Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Authoughts podcast.
Speaker 2: I'm Tracy Allaway.
Speaker 3: And I'm Joe wysnt Thal.
Speaker 2: Today we are bringing you a live episode recording that
Speaker 2: took place at Bloomberg's recent invest conference, where we sat
Speaker 2: down with Brad Jacobs, the billionaire and serial entrepreneur now
Speaker 2: chairman and CEO at QXO.
Speaker 3: We talked to Brad late last year about his new company,
Speaker 3: QXO and the basic plan of buying up companies within
Speaker 3: the building supply distribution industry. And since we talked to him,
Speaker 3: he's raised four and a half billion dollars and so
Speaker 3: we wanted to learn a little bit more about how
Speaker 3: he's actually going to deploy his money.
Speaker 2: Four and a half billion dollars is a lot to spend,
Speaker 2: I think I read somewhere it was the biggest ever
Speaker 2: capital raising in the building materials industry. So definitely worth
Speaker 2: talking to him again.
Speaker 3: Yep, we still don't know he hasn't bought any companies yet,
Speaker 3: but we got a better sense of where he's at
Speaker 3: and his sort of approach to figuring out how he's
Speaker 3: going to deploy his cash.
Speaker 2: Take a listen.
Speaker 3: So, as Tracy mentioned before, we are here interviewing Brad Jacobs,
Speaker 3: Chrman and CEO of the Newish firm QXO, which is
Speaker 3: going to make a major splash in the building material space. Brad,
Speaker 3: thank you so much for joining us.
Speaker 4: Slight correction, we've already made it.
Speaker 3: Oh, yes, you've already made this.
Speaker 4: What have you done?
Speaker 3: I've seen you've raised a ton of money? Is that counts?
Speaker 4: So since I first, well, thank you for okay, thank you,
Speaker 4: But since we did that podcast.
Speaker 3: We talked to Brad, I think in December.
Speaker 4: That seems like a long time ago. Yeah, we've done.
Speaker 4: We built out the management team. Okay, so I have
Speaker 4: fifteen amazing people now, one of whom was the head
Speaker 4: of M and A at Barkley's's on Garden Leave, and
Speaker 4: all the rest I know really well because they either
Speaker 4: worked at XPO or GXO.
Speaker 3: Some company with EXO in it.
Speaker 4: Yeah it didn't have XOO in it. On the next
Speaker 4: we didn't hire them. And then also we raised money.
Speaker 4: We raised we put our billion dollars into the pipe
Speaker 4: that we did into that public company, and then we
Speaker 4: raised another three and a half billion dollars from institutional investors,
Speaker 4: mostly long only funds, who know us, and now we're
Speaker 4: out there. But the next stage is let's go buy
Speaker 4: some companies.
Speaker 2: Wait, so four and a half billion dollars raised must
Speaker 2: be the biggest single raise in the building industry's history.
Speaker 4: Yeah.
Speaker 2: Right, So what's the pitch when you're going out to
Speaker 2: people and saying, give us your money for this as
Speaker 2: yet unproven business model. I know you have a number
Speaker 2: of companies all three three letter acronyms, but like, why
Speaker 2: do they want to give you four and a half
Speaker 2: billion dollars or three and a half Okay, here's a secret.
Speaker 4: I know most of the people who invest in us,
Speaker 4: mostly people have invested in one of the xos or
Speaker 4: gundamentals in other ways, the historical investors who did well,
Speaker 4: and they're betting that we're going to do well again.
Speaker 2: So when you're talking to investors who already know you,
Speaker 2: what do they think is the Brad Jacob's playbook for
Speaker 2: creating companies?
Speaker 4: Well, as you know, I actually have a book. We
Speaker 4: have the playbook in there.
Speaker 2: Oh yeah, Brad's book has also a very modest title,
Speaker 2: which is how to make a few billion dollars.
Speaker 4: I think that's a good title. Catchy title gets people
Speaker 4: to remember. So the playbook is pretty straightforward. It's first
Speaker 4: of all, talent, making sure the people in the company
Speaker 4: are amazing or honest or hardworking or collaborative or really
Speaker 4: special people that they can get along with each other.
Speaker 4: And we figure out ways where we can debate issues
Speaker 4: honestly and disagree with each other without being a jerk,
Speaker 4: being still nice and respectful, but you know, honestly debates.
Speaker 4: We gets the right decisions, is moving fast, being decisive.
Speaker 4: And it's an M and A play which means we
Speaker 4: look at many, many acquisitions at the same time, so
Speaker 4: we don't fall in love with one of them and overpay.
Speaker 4: That's the cardinal sin in M and as. Overpaying that's
Speaker 4: the ic and roic. And then integrating those businesses very
Speaker 4: thoroughly so we have one company, one brand that has
Speaker 4: a power in the marketplace.
Speaker 3: Okay, So one of the things we learned the last
Speaker 3: time we talked to you, I think you said, across
Speaker 3: the US and Europe, building products eight hundred billion dollar industry.
Speaker 3: At least it was back then, maybe it's higher now.
Speaker 3: We know there's a lot of building going on. There's
Speaker 3: housing there's infrastructures, there's all the green stuff, there's data centers,
Speaker 3: et cetera. We learned it's extremely fragmented this market. There's
Speaker 3: no one big giant in the space with three and
Speaker 3: a half billion dollars or four and a half billion dollars.
Speaker 3: Are you going to start with some big deal that's
Speaker 3: a big chunk of that or do you see that
Speaker 3: going to a range of companies that go then consolidate.
Speaker 4: Stay tuned. I'll give you the scoop. Get give us
Speaker 4: a little week.
Speaker 3: Come on.
Speaker 4: So we're not looking at tiny little companies. We're going
Speaker 4: to build a fifty billion dollar company, fifty plus billion
Speaker 4: dollar company over the next decade. So you know we're
Speaker 4: going to have to chop some big wood here. So
Speaker 4: we're looking at more larger acquisition.
Speaker 3: But more than one that do you see more than one?
Speaker 4: We're going to do more than one acquisition or over
Speaker 4: in the coming years. We're going to be acquisitive. So
Speaker 4: it'll go start and integrate, Yeah, M and A and
Speaker 4: then integrate M and A, integrate and when we after
Speaker 4: we integrate, we pay attention to a bunch of metrics
Speaker 4: like customer satisfaction, employee engagement, on time, performance and so forth.
Speaker 4: And if it's humming, we're closing the books on time,
Speaker 4: get clean numbers, everyone is in good shape. Then we
Speaker 4: go back and rinse, wash, repeat and go buy something else.
Speaker 2: I remember every Sunday when I was growing up, my
Speaker 2: parents used to give me ten dollars for my allowance.
Speaker 2: It was actually one thousand yen, but back then I
Speaker 2: grow up in Japan. Back then it was about ten dollars,
Speaker 2: and that will always be the exchange rate in my mind.
