Andrew Wilkinson: The Hardest And Easiest Businesses To Start

Episode 386: Sam Parr (@TheSamParr) and Shaan Puri (@ShaanVP) talk to Andrew Wilkinson (@awilkinson) - entrepreneur and co-founder of Tiny - about learning to be a successful entrepreneur in less than a decade. His hardest and easiest businesses to start. Plus, one business idea he hasn't acted on, yet. ----- Links: * Tiny * Pixel Union * Warren Buffett letter * AeroPress * Metalab * We Work Remotely * Tenzing.co * Mealime * Do you love MFM and want to see Sam and Shaan's smiling faces? Subscribe to our Youtube channel. * Want more insights like MFM? Check out Shaan's newsletter. ------ Show Notes: (03:20) - Mr. Business Builder (06:30) - Automatic revenue - Pixel Union (12:05) - Warren Buffett letter (16:35) - Bored of investing / AeroPress (23:55) - Cat furniture (25:10) - Hardest to easiest business to start (33:35) - Business idea to capitalize on (37:05) - New business (50:35) - Fraudsters (01:00:40) - non-binary term sheet ----- Past guests on My First Million include Rob Dyrdek, Hasan Minhaj, Balaji Srinivasan, Jake Paul, Dr. Andrew Huberman, Gary Vee, Lance Armstrong, Sophia Amoruso, Ariel Helwani, Ramit Sethi, Stanley Druckenmiller, Peter Diamandis, Dharmesh Shah, Brian Halligan, Marc Lore, Jason Calacanis, Andrew Wilkinson, Julian Shapiro, Kat Cole, Codie Sanchez, Nader Al-Naji, Steph Smith, Trung Phan, Nick Huber, Anthony Pompliano, Ben Askren, Ramon Van Meer, Brianne Kimmel, Andrew Gazdecki, Scott Belsky, Moiz Ali, Dan Held, Elaine Zelby, Michael Saylor, Ryan Begelman, Jack Butcher, Reed Duchscher, Tai Lopez, Harley Finkelstein, Alexa von Tobel, Noah Kagan, Nick Bare, Greg Isenberg, James Altucher, Randy Hetrick and more. ----- Additional episodes you might enjoy: • #224 Rob Dyrdek - How Tracking Every Second of His Life Took Rob Drydek from 0 to $405M in Exits • #209 Gary Vaynerchuk - Why NFTS Are the Future • #178 Balaji Srinivasan - Balaji on How to Fix the Media, Cloud Cities & Crypto * #169 - How One Man Started 5, Billion Dollar Companies, Dan Gilbert's Empire, & Talking With Warren Buffett • ​​​​#218 - Why You Should Take a Think Week Like Bill Gates • Dave Portnoy vs The World, Extreme Body Monitoring, The Future of Apparel Retail, "How Much is Anthony Pompliano Worth?", and More • How Mr Beast Got 100M Views in Less Than 4 Days, The $25M Chrome Extension, and More

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

• 0:00Shaan Puri?

  What are easy businesses that you've you've started where you're like, because I, for me, Milk Road was a way easier business than any business I had ever started. What what's been an easy business for you?

• 0:10Sam Parr?

  And where does, where does, where does agencies rank on the easy to hard scale?

• 0:15Andrew Wilkinson?

  I'd say it's medium. I mean, the hardest, let's just say the hardest possible businesses are brick and mortar, or where you have to move physical goods and you have a lot of employees.

• 0:29Sam Parr?

  All right, Andrew Wilkinson, you're back. What's going on?

• 0:33Shaan Puri?

  Not too much. Good to be here.

• 0:36Sam Parr?

  Sean, did you know that that Sahil, one that we did, we had Sahil Bloom on the other day? Two things were interesting to me. One, people thought, well, we were making fun of him that we disliked him. They thought I disliked him, which is not true. And two, it was shockingly popular. Did you see that?

• 0:52Shaan Puri?

  Well, that part's not that surprising. The first part's surprising. I mean, we were all making fun of each other. I thought I thought it was a fairly even give and take, but maybe not.

• 1:00Andrew Wilkinson?

  Maybe it was a bit of a roast battle.

• 1:03Sam Parr?

  But you don't, you only do that with people you like.

• 1:05Shaan Puri?

  Yeah, exactly. If you actually don't like somebody, you don't just come out and start busting their balls. That's not really like.

• 1:11Andrew Wilkinson?

  To be fair, the guy is like stupidly handsome. I met him when I was in New York. Very, very handsome guy. So we got to shit on him.

• 1:19Shaan Puri?

  Yeah.

• 1:19Sam Parr?

  Yeah.

• 1:21Andrew Wilkinson?

  Break down the handsome guys. You want, the worst part is you want to hate those guys, but if they're nice, it's almost worse. He was very nice.

• 1:29Shaan Puri?

  The one thing that was really good is he's pretty prone to like taking a pretty like a cookie cutter response to things. Cause he's like, he's got like a good image. He wants people to generally like him. Like he's, you know, he's on TV sometimes. He's got his like book deals. He's like doing things where, you know, public perception kind of matters. Whereas if you're just an entrepreneur, who owns some business, like you don't need everybody to like you. But for his things, you know, it's good when people like him. It's good for business. But he came on and he was like super honest, super open about everything and was not giving us politician answers, even though I do think he's a future president. He wasn't doing that though. So I thought, you know, mad props to him for, for just being normal. Like, like if we were normally hanging out, that's how he was on the pod. It was perfect.

• 2:11Sam Parr?

  What do you want to start? You want to start with some postmortem stuff? You want to, where do you want to go with this?

• 2:15Shaan Puri?

  Andrew, Andrew always sends us the best topics in advance where we could, we just pick at you. It's like, what's this word mean? And we could riff off that. But Andrew, I bet you have a sense of what you think the most interesting topic is. So let's not bury the lead. What do you think is the most interesting topic that you have?

• 2:30Andrew Wilkinson?

  When I started my business, I was like Mr. Business Builder. Like I'd say yes to absolutely everything. I'd be in the shower and have the idea of like, oh, you know, why doesn't this exist? And then that day I would start it and I would just constantly be starting new businesses like every single month. And I think it was really good because it was like throwing spaghetti against the wall, right? So it was like seeing what a good business model is via pain. So it was just constant pain. And then also running an agency, you get to see all of these startups make mistakes and learn from them. And I had this really painful experience of starting an agency, getting really, really lucky that my first business was actually profitable. Cause I think one of the things that happens

• 3:14Andrew Wilkinson?

  is people start their first business and fail and then they just say, I don't like this entrepreneurship thing. I'm out. And so I was able to keep going and started another five to 10 other businesses and almost all of them failed. Like it was incredibly, incredibly painful. And after that, I kind of swore off starting businesses and I've only just come back to it over the last three years. So I can talk a little bit about my experience in some of those businesses. Sam was texting me before and he's like, well, you start all these businesses, you've like tweeted out all these businesses, what actually happens to them? So I was going to go through a couple of those.

• 3:53Sam Parr?

  And by the way, for the, for the listener, this is Andrew Wilkinson. You're on, he's on the pod all the time, owns this thing called Tiny. Although are you guys, do you want to go by Tiny Capital now or just Tiny?

• 4:03Andrew Wilkinson?

  Just Tiny. I hate Tiny Capital.

• 4:05Sam Parr?

  Yeah, I know you, I know you hated it, but everyone was like using it, but owns Tiny, which is, I think one person called you online, the Warren Buffett or Berkshire Hathaway of internet companies. So you basically buy in whole, a bunch of internet companies that collectively are now doing a hundred north or hundreds of millions of dollars in revenue, whatever the number is that you say publicly.

• 4:26Shaan Puri?

  How much did you pay your friend to say that about you?

• 4:28Andrew Wilkinson?

  I actually, it's really funny because there's been all these, like on the cover of Newsweek or whatever, it'll be like the next Warren Buffett and Sam Bankman Fried was one of those people. And so everyone's sharing all these covers from all these things. So being called the next Warren Buffett is not good. And I'm, I'm different from Warren Buffett, but I've copied a lot of his ideas.

• 4:51Shaan Puri?

  Well, the next Steve Jobs, that was Elizabeth Holmes from Theranos. That was another, another one you didn't want to get tagged with. I think Chamath was calling himself the, the, the new Warren Buffett or like the brown Warren Buffett or something like that.

• 5:03Sam Parr?

  He called himself that?

• 5:05Shaan Puri?

  He called himself, uh, I don't know if he called, I don't know. I don't want to put like the quote on it, but he definitely insinuated it and he definitely said, we're trying to build, you know, the next Berkshire Hathaway, blah, blah, blah. And so, you know, he, he was given that or he named himself that way.

• 5:19Andrew Wilkinson?

  My favorite thing about Chamath was that in his annual shareholder letters, he would, he would compare himself to Berkshire Hathaway. So he would track social capitals results versus Berkshire. And then one year he just stopped and I think it was the one year that he didn't actually beat them. I think, I don't recall. That might be unfair characterization, but that's my recollection.

• 5:41Sam Parr?

  So where are you going with this? Do you want to do the postmortem thing?

• 5:44Andrew Wilkinson?

  Sure.

• 5:45Sam Parr?

  Is that, is that where you're going? I don't know.

• 5:47Andrew Wilkinson?

  Yeah, let's do it. We can go through a couple of those. I think it's kind of interesting.

• 5:50Sam Parr?

  Can you start with Pixel Union? I think that's incredibly interesting.

• 5:54Andrew Wilkinson?

  Yeah. So, um, was running MetaLab and I, uh, was like an early Tumblr user and I met David Karp just via Tumblr. Like he was, he was the CEO of Tumblr and he kind of knew all the early users and stuff. And I ended up making a Tumblr theme that I wanted to use myself. And he was like, hey, this is really, really cool. I would love it if you could create some more of these and we're going to make a premium marketplace where other people can pay to buy Tumblr themes. And so I'm kind of thinking like, oh, this is a favor for a friend and this is a really small platform. I'm not thinking of it as a business, but I end up going to a bunch of my designers and saying, hey, look, you know, over the weekend, would you be able to whip up some themes?

• 6:37Andrew Wilkinson?

  And so, um, I go to one of my interns, like, like literally, uh, a guy who is like, um, my brother's friend who had like just finished like doing a, I think a philosophy degree. And I was like, hey, like, turn this into whatever you, you want. And so we ended up calling it Pixel Union and it started doing like $10,000 a month of revenue. And it was my first taste of automatic revenue. Like I would go to sleep and I'd wake up in the morning and we would have sold, you know, 500 bucks worth, the worth of these Tumblr themes. And, uh, Shopify noticed what we were doing for Tumblr and they said, and at the time they were a tiny company. They were about 15 people. And they said, hey, can you guys?

• 7:19Andrew Wilkinson?

