This episode of the My First Million podcast explores the business model of multi-channel networks (MCNs) on YouTube, specifically focusing on how companies like Moonbug Entertainment and Maker Studios scaled and were eventually acquired. The hosts discuss the strategy of acquiring kids’ content channels, the importance of “reasoning by analogy” in business, and the challenges of managing creative talent within a corporate structure.
Topics: YouTube, MCNs, Moonbug Entertainment, Maker Studios, Business Strategy, Acquisitions, Content Creation, Entrepreneurship
The Rise of Kids’ Content Channels [00:00]
Sam Parr: I got to tell you about a YouTube story. Okay, so this is a story of how a guy found an underrated opportunity in the YouTube market and turned it into $3 billion. So, there’s this guy, Rene, and Rene discovers an opportunity. Sam, do you know what the most viewed YouTube channel is? Most views on YouTube, do you know?
Shaan Puri: Uh, the obvious answer would be MrBeast. The second…
Sam Parr: MrBeast? Number 13? Why are we talking about number 13? I’m talking about number one, Sam.
Shaan Puri: Okay. Do I do the bro move where I under-guess so you can win? No, I’m going to say some type of Indian thing. Probably like an Indian…
Sam Parr: Number one is T-Series. It’s Indian music. So it’s just like all the famous Bollywood songs. But do you know what number two is?
Shaan Puri: I don’t. No idea.
Sam Parr: Cocomelon.
Shaan Puri: Cocomelon, yeah, god.
Sam Parr: Does your kid watch Cocomelon or is she too young, maybe?
Shaan Puri: I refuse to let her watch Cocomelon because it’s crack. It’s baby crack.
The MCN Business Model [01:04]
Sam Parr: So, by the way, number two, number five, number six, number seven, those are all just like Cocomelon. They’re basically kids’ entertainment channels. By the way, a couple of them are like Russian and Ukrainian in the top 10 of all views. So, Cocomelon was this channel that was actually started back in 2006 or 2007. This dad, who was like an animator/filmmaker, and his wife, who I think was like a cartoonist for children’s books, they noticed there’s like, “Oh, there’s like nothing good on YouTube for kids.” And so they start creating very simple animations for kids on YouTube. Just like, literally, their, if you go look, go to their channel and you click pop, uh, click oldest. And the very old, the oldest one, I think it’s like 18 years ago, is a video that’s like the ABC song. It’s a 40-second video. And if you go look at all the old ones, it doesn’t look like Cocomelon today. There’s no character, there’s no like kid, JJ. There’s no like, um, crazy cracked-out animations. There’s nothing. It’s just like, literally, they’re just doing nursery rhymes. So it’s like ABC, Twinkle Twinkle Little Star, Baa Baa Black Sheep, all the hits. And so those start getting a lot of views. And for like 10-plus years, it’s just them doing animations, no sponsors, no, um, no merchandise, no gimmicks, no nothing. They’re just living off of YouTube ad revenue. They got a small team. They, they get to about 20 people. 10-plus years.
Shaan Puri: Wow.
Sam Parr: So, um, that’s a grind. They did that. There’s another story, uh, Blippi. I don’t know if you’re familiar with Blippi. Blippi is sort of like…
Shaan Puri: Is he the guy who sings, but it’s like many guys now?
Sam Parr: Yeah, they’ve switched out the character, but basically it’s a dude who wears a blue suit with orange overalls and a bow tie, and he’s like, “Yeah, it’s me, Blippi!” Right? And he’s like, basically, he just goes to like abandoned, like not abandoned, I shouldn’t say that, like kids’ like play places when they’re closed, and he goes and he plays in them, and he like films himself playing in the, in the play place, and he teaches you things and whatever. It’s slightly educational, slightly fun channel.
Shaan Puri: Wait, were you going to say Blippi is recording at abandoned play like a, a, a, abandoned warehouses? Like is, is…
Sam Parr: Abandoned play places. Like there’s no one there, but they’re not abandoned.
Shaan Puri: I thought you were going to be like, “Today’s special word is tetanus.” Like you do like…
Sam Parr: Please say rabbit. Rabbit. So, Blippi, this guy basically sees that his, I think his niece or nephew, or something like that, is watching these like really low-quality, uh, videos of tractors. Like, you know, like kids love trucks and tractors. He’s like, “Oh man, my kid loves this, my nephew loves this tractor video.” And so he goes and he makes one. If you go to the Blippi channel, you click oldest, you’ll see, it’s a video of a tractor going through a field. And his next one is like another tractor video, and he’s on green screen with it. He’s not even near a tractor, he just green screens himself on top of it. And so he starts creating this. He starts getting a lot of views.
The Acquisition Strategy [04:01]
Sam Parr: And so what happens is, there’s this guy, Rene. And what Rene does is he decides to create a PE roll-up but around these kids’ YouTube channels. And the opportunity is that Rene worked at a company called Maker Studios. Do you remember Maker?
Shaan Puri: Yeah, it kind of ended up being like they were the hottest thing going and they raised money at billions of dollars of valuation, and it didn’t exactly live up to that, but it kind of created like a, it was like so innovative that a lot of the employees were went and did amazing stuff. Is that right?
Sam Parr: Uh, kind of. Yes. So basically they were early on to the YouTube professionalization. And what they were trying to do was they created what’s called an MCN, a multi-channel network. And, you know, what does that mean? It’s sort of like an agency, um, like a CAA for YouTube talent. So for some of them, they would own the channels and then the talent would operate them. For others, the talent owned their own channel and they would do the brand deals. But like, instead of you, the one YouTuber negotiating your brand deals, they would go to, you know, whoever, Coca-Cola, and negotiate it for all 30 channels on their network, right? So it’s like creating a, like a television channel but on YouTube. And this idea sounded really good. It just wasn’t a really good idea. It’s been tried and failed many, many times.
Shaan Puri: Right.
