CMO Confidential: Auren Hoffman l Why Vendor Management Is A Skill You Need to Master Now

This episode is a rebroadcast of host Auren Hoffman's appearance on the CMO Confidential Podcast. Auren shares why he believes vendor management is the #1 skill for future executives—and why most companies should rent world-class capabilities rather than hire executives they can’t fully utilize. From “scaffolding” young talent to his provocative views on procurement’s negative value, Booz Allen, MBAs, and the transformation of private equity, this episode is packed with contrarian insights fo...

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This episode is a rebroadcast of Orin Hoffman's appearance on the CMO Confidential Podcast.

• 0:08Speaker 01

  Hello, fellow data nerds. Welcome to World of DAS. I'm your host, Orin Hoffman, CEO of Incubate and GP of Flex Capital. Discover more episodes, get weekly data as a service news, original content, articles on data and more at worldofdas.com. That's worldofdas, D-A-A-S, dot com.

• 0:30Speaker 02

  Welcome to CMO Confidential, the podcast that takes you inside the drama, decisions and choices that go with being the head of marketing, hosted by five-time CMO, Mike Linton.

• 0:43Speaker 01

  Welcome marketers, advertisers and those who love them to Chief Marketing Officer Confidential. CMO Confidential is a program that takes you inside the drama, the decisions and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Linton, the former Chief Marketing Officer of Best Buy, eBay, Farmers Insurance and ancestry.com. Here today with my guest, Orin Hoffman. Today's topic, why vendor management is a skill you need to master now. Now, Orin has been the CEO of Safegraph, a company that collects and curates data about places for

• 1:24Speaker 01

  eight years. He is a serial entrepreneur and I'm just going to say it out loud, a big data geek, having built and sold several companies, including Kyber Systems, Bridgepath and LiveRamp. He was a guest on the show about a year ago and now he's back to discuss his belief that one of the key ingredients for business success will be superior vendor management in the next decade. In fact, he wrote, "Hiring an exec is like buying a super yacht. Expensive, high maintenance and mostly just for show. Just rent the boat when you need it." So, so we're going to talk about that today. You know, before we

• 2:05Speaker 01

  even begin though, I think, Orin, we ought to just take one minute and say what Safegraph does so people know where you're coming from.

• 2:13Auren Hoffman?

  Sure. Safe Graph is what's called a point of interest data. So if you're searching for Italian restaurants near me and on most of the major platforms outside of Google, you're almost certainly using the Safe Graph data.

• 2:29Speaker 01

  Excellent. So let's delve into the thinking behind the quote about hiring an exec is like buying a super yacht. Tell us more, like what's behind that and what's the marketplace forces that made you post this?

• 2:47Auren Hoffman?

  So if you think of like an executive, really what an executive, an executive is someone who's done it before. They're usually 20 years in, let's say, to their career and they're very strategic. In fact, that's what they want to do. They want to be very, very strategic. Most of the work that's done in a company, even a very, very large company is very tactical.

• 3:15Auren Hoffman?

  And so that is, you're not getting the highest value out of most executives if you're asking to do these very, very tactical things, some of which they were very good at 15, 20 years ago.

• 3:28Speaker 01

  Yeah.

• 3:28Auren Hoffman?

  And some of which they even liked to do 20 years ago, but now they don't necessarily want to do it. They might be a little bit out of date with the new tools that I want and, and, and you're, and if you think of just like the hourly costs that you're paying them is, is quite high. And so what you really want for most of these executives is their strategic knowledge.

• 3:52Speaker 01

  Yeah.

• 3:53Auren Hoffman?

  They have to be enough in the business. You can't just like talk to them an hour a month to get enough strategic knowledge. You have to be a little bit more in the business, but you don't need them 24/7. They could guide, in fact, they could be a great mentor to, you know, your, so the person that might run marketing at your company doesn't necessarily need to be at the executive level. They could have a marketing mentor, maybe even someone like you as a marketing mentor that they could have. And that person could help guide them and help them understand things and help give them the core strategy that they will need. But then you really need an implementer who's running it. And you might, you call them an executive, but they don't have to be somebody who has 20 plus years of experience.

