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Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 1: Tracy Obviously, over the last few years we've done tons

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Speaker 1: of episodes about freight logistics, trucking, warehousing, etc. And one

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Speaker 1: of the things that has always struck me is just,

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Speaker 1: you know, all of this crucial stuff, how sort of

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Speaker 1: chaotic and help together with tape and glue. These industries

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Speaker 1: often seem.

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Speaker 2: To me, Can I tell you something. My husband and

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Speaker 2: I are rebuilding the shed in Connecticut and just getting

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Speaker 2: the lumber for the shed. Is this massive production that

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Speaker 2: involves us like renting a truck and having to like

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Speaker 2: negotiate it from some lumberyard and then like bring it

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Speaker 2: back and forth piece by piece. The industry of all

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Speaker 2: the movement of these physical goods and products, it seems

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Speaker 2: so difficult at times, and it also seems sort of

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Speaker 2: ripe for opportunity. But then you also hear stuff like

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Speaker 2: Convoy going out of business, right, the freight broker that

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Speaker 2: was supposed to be using new technology to revolutionize trucking

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Speaker 2: and things like that, And so I don't know, there's

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Speaker 2: like this tension between moving physical products and then using

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Speaker 2: tech to make the whole space more efficient totally.

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Speaker 1: It's one of these areas where it seems like, oh, yeah,

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Speaker 1: there must be more simple. Like I remember one of

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Speaker 1: our first sort of eye opening episodes with Stinson Deane

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Speaker 1: talk about how lumber is distributed and so much of

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Speaker 1: these communications just on sort of message boards or boards

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Speaker 1: that might resemble Craigslist. And then you know, we've talked

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Speaker 1: about it with Craig Fuller and Rachel Kremac and freight

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Speaker 1: waves and the idea that you know, you look at

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Speaker 1: how trucking brokerage works, these load boards and this is

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Speaker 1: all this crucial stuff that's sort of at the center

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Speaker 1: of how the economy works. And it's like they're in

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Speaker 1: WhatsApp groups. Yes, anyone can anyone pick up a load

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Speaker 1: in Akron and bring it to El Paso next week,

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Speaker 1: and this is how it all works.

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Speaker 2: It seems so informal, and then of course it leads

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Speaker 2: to these inefficiencies like trucks running around empty basically what's

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Speaker 2: it called dead heading? Basically yeah, yeah, and things like that,

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Speaker 2: And I guess the question is, like, what is the

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Speaker 2: sticking point here? Is there something like fundamental about moving

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Speaker 2: physical goods? That is, I guess, resistant to new technology,

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Speaker 2: or is there maybe something about the industry where you

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Speaker 2: know people are making while they were people are making

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Speaker 2: lots of money from lack of transparency in the industry,

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Speaker 2: and so they themselves are resistant to new technology. It

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Speaker 2: kind of reminds me of the bond market sometimes and.

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Speaker 1: Stocks absolutely tracy. It sounds like, given the headaches you've

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Speaker 1: had with your new shed, that you could really use

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Speaker 1: some efficiency gains in the world of building products distribution,

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Speaker 1: could you.

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Speaker 2: Not, Yes, especially since I keep messing up the ridgeboard

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Speaker 2: on the roof. I can't get it straight, and then

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Speaker 2: every time I mess it up, we have to go

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Speaker 2: and get more lumber. So yes, yes, please.

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Speaker 1: Well, we do literally have the perfect guest, someone whose

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Speaker 1: career I think almost is so odd. Lotsye, in all

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Speaker 1: of the topics that we discuss. Over the years, he

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Speaker 1: has started, depending on how you count, between five and

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Speaker 1: seven companies, started an oil brokerage, the founder of United

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Speaker 1: Waste Systems, which rolled up waste collection companies sold to

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Speaker 1: Waste Management, United Rentals, and then the creator of the

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Speaker 1: logistics conglomerate XPO, which also spun off a freight brokerage,

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Speaker 1: A logistics company, et cetera. We are speaking, obviously to

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Speaker 1: Brad Jacobs, who just a few days before this recording

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Speaker 1: announced the creation of a new company called QXO, which

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Speaker 1: intends to be a market leader in the space of

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Speaker 1: building products distribution. He plans to make billions of dollars,

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Speaker 1: and he's the author of a new book, how to

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Speaker 1: make a few billion dollars.

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Speaker 2: I like how in the press least for the new

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Speaker 2: company in qx so he basically says he aims to

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Speaker 2: make billions of dollars. So it connects very well with

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Speaker 2: the book.

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Speaker 1: Well, he has a track record of making billions of dollars.

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Speaker 1: I would love to make billions of dollars. So maybe

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Speaker 1: we'll learn something. Brad, Thank you so much for coming

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Speaker 1: on out laws.

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Speaker 3: The pleasure's mind.

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Speaker 4: Look, some people think in millions, some people think in trillions.

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Speaker 3: I think of billions.

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Speaker 1: That's it's a very very reasonable middle ground middle graund here.

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Speaker 1: So you say you're going to build a market leader

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Speaker 1: in building products distribution. There's a lot to get into,

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Speaker 1: but let's just start here. When you look at the

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Speaker 1: industry right now of building products distribution in the pre

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Speaker 1: QXO world, what does it look like to you. What

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Speaker 1: do you see when you look at that industry.

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Speaker 4: Something that's really big. First of all, it's eight hundred

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Speaker 4: billion dollars between North America and Europe, so it's large,

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Speaker 4: and it's very fragmented. You've got seven thousand distributors here

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Speaker 4: in North America, you have thirteen thousand in Europe, so

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Speaker 4: that's a lot a lot of independent companies and a

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Speaker 4: handful of the companies it's mostly privately owned companies. I

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Speaker 4: see an industry that's growing. It's been growing at seven

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Speaker 4: percent compounded annual growth on the top line for the

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Speaker 4: last five years. I see an industry that is rich

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Speaker 4: with acquisition targets, so it's an opportunity to scale up.

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Speaker 4: And I also see an industry that could use more technology.

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Speaker 4: There's a handful of companies doing some cool things in technology,

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Speaker 4: but by and large, the industry as a whole is

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Speaker 4: behind where logistics is. It's not where the logistics industry is.

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Speaker 2: This is exactly what I wanted to talk to you about.

