WEBVTT - Horse Barn: HVAC, Windsurf, Vanguard 0:00:04.840 --> 0:00:09.360 Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.800 --> 0:00:14.000 I'm excited with for today's episode. I'm only really excited to 0:00:14.000 --> 0:00:16.480 talk about search funds if I'm being honest, because. 0:00:16.239 --> 0:00:18.720 I want to get straight into you your future as 0:00:18.760 --> 0:00:19.480 an h VAC tech. 0:00:19.640 --> 0:00:19.800 Yeah. 0:00:19.800 --> 0:00:22.599 I was reading this article as a guide, you know, right. 0:00:22.960 --> 0:00:25.319 The appeal to the search fund is that, like, who 0:00:25.360 --> 0:00:29.160 among us hasn't wanted to own a lucrative HVAC business 0:00:29.160 --> 0:00:29.880 in New Jersey? 0:00:30.760 --> 0:00:35.120 Just run into the swamps of New Jersey and get 0:00:35.120 --> 0:00:40.599 into waste management. Wait, that's a different thing. It is similar, 0:00:41.040 --> 0:00:46.800 I'm sorry about Yeah, right right, right, right, right, right right. 0:00:47.760 --> 0:00:50.520 Hello, and welcome to the Money Stuff Podcast, your weekly 0:00:50.560 --> 0:00:55.200 podcast where we talk about stuff related to money. I'm 0:00:55.240 --> 0:00:57.400 Matt Levien, and I write the Money Stuff column. 0:00:57.200 --> 0:01:00.560 For Bloomberg Opinion, and I'm Katie Greifeld, a reporter for 0:01:00.600 --> 0:01:02.920 Bloomberg News and an anchor for Bloomberg Television. 0:01:04.520 --> 0:01:06.200 Wouldn't that be a great story, though, if you're like 0:01:06.240 --> 0:01:08.560 some twenty eight year old Harvard MBA and you're like, 0:01:08.560 --> 0:01:11.480 I'm gonna start a search fund, and you scour the 0:01:11.480 --> 0:01:13.120 earth and you send cold emails to a bunch of 0:01:13.160 --> 0:01:15.600 people and you end up getting into the waste management 0:01:15.640 --> 0:01:18.800 business in New Jersey, and you're like, oh great, now 0:01:18.840 --> 0:01:20.760 I can be my own boss and like run this 0:01:20.840 --> 0:01:22.840 licrative business. And then like the mob shows up. 0:01:23.640 --> 0:01:27.000 Yeah, surprise, Yeah, now you have you have many bosses, 0:01:27.080 --> 0:01:33.199 and they'll kill you. I'd never heard of search funds before, 0:01:34.120 --> 0:01:37.400 even as a dedicated money stuff reader. I guess I 0:01:37.440 --> 0:01:41.600 never absorbed it, but I was so charmed by this piece. 0:01:41.720 --> 0:01:43.959 This is probably the longest article I've read in a 0:01:44.000 --> 0:01:46.240 long time, but I wrote it start to finish in 0:01:46.319 --> 0:01:47.160 Business Insider. 0:01:47.880 --> 0:01:50.320 Right, there's a Business Insider story about search funds. I 0:01:50.320 --> 0:01:53.240 love search funds so much because search funds are like 0:01:54.120 --> 0:01:57.200 if you get a business degree from a fancy school, 0:01:58.720 --> 0:02:05.520 the highest calling could be running a duct cleaning business, 0:02:06.000 --> 0:02:08.519 or I always say pest control. Like pest control to 0:02:08.560 --> 0:02:10.360 me is the archetypal search fund. I don't know if 0:02:10.360 --> 0:02:14.520 it's actually that common search fund use, but basically, right, 0:02:14.560 --> 0:02:16.840 a search fund is like you go to business school, 0:02:17.000 --> 0:02:21.240 you graduate, you raise a like six or seven figure 0:02:21.919 --> 0:02:25.400 fund from investors. The investors, I think are often like 0:02:25.480 --> 0:02:29.120 your family, but sometimes are professional investors. Because the returns 0:02:29.120 --> 0:02:32.000 on search ones are really good. And then you go 0:02:32.040 --> 0:02:35.440 out and search for years to find a boring small 0:02:35.480 --> 0:02:40.119 business who's somewhat aging owner is looking to get out 0:02:40.120 --> 0:02:44.079 of the business and sell to some young whipper snapper, 0:02:44.760 --> 0:02:47.160 and then you buy it and then you run it, 0:02:47.440 --> 0:02:50.840 and you use the tips and tricks that you learned 0:02:50.840 --> 0:02:54.200 in your two years of business school to like optimize it, 0:02:54.680 --> 0:02:57.480 and you're like a little private equity king pin. Except 0:02:57.480 --> 0:02:59.720 instead of being like an associated a big private equity 0:02:59.720 --> 0:03:03.400 fund is just you. And instead of like rolling up 0:03:03.400 --> 0:03:06.520 a giant business, you like buy one pest control company 0:03:06.760 --> 0:03:08.440 and then you run the pest control company. 