#1188 Brent Beshore | Millionaire Shares Secret To Buying Businesses

Brent Beshore is the founder & CEO of Permanent Equity. In this conversation, we talk about the types of businesses that he buys, the structure of the firm, how macro environment plays into investment decisions, operating businesses, nuances behind transactions, family relationships, and balancing the success of businesses in the local environment. ======================= Pomp writes a daily letter to over 200,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

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

• 0:02Anthony Pompliano?

  What's up everyone. This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. We have no advertisers on this podcast, so it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Brent Beshore is the founder and CEO of Permanent Equity. In this conversation, we talk about the types of businesses that he buys, the structure that he set his firm up with, how macro environment plays into his investment decisions, what it's like

• 0:45Anthony Pompliano?

  to operate one of these businesses, and what are some of the nuances around all of the transactions from different family relationships to how they work in their communities. After you get done listening to this episode, get on Twitter and let Brent and I both know what do you like, what do you not like, what do you agree with, and what do you disagree with? The feedback always helps us make these better and we enjoy the conversation. Here's my conversation with Brent Beshore.

• 1:10Speaker 01

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• 1:38Speaker 02

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 2:01Anthony Pompliano?

  All right, guys. Bang, bang. I've got Brent here with me. I thought a great place to start would be you are somebody who is pretty well-known with tech entrepreneurs, with the investment community, and with what I'll call boring businesses or traditional businesses. How do you decide where to allocate capital in terms of those different buckets, but also in terms of where you think that you can gain an advantage or somehow drive outsized returns?

• 2:26Speaker 03

  Yeah, well, when you look at our firm, Permanent Equity, it looks like we're a generalist firm. So we've got investments in manufacturing and construction and business services. We own a military recruitment firm. We own a matchmaking firm, which we can talk about, like really diverse group of companies. You look at these and you say, what could those all have in common? We consider ourselves specialists in what we call adolescent businesses. So too big to be small, too small to be big. These are businesses that are Main Street America. They're doing, they're building pools, they're building fences, as I said, doing real things. And we like to get involved with people who want to do things long term. So we have really long-term capital. Typically, we're involved in three-plus million dollars of earnings, so much higher revenue than that.

• 3:10Speaker 03

  So these are not like small businesses, at least what, you know, like the bagel shop. But it's, these are legit companies and we try to be good long-term partners and good long-term stewards. So typically buying in with no debt, no intention of selling them and trying to treat people really well, long-term.

• 3:26Anthony Pompliano?

  So before we get into how you guys do this, let's talk about some of the businesses. We, maybe we can start with the pool businesses, one of the older businesses that I think that you've owned for a while now. Describe a little bit as to like what that business does and why that fits the mandate of what you guys are looking for.

• 3:39Speaker 03

  Yeah, so we always have these kind of short ways of thinking about these businesses. So we said, people have been dipping their bodies in water for pleasure for thousands of years. We think they'll continue to do so. So we're not worried about some new app or AI, you know, adjusting the market in such a way that's going to cause people to not want to throw a pool party in their backyard. So that's kind of the baseline. We think Phoenix, Arizona and Tucson, which are the locations of the businesses, we think they'll probably grow and it's only getting hotter. So out there, you know, you think about a pool in Wisconsin, it's a luxury item, right? You're typically going to use it a pretty short period of time of year. Get further south, you're going to use it more often. Phoenix, Arizona, it's like a utility.

• 4:22Speaker 03

  I mean, you have people who, you know, have fairly small homes who still want a pool because it's the only way to cool down in the summer, keep their kids entertained, make memories around pools, right? So yeah, we got involved with that business in 2016 and really just tell Opt them continue to grow the business and modernize it. You know, we think a lot about, we call like quality of earnings and not just quantity of earnings. So you can look and ultimately the quantity will show up, you know, as a function of the quality over time. But in the short term, it's kind of hard to tell. And so with all these businesses, we're trying to get in there and think about, you know, how do we create stability to serve their customers, to be a great place to be an employer, to serve our suppliers really well and be a good long-term partner to the community. And so that's what we try to do.

• 5:04Anthony Pompliano?

  And when you talk about modernize the business, is that like a technology and tools type thing? Is that like, hey, we want to go in and train, whether it is the management team or their employees? Like, how do you modernize it?

• 5:14Speaker 03

  Yeah. So there's a layer of business. We call it the everything tastes like chicken layer, right? Which it doesn't matter if you're doing matchmaking or pool building or recruiting for the military. It's going to be the same set of tools that you need across the, across the firm. So marketing, advertising, lead generation, sales, technology stack. So you know, like what's your software that you're using, accounting, finance, HR, and then kind of benefits, the back office type things. So if you look at all those, no business has ever been good at all of those things, no small business at least. And as we like to say, small businesses don't stay small on purpose, right? There's a reason why they're small. So what we like to do is get involved with businesses who are great at the thing that they do

• 5:56Speaker 03

  and maybe need help in these other areas. So for the pool business, we were able to institute a really robust online lead generation program. When we came into that business, basically weren't generating any leads online and they just weren't high quality leads. We were able to come in and help them build that new program. And now, well, online leads are the dominant way in which they get business. So things like that. And I mean, of course, reorganization of the management team. When we came into the business, there was a lot of people doing kind of overlapping jobs. And we said, hey, totally reasonable when you're smaller, as you start to get bigger, you have to specialize. So we're asking people about, you know, what is the next in line succession, succession planning look like for the business? You know, can we separate roles? Can we get more specialized talent in different roles, things like that?

• 6:40Speaker 03

  Really proud of that team. They've done a great job of, of building out the leadership team over time and really building the business.

• 6:46Anthony Pompliano?

  So on a business like this, you all come in and obviously there's a capital injection into the business and there is a very unique alignment for long-term growth and kind of continue to compound capital for that long period of time. But how much of it is like spreadsheet analysis and understanding of the business and like, let's move these numbers versus there are the people components and the ability to, you know, work with a management team. You aren't there every day, right? And how do you kind of balance between like what I'd call like the spreadsheet versus the people? And how do you guys evaluate which one's more important? Maybe as you initially look at a company that you might want to actually buy?

• 7:25Speaker 03

  That's a great question. For us, and this isn't probably true for most of the industry. For us, it's 99% people, 1% sort of the math. In fact, we've joked that if you can't get the math to work on the back of a napkin, it's not going to work in a spreadsheet. I mean, literally, because we're not using any debt typically in these transactions. So the math is super easy, right? It's what do we think the business is going to generate in free cash flow? What multiple are we paying based on that? What type of yield are we starting from? What do we do with the cash? If there's cash that's generated, how do we reinvest it? At what types of rate of return can we reinvest it? With that math, I mean, literally, we could get a piece of paper and model it out in about 30 seconds on the back of the napkin. The people are infinitely complicated. I'm messy. You're messy. Turns out when you

• 8:05Speaker 03

  get a bunch of messy people together, it's a mess, right? And so we really try to spend time, if we're going to partner with these companies for decades, which is our intention, it's going to take a lot of life to be lived together. And we want to make sure that we're starting from a really good foundation, a good place. And so, you know, oftentimes those discussions will start with the seller. What are your goals? You know, one of the questions we like to ask is if you could wave a magic wand and create the perfect scenario over the next five, 10, 15 years, what does that look like? Some sellers will say, look, I want to be out in a year. Okay, great. Let's all work towards that. That's a goal that we have. Let's all work towards that goal. Some will say, you know, I think I can give it three to five years. Like, let's

• 8:49Speaker 03

  kind of keep talking. Maybe I can step into an executive chairman role, maybe eventually just be an advisor to the business. Fantastic. What we say is, there's no right or wrong answer to any of these. We just want to know where the truth is. And we all want to be on the same page and make sure that truth doesn't change over time. And if it does, like, raise your hand and make sure to tell us. We promise not to surprise them. As they promise not to surprise us. Most of the time, it works out pretty well.

• 9:12Anthony Pompliano?

  Yeah, it's a, what is it like happiness is really just expectations in reality. And the closer those two things are, ends up actually increasing happiness. Same thing here with success of the business.

• 9:21Speaker 03

  Correct.

• 9:21Anthony Pompliano?

  Yeah. So that is a business that I think most people would look at as, you know, an atoms-based business. It is very much in the real world is tangible. You're building physical pools, etc. You have another business, which is matchmaking, which I don't think most people are like, I bet you Brent is going to get into the matchmaking.

• 9:39Speaker 03

  Matchmaking business.

• 9:40Anthony Pompliano?

  Talk a little bit as to like, why this business specifically is unique and how you guys think about the similarities and differences between pool building and then the matchmaking business.

• 9:48Speaker 03

  Yeah, it's a fascinating business. I, in a million years, I never would have guessed we would have been in the matchmaking business. In fact, Emily, who leads our deal team, I remember coming to my office and saying, okay, hey, I need you to sit down, shut up, don't say a word. I'm going to tell you some stuff about this business. You're going to come to conclusions that are incorrect, right? She sits down, all right, all right, what could she be, you know, she launches about three sentences. And I was like, stop, no way. She's like, I told you. And I was like, that's for sure a hooker business. Like, that's for sure. There's no way that this is a legitimate thing, right? Not at all. It was absolutely legitimate. It's actually, it's actually turned out to be one of those businesses where, when I think about what the work they actually do, it is an incredible net benefit to the world. They

• 10:33Speaker 03

  are helping people find the love of their life. And, you know, it's not a dating service. So this is not like, hey, set up a bunch of dates for me. This is a matchmaking business, which again, when I first learned about it, I was like, I didn't know the difference. What could it be? Think about executive search. So if you're in business, you typically retained a search firm to go hire you some specific role. Typically, it's going to be an executive role. So how does that process play out? You identify what you're looking for. What are the roles, responsibilities, all these different things? You then out go out, you source a bunch of candidates through a firm, right? That goes out, finds a bunch of people, they contacts them. They say, hey, how you, how do you like your job? What are you thinking about all that? Corollary is not exactly same here, but for the most part, they go out and do the exact same thing.

• 11:16Speaker 03

  So they say, hey, you know, what are you looking for? What, what's interesting to you? And some people are very broad with it. They're like, look, I'm looking for a man between the age of, I don't know, 35 and 50, who is a professional who lives kind of within 300 miles of my home now. That's it, right? Like, great. Some people are very specific. We had a gentleman who had lost his wife tragically, wanted to remarry down the road. He was an excellent golfer. So he said, hey, not only age and all these other things, but I want her to be an under seven handicap golfer. Literally. And you think about it, it's like for his lifestyle, right? It's something he loves. It's a deep passion of his. He loves playing golf.

• 12:00Speaker 03

  He loved to travel the world to play golf. So how do you find somebody who not only has all these other things, but also is a seven handicap golfer or under, right? Well, you partner with country clubs and you partner with Golf Digest and give me a bunch of these publications to try to go out and find this person. You place ads literally saying, hey, if this sounds like you, come out of the woodwork, right? Sure enough, he's happily married. No way. It's amazing, right? So what they're really trying to do is they're trying to find the right person for you. And that can either be relatively easy. I mean, it's always going to be as an executive search kind of program. It's always going to be, you know, a higher level of touch and service and interviews. And there's only one introduction at a time. Both have to opt out before you can move on to the next one. So this is not, again, like a dating service.

• 12:44Speaker 03

  It's not, I'm going to go to a city and set up a bunch of dates. It's not at all what they do. This is a, this is an in-depth process to try to find you the right person. And I mean, I haven't seen the stats recently. I know it used to be 60% of the time, the first person they put in front of you was the right one. That's how much work is done.

• 12:59Anthony Pompliano?

  Wow.

• 13:00Speaker 03

  Eighty-seven percent of the time, if you sign up for the service, it's called selective search, eighty-seven percent of the time, you end up in a long-term, committed, monogamous relationship, eighty-seven percent of the time.

• 13:10Anthony Pompliano?

  That's pretty high.

• 13:10Speaker 03

  I mean, that's incredible. You think about that for a second. So, yes, it's expensive, just like executive search is expensive. Is it worth it? Yeah, our clients are thrilled with the results.

• 13:20Anthony Pompliano?

  How much is it?

• 13:22Speaker 03

  Well, so it sounds shocking when I first say it. And then you gotta sit back.

• 13:26Anthony Pompliano?

  Let me sit down and be quiet.

• 13:27Speaker 03

  Yeah, exactly. Sit down for a second. So, it starts at about fifty thousand dollars, and our largest contracts go up of over a million dollars. And you say, what in the world to find a spouse? Like, can't you just go on Tinder or go to a bar? Sure. I think there are plenty of people out there who that doesn't work for. And the people who we work with are busy professionals, people who travel a lot, people who have a unusual lifestyle, and people who, some of them are well-known celebrity types, who just really frankly can't meet somebody without wondering if they're with them for them, or with them for what they have. And so, you know, the price for them is well worth it, and we love to serve them.

• 14:11Anthony Pompliano?

  When there is somebody who is well-known, whether it's a businessperson, a celebrity, whatever, is there some masking of who they are at first? Or is there just like, you know, hey, somebody contacts you, and they're like, by the way, do you want to talk to celebrity A?

• 14:26Speaker 03

  Yeah, no.

• 14:27Anthony Pompliano?

  Type thing?

• 14:28Speaker 03

  Yeah, it's incredibly masked. I mean, until the very end, I mean, the person's really not gonna know, because what they say is, it doesn't matter who the person's name is, we're gonna tell you about them. Everyone's interests are aligned to make sure that there's a good match there. So, they're gonna talk about, you know, they have an unusual lifestyle, they're traveling a lot, maybe they have requirements for their job that aren't typical, those types of things. They'll describe the lifestyle, they'll describe kind of the personality, they'll talk to them about generally what they look like. And then ultimately, if they end up being a match, I mean, there's only one person at a time that's matched, so the only person who knows about that person is the person who's matched.