  Also do the same thing for us. And so we got into the theme world for Shopify and Tumblr. Tumblr obviously died post Yahoo acquisition and the business still exists today. It's a really interesting story, actually. So we, so I started, incubated the business, didn't raise any outside capital, spun it out of Metalab, became its own independent company. We ended up selling it in 2014 and then I stayed on the board. I kept 20% of it. And then a couple of years ago, I bought it back and then we ended up taking it public and that became WeCommerce.

• 8:00Sam Parr?

  What did you sell it for, like 10 or 15 million dollars? I think I read about it publicly.

• 8:04Andrew Wilkinson?

  I sold it for 7 million.

• 8:06Sam Parr?

  7 million dollars. Why would you sell that?

• 8:08Andrew Wilkinson?

  Well, at the time it was doing, I think, 500K of net profit. And I didn't, to be honest, it was one of those things where I didn't know how good the business was and I hadn't read anything about investing yet. And so I didn't know how to value a business. And so it was a double edged sword because I sold this incredible business for, you know, a good amount of money. It allowed me to kind of have a sense of comfort and retirement and all that kind of stuff. But doing so, I suddenly had this pile of cash and I had to learn how to invest it. And so I started reading about Warren Buffett and reading all the investing books and going, oh my God, I can't believe I just sold that incredible business. You know, it was growing at 50% a year. And, you know,

• 8:53Andrew Wilkinson?

  I thought it was great to get a 14x multiple, but not when it's growing that fast. So I regretted it.

• 9:00Sam Parr?

  And then what did you guys pay for it when you bought it back?

• 9:04Andrew Wilkinson?

  So we bought it back for 26 million. And then we did a bunch of acquisitions and then we took it public.

• 9:12Shaan Puri?

  What was it doing when you bought it back? How big was it when you bought it back?

• 9:16Andrew Wilkinson?

  Uh, I think it was doing about $4 million of annual profit. So it had grown a lot. And we paid 26 and then we bought 460 and a couple of other businesses. And then we took it public at a $260 million valuation.

• 9:35Shaan Puri?

  And when you, you said, I didn't know anything about investing and blah, blah, blah at that time. I think today people look at you as somebody who knows a lot about investing and they want to be like you when it comes to investing or buying businesses.

• 9:47Shaan Puri?

  What year was that when you said that statement, you felt that way? Cause I, I'm guessing it wasn't like that long ago. Is that 10 years? Is that 12?

• 9:56Andrew Wilkinson?

  It was eight years ago, 2014.

• 9:59Shaan Puri?

  So that's basically eight years, so less than a decade going from, I feel like I know nothing about any of this to, you know, I don't know, what you're like in the top percentile, you know, in our, in our industry and have had phenomenal success. I think that's just sort of a, a nice thing. It's like, if you were willing to put in a decade, you can go from literally the bottom to the top and that's pretty cool.

• 10:21Andrew Wilkinson?

  Yeah, I think it was, you know, getting obsessed, right? I think that when you, there's no better feeling than, you know, picking up a book about something and just desperately reading it. Like you can't stop going through it. And I spent probably two full years just reading every single book I could get on, I could get about value investing. So yeah, I think with intensive time, you can do it. And the nice thing is there's that great Buffett quote where he says, I'm a better businessman because I'm an investor and I'm a best, better investor because I'm a businessman. And Chris and I, we were natural investors within our own business. We knew how to allocate capital within the business to drive growth and profits

• 11:02Andrew Wilkinson?

  and margins and all that kind of stuff. So when we became investors, we were much better at it, I think, because we had the operational lens. We could look at a business and say, oh, that's really hard. Or hey, they're not doing these three easy things that we did at our company. And I think one of the big problems with investors these days is they're often what I call spreadsheet investors. They look at a business like a spreadsheet and they go, oh, it's easy. We'll just increase margin by 20%, not realizing that in order to do that, you have to convince a hundred people to change.

• 11:32Sam Parr?

  What a

• 11:33Shaan Puri?

  Can I pay you back off that real quick? So Sam, did we talk about this Warren Buffett sees candy letter? I know I had it on our list. I don't know if we ever did it on the pod. Did we, did we talk about this?

• 11:43Sam Parr?

  You, it's been on your list. You've never, you've never brought it up.

• 11:46Shaan Puri?

  So Andrew, you're like a, you know, Warren Buffett PhD. So you, you probably know this, but maybe not. I had never seen this before. So there was a letter in 1972 that Warren Buffett wrote to the CEO of Seize Candy after they had bought Seize Candies. And have you read this before? If not, I just put it in the, in the chat because it's kind of amazing. And I want to talk about it. This was, this was very surprising to me. So I put it in the chat here on Riverside. But okay, so I think of Warren Buffett as this like, kind of like what I see today. There's this guy who's super smart, really like, you know, likeable storyteller. He's an investor. He's a, you know, he's not, doesn't look like an operator. He's like a geezer, right? He's just sitting there at his, at his, at his table and he reads all day. And you know, he makes investment decisions. He's a capital allocator.

• 12:29Shaan Puri?

  But when you read this letter, you realize like how detailed and in the weeds he was and how business savvy he was. So I actually want to read out parts of this real quick so that, you know, people who aren't reading it can

• 12:40Sam Parr?

  Dude, this is, this is terribly, I mean, sorry, this is incredibly well-written. He's, he's, he's got such a good voice.

• 12:47Shaan Puri?

  He goes, Dear Chuck, I was at Brandy's a couple of days ago and have a few strong impressions to pass along. So he visited the store and here's his, here's his impressions. He goes, people are going to be affected not only by how our candy tastes, but obviously what they hear about it from others as well as the retailing environment in which it appears. This means like the class of the store, the method of packaging, the condition it appears, the surrounding merchandise, just like the New Yorker creates a different editorial environment for Lord and Taylor ad than it does for Village Voice. So do the surroundings of our candy affect the way that our potential customers, mental and gastronomical impression of our quality? You know, of course, you know, of course, you of course know this better than I. Right? So that, that was the first piece, which he's basically talking about like, you know, the, the store environment, you know, like the way that Apple, you know, sort of

• 13:31Shaan Puri?

  recreated the, the retail store. He's already thinking about this and sending this like, more like an operational and almost like, it's like a design note, right? He's not talking about margin. He's not talking about like, you know, debt. He's talking about the, the, the merchandising of the store and how it feels and how that's going to affect how people taste, taste of stuff.

• 13:52Shaan Puri?

  Then he goes and he talks about. Uh, let's see, what's the next good bit? So he's like,

• 13:58Sam Parr?

  Number three.

• 13:59Shaan Puri?

  Yeah. He goes at Brandy's, our product suffers in comparative way against Stovers. He goes, they have extremely well organized, well displayed, attractive area, putting uh, featuring nothing but their candy. Um, we've taken a number of our boxes, put them on the counter with 25 other offerings, offering cheap bulk candy and other run of the mill products. And they, you know, so he's talking, he's basically comparing this, the store design. And then if you go down, he goes, um, so he's talking about the merchandising for a while. And then he goes, um, he's like, we may well want to have a, have descriptive material, maybe our own little booklet called the most famous kitchen in the world or something of that sort. Coors gets a lot of mileage out of the fact that all their beer comes from one brewery. And I do think there's certain, there's a certain mystique attached to products with a geographical

• 14:43Shaan Puri?

  uniqueness. Maybe grapes from a little part of Italy or France are really the best in the world. But I've always had a suspicion that 99% of it is just in the telling about it and 1% is in the drinking, right? So he's talking about like, you know, like sort of this marketing psychology about, you know, giving them like ideas for catchphrases and slogans. This is way more active and sort of like the brain switched on in terms of operating than I had thought. Uh, what is this? Was this a surprise for you too, Andrew? Or is this something you knew about?

• 15:12Andrew Wilkinson?

  That's one of the things I found really inspiring about Buffett is everybody, I like, to be honest, my impression was always like, okay, entrepreneurs are the people that do the work. The investors are people that shuffle paper around on Wall Street. And what I realized with Buffett is that he actually was someone who, yes, he owned the businesses, but he influenced the businesses massively and he made them grow and, you know, brought them together and did acquisitions. There's so many ways where he built value, right? Which you can't say about a lot of people like BlackRock doesn't build value. They just index. They own a bunch of pieces of paper. Warren Buffett actually grows stuff. What's fascinating though, and I'd be curious to know whether he would still write a letter like this is Chris and I had dinner with Charlie Munger a couple of years ago, and we

• 15:57Andrew Wilkinson?

  asked him, how involved do you get with the CEOs? And he really said, um, I'll never forget this. He goes, I've never been able to change someone's mind. If someone has an idea about something they want to do, I've never been able to talk them out of it. And so, you know, he said, there's always opportunities within their businesses to tweak them and make changes and all that kind of stuff. But it's just very hard to actually get CEOs to do stuff. CEOs are not puppets. They have their own brains and they want to do their own things. And, you know, to man with a hammer, everything looks like a nail.

• 16:30Sam Parr?

  Do you ever get bored just being an investor?

• 16:32Andrew Wilkinson?

  Yeah, very. That's why he starts all those businesses.

• 16:36Sam Parr?

  Yeah, exactly. Dude, it's so boring. That's why I don't like doing it. It's so boring.

• 16:41Andrew Wilkinson?

  I told you.

• 16:41Andrew Wilkinson?

  It's like, um, it's like, yeah, it's like, imagine if, you know, someone came along and was like, hey, look, you don't have to work and you can have all this free time and just read all day. And it sounds like a luxury when you're a stressed out entrepreneur, but actually doing it in practice, you have to find new things to fill your time with. And you don't get your hands on the tools, right? So you don't get the sense. So like, for example, you know, we bought Aeropress. And when we first bought it, I helped drive the redesign of the website, which, you know, I was proud of. But I very quickly had to let go of it. I knew I couldn't keep, you know, holding on to the business. And so I, you know, we hired a CEO and I had to pass him the baton and let go.

• 17:22Andrew Wilkinson?

  And yes, I get a sense of like pride of ownership, but as the business progresses, I don't feel the lifts. I don't feel the gains.

• 17:30Sam Parr?

  Can we talk about that acquisition?

• 17:33Andrew Wilkinson?

  Sure.

• 17:33Sam Parr?

  So the background here is Aeropress for like, it's almost like a coffee snob product. I owned it. I loved it. It was basically like a more convenient French press that you could travel with. I love it.

• 17:45Andrew Wilkinson?

  So you owned?

• 17:48Sam Parr?