Sam Parr: It was one of these startups you have to be really, very wary of because they, um, it’s reasoning by analogy. So, if you ever hear like Elon talk about like reasoning from first principles, which is basically you take like solid truths, like, uh, logic, and you build one logic block on top of another, like a stack of Legos that all click together in a chain of logic. Reasoning by analogy is to say, “Yeah, we’re CAA, but for YouTube.” And you don’t really understand the underlying assumptions about how YouTube works and how Hollywood works, it’s totally different. There actually doesn’t need to be a CAA for, for YouTube, um, or it wouldn’t be that valuable if you were the CAA of YouTube. But it raised money and it was a very hyped thing at the time. They actually ended up with a good exit to Disney. I think Disney bought them for $700 or $900 million, something, like a big exit. But, um, it was a, a like kind of a failed company and it failed inside of Disney.
Shaan Puri: But it, it like could be an okay business, just not a good business that requires hundreds of millions. Yeah, not hundreds of millions in funding, good business.
Sam Parr: There are plenty of these like agents, creator agencies on TikTok and Twitch that are like bootstrapped, that’ll do like a few million dollars a year of profit, and good for them. So, what happens? So Rene, he’s at Maker, he didn’t start it, but he works there. And when Disney acquires it, he goes to Disney and he becomes like the head of like digital content internationally, or some, some like, you know, some title there. And what he realizes is he says, um, “Here’s the opportunity.” He goes, “When I was at Maker, I realized that kids’ YouTube videos were getting tons of views, but they were overlooked by traditional PE and media companies because they, you know, basically they looked too janky to be taken seriously.” He said, “Of the top 100 most viewed children’s bands online, none of them were owned by big studios.” So he’s at Disney. He’s like, “Look at the top 100 channels, kids’ channels on YouTube, none of them are owned by Disney or Pixar or like any of the major studios.” And his co-founder, who was at Paramount at the time, goes, “Yeah, also none of those, none of those YouTube channels that are getting all these views have streaming deals because the streamers say, ‘We need the content to be exclusive,’ and the YouTubers are like, ‘Exclusive? I mean, YouTube’s my bread and butter. Why would I take the content off of YouTube?’” So they were just like, “Nah, we’re not doing a deal.” So they get together and they started stack ranking, and they basically made a simple criteria. So they said, “I want something that has high views and has like a, a quality IP. So like it has a brand name, it has a character that people might, might associate and love, something you might buy a plush doll of someday. Like, you’ll buy a a toy of this, this thing.” He goes, “If they have both of those, I’m interested.” And straight out of the gate, they raised about $150 million. And they raised all this money just saying, “We’re going to do this roll-up.” And they do three deals. So shout out to, uh, the the Roll-up Europe Beehive newsletter, because he had the details on this. Nobody, all the traditional media, they only have the surface-level details. Some guy on Beehive has like a really detailed breakdown of this, because these companies are based in Europe, and so they’re all listed in company’s house. So he was able to like go see literally like, how much did the CEO make? And the headline of the story is they take that $150 million, they start buying up these channels, and four years later, they exit this to Blackstone for $3 billion.
Shaan Puri: What?
Sam Parr: So they technically can’t, they, they exit to Candle. Candle is backed by Blackstone. That’s where Candle got the the money. Um, but they sell for $3 billion.
The Exit and Financials [08:26]
Sam Parr: All right, so a lot of people watch and listen to this show because they want to hear us just tell them exactly what to do when it comes to starting or growing a business. And really, a lot of people who are listening, they have a full-time job and they want to start something on the side, a side hustle. Now, a lot of people message Sean and I and they say, “All right, I want to start something on the side. Is this a good idea? Is that a good idea?” And again, what they’re really just saying is, “Just give me the ideas.” Well, my friends, you’re in luck. So, my old company, The Hustle, they put together 100 different side hustle ideas, and they have appropriately called it the Side Hustle Idea Database. It’s a list of 100 pretty good ideas, frankly. I went through them, they’re awesome. And it gives you how to start them, how to grow them, things like that. Gives you a little bit of inspiration. So, check it out. It’s called the Side Hustle Idea Database. It’s in the description below. You’ll see the link. Click it, check it out. Let me know in the comments what you think.
Sam Parr: So let let me break it down. They go and they buy, uh, Cocomelon for $103 million. 92 million upfront, 11 million contingent. Okay, so 100 million on Cocomelon, 70 million on Blippi, of which only 26 million was upfront, 45 million was contingent. And then Little Baby Bum was the third big one that they bought. And Little Baby Bum had also nursery rhymes and whatnot, and they did that for 65 million. So that’s that basically, uh, and they at that point they had raised more money of of equity and debt. And so they raised about 400 million in total equity and debt to create the $3 billion exit. So like a 10x return roughly on the capital that they used to buy these channels. And in four years, literally through M&A, they were able to create $3 billion of value. Here’s what they did. So here’s the revenue. So, uh, their company is called the the holding company is called Moonbug. So Moonbug basically 2019 is sort of like a $20 million a year business. 2020, it’s about a $50 million a year business. Then it goes to 150, then it goes to $230 million with 100 million in EBITDA before they got taken out.
Shaan Puri: Holy shit. It was doing 100 million in EBITDA in only four years?
Sam Parr: Exactly. And the founders of this thing, so each of them cleared, uh, Rene makes 300 million for this four years of work. Uh, his co-founder makes 300 million, the head of M&A made 60 million, and the CFO made like 20 or 30 million dollars, um, in the roll-up and the rest went to the investors.
The “Hold Company” Trend [10:41]
Shaan Puri: When they bought these companies, did they need to be great at operating YouTube or was the, they were so good at incentivizing Blippi or whatever that they’re like, “Just keep going, you’re doing fine. Uh, you get this much of your payout if you hit this and that.”
Sam Parr: So these businesses are are simple and complex at the same time. What do I mean by that? One, a lot of the views are just going to come on the back catalog. So, uh, you know, it’s, it’s still Wheels on the Bus, it’s Twinkle Twinkle Little Star that are just racking up views every single month. You don’t have to do anything on those videos, right? I’m not sure if you’re saying Wheels on the Bus as analogy of running a company or you’re literally referring to the song Wheels on the Bus.