• 15:01Anthony Pompliano?

  Yeah. It, um, it, traveling all the time as an example, is one of those things that I think a lot of folks are like, oh yeah, that sounds amazing. And then if you have to think about it, you're like, you know what? I don't know if I want to travel three hundred days out of the year. Like, actually, I may want to just be at home, and so maybe that lifestyle isn't for me. And so, there are little things like that, that I'm sure, I'm sure end up being a great filter for the different folks. So, we have pools, we have matchmaking. You also have a fence building business.

• 15:26Speaker 03

  Yeah.

• 15:27Anthony Pompliano?

  Talk about the fence building business. I think this is like a good example of like literally you guys look at businesses across different industries, but what's going on with fences?

• 15:34Speaker 03

  Yeah. So fences, so it's Ace Fence in Dallas, Texas. Incredible team started 40 years ago by great family and we think they're the largest fence builder in the country. So they build wood residential fences. They'll do some metalworking.

• 15:52Speaker 03

  It's a great team. I mean, they do exactly what you think. They just do it at incredible volume. I think they did average like 88 fences a day last year. So huge volume in the DFW area and they put your fence up. Make sure it's sturdy.

• 16:06Anthony Pompliano?

  So 88 fences a day sounds like an absurd number, right? Are they like speed fence builders? Is DFW area just so large and so many fences are going up that they have like 1% of the market? Like, how do you get, because a couple of things probably have to happen there to get to 88 fences a day, right?

• 16:23Speaker 03

  It's incredibly difficult, right? You have to build this business over, like I said, 40 years to get to that. So they're going in and finishing whole neighborhoods typically at a time. So they'll work with a builder and the builder will have, you know, they're putting up say 500 or 800 or 1,000 homes in this area. The fences are typically the last thing to go in. So the nuance of it is you could probably try to save money by hiring a cheap fence builder, right? The problem is if that fence builder is delayed, you don't get paid for the house, right? So actually being the last thing, you know, our working capital is almost nothing because we finished the fence, the house gets done, boom, everyone gets paid, right? So it's a really interesting, that's in evaluating these businesses, there's a lot of businesses that look one way on the surface.

• 17:05Speaker 03

  They look similar. And when you dig into them, the dynamics of the underlying economics, the working capital, really the business model in general is completely different, right? So we're actually, we'll do a little bit direct to consumer, but hardly any. Most time we're working with big builders and trying to really service their needs to finish out these big neighborhoods.

• 17:24Anthony Pompliano?

  When a business has been around for 40 years like that, what are some of the dynamics as you guys come in? I'm assuming there's family dynamics, there's probably people who have been there for a long time who aren't part of the family, but they see this as an opportunity to grab power, cause problems, like all kinds of the people stuff. Like what have you experienced in, you know, trying to mitigate as much of those risks as possible?

• 17:44Speaker 03

  Yeah, well broadly, I mean Ace Fence in particular, the deal, the fence company, really great family. We didn't run into many dynamics there. We have over the years though. It's funny, I have, I don't know how many hundreds of side visits I've been on at this point. I mean, I had one where a guy invited his entire family for, over for dinner because I offered to buy him dinner. And he was like, well, how many people can come? And I was like, I thought it was just maybe you, your wife, we could talk about the deal. And he was like, well, do you mind if I bring a few family members? And it was like Thanksgiving dinner he hosted on my tab, you know, things like that.

• 18:20Anthony Pompliano?

  That was so kind of him.

• 18:21Speaker 03

  Yeah, it was, I was like, oh, that's an interesting, interesting way to get a free dinner.

• 18:26Anthony Pompliano?

  How many people do you think showed up?

• 18:27Speaker 03

  Oh, it was like nine, I think. Nine people there, you started arguing about, you know, about family stuff. And I kind of was there just like eating my food and I was like, all right, guys, well.

• 18:36Anthony Pompliano?

  Did you do the deal?

• 18:36Speaker 03

  Literally, no, did not do the deal. No. Yeah, there are a tremendous number of dynamics. I mean, you can imagine after 40 years, every business has challenges. And like I said, every business is deficient in some areas, right? I mean, there's just no way that a business is going to be a 10 out of 10 in every one of the key areas you need it to be. If we do our job right, the people we partner with, and this is what we really tend to suss out during the process is, are they really good at the thing that they do? And Ace Fence being a good example of that, they are incredible. They are the best in the market by a mile, my, I would argue best in the country at building residential fences. They have it down to science, incredible well-oiled machines, still plenty of problems like anything else.

• 19:20Speaker 03

  But they have opportunities to expand into new technologies, to expand into adjacent geographies, to create a lot of efficiencies in how they work. And we're excited about that, right? We want to build for the long term, so.

• 19:35Anthony Pompliano?

  One of the things that always cracks me up about people who are like, I'm going to go buy some business is I can imagine, let's take the fence business as an example, somebody shows up and they're like, huh, you guys build fences? You ever thought doing it in the town next door as well?

• 19:50Anthony Pompliano?

  Right?

• 19:51Speaker 03

  I've got this crazy new strategy.

• 19:52Anthony Pompliano?

  Yeah, like the owner's like, I've been doing this for 40 years. I literally have thought about all of the, you know what I mean? Like I've literally obsessed over fences. I could tell you, you know, the degree at which if the fence posts is off, what the, you know, the hill,

• 20:05Speaker 03

  Correct.

• 20:06Anthony Pompliano?

  Uh, you know, degree or whatever. Like, how do you avoid kind of being the, you know, the person who shows up and is like, I got the good idea versus like, hey, you guys actually know what to do. Like, we kind of want to be support, maybe to some degree.

• 20:19Speaker 03

  Yep.

• 20:19Anthony Pompliano?

  Where's the balance there? Or how do you think about finding that balance?

• 20:23Speaker 03

  Yeah, we just try to take an incredibly high humility approach. And what we say to them, you know, people will ask us like, what are you going to do for us? We say, uh, nothing. They're like, what do you mean, nothing? Like, count on nothing from us. Nothing other than just being a good long-term steward of the business will be great partners to you. We'll write you a check, check will clear, and we'll show up and we'll try to be helpful to you, but we can't tell you what we're going to be helpful on. Right? Like, until you get behind the curtain, you have no idea. I mean, due diligence, you know, the, the phase before you buy the business where you're trying to really explore what, what am I really buying? What are the challenges with it? Uh, what are maybe the opportunities? I don't care how much due diligence, you could be in due diligence on a deal for five years. I mean, honestly.

• 21:05Speaker 03

  And you would show up day one, you start learning new things. It's just different once you aren't in the owner's seat than before. So what we try to do is we don't have a 90-day playbook. We don't have a, a goals for the company when we come in. We ask the leadership team, hey, what do you think we should learn? We don't know what you do. You're the experts, not us. Um, so we're coming in with the exact opposite mentality, I think, than traditional private equity, which is like, hey, we know exactly what I want to do this business, get on board, we're going to try to ramp this thing up, and then we're going to try to sell it within a short period of time. Right? That's the exact opposite of us. So we're just trying to get to know the business, trying to get to know the people, trying to develop trust, because, look, if, if I bought your business, right? And we didn't know each other, it would take you a while for me to say something and for you to be like, is this guy full of it or not?

• 21:48Speaker 03

  Right? Does he know what he's talking about or not? And vice versa, right? I don't know where the edges of your knowledge are, edges of your competency, right? So it takes a little while. To kind of get to a rhythm. There are exceptions to this, but for the most part, we try not to touch the business for the first six months, maybe even up to a year. Get everything resettled. Everything's fine. Everyone realizes we're not, you know, terrible people that are going to come in and bulldoze the company, right? And then it's like, okay, what can we go to work on? And the way we think about that is the lower the frequency and the higher the impact, the more we want to operate in that space. So if it's low frequency and high impact, example would be rebranding a company, building a completely new online lead generation program.

• 22:28Speaker 03

  Maybe re-incentivizing the sales team, hiring a new chief technology officer, right? These are things that are very low frequency, hopefully, if you do them right. A business shouldn't have that competency in-house. So the more that we can see across a portfolio, right? We have 13 portfolio companies. We see a lot over them and we can locate talent on our staff that is unusual to have in any one of the businesses. But that's helpful to all the businesses at various times during the life cycle of the business. So we have a full-time executive recruiter on staff. It's all she does day in and day out is help find talent. It's incredibly valuable for her. It would make no sense to locate that at any one of the companies.

• 23:07Anthony Pompliano?

  Yeah. When you think about incentives, one of the things that I've seen you talk a lot about, I know that you think deeply about. Incentives is something that Warren Buffett, Charlie Munger, Charles Koch, all these people who have built these huge, huge, you know, businesses, whether they are single companies, whether they own a bunch of subsidiaries, whether they're acquiring businesses, like incentives drive so much of what happens in business. How do you think about, maybe we can go top down, right? The incentives of your organization in terms of you have some outside capital, but you've done some unique things with the life cycle of the fund, the management fee, etc. Like, how did you kind of design the incentives where you felt it put you guys in the best position?

• 23:47Speaker 03

  Yes, great question. The goal that I've always had is to align incentives as much as you possibly can up and down the stack, right? So if you think about it, we want the portfolio companies to be focused on long-term cash generation, right? How do you develop long-term cash generation? You have a good quality and quantity of earnings. You establish a great culture and you incentivize them. Hey, if there's a great thing to do with a dollar to reinvest it, if you can invest it at a high probability and a high return, absolutely keep the dollar. We don't want it, right? If you can't, the worst possible thing you can do is to hold on to it. So same thing at the permanent equity level, our level, you know, we take no fees of any kind, no reimbursements of any kind. There's no cash

• 24:32Speaker 03

  that comes from either the portfolio companies or from our investors to the GP. So the general partner being permanent equity, the people that do the work on the deal. Outside of, we take a percentage of free cash flow above a hurdle. Once the cash of the business starts generating out. Now, you might say, well, doesn't that incentivize you then to strip the companies for as much cash as you possibly can? No, because if we think there's a great opportunity to take a dollar and get a 25% return in every subsequent year, we'd be insane to take that dollar out, right? We want to continue to compound that in the businesses. So up and down the stack, right? We're aligned with our investors. They want cash ultimately out of the investment. We want to get paid and our portfolio companies

• 25:15Speaker 03

  want to make money too. We're all incentivized to basically reinvest when it makes sense and to not reinvest when it doesn't. And because we're not in it for the fees, right? We're not getting that, you know, two and 20, you know, we're not getting the two. We don't have fee, you know, we don't have the incentive to raise more and more capital. The interesting part is when you actually, and maybe this is a little bit of a digression away from like sort of the capital stack. I agree very broadly with Buffett, Munger, Koch, all these, all these people who are, you know, big advocates for incentives. And of course, we believe in it. We want the right incentives. We don't want the wrong incentives. The thing I think that a lot of employers and business owners get into hot water with is they think they're like, okay, I want my sales team to sell more.

• 26:00Speaker 03

  Well, clearly, if I just gave them better incentives, they would sell more, right? The question you got to ask yourself when you're changing incentives on somebody is, okay, what are the things that they're currently doing that I don't want them to do? Okay? And am I incentivizing them to do those things that I don't want them to do? And what are the things they're currently not doing that I want them to do? And am I not incentivizing those things? When you strip it down like that, a lot of comp changes. I've seen, you know, a lot of business owners will tinker with all kinds of compensation structures. They're constantly adjusting all these things. And turns out that people just keep doing what they've been doing for a long time. It seems like you can't crack that nut. It's because they like what they're doing. The employees are focused on what they're doing. They're working hard and doing a good job, right?

• 26:45Speaker 03

  There's not much more you can turn somebody, right? It's only if you see something in the capital structure, right? In how you're incentivizing them that would cause them to do something you don't want them to do. So it's like, I would say incentives are wildly important at a very high level. And at a micro level, often are not as important as you might think, or at least in the, the way to incentivize people isn't going to create the most change the way you think it will.

• 27:09Anthony Pompliano?

  Yeah, it's this weird thing where I have seen, sales teams specifically, people will try to change some of those incentives, but it's almost like time is being wasted talking about all the incentive changes rather than just getting out, talking to more potential customers, right?

• 27:24Speaker 03

  Exactly.

• 27:24Anthony Pompliano?

  And so like, yes, you could get another point or two when it comes to the commission, but if you just had spent that time selling, maybe you would have actually made more on an aggregate dollar basis because this, the original commission would have actually reaped more because you had more sales.

• 27:39Speaker 03

  Yeah, yeah, yeah. I mean, like an example that we, we like across our portfolio broadly to have salespeople incentivized based on gross profit and not based on revenue for obvious reasons. Like, that's just something when we look at, uh, look at a sales team, we're like, okay, is the sales team incentivized based on revenue? If so, we probably want to make a change, right? Because there's all kinds of things. If you're, if your incentive is based on revenue, right? And you cut the price 5%.

• 28:04Speaker 03

  Doesn't really matter to your commission, right? It's a 5%. It's not like that big a deal. You'd rather get the sale. If by cutting it 5%, you're eating into 25% of the margin. That matters a lot more. So you, again, always want to just align the incentives between the parties to make sure that there's no heads I win, tails you lose, or vice versa.

• 28:23Anthony Pompliano?