  I still own. I own two of them. I have one that I have one that I travel with and I have one that just stays in the cabin. I use it every morning. I love it. But it was only sold, I'm almost positive, I would only see them in mom and pop coffee shops and maybe Amazon. I don't even know if they're on Amazon, but like, so the retail wasn't that great. But like, it was clearly like a good product. It's one of those products that like consumers can buy for 20 bucks, but even the coffee snobs are like, this is the best way to do it. And you guys purchased it recently, which it's not exactly an internet business, but you're trying to make it a little bit more internet related. But are you happy with this deal? I know you guys paid, it seemed like a lot of money. You paid a premium for it.

• 18:28Andrew Wilkinson?

  Absolutely. I mean, I think when I look across all the businesses that we own and I think about what business could exist in 50 years, there's a very, very small number. I mean, most businesses die. And I think that Aeropress is something that has potential lasting impact and can be around for decades. And it was just an incredibly unique business. I mean, when do you get the opportunity to buy a way of making coffee? It's like, how do you value buying Kleenex, right? The word for the way of making coffee that's written on grinders and is a verb almost.

• 19:07Sam Parr?

  No, I think it's sick, man. Sean, did you see he bought this?

• 19:10Shaan Puri?

  Yeah, I'm not a coffee guy. Like, I literally don't drink coffee. So even though I had heard of the brand, it didn't, I didn't know enough about it or didn't sort of, didn't have too much of a, you know, opinion on it, because it's not my thing. But it does remind me of, like, I was looking at SodaStream, and I was like, I really love this type of this category of product. I think it's a fantastic category where it's a thing that, another device that gets in, that can get into every kitchen and has like this sort of consumable, refillable component to it. So that's great. And then if you become the de facto device, like you said, I think you just said like the verb, basically, like if you could become a verb, I just read this recently with someone who was like, you know, I learned 25 years ago,

• 19:52Shaan Puri?

  if something becomes a verb, just invest. And, you know, it's pretty true, right? Google it, we'll Uber there. You know, like, you realize that these verbs tend to become like, de facto winners of their category. And so I definitely, definitely think it's a good idea. I just don't drink coffee myself. So it's not something.

• 20:11Andrew Wilkinson?

  It's the only business that I own that people, like, when I tell people, and, you know, you know, if I'm in tech, and you say, oh, yeah, we own Dribbble, and they're a designer, like, they know what that is, they think it's cool, they might like, give me a little nod or something like that. But if you tell, like, I'll talk to, you know, the carpenter working in my house and say, oh, yeah, I own Aeropress. And if they know what it is, they are passionate about it and they're excited about it. And that is very rare. So. So it's a really amazing business.

• 20:40Sam Parr?

  I remember reading about this in Priceonomics, the guy who created it, he was like this, you know, now, now he's quite, quite old, I think, I think he's in his eighties and he was like an inventor. He was like a wacky scientist inventor, like stereotype guy, where he also created like the Frisbee or like, what was the Frisbee?

• 20:59Andrew Wilkinson?

  The Aroby.

• 21:00Sam Parr?

  The Aroby, do you remember those commercials? It was like, we could throw this Frisbee over a football field or something like that. And he created all this amazing stuff and he just had owned Aeropress that he created, but he wasn't like a business guy, wasn't he just, wasn't this kind of just sitting? Kind of just like on autopilot?

• 21:16Andrew Wilkinson?

  I wouldn't say it was on autopilot. He had a really great president who was running the business side, but they were both older guys and they were really focused on the retail channel, which you can see, there's a reason why if you walk into 95% of gourmet coffee shops anywhere in the world, they sell Aeropress. But when we looked at it, just a very, very small percentage of sales were online. It just wasn't a focus for them. So we came in and there's just a ton of best practices. And Sean, it's funny, you mentioned SodaStream. We actually hired the president of SodaStream US, who grew the business to 200 million in the United States. That's the new CEO of Aeropress. So.

• 21:55Shaan Puri?

  Yeah, I read about that person because I was researching SodaStream and I was like, oh damn, this person was like, you know, they, they were, I don't know, the driver or the trigger of a lot of, a lot of growth that happened for SodaStream. Because didn't SodaStream sell a couple of times? Like it's owned by who? Pepsi now? Something like that?

• 22:10Andrew Wilkinson?

  I think it's owned by, what is it? Oh my God. I think it's, it's an Israeli company. I don't know if they've sold, they might've sold to JAB Holdings or someone like that.

• 22:22Sam Parr?

  Yeah, I think they have.

• 22:24Shaan Puri?

  So, yeah, no, no, SodaStream was acquired for $3 billion in 2018 by Pepsi. But maybe now it's owned by somebody else. I don't know. There was, there was some story like that where it had kind of like flipped hands, I thought. And I was thinking that there should be like more competition for this. Like there's a, there's so many D to C brands and I feel like the D to C SodaStream competitor should win. I know there's a few of them out there, but I'm surprised I don't hear about these more. I'm surprised there's not 100 million, you know, a D to C SodaStream competitor that's doing, you know, north of 100 million in sales. I feel like that's a, like that should be a thing because SodaStream is very not D to C.

• 23:01Andrew Wilkinson?

  Totally. Should we talk about some of the terrible businesses?

• 23:04Sam Parr?

  Yes.

• 23:05Andrew Wilkinson?

  Those are more fun. So and then I want to talk about a new business I'm starting actually because I've got yet another one because I'm a glutton for punishment. Okay, so some of the early stuff that I did. So I had the idea that I had cats and I was like, okay, all cat furniture is hideous. Like it just ruins your house. It looks horrible. And so I went out and I found a couple like kind of mom and pop brands that were doing this. And I said, hey, I'm going to start an online store for cat furniture called HJ Muse. Spent a whole bunch of money designing an e-commerce website and I, you know, poured probably 300 grand into it, which at the time was a lot of money for me.

• 23:49Andrew Wilkinson?

  You know, my whole business was maybe making 800 grand of profit a year. And I just learned how brutal a business e-commerce was that, you know, I was basically eking out these razor thin margins, whereas in my agency or in Pixel Union, I was making 30 to 50% EBITDA margins. I was making like 2 or 3%. And the amount of work required to move physical goods around by inventory. I realized that while on paper I was profitable, I was constantly taking my profits and putting them into buying more inventory. And so I ended up shutting that business down and losing, I think I lost all the money I put into it, but it was a great lesson in just

• 24:28Andrew Wilkinson?

  hard businesses. I didn't realize that different businesses were harder than others, right? Like you kind of just, when you, when you're inexperienced in business, you stumble into these things and I always go like, God, I'm so lucky I didn't start a restaurant as my primary first business, right? Because it's so brutal, right? It teaches you so much, but it would be so easy to tap out and just think you don't like entrepreneurship.

• 24:53Shaan Puri?

  A restaurant was my first business.

• 24:56Sam Parr?

  And then he went into e-comm.

• 24:58Shaan Puri?

  Now I have e-comm. The road less traveled, baby. So, so what, what are easy businesses that you've, you've started where you're like, because for me, Milk Road was a way easier business than any business I had ever started. What, what's been an easy business for you?

• 25:15Sam Parr?

  And where does, where does, where does agencies rank on the easy to hard scale?

• 25:20Andrew Wilkinson?

  I'd say it's medium. I mean, the hardest, let's just say, the hardest possible businesses are brick and mortar, or where you have to move physical goods and you have a lot of employees. So, one of the hardest businesses I own is I own a bakery and deli in Victoria, B.C., where I live. And I bought it because my brother had grown up working there. It was a neighborhood place. The owner wanted to sell. And I've owned it for about five or six years. And, I mean, they have to have about 40 or 50 employees. Someone has to wake up at 2:00 in the morning and go into the basement of the bakery and bake croissants. And the amount of coordination that has to go right, where if a couple people are sick, how messed up the business can be, is just night and day compared to any internet business.

• 26:04Sam Parr?

  Dude, if the manager of that bakery bails, who's gonna go out and find a new manager?

• 26:10Andrew Wilkinson?

  I have a restaurant group, like a food and hospitality group. So I have a guy who runs that now. Before, I was me. I mean, they would text me and say, "Andrew, the deep fryer's broken. I need an approval to buy a new one," or whatever it is. So I've put people in place between there. In the medium camp of challenge, I would say agencies. So, agencies are beautiful in that they're asset-light. So, really, you don't even need an office these days, but you really just need an office, an internet connection, and a keyboard. And you can hire, generally, the people as you need them. And so, you don't really need any investment. They're scalable, but they're hard in that you're constantly balancing supply and demand. So, Metalab,

• 26:55Andrew Wilkinson?

  for example, if Metalab was to do all the work that came to it at any given time, it could probably be five times bigger. But in order for us to get five times bigger, we would have to grow the company too fast, and we would ruin the culture. And so, I would say that agencies are a little bit like a law firm, or an accounting firm, or a consulting firm, where you've got this kind of flat, linear growth that happens over time. So, I think they're great businesses, but they're feast or famine, right? And you really have to be prepared for a downturn. And you need to be, unfortunately, ready to make Critical changes in the business at the drop of a hat if your pipeline's not looking good and that kind of stuff. So it's just very, very difficult in that way. Of course,

• 27:39Andrew Wilkinson?

  every agency owner I know wants to own a SaaS software company and every SaaS software company owner I want or that I know wants to own like a consulting business or something that grows really fast. So grass is always greener. The easiest business that I own is a company called WeWork remotely. This is a job board that we bought from Jason Fried and David Honnemeyer Hansen at Basecamp. They had started it and it was like the remote job board. They had written a book about remote and they had great SEO. They ended up ranking number one for remote jobs. And as you know, remote work has taken off over the last five years. And so we bought that business from them and it really was

• 28:23Andrew Wilkinson?

  just kind of sitting idle. And so with some very simple best practices and a very, very small team, we were able to build it into a very large business.

• 28:32Shaan Puri?

  And what about SaaS? Where would you put SaaS businesses that you've run?

• 28:37Andrew Wilkinson?

  Well, I've lost a lot of money doing SaaS. I mean, I think a lot of people know the story of Flow, the project management software that I built, where I basically poured $10 million into it because I was competing with Asana and didn't understand the dynamic of when you're competing against, you know, you're fighting an army that has unlimited budget. It's like Fiji fighting the United States, right? And I'm going like, I'm going to win this. It's ridiculous. And so I lost $10 million doing that. And that was a great lesson, but incredibly painful. And I wish someone like me had tweeted and I could have read it instead of losing all that money.

• 29:15Sam Parr?

  How many agencies do you own right now?

• 29:19Sam Parr?

  Or partially own?

• 29:20Andrew Wilkinson?

  I think we probably own 10, 10 or 12.

• 29:23Sam Parr?

  There was, um, there was, uh, what's the guy's name? Who's the richest black guy in America? Robert Smith, I think his name, uh, is it Vista Equity?

• 29:32Andrew Wilkinson?

  Vista Equity.

• 29:32Sam Parr?