Speaker 2: But I would get my allowance on Sunday and I
Speaker 2: would go out and I would buy like the first
Speaker 2: thing that I saw. You've got four and a half
Speaker 2: billion dollars, do you feel a sense of urgency to
Speaker 2: spend it?
Speaker 4: So we feel a sense of urgency in life in general.
Speaker 4: We feel that time goes by fast, and if you
Speaker 4: want to make your mark, do something big. Let's do
Speaker 4: some stuff. So we're prone to action. The fact that
Speaker 4: we've got four and a half billion dollars and we've
Speaker 4: got leverage we could add on to that. That's completely irrelevant.
Speaker 4: That doesn't put more pressure on us to do a deal.
Speaker 4: What we have pressure on us is to do good deals.
Speaker 4: A creative deals, strategically compelling deals, deals that make sense
Speaker 4: to do, deals that we can grow them over five
Speaker 4: or ten years and they'll be much bigger businesses at
Speaker 4: that time.
Speaker 2: Let me ask the question in a slightly different way.
Speaker 2: Before you announced QXO, did you have a potential list
Speaker 2: of targets in your mind? Is that how it so.
Speaker 4: Fast? Rewind so a year and a half ago or so,
Speaker 4: I stepped down as being CEO. I'm still chairman executive
Speaker 4: chairman of XPO, but I stepped down as the day
Speaker 4: to day running Mario Parkers doing that do a fantastic job.
Speaker 4: And I looked at fifty five different industries to see
Speaker 4: which one does my playbook fit that we can create
Speaker 4: some shareholder value with. And I hired two consultants who
Speaker 4: have expertise in this, consulting firms, and part of the
Speaker 4: mission was to educate us about the business fast. Part
Speaker 4: of the mission was give us a list of like
Speaker 4: who would we buy it? Give us like a one
Speaker 4: or two pager on. So we put together about a
Speaker 4: thousand names to look at, and Matt Fassler and Austin
Speaker 4: Landa worked me very closely on that project. And then
Speaker 4: we paired it down, paired it down, we filtered it
Speaker 4: to about forty names that have about three hundred billion
Speaker 4: dollars in aggurate revenue, and then we paired it down
Speaker 4: even more to the to the top dozen and those
Speaker 4: are the ones that we're really focusing on.
Speaker 3: Let's talk about building products. So and there's a lot there,
Speaker 3: and this is a wide ranging space. One of the
Speaker 3: things that we talked about on the last time we
Speaker 3: talked to you, and one of the things that Tracy
Speaker 3: and I have learned over the last several years we've
Speaker 3: done a lot of logistics and supply chain related episodes,
Speaker 3: which is that much of this space the physical world,
Speaker 3: ordering a bunch of lumber, ordering HVAC equipment, whatever, it
Speaker 3: does not feel like twenty twenty four. And there's a
Speaker 3: lot of old tech. Yeah, still like that, and so
Speaker 3: it still seems like there's an opportunity. You talked about
Speaker 3: this already, that there's an opportunity to upgrade the tech.
Speaker 3: So here's what I want to ask. If I go
Speaker 3: or let's say I'm a contractor and I need to, like,
Speaker 3: you know, buy some equipment, some bricks or something like that,
Speaker 3: what is the experience like today and what is the
Speaker 3: experience going to be like after you've applied your secret sauce.
Speaker 4: Okay, it's a ton of stuff in there. So first
Speaker 4: of all the long term growth and demand. Yeah, so
Speaker 4: the residential let's start with there. Okay, residential construction is unconstructed.
Speaker 4: There's millions of units were short on. And I live
Speaker 4: in Greenwich and Connecticut, and I have friends who want
Speaker 4: to move from Manhattan and they're on a real tough
Speaker 4: time finding a property to buy. It's very, very tight.
Speaker 4: That's not a Greenwich phenomenon. It's a country wide phenomen
Speaker 4: it's a phenomenon in Europe too. We've underbuilt and now
Speaker 4: so it's going to be growth. There's growth, there's gonna
Speaker 4: be and is it old? So most houses in America
Speaker 4: are like the average house is like forty something years old,
Speaker 4: which is old. I was a kid ten years old,
Speaker 4: was like an old house. As someone who was living
Speaker 4: in a fifteen twenty years I says, your father having
Speaker 4: a bad time, Like what's going on? So this is old.
Speaker 4: So this is gonna be repairing and remodeling and there
Speaker 4: will be new construction. Commercial is the same thing, which
Speaker 4: is actually older. Commercial is like fifty years old is
Speaker 4: a typical commercial building. And then you got the infrastructure
Speaker 4: building all the roads, the bridges and the tunnels. No
Speaker 4: trillions gonna have to be sent on that. So I
Speaker 4: think if you fast forward ten years from now, high
Speaker 4: high likelihood, there's going to be more demand for building
Speaker 4: products than there is today. I think it's so one
Speaker 4: of the things I filtered for when I looked at
Speaker 4: those fifty five industries was is this an industry that's
Speaker 4: going to get disrupted by AI or another form of
Speaker 4: tech or automation? And I think it's a safe bet
Speaker 4: that ten years from now will still have some form
Speaker 4: of physical body, and we'll sleep in a physical house
Speaker 4: with a physical roof from physical windows and physical doors,
Speaker 4: And so I think there'll be more demand as a
Speaker 4: result of all that.
Speaker 3: Just to follow what's the buying experience? Right now?
Speaker 4: Buying experience is not the right What happened?
Speaker 3: Someone goes to a warehouse? How does that work? I
Speaker 3: imagine there's pen paper facts as emails, Yeah, you got it?
Speaker 4: What perfectly right?
Speaker 3: And then what's gonna what's it gonna look like? When
Speaker 3: that's the same person goes to the same distribution center
Speaker 3: aka warehouse and is after it's QXO five.
Speaker 4: Yeah. So right now, when you talk to customers and
Speaker 4: you say what do you think, they generally think the
Speaker 4: industry gets about six out of ten, you say, we
Speaker 4: have great the industry one out of ten in terms
Speaker 4: of your customer experience. How delighted are you? Ten meaning delighted,
Speaker 4: one being it's a stinker. It's about a six. That's
Speaker 4: what I generally hear from people, and the two main
Speaker 4: reasons why people only give it a So send the
Speaker 4: follow up question what would make it a ten? Yeah.
Speaker 4: The two main things that you hear are, you know,
Speaker 4: I ordered ten things, I needed the ten things and
Speaker 4: I got six and I got back ordered on the
Speaker 4: other four. And the other complaint they have is, you know,
Speaker 4: I'm in a project and I ordered it, I needed
Speaker 4: it buy a week from Tuesday, and you know I
Speaker 4: got it like a week late, and that costs me money.
Speaker 4: So it's very frustrating you to customers to not know
Speaker 4: why is this happening. It goes to the other question technology,
Speaker 4: sense of technology. So one of the companies that we
Speaker 4: spun off that I still chair it is called GXO.
Speaker 4: It's the largest pure play warehouse company in the world.