  So when you do something like that, like that, I think that's a very tangible example, right? So you go and the sales team is incentivized on the revenue side. You now are going to say, hey, we're actually going to do it on this kind of gross profit type metric. Do you have to switch the team out? Or have you found that usually you could go in and you explain it and they say, okay, cool, I got it. I understand why this is happening. And you have to maybe explain to them how they can make more money doing it or something. But like the existing team usually can weather and be okay with the incentive change? Or is it something where you go in and you're like, look, no matter how hard we try, we're going to have to find new people because they're just so anchored on this other system or this other metric that their compensation is based on, which is an emotional thing?

• 29:02Speaker 03

  Yeah, of course.

• 29:03Anthony Pompliano?

  What's been the experience there?

• 29:04Speaker 03

  Yeah, the experience is if you're not changing magnitude of compensation, people are very flexible. If you start changing magnitude is when it gets really weird, right? So we've not come into a company, frankly, and said, oh, the amount they're compensating people, we just need to slash that because we think we should be able to retain more of that profit for ourself. That's not something we do. We don't think that's a really kind thing to do. We don't think that's long term. So oftentimes what we're doing is we're coming in and saying, okay, look, here's how much you made based on what you sold. Here's the amount of revenue that you, you know, sold last year. We're going to move you to gross profit. This would have been the amount of gross profit you has sold. And by the way, it's about in the same ballpark as the amount of money you would have made last year if you do this year what you did last year. But here's the upside for you.

• 29:49Speaker 03

  If you can sell more in gross profit, here's how this works out better for you in the long term. And so we're always trying to show them, you're basically not going to go backwards from where you are. And there's upside from there because we think that as you understand more about the gross profit profile of the business, we understand that, we think that it'll be better for you and actually, to be honest, better for customers oftentimes. We've seen that a number of times in the business where we change the incentive structure for a sales team and actually, sales go up. They don't just stay flat. They actually go up because everyone understands what's going on.

• 30:20Anthony Pompliano?

  So we violated one of the rules of the tech industry. We've been using the P word profit. Obviously, that is something that doesn't get talked about a lot. I heard somebody recently say that in San Francisco, everyone talks about growth rate, not EBITDA, right? And maybe actually on the opposite on Wall Street, everyone talks about EBITDA, not growth rate.

• 30:39Speaker 03

  But in the Midwest, we talk about cash.

• 30:40Anthony Pompliano?

  In cash, even better, even better. But what I remember reading at one point, early on, the Koch brothers, when they took over Koch Industries and they were going to grow it, there was a specific data point where they basically made, I don't know if it's a legal agreement, but I think it was more of like kind of a brotherly agreement. We are not going to take more than 10% of profits out of this business. Basically, reinvest at least 90% every single year, and we're going to compound this thing. Now, that is like a very strict kind of mathematical formula they came up with. How do you guys think about reinvesting? And then also, it's interesting because you can reinvest in the individual businesses, right? So if your pool business is generating a lot of cash, or the fence business is generating a lot

• 31:21Anthony Pompliano?

  of cash, but you also have the ability to pull up it into the GP and then either redeploy it into new opportunities, maybe into other companies that you already own, or pull it out of the business. Like, there's a couple of different layers to reinvestment versus maybe, you know, kind of harvesting that profit. How do you think about that?

• 31:39Speaker 03

  Yeah, well, so the nice thing is we're incredibly long term, and we typically don't use debt in our transactions. So all the free cash flow is truly free, meaning we can do whatever we want with it. That's an amazing starting point. We can talk about examples of how that really helped. I mean, owning an aerospace business as an example in COVID, I don't know if you know this, but aerospace doesn't go down as an industry. It just never goes down. And when you buy an aerospace business in 2019, which is what we did, for an industry that never goes down, and then all of a sudden, the industry's down 85, 90%, right? Massive shockwave through the system. Thank God, we didn't use debt, and we had free cash flow. It's truly free to be able to, well, do whatever we wanted with, which in that case allowed us to grow a ton.

• 32:20Anthony Pompliano?

  What did you do there, like in that situation?

• 32:22Speaker 03

  Yeah, well, so in that specific one, so Pacific Air Industries and Air Cert are two kind of sister companies. They work hand in hand.

• 32:30Speaker 03

  Led by Jason Harp out in Los Angeles.

• 32:34Speaker 03

  Incredible business. They they are, we joke, they're kind of like a hedge fund for airplane parts. They they buy large lots. So, you know, let's say FedEx is changing out their platforms. They're going to switch from one type of plane to another type of plane. Well, you're buying tremendous number of parts to constantly be replacing, right? In the different life cycles of these aircraft. And so they'll take all those parts, spare parts that they had used for the old platform. And instead of like doing a, you know, yard sale with it and be like, you know, that wouldn't make any sense. They bulk it all together. And they say, okay, who wants to buy it? Right? So we're a liquidator of large lots of airplane parts. We'll sometimes hold. We actually, I was with the CEO a couple of days ago, and he said that we recently sold a part that was, we had had in our warehouse for over 30 years.

• 33:18Anthony Pompliano?

  Wow.

• 33:18Speaker 03

  Over 30 years to a to a group in Africa that's flying DC 10s. So incredible how much diversity of airplane parts we have. In that business, because we didn't have any debt, all of our competitors were loaded up with debt. So the model was not only do you have operational debt, but you got huge lines of credit to buy all these airplane parts. You're trying to, you know, especially when capital is cheap, you know, you buy with very little cost of capital. And then you're trying to churn them as fast as you can, which is great until there's a massive slowdown in the business. And cost of capital starts going up. So

• 33:53Anthony Pompliano?

  That would never happen.

• 33:54Speaker 03

  That would never happen. I mean, again, the airline airplane parts business just never goes down.

• 33:59Anthony Pompliano?

  Yep.

• 33:59Speaker 03

  Right? It always either stays flat or goes up. And so, yeah, we were in this really interesting spot where we said, okay, we are one of the few people in the industry who has the ability to make reinvestments. Do we want to try to cash flow this out? Do we want to try to be conservative and just kind of hunker down? Do we want to do what everyone else is doing and lay off a bunch of staff and and sort of, you know, go into a wintery state? Or do we want to go hyper aggressive, you know, zig when everyone else is zagging? And what we chose to do is that. And so we got aggressive in this little tiny airplane parts business, started hiring some of the top talent in the industry and said, hey, come join our ragtag group of people and let's go try to change things. Implemented a brand new ERP system, basically did like 10 years of modernization in 18 months.

• 34:44Speaker 03

  It was incredible to see and now coming out the other side of it. I mean, the airplane business is not back to where as an industry, back to where it has been. And probably is going to be another year or two, I guess, would be before it's back fully. But we're up tremendously because of the changes that were made and the talent that we've added. So having that flexibility, this is where we get a lot of crap from the industry about, how can the world, can you guys generate, you know, even market returns when the, you know, three turns of debt, right? Having a balance sheet that's at least 50% debt is kind of the norm in the private equity business. I mean, that's conservative 50%. Some balance sheets have 80% debt. You know, how are we thinking about generating returns when we're not using any debt? It just doesn't make sense, except for if you look and say, okay, what if the optionality

• 35:28Speaker 03

  of that, not having that debt, provides the cash to be able to reinvest back into areas of the business? So what we say to our, our portfolio companies to answer your original question was, if you've got a great place to put cash, we want you to put it there. So high probability, high return opportunities. We absolutely want you to retain the cash, generate those investments, right? Because in every subsequent out year, we're going to be benefiting from that investment. If you don't have a good place to put it, for God's sakes, don't keep it, right? Send it back out. And so it's really that simple. We just set a high bar in the, in the portfolio and we say, you can, if you can generate better than that with a good probability, go for it. If you can't, send it up and out.

• 36:08Anthony Pompliano?

  You all look at some of these businesses that are tens of millions of dollars that you're going to have to write a check, could be single digit millions. I'm assuming if you found the right one, given the capital partners you guys have, you could go after a really, really big opportunity or whatever. How do you spend your time looking for the businesses, right? So, you know, I was telling you earlier that like, I think a lot of folks, when they go look for a home online, it's like, okay, I want a thousand to 2,000 square feet. I want, you know, two to four bedrooms and it has to be within this geographic location or 30 mile radius or whatever. There's a lot of sites where you go look at buying businesses online. You can do the exact same thing, kind of filter with these preset kind of constraints. For you all, the constraints seem a little bit less rigid.

• 36:51Anthony Pompliano?

  And so that means that you could look at literally thousands of companies. How do you know where to focus?

• 36:56Speaker 03

  Yeah, we do look at thousands of companies. And to be honest, this is one of the hardest parts. We had to get up to speed very quickly on a lot of different industries. We've seen a lot through the years, right? So there's rarely a business that comes to us that we say, we've actually never looked at the specific sector. Although a business that we're getting ready to buy, we had never really looked at it prior to it. So it does happen. It sounds daunting. Honestly, how do we find opportunities that come to us at this point? So we have an incredible network that we've developed over time. And we're kind of one of the only players in the industry that does it the way we do it. So we say to an intermediary, right? Broker, investment bank is, look, if you're going to show this to 500 people and they really don't care who buys the business, don't bring it to us.

• 37:41Speaker 03

  You know, our tagline that we kind of, we talk about a lot is, you know, we're for business owners who care what happens next.

• 37:49Speaker 01

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• 38:17Speaker 03

  So if you care what happens next, I think we're a really good partner. I don't think you'll find a higher quality partner than us. But look, if you're going to sell 100% of the business and you could care less about the future of the business or the employees, and they're going to write you a check, then like, it should just be a straight auction. It's like selling your house. Like, do you really care who lives in your house after you leave it? Probably not. Most people don't. I mean, maybe a few exceptions.

• 38:41Speaker 03

  Businesses are a little bit different. Businesses, the entire, potentially generations of family members are working there. The name is on the door, right? These are community employers. These are people who care deeply about way beyond the dollars. And if we've done our job right, we have a joke that we like to say, which is, if you haven't gotten rich doing it, we're not going to, right? So like, we want to buy a business from somebody who's probably already wealthy. So, you know, if money is the top thing, then we're probably not going to be the right fit, no matter what. And so that mentality gets the right people to come inbound to us. Now, we pay market prices where we wouldn't get a deal done, but we're probably, if you're going to put it out to bid to a number of people, we're probably not going to be quite the highest bid, but the quality of what we're going to offer is a lot higher.

• 39:24Anthony Pompliano?

  When you think about buying something from somebody who's already wealthy, and it's a great kind of heuristic, right? Of like, hey, look, if you made money, we have a shot at making money. But if not, then obviously not. How is it dealing with the wealthy business owner and buying their business versus if you were buying it from someone who, I'll use wealth maybe as a proxy for sophistication, but maybe that's the wrong way to think about it?

• 39:45Speaker 03

  Yeah.

• 39:46Anthony Pompliano?

  That looks like a no.

• 39:47Speaker 03

  It's really not. It's funny because we've met some incredibly sophisticated sellers who are, to be honest, have made good money. I mean, we're talking about here in the range of like, for normal America, good to great. Like, I mean, these are, sort of the low end would be like the chairman of the country club, right? I mean, these are like, very, very wealthy by any standards, nationally, internationally, to like, extremely wealthy, right? Because if you start a business, and, you know, the business we just bought, like, they started in their garage. It was nothing for decades. I mean, they slowly compounded. So this is not somebody who was like, you know, born with a silver spoon in their mouth. I mean, these are hardworking construction people. These are blue collar businesses typically

• 40:30Speaker 03

  we're getting involved in for the most part. And, look, the rewards are great, that if you can compound something for 40 years, treat your customers well, treat your employees well, be a great community member, yeah, good things happen. You know, it just takes 40 years. So if you've got 40 years and a lot of grit and willing to endure a lot of pain, you can Actually start a pretty big business, right? So yeah, um, some of them are very sophisticated and small. Some of them are not sophisticated and large. I would say they're all, if you're going to start a business and you're going to operate a business for that long, you're all sophisticated in, in some ways. I would say some are more sophisticated, like, you know, book smarts versus street smarts. We just love working with people and the difference in geography. I mean, we've got business across the country, differences in culture amongst those. It's so much fun.

• 41:15Anthony Pompliano?

  So what's interesting about this is, um, I think it was Forbes recently, uh, had kind of a 15 minute video, uh, profile. And when they interviewed this guy, uh, and if I remember correctly, I, I believe that he lives in, uh, Arkansas. He's the only billionaire in Arkansas, which immediately you think billionaire in Arkansas, right? People start saying, well, what does he do? And so this, uh, gentleman, uh, if I remember all the details, it was like his wife's family had, uh, a plot of land. And the way he described it was the accountant said to them, you're land rich and cash poor. Right?

• 41:45Speaker 03

  Sure.

• 41:45Anthony Pompliano?

  And so they got in some trouble. They basically sold everything off except for this one little six acre, uh, plot of land, which happened to have a wood treatment facility on it. And this wood treatment facility, he decided that he was going to try to run it. But he was a lawyer, so he was going to work. Uh, he'd wake up super early, four 35 o'clock in the morning. He'd go out there, he had one employee, he would help them get everything ready for the day. He'd then go home, shower, go work his job as a lawyer, do that till about four 35 o'clock. Then he'd go back, help the guy finish the rest of the work. He did this day in, day out for years, had a very hard time getting the business off the ground. Long story short, you fast forward 30 years or whatever it's been. And, uh, this gentleman is the owner of Yellow Wood, which is Y E L L A Wood,

• 42:28Anthony Pompliano?

  which is the number one wood treatment, uh, products and, uh, facility in the entire country, if I understand it correctly. The reason why it's so interesting is because he is now the only billionaire in his state. And so if you're the only billionaire in a state, immediately, most of America would think, well, this guy must be ballin'. He must be driving, you know, uh, a Ferrari. He has a private jet and a yacht and all stuff. I don't know if he does or not, but he has stayed in that same 2,000 person town. And a big piece of this was him and his business have basically helped to, uh, redevelop and kind of, uh, uh, make the entire main street, all of the buildings and, and, uh, small businesses, uh, make sure that they're sturdy and that they kind of, uh, look nice. They've helped employ thousands of people of, uh, people in surrounding areas.