Shaan Puri: Yeah, the song.
Sam Parr: And so, um, they, the back catalog gets a lot of views. What they did, which is smart. So Cocomelon wasn’t originally called Cocomelon. Uh, it was originally called Checkgate, which sounds like a baggage company. Dude, it reminds me of, it sounds like the cult. Remember the, uh, the cult that where they all killed themselves? It was like Heaven’s Gate, Checkgate.
Shaan Puri: Okay, so yeah, I’m not familiar with that. Not, I need a brush up on my cults. Yeah. Um, so Checkgate, and then they rebranded to ABC Kid TV, which if you watch the videos, it’ll still start, “ABC Kid TV,” and then it starts the song. Uh, then they rebranded to Cocomelon, but that’s like in 2017 or something like that. And like it was a long time. It was like 10-plus years into the company that they rebranded. And that’s when they introduced JJ and the characters and the colors, and then so basically that’s where you get the characters. Same thing with Blippi. They had Blippi, they take out the main guy, they have, they replace him with a like a rotate like a like an actor basically, because he’s ready to move on. And, um, they also introduced Mika, this like diverse character who could come in and like appeal to a wider set of audience. So they’re doing like moves in the content, yes, but the other moves they did was they got it on the streamers. So they got it on to Netflix. It’s now the most watched kids thing on Netflix is Cocomelon. Then they go into the toys business and they’re doing, you know, millions and millions in toys and licensing. And so, you know, you, they built out the full like suite of business basically around these. They do Blippi the musical. It’s a live tour that’s going around the nation and that’s, uh, you know, selling out, you know, basically tickets. Me and my family, we all went and there’s, you know, there’s not an empty seat in the house. And so like these things are like, they turn them into, you know, rock and roll businesses. They kind of use the Disney playbook, right? Which is like create massively loved IP and then monetize it through everything except for they just didn’t do theme parks.
The “Hold Company” vs. “Operating” Debate [13:09]
Shaan Puri: Have you seen on South Park where, uh, Mickey Mouse is, uh, you know, comes off as this nice guy, but behind the scenes, he’s trying to convince the Jonah Brothers that they better wear their virginity rings, uh, or their chastity rings because they’re wanting to like have sex and he’s like, “Ho ho, you better put that fucking ring back on.” Like, like, First of all, Incredible impression. Yeah. He like How did you feel three seconds before you did that? Before you committed? You know, uh, there is no, when you’re taking a risk, you cannot paint a world where it’s only upside. You have to accept that there might be potentially downside. These are the things I tell myself before I’m ever, uh, taking a big risk and I thought about that. Um, I’m a risk taker. I do, I do impromptu impressions sometimes that I’ve never done before. But that’s what I imagine Rene to be. He’s like, “Listen, Blippi, I need you to put that fucking tie on and I need you to get out there and dance.” Like when Blippi’s like asking for a raise. What’s the hard part about this business? Is it, uh, uh, convincing people to sell?
Sam Parr: No, I don’t think that was that hard because they had a huge check and the huge check helps. Um, you know, like I think at the time, I think Cocomelon had done like 80 million in revenue or something like that, uh, that year, and then they bought them for 100. So they bought them, you know, probably like at a 5x multiple or 6x multiple of profits or something like that. I don’t know exactly the multiple, but I’m guessing they offered them like, “Hey, here’s a bunch of money that you can have and like you’ve been running for like, you know, years doing this on this treadmill and like, what if we could help? And what if we could take you to the next level? You don’t know those people? Oh, I golf with the guy from Netflix. Oh, I used to be at Paramount. Oh, I was at Disney. I can help you get to that next level.” Breakdown doors that didn’t seem like they were open. The hard part was picking up the gold on the ground. So this happens a lot in business. It’s like these ideas are just sitting on the ground. And it’s the hard part is somebody taking a very simple idea very seriously. So to say, “Yeah, you know that silly like nursery rhyme channel, I’m going to go raise $150 million from like whoever, Goldman Sachs, to go and, uh, and acquire these.” And you have to say that with a straight face when there’s no track record of that, you know, you have to really pitch a strong case.
Shaan Puri: And I also wonder, and you would actually have good insight into this because you worked at Twitch, I wonder what opportunity looks like. So for example, when you explained, uh, Rene, Rene’s inner dialogue of like, “Hey, look at all the top 100 channels. None of them are owned by, uh, PE or they all are just kind of like these mom-and-pop shops.” This seems so obvious, but I wonder what that inner dialogue actually was with uncertainty. Uh, in the same way where I don’t know anything about streaming, but you used to work at Twitch and then I know that like there was that there was like two new video get Kickstream or I forget. But like I wonder if a Twitch employee could have looked at them and like, these, there’s an opportunity here, here’s a gap because I could see the data, therefore we should support this other thing. What what was the other one called? Kick? There’s Mixer, there was Kick, there’s YouTube has their own, Facebook has their own. Actually, you know, there was a time where we were before Twitch acquired us, we were building like a tool in the ecosystem. We were getting to know a bunch of the streamers who were using our tool and we were like, “Look, this tool, like the hard part is this tool like kind of caps out at like 100 million. If we do, if we win, if we win, this the size of this is like 100 million, we think.” And the problem is that the platform’s worth like 5 billion. Um, how do we do the 5 billion thing? And we were like, we’d have to create another platform. It’s like, okay, well, there’s the technology part of it, that’s hard but doable. Um, the hard part is getting the streamers and getting the network effect to go. Like how do you break the network effect of something like Twitch? And what you realize is that a very small number of streamers drive a huge amount of the viewership. Um, so in theory, you could get those streamers together and you could say, “Hey, we’re