0:03:08.639 --> 0:03:12.200 It's so good, it is so charming. And I mean 0:03:12.440 --> 0:03:16.160 reading this Business Insider article, Okay, so it's told through 0:03:16.200 --> 0:03:19.600 the lens of this man, Dan Schweber, I believe his 0:03:19.720 --> 0:03:23.160 name is. And I mean I thought that I deal 0:03:23.280 --> 0:03:25.680 with a lot of rejection as a journalist. Being a 0:03:25.720 --> 0:03:28.680 search fund founder, what do you call them? Just a 0:03:28.720 --> 0:03:35.160 search fundor a searcher. Being a searcher sounds absolutely grueling 0:03:35.200 --> 0:03:37.320 in terms of dealing with the word no. By the 0:03:37.400 --> 0:03:41.440 end of it, he sent thirty six hundred initial emails, 0:03:41.440 --> 0:03:44.280 three hundred and seventy five introductory calls, just thirty intro 0:03:44.400 --> 0:03:48.640 meetings and six signed letters of intent and this business 0:03:48.640 --> 0:03:51.240 that he ended up buying, which is an HVAC company. 0:03:51.520 --> 0:03:54.040 He emailed the guy twelve times, as you pointed out 0:03:54.120 --> 0:03:56.800 in your column, And I don't think I've ever made 0:03:56.840 --> 0:03:58.960 it to the twelve email. But I don't think I've 0:03:59.000 --> 0:04:03.560 sent twelve emails to the same person pitching them, which 0:04:03.600 --> 0:04:06.760 is I don't know. It was inspiring. It was inspiring 0:04:06.800 --> 0:04:08.240 on so many different levels, Matt. 0:04:08.960 --> 0:04:11.880 How persistence pays off by getting you an HVAC. 0:04:11.600 --> 0:04:17.120 Company exactly, but just sends a dozen emails. Maybe I 0:04:17.440 --> 0:04:19.279 can own an HVAC company. 0:04:20.200 --> 0:04:23.320 What I love about it is that this was a 0:04:23.360 --> 0:04:25.760 sort of novel idea at some point, you know, twenty 0:04:25.839 --> 0:04:29.960 years ago, and it has now really like pervaded the 0:04:30.000 --> 0:04:32.640 top business schools, so that a lot of people are 0:04:32.680 --> 0:04:35.960 doing this, which means that if you run an h 0:04:36.040 --> 0:04:40.440 BAC company, you are constantly, constantly getting cold emails from 0:04:40.560 --> 0:04:42.680 searchers and so like. Of course you had to email 0:04:42.760 --> 0:04:44.640 I twelve times because the guy who was like, ah 0:04:44.880 --> 0:04:46.360 more search funds. 0:04:46.640 --> 0:04:47.280 Yeah, it is. 0:04:47.279 --> 0:04:50.200 Such an amazing time to be in an unglamorous business 0:04:50.240 --> 0:04:53.040 because there are so many people with MBAs who want 0:04:53.040 --> 0:04:55.159 your glamorous business. Right. A lot of them are searchers, 0:04:55.200 --> 0:04:56.880 but some of them are like private equity funds doing 0:04:57.000 --> 0:04:59.080 roll ups of like pest control or whatever. Right, Like, 0:04:59.360 --> 0:05:01.440 there are a lot of buyers to choose from if 0:05:01.480 --> 0:05:05.159 you happen to own an HVAC company. And I don't know, 0:05:05.200 --> 0:05:06.680 it's just so strange to me to think, like, you're 0:05:06.720 --> 0:05:09.839 a plumber, you like work in plumbing for twenty years, 0:05:09.920 --> 0:05:12.640 you start your own plumbing company, you like go around 0:05:12.720 --> 0:05:15.719 doing plumbing, and then like you occasionally check your email 0:05:15.720 --> 0:05:18.000 and there's like four hundred emails from private equity firms 0:05:18.000 --> 0:05:20.720 and MBAs. It's just like a strange dynamic. 