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Speaker 2: So in the press release you say I think tech

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Speaker 2: enabled company or something like that. What does that mean

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Speaker 2: exactly in this context? What is the technological opportunity that

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Speaker 2: you see here.

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Speaker 4: It's a few things. Number one, it's how you interact

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Speaker 4: with the customer. And right now mid single digits percent

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Speaker 4: is done over digitally and ninety something percent is done

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Speaker 4: face to face, and that really should be reversed eventually,

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Speaker 4: over time, not right away. You should see more and

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Speaker 4: more penetration of digital on that. So that's number one

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Speaker 4: the e commerce penetration. Number two pricing. Pricing could be

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Speaker 4: more methodical, could be done electronically, could be done by AI,

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Speaker 4: could be done by machine learning, and be interactive and continuous.

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Speaker 4: And thirdly, the inventory, so this is a business has

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Speaker 4: a big transportation logistics element to it because you're buying

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Speaker 4: a bunch of products wholesale, you're storing them in dcs,

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Speaker 4: and then you'll distribution side like warehouses fancy word for warehouses,

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Speaker 4: and then you're delivering them in delivery trucks to the

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Speaker 4: end user. So there's a lot of transportational logistics here.

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Speaker 4: And the dcs or warehouses that I visited so far

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Speaker 4: not a whole lot of automation, and there they should

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Speaker 4: be highly automated. Now handful of companies aren't doing automation,

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Speaker 4: but they're the exception, not the rule, and it really

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Speaker 4: should be the rule, because as we know from Jexo

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Speaker 4: Logistics where we have a couple hundred million square feet

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Speaker 4: of warehouses around the world, automation is where it's at,

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Speaker 4: that's where it's going, and that's what customers want. It

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Speaker 4: takes out costs and increase safety, it's faster, it's more accurate.

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Speaker 3: There is a.

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Speaker 4: Thousand reasons why automation makes perfect sense for the inventory part.

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Speaker 4: And then it's not just the picking and packing that

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Speaker 4: needs to be automated, it's the actual inventory management. So

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Speaker 4: these distributors have lots and lots of skews and getting

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Speaker 4: it just right of not having too much and then

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Speaker 4: tying up capital but not having too little and then

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Speaker 4: disappointing customers so you can fulfill their demand. This has

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Speaker 4: to get right. And GXO, for example, has had a

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Speaker 4: client Boeing for years and years and years. It went

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Speaker 4: back to a new breed before we bought them, and

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Speaker 4: they do the parts management for that all around the

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Speaker 4: world on a global basis, and that's done technologically. That's

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Speaker 4: done not by people fraging out.

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Speaker 3: You know, I think we.

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Speaker 4: Need this many parts of this year, and we need

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Speaker 4: that many parts there, it's doing it methodically, using lots

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Speaker 4: and lots of data and using algorithms to understand that

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Speaker 4: to get the inventory just right. And here in the

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Speaker 4: billing products distribution space, I think there's a big opportunity

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Speaker 4: to optimize the inventory management. And then the last component

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Speaker 4: of technology that excites me is basic route optimization, meaning

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Speaker 4: you've got delivery trucks and it's still being done the

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Speaker 4: way it was done in trucking like fifteen years ago.

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Speaker 4: For the most part. There's again there's exceptions to the

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Speaker 4: rules and find companies doing good stuff, but by and

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Speaker 4: large it's not optimized in a typical distribution company you

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Speaker 4: have right now, and I think we can bring that

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Speaker 4: to the table pretty quickly.

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Speaker 2: So I have a billion questions already, not a million

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Speaker 2: or a trillion, just a billion. But just so we

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Speaker 2: understand the business. What part of the supply chain are

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Speaker 2: you actually targeting here?

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Speaker 4: Is it the.

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Speaker 2: Wholesalers who supply lumber yards or lumber yards that supply

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Speaker 2: builders or both.

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Speaker 4: We're buying wholesale selling retail. But there's three different categories

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Speaker 4: and markets. There's residential, it's non residential, and it's infrastructure.

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Speaker 4: So residential is like you like your apartments, your houses.

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Speaker 4: People who need floors and windows and doors and roofing,

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Speaker 4: tile and so forth, HVAC. Then there's commercial. Commercial can

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Speaker 4: be any kind of building that's not a house.

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Speaker 3: It could be a school, could be a church.

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Speaker 4: It could be a factory, it could be a town hall.

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Speaker 4: It could be just anything that's not people living in

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Speaker 4: it but has a roof protecting from the elements. And

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Speaker 4: the third category would be infrastructure. So infrastructure is roads, bridges, tunnels,

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Speaker 4: all the pipes underneath the ground. And if you look

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Speaker 4: at these three sectors, one thing that excites me about

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Speaker 4: this is all categories there are old. Houses are over

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Speaker 4: forty years old. Commercial facilities are over fifty years old.

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Speaker 4: A lot of the infrastructure underneath America is over a

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Speaker 4: century old. I mean it really needs to be repaired

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Speaker 4: and lots of activity has to be done here. This

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Speaker 4: is an industry that's not going to go into the metaverse.

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Speaker 4: This is an industry that's not going to be disrupted

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Speaker 4: by AI. It's can be enabled by AI. And that

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Speaker 4: was important for me when I looked at five hundred

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Speaker 4: different opportunities, because quite a lot of them I have

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Speaker 4: serious questions about whether they'll still exist in five.

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Speaker 3: Or ten years.

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Speaker 1: Can I ask a question? So with the XPO and

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Speaker 1: that family of companies, I guess, why is QXO a

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Speaker 1: separate company that needs to be Okay, it's in building

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Speaker 1: supply distribution. If you have a freight company, if you

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Speaker 1: have a logistics company, if you have a freight broker.

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Speaker 1: Why can't your existing companies simply move deeper into this space?

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Speaker 1: Why is it important for it to be focused on

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Speaker 1: its own Because when you describe, you say, okay, well,

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Speaker 1: the transportation system is like where trucking was fifteen years ago,

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Speaker 1: and I want to we'll get into sort of this

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Speaker 1: date of trucking. Why is it not that existing logistics

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Speaker 1: related companies can just offer services to this industry.

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Speaker 4: I mean, we couldn't be a real pure play focused company.

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Speaker 3: So the XOS, the GXO, RXO, XPO, they're very focused.