coming over here.” And so I actually went and pitched, uh, my investor, now I I should I shouldn’t say pitch because it wasn’t I wasn’t fully committed. I wasn’t sure that this is a swing worth taking, but I was like, I think what we would need to do Wouldn’t it be me if we did this? I was like, we need to throw some sort of event where we get 100 of the we get all the top 100 streamers in a room together. And basically, we need to make them an offer they can’t refuse. We need to make them we need to basically overpay the top 100. And, you know, the thing is with the top 100, even if they’re making $5 million a year and you’re offering them 3x that, 4x that, whatever it is, okay, you’d need $500 million to do this. And they’d need to say yes, which is hard. But if you had $500 million, you could create a platform that’s going to be worth $5 billion. Like it’s not that much more complicated. Like once you have the streamers, you’ve got the hard part. You could build all the other stuff. You could build the chat, you could build the streaming technology, you could build the the the bits, you could build the subscription feature, you could build all the other stuff you would need to build. But you’d have to get the main creators to come over and you have to have the sentiment be, this is where you need to be, not Twitch. Really, really, that’s the really, really hard part. And, um, so we were like, I don’t know, that’s kind of a crazy idea. We didn’t end up doing it. When we got acquired, Emmett takes me out to drinks, uh, the night we the deal closes and we go meet in this bar in the mission and we’re talking. And I was like, “Yeah, like, you know, it’s kind of like you could put your cards on the table. Wow, the deal’s done.” And I was like, “Yeah, you know, actually, we were talking about something. I said, ‘You know, one of the things that I thought about doing was I realized like, you know, we did the math, we realized these streamers matter the most. If we paid them this much, I think we could have got them, uh, you know, 70% of them maybe to come over. And like that could have caused like some waves.” And he’s like, “Yeah, actually, we’ve thought about that. So what we had done was we, um, we made it so that none of their all their they’re on contracts with us, um, unlike YouTube. So like on Twitch, they actually have like multi-year agreements with Twitch.” And he goes, “We just made it so that they don’t expire at the same time. So we always aligned it where for the top streamers, they’re all ending at different times so that nobody would ever feel safety in numbers to move to another platform as a giant group because they could never get their contracts to align.” That’s why Emmett is Emmett. Yeah, I actually, I think in reality that actually wasn’t the case and in in truth, the streamers just could have like moved over and there’s nothing Twitch could have done about it. Like the contract wasn’t, you have to stream here. The contract was, you only get this deal if you stream here. Meaning like you get this ratio, this uh, maybe this split or this minimum guarantee, whatever, right? But like the reality was, if Twitch went and started suing streamers, that would have been horrible for their own business. They would never do it. Uh, which is why multiple streamers did take money from Mixer and Kick and others and they left and Twitch didn’t do anything about it. So like the reality was a a more high-agency version of me, you could have actually tried it and it would have been probably would have been more worthwhile my time than what we did with the tool because the tool never had the upside.
The “Life Update” [21:55]
Shaan Puri: Yeah, this is a great story. Uh, I want to know like the update. I want to know what happened. And how did you know how much money he made?
Sam Parr: Uh, I told you, my guy on Beehive. He basically went to their their his Rene’s LLC or whatever, you know, the equivalent of an LLC, is on company’s house and you could see that $280 million hit the bank in a certain year. They had to report that. And so he kind of did all the math. And he also had their cap table like their waterfall. So it’s actually kind of nerdy and interesting in that that the way they structured the deal was basically with investors. They the founders who were doing the roll-up were basically entitled to somewhere between 22 to 28% of all proceeds of the roll-up. All right? So that was like their profit participation at the end. So whatever we sell this for, we get between 22 to 28%. Investors are going to get the rest.
Shaan Puri: Wait, that’s that’s insane. That’s different than equity?
Sam Parr: Uh, no, it’s like equity, but it’s basically like, you know, you have equity, but then you have, let’s say, preferred equity, right? Or you have like liquidation preferences. You you can have rules, you can have strings attached to equity. So for example, Wow, I did not know that. What they did, you did, because in venture, this happens all the time, right? When a company raises money, they rate preferred shares. Preferred shares mean they get their money back first. So even if I own 25%, I don’t necessarily get 25%. I might get zero. Yeah, I guess I just assumed if this is a PE firm, the rules are different and like it was like, for example, it was like tied to the carry or something like that.
Sam Parr: So what they did was, um, it was based on the the multiple of the invested capital, the MOIC, right? So it’s like, uh, if it was under 3x return, so they they raised 400 million, if it was going to be an under 3x return, they were going to get like only 9% of the proceeds or something like that, like a lower percent. Got it. But they hit 10 10x, right? So they hit the the highest tranche, which was basically they got their 10% of sweat equity plus 11% of profit participation. So they got like 22% or something.
Shaan Puri: Did they use any of their own money to start this?
Sam Parr: I think Rene was an investor, but I don’t know how much.
Shaan Puri: Yeah, this guy’s great. That’s a good story. I have a life update for you. Okay, let’s do it. And I I wanted to share because I think it’s I think it’s fun, but I also think that there’s a lot of people who can learn from the situation that I’m in because I think they’re in similar situations. So, the life update is my partner Joe and I, we are now the CEOs of my company Hampton. And the life update is basically I’m going like pretty much all in on it. And I wanted to explain a quote that I read that made me want to do this. So, we like, or at least I like Palmer Lucky. Do you like Palmer Lucky?
Sam Parr: Yeah, sure. Why not?
