#131 Robert Friedland (Billionaire Miner)

What I learned from reading The Big Score: Robert Friedland and The Voisey’s Bay Hustle by Jacquie McNish. ---- [0:04] Promoting a stock is like making a movie. You've got to have stars, props, and a good script. [2:22] He had learned that there was nothing that Robert Friedland could not sell. [2:50] This book is about how Robert Friedland accidentally discovers the largest nickel deposit in history. He winds up selling that discovery for over $4 billion. [3:50] Robert Friedland and Steve Jobs were friends in college. Robert influenced Steve. [4:50] Friedland grinned as if he had just won an award. But the prize being handed down was a two year jail sentence for selling drugs. Police confiscated 24,000 tablets of LSD valued at $125,000. [7:01] He is a very complicated character. He was involved in a lot of shady stuff on the way to becoming a billionaire. I was struck by the contrast between how the book describes Friedland and how he comes off in this sales presentation: China Is About To Ban The Internal Combustion Engine. He comes off as extremely likable and knowledgeable. [9:42] At Reed College Friedland’s drug conviction no handicap. The prison term only added to his mystique. Steve talks about the mind expanding experience that taking acid was. He felt it allowed him to approach product creation from a broader perspective. He said Bill Gates would be more interesting if he had dropped acid. [10:28] Friedland starts a cult. Even when he is in his early 20s Friedland is able to influence the thoughts of the people around him. [11:21] Frieland turns his uncle’s farm into a collective. The farm drew a steady stream of students. Including an introverted freshman named Steve Jobs. Steve devoted himself to reviving the farm’s Apple orchard. The orchard would later inspire the name of Apple Computer. [12:17] Robert Freidland’s influence on Steve Jobs: Robert was very much an outgoing, charismatic guy. A real salesman. He'd walk into a room and you would instantly notice him. Steve was the absolute opposite. After he spent time with Robert, some of this rubbed off. [12:57] Steve Jobs: Robert was the first person I met who was firmly convinced that this phenomenon of enlightenment existed. [14:07] Friedland returns from India and reinvents himself again. He wore flowing robes and sandals. He embraced universal love and rejected material attachment. Friedland and his disciples practiced yoga, Buddhist meditation, they grew their own food. They had children with names like Silver Moon and Ashberry. Friedland said he was a guru and his name was now Sita Ram Dass. [15:29] Steve Jobs: Robert walks a very fine line between being a charismatic leader and a con man. It started to get very materialistic. Everybody got the idea that they were working very hard for Robert's farm. And one by one, they started to leave. I got pretty sick of it and I left. [18:12] By the late 1970s Friedland was creating another roll for himself. This time as a gold mining promoter on the Vancouver Stock Exchange. [19:37] When he introduced Friedland to some of his colleagues, they dismissed him as a Jesus look alike who preached about gold as if it were a second coming. The 31 year old clearly knew nothing about mining or the stock market, but he had an unusual intensity. [22:21] There is a lesson here. He thinks he is going to find diamonds in Canada and he winds up accidentally discovering the largest nickel deposit in history. The lesson is that sometimes trial and error is the best way to discover an opportunity you didn’t even know existed. [24:43] Friedland constantly recreated his companies to bring himself closer to what was becoming his god: Money. [26:46] Friedland is a really good salesman. He has some negotiating tactics that you and I can learn from. [28:34] He never let failure stand in the way of his next venture and he operated in an environment where money was the only way of keeping score. [29:26] Outside of work Friedland had few interests. Friedland had a consuming passion for mining deals. He spent most of his days traveling the world in search of prospects or working the phones from his office. There was no time for hobbies. [31:45] They almost missed the greatest opportunity of their lives because they were distracted. [34:02] He realizes that when you have an opportunity you need to go all in on it. Don’t dillydally. [36:26] Friedland is definitely default aggressive. [37:50] The stock crashed, vaporizing more than $250 million of shareholder money. [40:06] I’m not worried about the details. This project is worth gigadollars. You’ve got to start drilling right away. [41:19] He is aggressive and patient at the same time. He milks this discovery for everything its worth. [43:11] I would say 25% of this book is Friedland negotiating and playing all these different companies against each other. [49:34] This is something that appears in tons of books. You have to watch your costs. Go back to Henry Clay Frick when he said, “Gentlemen, watch your costs.” Andrew Carnegie, Johh D. Rockefeller --they built companies you could not compete with because they could make a profit at a price that you could not. It is a massive advantage. [51:49] Steve Jobs focused on simple deals. This is what he told Bill Gates when he came back to Apple: So let’s figure out how to settle this right away. All I need is a commitment that Microsoft will keep developing for the Mac and an investment by Microsoft in Apple so it has a stake in our success.” When I recounted to him what Jobs said, Gates agreed it was accurate. He had been negotiating with Amelio for six months, and the proposals kept getting longer and more complicated. “So Steve comes in and says, ‘Hey, that deal is too complicated. What I want is a simple deal. I want the commitment and I want an investment.’ And so we put that together in just four weeks.” [1:00:17] Things can improve a lot faster than you think: Under Friedman's direction, Diamond fields has grown in less than 16 months from a dubious diamond play into the world's most sought after mining company, with a market value of more than $4 billion. His stake had suddenly become worth nearly $600 million. Not bad for a year's work. ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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

• 0:00David Senra?

  With typical impatience, he had been searching for a shortcut. "Promoting a stock is like making a movie," Friedland said. "You've got to have stars, props, and a good script." Lately, good scripts had been hard to come by. Friedland's reputation as a daring penny stock promoter with a Midas touch was unraveling with the collapse of his high-flying gold mining company, Galactic Resources. Thirteen months earlier, Galactic had sought bankruptcy protection in the wake of pollution and regulatory problems at its Colorado gold mine. The U.S. Environmental Protection Agency was billing the Colorado mine as one of the country's worst environmental mining disasters, and the U.S. Justice Department had launched

• 0:44David Senra?

  a criminal investigation. Compounding matters, Friedland's backup script, a hot gold play in Venezuela, was on its last legs. Most major investors already shunned the 43-year-old mining promoter. And now, he was marooned in the middle of nowhere with a handful of his remaining adherents. "This is an historic occasion," he began. "They used to shoot people who entered the territory. Now you are part of a select group that has been allowed in. We are very proud of the company that has brought you here. In the years since Diamond Fields was founded, we have accomplished a great deal.

• 1:27David Senra?

  We now have two diamond mines and the marine concession you see before you." These are the building blocks for a great, major mining company. Friedland sprang to his feet and began to work the crowd, moving deftly from table to table. He quickly assumed an easy familiarity with his guests, then launched into a passionate and impressive-sounding discussion of the area's diamond potential.

• 1:54David Senra?

  By the time this stuff hits the water, 90%, do you hear me? Nine, zero, is going to be gem quality and over one carat. He gestured seaward. And the diamonds are there, just lying on the gravel, waiting for us to suck them up. Robert Friedland had won his visitors. Jean Boll, for one, wasn't surprised. In his short year and a half with The Charming American, he had learned that there was nothing Friedland could not sell. That was an excerpt from the book that I'm going to talk to you about today, which is The Big Score: Robert Friedland and the Voisey Bay Hustle. And it was written by Jackie McNish.

• 2:37David Senra?