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Speaker 4: Now we divided the company up into three very carefully

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Speaker 4: designed units. You got GXO being supply chain, being warehouses

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Speaker 4: around the world. It's got a thousand warehouses and that's

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Speaker 4: all it does. Really, it really does warehouse warehouse warehousing.

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Speaker 4: It's an inch wide and a mile deep on warehousing

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Speaker 4: does it really, really, really well. And then you have

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Speaker 4: on RXO it's the asset light transportations, the tech enabled

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Speaker 4: brokerage model, and it also has the last mile delivering

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Speaker 4: right people's houses. And then thirdly you have XPO, which

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Speaker 4: is primarily an LTL carrier less than truckload carrier that's

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Speaker 4: mostly in North America. And we divided the company up

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Speaker 4: into those three categories because that's what our owners told us.

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Speaker 3: That's what our shareholders told us. Our shareholders told us.

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Speaker 4: Look, we don't want all these things altogether. We want

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Speaker 4: to have more defined pure plays that we can invest

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Speaker 4: in the industrial comeback and then we'll invest in XPO

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Speaker 4: for LTL or want to go more consumer, or we

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Speaker 4: want to go make a play on e commerce, which

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Speaker 4: we'll go more with with GXO. And that's worked really well.

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Speaker 4: I mean, we were getting a conglomerate discount for our multiple.

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Speaker 4: We were trading like eight times Ebada. Today those three

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Speaker 4: different companies trade at double digit multiples of Ibada, and

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Speaker 4: that in addition to improving the Ebadah, the multiple on

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Speaker 4: Ebadah improved too, so it made sense to split those up.

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Speaker 4: So I don't I think we would be going backwards

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Speaker 4: from a shareholder perspective if we if we started becoming

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Speaker 4: more multifaceted and blended distribution together with the xos.

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Speaker 1: Let's talk a little bit more about your plans for QXO.

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Speaker 1: And so you mentioned it in the US there's seven

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Speaker 1: thousand companies and in Europe there's thirteen thousand, and you

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Speaker 1: know you're gonna hit their grown running have billions of revenues.

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Speaker 1: You're gonna buy up a bunch of companies and.

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Speaker 3: Roll it up.

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Speaker 1: My understanding, you know, going back to the United Waste

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Speaker 1: days and when you sort of started building that up,

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Speaker 1: it was acquiring different types of assets, so distribution but

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Speaker 1: also landfills, et cetera. You know, and I think when

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Speaker 1: people think about roll ups in the traditional Pe sense,

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Speaker 1: they're like, Oh, I'm gonna go out and I'm gonna

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Speaker 1: buy twenty you know, h VAC companies and we're gonna

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Speaker 1: unify their back end and take out some dead and

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Speaker 1: make them all leaner and operation and six sigma and

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Speaker 1: all that stuff. It feels like you're thinking much more

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Speaker 1: holistically in terms of buying different parts of the supply

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Speaker 1: chain to work together. Can you talk a little bit

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Speaker 1: about what assets you need to buy to make QXO work.

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Speaker 3: So you mentioned it correctly.

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Speaker 4: At United Waste, we bought landfills, we bought transfer stations,

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Speaker 4: we bought collection companies, and that became one integrated supply chain. Yeah,

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Speaker 4: and it worked really well because we took out a

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Speaker 4: lot of cost as of doing that. We had an

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Speaker 4: end to end solution for customers and they loved it,

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Speaker 4: and that's why our earnings compounded a fifty five percent

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Speaker 4: kager and not coincidentally, so did our stock price. So

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Speaker 4: I get that. So you have to create a company

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Speaker 4: that works for the customer, that the customer appreciates the

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Speaker 4: service that you're providing so they wire money from their

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Speaker 4: bank accounts to yours. So it's very very important to

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Speaker 4: do that here in QXO. In our building products distribution company,

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Speaker 4: we're going to stay very focused on distribution, meaning distributing

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Speaker 4: building materials to the three segments that I was just

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Speaker 4: talking about with Tracy in terms of residential, non residential,

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Speaker 4: and infrastructure. And I'm going to stay right on those

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Speaker 4: three things and I'm going to toggle between them depending

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Speaker 4: on opportunities as they arise. Attractive opportunities, We're going to

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Speaker 4: be opportunistic, and how we think the five to ten

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Speaker 4: year outlook looks for each one of those.

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Speaker 2: So you mentioned infrastructure and just connecting this back to

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Speaker 2: the landfill business that we were just discussing. Reading your book,

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Speaker 2: one of the things you talk about is the reason

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Speaker 2: you were able to buy up landfills at that time

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Speaker 2: was partly because of new environmental regulations that made them

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Speaker 2: more costly for the existing owners to actually run, and

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Speaker 2: so a lot of people wanted to get rid of

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Speaker 2: their landfills. I guess, at reasonable prices and you snap

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Speaker 2: them up. When you talk about infrastructure spending, it seems

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Speaker 2: like part of your mo is maybe looking at what

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Speaker 2: the government is doing, what the government is spending its

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Speaker 2: money on, and taking that opportunity into account. How much

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Speaker 2: does that figure into your planning? And the other story

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Speaker 2: you tell in the book is at one point you

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Speaker 2: bought up a bunch of road rental companies in anticipation

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Speaker 2: of six hundred billion dollars of infrastructure funding, but that

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Speaker 2: didn't really work out. So I guess, like, how are

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Speaker 2: you evaluating the opportunity and the risk here?

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Speaker 4: I'm not counting on government handouts, the government handouts or

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Speaker 4: the cherry on top. It's extra and it's great and

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Speaker 4: we'll take it. But that's not what the business plan

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Speaker 4: is based on. The business plan is based on that

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Speaker 4: the infrastructure is very aging and there's got to be

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Speaker 4: spent about two trillion dollars in order to fix it up.

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Speaker 4: Whether that happens at this pace or that pace, or

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Speaker 4: from this pocket or this pocket, it doesn't really matter.

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Speaker 4: It's going to have to happen. Because so you mentioned

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Speaker 4: you have a house in Connecticut, so you know what

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Speaker 4: I'm talking about. Driving from Connecticut to the city is

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Speaker 4: a bumpy ride. Says these things have to get fixed

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Speaker 4: and or later. And then on residential, you look at residential,

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Speaker 4: the average house is forty two years old. I mean

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Speaker 4: when I was a kid, it was ten years old.