Shaan Puri: Palmer Lucky, we had him on the pod like three years ago, two years ago, and I have been just fascinated with his way of thinking. And he had this interview come out. I linked to it on the bottom of our document. Uh, it was with Tablet Magazine. And I think he came out with this in 22 maybe. Uh, and I want to read it to you. So Palmer Lucky is the CEO of Anduril. It’s a 13 or $20 billion company, something like that. Also created Oculus. So he said, “At some point in business and in life and in romance, you have to commit to a path. A lot of my peers in the tech industry do not share this philosophy. They’re always pursuing everything with optionality. Oh, I need to be able to raise money from anybody. I need to be able to sell my business in any way. I need to have liquidity in any way. I need to make sure that I’m not closing myself off to future romantic partners. I need to make sure that I’ve got my options open. I need to make sure that I’m not going to buy a house and lock myself in or having children. I don’t know. I’m not ready. I don’t want to commit to that path.” And keeping their options open, they ensure that they’re going to jump from option to option. And if they don’t commit to a path, they’re going to fail at it. You have to commit to make it work. And I think marriage is the same way. You just have to commit to it. You have to say, “This is the path that I’m on for better or worse, and I’m going to double down.” And I thought that is a great quote. That really stuck with me when I read this. And I realized that with my business Hampton, I had hired a CEO for it. And so I wasn’t able to like really From from day one, right? I think that’s the important thing. Uh, day month eight. So I got it to a million in revenue. He scaled it to eight figures in revenue, and then I am now taking over. And so, um, but because of that, I wasn’t able to like, you know, put my influence on it. You have to like respect your CEO, you have to respect the manager in charge. And I hated that. I was not a fan of that. And I think that on this podcast, we talk a lot about that, and it sounds cool, and I’m sure it’s great for a lot of people, but it wasn’t great for me. And the reason I wanted to bring this up on the pod was because a lot of people you see doing this, they call it like a hold company, a holding company or whatever, where they’re like doing lots of different stuff because we we glamorize it because if it works, I’m sure it’s great if that is your main thing. And I was starting to think, “Oh, that would be great. I would like to do that.” I realized I don’t want to do that. I just want to do one thing. And this quote like really inspired me that that’s like really what I care about.
Sam Parr: Now, let me ask you a couple of questions. You weren’t doing a hold company, holding company though, right? You were just doing Hampton already. So why the switch where you go from being founder, chairman type person to I want to be the CEO, or actually co-CEO, not even be the CEO. Why that?
Shaan Puri: I realized that I wanted to have full control because I wanted this to be a legacy creating company. I wanted to just put my texture on it. But also, what I realized, I hate remote work. I hate it more than anything. And I wanted to create an office where I live and an office culture because those are some of the greatest memories that I have. You and I used to work across the street from each other at the corner of Bush and Montgomery, right? Was it Bush and Montgomery? Yeah. I loved that intersection. Just walking out and seeing the action and seeing my employees upstairs and being able to just like go for lunch and just like like shooting the shit during breaks. I loved it. And I just felt that this was a really good way to make all of my selfish wants come to reality. Right.
Sam Parr: Yeah, that’s great. You know, I think that a lot of people are probably feeling this right now because everybody went remote during COVID. And now we’re what, two, three years into that, that full remote decision. And at first you have the honeymoon period of remote. Ah, look at this. I don’t have to commute. I don’t have to even get dressed. I don’t got to wear pants. I just got to top up. Here we go. Um, you know, oh, this is great. I can see my kids. And then you’re like, “God, I can’t get away from my kids.” I haven’t left the house in weeks, you know, or whatever, right? Like you you start to see some of the consequences of the negative side of of those decisions. And I think the biggest one for you and me, at least I I felt this is I I miss just being creative and serendipitous with my team. So it’s like, A, have a team, right? And B, be able to just whiteboard, sticky note, go for a walk, go for lunch. Like I brought uh Diego out here. So Diego was living on the other side of the country. He’s living on the East Coast in Baltimore. How long has he been out? Diego’s been out here for a couple months, two, three months, something like that. How has your life changed? For the better, dude, way better. First of all, I get to kind of still do basically what I do, but now I just have a buddy to do all of it with, right? So it’s like I kept the same schedule where it’s like, uh, in the morning he comes over. The first two hours of my day are like my creative block, right? Where it’s just I’m uh I don’t do anything else. I just write or I podcast or I, you know, read. I I only do something on the creative side. It’s like a creative gym session. It’s like going to the gym, but for creativity. All right, so we do that. Well, we do that together now. It’s great. And then, my trainer comes over. We work out together. He’s he’s working out with my trainer now. So it’s great. Yeah, you know, we do a we do a hard workout. Then we go grab tacos. And while we’re grabbing tacos, Dude, you guys are like a prison gang, man. That sounds exactly like a prison gang. You you wake up Yeah, we just need some enemies, dude. I promise there’s only just like old retired people around us. But if they you know, go start a beef. Actually, I do have some neighborly beef. I could I could actually just double down on that. Now that I think about it. Yeah, my neighbor’s getting blown into your yard. I’m sorry. I don’t control the wind. Um, so but then when we go and what I told him, I go, “Notice this, dude, of our best ideas, how many of them have come while we were at this taco shop?” Because there’s something in the creative process to like the bounce, as they used to call it, the pickup artist game, that in in in the book The Game, they talk about this technique called the bounce. It’s like you’re at the club or bar, you meet someone, if you really want to like accelerate your connection with that person, don’t just stay there for another hour with them. Just be like, “Hey, let’s go grab a bite to eat. I know a great place.” And if you leave, if you do the same the same hour with that person but in two different places, connection goes up. Well, there’s something like that with creativity where we’re working on a problem here, we end up getting, you know, like slightly stuck or we come up with what we think is a solution, but in our gut, we’re like, “That doesn’t seem great.” Uh, let’s take a break. Let’s go for a walk. So we walk or bike to a taco place. At the taco place, it’s always that’s where the idea comes. Once we’ve taken our mind off it, once we’ve changed the the environment. And I was like, “Dude, notice how many how often that happens.” If we were just remote, none of that would have happened because I would have gotten off the Zoom with you, and then I would have gone to take a break, you would have gone to take a break. I wouldn’t be like, “Hey, let’s just leave our phones on.” Like it would have just been like a little bit weird to do that. And we would not have had, you know, that those next ideas. And if you’re in a creative line of work, those ideas are gold. Those ideas is what you’re in it for. Right, right? Like unless you’re in a like factory type of work where it’s all about productivity, um, you know, for us, creativity is the pro is productivity. It is the new productivity. And so we need to set up a situation that lets us be more creative, which being in person was was pretty massive for that.