  So this is another example of a book I didn't know existed. It was recommended to me by a listener. So let's not waste any time. Let's jump right into the book. I want to tell you something I wish I knew upfront when I read it. So the title, The Big Score, what does that mean? This book is fundamentally about Robert Friedland having a company, a mining company, that accidentally discovers the largest nickel deposit in, I think, North American history. And he winds up selling that, even though he invests, I think, less than a million dollars upfront. He winds up selling that for $4.1 billion. And so the book is about how this happens. But the reason I think this is the right time to do this book right now is because

• 3:21David Senra?

  next week, I'm going to start a multiple-part series. A listener turned me on to the fact that there's multiple books on Edwin Land that I have not yet covered. So back on Founder's Number 40, I did one podcast on Edwin Land based on two books I read about him and the company he founded, Polarite. So the reason I bring that up now and how this relates to Robert is because Edwin Land was the single most influential person in regards to how Steve Jobs created Apple. And as we're going to see, Robert Friedland and Steve Jobs temporarily were friends when they were both at Reed College, and we're going to see Robert's influence on Steve a little bit as well. Okay, so I want to get right into it. I want to talk about

• 4:04David Senra?

  Robert's early life and then his arrest selling acid, selling LSD. So it says Robert Friedland had attracted attention all of his life, but it was at the age of 19 that he found his first big audience. On the morning, on one March morning in 1970, as he sat in a van in the parking lot of a shopping center in Portland, Maine, a somber group of middle aged men in dark suits and narrow ties surrounded the college sophomore. They identified themselves as federal agents, grabbed his arms and locked handcuffs over his wrists. Despite being shackled and flanked by two grim faced detectives as he was later led to jail, the thin young man with long wavy blonde hair still managed to flash a brilliant

• 4:45David Senra?

  smile for a photographer from the Portland Press Herald. Friedland grinned as if he had just won an award, but the prize handed down in February 1971 consisted of a two year jail sentence for unlawfully selling drugs. Police confiscated more than 24,000 tablets of LSD valued at $125,000. So the newspaper, this is a quote from the newspaper article at the time, it says, "The former star athlete and outstanding student was one of three young men arrested in a large interstate narcotics ring investigation." Friedland insists to this day that his time in jail was a miscarriage of justice, typical of the corrupt Nixon administration." Those are direct quotes from Robert.

• 5:30David Senra?

  "Like many college students of his generation, he experimented with drugs, including LSD, and he vigorously protested the Vietnam War." Echoing Timothy Leary's notion that drugs were an agent of change that would free the world from such stupidities as the Vietnam War, Friedland recalls, we, another direct quote from him, "We honestly thought that if everyone took LSD, the Vietnam War would stop." The judge sentenced Friedland to prison because he said, "The court is satisfied that you were the principal in this affair and that you took the role of leadership in this transaction." So that's an important part I wanted to highlight because not only is he doing that when he's selling LSD, when he's, you know, what, 18, 19, 20 years old, but he's also in every single transaction in business, definitely taking the lead.

• 6:15David Senra?

  And he was obsessed with control. Or he's still alive, so he is obsessed with control, as I said. According to the judge, Friedland was driven only by one motivation when he became involved in the drug sale. You gave no, this is the judge talking to Robert now. You gave no thought to the consequences for others that could have resulted from this transaction, but only to the large sum of money that you could have obtained. So this is one thing to know about this book right up front. You have to know the biases of all the authors that, you know, how they view the subject before you read the book. And it's very clear, the author doesn't, most of the time, she's calling him the promoter. That's what she refers to him. She doesn't refer to him as Robert Friedland. It's the promoter.

• 6:58David Senra?

  As you saw in the open excerpt, you know, he's, he's a very complicated character. He's undoubtedly been involved in a lot of shady stuff. What was so fascinating to me is the difference because his partner at the time talks about, you know, I've only known this guy for a year and a half, but he clearly can sell anything. And so I was struck at the contrast between how the book describes Robert. And I'm going to highlight a lot of, you know, a lot of his faults, say, no doubt about it. And a lot of the shady stuff he did on the way to becoming a billionaire. But I was like, you know what? Let me, let me see what this person was like. Why is everybody so, he's almost like a Pied Piper kind of character where, where, you know, he's a master salesman.

• 7:41David Senra?

  And we've, we've studied a lot of master salesmen on the podcast. And so I wound up watching a video of a sales presentation of his and it's, it's on YouTube. And I think the title is China is going to outlaw the, the internal combustion engine. Right? And I watched the entire 30 minutes and the, I was struck at how different. He, he comes off extremely likeable, extremely knowledgeable. I have no idea. He's also talking his book, which he says openly, like, you know, he, he's giving a discussion on the value of copper, especially if there's a huge increase in, in electric vehicles. So I don't know if the contents of his sales pitch, that 30-minute presentation I watched, is accurate. I have no idea.

• 8:26David Senra?

  I can't verify all the stuff he said. All I know is that it sounds like it is. And so you immediately see his charisma, even in this presentation. You immediately see that even if you don't fall for the sales pitch, other people definitely will. So I just want to bring that up front because, you know, people are complex. It's impossible to describe an individual as just one thing. And we see in this case, like, he can be unbeliev- we've talked about this paradox before. He can be unbelievably generous, but unbelievably Machiavellian, unbelievably selfish, and unbelievably kind. And he's all of these things. All right, so let's go back to this part. "The conviction was expunged in 1986, and the records relating to the case were sealed, legally entitling Friedland to say that the conviction never happened."

• 9:11David Senra?

  Friedland next captured the limelight in 1972 as a political science student at Reed College. And this is where we get into how he influenced the young Steve Jobs. This is one of the most fascinating parts of the book for me. So I'm going to quote heavily from this section. I've got a lot of highlights in the next few pages. So it says, "Reed College had a reputation for attracting bright, iconoclastic students. In the early '70s, Reedies," is what they called themselves, "took to heart their motto: atheism, communism, and free love." At Reed, Friedland's drug conviction was no handicap. If anything, the prison term only added to his mystique at a campus that was known as a freaked-out Reed because of heavy student drug use.

• 9:54David Senra?

  So, you know, and all the- I've covered what? Six books on Steve Jobs at this point. I think four of them were biographies. And almost every biography talks about- Steve talks about the mind-expanding experience that taking acid when he was a young person had a profound effect on his life. He felt it allowed him to approach product creation in more of a broader sense. He even said that Bill Gates would be more interesting if he dropped acid. So it says- Friedland soon gained a reputation as an irreverent and charismatic radical. So think about this, we're about to get into, he legitimately starts a cult here. That's a good way to think about Friedland. If you've ever studied, like, you know, they have this term, the cult of personality.

• 10:38David Senra?

  These people that start these cults, they have this, this like aura, this charisma about them that attracts people. Now, to some degree, people say, oh, this person's obviously crazy, but there's a smaller section of humanity that this is no, this person's a genius, or this person's, you know, god, or whatever the case is. So he's getting this, this, this reputation, even though he's still in his early twenties, you know, that he's able to influence the thoughts of people around him. He had a knack for telling people what they wanted to hear. He quickly put his talents as a budding salesman to work by promoting a new image of himself. And that's another way to think about him. He's very chameleon. He will blend into his surroundings and he will change depending on where he is.

• 11:21David Senra?

  Heightening Friedland's popularity was a 35 acre farm outside Portland that he says a wealthy Swiss uncle purchased as an investment. There's really no way to tell that. We just, that's what he says. No one actually verified that, that truth of that. The farm drew a steady stream of hanger-ons. This is going to relate to Jobs here in a minute. Among them, an introverted freshman named Steve Jobs, who soon dropped out of Reed and devoted himself to reviving the farm's Apple orchard. The orchard, orchard, would later inspire the name of Apple Computers. So that's not the only influence he had on him. You'll see Steve starts emulating and copying Robert's charisma, which people talked about later on in life, how charismatic Steve Jobs was.

• 12:04David Senra?