0:05:21.360 --> 0:05:23.600 It's a seller's market. I wish I had a plumbing 0:05:23.600 --> 0:05:24.160 company to. 0:05:24.160 --> 0:05:27.159 Sell, right, And Like, one thing I wondered about is like, 0:05:27.160 --> 0:05:29.400 if you are a search funder and you buy yourself 0:05:29.440 --> 0:05:31.640 a plumbing company in a year, do you flip it 0:05:31.680 --> 0:05:34.880 to another search funder, because like the demand keeps growing. 0:05:35.520 --> 0:05:37.600 I do want to talk about that how you exit 0:05:37.640 --> 0:05:41.520 it as a searcher. But you seemed charmed by particular 0:05:41.640 --> 0:05:44.520 from getting into the shoes of the man who owned 0:05:44.560 --> 0:05:47.960 this HVAC company. The article also got into the shoes 0:05:48.040 --> 0:05:50.800 of the employees who worked there. I think that's another 0:05:50.839 --> 0:05:54.080 interesting level. Like, Okay, the founder and owner of the 0:05:54.080 --> 0:05:56.440 business is getting a bunch of emails. How do the 0:05:56.480 --> 0:05:59.600 employees react when you tell them this thirty two year 0:05:59.600 --> 0:06:03.320 old now owns the business and you work for him 0:06:03.320 --> 0:06:08.120 and he's the CEO, and you know he's some Harvard MBA. 0:06:08.560 --> 0:06:10.800 Okay, here's how I think about this. I think in 0:06:10.839 --> 0:06:14.320 the olden days, people would start businesses and they would 0:06:14.320 --> 0:06:16.400 be like, you know, high school educated, like you know, 0:06:16.440 --> 0:06:19.400 they start a business because like they're just scrappy entrepreneurs, 0:06:20.400 --> 0:06:22.039 and then they would run the business for a while. 0:06:22.200 --> 0:06:25.000 They'd have employees, and they would have like a kid, 0:06:25.480 --> 0:06:27.080 and they'd be like, well, of course the kid is 0:06:27.080 --> 0:06:29.279 going to take over the family business. But because they're 0:06:29.360 --> 0:06:32.520 rich now, instead of like the kid just like you know, 0:06:32.600 --> 0:06:35.000 starting at the family business. After high school, they send 0:06:35.040 --> 0:06:37.680 the kid to Harvard Business School and the kid gets 0:06:37.680 --> 0:06:40.200 all these like new fangled business ideas and he comes 0:06:40.240 --> 0:06:42.960 back at age twenty eight and he's like, I'm going 0:06:43.000 --> 0:06:44.480 to take over the family business and run it in 0:06:44.520 --> 0:06:47.920 a modern way, and like, you know that's good, right, 0:06:47.960 --> 0:06:50.160 Like you have like the scrappy founder, and then you 0:06:50.160 --> 0:06:53.919 have the next generations like professional and educated. But the 0:06:54.040 --> 0:06:56.520 chain has been broken. So now like the founder gets 0:06:56.600 --> 0:06:58.080 rich and the kids are like, well, I don't want 0:06:58.080 --> 0:07:00.960 to work at the family h fact business sounds terrible, right, 0:07:01.000 --> 0:07:03.560 So the kids go off and like become documentary filmmakers. 0:07:04.080 --> 0:07:07.279 And meanwhile, like, it's really hard to get into Harvard 0:07:07.320 --> 0:07:09.279 Business School now, So you can't just get into Harvard 0:07:09.279 --> 0:07:12.000 Business School by being the like shiftless child of an 0:07:12.120 --> 0:07:15.280 h back founder. But all the people in Harvard Business School, 0:07:15.440 --> 0:07:17.600 you know, there's still a demand for Harvard MBAs to 0:07:17.680 --> 0:07:19.680 run h back companies. So now instead of it like 0:07:19.720 --> 0:07:21.200 being the kid of the founder, it's just like some 0:07:21.360 --> 0:07:24.200 random person who happened to get a Harvard MBA and 0:07:24.280 --> 0:07:27.480 now wants to run the you know, hvac business in Peoria. 0:07:27.680 --> 0:07:32.480 So it's disaggregated the like family you know family family air. Yeah, 0:07:32.560 --> 0:07:34.960 instead of like the son taking over the family business 0:07:34.960 --> 0:07:37.560 with his fancy Harvard degree, it's like some random person 0:07:37.600 --> 0:07:40.160 takes over the family business with his fancy Harvard degree. 