentage of your, uh, personality is pretty hardwired and baked by the time you're 5 years old. And you, you don't want to spend your whole life fighting your, your nature. Uh, so that's the first thing. And then he says that for kids, we do pretty much the opposite thing we're supposed to do. So he says, um, the human brain, if you just look at brain science, is that there's a golden window between, I think he says, the ages of 8 to 18. So there's this 10-year window where a child's brain is developing in such a way that it can, it can specialize and do some incredible things if you specialize during that window. And the people who do, and if you go look at like, oh, Bill Gates when he was coding, or Mark Zuckerberg when he picked up programming, or MrBeast when he started doing YouTube videos at age 12, like, it's often that these people who become the extreme performers, that they were doing something pretty specialized during this golden window. And he's like, in school, we tell them to do the exact opposite. I go to school, spend 30 minutes in 8 different subjects. Don't, you know, go an inch deep in each one. Don't care about anything. You know, don't specialize. Become this like super generalist. That's the factory model that we have. So he's like, it's— we're doing them kind of a disservice. He's like, your job as a parent is, um, you know, by 5, their nature is somewhat baked. You observe it. And 8 to 18, if they show an interest or an obsession in anything, feed it. Let them go crazy with it. Let them get obsessed. And lastly, like, get them around as good of a peer group as you can. Those are really the only things you're going to be able to do, is kind of his opinion. I don't know if I fully agree with that, but I think it's interesting. And then he tells a story of Buffett. And he's like, you know, when Buffett was a kid, he did all kinds of little hustles, right? Like he would buy a thing, he would sell it, right? So Coke bottles and pinball games inside of barber shops. But one of the things he loved to do was he would go to the racetrack and he would watch other people betting. And he didn't bet. He was a kid, but he would watch other people betting. He would watch the horses, study the track. And then what he would do is at the end of the day, he would go collect all of the discarded betting slips. That the, you know, people go to the horse track, they drink, they watch the thing, they're having a good time. They just chuck away their betting tickets. And he would see that, oh, actually, this wasn't a losing ticket. That actually they got a third place payout here. They didn't realize it. Or they got a second place payout here. They didn't realize it. He would collect all the, and, you know, 80, 90% of it's trash. But if even 5, 10%, he could make some money, then he would ask his aunt to go cash the tickets for him. And that's how he made money. And like, it's not that different than what value investing is, right? He would go look at 1,000 companies, 1,000 tickets, you know, most of them are rubbish. But when he found one that had like hidden value, he would pounce on it and he would make money. And that's essentially how Warren Buffett, you know, invested for the first, you know, whatever, 10, 15, 20 years of his, of his investing career. And he bought his first stock when he was 7. And, you know, so he was doing things in this kind of golden window as well, which I think is interesting, especially You know, for you and I, we have kids not at that exact age yet, but, you know, I think about that stuff. I don't know to what extent you can control it or you want to try to control it, but it does seem like it's worth knowing that and looking out for the right signals rather than being blind to it.
There's this— I'm not religious, but I grew up going to Catholic school and you got to read the Bible a lot. And there's this biblical story where it's like someone's by a volcano or something, or I forget what it is, but there's like a loud, like, earthquake or like a natural disaster. And then they're told, like, you have to listen to what God's telling you. And they're like, well, I hear this really loud noise, but it doesn't like— I don't hear like a person talking to me. And they're like, even when things are really loud, the whisper or the God talking to you, it's going to sound very faint in a whisper. And that's the challenge is you have to like, you know, like really pay attention when there's a lot of loud noise because the most important stuff is just going to be a really faint whisper. And you have to, like, try and hear it. And I don't really care about the message when it comes to God on that one. But I do think that, like, that's what this thing is, because it's like that, that whatever you're being told what to do or you feel compelled to, it's a lot of times it's not a yell. It's like this really small whisper that you have to like. And that's like quite challenging. It's really hard to try and listen to, like, where you're being drawn to, you know, like, or where your energy is pulling you to. It's not a push. It's a very, very, very small, like, faint nudge, right?