Shaan Puri: Yeah, it’s funny we’re both craving the same stuff and I think that a lot of people are. Um, and I yeah, and so like I went and looked at apartments this weekend and um, I uh we have our I think my lease starts May 1. Uh, and so I’m going all in on this uh this in real life stuff. Like I needed an office. Will you move or you’re going to like split?
Shaan Puri: I don’t know yet. I’m still working out logistics. I went and looked at this apartment building. Dude, have you ever been to like, I don’t know if this is happening in San Francisco. So the new thing in New York is that there’s these apartment buildings and it took me a long time to realize what they are, but I I’ve nailed it. They’re cruise ships. And so basically what they are is they’re really cheap, I mean they’re super expensive, but the build quality is like kind of crap, like all like basic builder quality uh apartment units, but then the actual lobby has a bowling alley, a rock Oh, like the amenities are amazing, yeah. Yeah, like a rock climbing gym and it’s they’re like all like in the basement and then it has like the best gym you’ve ever seen in the world and then it has like a playroom, a golf simulator. It’s basically built to be sort of like a mall where like it’s built for like uh the 35-year-old three two kid all all under eight type of like families. And so I went and looked at like an apartment like that and I was like sitting in that apartment building and I’m like, “I don’t know if I can go to bed here at night and these like tight ass walls like with hearing like honking in the city.” And so I haven’t decided if I can like put up with that and I’d rather commute, but potentially I would move to the city. I like, here’s what I did. I sat down and I was like, “What’s my dream day?” Well, my dream day is I get up at 7:00, I go and work out and then I get coffee with like Austin Reef who lives next to my in-laws or I’d get coffee with my in-laws and then I’d go to work at 9:30 and then my wife would like show up at the office to do some work and then we’re both home at 5:00 to have dinner. And that’s like and then maybe at like 7:00 or 8:00 after the kids go to bed, I would go for a walk outside. I’m like, “That’s the perfect day.” All right, how can I create that? And so I’m still working backwards on how how could I create that. The problem is is I forgot about going to bed at night and now I need a huge ceiling because I get claustrophobic and that’s going to cost $60,000 a month because New York City is like the craziest place in the world when it comes to renting an apartment. And so I’m still trying to figure out, you know, some of those logistical details on how on earth like I can pull off this.
Sam Parr: It was like super relatable with like walking and doing whatever until you’re like, but I need 16-foot ceilings to sleep.
Shaan Puri: No, I just like at your house, like your like a lot of apartment ceilings are 8 feet tall and it like I don’t know, you feel like claustrophobic. Dude, the rent in New York City is outlandish. So when we were younger, uh, during remember like the idea of when we were 25, I think I spent like $800 a month. A $10,000 a month apartment nowadays in New York City, it’s not nice. It’s like a shit two bedroom. Uh, it’s crazy how expensive uh Manhattan is. And so Yeah, that’s wild. I got to like figure out all the logistics. But that’s my spiel. I’m going all in and I’m going to go all in on in real life. I need it. My soul is aching.
The “Doping” in Business Discussion [23:06]
Sam Parr: How much were you working on Hampton anyways, hours a week?
Shaan Puri: 40 hours a week. Like it was like a What’s going to change? You’re CEO now.
Shaan Puri: Well, I can’t like like before it was like, “Well, how can I convince this person that my idea is the right way?” or “How do I respect the boundaries?” Uh, you know, like it I was a very respectful boss, I felt like, and it was like, but now it’s like I don’t I’m not really going to be respectful. I’m just going to say like, “This is what I want to make. Uh, I need you guys to help me make this,” uh type of energy versus before I think I was a little bit more hands-off and I was thinking a lot. Now I’m actually operating.
Sam Parr: Yeah. What?
Shaan Puri: Uh, nothing. It’s just funny. Like I I feel like uh I was just reflecting like, you know, you, I think Andrew has a good gift of this. I do this too, which is like we tell these great stories. You’re like, “You know, I was reading this article about Palmer Lucky and he said this beautiful quote,” and you have this quote, and you’re like, “I decided I too need to commit and choose a path.” But it’s like, and it’s a great way to frame a story like this. It’s like the truth, I think, I’m going to speak for you for a second, but I think the truth in a lot of these situations is they’re just like it’s irritating to be out of like to not have your hands on and not be in control. It’s like, “I just like to be in control, do things my way.” But like, wow, that’s a less fun story to say. It’s like, “You know what? I just really feel like we all chase optionality and it’s we’re better off to commit and really just make it work.” No, that is the truth. And it’s like I think it’s the truth, but I don’t think that’s why you’re the CEO now. No, usually usually discovery Because you brought this Palmer Lucky quote. No, usually discovery for me, and I bet it’s for you and for many other people is, you feel a certain way and you’re like, “This freaking sucks. I want this.” And then someone puts words on it and you’re like, “Oh, that’s like normal to feel,” or this person said this guy like Right. But I guess what I’m saying is, you weren’t choosing multiple options. You just weren’t in control. The quote that Palmer Lucky should have said is like, “If you’re the founder, put your fucking DNA in the company and just go like be hands-on, be a micromanager, go in there, do it, right?” I was going easy. I was in like the dad phase. So like it was like uh like I wanted to be available at like noon. Now I’m now I’m more so like, “Look, I can be there in the morning and in the evening,” and I think that’s I’m still being a good dad. Before it was like uh I have to have X amount of hours of FaceTime. Now I’m out of the honeymoon phase of being a dad and I’m like, “Look, I can like be with you for breakfast and be with you for dinner,” and I think I could still be a good father. And so that was partial it partially it.