  Vista Equity. So basically Vista Equity is a PE firm that owns, they're, they're mainly SaaS. And I think if I remember correctly, the article said that they own 200 million, sorry. Was it 100 billion? I, whatever it was, it was, it was north of 100 billion of, of SaaS revenue. I think it was second only to Salesforce in terms of their reach. And he had this, uh, thing where he was saying, look, on our companies, we're actually only seeing a 20% decrease from where we thought we would be this year, meaning like only a 20%. He's like, we're growing at 20% a year. We thought we were going to grow at 25%. So we're seeing a small decrease in the growth that we expected.

• 30:16Sam Parr?

  Therefore, we actually are pretty bullish on the economy. With your agency, since you mostly sell to big companies like Slack and whoever else you sell to, are you seeing a slowdown from American companies buying services?

• 30:28Andrew Wilkinson?

  Yeah, absolutely. I think we're seeing softness over the next six months and things are definitely slowing down. Or if they're not slowing down, people want to achieve the same things, but for less money. Uh, and so there's these pressures, you know, like I said, it's the supplier demand problem. And you've got the labor market where people are demanding more and more pay. And then you've got your clients crunching you down, right? So right now, um, you know, I think that it's unclear. So the other problem is it's really hazy. And so you get into these situations, like when COVID hit, we had a brutal three month period where the pipeline dried up. And then everything was fine. It really depends on what the market sentiment is.

• 31:09Andrew Wilkinson?

  Whereas if you own a SaaS business, what are the odds that someone's going to take, especially a sticky one? What are the odds they're going to rip it out of their company and retrain everyone on that? And plus they're only being reminded they pay for it once a year, right? It's, I always think it's better to have 10,000 people paying you a small amount of money than a hundred people paying you a lot of money.

• 31:29Sam Parr?

  And what's Famous Original?

• 31:33Andrew Wilkinson?

  So I would say the theme for me is that I will often do the wrong business before I find the right business. So for example, I started a, I always, I'm a designer and I always fetishize the idea of having brick and mortar businesses. I was so sick of doing all these internet things. I wanted to do something in my own city. And so I came up with this restaurant concept of like bar and pizzeria called Famous Original and me and some friends did it together. And we basically learned the hard way that restaurants are brutal. You know, we were like super egotistical. We're like, oh, we're great entrepreneurs. We're going to be able to nail it in restaurants. And Sean, as I, I've definitely heard you talk about your experiences here and nodded along.

• 32:19Andrew Wilkinson?

  We just learned it was the most brutal business in the entire world and we're shocked by how much money we could lose. And so we, you know, hired the wrong management. We got the incentives wrong. We overspent on the build out to the point where we could never get our money back. You know, labor shortages, we had slippage. There was, there was tons of issues, but what I learned from that was what is a badly run garbage restaurant look like? And then when the deli and bakery came up, I was like, oh, oh, this is a good one. Like this has been around for 25 years, stable earnings, great general manager.

• 32:56Sam Parr?

  What type of food were you selling?

• 32:57Andrew Wilkinson?

  Let it run. Pizza.

• 33:00Sam Parr?

  You could screw up a pizza place. I would have thought that had been one of the easier places to, easier of the hard.

• 33:05Andrew Wilkinson?

  Yeah.

• 33:06Sam Parr?

  Cause like you don't need, it's like pretty simple ingredients. I wouldn't have thought you were going to ruin that one.

• 33:13Andrew Wilkinson?

  No, we managed to do it.

• 33:18Speaker 03

  Our software is the worst. Have you heard of HubSpot? See, most TRMs are a cobbled together mess, but HubSpot is easy to adopt and actually looks gorgeous. I think I love our new CRM. Our software is the best. HubSpot, grow better.

• 33:33Shaan Puri?

  You have a couple, on this list, you got things you did in the past, you have things, new businesses you're doing now, but I'm curious, do you have, I guess, like, we haven't talked to you in a little while, have you, have you had any ideas for businesses that you're not starting currently, but you're like, someone could do that, or someone should do that, or I wish someone is, you know, could capitalize on this opportunity or trend? Is there anything that that comes to mind for ideas that you're not currently acting on?

• 34:01Andrew Wilkinson?

  So I might have talked about this idea in the past, but I've had this idea for a long time. I like the idea of a service that allows you to get on one person's radar. Right? So I choose, let's say that I, let's say I want to sell my company in the next two years. And I think the right buyer is this, you know, this X, let's say HubSpot, right? I want to target Dharmesh. So everywhere Dharmesh goes on the internet, I want him to see stuff about my company. And I want him to think we're huge. There's, I forget where the quote comes from, but there's this idea that if someone sees you five times, they think you're everywhere. So if you're on five podcasts they listen to, they deem you a huge celebrity and a success or whatever it is.

• 34:45Andrew Wilkinson?

  Right? So I think I want that, but hyper targeted. And I think it's worth a lot of money. So I would pay $10,000 a month to be on Dharmesh's radar everywhere he goes. And so I don't know how it gets done. It's like a advertising sniper rifle essentially. But I really like the idea of something like that.

• 35:03Sam Parr?

  So I have a story about this. So my best friend, his name is Jack Smith. He sold his company called Vungle for $800 million right before the pandemic, when he was like 29 years old. The way that he started it was he was in England, living in England as a college student. And he had this idea and he wanted to go to a accelerator called, what was it called, Sean? Do you remember?

• 35:26Shaan Puri?

  I don't remember the name.

• 35:27Sam Parr?

  Angel Pad?

• 35:27Shaan Puri?

  Yeah, Angel Pad.

• 35:29Sam Parr?

  And the guy who run it, ran it was named Thomas and Jack missed the deadline to join the incubator. And so what he noticed on LinkedIn, he goes, let's advertise just to Thomas. And he said, on LinkedIn, the way it worked is you could advertise to like, it said, like, only show this to people, like 100 people a day. And he's like, wow, you can go to 100 people a day. What if I just moved it to like 10 people a day? And they allowed it him to, and it says, all right, only shows to 10 people a day, but make it so they have to work in San Francisco and they have to work at Angel Pad. And the ad said, hi, we're trying to reach Thomas. Please tell us to contact us. And he did that and it worked and they let him into the incubator. And six or seven years later, the company sold for $800 million.

• 36:11Sam Parr?

  And we at the hustle wrote an article about this. It went viral and LinkedIn changed how they did it. You can't actually advertise, they won't tell you how many people you're going to reach per day or something like that.

• 36:20Andrew Wilkinson?

  Totally. Something like that would be amazing. Or even just figuring out like, okay, what? Let's, let's just do this. So, so I get Darmesh's email and I run it through some sort of database. And I go, what email newsletters does he subscribe to? Or what podcasts? Like, how do you, I don't know if it's possible, but what is his information diet? And then how do I appear in all those things?

• 36:41Sam Parr?

  That's crazy. Yes, I think that would work wonderfully.

• 36:43Andrew Wilkinson?

  Yeah, I would love it. If someone wants to start that business, please email me because I think it's a great idea. But yeah, there's, I mean, again, like I come up with tons of ideas, but that one has stuck with me for three years. So I feel like it's something good.

• 36:57Shaan Puri?

  Yeah. What could go wrong? Just targeting somebody wherever they go, everywhere they look.

• 37:05Shaan Puri?

  What could go wrong here? Okay.

• 37:07Sam Parr?

  He's buying a billboard by his house.

• 37:10Shaan Puri?

  So that's one. What about some other ones? I know you got more.

• 37:13Andrew Wilkinson?

  Let me, let me talk about the new thing that we're doing. So, and this has been something that's been driving me crazy forever. So you guys know what investment bankers are?

• 37:21Shaan Puri?

  Yeah.

• 37:23Sam Parr?

  I know a lot of people who call themselves that. Yeah.

• 37:25Andrew Wilkinson?

  Right. But a lot of people kind of go like, oh, that's like a stockbroker or, you know, they work at a bank.

• 37:30Sam Parr?

  It's confusing.

• 37:32Andrew Wilkinson?

  Investment bankers are realtors for businesses. They go and they represent you and they sell your business for you, or they raise capital for you. And I didn't really understand that world at all. So like I, like I said earlier, I have only understood finance for eight years. And I would say really only over the last two or three years have I actually tapped the world of finance, like gotten proper banking, credit, learned how to sell businesses, learned how to use investment bankers. But I think those, that stuff is not really accessible to founders. And frankly, they don't speak the language of investment bankers. The investment bankers are the spreadsheet business people, right? They look at your business as a spreadsheet and they want something that's simple and easy to understand.

• 38:17Andrew Wilkinson?

  And frankly, like I was kind of allergic to them because I didn't speak their language. They would come and talk to me and they would use terms like EBITDA and, you know, gross margin and all these things I didn't really think about as a founder. And so I have been looking for a firm for years that I can use to either sell small businesses. And when I say small, I mean like kind of one to $5 million of EBITDA, or help founders do secondaries or all these sorts of things, or even just finance M and A. And I'm yet to find someone. Everyone seems to specialize in larger businesses or they're too small.

• 38:57Andrew Wilkinson?

  And so last year, Chris and I met this young investment banker and he was just a normal person. Like, we had him out for lunch and he was not wearing a suit. And he was saying how miserable he was and how much he hated, you know, his, his old job doing it. And we, we kept saying like, look, like you should quit your job and come work with us. And we'll start a modern investment bank for founders, really focused on bootstrap founders, because they don't know how to access capital. And so we were starting this business called Tenzing. We started like a month ago.

• 39:30Sam Parr?

  What's Tenzing?

• 39:31Andrew Wilkinson?

  And the idea is Tenzing Norgay is the most famous Sherpa of all time. So he helped Edmund Hillary climb Mount Everest. And so basically, the idea is you can go to him and say, look, what are all my options, right? I, you know, can I get credit from the bank? Can I raise debt to do M and A? Can I do a secondary? Can I sell my business? And they can basically walk you through all of that stuff in a way that's aligned and not fee driven and more long-term focused. So we're basically starting our own little investment bank.

• 40:04Sam Parr?

  Is that gonna work? Dude, because if you are, if you're, if you're a startup and you're in the, if you use the word bank right now, I hate you.

• 40:12Andrew Wilkinson?

  No, it's not. I mean, it's not. They're not taking your money. I, I mean, I could just call it business. We're starting a business realtor firm, but the term is investment bank. There's no banking. We're not holding anyone's money. There's no tokens. I'm not going to Argentina.

• 40:28Sam Parr?

  I mean, yeah.

• 40:29Shaan Puri?

  Seems pretty lucrative.

• 40:31Sam Parr?

  Yeah.

• 40:31Shaan Puri?

  You're like tens of billions, turns out.

• 40:33Sam Parr?

  Yeah. Do you like billions of dollars or not?

• 40:36Andrew Wilkinson?