Yeah. There might be false positives along the way, and it's only obvious in hindsight. Like, when I was thinking about that, like, what was I doing when I was 12? Because I wasn't— and I used to actually be like kind of insecure about this. I was like, I wasn't really selling lemonade as a kid and, you know, flipping CDs and sneakers and whatever. Like the, the pattern I see now that I invest in a lot of founders, I'm like, I didn't really have that. Like the light bulb didn't come on for me, at least in terms of like trying to do business until I was 21. And frankly, like, I don't think I'm the best entrepreneur or CEO anyway. So like, maybe that's, that's true that that was the signal. But there were a couple of, couple of signs that I, when I did think back and I actually like took more time to think about, I was like, what the hell was I doing back then? What was I really into in a way that like, or what was I naturally pretty good at that I didn't maybe pay as much attention to? But now I can think about it. And the two that came to mind was I randomly, uh, like entered an improv class and an improv competition when I was like in 6th or 7th grade. And we like made it to like the Texas state finals or whatever for like what we were doing. It was like a duos improv, which like, that's what this is. This is duo improv, what me and you do twice a week. And like, that actually did come pretty easily. I did have a lot of fun doing it. I didn't triple down into it because I, you know, whatever life happened. My parents didn't, didn't help me and I didn't know to ask for it. But, you know, maybe there was a signal there of like, hey, you kind of like this making things up, thinking on your feet, riffing off a partner. If there was another way to do that, what would that look like?
And, you know, I don't think I could have predicted podcasting, but it does make a little bit of sense now that I did a podcast the other day and someone asked about you and I was like, in another lifetime or maybe even this lifetime, Sean's going to be either like a comedian or something in show business.
So yeah, I was in a movie or two when I was like a little like in same, same era, 6th, 7th, 8th grade, something like that. Uh, and then the other one that I noticed was I love video games, which is pretty common. You know, boys love video games, but the way I played video games was a little bit weird. And so if I said, hmm, what was— let's pay attention to the weird. You know, I used to play Madden or NBA 2K, but I would basically never play the games. I would only do franchise mode, which is just where you're the general manager. You're building the team, drafting the players. You're basically making bets. You're invest— essentially like scouting, investing, simulating to see the result. And I would just simulate like decades in these games without ever playing the actual game. And my sister would make fun of me. Like, are you ever going to play this game? Like, what is this like fantasy roster you're building? But yeah, I don't know. I think, I think it's interesting to go look back. I'm not sure again how much of it is like forced narrative versus reality, but maybe there's something to it. I've now heard this enough times where I kind of got to take it somewhat seriously. And I think it is important because, uh, it's like when you are screwing a screw into the wall or whatever. And if you start out crooked, right, if you're at the wrong angle, no matter really how hard you push, you, it's just constant friction, right? You're just like breaking the wall, breaking the screw, and breaking your own wrist trying to make it go in. And then if you get things like aligned right, it's like, oh, just, you know, 4 spins to the right, click. And I feel like a lot of my life was pushing screws into walls at the wrong angles, you know, trying stupid projects, trying things that weren't really in my nature, trying to be somebody who I wasn't. And man, life got a lot easier and it got a lot more successful when I sort of figured out like, oh, what do I actually like naturally pretty inclined to doing?
What do you think? You figured it out?
Yeah, I think like what we do is like probably the closest approximation to it. Like if I look at what I do today, I get to nerd out on topics, which has always been something that I would do. Like I would always go down these like rabbit holes and then this kind of duet improv type of thing, like being able to riff on topics and being generative with ideas. Has always been good. And then the other side of it is investing. I don't want to like play the game, but I like being the GM. I like being the sort of the, the franchise mode of doing this. And so I've had way more success, you know, investing or even incubating companies with other CEOs as operators now. Right. Like, I think in our portfolio is probably like, forget like angel investing, just like in the companies we own a big chunk of, there's like 4 companies or so where there's 4 CEOs and I don't do any of the day-to-day work and it's performing so much better than, you know, back when I used to do my own startup and I was all in on it. Right. So it's a better fit for me to do that.
I didn't know you had 4. You're doing shit that you don't even talk about.
Well, I want to talk about some of them soon, and hopefully I will have some news sometime in the next few months that I can, I can come on in and maybe start to tell these stories. All right, let's take a quick break. And I got a question for you. When a buyer asks AI for a solution like yours, does your business come up? Most companies have no idea. And by the time they found out, they've already lost the deal to another company that did. HubSpot has AEO, which helps you show up in the moments when the right buyers are looking for a company like yours before the first click, before they fill in the form. That is the moment HubSpot AEO is built for. Check out HubSpot.com, the agentic customer platform for growing businesses.