• 43:11Anthony Pompliano?

  They're bringing them into the town, even though only 2,000 live there. They took over like an old plant that went out of business. And now they're using it for all sorts of other businesses they're starting, et cetera. And all I kept thinking about the whole time I was watching this, and maybe I'm a weirdo for thinking this, but I was like, the day this guy dies or sells this business, does that town fall apart?

• 43:29Speaker 03

  Yep.

• 43:29Anthony Pompliano?

  Right? And so you, you mentioned earlier, kind of treating your community well, you're an employer in the community, all these things. When you all come in, sometimes the management team stays. Sometimes you bring in an external CEO or maybe the seller is like, hey, I want to be the advisor. We, we need to bring in a new management team. How do you balance like the success of the business? Maybe because they were such a good steward of in the community and there was such a great participant. But this new person coming in, like, maybe they don't have a connection to the, to the town. Like, like, how do you think about some of like the nitty gritty, really weird details of these businesses that don't fit in a spreadsheet?

• 44:03Speaker 03

  Yeah. Well, one, there's, there's a lot of magic to these businesses where you start picking them apart. And you're going to get some, some really weird results, which is what I think your intuition is pointing towards, right? Like, like, let's say that, you know, a business has 50 major decisions that you can make about how you're going to, where you're going to place it and how you're going to run it and all these things. You don't know kind of which ones you're, you're pulling on when you start making these changes, which is why we are, for the most part, pretty change averse, right? We want to make sure we fully understand, um, sort of the analogy I think in my head is like, you know, a ball of yarn and you start pulling on a thread and you all, you think all of a sudden you're just pulling on a thread. Then like half the ball of yarn drops off the other side, right? Same thing with the business, right? Enough stuff starts to break and all of a sudden you get this weird compounding in a bad way that, that occurs.

• 44:45Speaker 03

  Yeah, we're, we're very biased towards keeping businesses. In fact, I want to think with this, we've never moved a business, I don't think. You know, we buy businesses in small town America. Um, some are in large cities, but some of them are in small town America and we love it. We want them to be there. We think that's a huge advantage for the business because they're so deeply embedded. There are families that work at these businesses, right? Um, and to, to get up and out, I mean, it would require a tremendous amount. I mean, I'm not saying we would never do that. But, um, we would think really long and hard about it. And, and by the way, we try to be part of this, what does it mean to win, right? Maybe we could just kind of take a step back and like, all these decisions are kind of put through the lens of in order to win long-term. Everyone has to win.

• 45:29Speaker 03

  There's literally no way, if you actually think about the game theory of it, for anybody, any one actor to win at the expense of everyone long term. In the short term, you can absolutely do that, right? So this is kind of like the idea of like one time games, very finite games. If you're playing a long game, it's really, it has to become an infinite game. And everyone around the table has to win. All this, all the key stakeholders have to win, or it's not sustainable. Any one of those key stakeholders drops out, it's not sustainable, right? So you think about that and it really forces you to, to put yourself in the shoes of everyone around you and say, all right, what are we going to do that's going to help everyone win over a long period of time? And make sure that they agree that that's the way they want to win. So I mean, that's part of what we do. We get to know these businesses. We have these types of conversations.

• 46:12Speaker 03

  We try to talk to everyone, you know, what are your goals? What are your aspirations? What are you going to be doing?

• 46:17Anthony Pompliano?

  Yeah.

• 46:17Speaker 03

  How can we be a part of that?

• 46:19Anthony Pompliano?

  We've talked a lot about maybe what I'll call like peering into the business.

• 46:22Speaker 03

  Yep.

• 46:23Anthony Pompliano?

  Right? So they're running it. You've got the management teams, et cetera, there. Peter Lynch famously, I think, said, if you spent 15 minutes on macro, you spent 13 minutes too long. Right? And many people who will watch or listen to this, they're very interested right now in what the Federal Reserve is going to do, or interest rates, or inflation, and you know, kind of name your macro data point that they're paying attention to. How much do you guys think about business cycles and kind of external things that are happening, which may or may not have an impact on a specific business, but seem to have a lot of attention from the finance or business world? Does that play into decisions that you guys make? You know, interest rates on debt don't really seem to make a difference because you don't take debt.

• 47:05Anthony Pompliano?

  So like, how do you think about the intersection of some of the businesses you own and macro?

• 47:09Speaker 03

  Yeah, what I would say is we, um, the macro is always going to affect the micro, but you, we're not going to make decisions based on macro. We're going to make them on based on micro. So what I would say to you is, especially like 2021 was a good example of this. We saw a ton of business models that, um, all of a sudden had these giant spikes. Right? What happened? Oh, it was just the business model is great and just, just compounded. It's like, no, it was like, you know, very, very level and moderate growth. And then all of a sudden a giant spike. And now you're trying to sell the business based on, you know, two times the earnings you experienced in any previous year. What could have caused that? Could have been COVID, you know? And they're like, oh, no, no, no, no, it couldn't have been COVID, you know? It's like, of course.

• 47:52Anthony Pompliano?

  No, we sell medical masks. Right. Definitely had nothing to do with this thing.

• 47:56Speaker 03

  Nothing to do with that, right? Nothing to do at all. I mean, honestly, we saw a tremendous amount. Now, now that can actually happen on both directions, right? So you've got to be able to look at it and say, it doesn't matter what the past of the businesses, doesn't matter what's happened in the past. It's only helpful in being able to predict the future. And what we're trying to do is we're trying to say, okay, look, from the time we buy it, what do we think without our involvement, the trajectory of the business is on? And so we are very interested in what major shocks to the system, what, you know, we're going to look at different events. Let's say we looked at the events industry and we looked at the, yeah, personal protective equipment industry, right? And we looked at that same thing and we said, okay, what do we think 2020, 2021 is going to look like for those two businesses? Do we think there may be be some abnormalities associated with it?

• 48:39Speaker 03

  So it's important that you get to know what the major macro events are and kind of how it would affect these different industries so that when you go into them and you're looking at valuing them, you certainly don't want to overpay and you don't want to short people when it's like obvious that, okay, look, there was a stumble because, you know, you were throwing events or you were supplying equipment to the event industry or whatever it might be. Of course, there was like, you know, a year where no one had an event. So it's important to think through it that way. I mean, even, even interest rates, even though they don't directly affect us, because typically we're not using debt in our transactions, our companies are using lines of credit to grow the business, so it affects us there. Our competitors are all using debt, right? So when we think about like, there's, look, there's a lot of times in 2021 that we looked

• 49:24Speaker 03

  at each other and we said, how are we so off? I mean, we would be outbid by 50%. Well, when capital is basically free, right?

• 49:35Speaker 03

  You can bid some pretty crazy numbers and make the spreadsheet work. We thankfully never got there, but it was tempting at times.

• 49:44Anthony Pompliano?

  So as you're kind of looking at some of those aspects of the macro environment. How much are you all pushing information down to the companies, right? Like, I'm assuming that you and your team are better suited to evaluate macro than the average small business owner in America, right? They may pay attention to it, they probably read the news, like all that type of stuff. But we've talked a lot about things that you guys could do, change, you know, incentives, do branding, help with like online lead generation, like there's very tactical things. But is there any element of like, you're just pushing information down? And I've seen you guys start to do a lot more content online. Some of that seems to be aimed at, you know, hey, if you're a business owner, you want to sell your business, here's kind of how we operate and kind of inbound deal flow. But also it feels like, man, some of this information that I've seen you guys post,

• 50:29Anthony Pompliano?

  I've listened to some of the episodes, et cetera, like this could be pretty valuable actually for even the companies you already own. So how do you think about kind of information that you all have and getting it out to either future sellers or even the companies you've already bought?

• 50:41Speaker 03

  Yeah, we think about it a lot. You know, one, we think that content's the only way to scale conversation. So, you know, we want to have 10,000 conversations with sellers and business owners. Like, there's no possible way we can actually do that one-on-one. So we think that having conversations that we can record, things that we can write, that we can then share, is a really helpful thing. In our portfolio, we try to share quite a bit. I mean, depends on the person and depends on the cycle of the business, right? If it's just heads-down execution, we can share things here and there, but like actually very little is going to adjust, from a macro perspective, is going to adjust the micro. Now, I can tell you, during COVID, when no one had any idea where this was going to go, I mean, example, our pool business, we thought for sure that pool business was going to go

• 51:26Speaker 03

  down a ton, kind of, say, March, April, May. And I remember, you know, we were in touch with that team a lot and, and, you know, it was like, well, let's start cutting prices, maybe we can pull some demand forward, maybe we can, you know, fill our pipeline to get through. You know, we had no idea, is this pandemic going to last three months? Is it going to last six months? No clue. And then all of a sudden, the craziest thing happened, which was demand completely reversed and went through the roof. And it was like, Okay, cut the price cuts, like get, get the price cuts off and like, how are we going to then deal with inflation? So there was like, okay, the exact opposite problem. So there was a lot of information sharing around, okay, what do we think other businesses are doing in terms of price increases? How do we think about material availability? How do we think about labor availability?

• 52:10Speaker 03

  You know, we had this whole issue where, I mean, the government incentivized people not to work in, in the blue collar trades. I mean, we had people come to us and, and it's no fault of their own. They said, look, I can make more money staying at home than working.

• 52:23Speaker 03

  What would you do if you're me? Said, well, we'd prefer you to work, but you know, totally understand if you, if you feel like it's not something you want to do. So there's a lot of these macro headwinds and tailwinds that you've got to kind of adjust to. Those do, we are in a better position than our portfolio companies to kind of monitor that. And there's a feedback loop. It's not just one directional. They're constantly sending us stuff to and saying, hey, we read this, or we saw this, or an industry event that we were at, they did this. What do you all think?

• 52:49Anthony Pompliano?

  Yeah. One of the things that as I invested in more and more companies, the portfolio got larger, I always struggled with was I didn't know where the balance and kind of the right way to do it. When you buy a business, people probably want to talk to you, right? Like Brent, I want to talk to him. He's, he's the leader of the organization that is buying my business. You all are probably still at that stage, I would think, maybe I'm wrong. Steve Schwarzman, or Sam Zell, or whoever who's been doing it for, you know, 50 years, they've probably escaped that. And now it's like, hey, if you know, Blackstone is going to come buy your business, like, not very many people are going to demand to talk to, you know, whoever. They're probably just going to say, hey, you know, what's your offer? Who am I going to be working with? And kind of get the deals done.

• 53:31Anthony Pompliano?

  But on the same side, like the support of the businesses, you have the same 24 hours as everybody else. How do you think about, okay, you want to kind of be the leader that goes and, you know, shakes the hand of the person you're buying the business from, but also you can't answer every single phone call or email. Like, how do you scale yourself? Like, have you at least thought about this? And then also from an organization standpoint, is there like a threshold that you kind of cross into, whether it's size of team, or number of businesses or something where you go, look, we got to now have, you know, a portfolio manager and like they're your point of contact. How have you handled?

• 54:02Speaker 03

  Yeah, we've actually already crossed this.

• 54:04Anthony Pompliano?

  Okay, amazing.

• 54:04Speaker 03

  Yeah, so.

• 54:05Anthony Pompliano?

  Even better, because now you can tell me how you did it.

• 54:07Speaker 03

  Yeah, this was, this was actually, it was a big change. I mean, I remember getting to the point where there was no way that I could go on every site visit, have every phone call. I mean, this is probably four or five years ago. And so now, I mean, the goal of any business, I think, is to replace yourself with people who are more talented than you are. You know, we have a little bit something different about our model, and this maybe kind of goes to something a little bit zoomed out than even what the question you asked, which is how you scale a normal private equity firm is you hire more partners. So partners are what I call like private equity firms in a box, right? So you hire another partner to find more deals, to be able to negotiate more deals, to do diligence on more deals, to negotiate the paperwork on the deals, and then to ultimately operate them, sit on the board of directors post-close, right?

• 54:51Speaker 03

  So if you and I owned a private equity firm together and we said, okay, we're kind of maxed out, like, how do we grow? Well, we got to find a third partner, and then we got to find a fourth partner, and then we got to find a fifth partner. And this is the same thing like how law firms grow or accounting firms grow. So that's the traditional way of doing it. That's how almost everyone else does it. I don't come from a finance background, right? We haven't really talked about this. You know, I've joked in the past, I'm like the Forrest Gump of private equity, right? I kind of fell backwards into this. And so I don't have any of the muscle memory of how a private equity firm should be built. So I looked at it and said, well, why in the world would you do it that way? It seems really hard to find people who can do all these things exceptionally well. These are all these jobs that I just described.