  I think like, I don't know if you guys have experienced this, but like even here in Canada. So for like five years, I wasn't aware of this, but the government will actually pay 30% of your R and D when you're a small company. And I just didn't know about that. And so I literally lit a million dollars on fire. I could have gotten a million dollars of these tax credits and I didn't, right? I could have used a credit line to buy ads for my SaaS business, but I didn't know how to do that. I could have sold businesses that were working, but I didn't really want, that just kind of died. Like I let them die, right? So I think it's about like, how do you get, how do you get the most out of what you have? And giving people tools to do that.

• 41:20Andrew Wilkinson?

  And it's just, I wish this had existed when I was starting out.

• 41:24Shaan Puri?

  Yeah, I totally agree. You know, most investment bankers don't work with startups because they're too small or the deals are too small or whatever. So how are you going to get it to, how do you get, how are you going to get the numbers to work? Cause I don't think they're doing it because they discriminate. I think they're doing it because the money's not there for them. So how do you make that work?

• 41:42Andrew Wilkinson?

  Well, it's not small businesses, right? I mean, like we're really focused on bootstrap businesses because that's where we come from. And these are companies that are doing, you know, two, $3 million, maybe 500K of profit. Some of them are actually bigger. So we've talked to founders that are like, hey, I've got like a, you know, 10 million ARR business. I'm doing $3 million of profit. I was thinking I want to sell 30% of my business. And we kind of go, okay, well, we have the network. We've gone and, you know, raised all these funds and met all the people in finance. Let's connect the dots between these people and be the financial translators. I just linked you guys to the website. It's tenzing.co, but you can kind of see what we're doing.

• 42:25Sam Parr?

  What's been the biggest, oh dude, I thought you said you hated these graphics. You have the graphics of like the people with like the funny arms and funny fingers. If I remember correctly, you tweeted out, if you see another page like this, you're going to kill yourself or something like that.

• 42:38Andrew Wilkinson?

  No, no, no, it was the, um, the like weird Russian looking ones that Dropbox was using for a while. They were like so weird and depressing.

• 42:48Sam Parr?

  What? Oh, dude, I know you. I know these folks. I've met Rob before. Rob is in our world. That's funny. It's such a circle jerk world that we live in. Do you just like, you just collect people on Twitter is what you do?

• 43:00Andrew Wilkinson?

  Rob actually lives in Victoria, so I've known him for a long time. He runs Outway, the sock business.

• 43:06Sam Parr?

  That's right.

• 43:07Andrew Wilkinson?

  And they just launched a custom, they just launched a custom sock business. You guys should get some MFM socks made.

• 43:12Sam Parr?

  We did. Well, I've gotten them for this other thing. But what, uh, what's been the biggest business that you've sold so far? Was it the fitness thing or the meal plan thing?

• 43:21Andrew Wilkinson?

  Yeah. Yeah, we bought a business called Me Lime and we sold it to Albertsons.

• 43:27Sam Parr?

  Did you buy that? I thought you started it.

• 43:30Andrew Wilkinson?

  No, we bought it. So there was a guy up in Nanaimo, he's a developer and he started this business with two co-founders and his two co-founders after the first year didn't want to be in the business anymore. And so we, they own 70%. We came in, we bought them out and Mitch, the founder was basically like, look, guys, like, I'm already growing this business. I know exactly what I want to do. Just leave me alone. Like, we tried to write the Warren Buffett letter and say like, oh, you should do this on growth or whatever. And he basically just said, leave me alone. And so we said, okay, fine. We'll leave you completely alone. And a couple of years later, Albertsons came and they bought it for tens of millions of dollars and it was a great deal for everyone. And yeah, it worked out really well.

• 44:15Sam Parr?

  Do you think that in the future, you're going to sell anything? Or are you just going to keep on buying and keep on holding? I mean, do you, because you don't want to sell, do you?

• 44:24Andrew Wilkinson?

  No, I don't like selling. And I think that it's really hard to predict what's going to end up being large and how large it can be. And then also, if you think about it, like, if you have a business and it's dying, it's hard to predict how quickly it will die and how much profit will come out of it. And usually when a business is dying, you can't sell it for much, right? Let's say the business is on a major down slope, you might get like one times profit. And so you're basically making a bet that it's going to die before a year, which very few businesses die that quickly. And so you Usually it's better off just to hold forever, I've found. You know, you will see like Warren Buffett sold off his newspapers. I think that was partly because the writing was on the wall, but also because it's like

• 45:09Andrew Wilkinson?

  unions and a lot of complexity and they wanted to get out of that. But no, I mean, I don't ever want to sell businesses.

• 45:16Sam Parr?

  As someone

• 45:16Andrew Wilkinson?

  And the only reason we sold me Lime was because Mitch wanted to sell the business. He came to us and said, I want this exit and we weren't going to hold him back because he was the founder.

• 45:25Sam Parr?

  We, um, we just did this thing on the FTX saga and I know that you like have historically been, I don't know if you call yourself anti crypto, but you're definitely not pro crypto and you're for sure not pro NFTs and all that other bullshit of which I agree with you. What, what's been your take so far in watching all this drama?

• 45:44Andrew Wilkinson?

  I think it's really, really bad for crypto. I think that, you know, Sam Bankman Fried is somebody who I certainly had thought, oh, maybe this is one of the good guys. And I'd seen him do the podcast circuit and he seemed like a smart guy. And I think that when the number two, you know, if you think about these like banks, it's like, that's the equivalent of like JP Morgan going out of business just suddenly and everyone losing their money. So I think it probably has a lasting negative effect on crypto and trust. And it's been fascinating watching the price of crypto not react the way you would think where, you know, inflation you'd think would drive the price of Bitcoin up. It doesn't appear to have done that.

• 46:29Andrew Wilkinson?

  To be honest, I'm not, I was saying this to a friend of mine, I think I've probably said it on the show before, but if you came to me and you said, hey, I think British pound sterling, I'm super bullish on them because XYZ macro event was happening, I would just say, why are you currency trading? You're a tech entrepreneur and I think that Bitcoin is currency trading, right? Like just buy great businesses, do the thing you know. And I think everyone is just speculating on this stuff and there's a ton of fascinating arguments for it and I follow it, but I have just fully steered clear and I'm sure that we'll invest in a crypto business at some point, but for now I'm just waiting for it to play out more.

• 47:13Andrew Wilkinson?

  One important reminder is if you, if you missed Amazon, you had until 2010 to invest in it. There's a lot of time to wait and sit and watch to find these great businesses.

• 47:27Shaan Puri?

  Two things. One, that thing you just said reminds me of something Kevin Van Trump told us once. He goes, we go, what, you know, you've been trading for 20 plus years, you know, what are the biggest lessons or something like that? And I asked him some, some stupid question like that. And he goes, well, you know, there's no lesson, blah, blah, blah. Then he goes, one thing, there's always a second chance on the train. He goes, even when it's a winner, even when it's a good thing, you'll always get a second chance on the train. And, you know, so that sort of takes away a lot of the FOMO when you realize that, that, you know, there, you do get these second opportunities, you know, it happened with Amazon, it happened with Facebook,

• 48:07Shaan Puri?

  it happened with many, many businesses where even if you weren't early and correct, these things go up and down. Now, the hard part is, it's when they go down that you have the least conviction. So, could be that, that right now is the right time, you know, now might be the second time to get on that train because prices are down. But now is when people are the most scared and the most hesitant to act on. If you were hesitant before, you're probably triple hesitant now. And so I think that's the hard part for to get to try to get back on the train when, when there is a dip. The second thing is, we talked about red flags and fraud, I think on the last time you were on here, we talked about people who were lying, or our partners who had screwed you. With the FTX thing, did you hear of anything, or was there anything red flaggy

• 48:52Shaan Puri?

  that you had heard either along the way, or once it started to come out that you're like, oh, that sounds pretty bad, actually, that's, that was a bit of a tell now, either in hindsight?

• 49:01Andrew Wilkinson?

  No, I mean, I like you guys, I, I, I just haven't fall, I guess I hadn't followed it super closely, and I hadn't really spent a lot of time on that particular business. I was quite shocked that he was known for risk management, and he had been talking, you know, was very assertive about talking about the security of the balance sheet. And it seems like there's a lot of loans going on between related party businesses where he's bailing out his own business and stuff. So, very sketchy. What I find Fascinating is, is this a bad actor, right? Is he a psychopath who's building a Ponzi scheme?

• 49:43Andrew Wilkinson?

  Or is he just somebody who got in over his head and used too much leverage and messed up? And I don't really have an assessment of that yet. And to be honest, I'm not following it super closely. I'm kind of waiting to read the book. I find like waiting for this stuff to all blow up and wait four months for like, you know, The Atlantic or New Yorker or someone to write like an amazing piece on it is always more interesting than following the day to day.

• 50:06Sam Parr?

  My favorite Twitter feed, Autism Capital, who's been covering this whole story, has said that Michael Lewis, the guy who wrote The Big Short, has been like embedded with him for the past six months writing a book and that he's still involved. And so I have a feeling we're gonna, we're gonna.

• 50:21Shaan Puri?

  It was meant to be positive. It was meant to be like The Blind Side. It was meant to be this like, you know, this like rag, you know, sort of like this was, you know.

• 50:30Sam Parr?

  Like The Blind Side?

• 50:31Shaan Puri?

  Style story. What's that?

• 50:33Sam Parr?

  You said it's supposed to be like The Blind Side?

• 50:34Shaan Puri?

  Yeah, like a positive story, right? Big Short was basically like, here's, you know, this thing that was, you know, destined to fail. I think he was following him, not thinking FTX is destined to fail, but thinking, you know, these are the challengers, you know, and look at, look at the crazy craziness that's going on. But like not, I don't think he was following him and I don't think SBF let him in because Michael Lewis was thinking it's just a matter of time until this blows up and this will be the big fraud and the big scandal, like just like The Big Short Part Two. You know, so, so I think that that's the interesting part. It's like, well, here's your, here's your surprise twist ending that you got here. I will say, there's this one guy, Jason Choi, that wrote a Twitter thread that is the best. Andrew, if you want to read the equivalent of the book or the, the New Yorker piece, like,

• 51:15Shaan Puri?

  I wouldn't wait for them because A, the New York Times put out a piece on, on SBF that was supposed to be the, you know, the sort of like the recap. And it was like incredibly soft on him. It was sort of just made him out to seem like a good guy. And, you know, some, oh, some bad things happen to happen. And this guy, Jason Choi, wrote out this Twitter thread that's very clear and it has all of the evidence in a timeline that we know so far. And it is, it's pretty compelling. You should check that one out.

• 51:44Sam Parr?

  Have you guys, have you guys ever come, have you guys ever had contact with someone who's now famous fraud? I've, I've never, I've like never met someone who like was a blatant liar about things that like kind of became well known.

• 52:00Shaan Puri?