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Speaker 4: That was an old house. So it's a lot of

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Speaker 4: repair and modeling is going to happen. There nothing to

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Speaker 4: do with the government, the governments. I don't think the

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Speaker 4: government's not going to pay Tracey Alloway to repair and

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Speaker 4: remodel your house.

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Speaker 1: They might pair to install heat pumps, insulation and other

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Speaker 1: sort of you know, clean energy advances.

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Speaker 4: Yeah, and there is one company, Watsco, who specializes in HVAC.

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Speaker 4: That's capitalizing on that and making it a ton of

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Speaker 4: money doing that. But I'm not counting on that. I'm

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Speaker 4: not building a business plan based on government large ass.

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Speaker 4: That's nice and it's an extra kicker, but that's.

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Speaker 3: Not the guts of the business plan. You know.

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Speaker 1: I mentioned in the beginning that one of the big

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Speaker 1: eye opening things is Tracy and I have learned more

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Speaker 1: about these industries is how load tech communication is, and

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Speaker 1: you know, freight brokerages where it's still based on phone

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Speaker 1: I think we heard right right, Maybe facts is still

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Speaker 1: or maybe in the last few years there's no more facts.

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Speaker 1: I'm not sure. These websites and WhatsApp groups that you

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Speaker 1: know super retro in building supply distribution. When you talk

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Speaker 1: about how load tech it still is, you know, let's

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Speaker 1: say Tracy works with some local provider of lumber or

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Speaker 1: whatever she needs, Like, what is the process by which

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Speaker 1: the current status quo these these goods are delivered to

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Speaker 1: a regional distribution center or to her house.

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Speaker 4: So a couple things there. Let's start with the beginning

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Speaker 4: part of your question about truck brokerage. Truck brokerage is

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Speaker 4: not as old fuddy duddy as you may think it's

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Speaker 4: evolved quite a bit in the last ten years.

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Speaker 3: Now.

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Speaker 4: In twenty eleven, when I got into the truck brokerage business,

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Speaker 4: it was just as you described. It wasn't low tech,

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Speaker 4: it was no tech. It was one hundred percent people

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Speaker 4: talking on phones to each other and in very slow

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Speaker 4: book way. We didn't have factors. It was still email,

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Speaker 4: but it was not very machine to machine. Fast forward

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Speaker 4: to today, OURXO which was the truck brokerage spin off

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Speaker 4: of XPO that Drew Wicklinson runs that business. Now ninety

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Speaker 4: seven percent of their orders are either sourced or covered

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Speaker 4: electronically digitally, So that's come a long long way.

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Speaker 3: Now. Rxo's at the forefront of that.

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Speaker 4: It's been the leader of technology because we invested in

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Speaker 4: that right from the beginning.

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Speaker 3: That was our vision.

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Speaker 4: But even the whole industry, it's not ninety seven percent,

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Speaker 4: but it's over half. Over half now he's done electronically.

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Speaker 4: So that's brokerage. That's where brokerage has gone. Now. Distribution

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Speaker 4: is kind of where brokerage was ten years ago, maybe

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Speaker 4: eight years ago, because there are, like I said, there

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Speaker 4: are a handful of companies are starting to do this digitally,

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Speaker 4: but overall, it's an industry. It's still single digits percent,

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Speaker 4: so it's going to penetrate much much more than that.

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Speaker 4: There's so many things depending on the type of product

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Speaker 4: we're talking about that it should just be ordered on

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Speaker 4: your phone or on your website. You should not have

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Speaker 4: to go somewhere and stand in line.

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Speaker 3: It's not necessary.

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Speaker 2: What are the sticking points to technology adoption in distribution?

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Speaker 2: Because I imagine, you know, if you went to a

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Speaker 2: company and you said, I can make your inventory management

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Speaker 2: a lot more efficient using technology, it seems like a

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Speaker 2: slam dunk for them. Maybe it costs a lot of

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Speaker 2: money and that's the issue. Maybe on pricing, if you

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Speaker 2: say I can make your pricing a lot more transparent,

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Speaker 2: maybe there's less of an incentive for them to improve that.

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Speaker 2: But like, what are the major hurdles that you see here?

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Speaker 4: It's really just doing it. It's a question of companies

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Speaker 4: putting money there. This is a very low capex business,

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Speaker 4: very very low capex. The conversion from EBIDATA free cash

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Speaker 4: flow is enormous. In some companies, the cashual is more

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Speaker 4: than an income, so there's very little investment in capex.

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Speaker 4: I don't mind investing in CAPEX for technology. In fact,

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Speaker 4: I want to and I will because that was the

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Speaker 4: big driving force of our success at XPO, was being

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Speaker 4: ahead of the curve on technology. So we're definitely going

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Speaker 4: to do that there, and that's all that's required.

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Speaker 3: Now.

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Speaker 4: You have a lot of companies that are private equity

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Speaker 4: owned private equity because of their structure, their nature, and

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Speaker 4: they have to give them money back to their investors

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Speaker 4: after seven or so years. Sometimes it doesn't make sense

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Speaker 4: for them to invest hundreds of millions of dollars into

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Speaker 4: technology because they're gonna be flipping it, so why should

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Speaker 4: they do that? I get that, And sometimes companies have

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Speaker 4: a lot of pressure on short term earnings the quarter

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Speaker 4: of the year and they don't have an investor base

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Speaker 4: that's got a long term view of So my investors

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Speaker 4: always have been the ones looking for the big kill.

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Speaker 4: We're not looking for just like two hundred basis points

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Speaker 4: more than.

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Speaker 3: We're in the market.

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Speaker 4: We're looking for big, big, big returns. So XPO is

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Speaker 4: thirty two X and rentals today is more than one

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Speaker 4: hundred xs of.

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Speaker 2: One hundred bagger, pretty one hundred.

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Speaker 4: Plus bagger actually, And that's the kind of investors that

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Speaker 4: invest in me ones that want big, big returns and

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Speaker 4: are patient money that can hold a stock for a

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Speaker 4: few years and make a big bet on that. And

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Speaker 4: those kind of investors totally get it that you've got

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Speaker 4: to invest in technology in order to have the J curve,

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Speaker 4: so that in years three, four five, you're a category

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Speaker 4: killer and you have a big competitive advantage against companies

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Speaker 4: who haven't been investing in technology. So I'm definitely going

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Speaker 4: to invest significantly in technology.