Speaker 4: It's got over two hundred million square feet of warehouses,
Speaker 4: get one thousand warehouses in a couple dozen countries. If
Speaker 4: you go to a tip to a GXO warehouse, you're
Speaker 4: likely to see collaborative robots, likely to see robotic arms,
Speaker 4: autonomous equipment. You'll see a very sophisticated WMS, a warehouse
Speaker 4: management software system that keeps track of every single SKU
Speaker 4: in the warehouse and does inventory on a daily basis,
Speaker 4: so you know everything's in the warehouse. And one of
Speaker 4: the benefits of that is that you can do demand
Speaker 4: forecasting and then you can do inventory management so you
Speaker 4: get just the right amount of SKU, not too much,
Speaker 4: and then you're killing working capital, not too little. You're
Speaker 4: annoying customers not stocked upright. So I think if we
Speaker 4: use tech to do proper twenty twenty four inventory management,
Speaker 4: I think we can delight customers and I think that'll
Speaker 4: differentiate us in the eyes of customers.
Speaker 2: I'm going to ask the obvious question then, But you
Speaker 2: know we're talking about inventory management making the company more efficient.
Speaker 2: Why don't existing building distribution companies already do this?
Speaker 4: This is about a half a dozen actually are, so
Speaker 4: Ferguson gets the joke and they're doing that. Wats Go
Speaker 4: understands this is doing that. Build This first source seems
Speaker 4: to be doing a good job doing that too, and
Speaker 4: a few other companies are too, but by and large
Speaker 4: the industry, I have a theory to answer your question.
Speaker 4: It's not proven. This my hypothesis. My hypothesis is, this
Speaker 4: is an industry where you get about roughly seventy five
Speaker 4: percent ish conversion from EBIDAH to free cash flow. So
Speaker 4: there's not a lot of capex, there's working capital, there's
Speaker 4: not a lot of capecks, so it spits off a
Speaker 4: lot of cash. So in a downturn, there's not a
Speaker 4: lot of bankruptcies. So if you're in the trucking business
Speaker 4: or if you're in the garbage business, you're in a
Speaker 4: construct you have high fixed costs, you have him into
Speaker 4: When you have a downturn, you see people who like
Speaker 4: messed up and they took on too much leverage. They
Speaker 4: can't pay their debt, they can't service it. Boom, they're out.
Speaker 4: You see people have inventory and they can't get rid
Speaker 4: of it fast enough, so they have to sell it
Speaker 4: to stressed prices. It kills them. You don't see that here.
Speaker 4: So in this industry you don't have the lean six
Speaker 4: sigma continuous improvement kais in mindset of every day I
Speaker 4: gotta find some sofas to turn over and shake and
Speaker 4: find some nickels and some fennies and some dimes. That's
Speaker 4: not the mentality. So I think we'll bring that operational
Speaker 4: rigor that focus on operational excellence, and I think we'll
Speaker 4: bring that to the industry. There are some companies doing
Speaker 4: a good job. Don't misunderstand me. I'm not casting the
Speaker 4: whole industry and doing a lousy job. I think in general,
Speaker 4: particularly the smaller ones, they could improve.
Speaker 3: Is that a matter of balance sheet capacity? You're bringing
Speaker 3: a lot of balance sheet capacity as such, you don't
Speaker 3: you have the maybe luxury to invest across The stacle
Speaker 3: is that basically a.
Speaker 4: Couple of things. One is having the size to be
Speaker 4: able to afford that. And we're going to invest hundreds
Speaker 4: and hundreds of millions of dollars into technology. If you're
Speaker 4: only doing one hundreds of millions of dollars in revenue,
Speaker 4: you're not going to put hundreds of millions dollars in
Speaker 4: a tech. But we need to do that. That's what's
Speaker 4: going to differentiate us from the have nots. That's the
Speaker 4: main thing there. The second thing is it's a mindset
Speaker 4: of what I was talking about before. The industry as
Speaker 4: a whole has not had this passionate, intense commitment to
Speaker 4: continuously improve the business and to delight customers more and
Speaker 4: more and more and more. It's not that passion is
Speaker 4: not there in general. Some companies have it, but in general,
Speaker 4: the industry doesn't have it.
Speaker 2: So Joe and Brad and maybe some odd blocks. Listeners
Speaker 2: know that my husband and I are currently building a
Speaker 2: shed in Connecticut. And when I say shed, it's actually
Speaker 2: in New York. It would probably be the size of
Speaker 2: a small house. But because we're doing this and we're
Speaker 2: doing it by hand, I now feel empowered as a
Speaker 2: construction expert, so I can ask Brad all these questions.
Speaker 2: But you mentioned the frustration of getting supplies and having
Speaker 2: to wait ages for you know, did you have to wait?
Speaker 4: Yes, did you get did you get your ordered delivered
Speaker 4: in full or just in part?
Speaker 5: In part?
Speaker 3: There you go, ok Okay, okay, there you go.
Speaker 2: But I take I take the point about efficiency and
Speaker 2: reducing lead times and things like that, How does technology
Speaker 2: aid with quality control? Because I'm sure this is the
Speaker 2: other big thing for anyone who's ever done construction work.
Speaker 2: You order a piece of ply wood, you think that waterproof.
Speaker 2: I'm getting very specific here. I think that waterproof coating
Speaker 2: is going to be on the wood, and then maybe
Speaker 2: it's not as good as you thought it was.
Speaker 4: That's that's two things. It's tech. The system should be
Speaker 4: able to track that, and it should be controls on that.
Speaker 4: And secondly, it's a cultural thing of caring. So I
Speaker 4: mentioned before that we do M and A and then
Speaker 4: we stop and we measure a bunch of things. And
Speaker 4: one of the things we mentioned we measure that I
Speaker 4: mentioned was employee engagement. You want very high levels of
Speaker 4: employee morale. You want employees to care, to really really
Speaker 4: care about the customer, and you want to hire people
Speaker 4: who have that customer pleasing mentality. And as I was
Speaker 4: saying before, I think the industry could use a little
Speaker 4: more in that.
Speaker 3: You do one of these exo companies like every ten years,
Speaker 3: and you've done several. I'm guessing this is the first
Speaker 3: one that's I don't know if it's the first one actually,
Speaker 3: but for the first time in a long time. There's
Speaker 3: a high cost of capital interest rates, so where they are,
Speaker 3: they may not come down anytime soon. What is the
Speaker 3: difference today in looking at or evaluating deals in twenty
Speaker 3: twenty four versus whatever you are buying in twenty fourteen.
Speaker 4: So let's talk about this. Does that an important point?
Speaker 4: Let's talk about cost to capital? Okay, debt is higher
Speaker 4: than it was the last ten years because it was
Speaker 4: almost free. Yeah, so definitely is a cost to debt.
Speaker 4: But we're not going to be highly levered. We're going
Speaker 4: to lever this business something around one to two times
Speaker 4: as our standing target. Sometimes you might go over for
Speaker 4: short period of time in connection with an acquisition, but
Speaker 4: our target is to keep it at one to two times.