  I've told the story about the guy worked with the King of Coal in Indonesia, who ended up in jail and passed away in jail.

• 52:07Sam Parr?

  But he wasn't a fraud, was he? He was just a criminal. I mean, he did, like, he, like, like, well, no, no, no, it's way different. It's like, uh, uh, someone you know, who's like, like, what do you do for a living? Well, I, I fucking rob people versus like Bernie Madoff, who's like, well, I, I run a bank.

• 52:26Shaan Puri?

  People, people who steal tend to lie. And, and, you know, so I think that, yeah, this guy was bribing people, but it wasn't just, let's say bribery, you know, there was obviously going to be other things in an organism, in an organization like that where you're, if your primary agenda is to make as much money as possible, as quickly as possible, and you have great success doing it, um, but you're not doing a ton of the value creation yourself, you know, there's, there's often a, um, you know, both, there's often both going on. And, you know, I, I was able to see a little bit of it. What I, what I saw mostly was just the sort of like the, the fact that, okay, I guess that's the way you do business in these countries. You kind of got to grease the, the, the guy in the middle and that's how you get the

• 53:10Shaan Puri?

  thing, uh, you know, the, the sort of bribery corruption is very common in India and Indonesia and a bunch of different places. And so that part was known, I was an open secret. But I'm, you know, it's not like if you had, if you asked me at that point in time, is there anything else going on? I wouldn't have been able to tell you anything specific, but I would have bet a lot of money that there was something else going on. And it's part of the reason why I wanted to, to leave eventually.

• 53:31Andrew Wilkinson?

  So, so I am, most of the frauds that I've met have always been small time. So it'll be like, I meet someone and I ask around about them and someone's like, hey, like, you know, they've gone through the city and got like $10,000 from all these investors and like defrauded them, but it's small time enough that they get away with it. Charlie Munger calls them the rats in the granary. You can't really do anything about them because they're too small. They're always going to be there. And if you, uh, you know, you hammer them once, they're just going to come back in some other form. I met a guy, um, this is a bigger one, so.

• 54:09Andrew Wilkinson?

  In the Canadian stock market, there's tons of fraud and there's very little enforcement. And often what you'll see is something will get hot. So like, you know, oh, vertical farming is hot. So they'll find some, you know, guy with like five employees who has a vertical farming business. And some investment banker in the public market will say, hey, let's dress this up as the next great thing. And then what they do is they dump it to retail investors. So they go to mom and pop. And the investment banker calls them and says, hey, I've got this amazing deal. We're going to IPO it. It's going to pop, whatever. And they hand the candy out. And often what ends up happening is, you know, as the trend goes, so, you know, is marijuana stocks or fake meat

• 54:52Andrew Wilkinson?

  or cubic farming or whatever it is, it pops and then it drops. And what happens is the investment bankers often make a killing because they get paid in warrants. And they get paid a percentage of the money they raise. So if they raise a hundred million dollars, they might get paid five million dollars plus warrants. And if it pops, maybe those warrants end up being worth 10 million dollars. And this is all legal. This is totally legal. And so it's basically legal stealing, right? So they go out, they raise all the money from a bunch of, you know, grandmas and doctors and normal people. Stock pops, they sell, and then it goes to zero. And all the employees get laid off and the company goes bankrupt, or it's kind of a shell of its former self.

• 55:36Andrew Wilkinson?

  And I met a guy at a party, you know, last, last summer. And he was bragging to me about this IPO that he had done and how much money he made. And I started digging into it and it was literally a, the equivalent of taking a corner store public. This was like a two-location business and he dressed it up to match a trend.

• 55:59Sam Parr?

  How much did they make from it?

• 56:00Andrew Wilkinson?

  Probably made, I don't know, I could probably do the math, but it's, I would argue probably five to, five to 20 million dollars doing this. And, you know, he's bragging about it and the stock is down, I think to like 10 cents or something, right? It just, it turned into nothing. And so it's crazy because it's literally legal. It's legal stealing, right? Like everything he did is technically legal. They do all the right documents. When they take it public, they disclose all the details. They just write it in the right way.

• 56:31Sam Parr?

  And it doesn't hurt his reputation because he's behind the scenes and like, you know, no one knows.

• 56:36Andrew Wilkinson?

  And lots of people flipped the stock too, right? So many of his early investors probably just sold when it peaked out to, oh, you know, what are called bag holders in the industry. And then those people lost all their money. And so it's, they hurt, let's say 10,000 people in a very small way. And so it's just not the sort of thing that gets a lot of attention from regulators. So I find that kind of gross and crazy. And there's a ton of that up here in Canada.

• 57:03Shaan Puri?

  So I tweeted this out. Let's see, when was this? This was basically last year, February 2021. And I said, esport investments are a joke. There's so much dumb money in the space. Look at this billion dollar publicly traded company in Canada. And esports is another one of those like kind of hot industries that you're talking about. And the ticker is EGLX. So I showed this graph and I was basically like, look at this thing. It's trading at $8.59. So I said, it's basically, it's a hold co of random assets. It's got like a website for the sims. They own a minority stake in the Overwatch team of Vancouver. It's not necessarily a bad company, but it's definitely not a billion dollar company. And so it's like, here's some of the things that they bought.

• 57:46Shaan Puri?

  They bought Luminosity, the team, the esports team. They bought it for 1.5 million in cash, 7 million in stock.

• 57:53Sam Parr?

  What's the company called again? I want to look it up.

• 57:55Shaan Puri?

  I'll tell you in a second because the prediction came true. Here's the spoiler. So EGLX is the ticker. So it was $8.59 when I wrote this. It is now trading at what? 83 cents.

• 58:07Sam Parr?

  Point 84. Oh my gosh.

• 58:10Shaan Puri?

  So yeah.

• 58:10Sam Parr?

  What's the market cap?

• 58:12Shaan Puri?

  So it's down 90% since I wrote this thing.

• 58:14Sam Parr?

  126 million. How does it even have 126 million dollars?

• 58:18Shaan Puri?

  It's not worth 100, spoiler, it's going to go down another 90% from here is my guess. Not to pick on these guys, but just like, there's a lot of this happening. I met other people, you know, who are doing the same thing. And it seems to happen on these small exchanges in Canada and stuff like that. So they bought Luminosity for a million, a million and a half in cash, seven and a half million in stock. They bought some agencies for 13 million in stats, cash, some more stock. And they started trading on the TSX and then they were up 4X in a year. And it's basically an ad agency. And then they own, you know, a couple niche websites. And like, you know, if you add in all of the things that they bought, you know, they did 30 million in revenue with 50 million expenses. You know, they lost $20 million this year and they call themselves a, you know, billion dollar company.

• 59:03Shaan Puri?

  And so, you know, like I said, people want to invest in a rocket ship and this is a sparkler. They have eight million of cash left in the bank. It looks like they're going to need to raise more money if they want to keep this going. And so, you know, I didn't even remember that till you just said, the thing you said, I was like, I think I saw some bullshit esport thing in Canada and sure enough, this was it.

• 59:22Andrew Wilkinson?

  Yeah, there's endless numbers of these. I mean, it happens in the States too. You guys saw Nikola. Where, you know, even the name, you're like, okay, Tesla, Nikola Tesla, like you're just trying to grab on to this trend and they, you know, basically faked that they had this, what is it? I forget, hydrogen powered electric semi truck. And it turned out they were just rolling it down the hill and turning the camera. So it looked like it was driving on a flat surface. Complete fraud, complete fraud, like

• 59:51Sam Parr?

  Is that really what they did for that commercial?

• 59:53Andrew Wilkinson?

  Yes, I'll, I'll link you guys to, um, so there's this amazing guy named Nate Anderson. He has a short selling hedge fund called Hindenburg Research and he writes these amazing research reports where he takes down these companies. And it's just facts, right? It's like, all he does is just basic diligence and he'll find like, oh, like it turns out Trevor Milton, the guy who is the CEO of Nikola was accused of all these crimes. And if you just do basic research on this guy, obviously this guy's a fraud. And he'll write these amazing research reports. Um, here, I'll send you guys one.

• 1:00:29Sam Parr?

  No, this guy, his, his stuff was good. He's, he, uh, I mean, he's a short seller. So obviously he's going to be a hater, but his stuff is usually well researched and fun to read.

• 1:00:38Andrew Wilkinson?

  Yeah, I mean, I think there's, there's crappy short sellers who are gonna, you know, make stuff up or, you know, hint at stuff. And then there's short sellers that are basically journalists that just share what's going on.

• 1:00:50Sam Parr?

  Do you guys, do you guys remember Bird? Sean, you remember Bird in San Francisco?

• 1:00:53Shaan Puri?

  Yeah, of course. Scooter Company.

• 1:00:55Sam Parr?

  Okay, so Scooter Company that I don't remember how much they raised, but I believe it was a $2.5 billion valuation. And I bet they've raised north of 400, 500.

• 1:01:05Shaan Puri?

  I think they've raised over a billion dollars. Let me see.

• 1:01:07Sam Parr?

  They raised over a billion dollars?

• 1:01:09Shaan Puri?

  Yeah, they've raised more than it's currently worth. And I think it's currently

• 1:01:13Sam Parr?

  So listen to this. Listen to this. Google what it's worth right now. So they took it public at a $3 billion valuation, I think. It's currently trading right now at $70 million.

• 1:01:25Shaan Puri?

  Seventy. Okay, they raised 883 million.

• 1:01:28Sam Parr?

  Is that crazy? This company is, is, is the market cap is 73, I think, million bucks.

• 1:01:34Andrew Wilkinson?

  Which company?

• 1:01:35Sam Parr?

  Bird, Bird Scooters. Do you guys?

• 1:01:36Shaan Puri?

  They have to have at least 70 million of scooters.

• 1:01:40Andrew Wilkinson?

  Well, and how much secondary, how much secondary did the founders take out too? Which I don't know. I can't blame them, to be honest.

• 1:01:46Sam Parr?

  I don't blame them.

• 1:01:46Andrew Wilkinson?

  It was so hot, but still.

• 1:01:48Sam Parr?

  But I, but I don't know how much he took, but I always like stick with like the best way to figure out, uh, you know, how wealthy someone is, is by looking at how expensive their home is, because it's kind of hard to like, get a fake mortgage that way. Uh, and Travis, the guy who founded it, if you Google his name and like house, you'll see like, you know, uh, tech entrepreneur selling $10 million home in Santa Monica, or tech entrepreneur buying $20 million home in Miami. So he's, he bought, he's, I think he's bought two houses that are worth tens of millions of dollars. So he's definitely.

• 1:02:20Andrew Wilkinson?

  There's something, I've got a really quick thing if we have time.

• 1:02:23Sam Parr?

  Yeah.

• 1:02:24Andrew Wilkinson?