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Speaker 1: The United Rentals chart is absolutely insane. There's a four

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Speaker 1: dollars stock in two thousand and nine. It looks like

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Speaker 1: it's basically an all time high right now, but over

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Speaker 1: five close, So extremely well done on that.

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Speaker 4: You know, well, I can't take full critical because I've

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Speaker 4: been gone for a while.

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Speaker 1: But your original investors, the ones that just help buy

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Speaker 1: and hold, very pleased with you. I'm sure I'm freight brokerage, though,

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Speaker 1: I will. You know, I want to. I want to

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Speaker 1: get back to that because you know, I know there's

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Speaker 1: like different models and you mentioned that. Okay, it's way

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Speaker 1: more digital than it used to be. But on the

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Speaker 1: other hand, there are still big basically freight trading floors

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Speaker 1: or things that resemble a trading floor. And I went

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Speaker 1: to the headquarters of a Arrived Logistics in Austin, Texas,

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Speaker 1: and there's a lot of you know, and we talked

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Speaker 1: to their CEO, and you know, there's a lot of

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Speaker 1: X Big ten or Big twelve or sec athletes working

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Speaker 1: the phones. In those places. It looks like kind of

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Speaker 1: a stock brokerage. And the one side of the room

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Speaker 1: they're talking to shippers and the other side they're talking

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Speaker 1: to carriers, et cetera. Like there's still a lot of

435
00:22:35,480 --> 00:22:38,960
Speaker 1: humans involved in the process of freight brokerage.

436
00:22:39,240 --> 00:22:39,880
Speaker 3: And then when.

437
00:22:39,680 --> 00:22:42,000
Speaker 1: People think, it's like, oh, why can't we just have Uber?

438
00:22:42,000 --> 00:22:44,320
Speaker 1: And Uber of course also is a freight business. And

439
00:22:44,359 --> 00:22:47,240
Speaker 1: then Tracy mentioned Convoy, which I think was going to

440
00:22:47,320 --> 00:22:51,119
Speaker 1: try and uberize the industry and it recently failed, didn't.

441
00:22:51,280 --> 00:22:54,440
Speaker 1: I recently had to sell for basically nothing. Is my understanding,

442
00:22:54,960 --> 00:22:59,439
Speaker 1: why are there still so many humans involved in the

443
00:22:59,480 --> 00:23:02,160
Speaker 1: business of connecting shippers and carriers.

444
00:23:02,240 --> 00:23:06,880
Speaker 4: There's fewer number of humans now per revenue, per dollars

445
00:23:06,880 --> 00:23:10,080
Speaker 4: per shipment than there were two years ago, and five

446
00:23:10,160 --> 00:23:11,919
Speaker 4: years ago and ten years ago, and that's the trend.

447
00:23:12,359 --> 00:23:16,400
Speaker 4: I bought a company called NLM from land Start back

448
00:23:16,440 --> 00:23:19,919
Speaker 4: in must have been twenty fourteen or so, and it

449
00:23:20,000 --> 00:23:23,840
Speaker 4: specialized in freight brokers, mostly for the automobile industry, but

450
00:23:23,880 --> 00:23:27,320
Speaker 4: other industries too that had expedited requirements, like they needed

451
00:23:27,400 --> 00:23:29,399
Speaker 4: like a factory floor was going to close down unless

452
00:23:29,400 --> 00:23:32,000
Speaker 4: they had a machine or a part, and they needed

453
00:23:32,000 --> 00:23:34,560
Speaker 4: it like in two hours, like right away, and they

454
00:23:34,600 --> 00:23:37,480
Speaker 4: were willing to pay premium prices for that because the

455
00:23:37,520 --> 00:23:40,520
Speaker 4: cost of not getting it was really quickly. This business

456
00:23:40,520 --> 00:23:41,680
Speaker 4: blew my mind because I went.

457
00:23:41,600 --> 00:23:42,960
Speaker 3: Out to go and visit it.

458
00:23:42,960 --> 00:23:45,080
Speaker 4: It was moving over billion dollars for fready a year,

459
00:23:45,320 --> 00:23:47,160
Speaker 4: a pretty sizable firm.

460
00:23:47,440 --> 00:23:49,240
Speaker 3: And it was totally quiet.

461
00:23:49,359 --> 00:23:52,720
Speaker 4: They were like a few dozen people there and they

462
00:23:52,720 --> 00:23:54,359
Speaker 4: were basically taking care of the computers.

463
00:23:55,040 --> 00:23:56,640
Speaker 3: And there was none of what you just described.

464
00:23:56,880 --> 00:23:58,679
Speaker 4: There was no It wasn't like the old fashioned New

465
00:23:58,760 --> 00:24:01,760
Speaker 4: York's docking steeing trading floor from trading places thirty years ago.

466
00:24:01,920 --> 00:24:04,439
Speaker 4: It was very automated. And I said, this is the

467
00:24:04,480 --> 00:24:07,280
Speaker 4: future of brokerage. This is where brokerage is going, where

468
00:24:07,280 --> 00:24:13,280
Speaker 4: it's more machine to machine and automatic, automated tech driven

469
00:24:13,680 --> 00:24:17,359
Speaker 4: tech forward, not dependent on human beings. Now, there still

470
00:24:17,400 --> 00:24:20,320
Speaker 4: is a role for human beings in in almost any

471
00:24:20,320 --> 00:24:24,239
Speaker 4: business because of human relationships, and that's important, but the

472
00:24:24,280 --> 00:24:29,440
Speaker 4: actual transactions, increasingly in almost every industry and including truck brokerage,

473
00:24:29,720 --> 00:24:30,639
Speaker 4: should be done digitally.

474
00:24:30,880 --> 00:24:32,640
Speaker 1: That's what they're not right now, right. I mean, there's

475
00:24:33,119 --> 00:24:34,760
Speaker 1: a lot of email and they say like, hey, we

476
00:24:34,800 --> 00:24:36,480
Speaker 1: need this in North Carolina, and I mean I see

477
00:24:36,480 --> 00:24:38,640
Speaker 1: it all the time, or I mean it may be digital,

478
00:24:38,680 --> 00:24:41,240
Speaker 1: but it's email and a human reading the email XO.

