Episode of My First Million with Sam Parr and Shaan Puri.
Transcript
Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.
Kind: captions Language: en so the guy i’m gonna talk about today his name is brad jacobs bradley jacobs i think he goes by but uh we’re gonna call brad jacobs and this person is super interesting because they have started uh five companies that have either gone public or are worth over a billion dollars he started age 23 he’s 64 now uh google them brad jacobs he’s worth somewhere in the range of three four five billion dollars and he’s bought or in both he doesn’t like invest passively like a venture check they buy companies and he’s bought something like six 700 companies and he’s done it across a variety of industries and he’s done the same strategy over and over and over again in different industries and it’s incredibly interesting and this guy uh is very fascinating to me for a variety of reasons that i’m going to explain but andrew have you heard of this guy brad jacobs do you know anything about this ever i don’t know anything that’s kind of why he’s cool he’s kind of on the under the radar if you google him he’s uh he’s got like a bald head and he looks like a finance guy because he wears a tie and he’s like pretty um well spoken and you think that he’s just like a private equity person and i guess maybe he is but he’s really an entrepreneur he’s very entrepreneurial and he’s uh far more interesting than just a lot of the typical new york hedge funny type of folks and so i’m gonna give you a quick story about his background so he’s started five things that have been quite meaningfully sized so the first was uh it was called amorex oil associates he started it when he was and it was an oil biz it was basically like an oil brokerage firm which uh i’m not entirely sure what that entails but i imagine it just means uh connecting folks who created the oil to large businesses who are buying the oil and within a very short amount of time only about four years uh remember he started this when he was 23 so by the age of 27 amorex his oil business was doing 4.7 billion dollars in gross uh gross oil bookings meaning he would that’s how much oil they’re buying and uh and selling now i imagine his company kept a tiny percent of that like one or two or three percent but incredibly impressive for a young guy um and after a few years he sells that business for a billion dollars then only a couple months after that he starts this thing called hamilton resource uh hamilton resource he starts out of uh uh england he convinces a french bank to give him a billion dollars line of credit which he was quite successful already even though he was crazy young but uh he made it happen and he went and secured a line of credit and here’s what he said he goes we moved physical cargos of oil from one place to another the 80s turned out to be a great time in the oil business and i built hamilton up to about a billion dollars in revenues and did business in dozens of countries uh dozens of countries before i moved back to the states in 1989. so between 83 and 89 he started this business and it also was huge i believe he ended up selling it for a billion dollar north of a billion dollars so that’s business number two business number three a little bit of a of an odd one was waste management um i don’t think there’s anyone out there doing waste management stuff now that’s brand new but there’s a ton of companies that at the time started in the 70s 80s and 90s like waste management the company waste management and what they did was they would go out and find tons of mom and pop waste management companies because back then that’s how it was it probably is a little bit to this day but he started this thing called united waste management which eventually became the fifth largest solid waste business in america and it had a very very very simple business plan which was buy landfills and small markets by many of the local trucking companies that were serving those markets optimize the truck routes maximize the pricings get margins up achieve size so that they had the capability to scale and they did that and the strategy worked really well and in just five years our earnings compounded annually annually by 55 percent and the and he took the company public something like eight months after starting it and the stock price went up as well 50 every single year for like five years eventually that company grew to 3.9 billion dollars in revenue and 1.2 billion dollars in ebitda with 750 locations and 13 000 employees is this freaking crazy oh sorry that i just gave you the numbers i gave you the numbers for um his next business but the waste management grew to 2.5 billion dollars in revenue oh sorry uh 2.5 billion dollars and an exit to waste management nuts right that’s crazy so i i one of the most interesting things about this is like there i always think there’s like um four different types of entrepreneurs right there’s the innovators so let’s just take let’s take um chipotle as an example right so there’s the innovator there’s the guy who rolled the first burrito and was like oh [ ] this tastes really good um then there’s the remixer there’s the person who creates chipotle they take the burrito they package it up they create a brand around it then there’s the scalers the person who scales chipotle to 100 locations and then there’s the optimizer the person who just sits on top makes sure it doesn’t blow up and gets as much as possible gets as much juice out of the lemon as they can and this guy’s a great example of a scaler someone who just takes something that already works that’s already proven and just does a much better job of it and rolls it out makes it scalable and builds something massive and it’s super it’s super interesting because i’d say i i kind of fall into this camp at the same time i feel like what’s sexy about this guy is actually