0:07:40.720 --> 0:07:42.640 But you know, it's like still kind of the same. 0:07:42.760 --> 0:07:44.600 It's like the employees still have to work for a 0:07:44.640 --> 0:07:47.080 thirty two year old who hasn't marked the back. You know, 0:07:47.200 --> 0:07:49.320 it's like it all makes a kind of sense. It's 0:07:49.360 --> 0:07:53.000 just become more like coldly logical and market driven. 0:07:53.400 --> 0:07:55.840 Something that I kept thinking about while reading this article 0:07:56.080 --> 0:07:59.120 for some reason, a meme that keeps popping into my 0:07:59.240 --> 0:08:02.960 various algorithm is, you know, a cartoon guy hand in 0:08:03.000 --> 0:08:05.080 his face in the middle of the circle, and it's like, 0:08:05.200 --> 0:08:08.120 I meet a girl. Her dad owns like a twenty 0:08:08.120 --> 0:08:11.480 million dollar a year, like waste management company or pest 0:08:11.480 --> 0:08:14.280 control or something, but he doesn't want to like hand 0:08:14.320 --> 0:08:17.160 the keys to his ambitious future son in law, and 0:08:17.200 --> 0:08:20.000 then we stop talking, which it would be a lot 0:08:20.040 --> 0:08:22.080 funnier if I could show the meme, but I promise 0:08:22.080 --> 0:08:23.920 it's funny, but it kind of reminded me of this 0:08:24.200 --> 0:08:29.000 sure anyway, I thought also it was interesting. You know, 0:08:29.200 --> 0:08:33.520 this article described it as a phenomenon happening around like 0:08:34.080 --> 0:08:37.319 late twenty year old and like graduates in their thirties, 0:08:37.320 --> 0:08:40.520 and I think it speaks to something about millennial culture, 0:08:40.640 --> 0:08:44.200 that there is that desire to run into the woods 0:08:44.280 --> 0:08:48.240 or go to Peoria and run an HVAC company, versus 0:08:50.280 --> 0:08:54.000 stay in a city and try to climb the corporate ladder. 0:08:54.040 --> 0:08:56.680 Like this probably happens with every single generation, but it 0:08:56.679 --> 0:08:59.079 does feel like it speaks to some sort of disillusionment. 0:08:59.400 --> 0:09:01.440 Yeah, I don't know. You think about like what you 0:09:01.480 --> 0:09:03.520 can do with your MBA, right, Like if you're a 0:09:03.559 --> 0:09:05.960 sort of corporate type, like you can go work in 0:09:05.960 --> 0:09:09.160 private equity, and you can start by building models and 0:09:09.480 --> 0:09:12.160 doing kind of grunt work, and your hope is that 0:09:12.200 --> 0:09:15.120 in ten or fifteen years you'll be you know, kind 0:09:15.160 --> 0:09:17.679 of leading big deals and sitting on boards of companies 0:09:17.679 --> 0:09:21.960 and kind of running portfolio companies. Or you can just 0:09:23.000 --> 0:09:27.319 do deals and run companies yourself immediately, with the trade 0:09:27.320 --> 0:09:30.920 off being that those companies are small pest control companies 0:09:30.920 --> 0:09:33.680 in Peoria. But like maybe that's good trade, right, Like 0:09:33.679 --> 0:09:35.840 maybe you want that trade, right, Like I am sure 0:09:36.480 --> 0:09:40.280 that in like ten years you'll be reading about people 0:09:40.360 --> 0:09:43.959 who started as search funders and bought like one HVAC 0:09:44.000 --> 0:09:46.280 company and then bought another HVAC company and then became 0:09:46.400 --> 0:09:49.679 like billionaire private equity kingpins by like doing roll ups 0:09:49.720 --> 0:09:53.280 of their industries. There's kind of two paths to that outcome, right, 0:09:53.320 --> 0:09:55.480 There's like the outcome of being a private equity associated 0:09:55.480 --> 0:09:57.640 and there's the outcome of taking over an HVAC company. 0:09:58.000 --> 0:10:00.520 And I bet the second path is more we're likely 0:10:00.559 --> 0:10:03.720 to get you to the billionaire Kington outcome at this 0:10:03.760 --> 0:10:06.040 point than like being a private equity associate. 