What did you think of Austin?
Austin is a funny place.
Funny place.
I went to my, like, hotel room and I walked in and housekeeping was in there, but I was surprised. And I came out and I told Ben, I go, y'all got white housekeepers here?
I had a white housekeeper that my wife hired and I was like, I bet you she's going to be a drug addict. And I was right, she was a drug addict. I don't hire these guys anymore.
It's like there's this great stand-up bit where, um, I forgot who it was, like Aziz or if it was Hasan, or I forgot who it was, like an Indian comic was talking about like how they made it and they were like, I'm gonna go adopt a white baby, like just bring a white baby to like events and like stunt on people because it's like, yeah, I adopted a white child. So I don't know, Austin's a fun place. I mean, one interesting thing is because we're, I mean, you know, I'm in Austin, which is much more populated city, and we were just sitting like in a coffee shop basically working all the time. So many people came up that love the podcast.
That was crazy, right?
And then they would tell me their story, right? And it's like, oh wow. So, you know, it's almost like you get a lot of ideas for the podcast just talking to these people. Like, this guy came up and he's like, I'm all in on social selling, social commerce. I know those two words apart, but like, what is it together? What does that mean?, and he's basically like, you know, you know, people who are making, you know, hundreds of thousands, if not millions of dollars, just making TikTok videos for products, uh, and they're just getting affiliate fees, just making content. Um, and they're not influencers, they're not famous people, but they make like the best way to sell this soap, this teeth whitener, this, um, you know, these leggings, um, this hoodie. And that they're generating, you know, $40,000 a month, $100,000 a month, you know, $200,000 a month, $400,000 a month.
What platforms?
On TikTok and Whatnot. So like there's the lot, there's like live selling, uh, that's like Whatnot and TikTok. And then there's like just short-form video. And I mean, I'm not, I wasn't like unfamiliar about this concept. We use it in our e-commerce brand, but it's amazing just to hear the individual person's story. It's like, yeah, she worked at this like hair salon. And then she just took the product from the hair salon and started talking about it on TikTok. She doesn't have a following, but the way TikTok works is any video, you know, it's like America's Funniest Home Videos. Any, any video gets to have its, you know, its day on the For You page. And she realized like, wow, if I just get good at kind of like authentically, and I use quotes because it's like obviously not authentic, but like they tend, they don't look dressed up. They're not in a fancy place. They're in their bedroom. They look like they're just, talking informally to you like, hey, y'all, I just want to tell you about, oh my God, this, or like whatever this thing is. And they're just making a killing on it. And so, you know, this guy was like trying to build the agency around it and a podcast around it.
What's an example product? Soaps, you said? Just anything?
Anything, dude. I don't know if you've seen— are you like, are you tapped into this like wave of what's going on?
No, no, no. So I don't, I don't have a TikTok and I've seen whatnot, but I buy a ton of stuff off eBay. So like, I know about like buying used stuff.
I'm not stupid. And so I don't know what you're talking about. I read—
What I mean is social comment— like, it's all like new products. It's not, uh, like, it's just commission-based. Like, they're selling someone else's stuff and they're getting an affiliate fee. They're not selling like—
they're not without permission. So it's not like they needed to cut a brand deal.
Right?
Got it. You just grab the product from the shop and then you sell it. And then brands start— and then brands can see if you move product, right? You move weight on your corner and then they start sending you free shit to try their stuff. And then you could send— you could try to sell their stuff. And if it works, it works, right? Like, and if your video is good, then the brand puts ads behind it. So like, there was a good, really good podcast, uh, by, um, our buddy Sean Frank. Uh, I think their podcast is called The Operators Podcast, like an e-commerce specific podcast. He did one with the CEO of Comfort. Have you heard of this brand?
C-M-F-R-T? I see that guy and I see this other guy named Greg Louvecchi who started a thing called Bloom, which I think is energy drinks. But I'm seeing these guys all over the place and they're using phrases that I've never heard before. Like, I knew what UGC was, but like, they're using it in way different phrasing. And they're also like implying that they have like tens of thousands of people making this content on their behalf. And this is a totally foreign concept to me. And so this company, Comfort, as far as I could tell, is a total outsider, went from something like $0 to $500 million a year in revenue in like 5 years. And I went to their website. It's just like a fleece hoodie, I think, right?