• 4:38Speaker 01

  So what you're almost saying here is rent the strategy. You know, buy the execution, rent the

• 4:43Auren Hoffman?

  Yeah, that's right. And I think that's true for almost everything. So I think that's true for almost everything for most companies. And then if you try to think of like, okay, who's the executive that you could hire?

• 4:55Speaker 01

  Yeah.

• 4:55Auren Hoffman?

  Well, for most companies, you can't hire the best CMO, the best CFO, the best you're hiring, like, the number, like, 200,000 best, right? In most cases.

• 5:07Speaker 01

  Like in Star Trek, make it so number 2000.

• 5:09Auren Hoffman?

  Yeah. Yeah. And so, yeah, like, why? But, but a lot of times, you can rent the best, or you can rent the top, like, you, you, it's a lot easier to rent someone who's really amazing. And so why not just get the very top talent that could really help you, really, truly, the, the, the, the person that's out there that can help you. And then, of course, they like it better. Like, imagine an executive, and you're working for 10 companies.

• 5:32Speaker 01

  Yeah.

• 5:33Auren Hoffman?

  And you're just doing the strategy. Like, you're going to be happier as well. So it's the highest value you need for both the company and for the executive.

• 5:43Speaker 01

  Hey, so, Orin, when you say rent, there's a lot of ways to rent. You can put somebody on the board, you can have an advisor, you can hire a consultant, you can rent a fractional. When you say rent, do you mean all those things? Or do you have a specific view of what?

• 5:56Auren Hoffman?

  I think it can be any of those things. It is, it is very hard to get the most out of somebody who's part-time. And so, most companies have just not yet built that muscle, whether they have an advisor, whether they have a fractional, whether they're just not very good. And so, we all have to get better at managing these people who are not 100% in our company. They have other things that they're doing. There's so many people today who have portfolios of 20 things, even your board member, right? They've got so many other things that they're doing. And most people don't even manage their board member very well. So, how do you get the most out of this person? How do you have the agenda? How do you, how do

• 6:38Auren Hoffman?

  you, again, how do you go to that highest value of things? So when you call your lawyer today, and that lawyer's charging you 1,500 bucks an hour, you have a sense of like, they're charging me 1,500 bucks an hour, I better only call them for the right thing. And in fact, if I need something a little bit less, I'm going to call the associate and not call the partner. And I'm only going to bring them in when I need, you know, and so you, you have a sense of how to manage that. But for whatever reason, people haven't yet translated that to other people that they work with.

• 7:08Speaker 01

  So how do you set that up? Because, um, you know, you also said, look, you can rent almost anybody for one to two days a month. And I, I don't think you're talking about, look, okay, Procter and Gamble or Pepsi should, should maybe rent a CMO, but.

• 7:24Auren Hoffman?

  Actually, I do. Probably, yeah. You know, maybe not like, you know, and, and, you know, if you think of Procter and Gamble, they have like, they probably have 50 people who are called CMOs.

• 7:35Speaker 01

  Yeah.

• 7:35Auren Hoffman?

  At that company. Um, and most of those, you know, are, are probably not adding the value that they need to.

• 7:42Speaker 01

  Yeah. So let's go back to the, so if I'm going to rent some for one to two days a month, one, how do I figure out the right fit for this? And then how do I figure out how I'm going to manage this person? Like I manage my lawyer, because I think the lawyer example is an excellent one, uh, which is, you know, you will send out, you'll prepare everything and then you'll say, maybe, maybe the paralegal could do some of this because that's like, you know, 400 bucks an hour. And, um, how, how do you get ready to do this?

• 8:13Auren Hoffman?

  I think it's going to be very hard. I think it's hard to retrain people, but most people don't even manage their own employees very well. So it's very hard to manage people. It's very hard to manage vendors. It's very hard to manage anything and get the most out of them. We're all very bad at it. And we, if we can start thinking, and especially if you start thinking about it in an hourly rate, you start to get better.

• 8:37Auren Hoffman?

  Right? If you're starting to think like, if I rented you right now, I may have to pay you two grand an hour. That's all pretty expensive.

• 8:43Speaker 01

  I am super expensive.