  He was not that charismatic figure when he was a freshman in college. The dashing young Friedland made a big impression on Jobs. According to a close friend of Jobs, this guy named Don Kotke, Kotke had this to say about Friedland's influence. Quote, "Robert was very much an outgoing charismatic guy, a real salesman. He'd walk into a room and you would instantly notice him. Steve was the absolute opposite when he came to Reed. After he spent time with Robert, some of this rubbed off." Freeland leaves the cult, or whatever you want to call it, the commune. They're going to put a name to it later. But he goes and he travels throughout. He wants to study Buddhism, and he goes to India.

• 12:47David Senra?

  And then he comes back and he renames himself. This had a big influence on Jobs as well. It says, "Freeland's tales of his trip prompted Jobs to make his own pilgrimage." Now, this is a quote from Jobs. "Robert was the first person I met who was firmly convinced that this phenomenon of enlightenment existed," Jobs is quoted as saying in Michael Moritz's book, The Little Kingdom. I was very-- another quote from Jobs. "I was very impressed by that and very curious." So I actually read that book. I actually covered it back on Founder's Number 76. If you haven't listened to that podcast, you haven't read the book. I'd highly recommend reading that book. It's very unique because it's written, it ends, it covers only the first five years

• 13:31David Senra?

  of Apple Computer. So it's very fascinating because it was published very shortly after Apple had its initial success. And so, we don't know, obviously, it ends in, let's say, maybe the early 80s, maybe late 70s, whatever it was. And it's just, I haven't found many other books, because you think about how important Apple, many decades after, became. Like, I haven't found many books where it only shows you the first few years of that company. And I think it's very fascinating. So anyways, continuing. "When Freeland returned to Portland in the fall of 1973, he had reinvented himself yet again. He wore flowing robes and sandals and mesmerized friends with tales of enlightenment. He would embrace universal love and reject material attachment," which is hilarious

• 14:16David Senra?

  because he's extremely greedy later in life. "Reject material attachment was Freeland's new mantra." Freeland began calling his Apple farm "The All-One Farm" and operating it as a collective. And if you've studied any of these, how they begin, these communes, these cults begin, it's all, you know, we're going to share everything. And then eventually, it's somebody wanting to sleep with your wife and getting you to work for free while he reaps all the benefits. That's played out over and over again, and this is exactly what happens here. "Freeland and his disciples practiced yoga. They taught Buddhist meditation. They grew their own food and blew it into conch shells to scare deer away from their crops. Their children were bestowed with such names as Silver Moon and Ashberry."

• 15:00David Senra?

  He lived full-time on the farm as a self-appointed local guru. He's going to tell you, "I'm a guru and my name is now Sita Ram Das." While Friedland's fascination with eastern religion continues to this day, anti-materialism began to fade within a few years. His friends first noticed the change at the All One Farm. When Friedland began introducing new ventures such as an organic cider press, they began to suspect that money, rather than the greater good of the collective, was motivating their local guru. As Jobs explained in The Little Kingdom, by the mid 1970s, Friedland's friends became alienated by his growing preoccupation with money. Here's a quote from Jobs. "Robert walks a very fine line between being a charismatic leader and a con man.

• 15:44David Senra?

  It started to get very materialistic. Everybody got the idea that they were working very hard for Robert's farm and one by one, they started to leave. I got pretty sick of it and I left." And so everybody leaves. Now he's got to find a new hustle, right? So he comes up with this idea, this thing called Siva. And what he wants to do is he wants to heal the blind in the paw. And so this is a description by a friend of his at the time. One of, her name is Susan Gilbert and she was one of the first executive records at Siva. This kind of goes nowhere. He says she was very idealistic. He worked very hard to make it happen. After a few years, Friedland's friends at Siva saw his idealism give way to something else.

• 16:26David Senra?

  So again, this is why I think it's so important to use time as a filter. Because somebody could fake like being your friend or being a good person, maybe for a few months, a few years, but over multiple decades. You know, let's say you've had a friend for 20 years. You know if that person's a scumbag or not. It's very hard for them to not reveal their true intention for a long period of time if you actually know them on a, like on a deep level. And that's the problem with Friedland is you see is like he jumps around. So many different ventures, so many different partners that if I was standing from the outside, let's say this person approached me and they wanted, he had an opportunity, and I saw the track record, it was like, you know, I've been the chairman of 17 different

• 17:09David Senra?

  companies, you know, I used to be partnered with this guy and this guy doesn't like me anymore, and I used to know Steve Jobs, but we're not friends anymore, red flags would go crazy for me because you just see that, you know, he's just not a very trustworthy individual. And what's even weirder is, and the reason I wanted to cover this book is not only is it a thrilling, like, the author does a great job, like, keeping you interested in something that's as bizarre as like, what, like, how are mines discovered and like, why are they so valuable? And the crazy characters that, that prospect the mines and, and all the different structures and all the different people involved, which I found fascinating. But it struck out, it stuck out to me, rather, that even with all his faults, I mean, he's still one of the most, on a financial basis, we're going to see

• 17:52David Senra?

  he's got some serious personality defects, which I've already hinted at, you know, on a financial basis, he's one of the most successful people in the world. So that, that's hard for people to reconcile, you know, the fact that there can be super successful on a financial business level and yet be extremely flawed people. It says, by the late 1970s, Robert Friedland was creating yet another role for himself, this time as a gold mining promoter on the Vancouver Stock Exchange. At the time in the 70s, this is the international capital of penny stock speculation. Just as with Buddhism, Friedland's conversion to capitalism seems to have been swift and complete. And so he starts working in this area from 1970, and that's still what he does to this day. He's definitely

• 18:35David Senra?

  not, I don't think he would agree with the, the description of a penny stock promoter. Now, you know, he's venture capitalist, an international financier, I think, is how he describes himself, but this is how he starts out. So, let's talk a little bit about, you know, this is a wild time. I never even, before reading this book, I didn't even know this ever existed. And so, the book goes into a lot of detail about like, how there's a bunch of, a series of shell companies and penny stocks and like, why? This phenomenon exists, the people that are involved. And you know, there's like a specific place, point in time where this was very prevalent. And Vancouver was like the, you know, the mecca. So this is now a description of Friedland.

• 19:19David Senra?

  We, he drops into, he's a newcomer in Vancouver and he's going door to door and trying to sell ideas to experienced brokers. And this is one experienced broker talking about how he remembered Friedland at the time. "Just another one of the many wild characters that come through my office," Seymour Gray thought to himself. "When he introduced the unconventional entrepreneur to some of his broker colleagues, they dismissed him as a Jesus look-alike who preached about gold as though it was a second coming. But there was something about Friedland that made Seymour Gray look twice. The 31-year-old clearly knew nothing about mining or the stock market, but he had an unusual intensity." So I really think this, this hits on like, you know, this, at this point in time, people

• 20:02David Senra?

  are always wondering like, what is, if this one skill that you should go after, like, should you learn how to program? Should you learn investing? Like, what is one thing? Like, what's the most valuable skill set in this time? And I would argue that it's not, this time is not unique that we're living through, that what I'm about to say is true today, it's true in the past and true in the future. But it's this, if you can learn sales, if you can learn the ability to talk other humans into cooperating with you, that is extremely valuable. And that's what we're seeing here. This guy is, he doesn't know anything about the industry he's jumping into, but he knows people and he's really good with them, at least in the short term, especially one-on-one. People fall in love with him and then shortly after they see the real person, it's like, oh my God, this guy's crazy. I'll get to a crazy story later on where he's taking, he's in a meeting, he's taking

• 20:47David Senra?

  off his shoes, banging the table. I mean, just, he's a very bizarre person. "Seymour Gray just happened to have a shell company sitting on his shelf when Friedland walked into his office." It says, "To this day," this book is published in the late 19, I think 1998 was the publishing date, so I don't know if this is still true, but it says, "To this day, the easiest way to launch a public company in Vancouver is to revive an old publicly traded corporation that has lapsed into a coma." So we read this paragraph too, it's important because this is how he gets started and this is how he creates all these mining companies. It's like, how did you get, how did you become, how did you go public, Robert? You have no revenues and this company's two months old because it's not two months old. They're using these shells and there's like this loophole. I don't know if this loophole still exists, but this is what's happening.