  So, um, do you guys remember I did this thing called a non-binary term sheet a couple of years ago?

• 1:02:30Sam Parr?

  Yeah.

• 1:02:31Andrew Wilkinson?

  So

• 1:02:31Sam Parr?

  You're on that non-binary train before everyone else was, dude.

• 1:02:34Andrew Wilkinson?

  Exactly, exactly. So, so I've always found, I've always found venture really tricky, right? Because someone will come to you and they'll say, um, you know, I'm going to revolutionize XYZ industry and I'm going to create a billion dollar business. And I always say, okay, well, if you don't create the billion dollar business, then I lose all my money, right? And to me, that A, it sucks for the founder because if they, um, you know, get a bunch of money at a valuation that's too high, they can never make their investors happy. And it sucks for the investor because it's binary. Either they lose all their money or, uh, or it goes. And so when I was raising money for Supercast a couple of years ago,

• 1:03:15Andrew Wilkinson?

  I wanted to get what the market rate was for valuation, but I also wanted it to be fair because for me, I didn't want to feel like shit if the business didn't pan out. I knew that if the business didn't pan out to be a huge business, it could actually be a good smaller business. And so, uh, we raised at a $10 million valuation, which at the time was kind of a good, um, you know, angel, angel round valuation, but it was structured so that within two years, if the business doesn't do a million dollars of revenue, that turns into a $5 million valuation. And so it ended up, we, we did, uh, close to a million dollars, but we didn't hit it. And so I crammed myself down by 50% to make

• 1:03:59Andrew Wilkinson?

  it fair. Now, I know a lot of founders wouldn't want to do this because why would you do this, um, you know, other than to be a boy scout and, you know, have a sense of fairness if no one else is doing it and if VCs expect this. But I think it's a really interesting structure and we've been offering it to more and more founders as the environment changes, where we say, look, we'll invest, but it has to be structured so that if you don't deliver on what you say you're going to do, we can still get our money back. What do you guys think about that?

• 1:04:30Shaan Puri?

  I don't love it for two reasons. One is what you just said, which is like, why would a founder do it? Uh, like if I think about it from the founder's perspective, if I don't have to do that, I'm not gonna, I'm not gonna do that, right?

• 1:04:43Shaan Puri?

  Like traditional venture would just be a better deal for me as a founder in that case. And the other thing is I think it creates weird incentives like I like the concept behind it. Like I like the spirit of it, but then I'm like, okay, who's going to set these benchmarks? And then what happens when the thousand different things can happen in business? And like you, you said it yourself, like we got close, but we didn't get there. And then there's like this crazy urge to like, do something to nudge it over the top. And now you're doing something that may not be long-term, you know, right for the business. And so you create some weird dynamics. I wouldn't say it's worse dynamics than it currently exist. It's just more like, if I'm the founder, I would rather, and I also think I'd rather take the venture path where I'm getting a higher valuation and selling less of my business.

• 1:05:28Shaan Puri?

  I would also say there is a sort of like, we're going for it or we're not like you would. If you're running a, like my e-commerce business, we run to maximize EBITDA. Like, yes, we want to grow it, but it's like, this thing needs to make profits every year. Whereas when we did venture things, it was like, we don't think about that. We think about, you know, how are we going to grow users, let alone revenue? Let, forget about profits altogether. And so there is like, sort of like a, there is a benefit in knowing which path, which blueprint of business you're trying to build. And then being able to go all in on a strategy that's aligned with that versus a strategy where you're hedging. You're like, maybe we should try to have profits, but also try to get big.

• 1:06:08Sam Parr?

  Sorry, go ahead. But Andrew, the, my whole, like I see all these, I think there's this, like, I've seen this, like, this thing called a, like hustle fund and all a few other funds. And they're like, we're trying to do things differently. And my opinion on that is why? Like the game isn't broken. The game works as it should. The, the, the thing that's broken is people who are joining and playing the game, and they maybe shouldn't be playing the game, but it works perfectly fine. Like we are getting our desired outcome.

• 1:06:35Shaan Puri?

  Sam of where that's not true necessarily. There are certain businesses that are good businesses, but they're not good venture businesses. And then they have, they have a lack of access to capital. So I forgot the guy's name. I feel bad now. He's kind of like, it's kind of like an indie VC thing they're doing. They created

• 1:06:49Sam Parr?

  Tyler.

• 1:06:50Shaan Puri?

  Is it Tyler? That was it called the seal agreement or the something like that? They have like some new type of doc that's like the nine not non-binary term sheet.

• 1:06:58Sam Parr?

  But that's not, but that's not VC, right? I mean, you would consider that's almost like PE. That's a different category.

• 1:07:04Shaan Puri?

  Yeah, but I guess what I'm saying is it's a funding, it's a funding option. It's an alternative funding option for a technology business, right?

• 1:07:11Sam Parr?

  Right. That's what I'm saying. It's alternative to VC. What I'm saying is venture capital as we know it, I think it works perfectly fine. Like it's the, the way it's supposed to work is some get it, most don't, and the some that do get it, most fail and very few become huge life-changing things.

• 1:07:30Andrew Wilkinson?

  And don't, but don't you think like, okay, so Sean, let's say that you got really bullish about your e-commerce concept and you'd raised $10 million. Like, let's say like in the age of Casper, when e-commerce is super hot and D to C is crazy and the valuations are high and you go out and you raise $10 million and now you're stuck where you're going, you know, what I really want is to pivot this into a lifestyle business because that's what's logical for what you want. And imagine if there's a structure where you didn't have to feel, feel like a piece of shit because you can never get your investors money back. Right? And what I've seen is the incentive creates this situation where the founder is sitting on a business that could make them happy and give them a great lifestyle, but they have a gun to their head. And so they continue down

• 1:08:15Andrew Wilkinson?

  the venture path, even when it's actually futile and won't work and they drive the business into the ground. So it's worse for the employees. It's worse for the founders. It's worse for the investors as well because the investors just go to zero instead of at least making a reasonable return. So, and it is kind of like private equity, but you got to remember private equity doesn't take risk on what could be, right? Private equity invests in what is they, they will say your business does $10 million EBITDA. I'm going to assume it's going to be 11, 12, 13, 14, not venture, which is your business does 200K revenue. You're assuming you're going to get to two and then 20 over the next three years. Right? So it's a different form of capital in my opinion.

• 1:08:56Shaan Puri?

  But isn't the problem like, let's say I take that 10 million and I take it where I sell, let's just say 10% of the company in that round. And what you're saying is that in the event that things don't grow as fast, two years now from now, that 10% becomes 30% for the same 10 million, or it becomes whatever, just numbers like that.

• 1:09:14Andrew Wilkinson?

  Totally.

• 1:09:15Shaan Puri?

  So, but isn't the problem that they probably burned the 10 million along the way trying to get the thing to grow? Hiring people, marketing, whatever else they're gonna do. And now they still need money. Now they have all these people. So you're gonna have basically like a combination of things. It's like, we're gonna have to lay off a bunch of people probably as we shift strategies to more of the lifestyle type of business to be more profitable. We're gonna ratchet up those investors who go from 10% to 30%. The 10 million is gone, so I still need money to run the thing. Most likely, I need to maybe raise additional capital, so I'm gonna raise more money, but on those lower terms dilute everybody. It just becomes kind of like, it's like, it's a sad rainy day now, or am I thinking about it only in the bad scenario?

• 1:09:55Andrew Wilkinson?

  I think I just fundamentally have a problem with founders who raise money at a very, very high valuation with the knowledge, especially from people who are not VCs. Right? So you know, you've seen a lot of this. There's lots of people in our world who have raised very, like, on businesses that, you know, we've looked at and would value at like, maybe five or $10 million. And they've gone on crowdfunding platforms or something. Can you give an example of one? Tons of money. No, I won't say any names. No, but there's lots of people and there's, I'm not singling anyone out. Literally, there's like 10 or 20 examples I can think of. And frankly, it's like, it's opportunistic. I get it. You know, you want to raise on great terms.

• 1:10:38Andrew Wilkinson?

  But I have a fundamental problem with taking money from someone when I know I can't give them a return, or there's like a 5% chance. And positioning it as, you know, you're investing in this super solid, awesome thing that's gonna be huge, or is cash flowing or whatever. And you're basically just taking someone from, it's like going to someone in real estate and selling them on your tech startup that we would all know as a bag of garbage, but because they're in real estate, they go, oh, this looks great.

• 1:11:05Shaan Puri?

  Yeah, I actually, I agree with you 100% and I really, really dislike that. I tweeted something out that I want to get you guys' reaction to. So I tweeted something that kind of, I don't know, ruffled some feathers, I guess. So I go, I got one lesson. Let me pull it up exactly.

• 1:11:23Sam Parr?

  Yeah, I like this one.

• 1:11:23Shaan Puri?

  I don't say it wrong, but.

• 1:11:26Sam Parr?

  I don't understand how this ruffled feathers, but go ahead.

• 1:11:29Shaan Puri?

  I go this year I learned there is no quote, smart money. Andreessen, Sequoia, Chamath, Tiger, Tribe, Co2, SoftBank, Paradigm, Alameda, FTX. They all made terrible financial decisions at huge size and yet most will get richer. They play a rigged game. Chamath made money off of a bunch of his shitty specs because he's the promoter. And these funds manage billions of dollars and they'll make hundreds of millions in fees along the way. As a reward, even if they lose their investors' money.

• 1:11:59Shaan Puri?

  They don't invest. They didn't. These aren't just companies that they invest in that start to underperform. These are huge bets on fundamentally flawed assets. It's crazy. But the lesson for me, remember to think for myself. Don't use the justification that the big name is investing as any sort of signal. And remember that the smart money is just as dumb as me. So I tweeted this out and I did it really fast. I probably should have worded it differently, but a bunch of people from these firms didn't really like what I was saying. I think.

• 1:12:25Sam Parr?

  Did they DM you or comment?

• 1:12:27Shaan Puri?

  DM. Come on, the courage to comment and get into a tiff about this? No way. There's no way they're gonna, they're gonna take that chance.

• 1:12:36Shaan Puri?

  You know what? And I think the, I think part of it is I worded it poorly. I think they thought I was saying. These people who are supposed to be smart are dumb and evil. And I think it's because like I said, like, you know, they play a rigged game. I stole that from Chris Saka, who was a VC. He goes, venture capital is a rigged game. You make money on the fees regardless of whether you get returns or not. And then you get the carry on the returns too, down the road, seven to 10 years later. Before, you know, before anyone figures out if you're any good at this or not.

• 1:13:03Shaan Puri?

  But, you know, I think they, people thought I was calling them dumb and evil. And actually, no, I think they're very smart. My point was actually that even the very smart people are doing some really dumb things. Because it's a really hard game and. And I gotta remember to like, you know, not use their conviction in something to override my own. Either cluelessness or lack of conviction in something and be like, yeah, this is a good. This is, I guess it's a good idea. These guys are doing it. I guess I should put money in. These guys are doing like the FOMO investing style. You know, I got burned on it.