0:10:06.760 --> 0:10:13.079 Well, I think you have to have some ridiculous amount 0:10:13.320 --> 0:10:17.480 of just self confidence or real earned ego to think 0:10:17.600 --> 0:10:20.600 like I'm going to go in and I am going 0:10:20.679 --> 0:10:25.080 to ceo this small company, like it hasn't been ceoed before. 0:10:25.640 --> 0:10:28.079 Yeah, it's here like a little bit more confident, a 0:10:28.120 --> 0:10:31.040 little bit more risk taking. You're not like just following 0:10:31.080 --> 0:10:34.600 the expected prestigious path of going to a private equity 0:10:34.640 --> 0:10:36.480 fram and you're like, I'm going to strike out on 0:10:36.480 --> 0:10:39.120 my own and see what happens. Well, you know, it's 0:10:39.120 --> 0:10:41.760 interesting because like also in ten years, this will be 0:10:41.800 --> 0:10:44.280 such a like well trodden path, you know, they'll be 0:10:44.320 --> 0:10:47.360 like incubators for search funds and like it'll be so 0:10:48.320 --> 0:10:52.520 standardized that it won't be like particularly entrepreneurial and risky anymore. 0:10:52.559 --> 0:10:54.840 But right now it's still a little entrepreneurial and risky. 0:10:54.960 --> 0:10:56.920 So you're saying I should get it now, is what 0:10:56.960 --> 0:10:57.480 I'm hearing. 0:10:58.080 --> 0:10:59.520 I don't know I was gonna say you should have 0:10:59.520 --> 0:11:01.200 gotten in five years ago. I have no idea what 0:11:01.240 --> 0:11:03.280 the market is like. I think you shouldn't get in 0:11:03.400 --> 0:11:03.959 ten years. 0:11:03.760 --> 0:11:06.079 But yeah, get really pandemic. 0:11:06.480 --> 0:11:08.080 I think this is great. I feel like we've had 0:11:08.120 --> 0:11:11.160 a number of like career ideas for each other during 0:11:11.200 --> 0:11:14.560 the course of this podcast. But you like taking you 0:11:14.760 --> 0:11:17.160 raising money from friends and family to take over an 0:11:17.240 --> 0:11:19.920 HHAC company. I like it. I didn't know that you 0:11:20.000 --> 0:11:23.160 had such an intense interest in HPAC. 0:11:23.720 --> 0:11:28.720 I'm not specifically h we're using a horse barn, but yes, 0:11:29.040 --> 0:11:29.680 that's the thing. 0:11:29.760 --> 0:11:31.880 I don't know if that works. I think like the 0:11:31.920 --> 0:11:34.080 whole point of this is that you're taking over like 0:11:34.559 --> 0:11:38.839 non glamorous family businesses from like aging founders who don't 0:11:38.840 --> 0:11:43.240 want to do it anymore, not like people's like delightful 0:11:43.679 --> 0:11:45.000 lifestyle businesses. 0:11:45.480 --> 0:11:48.920 But there's there's plenty of people who would think that 0:11:49.000 --> 0:11:50.200 a barn is un glamorous. 0:11:50.679 --> 0:11:52.120 Do any of them own barns? 0:11:53.040 --> 0:11:54.560 No, they don't. 0:11:54.600 --> 0:11:56.840 It's your problem. You have to buy the barn from 0:11:56.920 --> 0:11:59.200 someone who runs the barn. I don't know. 0:11:59.280 --> 0:12:03.480 I'm reading this have like a renewed I'm reinvigorated, and 0:12:03.679 --> 0:12:06.280 you know, I thought I wanted to be a podcaster 0:12:06.360 --> 0:12:10.840 or I did that, It's okay. I wanted to be 0:12:10.880 --> 0:12:13.160 a novelist, still working on that, but I think that 0:12:13.320 --> 0:12:16.600 what I really want to be is a searcher. I've 0:12:16.600 --> 0:12:18.800 always wanted to buy a trissage barn, but now I 0:12:18.840 --> 0:12:23.280 have a fancy, not yet saturated sort of term to 0:12:23.360 --> 0:12:24.040 apply to it. 0:12:24.360 --> 0:12:26.080 Yeah, I mean that is really like. The thing about 0:12:26.120 --> 0:12:28.880 the Search Funding is like it's given people a set 0:12:28.880 --> 0:12:32.360 of concepts to sort of standardize and think about and 0:12:33.000 --> 0:12:36.520 justify this thing of like I want to buy an 0:12:36.559 --> 