• 8:44Auren Hoffman?

  Sorry?

• 8:45Speaker 01

  I am super expensive.

• 8:46Auren Hoffman?

  Yeah, exactly. So like, and, and, and so like, oh, then I really need to start thinking about, am I really getting the value out of this? And by the way, like, at some point you might be like, I'm not getting the value.

• 8:56Speaker 01

  Right.

• 8:56Auren Hoffman?

  I rented this person. I'm not getting, I'm, I'm, I'm renting them for two grand an hour and I'm, I'm only getting $400 worth of, an hour worth of value. So maybe I, and that, that's a good forcing function to then move on to the next person. And, and by the way, you don't, doesn't mean you only have to rent one CMO. You can rent three CMOs. I could get a, I could get a mentor if I'm, if I'm like running marketing, I can get a mentor for each different types of marketing. And then the CEO can talk to three slightly different types of people who can help me understand. So it could be a lot of different, uh, sizes. There's no one size fit all.

• 9:32Speaker 01

  Yeah. So how do I? Start. If I've never done this before, how do I even get started? I mean, logically, I probably have the lawyer thing going somewhere or something.

• 9:43Auren Hoffman?

  So a lot of times you're in a company and you have a great person, let's say, running marketing. And they're, they're 30 years old and they're, you know, it's a newer company that they're doing great. You're like, we gotta up level this person. We gotta, we, first of all, it would be great if this person had an amazing boss. So they could learn because right now they're, they're the top marketing person. They can't even learn from, there's no one else who can even teach them. So they're not growing as fast. This amazing 30 year old I have running marketing. And so you do a whole search, you hire some outside search firm and you, you, you bring in a CMO. And, you know, and by the way, these have like 30, 30 something percent success rate that is even that it works long-term.

• 10:28Auren Hoffman?

  A lot of times you end up losing that 30 year old because that you didn't hire the right CMO.

• 10:33Speaker 01

  Or the path, suddenly someone else just plucks that person out.

• 10:39Auren Hoffman?

  Yeah, exactly. There's a lot of different types of things. So, okay, well, we already have this great person. A lot of times you already have this good person somehow, for some random reason. Let's, let's surround this person. I have Mary. She's my amazing up and coming marketing person. She's going to be a super strategic person one day, but today she's just a super doer. She's been in the, you know, industry for eight years. She's, she's ready. Let me start surrounding her. Let me get her a mentor. Let me get her some other strategic. So it's a scaffolding around her. Maybe you think you need to replace her now, but if you scaffold her, all of a sudden you can delay that for X number of years. And then maybe you can delay it forever.

• 11:22Speaker 01

  And you have to get the Mary to buy in completely to this or.

• 11:27Auren Hoffman?

  Well, Mary's gonna, Mary's gonna be bought in. It's really getting like your board to buy in because your board's gonna be like, we need someone. Mary's only 30 years old. She can't run marketing for this company. We're expecting this company to be a global power. We can't have Mary out there like she doesn't, you know, and so it's, it's, it's really getting the other executive, you know, the, the board and everyone to be, to, she's gonna love it. Because now she's really gonna have a chance to grow. She's gonna be accelerating. She's gonna be doing things she's never been doing before. So she's gonna be, any great person's always optimizing for their own growth.

• 11:59Speaker 01

  I, I think that's, that's right. Particularly if you get the right relationship. You'll also have to go, they'll get the right, if you call a coach, consultant, board member, whatever, so they don't step all over the operations. So they don't become a part-time, and that is, are there any tips you have for that? Like, for people that are gonna be the, you know, the vendor in this case, the rented yacht?

• 12:25Auren Hoffman?

  Um, I, well, I think people are gonna have, they're gonna have to learn how to do that as well. Um, and the best person, the best people there are the people who can manage, you know, that manage the client rather than having the client manage them.

• 12:42Speaker 01

  Yeah.

• 12:43Auren Hoffman?