• 55:34Speaker 03

  They're very difficult jobs. They're very different skill sets. What I said was, why would we run this like a manufacturing operation, right? You wouldn't expect the welder to do all the woodwork, right? Like, that doesn't make any sense. You say, hey, we want to go out and hire the guy who's amazing at welding, and then we're going to hire the guy who can do carving, right? I mean, those are very different skill sets. Same thing in our business, how you talk to a seller or a leadership team when you first get in touch with the business, what you ask, how you ask it, how you pursue it, what you push on, what you don't, is completely different skill set than how you operate the business post-close. Now, you want a continuity of information. You want to make sure there's not disincentives or wrong incentives. Along the way to pass the buck that something's bad, right?

• 56:15Speaker 03

  But we have specialists in each area. So we have partners, but those partners are over a specific vertical. Right? So somebody who's only over the intake of the business. Once that, once that business gets to a letter of intent, they fall off. We have a new team that comes in. So we're constantly moving them between these things, which makes it really much easier for me. So instead of being the partner that's in charge of leading a deal, we actually don't have a partner that's in charge of leading a deal. Right? We have a whole team of people that comes around your business. Everyone is kind of like, I don't know, it's like the League of Extraordinary Gentlemen or the X-Men or something. Right? Like, like you don't want Cyclops to go underwater, right? Not going to be a healthy thing, right? We got each person's got their own powers that they are really, really good at.

• 56:57Speaker 03

  And what we try to say is, hey, here's the kind of an array of people around you. At any given stage, you're going to know who's kind of the lead person. But that lead person's going to change depending on the stage we're in.

• 57:07Anthony Pompliano?

  And then how, once you've bought the business, is it the same thing? Where you basically have used that manufacturing analogy. Now all of a sudden you're the owner. You have somebody who, hey, they're going to help you with marketing. If you need help, they're going to help you with finance, whatever. And there's not really one single point of contact that's supposed to oversee everything.

• 57:24Speaker 03

  Yes, we actually have two points of contact that help resource the company beyond that. So we have an operating partner and we have a financial partner. They're creating feedback loops in those companies. So the financial partner is interacting with their financial team, creating financial reporting, reviewing things, providing feedback. Trend spotting, all these are things you'd want them to do. Then the operating partner is really becoming the advisor, kind of the more of the board of directors in a box. If you want to call it that for the company. And then their job is to then between the two of them to resource the company. Besides kind of the things that they directly offer, right? So it depends on the person, the operating partner, they're going to have different skillsets. But let's say that they want to recruit an executive, right? They're going to say, hey, let's get Kelly involved. Here's how Kelly works.

• 58:07Speaker 03

  What do you think? Yeah, great. Let's get Kelly involved. Then Kelly, who's our lead person on recruiting, she comes in and helps us recruiting. It's a very specific talent that she's adding to that. So their job is to kind of understand the strategy, do the governance, oversee the companies, develop relationships, succession planning, all those things. And then resource the company either from within or without.

• 58:29Anthony Pompliano?

  You've been doing this now for 15 years, 13 years, something like that.

• 58:34Speaker 03

  15 years.

• 58:34Anthony Pompliano?

  15 years, okay. So 15 years, you are not old, which is unique.

• 58:41Speaker 03

  Thank you.

• 58:43Anthony Pompliano?

  Because.

• 58:43Speaker 03

  I haven't been called not old in a long time, so that's good.

• 58:45Anthony Pompliano?

  Well, I was recently reading something and I don't remember the exact age, but I believe that Bernard Arnault, who LVMH, I think that he finally got control right around 39 or 41, somewhere in that range.

• 59:00Speaker 03

  Yeah.

• 59:01Anthony Pompliano?

  Which many people, when I was 21, I was like, oh, that's real old, right? Now I'm like, hey, chill out, youngins, right? But he then went on a 30-year run. And when you think of doing something and doing it well and being obsessed and focused with it for 30 years, you can accomplish some pretty incredible things.

• 59:20Anthony Pompliano?

  When you think about what's ahead of you, is it just more of the same? Or is it, hey, we want these businesses to grow in size and use the free cash flow to buy more business? Like, how do you think about what's like the next 30-year plan? And you may tell me, actually, in five years, I'm gonna retire and never talk to anyone again. But like, how do you think about the next like 30 years?

• 59:40Speaker 03

  Yeah, well, I recently turned 40, so it's been a.

• 59:43Anthony Pompliano?

  I wasn't gonna say that. I was gonna let people think that you were somewhere between 25 and 55.

• 59:48Speaker 03

  Yeah, yeah, yeah, yeah. Well, I feel like it's to put a flag in the ground. And I mean, Bezos didn't start Amazon until he was at 39, 40?

• 59:56Anthony Pompliano?

  I think somewhere, I think in like mid-30s, but yeah.

• 59:58Speaker 03

  Was he mid-30s? Okay, maybe he's a little bit younger than that, but yeah, so it means it's inspiring.

• 1:00:01Anthony Pompliano?

  40 is the new 35, it's okay.

• 1:00:03Speaker 03

  40 is the new 35. Yeah, I mean, 40 is the new 20? No, it's probably not the case. Yeah, so in terms of the plan, like, I didn't have a plan for permanent equity 15 years ago. I had, none of the stuff that we're doing now was on the radar. Even five years ago, if you, if you kind of go back, we had just raised our first fund. In fact, we were actually in the throes of raising the first fund. Weren't sure if we're gonna be able to convert over or not. I mean, it was a, it was a stressful time, right? And it's gone way better than I ever could have imagined. And so I feel like that.

• 1:00:35Speaker 03

  I am, I'm always interested in thinking ahead of what, what could come next. You know, a, a clear path is to continue to raise capital, to continue to serve our customers. Well, it seems like everything, everyone's happy in the system. It seems like we created kind of a de novo new way to do private equity. Which, you know, everyone does it one way and you do it something other way. It probably shouldn't work. Turns out it's, I think, working decently well. I think the model, I'd prefer our model to any other model, right? So I think it's got legs to be able to continue to grow into the future. We get continually pulled into larger and larger opportunities. Ironically, our model works better even up market from where it is today.

• 1:01:17Speaker 03

  But at the end of the day, I have no idea where this thing's going to go. And I think always planning and never having a plan is kind of like the ultimate combination. So I think our model works in other geographies worldwide. I mean, I think there's a real opportunity probably in Germany and in England.

• 1:01:36Speaker 03

  Canada, we really not touched much. Australia, New Zealand, Japan's got a really interesting economy for, for something similar to what we're doing. Obviously, there's a lot of cultural nuances to moving into those. There's a lot of baggage that comes with moving up market because that's what every other private equity firm has done. And really what we've just tried to do is to say, we're going to do what makes sense. We're going to try to treat everyone exceptionally well. So we always want our investors to know that like, whatever we do, we're going to have their back. And the employees at these companies, whatever we do, they're going to have their back. So I feel like we can't lose, you know? And tomorrow's not assured. So I have no idea. I'm trying to take it day by day.

• 1:02:15Anthony Pompliano?

  Everything you've done is in the private markets. You talked about geography and industries. Would you guys ever look at public opportunities to bring private or take a permanent equity public? Like, how do you think about public versus private markets?

• 1:02:27Speaker 03

  Yeah, that's a great question. We have looked at a couple, take privates. Ultimately, we just don't have good muscle memory for it. There's just a whole nother set of rules. I mean, we're highly regulated now. We've come to a, a big enough size from a capital perspective where we're, I mean, we're regulated like the big boys are, right? And That is its own challenge and its own barrier in some ways. It's costly and it's kind of stressful to deal with regulation. But, you know, I think we're doing great in that department. When you get into the public markets, kind of a different level of scrutiny and a different level of rules and what you can and can't do. I actually looked at a take private at one point. This is way in the past and I just didn't know what I was doing. So I went and met with the CEO and I was kind of getting excited about the opportunity

• 1:03:12Speaker 03

  and, you know, he kind of made it clear that he was like, I'm doing this out of a favor to a friend. Like, I'm not meeting with you because I'm interested in, you know, your firm helping us at all. And I was like, okay, well, great to meet you or whatever. And he made like two or three comments. I was like, man, that seems like oddly specific information. He goes, oh, by the way, son, I just want to let you know, you're now opted out of being able to do anything in the public markets because that's not public information I just gave to you. And I was like, wait, what? And he was like, so if you're thinking about buying our stock, you can't buy it now. I was like, shoot. You know, so like, there's just a whole lot of different set of rules that you have to go on.

• 1:03:47Anthony Pompliano?

  And also, it feels like, you know, if you're the newbie sitting down at the poker table and you're playing with sharks, they know exactly what information to tell you.

• 1:03:56Speaker 03

  Correct. Yeah. So I would say not say that we wouldn't ever go do it. It's just an expertise that we haven't built up and, you know, never say never, but, you know, we're not sure. In terms of taking something public, I mean, I think the one thing that is frustrating to me, there's always opportunity cost everything. You know, we would love to be able to help our employees compound their capital with us, right? Because the way the rules are set up in the United States around being a qualified investor and all those things, like, we can't take investment from hardly anybody, right? There's a very narrow group of people we can take investment from. And I understand why the rules are

• 1:04:37Speaker 03

  there and we can debate the merits of that. Totally get it. It would, it would be interesting at some point to be able to offer the opportunity to work with us to a larger group of people, but we have no plans for that.

• 1:04:49Anthony Pompliano?

  Yeah. It's interesting. The name is permanent equity.

• 1:04:54Anthony Pompliano?

  There are many vehicles that somehow I figured out how to get truly permanent equity with no kind of end life of the fund, right? When in the Bitcoin world, there is a fund that is run by grayscale. It's got about three and a half percent of all, I think, of the supply circulating. When Bitcoin went in or the dollars went in, they're not coming back out. And so there's this permanent equity component. But to your point, there's a hell of a lot of rules and also the day to day scrutiny, right? You know, I'm assuming you guys aren't sitting there trying to figure out, are you up, you know, this multiple or that multiple on a day to day basis?

• 1:05:30Speaker 03

  Yeah, we don't have to worry about day to day.

• 1:05:31Anthony Pompliano?

  With the with the stock market a little bit different.

• 1:05:33Speaker 03

  Yeah, for sure. Yeah.

• 1:05:34Anthony Pompliano?

  I ask people for questions. And so I held off. I was gonna email and text a bunch of our mutual friends. And I was like, no, I'm not gonna subject him to that. And I have a couple.

• 1:05:44Speaker 03

  Sure.

• 1:05:45Anthony Pompliano?

  The first Morgan Housel.

• 1:05:46Speaker 03

  Yeah.

• 1:05:47Anthony Pompliano?

  You and him.

• 1:05:48Speaker 03

  That guy sucks.

• 1:05:50Anthony Pompliano?

  You and him don't get along on the internet, but I know you guys are good friends.

• 1:05:56Anthony Pompliano?

  He has no clue. I'm gonna ask you this, but at what point did the razzing of Morgan begin?

• 1:06:02Speaker 03

  He's just, he's, he's my, he's my fake Twitter nemesis. Yeah, Morgan, Morgan's such a great friend. He's a great guy. We were actually texting back and forth yesterday. It's hilarious. Yeah, people, people who I just started going after him just because he's such a like, he's such a lovable guy, and he's so humble. And he's just hilarious to make fun of. He's just like the guy that you're with, like, you know, at a sports game, that you just keep razzing on him, right? And he just takes it.

• 1:06:26Anthony Pompliano?

  Do people think we're serious?

• 1:06:28Speaker 03

  People thought I was serious. Like, I had multiple people I've read, reach out and be like, hey, man, I don't think it's worth it. Like, you know, can you just like, you tone it down a little bit? Like, what do you, what do you have against Morgan? Like, what? I'm like, no, no, you don't understand. It's, it must be the worst kept inside joke.

• 1:06:42Anthony Pompliano?

  Yeah.

• 1:06:42Speaker 03

  Yeah, he, he and I are great friends. And I admire the heck out of him. He's a great dude.

• 1:06:46Anthony Pompliano?

  Every time I see one of you say something, it, I don't know why, but it just cracks me up. I'm like, look at these two guys. And I, and I've always thought like, I'm sure people think they're serious, right? So that's pretty good. Twitter in general is something that you've used. Sometimes you're using a lot. Sometimes you're not. How do you think about? Not just the firm communicating, but you communicating through whether it's social media or you guys wrote a book, right? And so that was a whole process. Like, talk a little bit about your communication with not only business owners, but maybe the broader business and investing community.

• 1:07:17Speaker 03

  Yeah, I mean, I think over time, just Twitter's just become a source of fun and enjoyment for me and something that I enjoy trying to help people through. You know, I, at one time, you know, it's like, try to be a thought leader, try to put out interesting content, try to do whatever. When I stopped doing all that garbage and just focused on like trying to help people and put out things that I thought were interesting. And again, content's the only way to attract the right people and repel the wrong people. So, you know, every time you say something into the world, especially when you've got a megaphone like a Twitter can provide, you're going to lose a bunch of people and you're going to gain a bunch of people. And the people you lose are people who don't agree with you or don't want what you're saying.

• 1:07:59Speaker 03

  And the people you gain are more in your tribe, right? And so, you know, I've enjoyed it from that perspective. I mean, I met most of my good friends through Twitter. I mean, my life would not be nearly the same if it wasn't for Twitter. I'd use the joke that I monetized Twitter better than Twitter has, may still hold.

• 1:08:21Speaker 03

  And really, I would just, you know, from like encouragement perspective, encourage people to just be who they really are. I feel like that social media creates this inauthenticity that you want to put a, you know, mask on and say, I want to present myself a certain way and my life a certain way. And it may work for a little while, but people can tell. And when that gets shattered, I think people, people don't care for it. I'm curious about you. I mean, you've got a huge Twitter following. I knew you before you had any.