Yeah, super basic hoodie. But yeah, so, so they're, they're a good example of this.
How big did they get to?
So the model is this. The model is you have a product. The old way of selling it was the old way, as in the last 10 years, was you run Facebook ads and you run Google ads. And for both of those ads, you, your team makes the content. You typically will have an ad creative team in-house, 1, 2, 10, 15 people. Their job is to come up with concepts. They do photo shoots, they do scripts, they do static images, give it to the designer, the editor. You make it, you run it, you see what works. You're putting paid ads. That's what's been working. Well, there was a new game in town. And if you remember, I kind of hinted at this maybe a year or two ago where I said I invested in this company. And it's gone $0 to $30 million in, uh, revenue in like a few months.
It was like, can you say what it was?
Uh, I can't, I don't want to say the exact brand. So the, the brand blew up. It was, uh, in a bad way, not the good blowup. Uh, it was a supplement brand. It was crushing it. The product was all fine, but they got banned off Amazon because they were like, like manipulating like reviews of other companies or something like that, like of other brands or something. And so Amazon was like, oh, you guys were the ones who wrote a bad review about them. Boom. Shut down your ad account.
They weren't playing by the rules.
Ruined the company. But, and I think I even told you at the time, I go, this is growing faster than any e-commerce brand I've ever seen. And, um, you know, $0 to $30 million in a couple of months. And, and I think I told you, I was like, I hope I can come on in a year or two and say the, the playbook that they use. Well, the playbook is, is more or less out now, now 2 years later, which is that what e-commerce brands do is you basically gift or, um, you know, called seeding. You seed your product out to not 1, not 10, not even 100, but maybe 1,000 creators that are out there. And these creators are everyday people, non-famous people. So not, not influencer, not micro-influencer, not influencer. Person with time on their hands who has been on TikTok and Reels enough to know what type of content could work. And those people will make sometimes just like, you know, one video. But what, what ends up happening is that they realize, oh, I should just make 30, 30 to 40 videos a month. I should make a video every day and I'll have multiple accounts and I'll post it and I'll, you know, and so they basically rapidly test content. And so now you've got, instead of having an in-house team of a couple people doing 10 to 20 creative assets,, a month and usually just thinking inside the box, 'cause it's like, this is my job, this is what I do. I work at the company, we have a way of doing things. You're just letting the market, the, letting the crowd figure this out. You're crowdsourcing your creative. And that's UGC means user-generated content. So you're getting in a given month, 3,000, 5,000 different pieces of content that go out there. Most of which get absolutely no views, but a few of which pop off.. And then, and then all of them look at you. Then you tell all the creators who are like, you know, on board, you say, look at this content. This works best. This worked. And then they all start to remix them. And then the hive mind gets smarter every single month and they keep trying to do it. They keep trying to sort of one-up themselves. And brands like, uh, Goalie. Goalie's a, a gummy, like vitamin brand. I don't know if you've seen their, like, commission structure for this. They, they started out with apple cider vinegar gummies and grew it to like, you know, whatever, $500 million or something in revenue in very short order. What? And then they got slapped on the wrist and they kind of tanked and they're coming back, whatever. But like, point is they were pretty aggressive on this model. So what they were doing was, as they found good creators who were good at making this content, um, they started incentivizing them more than the commission. So there's a default like commission on these platforms, right? 15%, 20%. You set your commission.
What's the platform?
Usually.
Yeah.
Wow. And, and so you, what you do is you go to those TikTok influencers again. Sorry, not influencers, TikTok creators. And they get a, uh, they get a commission. And so again, just to describe the system, it's crowdsourced, it's way higher volume. So you're talking about thousands of pieces of content a month instead of, you know, maybe 100. You don't control it, you don't operate it. In many cases, you never even met them. They just pull, pull your product and your shop listing and they just decide. You just say, I'm if you're an affiliate, use this, use this tag so that you get paid if you sell product, right? That's the core idea. Now what happens is, on top of that, Goalie started going crazy. So they were like, yo, if you do $10,000, you get 15% commission. If you do $100,000, you get, you know, a trip to Miami. You do $1 million, you get $1 million in a month. You get this condo in Miami, you get this Lamborghini. They started giving away crazy shit. I'm making up the tiers, right? The math made sense for them. But they have this like, I have this like one-sheeter that Goli was giving creators and like the top thing was a condo in Miami and the next thing was a Lambo and then it goes all the way down to just like, yeah, you get like a bracelet. Um, you know, like you go to Chuck E. Cheese and there's the prize wall and like, you know, you end up with the shitty rubber frog, but like up there is like, you know, the Nerf blaster and they, this is basically the model that they were doing. And so there's been several brands that, I mean, several hundreds of brands that have aggressively use this strategy and yeah, it works. It works very well.