  Right? And so that, that's really the problem today is that you, it's like, and that's true for the best people even that you hire full-time, is you want someone who manages your company, manages you, you don't want to have to manage them. Uh, whether it's, whether it's a executive assistant all the way to, um, you know, your CFO. If you have to manage your CFO, that's like, that's a bad hire, right? Um, and so, you know, so ideally, this, like, the, the, and hopefully, you know, this executive is usually gonna be a pretty senior person, so they, you know, they have to come with the ability to be able to manage the client well. And if they don't, then you're, you know, the, and by the way, the good news is, like, okay, well, if you're, if you're just paying them an hourly rate

• 13:26Auren Hoffman?

  or a monthly rate, or whatever it is, so you're paying them 10 grand a month or something, right? And they have, they have 20, you know, 15 clients or whatever they have. Um, you know, it's like, well, okay, like, three months in, if they're not working out, you can just stop. Um, it's not a big deal. It's easy. Whereas if you hired that person, you know, it's like, that's like, um, you know, over million dollar decision after three months if it didn't work out.

• 13:51Speaker 01

  And it really, it, it really can slow down the strategy if you hired.

• 13:55Auren Hoffman?

  Yeah, yeah, exactly. You just had to pay 200 grand or more to the search firm, and then you have to give that person 500 grand in severance, and, you know, and all this other stuff that you would have had to do that, like, you don't have to do anymore.

• 14:07Speaker 01

  So when I'm when if I'm giving advice to someone out there recruiting somebody into these things, what are the questions you should ask if you're like the CEO or the board or that's, you know, whoever is recruiting this, you know, super yacht person for two days or three days a month, any good questions you should ask?

• 14:29Auren Hoffman?

  I mean, honestly, like, help them understand your business and see if they could add value.

• 14:35Speaker 01

  So a little mini case study almost in the beginning.

• 14:38Auren Hoffman?

  You know, whatever, like, they're gonna wanna, they're gonna be asking you questions about your business, I'm sure, right? Like, any good person's gonna be asking, and they're probably already be adding value on the first call. If they're not, they're probably not good. And then, like, you know, what the, again, the downside of trying someone is so low. And so why not, like, you know, if you think they're, if they're adding value already on the first call, you like their personality, it's working, it's like, if you have to, if you have to bring on a CMO, the process to do that is gonna take you, it could take you a year. And you're gonna have to call gazillion references, you're gonna have to interview gazillion candidates.

• 15:17Auren Hoffman?

  So just the hiring process to bring on a CMO is gonna take hundreds of hours of your company to go do that. Whereas if you're gonna bring on a CMO consulted, well, like, again, like, because again, the downside is so low, if they don't work out, you could bring someone super fast. And and then, of course, like, when you're hiring someone full-time, like, you have to convince them. You have, it's really hard to convince them that, because they only get one shot. It's like, they only work on one CMO at once. So why are they gonna work for you? You know, you're gonna have to, all these people you want are not gonna wanna work with you. They're gonna have so many other options. Whereas, again, if you're at the fractional, it's gonna be so much easier to get that person that you want.

• 16:00Speaker 01

  And your theory is it's not just CMOs, it's almost anything, right?

• 16:04Auren Hoffman?

  Any executive related thing, yeah, that anyone who's strategic. So any like C level thing. Most companies, again, like outside the very, maybe the very, very biggest companies, most companies shouldn't have. So what the companies that I'm interacting most, you know, startups, that startup may have like a few hundred people. But I don't think a few hundred person startup should have a CFO, a CMO. Now, again, you can call that person a CFO or CMO. You can call whatever you, if you want to call Mary a CMO to make her feel good, great.

• 16:36Speaker 01

  Right.

• 16:37Auren Hoffman?

  You can call her whatever you want. She is running marketing at your company, so call her that. But you don't need to have that like super executive that's been there, done that gazillion times already.

• 16:50Speaker 01

  I think this is right. We've had a, we had a

• 16:56Speaker 01

  oh, oh, and a CMO. And she said, it's really important you understand the position you're hiring for. Because you're hiring essentially off a football team. So if you need a quarterback, that is totally different than if you need a wide receiver or guard or defensive tackle. You have to know what you want, and this would allow you to practice with what you want. Versus try and hire exactly right, particularly in that early and middle stage company where

• 17:23Auren Hoffman?