how boring the businesses are right they’re they’re so basic these are things that are like undisruptible and when you build them it’s like a hundred year business or something which i think is really cool whereas what we do is like five you got to think in five year uh chunks i completely agree and if you scroll up to this document that we have open and you click source um the source that i’m using for a lot of this and this is so interesting um so we’re on business number three i’ll get to four and five in a second but when what this guy does and then when i wrap up all five i’ll explain to you what my lessons uh learn from this guy are but i’ll say one of them right now which is what this guy does is he raises money like a madman and it’s not like a ridiculous amount i mean saying you’re raising tens of millions of dollars i guess for the for the average show yeah that is a ridiculous amount but he’s got a track record and he turns him into multi-billion dollar things but uh so so kind of tens of millions of dollars is not that much money um but if you click that source thing what what does that take you to to the sec okay i found this file on the sec and i don’t really know what this is but i don’t even remember how i came across it but this is what interested me it’s a q a session of him having written it out and he basically lays out the strategy of his fourth and fifth business and so what this appears to be is a q a that he prepared and they showed this to a ton of potential investors a ton of potential banks and they decide to invest in him and i think this was before the company even started is that what that is so you’re saying this is what he raised on like there’s no deck there’s nothing it’s just this is the thing he goes out and he says read this document and you can invest i’m not entirely sure but i think that is part of it it’s called this is called a schedule 14a which i i’m not an expert in the sec i believe that is something that you have to answer before a board of directors at a publicly traded company um raises money but i’m not entirely sure but it’s interesting though because he writes in wonderful straightforward simple english and you could read his entire strategy which i’m going to go through in a second um but skim that while i bring well i i’ll summarize the next two businesses that he did so he started um i told you he started two oil things but basically those were oil brokerage businesses then he started um well waste management business now his fourth one is called united rentals now i don’t know if you see this in canada but if you pay attention to this now and if you’re listening to this and you live in america go on a drive in downtown the downtown city wherever you live and look at the big box trucks and look at the rental equipment so look at um like the caterpillars or the bobcats or the the um the construction equipment as well as the um porta potties and anything involving construction or trucking go and look at those things and i guarantee you on a lot of them you’re gonna see united rentals well that is the fourth company that he started and he started it with the idea of the same thing of waste management he wanted to go out and he wanted to find a massive industry that was highly segmented by small businesses where that were profitable and great but they didn’t have enough capital to grow and they were kind of bad at sales and that’s what he did and so he founded it and in just five years five years it grew to 4 billion in revenue and 1.2 billion in is he growing via acquisition or is he just rolling this out and crushing competition across the country we’re going to talk about that but what he said was we got there partly through acquisitions partly through organic growth developed by developing greenfield locations um he goes we grew by using the same strategy at united ways we bought about two thirds of the branch locations and cold started another third from scratch i actually prefer cold starts is what he said the business plan for united rentals was to become the largest equipment rental company in the world and leverage our purchasing power branding and other advantages of size within 13 months we became number one leap frogging fleet frogging hertz which had become the equipment rental which was the number one equipment rental business in 1965. another thing we did was we went fast uh we went public fast we formed the company on labor day weekend and we were trading on the new york stock exchange by december labor day weekend is in may i think right so they started the company in may and five months is that five six seven months that seven months later they were merrill lynch said it was the fastest growing or the fastest ipo they’ve ever seen and i stepped down uh uh and so he stepped down of united rentals in 2007. this is only five years after starting and to start the next company but when he stepped down united rentals if you look it up now i believe their market cap is 25 billion so he spent five years on this company and it’s worth 25 billion dollars crazy so listen to what he did after this um after i stepped down i began looking for my next big thing i studied tons of industries and i ended up concentrating on transportation and logistics it’s larger and more fragmented than the industries i’ve been i’ve previously been involved in it’s a 13 billion dollar um sorry a 13 trillion dollar industry and here’s what this guy says this guy at the time is already multi-billionaire but let me see if i um i have he wrote out what he does which was basically he basically spends three months he reads tons of reports and then he calls a hundred experts in each industry and he just goes and he sits down with them and just asks them questions it might as well be a podcast all that’s like exactly how he learned so he’s this multi-billionaire he’s his big shot he’s done all this