0:12:40.080 existing small business and run it according to my own 0:12:40.240 --> 0:12:43.200 you know ideas. I think like a while ago, if 0:12:43.240 --> 0:12:45.000 you're in business school and you're like, I want to 0:12:45.040 --> 0:12:47.680 run an HVAC company, people would be like, that's a 0:12:47.720 --> 0:12:50.000 strange thing to want to do with your forward MBA, 0:12:50.400 --> 0:12:52.560 Whereas now it's like totally standardized. I was like, oh, 0:12:52.600 --> 0:12:55.160 of course the Search fund. And similarly, I feel like 0:12:55.160 --> 0:12:57.240 this is going to be like season two of the 0:12:57.240 --> 0:12:59.560 podcast is going to be You're going to go to 0:12:59.600 --> 0:13:02.360 investor meetings. We're going to record them. People are going 0:13:02.400 --> 0:13:04.880 to be like, of course, here's a million dollars you're 0:13:04.920 --> 0:13:07.960 going to people. I think send every horse barn in 0:13:08.000 --> 0:13:09.320 America at. 0:13:09.320 --> 0:13:13.760 Least twelve at least twelve. If anyone listening right now. 0:13:14.000 --> 0:13:16.200 You own cold email, you'll show up on a horse. 0:13:16.040 --> 0:13:20.160 That's true, and they'll know I'm the real deal. They won't. 0:13:22.240 --> 0:13:24.439 Yeah, That's like one thing in this h RAG article 0:13:24.520 --> 0:13:25.920 is like, you know, the guy who owned the h 0:13:26.000 --> 0:13:29.040 RAG company was like, all these search funders emailed me 0:13:29.400 --> 0:13:31.000 and I was like, all right, come out and they're like, 0:13:31.280 --> 0:13:33.120 let me check my schedule. But this guy and the 0:13:33.120 --> 0:13:34.520 guy who bought the company from him, I was like, 0:13:34.520 --> 0:13:36.840 I'll be there tomorrow, right, You're going to show your 0:13:36.960 --> 0:13:38.680 enthusiasm by like showing up on a horse. 0:13:39.240 --> 0:13:41.680 That's the other thing I found charming is that it's 0:13:41.800 --> 0:13:45.000 just like old fashioned sort of you know, I'm going 0:13:45.040 --> 0:13:47.000 to come up and meet you in person. I'm going 0:13:47.080 --> 0:13:48.800 to shake your hand and I'm going to look you 0:13:48.840 --> 0:13:51.200 in the eye. And that has a lot of currency 0:13:51.240 --> 0:13:55.400 with the people who are selling these un sexy businesses. 0:13:55.160 --> 0:13:58.320 Right because these are people who have built businesses over 0:13:58.679 --> 0:14:01.120 years and they are the owner, but they also like 0:14:01.200 --> 0:14:04.680 work closely with the employees, and they are not just 0:14:04.760 --> 0:14:07.440 maximizing shareholder value. And if they were to sell to 0:14:07.480 --> 0:14:09.600 a private equity firm that laid off all the employees, 0:14:09.640 --> 0:14:12.760 they'd be sad and like they live in the community, 0:14:12.880 --> 0:14:14.719 they'd be looked down upon. So if they can sell 0:14:14.800 --> 0:14:17.560 to someone who gives them a firm handshake and looks 0:14:17.600 --> 0:14:18.719 them in the eye, and so they'll take care of 0:14:18.760 --> 0:14:21.120 your employee. You know, it's a very family business oriented, 0:14:21.280 --> 0:14:24.360 you know, kind of tool making environment, and you're not 0:14:24.440 --> 0:14:26.880 just paying the highest price to maximize shareolder value. You're 0:14:26.960 --> 0:14:28.720 kind of taking over a business that has lies to 0:14:28.760 --> 0:14:29.360 a community. 