  And by the way, in that, in your analogy, a lot of companies, you don't even know that you're playing football. Right? So, yeah, you would think, yeah, if you know you're playing football, you know the rules of football, you need a good kicker. Right? Right, you need that. But like, you don't know the game often. And like, why do you necessarily need a kicker? You, you, you're like, again, if you, if you have an NFL team, you got to go spend, you know, $5 million a year on a great kicker. Every NFL team goes to do that. If you got a good kicker and you're playing baseball and you spend $5 million a year on that person on guaranteed contract for 10 years. Like, this is a terrible decision, right? So you don't know, you just, you just don't know. So having that, you want an all around athlete that can do lots of things.

• 18:08Auren Hoffman?

  You don't necessarily want who, someone Could just kick that ball and kick that field goal for you. That is a very bad use of time unless you know precisely what you need.

• 18:17Speaker 01

  Well, and I also think if you're in particularly in startup land or early stage companies, you may think you need a super quarterback, but really what you might need is someone that is fantastic at acquisition. And and maybe social media or something just to get things going versus somebody that's run like a Fortune 500 department.

• 18:40Auren Hoffman?

  Yeah, that's right. By the way, like Patrick Mahomes, if you want Patrick Mahomes to play to play on your team right now, you can't. Right. He's he's committed to to to the Kansas to the Kansas City Chiefs. But right now, if you want Patrick Mahomes to just teach you a little bit how to do it, he is available.

• 18:57Speaker 01

  Yeah, you can go. I bet. I bet he has a camp. I bet he has a camp.

• 19:02Auren Hoffman?

  Yeah, it's expensive, but you can get him right now. You can get him to come to your house and teach your kid if you really want, if you want to pay for it. Literally, he's available. So it's like, again, you can't hire him as a quarterback for your team. That that he's not, but literally the best quarterback, maybe, you know, one of the best quarterbacks in the history of the world you can get. That's how that's why these things are so powerful.

• 19:25Speaker 01

  I think that's a super analogy, and I am guessing that as AI becomes more mainstreamed and everything, this will drive the need to use even more vendors, or at least that would be my theory. Am I right in that theory?

• 19:39Auren Hoffman?

  That is my belief. Yes, that's my belief. Tell me how you think it plays out.

• 19:46Auren Hoffman?

  Well, I think we're we're moving into a world where the.

• 19:54Auren Hoffman?

  If you just think of the most important skill in the last century, that was the ability to. Identify, hire and manage talent.

• 20:05Speaker 01

  Yeah.

• 20:05Auren Hoffman?

  And there are tens of thousands of great books on that. Every single MBA has at least three or four courses on how to do that. Well, we've all talked about it. Everyone has a sense of that. Everyone has been hired and many of which has hired and managed people. So we all kind of have a sense of those types of things. That is still an important skill, but in this century, the most important skill is the ability to select and manage vendors. And that vendor could be contractors. That vendor could be software. It could be a lot of different types of things. Almost every company has way more vendors than they have people.

• 20:50Auren Hoffman?

  Outside of like Walmart and Amazon, which, you know, they, they employ over a million people each, almost every company has way, way, way more vendors. Sometimes like we're talking about one or two orders of magnitude more vendors than they have people. So, and there is no book about it that I know of, on how to do it. There's no MBA courses on it. It is extremely hard to do, but that is the most important skill that we all have to get better.

• 21:17Speaker 01

  Your, your thing would be if business schools are really keeping up with the marketplace, they would, someone, somewhere would create a class on this.

• 21:27Auren Hoffman?

  I mean, for sure. I mean, obviously like, I mean, I think business school is complete waste of time. And I mean, it's, I mean, it's very good if you want to spot found your spouse or something. So like, and it's just have fun. So, you know, it's just certainly has some value there, but like it has bad ROI outside of like social reasons. And, and so, but, but even putting that aside, like you would expect that you'll know that the schools are more relevant when they start moving in that direction.

• 21:59Speaker 01

  I love this comment because I think it's going to generate a lot of discussion from a lot of the business school people we've had on the show. I want to just stay on this provocative note and say, in our first show, you said that everyone in procurement should be fired.