• 21:31David Senra?

  Usually regulators have halted the stock trading of these so-called shell companies owning to poor financial health. Technically, they're still listed on the VSE, that's the Vancouver Stock Exchange, but their stock can't trade until certain financial regulatory standards are met. Investors typically gain control of a junior mining shell by buying control of its stock in exchange for transferring some new assets, such as a mining property or lease, to the dormant company. The shell is then reincarnated under a new name on the stock exchange. Doesn't this seem like this shouldn't be legal to you? This is crazy, where its stock may literally be traded for pennies, hence the name Pennystock. This is him creating this, what I referenced at the beginning, this galactic. He has a series of missteps here where he's able to, he's essentially pumping and dumping.

• 22:15David Senra?

  This is before he accidentally discovers, he's searching for diamonds and he accidentally discovers, there's like a, there's a lesson here. He's searching for diamonds. He thinks he's going to find diamonds in Canada and he winds up discovering the largest nickel deposit in, I think in the world. If not, definitely in North America, might be the world. And so there's a lesson there that, you know, sometimes trial and error is the best way to discover opportunities that you don't even know exist. But he says, galactic, we're not there yet. This is one of his pump and dumps, which winds up being, you know, a huge environmental disaster. Galactic's birth and financial evolution offer important insights into how Friedland would build his fortunes. So that's why I'm bringing this up. I don't want to just tell you about, you know, there's a point to all this. In what would become Friedland's signature promotional tactic,

• 22:59David Senra?

  he distracted Galactic shareholders' attention in 1984 with a dazzling new gold play, the Summitville Mine in Colorado. This is the one I started the podcast with where they're saying, you know, it's one of the largest disasters in Colorado history. A clue to Friedland's promotional style could be found in the name of his holding company at the time. Hanuman Mines. I'm definitely pronouncing that incorrectly, by the way. Friedland had told Seymour Gray, that guy I was just telling you about, that Hanuman was named after the Hindu god he most admired. And I always say that the reason I love kind of... Following these like, I guess, trees of knowledge is the way I would think about it. It's like, okay, if you admire somebody, find out who they admired and then follow that all the way up the chain, right?

• 23:44David Senra?

  Because you learn a lot about people by how they, who they tell you they most admire. Like, you can have a fundamental understanding of Larry Ellison when he tells you the greatest, he feels the greatest human in history is Napoleon. You have a fundamental understanding of Steve Jobs when he tells you his answer is Gandhi. These are very interesting. So, this is now Friedland telling us the Hindu god that he most admires. According to mythology, Hanuman was a legendary warrior hero and powerful magician who could transform himself into any form to defend his god. Remember, he's kind of Friedland's, kind of like a shapeshifter, isn't he? I told, talked about, you know, the person he is now, 20, what is that, almost, let's

• 24:25David Senra?

  say 25 years after the events that take place in this book, I'm watching him on a video. Very, very different to the person described in this book. Uh, it wasn't long before the deity's shapeshifting example was evident in Friedland's ventures. Whereas Hanuman changed form to defend his god, Friedland constantly recreated his companies to bring himself closer to what was rapidly becoming his god, money. By changing the shape of his companies, he could divert criticism and renew investor enthusiasm with new opportunities. Now, that is a negative if you're pumping and dumping and you have no assets that are underneath the company. As we're going to see today, that is a, actually, really smart strategy when you're increasing

• 25:08David Senra?

  the value, because think about it this, this way, right? You have a shell company, you hire some prospectors for, you know, I think in this case, they give them like $700,000. They wind up discovering the largest nickel deposit, which they had turned, uh, so then the prospectors work for the, the shell company, right? The shell company, they're not, they're, they say they're a mining company, they're not a mining company. They're going to then, they have the rights to that discovery, right? Which is worth, in this case, over $4 billion. But they don't want to do all the hard work of mining it, so they then sell it to an actual mining company, and these are usually huge publicly traded companies, multi-billion dollar companies, that then say, okay, you guys did all the, the, the hard work for us, you found it, now we'll come through, we'll give you a premium on top of that, but we'll take it over from here.

• 25:52David Senra?

  And so they're still doing this to this day. In fact, a few, so they wind up doing the sale, I think in 1996. Like in 2018, the company that's going to buy the, this nickel deposit from Freeland has just, like, they're still working on the mine and it's going to be going, in 2018, they're extending mining for like another 15 years in the future. So these are multi-decade projects, right? But what Freeland does really smart, he does the same MO that he's doing here with like this, you know, pump and dump, like fake gold mine. He does with the real thing. And he takes a bidding war, you know, they think they might be able to get it for 1.2 billion.

• 26:34David Senra?

  And he does this over and over again. And so I'm not like, I don't want to mischaracterize my, my impression of Freeland. Like, I think, you know, he's not somebody I want to be friends with, let's put it that way. But he does, he's a really, really good salesman. He's got some really good negotiating tactics that, that you and I can learn from, assuming that what we are actually doing is valuable to other people. That's, that's the point I'm trying to make here. So now we're going to get into Robert's personality and his MO. Freeland's rapid ascent in Vancouver can be attributed to a number of factors. He's incredible, quick study. He's definitely not a stupid person. With the help of what friends describe as a photographic memory, he rapidly absorbs an almost encyclopedic knowledge of gold mining and financing, financing techniques shortly after his arrival. More important, he knows how to make the most

• 27:19David Senra?

  boring mining story riveting. One of the first things Freeland did after founding Galactic was to travel to gold conferences throughout North America to rub shoulders with penny stock newsletter writers, one of the few sources of information on junior mining stocks. So that's what he's doing at this point. He's considered a junior miner. And junior miners usually sell to like the, the major players, okay, which he does. The stock tipsters warmed immediately to the showman and began touting his, touting his new mining plays. It says, "Friedland specializes in finding near worthless assets, shuffling them into a public company and applying a great deal of chutzpah in establishing the immense worth of that asset."

• 28:04David Senra?

  And some of these, you know, have very rare value. Not all of them are pump and dumps, and this is an example of that. In 1991, he received more than $40 million when this company called Amex purchased his fledgling Alaskan Gold Company, a company whose total stock had been less than $3 million three years before. After the Galactic fiasco, Friedland was never going to be a mining hero, but he could build a fortune as a money miner. That's actually a good description of what he does. He had two things in his favor. He never let failure stand in his way, stand in the way of his next venture, and he operated in an environment where money was the only way of keeping score. Galactic's financial and environmental debacles would have buried most businessmen,

• 28:49David Senra?

  but Friedland barely missed a beat after he left the Galactic board. The man who had proclaimed entrapment when he was charged with selling LSD blamed others for the environmental fiasco. Friedland says that he profoundly regrets what occurred, but he denies any legal or ethical responsibility for the environmental mess, instead blaming Galactic's engineering and consulting companies. It says, "Bob does not look back," explained Norm Kievel. He's chairman of this mining company called Tech. Norm, we're going to study in a little bit. He actually does something that's really smart. Outside of work, Friedland had few interests.

• 29:31David Senra?