• 1:13:36Andrew Wilkinson?

  I think this is one of the dirtiest things in our industry. So if you're in private equity or you run a hedge fund, you know if you're an idiot or a genius in months or years, right? When you're playing venture, you can take 10 to 15 years to see what a fund really does. And yeah, there's markups and all this other stuff, but at the end of the day, to see realized gains takes a very, very long time. And so what you'll see is someone raises 100 million, and then 500 million, and then a billion. And on a billion, they're getting a 2% management fee. So they're getting $20 million a year. And let's think about what are the costs to run a venture capital firm? You've got someone as a custodian managing your fund. You could,

• 1:14:18Andrew Wilkinson?

  if you wanted, probably have three or four employees. I know Benchmark manages 3 billion plus with like 12 or 15 people. So these are not expensive businesses to operate. And I think that they make money guaranteed every year. And by the time that investors realize that over a 10-year period, they've underperformed, they've already made hundreds of millions of dollars. It's just absurd for taking very limited risk themselves, and they win no matter what. And so I think this is something that will go away in the long term. And I'm frankly shocked that when you raise a venture fund, you don't have to say, this is my budget. I'm going to hire three associates, and my salary is this. That's all I'm charging you in fees. Instead,

• 1:15:03Andrew Wilkinson?

  they get this thing where it's like, you get $20 million of fees, and if you spend $2 million a year on the office, you make $18 million a year. It's total hustle. And this is why, like, our rolling fund and our private fund, we don't do any management fees whatsoever, because I'm allergic to this. I find it really gross. Yeah, that is crazy to me.

• 1:15:22Shaan Puri?

  The first two years of my fund, I took zero management fees. And then as I hired people, then I added the fund. But also, my fund is so small, that 2% management fee of my fund is 200,000 a year. It's less than what I'm paying people to doing it. I am taking a loss on the salaries with that management fee. But 2% of a billion dollars every single year is $200 million over the life of that fund that you got as risk-free reward, which is insane. And so, and then, you know, the other point I was trying to make was that, like, There are times when you bet on something that's a business that's doing really well, a really healthy business that, hey, you know, it didn't achieve the, maybe it didn't get as

• 1:16:03Shaan Puri?

  far as we thought it would. So it was a 2X instead of a 20X, or something in the market dynamics changed, a competitor or regulation, or the economy slowed down, and then they slowed down and they, they didn't end up, you know, achieving the dream that they had versus like the, the investors invest in FTX. If you're putting like, like Paradigm, Paradigm is the number one, like, you know, crypto VC, crypto focused VC, and they put $290 million into FTX, right? $300 million bet. And they came out the other day, they go, we are writing our investment down to zero. We want to assure you that this was a small portion of our overall funds, and we had no idea what was going on. Like, we didn't know about this. You think about it,

• 1:16:46Shaan Puri?

  you're like, first of all, the fact that a $300 million bet is a small portion of your overall thing, like, that's true. I'm not saying that that's not true, because you have a $3 billion or whatever fund. But man, when people, when, when an outsider reads that FTX, that Paradigm puts $300 million to FTX, they assume a couple of things. FTX is probably a good business, and that Paradigm, the smartest guys in the room are probably doing diligence to say, hey, is this guy literally funneling customer money into his, like, his own trading hedge fund? And like, going and gambling with that money or not, right? Like, you would hope that somebody's doing the diligence. And so, you know, I think that that's, that's, and not to pick on Paradigm, I still think these guys are really smart. It just sort of shows in general that the amount

• 1:17:28Shaan Puri?

  of diligence you would assume happens on large bet sizes like that is actually, you know, nowhere near what it, what it could or probably should be. And secondly, like, you have people like, like Chamath, when he was doing his SPAC for Metro Mile, right? Like, you know, we've named basically a couple of businesses that, All In Pod, I think these guys are super awesome. I love the podcast. They're super smart and successful. That's, there's no, no doubt about that. But you talked about Bird, you know, David Sacks was the lead investor, I think, at Bird for like, multiple rounds, if I'm not mistaken. And, you know, Bird now is a $70 million company, but you know, these guys cashed out at the IPO probably, you know, over a billion dollars and, you know. You know, there you go. You're done. These guys were months ago laughing about Solana and how

• 1:18:11Shaan Puri?

  they, you know, just received all the Solana at the super low price. They can't wait to dump it. And, um, and you know, now they're, you know, finger pointing at other people in crypto for doing the same, for doing the same thing, but not acknowledging it. Or, you know, Chamath took Friedberg's company, Metromile Public, through SPAC and said Buffett had GEICO, I have Metromile, a better business in all these ways. And like, I don't know, less than a year later, Metromile sells for a third of what it went public for, um, you know, it's to lemonade. And so you know, you see this stuff, you think, are these people lying? No, I don't think that they're lying. It's just that investing in business is a really, really hard game. And even the smartest people in the room are making really dumb things, really making really dumb decisions or dumb bets.

• 1:18:56Shaan Puri?

  And in some cases, they have unfair advantages that you don't have. So it was a reminder to myself and to many other people out there who don't have those unfair advantages, that you cannot take their backing or their involvement in a project as a signal that this is a winner or a good thing. That's my rant.

• 1:19:13Andrew Wilkinson?

  When you just think about how much more powerful it would be if Chamath, like, I would have a lot of respect if he had said, look, you know, we took Metromile public. I thought it was my GEICO. I put $200 million, 20% of my net worth into this business and I lost it alongside of you. Or I invested my warrants into equity and I locked it up and I held it for three years or something like that. But no, there's nothing like that. There's no alignment. And I think so often this comes down to alignment of incentives. Um, you know, they're incentivized to do the bad thing.

• 1:19:47Sam Parr?

  What was the general sentiment of the DM, Sean?

• 1:19:50Shaan Puri?

  Uh, I got a bunch.

• 1:19:51Sam Parr?

  You or like, you're right.

• 1:19:52Shaan Puri?

  Like semantics will stuff first. Like, we, wait, we weren't an FTX. Dude, I'm not talking about FTX. I'm talking about these other three shitty bets. If you need me to name the names, I'll, I'll do it. That, you know, this thing you invested that made zero sense, you know, blah, blah. So it's like, some was, we didn't make this mistake. And then the other one is, look, this is just the nature of the game. It's venture. You should know this, but you have a venture fund. Like, you know, you're going to have a bunch of zeros. And I said, I totally agree. You know, I invest in seed, you know, startup ideas that are, you know, summer routine, a pitch deck, a prototype, or, you know, early stage product. I know a lot of these aren't going to work out. It's very different than I put 50 or 100 or $300 million into a business that was fundamentally like, you know, fraudulent, or was like doing something that was, uh,

• 1:20:36Shaan Puri?

  You know, sort of self dealing. That's, that's very, very different than, um, you know, we bet on this technology and it turned out the costs weren't, and it cost didn't work out, or that traction wasn't, it didn't grow as fast as we had hoped, or whatever. There's, there's different ways to lose. In the same way, I always say in our business, like, there's errors of action and errors of inaction. If you're trying really hard and you make mistakes, totally acceptable. If your error is that you didn't think about it, or you didn't do anything, you forgot, you just dropped the ball on it, that's where I have trouble. And the same thing in investing. You can, you can misjudge a business and think it was going to grow faster, or, you know, um, it got sideswiped by something else versus, you know, you put something into, you put money into something that you should have diligence and you didn't.

• 1:21:21Andrew Wilkinson?

  To me, this is like, yeah, if A16Z on average delivers value, right? So as a portfolio, they've created all this innovation, they've invested all these great companies, and yes, there's going to be some colossal mess ups where they're going to lose a ton of money. I think that's great. What makes me sad is when you take the holistic result of an entire firm and you go, wow, over a 10-year period, they made tons of money and all their investors lost a bunch of money, or all these businesses were, were zeros. That, I think, is the hard part. And again, this is a decades game, right? Chamath, we won't know if Chamath has actually built value for another 10 or 20 years. And frankly, like, his, it's all very, like,

• 1:22:05Andrew Wilkinson?

  secret, because I think a lot of his stuff is private. So we really have no clue how much money he has, how much money he made, um, what's been successful, what hasn't. There's a bit of a smokescreen there. Um, and I, you know, I've talked to Chamath before. I think he's like a super nice, charming, smart guy. And I, like you, I listen all in and I, I like those guys. And at the same time, I go, you know, wow, there's some, there's some games.

• 1:22:28Shaan Puri?

  Yeah. And again, I'm not saying that they do a bad job, or that they did anything bad. I'm just saying, the reminder to myself was, just because this really smart person who you respect and is generally successful and has made money and probably will continue to make money, is in something. Like you can't outsource your conviction. Like you can outsource a lot of shit. You can't outsource your conviction. So that was really what I was trying to say. I think I got a little too heated up and made it sound like they were dumb or evil. But that really wasn't what I was trying to say. It was actually, they are smart, but even though they're smart, they're gonna make some colossal mistakes along the way. They will probably end up fine, but you gotta make sure that you know that. You go in eyes wide open, that smart person can do dumb things. And it sounds so simple, but it's like, a reality is, we all do this. We all take mental shortcuts.

• 1:23:13Shaan Puri?

  Oh, if these guys are in, we're in. If they say it's good, it probably is good, right? And you have to do that to some extent, or you can't function. I can't sit here and diligence every business on earth. But you have to be, you have to, at the end of the day, you have to, the reminder was to myself, make sure if I bet on anything, and I wasn't an investor in FTX, for example, but like, let's say I was, or an investor in crypto, or promoted Sam as a smart guy. Like, you have to try to, um, try to not lean on other big names as your source of conviction.

• 1:23:48Andrew Wilkinson?

  Totally. I remember I read Howard Marks' book. So he's like a famous billionaire investor, value investor, and specializes in distressed debt. And I read his book and I went, wow, this guy's amazing. What a great investor. And I realized there is ways to see what they were buying. So you can find out what all your favorite investors buy in the stock market. And so I went, well, I totally trust this guy. I read his book. It's incredible. I'm gonna buy into this weird Greek shipping company that he just bought, you know, $50 million of equity in. And so I put like 100 grand into it and it goes out of business. And what I didn't understand was two things. One, he has thousands of positions, right? Or hundreds at least.

• 1:24:32Andrew Wilkinson?

  And for him, it's just a tiny little roulette chip that he's put down. And two, he's a distressed debt investor. So he might buy the equity, but he's buying mostly focused on the debt and expecting it to go out of business. So I actually screwed myself by not understanding it and just blindly going along with it. And I've made that same mistake, you know, hundreds of times.