0:14:29.960 --> 0:14:33.360 Yeah, I do want to talk about how Schweber is 0:14:33.440 --> 0:14:36.960 going to get this big payout. The business insider says 0:14:36.960 --> 0:14:39.640 that he's in for so if all of this goes 0:14:39.640 --> 0:14:41.880 according to plan, he's in for a big payout. Of 0:14:41.920 --> 0:14:45.560 the search entrepreneurs who eventually sell their business, just under 0:14:45.600 --> 0:14:48.640 a quarter of them get nothing. Another twenty seven percent 0:14:49.120 --> 0:14:51.960 get less than four million dollars in equity, twenty eight 0:14:51.960 --> 0:14:54.800 percent get four million dollars to ten million dollars. The 0:14:54.880 --> 0:14:59.480 luckiest eighteen percent get more than ten million dollars. So, 0:15:00.520 --> 0:15:03.160 you know, after I buy the horse barn, I have 0:15:03.280 --> 0:15:05.760 to stay there and make it better and grow it. 0:15:05.800 --> 0:15:07.400 And then the idea is that I'm going to sell 0:15:07.440 --> 0:15:10.480 it in like a decade and make a big profit. 0:15:10.960 --> 0:15:13.000 I can imagine some people go into it thinking like 0:15:13.240 --> 0:15:15.680 I'm going to make my life in p area running 0:15:15.680 --> 0:15:18.400 an HRC company. But you know, most of them are 0:15:18.440 --> 0:15:20.840 like business school people, and like they're choosing between this 0:15:20.920 --> 0:15:23.920 and private equity, and yeah, they want to do a flip, right. 0:15:23.920 --> 0:15:27.400 They want to like buy a sleepy family business that 0:15:27.480 --> 0:15:31.720 isn't you know, optimizing everything, and they want to spruce 0:15:31.800 --> 0:15:34.040 up the financials and maybe do a few like tuck 0:15:34.120 --> 0:15:38.680 in acquisitions and then sell it to you know, a 0:15:38.680 --> 0:15:40.680 sort of more scale buyer, sell it to you know, 0:15:40.840 --> 0:15:43.760 private equity roll up or something for you know, if 0:15:43.760 --> 0:15:46.760 you can buy it at like one time's revenue and 0:15:46.800 --> 0:15:49.400 sell it at you know, five times revenue, then they 0:15:49.480 --> 0:15:51.080 you know, make a lot of money. 0:15:51.560 --> 0:15:53.080 And so the investors who. 0:15:55.280 --> 0:15:57.080 You know, or you retire or something on it. 0:15:57.480 --> 0:16:00.960 Or you become an investor in search funds. Sure, so 0:16:01.000 --> 0:16:02.760 if you invest in a search fund, you're in it 0:16:02.800 --> 0:16:05.720 for the long haul. You're in it until there's a flip. 0:16:06.040 --> 0:16:08.600 I don't really know the terms, right, Like you could imagine, 0:16:08.920 --> 0:16:10.640 you know, the investors just getting a share of the 0:16:10.640 --> 0:16:13.720 cash loough and being happy with never flipping it. But no, 0:16:13.920 --> 0:16:16.160 most of them want to cash out, and yeah, you're 0:16:16.160 --> 0:16:17.560 in it for a flip, and you know, you say 0:16:17.600 --> 0:16:20.720 the long term. I don't know what the holding periods are. 0:16:20.760 --> 0:16:23.680 But like you know, again, the sort of alternative to 0:16:23.720 --> 0:16:27.760 this is private equity funds. And so yeah, you might 0:16:27.800 --> 0:16:30.040 think I'm going to take over an HVAC company. I'm 0:16:30.040 --> 0:16:34.280 gonna learn hvac, I'm gonna do some deals. I'm gonna 0:16:34.320 --> 0:16:38.160 spruce things up that won't take me more than five 0:16:38.280 --> 0:16:40.480 years until I can flip the company, right Like, it's 0:16:40.520 --> 0:16:43.480 not necessarily your family business for the rest of your life. 0:16:44.200 --> 0:16:47.320 I have to imagine a lot of these fail I 0:16:47.320 --> 0:16:47.800 don't know. 0:16:48.320 --> 0:16:50.680 I don't know what fail means. I mean, right like, 0:16:50.800 --> 0:16:53.800 probably some of them, at least of them, they don't 0:16:53.800 --> 0:16:55.280 scurce them up, and then they get bored and then 0:16:55.280 --> 0:16:56.880 they're like, I were shutting this down and I'm going 0:16:56.920 --> 0:17:00.240 back to New York. But right like, you're taking were 0:17:00.280 --> 0:17:04.560 like a stable business with customers, and you know, you 0:17:05.320 --> 0:17:08.200 like that, You're not founding a business, right like, your 0:17:08.200 --> 0:17:10.600 downside is not as bad as if you were founding 0:17:10.600 --> 0:17:13.280 a business from scratch, right you know that this company 0:17:13.359 --> 0:17:17.160 already has a business and customers and you know, revenue 0:17:17.240 --> 0:17:22.400 and employees, and probably in many cases it could operate 0:17:22.480 --> 0:17:24.880 on its own that much from you, So you might 0:17:24.920 --> 0:17:26.520 not be able to do a flip. You might like 0:17:27.040 --> 0:17:30.800 get bored and close it down rather than eke out 0:17:30.800 --> 0:17:32.960 a very small profit for yourself every year. But like 0:17:33.320 --> 0:17:34.720 you're not going to lose all your money. 