Speaker 4: Equity is not more expensive. I mean markets are all
Speaker 4: time high and yeah that's right. Equity is okay. Equities,
Speaker 4: But just on the.
Speaker 3: What about when it comes to the buying the company part?
Speaker 3: Does the math change at all in this environment? Does
Speaker 3: it affect sellers? Do they say, oh, I want to
Speaker 3: wait for rates to come down in multiples to go
Speaker 3: up or Etcider Like, how does this current environment affect
Speaker 3: that process?
Speaker 4: It's a dynamic market and you have a whole range
Speaker 4: of people. You have some people saying, you know, I
Speaker 4: think I think it's going to get better over the
Speaker 4: next couple of years, and the industry is going to
Speaker 4: come down, and I'm not selling now, let's pay some
Speaker 4: really crazy high price. Yeah. Other people say, you know what,
Speaker 4: kind of feel soft out there. Some of the public
Speaker 4: companies has been missing their numbers recently, and some of
Speaker 4: the indicators coming out looks like construction might be softening,
Speaker 4: the industry might be slowing in general, the economy might
Speaker 4: be slowing possibly over the rest of the year. So
Speaker 4: they want to sell now. So it's a range, It's
Speaker 4: a whole range.
Speaker 2: Wait, tell us more about this, because of course everyone
Speaker 2: looks at construction as a leading indicator for the economy.
Speaker 4: It's not the most leading. Transportation is more leading.
Speaker 2: Oh wait, okay, talk about that too.
Speaker 3: You definitely have of you on the farm with all
Speaker 3: the bords.
Speaker 2: You're talking to a bunch of different.
Speaker 3: Tell us what's happening right now?
Speaker 4: Okay, there are there are two categories of professionals who
Speaker 4: traditionally have fairly consistently been wrong about predicting the economy.
Speaker 4: Actually three, it's one of them. Podcasters, economists, the FED,
Speaker 4: and CEOs. So I was at a.
Speaker 3: You spirit journalists, so thank you.
Speaker 4: Journalists haven't been better at because journalists are providing both sides.
Speaker 4: They don't really take a few on the one hand
Speaker 4: because on the other hand, you could do like that.
Speaker 4: So I always at a CEO Trade Association thing a
Speaker 4: couple years ago, and you know, you have these little
Speaker 4: slideo apps where you can vote in the audience. People
Speaker 4: get their phones out and they vote. You should never
Speaker 4: do that because they never come back to what you're
Speaker 4: doing and once they're on their phones, but you take
Speaker 4: a vote, and the vote was what's the likelihood of
Speaker 4: a severe recession, a moderate recession, no recession growth? Over
Speaker 4: ninety percent of these you know smart quote unquote CEOs
Speaker 4: said there was either going to be a severe recession
Speaker 4: or motor session. Well there's no recession. So it's hard
Speaker 4: to predict this stuff. And right now it's much harder
Speaker 4: than it has been in the past. And I say
Speaker 4: that because you have these two opposite things going on.
Speaker 4: You still have a bunch of stimulus, which is inflationary
Speaker 4: by definition, and you have interest rates having gone up,
Speaker 4: which is like the breaks and slowing things down, So
Speaker 4: the economy is like really weird. You have, it grows,
Speaker 4: but then it contracts. There's a tension there. So I
Speaker 4: don't know who's going to win the arm wrestle here.
Speaker 4: So I don't know the answer is the understands. So
Speaker 4: I don't have a firm view with strong conviction, like
Speaker 4: the rest.
Speaker 5: Of the year is going to be stronger weak.
Speaker 2: Well, since I mentioned conversations with other companies, here's something
Speaker 2: I always wanted to ask a a serial roll up er,
Speaker 2: if you will, or a M and a person. Warren
Speaker 2: Buffett is still on my list to ask this question,
Speaker 2: but maybe one day, but.
Speaker 3: Maybe I will.
Speaker 2: It takes when you approach a company, how do you
Speaker 2: actually do it? What's that initial contact line?
Speaker 4: Very straightforward, so you send it a d M on
Speaker 4: X slash call somebody. I just call him up and say, hey,
Speaker 4: you know, I'm Brad Jacobs. I haven't heard of me.
Speaker 4: I'm trying to do some acquisitions. Learn there you go
Speaker 4: three dollars every time you buy, and and you know,
Speaker 4: I could have an interest in buying your company. I
Speaker 4: don't know yet. I got to learn more, but I
Speaker 4: could have an interest in you know, the reaction usually
Speaker 4: is one of two things, like, look, I'm happy to
Speaker 4: meet you could be an interesting guy, but we're not
Speaker 4: selling the company. That's like part sometimes true and sometimes
Speaker 4: blown me and and other times people say, hey, you know,
Speaker 4: at the right price, why not come on over. I
Speaker 4: find a different reaction depending on who the seller is.
Speaker 4: So there's this bec term of types of folks. The
Speaker 4: private family companies are great because I call them up
Speaker 4: and they say, yeah, come on over, and it usually
Speaker 4: turns into like a three day event. We were just
Speaker 4: hanging out meeting the people, touring the facilities, and I
Speaker 4: really understand the business, and I appreciate that and reciprocate
Speaker 4: for that, because that's really great. On the other end
Speaker 4: of the spectrum would be private equity owned ones where
Speaker 4: it's very controlled and very choreographed and you have to
Speaker 4: really keep your intendant up to figure out what's true,
Speaker 4: what's not true, and what are the real numbers and
Speaker 4: so forth. And in between that I would put corporate companies.
Speaker 4: We've done very well with the carve outs corporate carbouts,
Speaker 4: and that works well. We're looking at some in this
Speaker 4: industry as well, but even buying whole public companies has
Speaker 4: worked out. Well for us too. We just just announced
Speaker 4: one with RXO a couple of days. Well, actually it
Speaker 4: wasn't a public Corani's division of public coanies carve out.
Speaker 3: It was Coyote from you Coyote, yeah right, and the
Speaker 3: stock the investors really liked that deal.
Speaker 4: Up.
Speaker 2: Why buy an existing company as your sort of vehicle
Speaker 2: at all? Like, why not start from scratch and do
Speaker 2: an IPO?
Speaker 4: Is it just I did the same exact thing with XPO.
Speaker 4: If you remember back in twenty eleven, there was a
Speaker 4: trucking company called this brokerage company called Express One, which
Speaker 4: is where XPO comes from. Express One. It was trading
Speaker 4: on what was then called the MX American Stock Exchange
Speaker 4: that NYS bought and we did a pipe. We did
Speaker 4: a pipe into the company, took control of the board,
Speaker 4: moved the headquarters to Grantwich, and off to the races.
Speaker 4: We kept buying, buying more companies. I did the same
Speaker 4: thing here. I found a public company, we did a
Speaker 4: pipe into the company, and we're continuing to grow the company.