What I'm looking— I just Googled it. It said that they went from $0 to $4 million a month in 30 days.
They got way higher than $4 million a month. Maybe they did in 30 days, but they went way high, way past that.
Okay, so let me ask you a bunch of questions. This is so fascinating to me. One, is this stuff profitable? So a company like that, like that got however big. So 4 times 12 is $36 million. So they were at least doing $36 million a month. They were probably doing hundreds of millions a month. If you're doing that amount of money, are you actually creating a valuable company?
Well, you asked two different questions. Is it profitable and is it a value—
valuable company? When I say profitable, I'm going to say cash flow positive.
Should be profitable. Here's just basic math. Let's say you're giving a 20% commission. So a way to think about that is you outlaid no cash upfront. Okay, so no ad spend. This is— they take the risk of making the content. If they sell, then you pay. So you pay out of the revenue, not upfront, the way that normal ads work, right? I go to Facebook, put, put $10 grand in, I have no guarantee I get anything out. So with this, I only pay when they sell. I pay a fixed percentage of the revenue that they sold for. So let's say it's 20%. Well, that means my marketing spend is 20% of revenue. Now, a normal e-commerce brand is spending somewhere 20 to 50%, depending on their level of aggression, what phase of the business that they're in, et cetera, et cetera. Usually at the beginning they'll run 40%, 50% aggressively to go get a big customer base. And then those customers hopefully will repeat buy. And that's where the profits come from, those customers. And then, you know, over time your ad spend as a percentage of revenue shrinks because you have all this returning revenue coming in. But at the beginning you have no returning revenue. So it starts out pretty high. So is it profitable? Yeah, it should be profitable. I mean, it doesn't take a lot of— it doesn't take a lot to make something unprofitable. So, so, but, but you should be able to do this profitably. Now, are these companies valuable? That's a different— hold on.
When we say profit, I'm actually saying like, can the owner pay themselves a huge sum if you're making—
Yes, but it depends on when you're at, where you are in your lifecycle. Year 1, no. Year 2, maybe also no, but also could be yes if you just decide to grow slower. Right. So it's like up to you how much you want to prioritize taking market land and like going for the opportunity.
Because Sean Frank will always say like you could have a business. He's put the numbers out there. I forget exactly what he said, but it was something like $100 million a year. And like the two owners, are barely drawing 7 figures a year.
E-commerce is like saying— is like startups where the spectrum of outcomes ranges from everything to, you know, you can go from loser shirt to, oh my God, this person is rolling in profit. I know people on all ends of that spectrum. There's operational excellence, how you're going to run. And so there's no like rule. What I'm saying though, is that in some cases it's like, let's take startups for example. Startups, you're fighting gravity. Almost every startup fails, even the ones by smart people, even the ones by smart people who work hard, who are like doing, you know, all the best practices of management, right? They'll still probably fail because building a billion-dollar startup, which is usually a novel idea or disruptive, uh, company, like the venture startup game— I'm not talking about like person who starts a barbershop, I'm talking about venture startups— it's such a hard game. The gravity is that you're gonna fail. E-commerce is not like that. E-commerce is— the gravity is you should, you should be able to succeed if you were, you know, smart and hardworking. And so same thing here. Now, are these companies valuable? No, not really, because value is typically based on defensibility. And a buyer of this business doesn't know how long this channel, this tactic is going to last. And if this is what's driving all your growth, then you're going to trade at a much lower multiple.