amazing stuff and he calls these people and he just sits down and he listens that’s all he does it’s pretty amazing and he did this and then he’s in this with his new thing it’s called xpo logist logistics have you heard of this i have i have heard of this i think it’s a delivery and logistics company like a competitor to fedex at least that’s my understanding well we’ll put this in the show notes but in that document up top that is the document from where he was raising money for xpeo logistics and then plain and it looks like it looks like it’s like supply chain so it’s like getting people things they need that are critical on time well in there he um in that document that i sent to you he i didn’t i i couldn’t study the whole thing but in plain english he explains kind of what they did and his reasoning for getting into it and he just says well i just studied loads of industries this one seemed industry interesting i went and um interviewed a hundred people who were experts on it i hired really good people and we’re gonna do x y and z and that x y and z is exactly what he’s done in his uh last uh businesses and now i wanna wrap up by by giving you guys incredibly detailed um stats or uh incredibly detailed strategy on what he does so his first thing that he does he looks for huge industries with lots of fragmentation that are small and profitable but don’t have the capital to uh to scale so here’s what he says he was in a nutshell this is how you ramp up a you buy a brokerage or some type of small business with 30 million in revenue and you add 30 to 40 bodies to it and you double revenue in time i’ve looked into companies that have executed this plan but most of them don’t have the capital to sustain it i try to find those businesses and i bring all the capital to do it the second thing that he does is he hires salespeople so he says i like to hire hungry talented salespeople at a low base but big upside for incentives i fund their training for a few months and it’s not that hard for the winners to build a million dollar book after a year or so um it’s a business where you have to make 99 calls a day and do one or two deals so you have to hire people who are psycho i actually don’t know this word what’s this we have to hire people who are psycho chromatically test high on the need to win scale and low on the need to be liked scale a sales person will have a base of 25 000 or 35 000 but can make many times that amount through an incentivize a really good incentive program once you get the right people in the system and integrate them on the right i.t it can be really powerful and finally speaking of i.t when someone asked him what was the best acquisition of all time they ever made he said they made a powerful software acquisition with a politically incorrect name called rental man and we used that to integrate all of our rental businesses we rolled up into that company we couldn’t have made the hundreds of acquisitions we did without rental man and that was his best acquisition of all time and that my friend is brad jacobs and i can go on i i like i both love and and um find these guys kind of mysterious and i kind of wonder like what the thing that’s missing in all this is like what keeps him going what’s his purpose how do you how does he use his money and and like why does he do this right what’s the driving force i researched him and the guy looks like a wall street stiff did you look up what he looks like yeah he looks kind of like um there’s like a character actor that he looks like i’ll try and find a photo of him like a generic nerdy like steve ballmer looking kind of guy yeah he looks like he would be like in biden or trump’s cabinet uh yeah yeah but i’ve actually seen interviews with him he’s very endearing and i think that he’s not actually just a stiff like wall street like just milk all the numbers out i actually think that he um just this is his bill this is his urge he just loves to build and and and he constantly talks about integrity he goes the common denominator of everything we buy is the people who we buy from have to have high integrity and also one of our moats is we take care of the people of the businesses who work for the businesses that we’re inheriting in fact the biggest risk of our plan is that the people who we buy companies from they leave and so we treat them all really really well and so i don’t think this is actually [ ] because when i got his energy from interviews i actually believed that he was a good dude and this is just his art what do you think though what do you think he does with his money is that kind of public does he do any philanthropy or or anything because i always find it so interesting i mean there’s two ways to look at like doing good in the world it’s like okay you do capitalism right you employ a whole bunch of people you make an industry more efficient you add to global gdp you know good things happen because he does this right but on the flip side like what’s driving making more money and maybe it is just continually maniacally going industry by industry and improving them and optimizing them that’s his like gift or whatever but um but the guy i’m going to talk about next is really interesting because he basically uses all his money to do crazy good things right which is really fascinating i’ll talk about him in a minute but do you have any sense of what this guy does like no with his money like he like he’s very much jets like i i don’t i cannot figure it out but i will i can wrap this up by saying there’s a few things that i’ve learned from this person the first is like taking the red pill which is like have you heard i i don’t know someone just used that phrase to me their day and and i’m picking it up you should be careful it’s uh associated with all sorts of not so uh not so positive connotations oh well i didn’t know that what i mean is like i guess his perspective