0:17:35.640 --> 0:17:38.320 Yeah, that's true. I mean to your point that they're 0:17:38.359 --> 0:17:40.400 not founding a brand new business. So I was thinking 0:17:40.400 --> 0:17:42.920 about this in terms of, like, you know, maybe these 0:17:43.480 --> 0:17:47.800 smart young people with these big degrees, maybe their brain 0:17:47.880 --> 0:17:52.080 power would better serve the economy by putting that towards 0:17:52.119 --> 0:17:52.760 new ideas. 0:17:52.880 --> 0:17:58.920 Why degrees are not in astrophysics, right, there's there masters 0:17:58.920 --> 0:18:02.480 of business administration, right, they've learned to administer businesses. I 0:18:02.480 --> 0:18:04.360 think it's like a really good thing for the economy 0:18:04.400 --> 0:18:07.440 if like the local sort of mid sized businesses get 0:18:07.520 --> 0:18:11.600 really good business administration, Right, if like the Harvard MBA 0:18:11.720 --> 0:18:14.840 is instead of just going to work in finance, like 0:18:14.960 --> 0:18:17.240 actually go and work for real companies that do you 0:18:17.280 --> 0:18:18.399 know HVAC. 0:18:19.040 --> 0:18:23.480 This reminded me, I know these people who there was 0:18:23.520 --> 0:18:27.040 a bed and breakfast for sale in a small Pennsylvania town, 0:18:27.240 --> 0:18:31.160 really charming, and it was an existing business with existing 0:18:31.640 --> 0:18:34.320 customer base who they had a lot of repeat customers 0:18:34.680 --> 0:18:36.960 and the owners were retiring and they bought the business 0:18:37.000 --> 0:18:38.240 and it's going really well. 0:18:38.600 --> 0:18:41.080 And those people are named. 0:18:41.640 --> 0:18:44.159 Bob and Julia. And Friday is my dad's birthday, So 0:18:44.359 --> 0:18:46.560 happy birthday, Dad, Happy. 0:18:46.240 --> 0:18:50.359 Birthday, Bob. I meant to tell you that I saw someone. 0:18:51.720 --> 0:18:55.320 Hold on, that's you, Okay, that is me. I mean 0:18:55.320 --> 0:19:04.280 it's your's your home studio. You need to go to 0:19:04.320 --> 0:19:04.640 the ville. 0:19:08.640 --> 0:19:27.560 It's literally a hairball. He's fine, he's fine. Windsurf windsurf 0:19:28.200 --> 0:19:34.280 man buying companies, Yeah, but not really, not really buying 0:19:34.400 --> 0:19:37.800 the company. Well kind of set the scene. 0:19:38.200 --> 0:19:41.320 Windsurf is like an AI coding assistant company, and of 0:19:41.320 --> 0:19:44.400 course it was in talks to be acquired by open 0:19:44.440 --> 0:19:46.680 Ai for a while. The rumor was that open Eye 0:19:46.760 --> 0:19:48.679 was going to pay three billion dollars to acquire it, 0:19:49.240 --> 0:19:51.680 which I think means to acquired in the normal way, 0:19:51.760 --> 0:19:53.840 like buy all the stock of the company. But they 0:19:53.880 --> 0:19:57.120 couldn't get to an agreement on some weird terms, including 0:19:57.160 --> 0:20:00.840 like sharing the technology with Microsoft. It's open I walked 0:20:00.840 --> 0:20:05.320 away and then Google did this weird deal where it 0:20:05.520 --> 0:20:09.960 paid two point four billion dollars to Windsurf for basically 0:20:10.040 --> 0:20:14.320 like some but not all, of Windsurf's employees. Like basically 0:20:14.359 --> 0:20:16.239 Google was trying to acquire like the top talent from 0:20:16.280 --> 0:20:19.840 Windsurf to feed into the mall of like having AI 0:20:19.880 --> 0:20:24.240 researchers do AI at Google. And they've got like a 0:20:24.280 --> 0:20:27.119