• 1:08:44Anthony Pompliano?

  Love, hate, relationship.

• 1:08:45Speaker 03

  Yeah, yeah, I mean, I knew you before you had any Twitter following.

• 1:08:49Anthony Pompliano?

  I think that you had more Twitter followers than me.

• 1:08:51Speaker 03

  For sure I did. Did you even have a Twitter account when I first met you?

• 1:08:55Anthony Pompliano?

  I think I had one, but I hadn't used it in years.

• 1:08:57Speaker 03

  You had like a hundred followers or something. Yeah. So how's it been for you? I mean, what's the?

• 1:09:03Anthony Pompliano?

  It's amazing. I think your point about like monetizing it better than Twitter has, I could sit here and rattle off a bunch of probably friends that I have and mutual friends that we have that they've built their business. They've literally started companies with people they met on Twitter. They've got investors that way. They've raised capital, all these different things, which is amazing from a business perspective. I find the most valuable part is not so much, I think a lot about in life is like, there's three groups of people that you can aspire to or spend your time with, which is like, there's your heroes, your peers, and then like the next generation. And I actually see most people on Twitter, they're trying to get in touch with their heroes, or they're trying to engage with them or enter those conversations.

• 1:09:44Anthony Pompliano?

  And if I'm honest with myself, I actually think outside of maybe guests for the podcast, because a lot of that has happened where I've just DM'd someone, they like responded to me or something and it kind of opened the door. And you shoot your shot. I've actually probably met the most younger people.

• 1:09:58Speaker 03

  Yep.

• 1:09:59Anthony Pompliano?

  And that to me is a place where like, you know, I've thought like, I don't know how I would have met those people otherwise. The peers you meet, you know, in just kind of doing deals or talking to people or whatever, the heroes you can read about, see them do interviews, like all that kind of stuff. But it's actually like the younger people. Again, I'm getting to an age where like, I'm probably disconnected to some degree. And so I meet these people and it always cracks me up because I can tell, oh, you're from a different generation. They'll hit me with like, uh, we have one person who works with, that I met on Twitter. And he'll send me these text messages. It's like deciphering a new, you know, a secret code.

• 1:10:31Speaker 03

  Yeah, I can't do it.

• 1:10:32Anthony Pompliano?

  The first time he hit me with the letter P, good.

• 1:10:36Anthony Pompliano?

  I was like, pretty good. Okay. Got like, hey, you know.

• 1:10:38Speaker 03

  That's good. I was actually like trying to shoot through it myself.

• 1:10:41Anthony Pompliano?

  Right. And he like kept sending me these text messages. And I was just like, man, I need to find more young people because like, I hope that we're not putting this in, you know, like actual professional communication. Like this is a whole different culture. This is a whole different way they talk about whatever. And one of the things that I started to realize was like, these young people were taking TikToks that were being uploaded and they were putting them on Twitter. And so I'm not on TikTok, but like, I almost felt like I was getting, you know, a flavor of like, oh, that's what's going on there because I'm seeing the content here. So I think that's one. The other piece of it is in whether better or worse, like it is that megaphone. I think you said it earlier, like content is the way you scale conversation. I'd never heard anyone describe it that way. Twitter to me is maybe one of the best ways to do that because yes, a podcast or a YouTube writing, you can reach a really deep connection.

• 1:11:25Speaker 03

  Yep.

• 1:11:26Anthony Pompliano?

  But man, if you get a tweet that, you know, takes off, it's really hard to write something that reaches a million people, right? It's hard to get a podcast with a million listens.

• 1:11:33Speaker 03

  And nuance is hard, too.

• 1:11:35Anthony Pompliano?

  Of course. And so I look at Twitter a lot, actually, as like, there's this output, but maybe the response is more valuable.

• 1:11:43Speaker 03

  Yeah.

• 1:11:43Anthony Pompliano?

  And you put things out there all the time and you're like, oh, I am an idiot. Thank you for reminding me. Like, I didn't think about this or that or whatever. So I don't know.

• 1:11:51Speaker 03

  No, I mean, I have a love hate and I think that the love is, I love chatting with people and getting to know new people. And it's been a great serendipity engine, right? If you want to think about it that way. The hate is just that when I'm at my worst, it's like a really bad reinforcement of all the things I should not want from the world. Right? It's like, oh, well, I don't feel loved. I don't have attention. So I need to go and get attention online. Right? Like, that's a, it's a very toxic cycle you can get yourself into. So.

• 1:12:19Anthony Pompliano?

  As someone who went through this, I now can see it playing out. And I've sent messages to people privately and said, hey, you're not going to listen to me. Right? Because guess what? Somebody said it to me and I didn't listen to them. But on the rise up, just remember, there's another side to the hill. And that can be a forced error. That could be an unforced error. That can be a mainstream media thing, where that literally can just be like, hey, you're, you know, you're the darling today because your company's doing well. Covid happens, right? And, you know, that big event business you had, nobody gives a shit anymore. So I think that's interesting. Another person that I was going to message, but did not, because I knew for sure he definitely was going to give me too much dirt, Patrick O'Shaughnessy.

• 1:13:02Speaker 03

  Yeah.

• 1:13:03Anthony Pompliano?

  I think I've heard you guys talk about, you talk multiple times a week, for sure. I think maybe even multiple times today.

• 1:13:09Speaker 03

  All right.

• 1:13:09Anthony Pompliano?

  Yeah. He has built a whole kind of media empire of himself. He's got his venture fund. You all appear on the outside to come from completely different approaches to investing capital, which are great friends. Talk a little bit about whether it's him or other people like that, that you spend time talking with, but they now actually do exactly what you do in terms of deploying capital.

• 1:13:30Speaker 03

  Well, those are my favorite people. I mean, honestly, I don't have great contacts, relationships with other private equity people. One, I think it's because what we do and how we do it is so weird and different than traditional private equity. I think in some ways, we're kind of like the zoo animal in the private equity world. But yeah, Patrick, in particular, we met online, met on Twitter. He had actually put out a tweet. He was like talking about capital allocation. He's like, hey, can somebody talk to me who does capital allocation for a living? And I was thinking to myself, well, I allocate capital. Like, I don't know. I'll reach out and I'll say, hey, sounds great. So we got on the phone. This is 2014, probably 2015. It's been a long time. And we got about three minutes into the conversation. He was like, wait, stop. What do you do?

• 1:14:16Speaker 03

  And I said, well, you know, we buy these small companies. Like, how much do you pay for them? I was like, well, you know, we pay like four or five times free cash flow. And he's like, and these aren't like going bankrupt? No, no, there's small companies, you know, they're hard to get access to, hard to run. Everything's hard about them. He's like, all right, stop. I don't want to talk about, I thought we were going to talk about like capital allocation of public markets. Like, I don't want to talk about that at all. Like, tell me more about what you do. So fire away, whatever questions. He asked me like 30, I mean, incredible questions. Patrick's always been, he's got a mind for interviewing. And now the whole world can see it. I still remember when he was like, hey, I'm thinking about starting a podcast. And I was like, oh, that's interesting. Like, well, wonderful turn it into anything, you know?

• 1:14:56Speaker 03

  Turns out it has. But anyway, so we chatted and then he was like, hey, can I come visit you? Sure. I loved having guests. You've been in Columbia, Missouri? Patrick came to Columbia, Missouri?

• 1:15:05Anthony Pompliano?

  I was gonna ask about the Columbia, Missouri pilgrimage, because I, when I tweeted and asked people for questions, literally, I think two different people, I went and I had a steak with Brent in Missouri.

• 1:15:17Speaker 03

  Columbia, Missouri. Yeah, I love having, I love hosting people in Columbia. So anyway, so he came to Missouri. And I mean, I don't know, it's just you jive with certain people. And he's just, he and I have always just been like kindred spirits since the very beginning. He came in, we talked for like 13 straight hours one day. And at the end of it, he was like, okay, look, like, I want my family to invest. And I was like, Sorry to break it to you, like, we don't take outside capital. And I remember when you came and visited me in Columbia, this is again, seven years ago, probably, six and a half years ago, seven years ago. I probably said to you, like, we'll probably never take outside capital because I really believed at that time because I thought my choices were either taking a traditional private equity structure, so two and 20, you know, fee structure with a 10-year time horizon, which would have

• 1:15:59Speaker 03

  completely destroyed our business model, would not have given us the right incentives. It was just a nonstarter. Or create a holdco, which has lots of challenges with how you raise more capital. There's, you know, it to value the assets initially, if you've already got something started, which we had at the time. And so I just really felt like neither of them were going to be the thing. And we were doing just fine, like, we were making really good money and compounding. And I felt comfortable that we didn't need to raise outside capital. And then I met Patrick and he blew up my life and in all the best ways, but.

• 1:16:32Anthony Pompliano?

  Well, he also didn't take no for an answer.

• 1:16:33Speaker 03

  He didn't take no for an answer. So what he said was, he was like, tell me what do I take? And I was like, well, what do you mean, tell me? Like, he's like, I said, we're not going to do it. And he's like, no, no, like, you create a structure. You tell me all the rules of the structure. What do you want? How do the fees work? Everything like that, just make it work for you and then I'll tell you if my family can do it or not. I thought, well, that's a challenge. I get to create a completely new system. Okay. And really, he enabled that creativity. I mean, without Patrick, I wouldn't have had the creativity to do this. And anyway, so I got in front of a whiteboard for multiple days and basically sketched out what we have now and presented it to him. And he took it to his dad and they talked about it. And he came back and said, little tweak here, little tweak there, and we're ready to go.

• 1:17:18Speaker 03

  And I said, what was the structure? It's the same structure we have today. I mean, honestly, it's, so no fees of any kind, no reimbursements of any kind. So we only get paid whenever we start returning cash back to the investors. They get a hurdle, then we get a catch up, and then we split above that. Typically, no debt in our transactions. And I asked for 50 years on a time horizon and actually got 50 years. And then another family that got involved later, their, their lead attorney said, I would never let the family agree to 50 years. That's insane. Like, no one, no one gets to keep capital for 50 years. And I said, okay, what's the longest structure you've ever seen? Cause I could tell he was serious about this. He was like, look, son, you know, it was like one of those like, this isn't going to fly. We're serious. We're serious. Right. I mean, and he was a serious man, like they were a serious family.

• 1:18:02Speaker 03

  He's a serious man. And, uh, and he said, I, okay, look, one time I saw 27 years with three, one-year extensions. And I was like, sold. That was it. That was it. So anyway, that's the structure we have. And that's the structure we have for the first fund, for the second fund. It's worked out great. Um, I got cold feet, I think twice during that process of raising that initial fund. So, so Patrick's family says, yes, we want to, we want to invest. And I said, great. Like now what? And he said, well, we know a bunch of rich people. I said, great. Who knew? You know? Um, so he started making introductions and I mean, literally like he, his team to his credit, like he's like, send me your numbers. We'll actually create a deck for you. Like, like they did a lot of work and we're just incredible partners. He and his father Jim

• 1:18:46Speaker 03

  are just both of them gems of human beings. And, um, multiple times through the process, though, I was like, I'm giving up. I don't know what I'm going into. It was like, I was exiting a phase of my life and my career where, you know, I had kind of made it, right? I like, we had, we had a great team. We were on a great trajectory. The businesses were working. The strategy was working. And we were kind of breaking the thing that was working to make something new. It was scary. And there was, you know, not everyone in my office was, uh, in agreement that that's the direction we wanted to go. There were a lot of heated discussions, um, around what we were going to do. And multiple times I called him and I was like, I just don't think this is worth it. And he's like, stop being an idiot. This

• 1:19:30Speaker 03

  is worth it. Here's how it's going to work. You're fine. Like, you know, kind of stay the course type thing. Literally talked me off the ledge twice. And so, I mean, truly the, there wouldn't be a, any outside capital. There wouldn't be a first fund. There would be a second fund without, without Patrick and his dad. And, uh, then we just developed a friendship. We, we created this event called Capital Camp, which is, it's kind of crazy how the thing, I mean, we just thought we'd get some friends together in Missouri and show them a really great time. The joke is that I run a food and wine festival and Patrick runs an investing conference, right?

• 1:20:00Speaker 03

  It's turned into this like really big international event like last year we had 400 people from 16 countries. A lot of capital in the room and just try to make this experience. It's in Columbia, Missouri, right? Nothing cracks me up more than like people flying in, not only just from like New York, LA, San Francisco, Dallas, you know, into Columbia. People were flying from like Shanghai and Singapore and South Africa and Switzerland to like Columbia, Missouri. So just have fun.

• 1:20:28Anthony Pompliano?

  When you guys set up the structure, a family or a private investor has a lot of flexibility. You also have institutions that have invested. What was that conversation like?

• 1:20:41Speaker 01

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• 1:21:09Speaker 03

  Well, a lot of institutions said, just laughed us out of the room, to be completely honest, especially on the, I mean, the last fund raise. I mean, we were, we had raised one, one fund, but it was pretty small. The initial fund was 50 million. We were raising 300 this last time. And, you know, they kind of counted that as like the first institutional raise. That kind of counts as your, really your first fund in their eyes. And a lot of them were just like, look, we don't do first funds, which I get it kind of to some degree, but like, if you're going to wait until somebody's already like proven themselves, like haven't you missed the, like the real early opportunity to get with them and become like a true partner? So, but anyway, there were a bunch of people-

• 1:21:45Anthony Pompliano?

  And also first time funds usually outperform.

• 1:21:47Speaker 03

  First time funds do outperform. Now, there's also a lot of people who shouldn't raise capital and all that-

• 1:21:52Anthony Pompliano?