479
00:24:42,040 --> 00:24:45,600
Speaker 4: Ninety seven percent of the shipments are either covered or

480
00:24:46,280 --> 00:24:49,480
Speaker 4: sourced digitally, and they are growing at three times the

481
00:24:49,480 --> 00:24:51,960
Speaker 4: industry average. And that's why they're growing at three times

482
00:24:52,000 --> 00:24:55,520
Speaker 4: the industry averages because it's tech power. It's done by technology,

483
00:24:55,560 --> 00:25:10,280
Speaker 4: not by us mere mortals.

484
00:25:12,720 --> 00:25:16,240
Speaker 2: How much does pricing power matter, for instance, in the

485
00:25:16,280 --> 00:25:19,520
Speaker 2: new distribution business that you're starting, Like, how much of

486
00:25:19,520 --> 00:25:23,639
Speaker 2: the strategy depends on consolidating and then being able to

487
00:25:23,680 --> 00:25:25,720
Speaker 2: get pricing power in the market. And the reason I

488
00:25:25,760 --> 00:25:29,280
Speaker 2: ask is because if you look at something like freight brokerage,

489
00:25:29,359 --> 00:25:32,399
Speaker 2: I mean one of the criticisms of that market was

490
00:25:33,000 --> 00:25:35,520
Speaker 2: a lot of people lowered their prices in order to

491
00:25:35,520 --> 00:25:38,879
Speaker 2: get market share, so get people using their apps or whatever.

492
00:25:39,000 --> 00:25:42,080
Speaker 2: And then when they started raising prices in order to

493
00:25:42,160 --> 00:25:45,760
Speaker 2: actually make money. People just switched platforms right like. It

494
00:25:45,840 --> 00:25:48,639
Speaker 2: was very easy to switch. So I guess how do

495
00:25:48,680 --> 00:25:50,840
Speaker 2: you manage those things? You know, the scale and the

496
00:25:50,880 --> 00:25:52,400
Speaker 2: pricing power in.

497
00:25:52,480 --> 00:25:55,720
Speaker 4: Building products distribution. The business plan is not to raise

498
00:25:55,760 --> 00:25:59,280
Speaker 4: prices to the end customer. However, the business plan is

499
00:25:59,640 --> 00:26:03,360
Speaker 4: to low are a cost of sourcing of procurement. And

500
00:26:03,720 --> 00:26:06,479
Speaker 4: that's not a difficult thing because as you get bigger

501
00:26:06,480 --> 00:26:09,680
Speaker 4: and scale up, you're a bigger buyer, you're a bigger customer,

502
00:26:09,720 --> 00:26:11,960
Speaker 4: and you had a better break. A lot of these

503
00:26:12,800 --> 00:26:15,119
Speaker 4: products are sold on a rate card. Basically, it's not

504
00:26:15,200 --> 00:26:17,760
Speaker 4: much negotiated. It's a rate card. If you buy this price,

505
00:26:18,080 --> 00:26:20,160
Speaker 4: this amount, this is what your price is. You buy

506
00:26:20,160 --> 00:26:22,160
Speaker 4: a larger amount, you get a lower price. You buy

507
00:26:22,160 --> 00:26:24,119
Speaker 4: an even larger amount, you get an even lower amount.

508
00:26:24,280 --> 00:26:26,760
Speaker 4: And that's part of the business model, is to scale

509
00:26:26,840 --> 00:26:30,960
Speaker 4: up and get the procurement savings and then to actually

510
00:26:31,000 --> 00:26:33,760
Speaker 4: pass along some of that to the end user and

511
00:26:33,880 --> 00:26:35,240
Speaker 4: keep some of that for ourselves.

512
00:26:35,720 --> 00:26:38,240
Speaker 1: How big do you have to get then, so again

513
00:26:38,320 --> 00:26:41,000
Speaker 1: going back to your ambition to be a multi billion

514
00:26:41,080 --> 00:26:43,800
Speaker 1: dollar company in Europe and the US, and to have

515
00:26:43,880 --> 00:26:46,399
Speaker 1: that sort of power to get good prices from the

516
00:26:46,480 --> 00:26:49,639
Speaker 1: original list sellers, Like, how much do you have to

517
00:26:49,720 --> 00:26:52,200
Speaker 1: buy in order to get the scale that you want

518
00:26:52,320 --> 00:26:54,040
Speaker 1: to sort of hit the trajectory you're aiming for.

519
00:26:54,280 --> 00:26:56,120
Speaker 3: We're going to buy. We're also going to grow.

520
00:26:56,359 --> 00:26:58,600
Speaker 4: So the industry is growing at seven percent, so I

521
00:26:58,640 --> 00:27:01,159
Speaker 4: would hope to go more than the industry orically, but

522
00:27:01,640 --> 00:27:03,679
Speaker 4: you're right, the main growth is going to come from

523
00:27:03,920 --> 00:27:06,880
Speaker 4: M and A. And we've already put out revenue targets.

524
00:27:07,600 --> 00:27:09,639
Speaker 4: We should be at a billion dollar at least a

525
00:27:09,680 --> 00:27:12,159
Speaker 4: billion dollars revenue run rate after year one the end

526
00:27:12,200 --> 00:27:14,960
Speaker 4: of year one, we should be at least five billion

527
00:27:15,000 --> 00:27:16,840
Speaker 4: dollars revenue run rate after.

528
00:27:16,720 --> 00:27:17,600
Speaker 3: Two or three years.

529
00:27:18,200 --> 00:27:20,400
Speaker 4: And my vision is to be at tens of billions

530
00:27:20,400 --> 00:27:23,359
Speaker 4: of dollars in revenue over the next decade. And I

531
00:27:23,400 --> 00:27:25,119
Speaker 4: see a very clear path to do those numbers.

532
00:27:25,400 --> 00:27:27,760
Speaker 2: So Joe and I both read your book How to

533
00:27:27,800 --> 00:27:30,080
Speaker 2: Make a Few Billion Dollars, and I enjoyed it, and

534
00:27:30,160 --> 00:27:33,080
Speaker 2: I have to say, it's not what I was expecting.