This is for the folks out there who have a business that does at least $3 million a year in revenue, because around this point, that's when you're able to look up after being heads down for years building your company and you realize two things. One, you've done something great, but you're still a long way from your final destination. And two, you look around and you realize, I am all alone. I've outrun my peers, which means you're now making $10 million decisions alone by yourself. And that is when mediocrity can creep in. My company Hampton, we solve this problem by giving you a room of vetted peers, of other entrepreneurs who are going to hold you accountable, call you out on your nonsense and help show you the way. Because the fact is, is that there's only a tiny number of people in your town who know what you're going through and who have been there, and they're hard to find. And if you can find them, it's hard to have this explicit time, this explicit place where you sit down, where the rules are clear that we are here to help each other and to be one another's board of directors. The biggest risk is not failing. You have a company and it's working. You're going to be fine. But the biggest risk is waking up 10 years from now and saying, Shit. I barely grew in business and in life. And for people like you who are ambitious, wasted potential and regret is what we want to help you to avoid. We have made so many of these groups and we have 1,000+ members, and I know this stuff actually works, whether you work with Hampton or you get your own group on your own. But having a group like this, a group of people who you meet with in real life once a month, it can change your life. It changed mine, and I know it will change yours. So check it out.
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It seems like you could start off being a nobody company and you sort of have a get rich mentality. I do think you can— it's better to start off like thinking my brand should be amazing, my product should be amazing, and that's how I should grow. And I add ads and all these tactics on top of it. But I think that some companies do start off doing these like stupid things early on and they, and they swap, they can switch. Like, I don't know anything about Ridge, but like, there's a world where this was like a silly, dumb thing and then he switched it. I'm just hypothetically making this up. It could have switched to like, oh, this actually product is good and we are going to invest in our brand.
I mean, have you seen like original Athletic— have you seen the original Athletic Greens?
No. Was it lame?
This is, you know, one of the early days landing pages of Athletic Greens. I mean, it's like this is Internet Marketing 101. Yeah. Beachbody MLM infomercials, right? Dude with six-pack, girl eyeing him. All your vital nutrition in 30 seconds or less. Money-back guarantee, 100% satisfaction, limited time offer. Act now. Giant orange arrow. Rush my order is the name of the button for buying it. The world's number one superfood cocktail, antioxidant-rich with great sweet taste. Okay, so that's like, you know, an old version of that. That's not even the original version. That's the old version, right? And you go look at it today, right? If I go to like the AG1 website.
Yeah, it looks great.
It looks like you have Hugh Jackman drinking from a glass vase his daily, you know, green nutrients, right? With clinical trials and, you know, blah, blah, blah, blah. And like, you know, who knows? Who knows if this shit works or not? You know, yes, you're right. Like, you can absolutely start a little janky, a little move fast and break things, a little, little, you know, fake it till you make it. And then you can adapt and you could like, you know, go, go, go more and more legit over time. You can improve your formula, you can improve your packaging, improve your sales methods. You can get off one hacky sales tactic and get more diversified, right? Like, go from there. I mean, Moys, who did Native, I think is one of the best examples of this. I think he's told all this publicly, so I don't think we're saying anything that's out of school here. Here's, here's the timeline that I love. Moys is sitting next to you in a coworking space, and he's at some point had this idea of he looked at Etsy and saw that the number one selling product on there was a natural deodorant. And he realized, oh wow, that's market validation. Cool. Like that. Um, contacts a woman on there, says, hey, can I take your natural deodorant? Can I put my label on there? You know, goes outside the office.
There's like— it was like— it was like homemade. It was like homemade ammonium. I, I forget the drug or the chemical, something free, you know, what's it called?
Parabens and aluminum and parabens, aluminum-free, whatever.
And he— and it was like a mom-and-pop thing. And he was like, let's commercialize this.
Yeah. So he was like, I'm gonna put my label on it. We've both seen right outside where you guys worked, there was a restaurant or something called Native. That looked exactly the same with the exact same logo. Somehow that ended up to being his name and his logo. Um, you know, he grew the thing with cheap Facebook ads and grew it like crazy and was like fit packing orders himself on the kitchen table. When she was like, dude, I can't make like 10,000 bars of deodorant in my bathtub anymore. He's like, okay, like, can I buy the formula off you? And I'll move to like another person and figure that out. He used to put deodorant on his armpits, run around the block. 2 different sticks, 2 different formulas, run around the block, have his brother smell each one and be like, which one's better? And like, that was his like clinical trial that he was running. And so, you know, like you do what you got to do. If somebody asked him, I remember early on, like, uh, he told the story where somebody said like, you're starting a deodorant company. Like, Moise, do you know anything about deodorant? And he goes, today I know nothing about deodorant, but in 6 months I'll know everything there is to know about deodorant. And that was true. And like, you know, ends up selling the company for $100 million to Procter Gamble. And now it's in Target. It's like the best selling thing.