  Says he neglects his kids, gets divorced, winds up getting remarried. We see his personality here. "The marriage was overshadowed by Friedland's consuming passion for mining deals. He spent most of his days traveling the world in search of prospects or working the phones from his office. There was no time for hobbies." His associates, this is where we see serious personality defects here. And again, this would raise a red flag if you ever deal with people like this. "His associates were a time taken back by his treatment of his wife. On arrival at a destination, Robert would sometimes bolt out of the airport and grab a cab, leaving Darlene behind to collect their baggage and make their own way to the hotel." So again, You're going to treat your wife like that. What is the chance that he's going to treat you, some stranger, some temporary business associate,

• 30:16David Senra?

  any better? Not very likely, right? So I mentioned earlier, this discovery was accidental. They're looking for diamonds. So Friedland has a company. He's got partners in the company. They're seeding. Think about it, it's like a seed investment. Prospectors are the ones that go out into very harsh environments and actually search to see if there's copper or nickel or diamonds or whatever they're looking for. And so they, at this point, when they discover, they're like, oh, wow, we've hit something. They think it's going to be, it says, if the average grade is 2%, then the gross value of this deposit is worth $1.2 billion at today's prices. So that's a direct quote from one of the prospectors' journals, right?

• 30:57David Senra?

  At this point, they've only invested $700,000 by the time they make this discovery in this company. So $700,000, that's how much they spend on the company. 1.2 billion winds up being obviously for over $4 billion. But the reason I want to bring up this point is because at this time, Friedland is distracted. This is not just, this is not the only series of prospectors that he's, that he's funding. And he's focused on like this, this, the, this, taking diamonds off the bottom of the ocean, which doesn't wind up working out, by the way. And so this sentence I thought was very interesting is, "The prospectors had to keep calling the office." It's like, hey, we have something big here. We have something big here.

• 31:38David Senra?

  And it says, "To the prospectors' dismay, diamond fields continued to dither." So the only, the reason I bring this up is because they almost missed the greatest opportunity that they had in their entire lives because they were distracted. So that's the lesson there. And before moving on, I want to describe the work that prospectors do. They play such a huge role. And they can reap benefits, like the two prospectors that wind up doing this discovery, they wind up, I think, making 300 million out of the deal. So they definitely do very well. But the work is really crazy. It says, "Drilling for core samples is lonely, numbing work. Isolated in remote wilderness, drill crews were grueling 12-hour shifts, fighting nature and machinery to cut narrow pipes of rock from the earth." So they work two 12-hour shifts. They're running 12, 24 hours a day.

• 32:23David Senra?

  "Yet their work is one of the most crucial steps in mining exploration because the cores measure the thickness and richness of a deposit. Fortunes are made or lost on the basis of what drillers and their helpers pull out of the ground." So I'm fast forwarding to the part of the story where they finally get Friedland's attention, right? Because he's got other people in the company handling this. He also, he was, he kind of, at the time, remember, the book starts, starts out saying, you know, he's 43 years old, a lot of people were kind of shunning him, only a few people were still buying into it. He winds up moving to Singapore from Vancouver, kind of in shame. And so, this is where we find him at this point. And his, his, they finally realized, oh my God, we discovered something big. We got to get Friedland, we got to tell him what's

• 33:05David Senra?

  going on. And so his partner's going to call him. But his partner, the guy that said, hey, I've been dealing with this guy for a year and a half, and he could sell anything, they had a falling out. But he's got, he realizes like, they have to communicate because this could be such a big deal for the company. It says, reluctantly, he picked up the phone and began dialing Singapore. His name's Gene Bull, maybe? Bull did not know whether the man he was calling was friend or foe. In the past year, he had grown weary of Robert Friedland's mercurial temperament. That's a great description of him. One moment screaming and swearing at him, and the next sending gifts such as rare, such as a rare parrot to his wife. As, as Bull correctly anticipated, his conversation with Friedland was trouble

• 33:47David Senra?

  from the start. The promoter knew little about Voisey's Bay. When Bull updated him on the drill test and described the massive sulfides, Friedland exploded. So this is, I'm not, this is a smart move, what he does. This is not smart, the way he treats other people. But he realizes like, when you have an opportunity, you know, need to go all in on it. Don't, you know, don't dilly-dally. So it says, when, so updated him on the drill test and described the massive sulfides, Friedland exploded. "Why haven't you kept me informed?" he screamed. "What do you know about the drilling? We have to find out if it's a real discovery." When Bull explained that the two prospectors were overseeing the exploration and, and claim staking, Friedland lost it. This thing is being run by prospectors?

• 34:30David Senra?

  They don't know what they're doing. We have to stake this thing to the horizon and claim all the land. So let me pause there, something I didn't know. So let's say you're a prospector. You want to go out in the middle of wilderness. And this is happening in Canada. They have like a department of mines, governmental agency. You go down there. You say, hey, you look at a map with them. You place markings on the map. Is this area staked by anybody? Has anybody else laid claim to this? You pay the government a small fee. And if you find anything, you can get the rights to that, to the valuable resources. Okay? So that's like a basic overview of what he's talking about with claiming and staking, which is actually smart because the problem is like, what people have failed to do in the past, like say you do a good discovery, they'll, because it costs money to lay claims,

• 35:15David Senra?

  they won't claim enough area. And then somebody else, because this is public information, will jump in and maybe they'll go, you know, five miles away. And then they'll jump and say, hey, we're claiming this. And it's the same because everything is underground. You don't know how big the deposit is. They can piggyback on that and steal preemptively. I mean, steal maybe not the word, but they take advantage of the opportunity because you didn't lay enough claims. So that's what I mean about the smart move. Robert's like, no, no, we're going to claim everything. So you see this conversation continues. Bull disagreed, saying he trusted the prospector's advice that enough land had been staked. But again, how do you even arrive at that conclusion? There's no possible way that you know that at this point. And that's what Robert picks up on. He was not going to bend to Friedland's demand for a claim staking blitz.

• 36:00David Senra?

  After a few more testy exchanges, Friedland hung up. Much later that night, he called and left a message on Bull's answering machine. Jean, Jean, I don't know his name. I'm going to sue you if you don't buy more claims. So they wind up staking more claims. This is when Friedland realizes, oh, okay, I have to take control here. These people are not aggressive enough. Friedland is definitely default aggressive. This is a quote from Wall Street Journal at the time in 95. Robert Friedland, the Canadian mine promoter, is known for pushing ventures that later stumble. Remember, as far as I can tell people, he's got a better, you know, it's funny what success does to your reputation, right?

• 36:43David Senra?

  At the time, in the early 90s, you know, he's this penny stock like charlatan. And now he's, you know, he's invested in charity. He's got foundations. They say he's serially successful. It's very interesting how these things are a lot more malleable than maybe we're led to believe, right? So this is how he's, the reason I wanted to bring that up, because that's how he's thought of at the time in the story. And this is why, when Vengold, this is another one of his operations, released long awaited assays, which is basically reports on like they, you know, their speculative drilling. When they, let's call it a report. When Vengold released long awaited reports from its first drill cores in Venezuela, there was hardly a trace of gold.

• 37:26David Senra?