Speaker 4: After that, A million territories for me to repeat.
Speaker 3: Going back to building products, So there's a lot, as
Speaker 3: you mentioned, that's getting built because there's housing, there's infrastructure,
Speaker 3: there's all the energy stuff, there's all the data centers that.
Speaker 4: Are energy is not the strongest of them, okay.
Speaker 3: But there's all the data that all the data centers
Speaker 3: are huge.
Speaker 4: Electricity is huge.
Speaker 3: Are they competing with each other like for some of
Speaker 3: the same supple so agree? Is the supply chain intention.
Speaker 4: No, they're fairly segregated. So electrical is a whole different
Speaker 4: than plumbing and HVAC and lumber and your case, they're
Speaker 4: fairly different.
Speaker 3: Are you going to be in the data center? Is
Speaker 3: there anything that will come through your warehouses or distribution
Speaker 3: centers that may go to data centers.
Speaker 4: I would love to have exposure to data centers. I'm
Speaker 4: very bullish long term about the demand for data centers.
Speaker 4: The AI growth needs data centers, a lot of them,
Speaker 4: a lot of power. So yeah, I think that's a
Speaker 4: growth area.
Speaker 2: You mentioned distribution for commercial real estate earlier, and I'm
Speaker 2: curious are there additional considerations for commercial versus something like
Speaker 2: residential or infrastructure. And one of the reasons I ask
Speaker 2: is because we were speaking with I think it was
Speaker 2: the CEO of Chactor Supply how lowten, and he was
Speaker 2: talking about how expensive it is to build out these
Speaker 2: big stores nowadays, and he was talking about ways to
Speaker 2: save money in that space, and I think I jokingly
Speaker 2: said to him, like, well, you know, you run a
Speaker 2: distribution company. Essentially you bring goods into the store and
Speaker 2: then you sell them. Couldn't you become your own supplier
Speaker 2: and distributor for construction materials? And he was like, yeah,
Speaker 2: that's something we're looking at. Would you expect to see
Speaker 2: more big commercial companies like a Walmart for instance, or
Speaker 2: a tractor Supply start to be their own suppliers and
Speaker 2: distributors for construction materials they have the scale already.
Speaker 4: Yeah. Both those are good customers of the XPO families. Yeah,
Speaker 4: I like both.
Speaker 2: I think the Waltons are invested in the new company
Speaker 2: as well.
Speaker 4: Right, no comment, okay Bloomberg speculation. I didn't. That wasn't
Speaker 4: from us, So I think you already. I mean sometimes
Speaker 4: it's not through distributors. Sometimes, if you have these big purchasers,
Speaker 4: is they go direct?
Speaker 2: Yeah?
Speaker 4: Right, direct? And that's fine. It's like in most industries,
Speaker 4: the ones that have the massive size, massive procurement, they
Speaker 4: tend to go direct. But that's an exception, not the rule.
Speaker 4: That's few at the top.
Speaker 3: Question from the audience. That's good, by the way, I
Speaker 3: think there's a way ye Tracy mentioned, there's a way to.
Speaker 3: There's the QR code if you want to enter in
Speaker 3: a question. There is others, as you mentioned, there's others
Speaker 3: in the space in the building's products industry. Others are
Speaker 3: trying and presumably seeing the same thing of consolidating this
Speaker 3: hyper fragmented space. How do you think about competition for
Speaker 3: deals and how do you balance that competition while not
Speaker 3: avoiding the winner's curse or overpaying for company.
Speaker 4: We don't overpay, we don't underpay. We don't try to
Speaker 4: steal a company or take advantage of anything like that.
Speaker 4: We pay a fair price, a fair price. We don't
Speaker 4: pay these trophy prices. So sometimes you see in many
Speaker 4: industries companies they're not really professional m and A machines
Speaker 4: there there once in a while do a big deal
Speaker 4: and and and they overpay. And when you overpay, it
Speaker 4: takes years and years and years to get your costing.
Speaker 4: It doesn't work in terms of creating shareholder value. If
Speaker 4: your focus is on shareholder value creation, then you need
Speaker 4: to pay a reasonable price in order to get good
Speaker 4: returns on that competition for M and A is normal.
Speaker 4: I mean, in every industry I've been in, I haven't
Speaker 4: had a monopoly on being a consolidator. Yeah.
Speaker 2: I'm going to ask a very cliched question, but I
Speaker 2: think it might it might be illuminating in the sense
Speaker 2: of what you look for in an acquisition. But is
Speaker 2: there a particular deal that you're most proud of?
Speaker 4: Well, you know, it's like asking who's your favorite kid,
Speaker 4: Like you can't answer that there's I should get Christmas
Speaker 4: cards from, like most of the people life, it's I
Speaker 4: there's a there's a Yeah, there are. I would say
Speaker 4: two deals, they'd hard to pick which ones was so
Speaker 4: in to too fifteen at XPO, we did two deals.
Speaker 4: We did Conway, which got us into LTL and now
Speaker 4: it's we're, you know, an LTL behemoth. And the other
Speaker 4: one was Norba don Song, which was a French company
Speaker 4: that did contract logistics and trucking and brokerage and LTL
Speaker 4: and different parts of that company we put with the
Speaker 4: different different spins and both of those were really good.
Speaker 4: And both those are really good because they gave us
Speaker 4: al and they gave us an opportunity to apply our
Speaker 4: playbook to those businesses and dramatically improve the profitability in
Speaker 4: the return on capital on both of them. So from
Speaker 4: a point of view of shareholder value creation, those were
Speaker 4: very remarkable deals. So I would pick those two.
Speaker 3: Why don't you tell us more about that Conway deal?
Speaker 3: So less than truckload carrier when you see we applied
Speaker 3: our playbook, because that's what we're trying to understand further,
Speaker 3: what did you do Conway? Conway? Conway came into the house,
Speaker 3: and what did you do with it?
Speaker 4: First thing we did is we looked at the organization
Speaker 4: chart and figured out and when you have an organization chart,
Speaker 4: I've looked a lot of organization charts, it should be
Speaker 4: real elegant. It should be simple and geometric and just
Speaker 4: really really simple, simple and straightforward. Their organization chart was
Speaker 4: spaghetti throw out a painting. You know, there's some artists.
Speaker 4: You look at the painting, you say, kind of looks
Speaker 4: like you just like took a bunch of mud, put
Speaker 4: it in paint on the canvas. That's what their org
Speaker 4: chart looked like. It's very unsatisfying to look at it,
Speaker 4: and there is a there is a correlation between the
Speaker 4: beauty of it elegance of it and the effectiveness of it.
Speaker 4: It's a very very interesting concept. Theirs wasn't, and they
Speaker 4: had multiple It was a business that had grown up
Speaker 4: Cluegate style kl Uge meeting just they bought some stuff
Speaker 4: and they never really integrated it thoroughly. You know, to
Speaker 4: do integration, you need courage, you need confidence, you need
Speaker 4: to know that what you're doing is the right thing
Speaker 4: and execute on it. They were more a sheepist about that.