Sam Parr: Gotcha. Yeah, I uh I was talking to somebody and uh recently and they were like, “You know, I just want to like I’m working I’m working hard on this.” They they’re like chasing some project, some deal. And I was like, “Why are you doing this? You’re so like you’ve done so many deals, you’re you’re post-economic. You you’ve made so much money. Why go so hard at this?” And they were like, “I just really want my kids to see what they’re, you know, their dad working.” And I was like, “I don’t I I don’t even think he was lying. I think he genuinely believes that, but I’m like, “Dude, you’re doing this deal because you like doing deals. That’s all you’ve done. You you’ve done deals for 30 years. You’re amazing at doing deals. It’s a rush to do a great deal. It’s fun to win. It’s fun to dunk the basketball, and you’re trying to dunk. And you don’t have to be like, “I just want my kids to see a hard-working dad.” Like, dude, you’re sitting on your laptop sending an email. It’s like, it’s not like they see your their dad, you know, sweating it out in the soul mine right now. Yeah, you’re not chopping down wood, dude. Yeah, so I was like, but people tell themselves all kinds of stories and I just find it hilarious because of course I do the same thing. But when you see it in other people, it’s much more easy to spot like, “Oh, you’ve told yourself a story. That’s cool. Like that make it’s fine. Whatever whatever gets you to do the things you want to do is fine.”
Shaan Puri: Would you want your children to work with you? Is that even in your wants?
Sam Parr: I would I would think that would be really fun or cool to do. I worked with my dad for about a year and it was actually a lot of fun. Much more fun like my working with my dad was more fun than just like hanging out with my dad and not working. You know what I mean? Like it was actually like a a better dynamic, was a cooler dynamic. I learned more that way. And I saw him differently and he acted differently in work mode versus he did in home mode. So it was kind of cool. So I think it would be really fun, but it’s not something I’m like trying to gear up, you know. I I I think I’ve told you this before, like my new sort of dad ideal is uh Ben’s dad. So Ben’s dad, Andy, he he he did a very simple thing that’s going to sound like it’s going to sound like nothing, but I personally think it was quite profound, which is the way I initially was trying to be a dad and how other people are dads is you have things that you’re into. I love basketball and I keep trying to buy little basketballs and like put them near my son, I buy the hoop and I like take him to a class. I’m like really trying to get him into basketball because like, “Oh man, I really just want him to like love the things that I love.” And then we could share that. We could bond over that. Whereas his dad was like, he’s like, what what’s that type of blood that’s like uh it’s the universal donor? And it’s like O negative or something like that. He’s O negative. So he’s like, he’s got one son who’s into stand-up comedy. So he’s like, “Great, I’m now into stand-up comedy.” Yesterday I knew nothing, didn’t care. Today, everything I do is eat, sleep, and breathe stand-up comedy. Bought books, watch videos, goes to shows by himself, starts practicing himself, starts giving his son feedback on every single thing that he’s doing in a helpful, supportive way, making connections, whatever, whatever he could do. He’s like, “I’ll meet you where you’re at.” And uh Ben loves the Phoenix Suns. Guess what? Andy now watches every Phoenix Suns game. Is a hardcore fan, is always talking about the Suns because he’s like, “I’ll meet you where you’re at. If that’s what you’re into, I will get so into it that we can bond over that.” And I just thought that was like a really selfless, kind of amazing thing he did and I just hadn’t seen a lot of dads do that. I think my instinct and many dad’s instinct is just to try to get them to like the shit we like. And then they don’t and then we’re like, “All right, like I support you.” But like at an arm’s length. And I just thought it was much cooler to go all in on what your kids are into. So, I hope and I’ll expose my kids to like business and like I’ll be totally open to them working with me, but I really want to do the Andy thing, which is if they’re into whatever, musicals, then do re me, you know what I mean?
Shaan Puri: That’s awesome. That that almost makes me emotional hearing about Ben’s dad. What a what a great dude.
Sam Parr: He really is. Do you want to end there or do you want to keep going?
Shaan Puri: I have a I have one quick one. This is actually kind of cool. This guy Josh on Twitter, so Joshua Ogundu, uh tweeted this out. It’s a cool find. So he tweeted out about this company called Shotzy. Have you ever heard of Shotzy? It’s an app.
Sam Parr: No.
Shaan Puri: Yeah. Didn’t we talk about Shotzy?
Sam Parr: No. So Shotzy is an app for tracking your Ozempic injections.
Shaan Puri: Oh, that is funny. And it just crossed a million in ARR. And all it does is it basically is a it’s a shot tracker. So you know, it’s I guess I I don’t know, maybe you can tell me like I guess it’s somewhat cumbersome to keep track of maybe I don’t know if it’s when you did it, or how much, your dosages, and a reminder, it’s time for your next shot. Um By the way, how about that little jab of uh I don’t know, maybe you can tell me like how do people use this app? You’ve talked about you took it. I know, I’m joking. Uh with Ozempic, you have to increase the dosage a lot. So let’s say you start with like 5 ml, after two weeks you have to go to seven, and then you have to go to like 10, and it’s not like incremental. So you So when you hear this idea, were you like, “Yeah, that was a pain point,” or for you was it like, “Nah, I don’t want to see it.” I didn’t take it enough to be a pain point, but it’s very clear. It’s just sort of like imagine taking vitamins and like you have to add a pill every two to three to four months. And it’s like it just it is easier to track if you want to follow it by the book. I’m more of a like eyeball it and see how I feel type of guy. Look in the mirror. Yeah, like do we want a party today or not? That’s like you know, that that’s kind of They call it vibe coding. I was a vibe Ozempic guy. It was just how do I feel that day? Yeah, so this the woman who made this, I think her name’s Aja, she uh she was a engineer at The Athletic. Like a software engineer at the at the media company, The Athletic. And I guess on the side, she just built this like for her own pain point and then I think it took off in like the Reddit communities. And just off of Reddit and then some TikToks about it, it’s gotten downloaded like 100,000 times. It’s got this paid subscription, crossed a million in ARR. Um What? Just niches and riches, man. Like this is uh riches and niches. This is like just such a simple just problem solution app, right? That it that it that somebody realized, okay, if if Ozempic is the next big thing, right? If these GLP-1s are the next big thing, I don’t know how many people take them. I think it’s like 40 million people or some like really big number of people who now all are on some schedule and realizing that you could build an app just for that population is a smart idea.
Shaan Puri: Have you seen like the Oscars and the Grammys and things like that? Like everyone looks great. Is everyone looks great. Look at Don. He’s losing weight quickly. Is is it is uh are they illegal in sports?