  There's a lot of first time funds that also don't perform at all.

• 1:21:54Speaker 03

  Correct. Yeah. So we should, you know, in all caveats, there may be some survivorship bias there. But, but anyway, so, um, yeah, I mean, a lot of people laughed us out of the room. I mean, we had a lot of people who said, one, you're not going to be able to build this in Columbia, Missouri. Like, who the heck would ever live in Columbia, Missouri? And we're like, like, what we do and we think it's pretty awesome.

• 1:22:14Speaker 03

  And another one was just like, building any firm new is really, really hard. And I said, well, yeah, but we've been doing this for like a decade already. So you gotta remember, like, we didn't just like, come up with an idea and say, hey, we're gonna raise money to do this. Like, we did it with our own capital for like, the better part of a decade. And, you know, the actually, the, the ability to go slow, this is what, you know, I have probably two or three people a month who reach out to me and say, hey, I want to do what you do. On the surface, the returns look fantastic, right? The math is not hard. If you're, if you're buying something at a four or five times multiple and free cash flow, you're starting with a 25%, 20% yield on that capital, right? And you can grow the business, the returns are incredible, without any debt, right?

• 1:22:58Speaker 03

  Like, that's just the baseline assumptions. So people will look at that and say, well, that's better than I can get anywhere else. Like, I should go move into this. I always tell people, it's simple, like, there are no secrets. Like, I'm happy to answer any question that anybody has. It's just really hard and judgment really matters. If you'd given me $50 million, two years into what we were doing, I would have lost all the money. If you'd given me $300 million in five years, I would have lost all the money. It's just, takes a long time to hone, you have to look at thousands and thousands of deals to hone, what do you like, what do you not like? How, you know, how do you see these things play out over time? And if you're given a lot of capital, you can just short circuit a lot of that learning.

• 1:23:40Speaker 03

  And you can pretend to be good for a while, and you just gotta get lucky and hope that it all works out. And I gotta tell you, I'm, I, I've seen a lot of people come and go. There's almost no one who's actually been able to start and build, with some, some exceptions, which have been fantastic. I mean, we always try to help anybody who wants to enter the industry. We actually try to be helpful to them, which sounds like a weird, like, aren't they quote unquote, competitors to what we're doing? The market's enormous. There are just an ocean of people out there who need to sell their business. And there's not enough qualified people, there's enough people who would like, sure, you can give me your business. But like, not enough qualified people who really can take that business and move it forward. And so, I actually think it's a great opportunity, if you're listening to this and you want to get into the space, I would encourage you to try to get into the space.

• 1:24:25Speaker 03

  Just take it slow, like, really learn what you're doing. And it's mostly learn about people. The, the people I think that, that have the worst time And have the most access are like the finance types, the people who look just graduated from Yale, Stanford, Harvard, wherever, big MBA program, you know, they know a bunch of people with a bunch of capital, they can raise the money, they've never operated anything, or if they have, they've been at like a big company or in sort of a bigger organization as like a low tier or middle manager, right? That training just isn't that valuable to running, owning and running a small business.

• 1:25:06Speaker 03

  And also, you know, the way in which the deal process works and the operations post-close are really disconnected in terms of value. So if you're really, really good at finding opportunities and selling investors on how to invest and all this stuff, like you're probably almost by nature, not going to be good at the post-close operations. So there's all these like stumbling blocks along the way. The path looks so easy. Just find a business that's making two, three, five million dollars, pay four or fives, maybe six times for it, God forbid, and then you grow the business and you exit a period later and you make millions and millions of dollars and retire. Like, duh, just do it, right? Like, of course, it's easy. It actually is that simple. It's just the stumbling blocks of doing it are tremendous.

• 1:25:48Speaker 03

  And so that's been something that's interesting over time to watch a lot of people that are frankly, way more intelligent, way more educated, way harder workers, I think, than we are, that have been able to do it because they've actually gone too fast, too quickly.

• 1:26:04Anthony Pompliano?

  Somebody once told me that operating a business is like looking at a beach full of sand. And when you start walking, you have to try to figure out where is actual sand versus quicksand, because it all looks the same. And if you can just, you know, go down the entire beach and avoid all the quicksand, then you'll be fine. But good luck.

• 1:26:21Speaker 03

  Yeah, I've equated it to being in a constant knife fight, where you just get out of bed in the morning and try not to get knifed that day and then get back into bed and do it all over the next day. I mean, it's amazing, like, you know, people look at successful business owners and look, you can make millions and millions of dollars, right? Have this incredible free cash flow engine that you can build over time. Like, it's very attractive if you make it. The number of things that can happen to a business and the number of things that I have seen in my career that just make no sense, that you'd just be blown away by, it's extraordinary, right? I mean, we've put so many people through rehab. We've had people who've done all kinds of crazy stuff, have embezzled money. We've had, I mean, you get weird stuff in the mail from the government. You're like, well, that law conflicts with this other law. Which law

• 1:27:03Speaker 03

  do you want me to follow? That's not our problem. Either way, you're screwed, right? Like, you cannot do everything well. And so that's where you just have to get into businesses where there's margin of safety. You can't use as much debt. I mean, you know, we haven't really talked about the philosophy behind debt, but that's another thing. It's like, we try to be humble and not only our approach, but also in the price we pay and the fact that we don't use debt because we're trying to set up these situations to be the most durable they possibly can. Because frankly, these small businesses are outrageously volatile without adding any more volatility to the situation.

• 1:27:37Anthony Pompliano?

  What I think a lot about is maybe in the more traditional tech industry, it's always how high does it go? You're in a power law game, right? And so it's literally, you're basically buying these lottery tickets to a degree. And now you try to, if you're a good investor, pick the ones that have higher probability, maybe things that you could help, find the right founders, like all the things that make, you know, the good lottery pickers good, but you're still playing a power law game. And so it's all about height and velocity and growth rate and all those things. You're playing a game of like, how bad can it go?

• 1:28:07Speaker 03

  Yep.

• 1:28:08Anthony Pompliano?

  Right? Because you're actually buying something, you're paying based on how it's already going. And if it degrades, you lose money.

• 1:28:16Speaker 03

  You lose a lot of money.

• 1:28:16Anthony Pompliano?

  Right?

• 1:28:17Speaker 03

  Very quickly.

• 1:28:17Anthony Pompliano?

  Yeah. And what I always think about is like, I guess in both scenarios, there's a 1X downside. The difference, though, is that when you're playing the power law game, the rest of the portfolio can like easily make up for any losses. You actually go into it thinking you're going to lose 50 to 80% of the time.

• 1:28:33Speaker 03

  Yep.

• 1:28:34Anthony Pompliano?

  When you're playing a game of buying cash flowing businesses, you're not hoping that you lose 1% of the time. You're hoping actually that everything is, you know, flat to up.

• 1:28:43Speaker 03

  Correct.

• 1:28:44Anthony Pompliano?

  And so you have, you know, a very different kind of calculation because you don't have that power law.

• 1:28:49Speaker 03

  Yep.

• 1:28:49Anthony Pompliano?

  And so debt obviously becomes a whole different game. And it's understandable why people use it.

• 1:28:54Speaker 03

  Of course.

• 1:28:55Anthony Pompliano?

  But at the same time.

• 1:28:56Speaker 03

  Some business models can handle a lot of debt, right? I mean, the predictability of the outcome really is indicative of the amount of debt you can use. Most small businesses are highly unpredictable. So if you're running a business that has an incredible base of recurring revenue, that's like, you know, let's say that hypothetically, you could get a stream of income that we knew exactly how much money we were going to make for the next 10 years. Like, like, no questions asked, backed by the US government. Let's say it's a government contract or something that's locked in for 10 years guaranteed. There's no outs. The government's going to pay you for whatever your service or product you're doing for the next 10 years. Look, you can, you can definitely put debt on that business because you have high predictability of outcomes. Right? Now, do you want to try to grow beyond that?

• 1:29:40Speaker 03

  If you lever it up, there's no capital to reinvest in the business. So you can still get yourself into trouble, even when things are predictable. Right? If you've got a business that's like what I call a normal small business that's going to go up and go down, and you're going to have people leave and you're going to have all kinds of weird headwinds and tailwinds and crosswinds and all this stuff. Like, putting debt on a business only helps one of the people at the table. And that's the investor. Everyone else loses. You're the only one who wins. Now, in the short term, if you're going to play the short run, you can win at the expense of everyone else. And that's what traditional private equity historically has done. I want to paint the entire industry as that because there's some awesome people. They're very, very thoughtful and great stewards that are in private equity that have a traditional model.

• 1:30:24Speaker 03

  But traditionally, if you look at most of the industry, the leveraged buyout industry in particular, it has been, how do we lever this thing with max debt? So that we can put in minimal equity so that this thing works. Heads I win, tails you lose. And the tails, by the way, you being not only the debt holders, but also the employees and the executive teams and the communities they're in, the suppliers, the customers. Everyone else loses at the expense of the investor.

• 1:30:52Speaker 03

  That doesn't seem like a game I want to play. We want to play again where everyone wins long term. And we think that the actual volatility of these businesses, where everyone else says that's a weakness, right? Because we had a lot of investors, you know, go back to your question about what did institutional investors say? They were like, you know, I just don't think you can buy these highly volatile, small businesses at scale and make money doing it. And we're like, okay, that's a bet, right? What they're saying is we don't think you can do it. And to be honest, from the outside looking in, I think that's actually a pretty reasonable thing to say. When you get close and you say, well, what if instead of the volatility being a bad thing? Because volatility goes both directions.

• 1:31:27Anthony Pompliano?

  Correct.

• 1:31:27Speaker 03

  It goes up and goes down. If you don't use any debt and you can handle high volatility, then like our aerospace business, yeah, high volatility down. Now there's going to be high volatility back up. What if you can use that cash flow to reinvest back in the business and catch that volatility on the way up when no one else can?

• 1:31:45Anthony Pompliano?

  You sound like a Bitcoin investor.

• 1:31:46Speaker 03

  There you go. I don't know about that. That's a whole nother world for me.

• 1:31:50Anthony Pompliano?

  No, but it is true, right? Like, I think that this idea of the volatility, but really what you're talking about is like, if you're durable as a business owner, because of the way that you bought the business, it goes back to, and it's so funny, because I think a lot of times when I talk to people who are doing something that appears to be new, it really goes back to the timeless investing principles. Like, you make the money on the purchase.

• 1:32:09Speaker 03

  Yeah.

• 1:32:10Anthony Pompliano?

  Right? And so, purchase could be the price, but also could be the structure in which you choose to do it. And obviously, you guys figured that out.

• 1:32:15Speaker 03

  Price and structure matters.

• 1:32:17Anthony Pompliano?

  Absolutely. Last thing I want to talk to you about, the number one question I got was your kind of journey in faith.

• 1:32:24Speaker 03

  Oh, yeah.

• 1:32:24Anthony Pompliano?

  And a believer in Jesus.

• 1:32:25Speaker 03

  Yep.

• 1:32:27Anthony Pompliano?

  I don't know when you kind of converted, but my understanding is you're an atheist.

• 1:32:32Speaker 03

  Yeah.

• 1:32:32Anthony Pompliano?

  Now you're not.

• 1:32:33Speaker 03

  Yeah.

• 1:32:34Anthony Pompliano?

  Tell kind of that journey, what happened?

• 1:32:37Speaker 03

  Yeah.

• 1:32:38Anthony Pompliano?

  And what I found so fascinating is not only the level of interest when I asked for questions, but also it was people who obviously didn't know who you were.

• 1:32:45Speaker 03

  Yeah.

• 1:32:45Anthony Pompliano?

  They had never seen you on the internet or anything. And so, one of the people that I was by and I saw this and asked him about it.

• 1:32:50Speaker 03

  Yeah.

• 1:32:50Anthony Pompliano?

  And I was like, wow, maybe it's something that's not Brent specific as much as it is, there's this maybe human curiosity.

• 1:32:57Speaker 03

  Sure.

• 1:32:58Anthony Pompliano?

  So, talk a little bit about that journey.

• 1:33:00Speaker 03

  Yeah, man. It has been, it's been incredible. I

• 1:33:05Speaker 03

  Let's see here. So I told my mom I didn't believe in God when I was nine. I've always just been a Hot start. Tough kid. I was, I was, I was coming in hot, coming in hot. Um, yeah, I, I actually asked my mom to drive me to the church when I was 14. Because I set up a meeting unbeknownst to my parents with the head pastor at a local church. And I was like, hey, can you drive me to this church? And she was like, gee, is there anything you want to tell me? Like, is there a drug issue? Is somebody pregnant? You know, like, what's going on? I'm like, no, no, no, I just have all these questions about faith and met with pastors, unbelievable guy, super thoughtful, kind, generous. Sat with me for probably over an hour and I just pounded him with question after question. I just could not understand what was going on.

• 1:33:46Speaker 03

  And I just said, after that, I was like, I couldn't get the answers I wanted. My, my heart was hardened at that point and I just, I was done with it. So from like, you know, kind of 14, 15 through my, gosh, mid to late twenties. I was just an atheist. Like I was a, what I would call strict materialist, you know, this world is what it is. It's what we can see and touch. There's nothing beyond this. And um, that was it, right? In fact, I made fun of Christians. I was like, come on, guys, like the big sky fairy. Come on, like, what, what is all that going on? Come on, like, let's not, let's not go through all that garbage, right? I thought Christians were dumb. I thought they were uneducated. I thought they, they didn't know what they were doing. And um, I reached a point in my career where um, was making more money than I ever thought I would make.