• 22:18Speaker 01

  Because they weren't very good at vendor management. They were just good at cost management. Do you still feel the same way?

• 22:25Auren Hoffman?

  Yeah, I mean, most companies don't even have anyone in procurement. I mean, you gotta be, you gotta be 500 people plus usually before you have someone to procure. If you had someone, if you had someone called procurement and you're 100 people, well, your company's gonna go under anyway. Like, you clearly don't know how to manage your company, right? So usually, you're talking about like, whenever you don't have a procurement person until you're at least 500, maybe 1,000 people.

• 22:49Speaker 01

  Yeah, you have to get, you have to get pretty big or procure.

• 22:51Auren Hoffman?

  You always have to be big. And already by that point, you have like so many random bureaucratic people that do bureaucratic things that you, you know, you probably have 30% of people you should probably get rid of that, you know, have jobs like quote unquote procurement. But yeah, of course, like procurement is like, it's a negative, it's not just zero value, it's negative value at almost every company.

• 23:12Speaker 01

  And it's negative value because it's in the way of the actual project or give me a...

• 23:17Auren Hoffman?

  Yeah, it just, the whole idea of having a procurement person is to make things move slower. And right, that is literally the idea. It's like, at some point, you want to buy something and you're like, okay, I'm, I'm, I'm getting to the decision I want to buy. Now I have to bring in the procurement team and they have to go do their thing, right? Um, so that is, that is literally what you have procurement do is to, is to slow things down. That makes no sense in most companies. Like, why would you want to slow things down? And then they save you like 3%. It's like, so you just slowed the whole, everything down for 3% um, like, and then it's like, and it's a bad experience for the other people in your company. They hate it. It's a bad experience for the vendor. So they're probably going

• 23:59Auren Hoffman?

  to give you like 20% less service because now they have to deal with this and they just had like a bad experience. Imagine you're hiring somebody. Uh, and some companies do this. It's like, right before you're gonna hire them, you like put them through this whole terrible process. And then you should you try, instead of like them, they wanted 100 grand a year and you like beat them down to like 98 grand a year, right? Um, or something and, you know, by showing them all these things and, you know, they're gonna come in, they're like, I hate this company. Like, you would just like, again, some companies do that to their employees. So they're, they're, they're, they're, they're, those companies will likely go out of Business like they're just not good and you know, government does that sometimes to their employees. But they're like the, the only one, their only employer.

• 24:42Auren Hoffman?

  It's for certain types of things. If you want to work for like the FBI or the CIA. They're going to do that to you, but like you have no choice there. But like for most things, like you just don't want to do that. You want people to have a great experience coming in. And that means you have to treat your vendors well. That doesn't mean you have to overpay them or anything, just like you don't have to overpay your employees. But you've got to treat them well. You have to think of your vendor as like part of the team. And that could be even an API. You want to be able to use that in the right way. You want to treat it well. You want to treat the other people well. So they're, they're, they're helping you. They're supporting you, et cetera.

• 25:17Speaker 01

  The soundbites coming off the show are going to be fabulous. I'm just saying. And I want to stay on this because you also wrote a note that you are shorting Booz Allen, the consulting firm. That gets most of its revenue from the government. Tell us why and um. What lessons can business leaders take from this whole? Thing we've just been talking about. So start with booze and then go into like what's happening.

• 25:49Auren Hoffman?

  So Booz Allen is a, they make 98% of their revenue from the government. Um, and they're often doing things that the government should do themselves. So this is like, it's not exactly where it's like you're having a vendor who's doing something. In a, in a, you know, you're hiring someone for three hours a week to do a specialty thing. In their case, most of the people you hire through them are full-time people doing something. You know, it's like, it's like the Pentagon hires, they have many people at Booz Allen who, who join the Pentagon. To help them buy ammunition. Um, right. It's something that like they should be able to do themselves.

• 26:30Auren Hoffman?

  And they're often hiring like a 27 year old person who has a political science degree. He's just a normal person. He's probably relatively smart person. But they could have hired that person themselves. And then they pay them, you know, and that person's like commuting to the Pentagon for. Minnesota.

• 26:46Speaker 01

  Yeah.

• 26:46Auren Hoffman?