  So he'd raise those money, saying, hey, we're gonna, we're really striking it rich. We've struck gold. Maybe they've done initial drilling and they think it's gonna be a lot bigger than it is, and it's not. Or sometimes they fake it. You really don't know. This is a wild, this is like the wild, wild west. Within five days, the high-flying stock, which had peaked at $16.25 a share five months earlier, crashed to $4, vaporizing more than 250 million of shareholder money. For the second time in five years, investors had been badly burned by ventures linked to Friedland. So that's why the Wall Street Journal described him as such. And you'll see a lot of, you know, shenanigans, as you could expect with human nature in

• 38:10David Senra?

  times like this, you know, they're pumping, maybe the stock starts at four, they'll, you know, they'll sell at eight, and 10, and then 12, and then 16, and then oops, it collapsed, and you're left holding the bag, unfortunately. So I want to fast forward. The prospectors come to meet with Friedland. Not only do they want a residual, based on how much eventually is mined, that's where they get a lot of money, but they also want to actually manage the initial drilling there. And so the prospectors want to maintain control. And we learn, at this meeting where they're meeting him for the first time, we learned Friedland's reason for urgency. And again, I think he's got, he was really astute at picking up on this and pushing for urgency.

• 38:55David Senra?

  It wind up, you know, he wind up in one deal, creating generational wealth. So he was right to do this. Even though the prospectors believed they were qualified to manage the drilling at Boise's Bay, the odds were stacked against them. These days, most prospectors are history. Once they discover a major ore body, so the author's giving us some background on what normally occurs, almost never do they continue managing an exploration camp. It takes a small army of trained experts to meet a myriad of government standards and operate a fleet of modern testing equipment. So they don't necessarily always have that skillset, but they want to learn. They went up starting a company later on that does this for other prospectors, by the way. The prospectors were in for a surprise when they were ushered into the boardroom. The stranger grinned at the prospectors and extended his hand. "Hi, I'm

• 39:40David Senra?

  Robert Friedland." Instead of the stern, tough-talking opponent they had expected, the promoter was charming and sympathetic. See, this is where he's very Machiavellian, more like Camilleian. He can be extremely charming and then extremely tyrannical, like in a blink of an eye. They explained that they were not prepared to hand over the claims until Diamond Fields, that's Friedland's company, gave them the contract at Boise's Bay. But Friedland didn't bat an eye. "I'm not worried about the details now. This project is worth giga dollars. You gotta start drilling right away." The prospectors warmed to the promoter immediately. If you were to meet Robert Friedland, you'd probably do the same thing. It's over time that he unveils his true color sheet, right? They were just as

• 40:24David Senra?

  keen to start drilling as well, but for different reasons. Friedland wanted more drilling results to boost Diamond Fields' stock. So this is what I mentioned earlier, how just the same strategy that he has when he does these pump and dumps, when it's not clear if they've hit gold, he does when it's very clear they have a large nickel deposit here, right? And so what happens is you drill, let's say you drill 15 holes. The first two keeps expanding, okay? Now we think it's X big. Let's say we think it's 100 million tons. Then the second thing, second time we drill, now it's 150 million tons. He doesn't announce that all at once. This is actually smart. He waits. And so you see this huge pop of stock. So let's say, okay, now it's 100 million tons, 100 million tons, right? The stock pops.

• 41:09David Senra?

  Keeps drilling. Six months later, now it's 200 million tons. Stock pops again. He does this over and over again. I think it's for almost like two years. And that's how he keeps, he like, he's very patient. He's aggressive and patient at the same time. And he really does milk this discovery for everything it's worth. And this is the strategy that he's using. Friedland wanted more drilling results to boost Diamond Fields' stock. The prospectors wanted to better understand the size of the deposit and the value of the future royalties they were entitled to. "You'll get all the money you need," Friedland promised, as he pounded his forefinger into the table. He's really big on pounding tables. "You guys just get back to Labrador," that's the part in Canada, "and drill as much fucking core as you can." So they do some drilling. They really say, hey, this thing is big.

• 41:52David Senra?

  And again, this is how, this is, I know that myself. This is further into the book, how Robert planned to increase the value of his company. We see that this happens in a series of steps. Freeland was outraged at the 300 million price tag the stock market was currently giving to Diamond Fields stock. And I don't think they have any revenue at this time. The company is worth substantially more. If they played their cards properly, he boasted, they could pump the value into the billions. He once had been correct about that. Freeland reminded them that more than a dozen major suitors had begun to make noises about a takeover of joint ventures. So think about that. And this is very common. Let's talk about the technology industry, present day. You know, you have somebody that's doing random prospecting. If that's what we say, they create an app, they create a technology. Maybe that technology or app is not monetized.

• 42:37David Senra?

  And, but they have people's attention. They clearly see value there. So what happens? Other people, Google, other companies come in and say, whoo, that's a really nice app you have here. Here's a billion dollars, or here's 500 million, or whatever the case is. And then they wind up, you know, collecting much more value after the fact. So that's, that's the analogy I would use to, to this relationship between prospectors, companies like Freeland's, and then the, the bigger players, the people that, that have assets that can, you know, drop $4 billion on a company. So it says, you know, we got tons of interest already. But again, he played, and he does a lot of smart things, plays them against each other. A large part of this book, I would say 25% of this book is just a negotiation of Freeland playing all these different companies against each other.

• 43:18David Senra?

  So if you're ever in an opportunity where you're going to sell something that's of value and you have multiple suitors, you might want to read the second half of this book. Right now, they would be lucky if anyone offered more than a half a billion dollars for their entire operation. What Diamond Fields had to do, Freeland told, told everybody, was to buy time. This is just what I was just, the strategy I was describing to you earlier. He was not going to make a move until more drill tests give him a better handle on the potential size and value of Boise Bay's deposit. That meant they had to start looking and acting, this is really funny. He has to act like he's going to be a mining company. He doesn't want to be a mining company. They had to start, they had to start looking and acting as if they were prepared to build a mine in Labrador,

• 43:59David Senra?

  hiring senior mining staff, commencing a mining feasibility study and beginning environmental assessments. Pretty crazy that they're doing all this just to increase the value. It's all for perception. It's not real. Friedland had no intention of really building and operating a mine, especially after the fallout from Galactik. But if Diamond Fields went through the motions, it would immeasurably strengthen his leverage at the bargaining table. So at this time, he starts, he does something really smart. He's like, oh, you know, the company's valued at 300 million, maybe 500 million, whatever the case is, but I only own like 40% of it. Him and his like partners where he has control. He's like, these guys could just come in and have a hostile takeover. I guess there's a lot of hostile takeover if it's in the mining industry. I didn't know that. And so he does something smart.

• 44:42David Senra?

  He's like, I gotta, I gotta find, there's a bunch of companies that have a lot of money. So I need to find one that I can sell a small piece. He calls it slicing the salami. That's literally what he calls it. He's like, I'm going to sell you a piece of salami here, but we have to have an agreement that you're going to vote with me. So again, another smart move that he does to maintain control because he keeps control and voting rights and avoids hostile takeovers, even though there's multiple attempts throughout this entire endeavor. And I think, I said it multiple years, I think it might, this, this, this might, I think it's one year, maybe a year and a half. So it goes really fast. So he meets with this guy Kievel that I mentioned earlier, and he runs another company called Tech, right? Tech is not going to be a major player. The company that buys this is called Inco, which I'll get to later.

• 45:27David Senra?

  They own it today, to this day, they renamed their company called Vale, I think is what it's called. So it says, they're, they're having a negotiation. And it says, Kievel turned to Friedland and offered to acquire an interest in Boise Bay. This is a good question. This is another smart move by Friedland. What would you do if you were me? Friedland asked. Kievel paused for a moment and stared thoughtfully at the core. Meaning, because he came to the meeting showing Kievel like one of the drill samples, right?

• 45:56David Senra?

  He looked at Friedland and shrugged. Frankly, if I were you, I would keep on drilling to see what I've got. Thank you, said Friedland. That's good advice. That's what I want to do. So, smart move on Friedland, asking the question, and smart move on Kievel, because answering him honestly develops trust. So, Kievel is going to wind up investing, I think, $100 million for 10%, if I'm not mistaken. I think that's the numbers, which puts a valuation at $1 billion. Maybe it's... In any case, Kievel is going to make a couple hundred million dollars on this deal and not have to do a lot of work for it. I'm going to talk about how he negotiates later. Kievel reminds me a little bit of Steve Jobs and how he negotiates, so I'll get there in a minute.