Sam Parr: I don’t think so, no.
Shaan Puri: Oh, I mean, it’s kind of a kind of like a it definitely is like But you lose like muscle mass, right? So I don’t think athletes would really care too much about this. You cannot lose you I’m not a scientist, but you obviously you can if you eat enough protein and you lift weights, I think you can maintain. It basically just makes you not eat. So if you can say like, “Yeah, but I’m going to eat, uh, and I’m going to hit my protein and I’m going to lift weights even though I don’t want to eat today,” yeah, you could you could keep protein. It’s just you don’t want to eat. You’re full. Let me ask you, let me ask you a random question. Um, I was watching this video today about somebody was speculating uh that LeBron, uh LeBron does like whatever performance enhancing drugs. I saw the Lance Armstrong thing about it. So Lance Armstrong was talking about it, Chael Sonnen has talked about it. Chael’s like, “Yeah, we have the same drug guy. I know. I know what he’s taking. I’m not going to say, but I know he’s taking.” But Chael’s also like a professional troll, so you don’t know when he’s being facetious or truthful. But also, was a drug cheat. Yeah, but also did use uh, you know, performance anti-drug when he competed. And he was basically like, he’s on EPO and like, you know, you would take if you if you wanted to do what he’s doing, if you wanted to be doing Tomahawk dunks at age 40 in the NBA, uh like, you know, playing 30 minutes a game and averaging 27 points or whatever, like you would do this. And uh and I I I actually just was thinking about this in like the world of business. Um, is there PEDs in business? And like how would you feel about uh people doing that? Have you ever taken Adderall or Ritalin? I’ve never taken it, but I know I have several friends that do it uh to to focus, to be more productive. I don’t do any I don’t do any drugs, but 10 years ago before I got sober, I for some reason, a doctor gave me a Ritalin prescription. I have no idea why. I I don’t remember how what what happened, but I got it. And I took it for about four days and on the fifth day, I had like a mental breakdown. It made me too speedy. I was like, I maybe anxious. I’m like, “I’m going crazy. This is horrible.” And I was like, “I’m never taking this crap again.” But those four days, I was on fire. Uh I was like laser focus and it I felt on top of the world. And so obviously a lot of people take this and I would not feel bad if my competitor took it. Is that what you’re asking? I just I don’t know, like in sports, it’s definitely seen as I think for most people, when they see would hear about an athlete doping or cheating, it’d be literally like you’re cheating and it’s a tainted record, right? But I think I think those drugs should be legal in sports a little bit. Do you think that? Okay, so so you would you think in in business, you I guess there’s two questions. Do you think a lot of people are taking this type of stuff? I remember Sam Bankman Fried had the like the patch. I think a huge amount of people are taking it. Dude, I think there was a joke on Reddit. There was a guy who was like, “I’m naming my daughter Vivance because I love this drug so much.” Uh, yeah, I think there’s a yeah, I think everyone I think if you’re under the age of 30, I would assume that you’re taking it. Oh, wow. That’s crazy. That’s you think it’s that popular. Yeah. I think that I am now a very wholesome straight-edge person and I think you have always been that way. So I think perhaps we don’t I’m just naive, dude. I didn’t even like nobody nobody offered me any. I didn’t I didn’t get any. It’s not like I’m like I’m more morally superior. I just didn’t even know. No, I’m not I’m not saying that it’s morally superior to be this way. I just think that you and I have never, well, since I’ve known you, I have never partied and you have never partied or at least been part of like the drug or alcohol scene really. And I do think most people uh it’s like getting weed. You know, like, “Oh, like I can’t sleep.” And the doctor’s like, “Gotcha. I understand.” Do you know what I mean? Like waking, like Yeah, that’s how I think it is. The closest thing I have to that is like calling my dog a service animal so I can like, you know, take her into some place. Dude, I so when we were younger, our parents would like my parents gave me Ritalin because like every boy who couldn’t sit still in fourth grade, they were like, “Oh, you you you have an illness, son, and we need to keep you from standing up from the chair and like, you know, you you have to take this pill.” And I remember taking the pill in fourth grade and after like a few months, I’m like, I didn’t have like the vocabulary to explain to my mother, but I was like, “This is making me sad.” Like something was going on. And so she was like, “Oh, this is crazy. What are we doing?” But I remember taking it. It changes you and I do think that when I took it as an adult, it felt like I was on EPO and I was having to do the Tour de France. Like it felt I’m like, “Oh, I understand how this is like a a a PED.” Did you see how Chamath wants to come up, which I don’t really respect a lot of what he says, but you see how he said he wanted to have the uh PED-free poker? Oh, yeah, yeah. He was saying like a no-Adderall poker tournament, basically. Yeah. Yeah. Uh that’s that’s sort of intriguing. That’s great. You know, I must just be sleeping on this. Like I I didn’t realize this was as I I have a couple of friends who I know they were they told me like, “Oh yeah, I’m going to stop doing that.” I was like, “Oh, you’ve been doing that? What is that? Why? For what?” Like, you know, I didn’t even really occur to me. I guess this I as you guys are saying this, I’m realizing that, oh, I’ve probably just been foolish about that. Yeah, it wouldn’t surprise me. Okay, so like what do you call the listeners of this pod? The yuppie class? Like the white-collar class or whatever? I would bet that 30% of the people between the ages of 22 and 35 who are in this white-collar or yuppie or Henry class are on uh ADHD medications. That’s my prediction. 30%. It’s a lot, right? If you’re on that addie in the comments, let us know. We’re going to poll the YouTube comments right now. Natty or Addie? Which one are you? I had friends that would buy in the Silk Road. Can you even buy it online? I guess you don’t even need to buy it online anymore. You can just go to your doctor, but There’s probably like like a Adderall toothpaste at this point. And if not, great idea. Yeah, that’s Yeah. Brush in a rush. Let’s go. 10 out of 10. 10 out of 10. You nailed that one. Um all right, that’s it. That’s a pod.