  Um, every week and all end cost is 1.1 million dollars. Um, that's like a typical thing like no one, there's no one in the world who thinks this is a good bargain. Um, yes, you need someone to help you buy ammunition. There's no reason why they can't bring that person on. Um, and they can bring that person on like internally to go do that. Now, now the Pentagon might need better hiring and firing authority, which they don't have today. So there's a whole bunch of things. So this is also, this short is a bet that this administration is going to be a little bit more sensible. They're going to have the right hiring and hiring and firing authorities. They're going to do a few other sensible things so that like folks like the Pentagon can actually make the right decisions.

• 27:29Speaker 01

  But the lesson here, if I put all this together, I think what you're saying is geez, you know, because they are renting booze to do regular jobs and they're essentially renting booze. Uh, at Booze Allen to do their, their normal job and they're overpaying for it. So their vendor management in this case is terrible.

• 27:50Auren Hoffman?

  Correct.

• 27:51Speaker 01

  And so what you're saying is the lesson here is you have to look at everything and the outputs, including the vendors. Is that, is that right? And do you have any tips for how to do that?

• 28:04Auren Hoffman?

  I mean, the, a lot of these things, you don't need tips, like they're actually just common sense.

• 28:10Speaker 01

  Yeah.

• 28:11Auren Hoffman?

  Like there isn't anyone who would look at the, what the Pentagon spends on booze and thinks like, this is good. Right? I mean, there's literally nobody, it's bipartisan, like, it's not like, um, you know, it's from Elizabeth Warren to Tom Cotton. You know, it's like, it's bipartisan. They think this is bad. Um, so it's like, there, there, I can't even imagine there's like one of 100 senators who would think this is a good thing. Um, so everybody from every walk of life is going to think this is bad. Uh, now it doesn't mean booze won't continue. You know, I have a short on them. The company, the stock has gone down pretty significantly since I shorted it. But like, I might be wrong about that. And you know, they might, you know, if, if, if you, if you, if you're long on government dysfunction,

• 28:55Auren Hoffman?

  then you're long on booze. If you think government will actually reform over time, which I'm hopeful, but that may, you know, that historically has not been the case, then maybe, um, you know, maybe then you're short on booze.

• 29:07Speaker 01

  CMO confidential does not give financial advice.

• 29:10Auren Hoffman?

  Yes, exactly.

• 29:12Speaker 01

  I know you also wanted to say one or two words on on kind of the dichotomy of private equity firms and how.

• 29:22Auren Hoffman?

  Private equity firms. And I wasn't really around in the 80s, but my guess in the 80s and 90s is that a company that was bought by a private equity firm was an way better run company than a company that wasn't. So the average company that private equity firm, you know, back then they called them LBO companies or whatever. They were they were leaner, they moved faster, they had less bureaucracy, they were more profitable. They they had a better strategy, they employed smarter people.

• 29:57Speaker 01

  And because they would do a leverage buyout, the LBO thing, and that would put pressure on the company to cut all the bureaucracy you were just talking about.

• 30:04Auren Hoffman?

  I mean, it isn't it isn't any different today. They still load them up on debt, it's still the same thing today, but for whatever reason. I don't I think I think the alpha back in the day was the reason why these private equity firms existed was to take a company and make it much, much better. Now, back then, the the the lots, the interest rates were pretty high.

• 30:30Speaker 01

  Yeah.

• 30:30Auren Hoffman?

  So it was actually very expensive, you know, they they often had to do junk bonds, they were often way, you know, they're in the teens percent that they had. So the debt was very, very, very expensive. So they really had to make the company much better. Now you start to go to the world in the 2000s where the debt gets cheaper and cheaper and cheaper. At some point it gets close to zero.

• 30:55Speaker 01

  Yeah.

• 30:55Auren Hoffman?

  And you don't have to, it becomes a lot more about financial engineering than really making that company better. So the average. Private equity person who's been in the business for the last 15 years, they could make tons of money without necessarily improving the company. And so at least for me, when I've interacted with private equity backed companies, I don't think they're run any better than non-private equity backed companies today. I don't think they're less bureaucratic. I don't think the employees are better. I don't think they're leaner. I don't think they move faster. So because I don't think the private equity people have had to make them better. In fact, the traditional exit for a private equity company today, to get rid of your, when you actually make money,

• 31:37Speaker 01

  Well, to another private equity company.