Speaker 4: So they had three I organizations, the three HR organizations,
Speaker 4: the three finance accounting organ the three of everything. And
Speaker 4: you don't need three of everything. That's two x extra
Speaker 4: that you really need. So we went in there and
Speaker 4: we did an exercise that we do all the time
Speaker 4: as part of continuous improvement, which is look at everything
Speaker 4: that we're spending and look at everyone who's on the
Speaker 4: payroll and think, how are they contributing to achieving our goals?
Speaker 4: And are they must have costs, must have people, or
Speaker 4: they kind of nice to have but it's not really critical,
Speaker 4: or are they like the hell did this get an organization?
Speaker 4: You find a lot of that kind of stuff, particularly
Speaker 4: in bigger companies where things just kind of grew and
Speaker 4: no one got rid of it, but it's served its
Speaker 4: purpose and it's not doing much more. So we went
Speaker 4: through the whole organization and made it streamlined and more effective,
Speaker 4: and then in the last few years we got our
Speaker 4: service levels up really, really high, and as a result
Speaker 4: of that, we're able to get yield growth and we're
Speaker 4: able to get take market share as a result of that.
Speaker 2: A good question from the audience, they ask, what's the
Speaker 2: biggest challenge of breaking into the building products supply chain.
Speaker 2: I guess another way of asking that is, what's stopping
Speaker 2: you from making one billion dollars of revenue right now
Speaker 2: as opposed to the end of the year.
Speaker 4: Give me a little time and we've been in the
Speaker 4: business like ten seconds, but we'll get there. I will
Speaker 4: satisfy you on that goal. So the biggest the biggest
Speaker 4: obstacle to achieving big goals personally too, by the way,
Speaker 4: personally and professionally or people, the people that you associate with,
Speaker 4: people you surround yourself with, people who deal with all
Speaker 4: day long, the people whose exhales you inhale and vice versa.
Speaker 4: That's the key thing. If you can get fantastic people, smart, honest,
Speaker 4: hardworking people who get along with each other, and get
Speaker 4: the right culture of how you interact with each other.
Speaker 4: You can accomplish enormous things. You can dream big and
Speaker 4: actually achieve it. If you don't have that, if even
Speaker 4: you have to have it universally. You can't just have
Speaker 4: like your top twenty five people. You can't have like
Speaker 4: fifteen are hardworking, but ten, you know, maybe the work
Speaker 4: they don't worry. You can have like fifteen honest ones
Speaker 4: and ten are just honestly. It has to be all
Speaker 4: in this example, twenty five out of twenty one hundred percent.
Speaker 4: If you can concentrate on the quality of the people
Speaker 4: and the rules of engagement between that constellation of people,
Speaker 4: you can move mountains.
Speaker 3: I think there might be someone in the audience who
Speaker 3: also is planning a roll up because they want to
Speaker 3: know what is the what was your number two? What
Speaker 3: almost made the cut? You know, the fifty industries you
Speaker 3: looked at, what didn't happen, So therefore there's an opportunity
Speaker 3: for someone else.
Speaker 4: So my absolute favorite one apart from this, was oil
Speaker 4: and gas so or emp oiling gas. So I used
Speaker 4: to be in the oil business a long time ago,
Speaker 4: and right now, right now, you can go out and
Speaker 4: you can buy bruising properties for three times cash flow,
Speaker 4: and then you have an annuity for like fifteen years
Speaker 4: or just getting.
Speaker 3: And that's right today, these bright right right this minute.
Speaker 4: However, you can't finance it. You just can't finance it.
Speaker 4: I went to seventeen sovereign wealth funds and long only
Speaker 4: funds that have historically financed XPO in the past and said,
Speaker 4: went over, like the things I was looking at, so
Speaker 4: what do you think of energy? Every single one said no, no, no,
Speaker 4: don't do energy. We can't do that. It's a ESG
Speaker 4: or they got burnt during the boom or for whatever reason.
Speaker 4: It was just like they're sellers not buyers. Well that
Speaker 4: makes low prices when there's not a lot of buyers.
Speaker 4: And now similar phenomenal you see in Europe sort of,
Speaker 4: I mean the analogy backs down at a certain point.
Speaker 4: But in Europe right now in building products distribution, very
Speaker 4: few buyers, very few buyers. Yeah, I can't think of
Speaker 4: one big strategic that's doing a roll up in Europe,
Speaker 4: and the private equity firms is just a handful of them,
Speaker 4: whereas here in the United States, you know a couple
Speaker 4: dozen of them, we're active.
Speaker 2: Would you have for two renewables. I mean, since you
Speaker 2: brought up renewables, since you brought up the financing point,
Speaker 2: I mean I don't think people Yeah, I don't think
Speaker 2: people are falling over themselves to finance renewables necessarily, but
Speaker 2: you don't necessarily have the mandate constructions. Is that something
Speaker 2: you see any value in?
Speaker 4: I think green renewable, this is all sustainability. These are
Speaker 4: long term real trends. This is this is this is
Speaker 4: this is the future. It's it's not just a story.
Speaker 4: And I think any company that wants to succeed and
Speaker 4: prosper needs to be thinking about am I leaving the
Speaker 4: world in a better place? So I think every company,
Speaker 4: not just our company, not just our industry, needs to
Speaker 4: be thinking about all those things.
Speaker 3: Another question about global supply chains, and obviously we hear
Speaker 3: a lot about friends shoring or companies feeling that they
Speaker 3: have to reduce their exposure to China because reasons or whatever.
Speaker 3: How is that going? How are those trends going to
Speaker 3: play out within the context of building supplies? So what
Speaker 3: are you seeing in terms of geopolitical risk hedging? Maybe
Speaker 3: is the way to put it, and the just and
Speaker 3: the sort of changing geography of supply chains within building supplies.
Speaker 4: Well, China is certainly a risk because the relationship between
Speaker 4: China and the West is probably an all time low,
Speaker 4: so it's a it's very difficult time. So diversifying your
Speaker 4: supply chain away from China is probably not a bad idea. Now,
Speaker 4: in our case, we're we have a very clear perimeter
Speaker 4: that we're going after. We're going after North America. Primarily,
Speaker 4: We're not say North America, I mean USA and a
Speaker 4: little bit of Canada, most of the USA, not not
Speaker 4: so much Mexico and Western Europe, so France, Germany, Spain,
Speaker 4: so forth. That's really our perimeter. And that's about eight
Speaker 4: hundred billion dollars between those two.
Speaker 3: But there must be products that you expect to come
Speaker 3: through your distribution centers, oh yea, from all over the world.
Speaker 4: There'll be some source from China, but you don't want
Speaker 4: to have a preponderance of your supply chain coming from China.
Speaker 4: That's highly risky.
Speaker 2: Is that different to how you would have maybe done
Speaker 2: this kind of business previously, Like that newfound supply chain
Speaker 2: resiliency is at the background.