• 1:34:31Speaker 03

  And I had married a beautiful woman who loved me and everything was just gray. It was dark.

• 1:34:40Speaker 03

  I didn't really care. I didn't care about life. I told my wife I didn't love her.

• 1:34:45Speaker 03

  I didn't care about anything. Food didn't taste good. Best drinks didn't taste good. It just kind of was all gray. I was like, this is it? Like you make money and then you buy stuff with it and then you just kind of then, then you die someday and ultimately you're in the dustbin of history. Like that's it? That's the world. It's just like this, this real nihilism that had set in for me. Just like nothing mattered, right? And intellectually, I just couldn't get to a spot where I could figure out like, what is morality? Like if there's no ultimate authority, then there is no objective morality. Like you can say, I believe in this and I believe in that, but like, so what? Like I believe in something different. There's no ultimate arbiter.

• 1:35:24Speaker 03

  And so, you know, everything, again, just the beauty of everything kind of dissipated as I, the more I got into this. And the only thing that would, you know, help me was just not to think about it. Then I was like, man, do I really want to live a life that's unexamined? Like, is the only way to live life in a way that I really don't explore the deepest questions that there are out there? And right around that time, I look at now as God calling me, started putting Christians in my life who are like way more educated than me, and they started really challenging me on like, you say that, do you actually know what that means? Have you read this? Have you thought about this? Have you done this? And I was like, well, shoot, I thought I was pretty well educated and I, I don't know. And so I started just reading books. And I went from like, God being an impossibility. I mean, when I started, my heart was so hard. I was like, there's no way. And look, I had

• 1:36:08Speaker 03

  all the things. Like, I had all the worldly things that you could want, right? My life from the outside looking in was great. Like, I didn't need God. Like, I didn't care, right? But there was just this deep longing, right? C.S. Lewis, C.S. Lewis was a major influence on me as I, as I came to faith. He's got these great quotes about like, you know, we yearn for food, there's for there's something called food, right? We yearn for sex, there's something, there's sex, right? The things that we yearn for are reality. And so, we all yearn for meaning, which means there is deeper meaning. Like, the animals, they don't yearn for deeper meaning. We do, right? There's a difference. And so, I started reading

• 1:36:49Speaker 03

  and, and slowly over time, like, it went from an impossibility to like, oh, shoot, there's a lot of people who are deeply thoughtful and study this stuff, to plausible. And then it really just centered around the resurrection of Jesus. You know, so Christianity, just to take a step back, it's lumped in with all the other religions. I actually was, I did quite a bit of religious studies in undergrad as an atheist. And, you know, I would say maybe to define religion here is, is there's a set of rules. So, some, some higher power gives a set of rules about how the world works that some are unseen. But if you do enough of these rules, you get favor in this life and the next, right? Would you, would you say that was a fair, a fair characterization?

• 1:37:29Anthony Pompliano?

  Every religion that I've ever looked at, that's pretty much it, yeah.

• 1:37:31Speaker 03

  Right. And that's never been a tragedy. To me, like, how could you know if you did enough of the things and like, I don't want to live life like, well, like, I don't know, I didn't bow enough, I didn't pray enough, I didn't, I didn't do the, I didn't do the right I gave nine percent, not 10%. I gave nine percent, not 10%, I don't know. I mean, like, at what point do I, you know, click over? There's even, I mean, you know, TV shows based on the good place, right? It's like, you know, this ultimate weighing machine is like all the good things and all the bad things. So all that just seemed like, it just didn't seem right. Then I experienced what I would call this big realization. I remember the first time I heard what Christians called the good news. So the good news is, God loves you now as you currently are. So

• 1:38:16Speaker 03

  therefore, follow Him, not do all the things to earn God's love. So it's the incomplete, it's a great reversal, right? It's a great reversal. That's why I don't think that actually following Jesus is a religion. It's actually a really interesting, like, there's a whole philosophical debate on this topic. Well, if you think about it, every other religion says, do these things, and you'll get favor in this life and the next. So do these things, the doing, the achieving, is the key to the religion, right? In Christianity, it's reversed. So I don't think there's anything I can do to earn God's love, and there's no way for me to lose God's love, right? All God calls me to do is to follow Him as the one true

• 1:38:57Speaker 03

  King, right? So I'm adopted as a son of the Most High King, I'm royalty, which means a very odd thing, right? But you're royalty under a King who's crucified, under a King who preaches humility, who preaches self-sacrifice, right? So it is the great reversal. I'm not trying to give to charity in order to earn God's love. I'm not trying to, you know, not look at pornography or do whatever to earn God's love. Like, I think, I know now, God loves me, and therefore, I want to follow Him because I care about Him, because I'm in a relationship with Him. Like, if I'm friends with you, and I have care for you, and you say to me, hey, will you go do this thing with me?

• 1:39:39Speaker 03

  Well, why do I do it? Am I doing it to earn our friendship? I guess that's one way to look at the relationship. It doesn't seem very satisfying. Well, how do I know if I go on enough trips with you or do enough of the things? Am I going to earn, right? But this is a very like a utilitarian approach to relationship. That is what I would call the religious approach to relationship, right?

• 1:39:57Speaker 03

  There's no achievement in following Jesus. The work's already been done, right? Like Jesus on the cross, it's conquering. It's actually the the darkest day. This is what we call Good Friday, right? It was the darkest day when Jesus was was crucified, looked like the darkest day was actually his enthronement, right? He was put onto the throne. He defeated sin and death, right? And so what when I heard that for the first time, I was like, that is too good to be true. That just can't, that can't can't happen, right? Because one, my pride said, my works matter. Like, I want to be a good person. Have you ever struggled to be a good person? I know I have.

• 1:40:31Anthony Pompliano?

  I think every single human.

• 1:40:33Speaker 03

  Everyone struggles to be a good person, right? Right?

• 1:40:36Anthony Pompliano?

  It's the whole idea of everyone is a sinner.

• 1:40:39Speaker 03

  Everyone's a sinner in need of grace, right? We need a Savior. I think as I got older, I also realized when I was young, I didn't need a Savior. Right? I can save myself. I had this whole world ahead of me, right? When I was older, things were going to be better. When I was older, I was going to know all these things. I was going to be able to do all these things. And I was gonna, I was gonna not need help, right? I was going to be autonomous, independent. And then as you get older, you realize like that's the exact opposite of reality. Like, we are frail, future's not secured, right? I mean, I've had enough friends now die. I had a guy the other day, he emailed me at 8:17 PM and he died in the middle of the night. He was 35 years old.

• 1:41:12Anthony Pompliano?

  Wow.

• 1:41:13Speaker 03

  Future's not secured, right? We are, we are way more frail than we realize. And so what it really came down to me was, okay, I heard this completely new way of looking at the world. And there were people who believed it, who were deeply thoughtful. I can barely remember what I had for lunch yesterday. How in the world could I know what happened 2,000 years ago? It seemed like an impossibility to me. So, one of the friends that I had who's unbelievable PhD, and he said, "Actually, you should go and research that. See what you think." So I just started studying the person of Jesus. And I started, "Okay, what did he actually say?" Because we've got this movie caricature of this like lily-white, southern church setting, right? Which is like mildly racist and like, you know, people are all trying to earn things

• 1:41:56Speaker 03

  and, you know, be good, don't have sex, give money to charity, do all these things, right? And then behind the scenes, there's like this very cynical view of like, everyone's indulging in all these sins and it's all terrible. And by the way, people are sinners. You know, one of the things that I heard, I think it was C.S. Lewis who said it, it's like, "Church is a hospital for sinners, not a museum of saints." So if you go into a church and you see a whole bunch of people who you think are like terrible, good news that they're there, because you should have seen them beforehand, right?

• 1:42:22Anthony Pompliano?

  Yes.

• 1:42:22Speaker 03

  And by the way, when I started looking at my own heart, and I realized how dark I was, I said, "Hey, maybe this is a place for me." But in the resurrection of Jesus, I actually found the answer. And so if you look at what Jesus said, Jesus thought very highly of the scriptures, the Hebrew scriptures that were before him. He said that he didn't come to abolish the scriptures, he came to fulfill them. So he thought very highly of them. So basically, the entire religion of Christianity, if you want to call it that, following Jesus hinges on the resurrection of Jesus. If you don't believe Jesus was God, and you don't believe in the resurrection, you're just not a, you're not a Christian. Like, I just don't know how to say it. Like, you can be something, you can be, you can be Christian-like, you can, you can be Christian-curious, I don't know, whatever you want to call it, but, but you're not a Christian, right? And I never thought I would get there. I never thought I would actually believe that

• 1:43:07Speaker 03

  Jesus was resurrected. I never thought he defeated sin and death, like, like the actual literal rising from the dead. If you go back, there is incredible evidence. We have more evidence for the resurrection of Christ than we do for any other historical event in history, literally.

• 1:43:22Anthony Pompliano?

  Wow.

• 1:43:23Speaker 03

  You've just got to go and do the work. I did the work. I spent years poring over. I did not become, it wasn't like I went from being an atheist to all of a sudden, it was like some light, like light switch flipped and I was a Christian, right? Like it didn't work like that at all for me. I had to grind and grind and grind and ultimately realize that the evidence became overwhelming. Do you know the founder of the Aspen Institute? He did the exact same thing. He did it in his seventies, his late seventies. This is a guy who started the Aspen Institute, one of the most world renowned institutes of knowledge, right? It's this, this sort of hall of ideas, right? And brings in world-class thinkers from around the world. He, he literally became a Christian in his early eighties after studying the person of Jesus. He shocked everyone. Like Aspen Institute, not a religious organization,

• 1:44:08Speaker 03

  shocked everyone because he did the work. And so, you know, look, I, I can tell you that the freedom I feel, the love that I feel, the life that I have, I can't even imagine what my life would be now without Jesus. I can't even imagine.

• 1:44:22Anthony Pompliano?

  When you went to do the work, what were the one or two things, if somebody's watching this and say, okay, I want to go do that too, that you would send them to?

• 1:44:29Speaker 03

  Yeah. Well, first of all, I'd have them read. So there's four gospels, Matthew, Mark, Luke, and John. I would have them pick one. Doesn't really matter. They're all kind of written to a slightly different audiences. They have slightly different details in them, but like just get a basis of just slowly start reading through the gospels and, and find out who Jesus actually was to start, because you're going to have to get a basis of knowledge, right? And, and you can't get it from like popular culture. It's just so screwed up. And, and by the way, most people, if you ask most Christians actually who'd say they're, they're like Christians, especially in cultural Christian areas, describe what Christianity is, they would actually probably describe it more closely to what, you know, we would call religion. Like I'm trying to earn my

• 1:45:10Speaker 03

  way to God's love. Like it is this very counterintuitive and highly offensive thing to experience the love of God, because it levels everyone. There's no good, there's no bad. We're all on the same level field, right? Which is highly humbling. I would say you start there. And then there are just a number of books about the resurrection. I think the resurrection is the key piece. Paul, who wrote most of the New Testament, used to be Saul of Tarsus, was a persecutor of Christians, actually killed Christians, and then had a experience with Jesus and became Paul, who was a devout believer and, like I said, an apostle and wrote most of the New Testament.

• 1:45:50Speaker 03

  So you can look at these different lives, lives of Jesus's half-brother James is a great example of. James was, it literally says it multiple times in the scriptures, like James was skeptical. James thought like his brother was out of his mind, right? It's like you can imagine, like, what if your, what if your brothers claimed to be God, right?

• 1:46:07Anthony Pompliano?

  He probably has when, you know.

• 1:46:09Speaker 03

  Exactly.

• 1:46:10Anthony Pompliano?

  Punch them.

• 1:46:11Speaker 03

  You punch them, right? That's exactly right, right? You come in, you're like, you're an idiot. Come on back home, right? Well, James did that to his brother Jesus, right? Well, then James, who wrote the, the, the book of James later, says, "I am a servant of Christ." And by the way, he went to his death professing the divinity of his brother, his half-brother. Like, there are just these lives, and it's really hard to explain it, other than, you have to make sense of Jesus. Either Jesus was who he says he was, or he was a madman, a lunatic, and a liar. And like, everyone, I think, has to come to the conclusion of one direction or the other. And I can tell you, it's just, it's been, it's been incredible. It's harder to even describe how, how different my life has been.

• 1:46:55Anthony Pompliano?

  I love that. That's a great way to describe both religion, but also, I think, your journey. Where can we send people to find you on the internet? Find out more about Permanent Equity? Or if they happen to be listening to this and have a business, they would love to partner or sell to you guys?

• 1:47:09Speaker 03

  Yeah. Where can we send them? We're available, permanentequity.com. There's tremendous amount of information.

• 1:47:16Speaker 03

  I'm on Twitter, so at Brambish where my DMs are open. I try to be active depending on how, what delusion. I'm sure you get the same thing. It comes in kind of fits and spurts. Yeah, those would be the kind of the two primary ways on LinkedIn. If you want to look me up there. But yeah.

• 1:47:31Anthony Pompliano?

  You can be reached.

• 1:47:32Speaker 03

  I can be reached. Yeah, for sure. Yeah, happy to connect with people.

• 1:47:34Anthony Pompliano?

  Thank you so much for doing this. I always learn something every time we talk and I love just the approach that you guys take. The success is kind of the icing on the cake, but I think more people who could figure out how do you play kind of these long-term games, do things, hopefully the right way is, is good for the world. So I appreciate it. We'll definitely do it again in the future.

• 1:47:52Speaker 03

  Thanks for having me on, man. Good to see you.