like when you look at what this person is capable of doing you think or when you read what he’s done if you didn’t know it was true you would say well that’s impossible no one can do that but the person has done it repeatedly over and over and over again and he seems pretty nonchalant about that and so my what i’m learning from him is that um you can create these amazing things and it’s hard but maybe could be kind of simple well it’s so inspiring right you basically go find an industry that has let’s look at the restaurant and industry in general right restaurants are disorganized they’re very difficult businesses they’re very low margin people have done this essentially in restaurants by building fast food chains right so you go in you build systems you do training you incentivize people the right way and you can make a lot of money doing that but you can’t make a lot of money usually in an individual restaurant so what he’s done is he’s gone out and fun he finds these fragmented disorganized industries like you know waste management or logistics and he goes okay i’m gonna do the fast food chain uh except for that industry it’s yeah and it’s really really cool um the second thing that that i learned is he actually does the same thing as you well i actually don’t know your numbers but i bet you they’re similar he likes to buy companies between five and ten times earnings um and that’s like his number um that’s what i mean yeah i’d say i love to buy businesses for that um that valuation or whatever um but the problem the problem with buying a business at that valuation is like you’re buying kind of a crappy business often if it’s going to be that low well these are trash what he’s doing yeah exactly what he’s doing is kind of building a platform where he’s like i just need one so i can build the systems and then i can go and acquire a whole bunch more and the final thing and then we can move on is the guy loves debt and oftentimes that ends bad but i personally have zero debt in my life and i’ve never really had debt and i actually think though that not having debt or not having some type of leverage is silly and i’ve read articles about him and he talks about it very unemotionally like he seems like a really charismatic emotional guy but he’s like yeah look like this makes total sense because i can grow this business at 30 percent uh therefore the cost if i look at the cost of capital i should allocate capital this and it just makes sense and i hear that i’m like yeah everything you’re saying makes total sense i’m just so fearful and it’s really cool that you don’t seem to have that fear and i think that’s interesting yeah and i think debt that’s it goes back to like not having fatal potential potential blow-ups in your life right so i’ve heard everything from like you know i was talking to a guy and he was saying i’m super rich guy and he goes i’ve paid off my house in full i never have a mortgage or whatever and it just gives him that sense of security maybe this guy has he’s so rich he’s already made a whole bunch of money on other stuff that he can take a little more risk or he knows how to structure debt or whatever it is um you hear both things and the problem is you only hear the stories about the guys who levered up and did really well there may be a whole bunch of other brad jacob types who went out levered up and it totally [ __ ] them they hit a speed bump oh yeah lost all that money so the interesting thing about this though um the and the difference between what we do in this guy is this guy’s essentially starting a new business um and what we like to do is find a business that’s already working where we can actually just leave it and make it you know maybe we’ll help plug in a new ceo or something like that but we’re actually not messing with it we’re not changing the dna this guy’s like modifying the dna he’s doing like crispr on these businesses he’s working and warping them and turning that he’s working really hard right so i don’t like to work hard i get really excited when i hear about people like i’m so glad they exist but i’m like oh my god this is a big lift i don’t want to do it it’s a big lift but it does seem cool it’s cool uh it’s this is like cornrows or sleeve tattoos i think they’re cool i just don’t want it they’re cool for certain people and it works great for them exactly tattoos not for me too it’s pretty sick that someone else has it but i don’t know if i want it totally totally um and i i i think again going back to like this guy does make the world better because he employs a lot of people in industries where you know people aren’t getting laid off because of this guy right because he’s managed this business better he can probably pay people better give them more opportunity he’s not going to lay them off because he’s got this global business so it’s very it’s very positive but what i would want to understand is what’s the guy do with the money what’s driving him like is he like a sad empty hole where he’s like i have to keep doing this all the time or is he like you know donating it all to charity or views this as super philanthropic in and of itself i’m super curious about that um i don’t know i i like the only thing that i saw is that he has a good glass door rating um which i actually everyone dismisses glass door but i’m like yeah there is like i got made fun of from the michael saylor podcast i brought that up i’m like yeah it’s not like facts but it’s like there’s a signal that you can learn a little bit it’s the glass door people only go on glass door when they really hate you so it’s like the voices of the people who hate you most and if the people who hate you most are saying good things or at least okay things that’s a really good sign i feel like i can rule the world i know i could be what i want to i put my law in it like no days off on the road let’s travel never looking back