Now it's probably a multi-billion dollar company.
Multi-billions in revenue, right? Like unbelievable, unbelievable, like sort of story, right?
And there's an even better part where Procter Gamble or someone was in the meeting to buy the company and he was like, well, how do you expand? He's like, well, can you put the Native logo on a shampoo bottle? And they go, yeah. I go, Okay. That's what you do.
Do you think you guys could print it on toothpaste? All right, you'll be fine. Um, and by the way, there's another great story. People should go back and listen. He, he was like in the first 20 episodes of this podcast.
I'm shocked that he says some of the stuff he says. Moïse is very good with words.
Oh, he's super entertaining. He tells a story of how when they were trying to sell, they didn't own the trademark for Native. And he's like, shit, Procter Gamble is not going to buy this if I don't have the trademark for my like consumer, you know, good that's going to be on the shelf of Target someday. And so somebody was squatting on it. And the negotiation story of getting that trademark was great. Like, there's just so many great stories in the, in the formation of Native.
A lot of people don't realize this, but Moyes, now that I think about it, it is. So Moyes used to have a company called Casker or Caskers, which did you know about this?
It's like a spirits brand, but I don't actually know. What was it? Was it actually a liquor or was it a D2C shop? What was it?
It was basically like they would get rare whiskeys and I think wines that only had limited runs and they would do drops. So it was sort of like this was like during the Gilt Group or Gilt craze where it was like, you know, crazy good deals, but you only have a limited amount of time to buy it. So I think it was basically like an email list of like wine and alcohol buyers of who like rare stuff. And then they would broker deals where they would, you know, send out an email, an email drop of like a rare whiskey. And he sold it. He sold it for— I forget how much, but he, you know, changed his life at the age of 30. But he has this cool blog post that interestingly, it's actually on The Hustle, my old website, but it used to be on Medium. But the first— listen to the first few sentences. The Hair of a Dog is a sports bar located in Lower East Side of Manhattan. Like, like most sports bars in New York, it has an ungodly number of televisions, a beer pong table, and 3.5 stars on Yelp. More importantly, though, Hair of the Dog has a single dollar price rating, which is really important when your goal is to be drunk by 3 PM. It was October 2013. My co-founder and I were in negotiations to sell Caskers, an e-commerce site we founded just 1.5 years ago that sold spirits, meaning booze, not ghosts, online. Negotiations had already dragged on for a few months and we were days away from our scheduled closing date. And then he goes on to like explain the story of how he sold. But isn't that a beautiful, like, first couple sentences? That's awesome. And then he like tells— he like gives 5 lessons about his starting Casca. He called it Birchbox for men, if you ever heard of that. But he's like, says, be frugal, be relentless. And then he says, be experimental, be careful. And he gives like all these cool tidbits about it. Last question, can this work for B2B products?
Why don't—
why do people only do this for consumers?
I think— I think one of the great arbitrage is that B2B businesses don't do the proven tactics of B2C companies. So B2C companies are out there fighting for their lives with customers and marketing to try to build their brand. And B2B companies, if they simply borrowed the playbooks from B2C, not everything would work, but way more would work than doesn't work. And it's— I think it's woefully underused. And usually the skill sets— a lot of people who are in B2B don't know this because they don't come from that world. People in consumer tend to stay in consumer. Or they go to, they go to B2B and they are so scarred that they only bring over like a portion of it. But I think, I think a lot more of it would work.
This turned out to be pretty cool. We were supposed to have a guest on. This is a little behind the scenes. We were supposed to have a guest on. Something happened last minute and here we are. And it turned out to be quite fun.
That whole thing was live and improvised, unprepared. Here we go.
All right. 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 day off.
Hey, let's take a quick break. I want to tell you about a podcast that you could check out. It is called The Science of Scaling by Mark Roberge. He was the founding CRO of HubSpot, and he's a guest lecturer at Harvard Business School. The guy's smart, and he sits down every week with different sales leaders from cool companies like Klaviyo and Vanta and OpenAI, and he's asking about their strategies, their tactics, and how they're growing their companies as, you know, head of sales or chief revenue officer. If you're looking to scale a company up, if you're a CRO or head of sales that's looking to level up in your career, I think a podcast like this could be great for you. Listen to The Science of Scaling wherever you get your podcasts.