• 31:41Auren Hoffman?

  So imagine Blackstone buying it from KKR. It's not like, you know, it's not like, they can even improve it that much. KKR is already amazing. Like, what can Blackstone do? It's not like, oh yeah, those KKR guys are idiots. They didn't know how to run this company.

• 31:56Speaker 01

  That's interesting.

• 31:57Auren Hoffman?

  Like make this company so much better. They're already buying probably a company that's like relatively. So it's a lot more about financial engineering now than it is about improving the company.

• 32:07Speaker 01

  Well, and we're going to see because, you know, when you could borrow money at, at very low interest rates, you could dividend yourself like crazy.

• 32:14Auren Hoffman?

  Yeah.

• 32:15Speaker 01

  And now they did. Yeah, you could just load on the debt now to higher rates. Dividending yourself is going to be a little harder.

• 32:21Auren Hoffman?

  Correct.

• 32:21Speaker 01

  See what happens, which brings us to our traditional last question. It's a two parter. You have to take one or both, but you must take at least one.

• 32:31Auren Hoffman?

  Okay.

• 32:31Speaker 01

  Funniest story you can tell on the air or practical advice for our listeners? We haven't discussed yet.

• 32:38Auren Hoffman?

  A practical advice.

• 32:40Speaker 01

  All right. Very good.

• 32:42Auren Hoffman?

  So that's the question. Sorry.

• 32:43Speaker 01

  Yeah, you can do funniest story and or practical advice. We haven't talked about yet.

• 32:50Auren Hoffman?

  Well, I mean, I think we talked about it a little bit, but.

• 32:56Auren Hoffman?

  My guess is almost anything to do with like an MBA is just extremely bad ROI. Today, if you got an MBA outside of the top three schools,

• 33:08Speaker 01

  Yeah.

• 33:08Auren Hoffman?

  You are going to lose money. Again, you might meet your spouse. So the ROI might be extremely high for your life.

• 33:15Speaker 01

  Yeah.

• 33:15Auren Hoffman?

  And or you might have just like tons of fun or make lifelong friends. There's a lot of other good reasons to go there. But if you think you're going to like make your career better, I think most cases it makes it makes it worse. In some cases, it might make it marginally better, but not enough to justify like the cost. And you have two costs. One is you have the cost of like the tuition, housing, all that other stuff that you know, the tuition there. But the second is you have the the lost revenue and the lost two years of your career where your career didn't progress. And so if you're making 120 grand before MBA, you might have been you might be making 160 grand if you just kept on that trajectory,

• 33:59Auren Hoffman?

  right? And then you leave the MBA and now you're making 140 or something like it often just doesn't doesn't play out.

• 34:06Speaker 01

  It's interesting. I think that's probably true, maybe in some college degrees as well. So.

• 34:12Auren Hoffman?

  I think it's true in most college degrees. Yes.

• 34:14Speaker 01

  There we go. All right. Another little incendiary thing. We will we will cut up as a short. Thank you, Orin, and thanks to everyone for listening to CMO Confidential. Look for more of our shows on Spotify, Apple, and YouTube, which include From the Academics, The Insomnia Cookies Case, How Northwestern Uses the Ghost Model to Teach Marketing, The Gumball Machine is Broken: Rethinking B2B Marketing, The Top Five Mistakes CEOs and Boards Make When Hiring CMOs, and of course, Orin's first show, Unlocking the Potential of Martech. Hey, all you marketers, stay safe out there. This is Mike Clinton signing off for CMO Confidential.

• 35:01Auren Hoffman?

  Thanks for listening. If you haven't already done so, please subscribe to World of DAS wherever you consume your podcasts, YouTube, Apple, Spotify, and more. And please help us get discovered by leaving a review. And check out worldofdas.com. That's worldofdas, D-A-A-S, dot com. And of course, connect with me on Twitter, at Auren, that's A-U-R-E-N. Would absolutely love to hear from you.