535
00:27:33,080 --> 00:27:36,440
Speaker 2: I was expecting a biography, but like, actually it's sort

536
00:27:36,480 --> 00:27:39,840
Speaker 2: of conceptual in many ways. So at the very end,

537
00:27:39,880 --> 00:27:43,040
Speaker 2: for instance, you have a list of thought experiments, including

538
00:27:43,080 --> 00:27:46,600
Speaker 2: one that's very similar to imagine yourself as a banana,

539
00:27:46,800 --> 00:27:50,040
Speaker 2: or imagine that you're related to a banana. Human DNA

540
00:27:50,160 --> 00:27:53,600
Speaker 2: is fifty percent related to banana DNA, right, Like, what

541
00:27:53,840 --> 00:27:58,200
Speaker 2: inspired that direction in the book, because again, it seems

542
00:27:58,240 --> 00:28:01,399
Speaker 2: kind of unusual. You don't get many billionaires writing, you know,

543
00:28:01,560 --> 00:28:04,119
Speaker 2: lists of thought experiments, and there's also a timeline of

544
00:28:04,359 --> 00:28:05,480
Speaker 2: technology advancement.

545
00:28:05,840 --> 00:28:09,359
Speaker 4: Okay, so let's start with the thought experiments. The purpose

546
00:28:09,400 --> 00:28:11,280
Speaker 4: of the book, as you can tell from the title,

547
00:28:11,359 --> 00:28:14,320
Speaker 4: is how to make a few billion dollars. And in

548
00:28:14,359 --> 00:28:18,840
Speaker 4: my experience, I've met so many very successful people, many

549
00:28:18,880 --> 00:28:21,920
Speaker 4: people who are much more successful than I am, and

550
00:28:22,920 --> 00:28:25,760
Speaker 4: they're very different from each other in many many different ways,

551
00:28:26,280 --> 00:28:31,440
Speaker 4: and they're identical in one trait. They think differently than

552
00:28:31,640 --> 00:28:35,080
Speaker 4: most people do. And I think that's a big insight

553
00:28:35,560 --> 00:28:39,000
Speaker 4: that if you want to create something big, something amazing,

554
00:28:39,520 --> 00:28:41,760
Speaker 4: something very successful, and it doesn't have to be just

555
00:28:41,760 --> 00:28:44,400
Speaker 4: making money, by the way, making money is just one

556
00:28:44,440 --> 00:28:46,959
Speaker 4: thing in life. But if you want to accomplish anything huge

557
00:28:47,000 --> 00:28:49,760
Speaker 4: in life or in business, you got to figure out

558
00:28:49,760 --> 00:28:51,200
Speaker 4: a way to think differently, because if you think the

559
00:28:51,200 --> 00:28:53,840
Speaker 4: same way everyone else thinks you're going to get the

560
00:28:53,880 --> 00:28:57,320
Speaker 4: same results that everyone gets, which is like the average results.

561
00:28:57,400 --> 00:29:01,320
Speaker 4: If you want super average results, you need to think differently.

562
00:29:01,720 --> 00:29:05,520
Speaker 4: And I've made it my discipline, my hobby, my passion,

563
00:29:05,600 --> 00:29:09,800
Speaker 4: my pastime to think differently and use different techniques of

564
00:29:10,240 --> 00:29:16,240
Speaker 4: self hypnosis and meditation and cognitive therapy and mindfulness and

565
00:29:17,080 --> 00:29:19,480
Speaker 4: thought experiments. And I come up with all these things.

566
00:29:19,520 --> 00:29:22,680
Speaker 4: I mix and match all these different schools of consciousness,

567
00:29:22,720 --> 00:29:24,320
Speaker 4: so to speak, and I come up with my own thing.

568
00:29:24,360 --> 00:29:27,040
Speaker 4: And it helps me get out of my little way

569
00:29:27,080 --> 00:29:29,680
Speaker 4: of thinking, and it helps me think in a more

570
00:29:30,080 --> 00:29:33,720
Speaker 4: unbounded way, and that helps me think big and move fast,

571
00:29:33,760 --> 00:29:36,200
Speaker 4: which is the mantra of making a lot of money

572
00:29:36,200 --> 00:29:36,640
Speaker 4: in business.

573
00:29:37,000 --> 00:29:40,719
Speaker 2: So, speaking of thinking differently, there was one part of

574
00:29:40,760 --> 00:29:44,560
Speaker 2: your book where you talk about doing due diligence on companies.

575
00:29:44,680 --> 00:29:47,200
Speaker 2: And you've spoken about this a lot before. You do

576
00:29:47,240 --> 00:29:50,080
Speaker 2: a lot of research before you make these decisions. But

577
00:29:50,120 --> 00:29:52,920
Speaker 2: you also mentioned that you have been working or have

578
00:29:53,080 --> 00:29:56,280
Speaker 2: worked with a guy who was a twenty five year

579
00:29:56,480 --> 00:30:00,560
Speaker 2: investigator and polygraph examiner for the CIA. So you have

580
00:30:00,760 --> 00:30:04,360
Speaker 2: him interviewing the executives of companies that you're going to

581
00:30:04,360 --> 00:30:04,760
Speaker 2: take over.

582
00:30:05,000 --> 00:30:07,720
Speaker 4: Absolutely and so we could have a whole podcast just

583
00:30:07,800 --> 00:30:16,680
Speaker 4: on Philly. He is the world's expert in detecting deception,

584
00:30:17,440 --> 00:30:20,880
Speaker 4: so yes, he was, come on, I think he'll do it.

585
00:30:20,880 --> 00:30:23,560
Speaker 4: I think he'll do it. He's actually written two books

586
00:30:23,560 --> 00:30:26,000
Speaker 4: on it, and it's right out. There's right there and

587
00:30:26,080 --> 00:30:28,400
Speaker 4: how to Spy the Lie and I Find the Truth.

588
00:30:28,400 --> 00:30:29,720
Speaker 4: I think the other want to get the truth? And

589
00:30:30,000 --> 00:30:33,200
Speaker 4: very interesting books. So he was a polygrapher. He was

590
00:30:33,240 --> 00:30:37,400
Speaker 4: the most senior polygrapher in the CIA, and everyone in

591
00:30:37,440 --> 00:30:40,479
Speaker 4: the CIA has to get wired up every year make

592
00:30:40,480 --> 00:30:44,440
Speaker 4: sure they're not a spy. And he learned that you

593
00:30:44,520 --> 00:30:47,040
Speaker 4: asked the question, which is the stimulus, and then there

594
00:30:47,040 --> 00:30:51,240
Speaker 4: was a response. Now the polygraphy measures your galvanic skin response,

595
00:30:51,280 --> 00:30:53,760
Speaker 4: your stress response, your heartbeat, your sweating, and so forth.