• 46:40David Senra?

  Now, I want to read this section. This section is a little longer. This is what it would be like if you met the promoter, which is what the author calls him, for the first time. So, you have this investment manager, portfolio manager, named Deans. And Deans is coming... There's all these financial intermediaries that are all around all these deals, because they make a lot of money when these deals are closed, whether they're raising money in the stock market or when they're sold from one company to another, right? So, it says, "Deans had never met the infamous promoter, but he wouldn't soon forget him." "The meeting in Friedland's penthouse office began with..." Don't worry about the names. I knew I was in trouble, because the book starts with a cast of characters, just like 50 different characters you need to memorize in this book. The names I'm going to tell you are not important, okay?

• 47:26David Senra?

  "The meeting in Friedland's office began with Mercado explaining drill results and ground surveys from Boise's Bay, why Friedland paced the room like a caged animal." "Eddie, Eddie, get to the point. This is taking forever." That's Friedland interrupting. Mercado tried to continue, but Friedland interrupted again. "Stopping in front of Deans, he began wagging his finger." "You portfolio managers don't know anything. The biggest risk to your investment is that a company like Inco steals your company at a small premium to what it's trading at now. They pay me a premium of $35 a share today, and you think you've died and gone to heaven." Relaxing slightly, Friedland smiled conspiratorially at Deans.

• 48:09David Senra?

  "Vote with me. I want you to vote with me. That way, if I have you on my side and nobody can steal Diamond Fields." So what he's talking about is avoiding this hostile takeover, right? "If you stay with us on this, I'll get you $150 a share." Deans couldn't believe what he was hearing. Like most money managers, he thought Diamond Fields was pretty rich at $24 a share. Now Friedland was talking about a six-fold increase? What kind of man would think to make such an outrageous boast? Sensing Deans skepticism, Friedland continued. "I have all the leverage," he repeats this over and over again, and he winds up being right about this. "Inco is going to buy this because they have to." Inco is the largest nickel producer in the world at the time.

• 48:52David Senra?

  At one point in its previous history, for like 50 years, they controlled the entire world's nickel market. They'd cornered, I think they owned like 90% of all of it. At this point in their history, they've fallen from grace, but they're still the number one. I think they have like, I don't know, let's say 40% of the market, something like that. So it says, "Inco's going to buy this because they have to. It can't afford to lose this." He's right about that. "Do you know what the costs are going to be to produce nickel at Voise's Bay? Less than zero." He's wrong about that, but that line about cost becomes very important in Inco's decision to purchase it. And I'm going to talk about, I'm going to give you an example later in the book about

• 49:32David Senra?

  why, you know, this is something that's appears in tons of these books that we read, that you have to watch your costs. Go back to Henry Clay Frick. "Gentlemen, watch your costs." Andrew Carnegie, John D. Rockefeller, they have, they built companies you could not compete with because they could make profit at a price that you could not. It's a massive advantage that people don't talk about enough. I don't know why. It's craziness. Deans head was swimming. As he had made his way back down the stairs, never before he had witnessed such a brazen promotion. There was no way Diamond Fields was going to hit 150, but maybe, he thought, it was worth more than he realized. Okay, so now I got the part in the book where Tech, he winds up, Friedland does a deal with that company, Tech, I told you about.

• 50:16David Senra?

  They were able to make the deal and fasten other people because they made it simple. It was closed very, very, very quickly. Before many other companies even started their proposals, they're like, oh, we have to meet with a committee. We have to go here and here. And Tech, because Kievel has, he's running the company. He's like, no, we're going to sit down person to person. We're just going to do this deal. So it says, "The fine point was slowing everything down. Every day," so it talks about the lawyers from each side were fighting, don't worry about their names. "They waged fresh battles over legal language. They wanted every angle of the transaction spelled out in detail to minimize potential liabilities for INCO." So they're comparing and contrasting how Tech was able to do a deal very, very quickly and how INCO, it took INCO like a long time, long time.

• 51:00David Senra?

  They've negotiated, renegotiated, I don't know, dozen times before they actually wind up closing this. So it says, "They wanted it spelled out in detail to minimize the potential liabilities for INCO." And they're comparing, contrasting. It had taken only a three-page contract. I was wrong, I thought it was four pages. It'd only take a three-page contract to satisfy Tech's 10% investment in April, and they got it done, I think, in a weekend. But, but under INCO's, but INCO's proposed agreement was inching toward 100 pages. They were becoming exasperated with their lawyers nitpicking. Okay, so when I read that section, I want to pull up this quote that is from, it's Bill Jobs, Bill Gates,

• 51:44David Senra?

  talking in Steve Jobs, the book Steve Jobs by Walter Isaacson. Talks about right before Steve Jobs came back to Apple, Gates was negotiating with the previous CEO, Gil Amelio, I think is how you pronounce his name. He just couldn't get a deal done. And then Steve Jobs comes back and he's like, forget everything Gil said and he throws it out. So let me read to you. This is how Jobs recalled it. And then I'll tell, and then I'll tell you how Bill Gates remembers it. He says, I called up Bill and I said, I'm going to turn this thing around. Bill always had a soft spot for Apple. So I called him and said, I need help. Microsoft was walking, walking over Apple's patents. I said, if we kept up our lawsuits a few years from now, we could win a billion dollar patent suit. You know it and I know it. But Apple's not going to survive that long if we're at war.

• 52:29David Senra?

  And I know that. So let's figure out how to settle this thing right away. All I need is a commitment that Microsoft will keep developing for the Mac and an investment by Microsoft and Apple. So it has a stake in our success. And now this, this is Isaacson writing and he's interviewing Bill Gates. Okay. When I recounted to him what Jobs said, Gates agreed it was accurate. We had a group, and this is now a direct quote from Bill Gates. We had a group of people who liked working on the Mac stuff and we liked the Mac. Gates recalled. He had been negotiating with Amelio for six months and the proposals kept getting longer and more complicated. So Steve comes in and says, hey, that deal is too complicated. What I want is a simple deal. I want the commitment and I want an investment.

• 53:13David Senra?

  And we put that together in just four weeks. So we're seeing, again, I don't know why more people haven't learned from this. Why, Inko almost loses the deal that if they don't have this deal, their company's screwed, right? And they almost lose it because,

• 53:29David Senra?

  think about another, their competitor, Tech, could do a deal that was four pages long. Why the hell do you need 100 pages? What are you doing? Why do humans always want to unnecessarily complicate things? Why was Gil Amelio? Negotiating with Apple, negotiating with Microsoft for six months and still couldn't get it done. And then Steve Jobs comes back and gets it done in four weeks. Which one do you think is a smarter move? It's clear that, in this case, tech clearly did the really smart thing. And Jobs, in the Apple case, did the really smart thing. So, I need this note I left on this next page.

• 54:12David Senra?

  It's just like, what the hell is going on here? This guy is a lunatic. So now they're negotiating with INCO. Friedland's negotiating. It says, "During negotiations, he had a way of making INCO's offers sound like an order." So INCO doesn't realize they don't have the leverage here. And Friedland's in this office, or in this meeting. And he's gonna always make sure he's fighting to maintain the leverage. And so we see this weird behavior that he does to get leverage, or to maintain leverage. So they have people from INCO saying, "This is the deal. Take it or leave it," kind of thing. "After several minutes, Friedland jumped to his feet in a fury. You don't seem to understand what's going on here.