Speaker 4: Absolutely. I mean I gave the keynote at a big
Speaker 4: trade event out in California about I know, eight or
Speaker 4: nine years ago, and the topic was globalism. Now it's
Speaker 4: a big champion for thinking globally, but the world's changed
Speaker 4: a lot in last decade.
Speaker 2: Yeah, you don't hear that much anymore.
Speaker 4: No, they don't.
Speaker 3: I have a question that I thought of earlier, and
Speaker 3: I don't want to forget to ask it. It's about
Speaker 3: warehouse tech, and we did this episode. It was actually
Speaker 3: about the snack food industry and why there are so
Speaker 3: many proliferations of snacks like you know, Korean prawn flavored
Speaker 3: Doritos and stuff like that. And the guy was saying
Speaker 3: that one of the technological breakthroughs is that with the
Speaker 3: robots and the warehouses, they can get a lot more
Speaker 3: skews within a given amount of square footage because they
Speaker 3: could pack the warehouses in different ways. And if the
Speaker 3: robots go around and stuff like that. What do you
Speaker 3: see on that? Like in your for your years of
Speaker 3: dealing with warehouses, do you are you able to get?
Speaker 3: Is that the same in the various industries you work with,
Speaker 3: that a given amount of square footage can have a
Speaker 3: greater diversity of goods. These days, due to automation.
Speaker 4: A warehouse man as well can be far more productive
Speaker 4: and efficient than one that's like a hardware store. So slotting,
Speaker 4: for example s L T T I G means you
Speaker 4: use the data to analyze which SKUs tend to go
Speaker 4: out together, and you position those in the warehouse. You
Speaker 4: locate them next to each other, so you save a
Speaker 4: lot of time for example, and everything. So warehouse should
Speaker 4: be less in the warehouse of the future is less
Speaker 4: and less people and more and more collaborative robots and automation.
Speaker 4: If you go to some of the more advanced jicks
Speaker 4: of warehouses and you look around, you, hey, where's the people?
Speaker 4: Very quiet here, very efficient and very very effective. What
Speaker 4: it does? That's the future for sure.
Speaker 2: This is a question from the audience, but they're asking
Speaker 2: because the industry is so fragmented and often, you know,
Speaker 2: very regional. Is there part of the country that you're
Speaker 2: more focused on, at least initially.
Speaker 4: No, Nationally, we want to be nationally, want to be global.
Speaker 4: Global in the sense of Western Europe and North America.
Speaker 4: We're not really pursuing the other parts of the world.
Speaker 3: But like people talk, for example about you know, there's
Speaker 3: great business migration to the southeast Southwest, et cetera.
Speaker 4: But that's not at there's there's a lot of the
Speaker 4: growth rate for constructions, certainly bigger down down south.
Speaker 2: Wait, here's something else. I always wanted to ask a
Speaker 2: roll up er to use rollbrevious and M and a
Speaker 2: profession serial entrepreneur, billionaire I suppose would work.
Speaker 4: Don't call me a billionaire, but M and a professional.
Speaker 4: I like that.
Speaker 2: OKAYM and a profession here. But okay, we know that
Speaker 2: you want to buy a bunch of companies. Does the
Speaker 2: sequence that you buy them in matter?
Speaker 4: Like?
Speaker 2: Is the idea Okay, I buy this one, I buy
Speaker 2: that one, and then I put them together and I
Speaker 2: get to that level and then I do this and
Speaker 2: that or is it just like we have all these targets,
Speaker 2: let's just try to complete as many deals as in the.
Speaker 4: Perfect world, which doesn't exist. Yes, the sequence would be
Speaker 4: deliberate and you'd have lots of synergy between number one
Speaker 4: and number two and number three. In the real world,
Speaker 4: there should be some level of opportunism and seeing what's
Speaker 4: what's out there and what's actionable, what's a good value.
Speaker 3: Since we're at a conference and it's the year twenty
Speaker 3: to twenty four, I have to ask an AI question. Great,
Speaker 3: and I'm sure you know everyone's doing something with AI
Speaker 3: et cetera, and I'm sure it's all great efficient, but
Speaker 3: what specifically, what does it mean and when we you know, what,
Speaker 3: when you when it's at this company or some of
Speaker 3: the other exos, what does it mean to you to
Speaker 3: put like AI into practice? And are there any specific
Speaker 3: areas where you can say, look, this is a tech
Speaker 3: that I want to call artificial intelligence, and it's either
Speaker 3: improved the product or significantly saved on costs.
Speaker 4: So XPO was all about machine learning and AI. When
Speaker 4: I first hired Mario Harrik from my CIO now CEO
Speaker 4: when you CIO, so the vision was, here's all these
Speaker 4: brokers and they have like these halls with like hundreds
Speaker 4: of kids, and they're on two phones at a time
Speaker 4: and they're playing. And we said, why do you need
Speaker 4: these people? This is stuff that should be done on
Speaker 4: an app. The shipper would prefer it would be better
Speaker 4: for the shipper to be doing on an app, be
Speaker 4: better for the dispatcher on the trucker to be doing
Speaker 4: an app. And why you're paying a third of your
Speaker 4: gross margin to sales repsen you know that this is
Speaker 4: not adding in some cases enough value to justify that.
Speaker 4: And at that time zero percent of the business was automated. Today,
Speaker 4: our XO, the one that just bought Coyote from the EPs.
Speaker 4: OURXO is where we put the brokerage spin. Ninety seven
Speaker 4: percent of the orders are either sourced or covered digitally,
Speaker 4: and I believe that is the main reason, not the
Speaker 4: only reason. It's the main reason why OURXO has been
Speaker 4: growing at three times industry growth rate, because the model
Speaker 4: works better.
Speaker 2: Are there specific pieces of technology or technology platforms that
Speaker 2: you can whole out of XPO or GXO and use
Speaker 2: for QXO. Like do you use, for instance, like those
Speaker 2: trackable palettes? Those are very cool I find could you
Speaker 2: use something like that for distribution?
Speaker 4: So there's tons of stuff we could do with the exos.
Speaker 4: We gotta a little careful about that. That has to
Speaker 4: all be arm's length and market and so forth. But yeah,
Speaker 4: there's tons of things that we could use from the exos.
Speaker 4: You got to remember this business has a big component
Speaker 4: of transportational logistics. This is a business where you're transporting
Speaker 4: building materials from the OEM from the manufacturer by truck,
Speaker 4: mostly a little intomotive, but mostly truck to the warehouse
Speaker 4: that you're managing we were talking about before, and then
Speaker 4: you're delivering it in the last mile generally to the
Speaker 4: job site, almost always by truck. So there's a big
Speaker 4: cost and a big efficiency and productivity and ability to
Speaker 4: delight or annoy the customer by getting transportation logistics just right.