• 54:55David Senra?

  We're the major mining company, and you're the junior. If you don't buy Boise's Bay, you're gonna be out of business. You have to start playing the role of supplicant. At that point, Friedland bent over." A relieved, this guy, he's actually important. His name is Sopko. Sopko is running INCO while the negotiations is going on. "A relieved Sopko thought the lecture was over, and Friedland was finally sitting down. But instead, the promoter came back up, swinging one of his black loafers. So he sits down to take off a shoe. Grinning maniacally, he thrashed the marble table with his shoe, over and over." This is him pounding the table again. "Every impact sounding like a rifle shot. To the INCO team, the tantrum seemed to go on for minutes.

• 55:39David Senra?

  When Friedland was done, he turned to his startled visitors." So he's emulating something that happened in history here. He says, "I could say what Khrushchev had said when he did this at the United Nations back in the 1960s. We will bury you." Of course, we don't need to do that now, do we? Moving on, we finally get to this point where, you know, he's holding, Robert Friedland has this, he's perpetuating the charade that, you know, maybe we're not going to sell to INCO, you know, we'll just mine this thing ourself, we'll just keep all the money ourselves. And the note of myself is, you know, you say you want to mine this yourself, but your actions say the opposite. And, you know, INCO's, they're not stupid people. And they're seeing

• 56:22David Senra?

  that. So it says, "The promoter was sticking to the Voise's Bay is not-for-sale script." So he'd go to the negotiation table, they couldn't work it out, so he's like, "Okay, I'll keep it, I'll mine it myself." But Sopko was suspicious. During the summer, whenever INCO geologists visited the camp, they had been dismayed by the lack of progress towards the mining complex. The reports reinforced Sopko's belief that Friedland had no interest in developing the mine himself. And so they're realizing, hey, his words and his actions are not lining up. And so this is, this is the conclusion they arrive at. The INCO team had already, had their answer already, in Friedland's lack of interest. The promoter was not in the least bit interested in the details of building a mine. So they're like, "Okay, you're going to build a mine, let's

• 57:07David Senra?

  sit down and we'll tell you the stuff that you need to know and, and the expertise that you might need. And if, and if you can't do this internally, maybe hire us to do it." And again, that's a negotiating tactic. And they realize, this guy's not serious. He was going to sell Voise's Bay, the question was when. And so I'm fast forwarding, but there's something that happens. INCO bids $3.5 billion, right? They're the number one producer of nickel in the world. Falcon Bridge is the number two producer, they bid $4 billion. Then they're like, they start having back, like talks on like through back channels between the two companies. It's like, listen, we're going to keep outbidding each other and then we're going to get to the point where we overpay and no one's going to be able to make money on this mine. What are we doing? So like, why don't we go 50/50?

• 57:49David Senra?

  Let's do a joint venture on this thing. And Friedland goes crazy. So it says, "If they had learned anything in the last year, it was that the often unpredictable promoter went on the attack whenever his leverage started slipping." Pickard, that's the guy running Falcon Bridge, they predicted, was about to get the shoe, meaning the story I just told you where he's banging the shoe on the table with the meeting with Inko. So Pickard doesn't think it's gonna happen because he's like, "No, no, I have a good..." He's only seen the good side of Friedman. This is why I'm reading his section. And so he's under the false impression that he's got a special relationship with Friedman, that Friedman's a stand-up guy, right? So it says, "Pickard knew the plan was going to be a tough sell,

• 58:34David Senra?

  but having seen only the charming side of Friedman, he believed he could talk the promoter into accepting the co-venture with Inko. Friedman had treated Pickard so deferential in the past month that the Falcon Bridge's boss had come to believe he enjoyed a special relationship with the younger man. So why do you make a mistake? If you're offering somebody $4 billion in a venture where they probably, I think at this point, they have probably under $1 million that they've actually put out of their own money. Maybe it's a little bit more, but it's not much more than that. They're gonna be very nice to you." That's not a true representation of who that person is. So it says, and so now this is Friedman. "Frank, we want you to know that we like you guys a great deal, but we're really disappointed about this. You've really let us down."

• 59:20David Senra?

  Then Friedman threw the shoe, metaphorically speaking. "We're gonna sue your ass," the promoter screamed. "Friedman snarled. He was going to crush the joint venture in court and demand millions in damage for the double-crossing deal." And poor Pickard, a few years later, he's got a bad heart. His company owns a mine in Chile, which is like, the mine is like 15, the site is like 15,000 feet elevation. His doctor warns him, "Hey, don't go over there. Your heart can't take the elevation." He goes anyway. He checks out the site, gets into the helicopter. They take off. He slumps over and dies from a massive heart attack a few minutes later. And I'll close on these last few sections here.

• 1:00:03David Senra?

  Just a few more things I want to pull to your attention or bring to your attention. This is another, I talked about this last week. I've talked about this in many different examples.

• 1:00:15David Senra?

  In these life stories and these books that we cover, things can improve a lot faster than you can think. Under Freeland's direction, Diamond Fields has grown in less than 16 months from a dubious diamond play into the world's most sought-after mining company with a market value of more than $4 billion. It's pretty crazy. I got to the part now, the advantage of lower costs. The reason Falcon Bridge does not win the bid at $4 billion, Inco goes up to $4.5 billion is because they have to. They realize the advantage of lower costs that happen, that will occur with the Boise Bay discovery. So it says, "The most important numbers came from this guy named Ian McDougall, who works at Inco. He began comparing Falcon Bridge's and Inco's average cost of producing Canadian nickel."

• 1:01:01David Senra?

  So it says, "Right now Falcon Bridge can produce a pound for $1.60, and it sells for like $4 at the time, although it fluctuates. By comparison, Inco produces a pound for $1.75." So Falcon Bridge, we're at this time, if nobody does anything, Falcon Bridge has a 15 cent a pound advantage, right? Once Boise Bay began producing Falcon Bridge, and Falcon Bridge was allowed to keep it or to get it, the average cost would plunge to 90 cents a pound, making them way more profitable, right? With its 25% stake in Boise Bay, Inco's cost would only fall to 1.45 cents a pound. So they own 25% of Boise Bay, they want all of it, right? For the first time in its existence, and are you going to be able to compete? You can't, how are you going to compete?

• 1:01:46David Senra?

  Your main competitor can produce, what's that, 55 cents cheaper than you? That's substantial. 33% cheaper? For the first time in its existence, Falcon Bridge would be producing nickel at substantially lower costs than Inco, 55% per pound less. Falcon Bridge would be significantly more profitable and in a dangerously strong position to cut into Inco's market share and profits by slashing nickel prices. So the reason I bring that up is because, let's say you're competing directly with somebody else, and if you can have a massive advantage, and we've seen throughout history over and over again, just by having lower costs, just by being better at managing costs.

• 1:02:25David Senra?

  And I'll close here and then really the summary of the book as hard as it would be to swallow because for some people, you know, Robert's got a, at least the Robert in this book, I have no idea who he is as a person now. And I don't know how accurate, obviously, you know, the author clearly does not like this person that she's writing a book on. But listen, his tactics worked and this is the result of that. After months of saying no, Inko was bowing to Freeland's demand. The best part, however, was the price. At $43.50 a share, which the deal gets closed at, his 13% stake had suddenly become worth nearly $600 million. Not bad for a year's work.

• 1:03:11David Senra?

  And that is where I'll leave it. If you want the full story, I recommend reading the book. That is 131 books down, 1,000 to go. If you buy the book using the link that's in the show notes, it's available on your podcast player or going to founderspodcast.com. You'll be supporting the podcast at the same time. Thank you very much for listening and I'll talk to you again soon.