Speaker 3: Someone asks, in perfect dovetails with your answer there, how
Speaker 3: far up and down this supplied chain do you go
Speaker 3: to ease bottlenecks? When you think of I mean supply
Speaker 3: chain risk. I know supply chain professionals, this is what
Speaker 3: they've always done. But for the rest of us, supply
Speaker 3: chain risk is this new thing that most of us
Speaker 3: started talking about in the last three or four years,
Speaker 3: and I have to imagine it's going to stay on
Speaker 3: the minds of many business managers, particularly with the China
Speaker 3: risk and so forth. Talk to us about some of
Speaker 3: what you will do with QXO to hedge against that
Speaker 3: or protect against supply chain risk. And how close do
Speaker 3: you want to get to the producer, how close do
Speaker 3: you want to get to the end customer to ease
Speaker 3: those concerns.
Speaker 4: I want to get very close. We want to buy
Speaker 4: directly from the manufacturer and want to sell directly to
Speaker 4: either the final end user or the contractor that's servicing it.
Speaker 4: More often not so much. They see more the b
Speaker 4: that's serving the sea, the business that's serving the consumer.
Speaker 4: So yeah, you want to be close. That's the whole business.
Speaker 3: How do you do it?
Speaker 4: The business plan is to buy in large quantities at
Speaker 4: a price that reflects at a lower price that reflects
Speaker 4: those larger quantities and the risks you're taking by storing
Speaker 4: them and putting in inventory and selling them retail, and
Speaker 4: smaller amounts at a price that is appropriate for retail,
Speaker 4: and that's your margin. That's how you make your business.
Speaker 4: The supply chains, yeah, but you can't blame the manufacturer.
Speaker 4: You can blame anybody on the supply chain, but ourselves,
Speaker 4: if we're a distributor, that's our responsibility. Our responsibility is
Speaker 4: to get the supply chain right, to use technology and
Speaker 4: to use and to use culture, to use compensation and
Speaker 4: recognition to get people to take that seriously so that
Speaker 4: we always have the right amount of products in stock
Speaker 4: so when customers want a product, we got it, and
Speaker 4: that when a customer needs it by a certain date, yes,
Speaker 4: we can do that. And if we do that, if
Speaker 4: a distributor does that professionally, I believe you'll get a
Speaker 4: little more price, not a huge amount more price, but
Speaker 4: you get a little bit more price, and you'll get
Speaker 4: greater share of wallet. That's my thesis.
Speaker 2: I need treated plywood by this weekend.
Speaker 4: Brad, I know again, so this is bad.
Speaker 2: Okay, there's one more question from the audience. And before
Speaker 2: I ask this one, I'm just going to give a
Speaker 2: plug to Brad's book because it's all about his experience
Speaker 2: as an m and a professional. But it is one
Speaker 2: of the more unusual sort of entrepreneurial books that I've read,
Speaker 2: because you do have some unusual strategies in the way
Speaker 2: you think about business. So I remember there's a chapter
Speaker 2: where you talk about thought experiments to make you think
Speaker 2: in new ways, and one of the thought experiments was
Speaker 2: imagine yourself as a banana. That one sticks in my head.
Speaker 4: I like that one.
Speaker 2: But you also worked and this actually led to another
Speaker 2: all thoughts episode. But you've also worked with an ex
Speaker 2: CIA official who was very instrumental in the use of
Speaker 2: lie detectors as someone to help you do due diligence
Speaker 2: on different companies we did and he was amazing. It's
Speaker 2: a good episode. But this brings me to the audience question.
Speaker 2: They ask, as you've applied various new and improved management
Speaker 2: techniques to your aqui positions, what are some old techniques
Speaker 2: that you found have to go or just aren't very
Speaker 2: useful anymore?
Speaker 4: So my approach is, as you can tell from reading
Speaker 4: the book, is really simple. It's very straightforward. You get
Speaker 4: great people, You figure out big goals with great specificity
Speaker 4: and clarity. What are you trying to achieve? But bold
Speaker 4: We're going to create a fifty billion dollar company. I've
Speaker 4: got everyone in the organization completely signed up for that.
Speaker 4: And then you figure out what do I have to
Speaker 4: do to get from here to get to there? What
Speaker 4: are the steps I have to do? And then who's
Speaker 4: going to be in charge of that? And then how
Speaker 4: do we tie compensation to that? So that and how
Speaker 4: do we measure it, keep people accountable accurately and appropriately
Speaker 4: and fairly, reward people for achievement on that, and keep
Speaker 4: people on track. That's my basic playbook. There's a lot
Speaker 4: of other details to it. That's my basic playbook. Great people,
Speaker 4: big vision, hold people accountable, and go make it happen,
Speaker 4: and as a result of that, you create, in all
Speaker 4: likelihood great shareholder value.
Speaker 3: The book's been out for several months, has anyone, And
Speaker 3: it's called how to Make a billion dollars?
Speaker 4: Right? Few billion dollars?
Speaker 3: How to make a few billion dollars? Sure, sometimes Tracy
Speaker 3: and I, because we've been doing the podcast for several years,
Speaker 3: like we'll get a email. It's like, by the way,
Speaker 3: I just want to say I listened to this episode
Speaker 3: and then I went to business school, and now I
Speaker 3: got my first job on Wall Street. You've been doing
Speaker 3: it for a while. Has anyone called you up and say, Brad,
Speaker 3: I just want to thank you. I've made a billion
Speaker 3: dollars since buying your book, or a few billion billion?
Speaker 4: Not yet, but I'll underline the word yet. But I
Speaker 4: tell you what I have had a lot of people
Speaker 4: like what Tracy thought experiments.
Speaker 2: I have imagined myself as a banana.
Speaker 4: It's true because the commonality of DNA between a banana
Speaker 4: and the humane is it's quite Significant's like ninety something percent.
Speaker 2: It is more than you would expect. I'll say that, Brad.
Speaker 2: There's one There's another question I want to ask you,
Speaker 2: which is you know you're an m and a professional
Speaker 2: serial entrepreneur. You start one company that's very successful, then
Speaker 2: another that's very successful, and now another. How much runway
Speaker 2: do you give yourself for each company? And when do
Speaker 2: you declare like, Okay, I've done it here and now
Speaker 2: I'm going to move on to the new thing, or
Speaker 2: now I feel prepared to take an additional thing on.
Speaker 4: If you look at my bio 'es, basically every decade
Speaker 4: I really get into something I started from scratch, this
Speaker 4: big idea. Get everyone, we do it, do it, do it,
Speaker 4: do it. Ten years later we did it, and I
Speaker 4: do it again. That's my psychic Everyone's got their bio rhythm,
Speaker 4: that's mine. Once a decade.
Speaker 3: Well, we'll have you back here in a decade and
Speaker 3: you can tell us about your next venture.
Speaker 4: Great, it'll have x O in it.
Speaker 3: Sounds good, Brad Jacobs QX So thank you so much
Speaker 3: for coming on. Odd lots, thank you, good question.
Speaker 2: That was our conversation with Brad Jacobs at Bloom invest
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway and.
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