596
00:30:54,760 --> 00:30:58,200
Speaker 4: He also noticed that there were other things besides that.

597
00:30:58,200 --> 00:31:01,320
Speaker 4: There was body language, There was language. Language was the

598
00:31:01,560 --> 00:31:03,960
Speaker 4: language that people used in order to answer a question.

599
00:31:04,440 --> 00:31:09,680
Speaker 4: There were clusters of traits that were the hallmarks of deception.

600
00:31:10,320 --> 00:31:15,120
Speaker 4: And he created a whole method of detecting deception and

601
00:31:15,720 --> 00:31:19,640
Speaker 4: it's a very disarming technique. A great conversationalist.

602
00:31:20,160 --> 00:31:21,600
Speaker 3: You would never think he's not.

603
00:31:21,560 --> 00:31:24,400
Speaker 4: A difficult guy or an interrogate or anything like that.

604
00:31:25,040 --> 00:31:27,080
Speaker 4: And I've studied him very carefully, and I've worked with

605
00:31:27,160 --> 00:31:28,960
Speaker 4: him for oh decade and a half.

606
00:31:29,040 --> 00:31:31,720
Speaker 3: Now I'm still not as good as he is on that, but.

607
00:31:31,680 --> 00:31:34,000
Speaker 4: I've studied how to detect deception, and so is my

608
00:31:34,320 --> 00:31:36,560
Speaker 4: senior management team. They've all taken his courses. They've all

609
00:31:36,560 --> 00:31:40,160
Speaker 4: taken his training, and we find it so beneficial. We

610
00:31:40,240 --> 00:31:44,560
Speaker 4: find it beneficial in due diligence on companies because guess what,

611
00:31:44,760 --> 00:31:46,760
Speaker 4: sometimes people don't tell you the truth when they're selling

612
00:31:46,840 --> 00:31:49,440
Speaker 4: their companies. They exagger a little bit. And guess what

613
00:31:49,640 --> 00:31:53,320
Speaker 4: in job interviews, we're interviewing people. You know, people sometimes

614
00:31:53,320 --> 00:31:56,320
Speaker 4: spend they don't tell you the straight story. And if

615
00:31:56,320 --> 00:31:59,680
Speaker 4: you can figure out what's blogny and what's true, wow,

616
00:31:59,720 --> 00:32:01,960
Speaker 4: you can save a lot of aggravation and a lot

617
00:32:01,960 --> 00:32:03,280
Speaker 4: of money and a lot of you can avoid a

618
00:32:03,280 --> 00:32:07,520
Speaker 4: lot of mistakes. So I do believe that learning the

619
00:32:07,760 --> 00:32:11,680
Speaker 4: art and science of detecting deception, and and we've used

620
00:32:12,040 --> 00:32:14,560
Speaker 4: Phil Houston, he goes his nickname is Dick to Houston

621
00:32:15,240 --> 00:32:15,760
Speaker 4: to do that.

622
00:32:15,880 --> 00:32:18,520
Speaker 3: To teach us. That's really helped us a huge amount.

623
00:32:19,320 --> 00:32:22,200
Speaker 1: So all of these industries that you've worked in, Like

624
00:32:22,320 --> 00:32:24,160
Speaker 1: I don't know if it was always the case, but

625
00:32:24,320 --> 00:32:27,360
Speaker 1: these days there's something like I guess I would say

626
00:32:27,360 --> 00:32:29,680
Speaker 1: sexy about a lot of these sort of you know,

627
00:32:29,760 --> 00:32:32,120
Speaker 1: like I see people on Twitter like talking about like.

628
00:32:32,160 --> 00:32:34,800
Speaker 2: Self high chain so hard, no, like for real, like.

629
00:32:34,760 --> 00:32:37,120
Speaker 1: Self storage, or I want to buy up h vacs

630
00:32:37,120 --> 00:32:40,320
Speaker 1: and you hear stories about x ex Wharton MBAs and

631
00:32:40,360 --> 00:32:41,840
Speaker 1: the first thing they want to do is get some

632
00:32:41,840 --> 00:32:45,440
Speaker 1: friends together and roll up in the local pool management

633
00:32:45,480 --> 00:32:48,000
Speaker 1: company or hvac or whatever, or you know, a chain

634
00:32:48,000 --> 00:32:50,560
Speaker 1: of laundromat to whatever. These physical things that exist in

635
00:32:50,600 --> 00:32:53,040
Speaker 1: the world that aren't going to disappear or go anywhere.

636
00:32:53,360 --> 00:32:57,640
Speaker 1: You spent a year figuring out which industry you'd attack next,

637
00:32:57,720 --> 00:33:03,440
Speaker 1: building products distribution? Is there a system for identifying industries

638
00:33:03,600 --> 00:33:07,120
Speaker 1: or types of companies that you use to go after next.

639
00:33:07,240 --> 00:33:08,640
Speaker 4: I have a system, and I read about it in

640
00:33:08,640 --> 00:33:11,600
Speaker 4: the book I put the process that I use in

641
00:33:11,680 --> 00:33:13,840
Speaker 4: order to study an industry and in order to study

642
00:33:13,840 --> 00:33:17,240
Speaker 4: a specific company, and to make a long story short.

643
00:33:17,720 --> 00:33:19,520
Speaker 3: I get a lot of the.

644
00:33:19,440 --> 00:33:22,640
Speaker 4: Important information and I don't waste time on the unimportant information.

645
00:33:22,840 --> 00:33:24,680
Speaker 4: And I've been doing this long enough I know what's

646
00:33:24,680 --> 00:33:27,760
Speaker 4: important what's not important. And we do a lot of

647
00:33:28,000 --> 00:33:31,680
Speaker 4: diligence online before we even meet people, and then we

648
00:33:31,760 --> 00:33:33,840
Speaker 4: try to use the time of the people we're talking

649
00:33:33,840 --> 00:33:36,560
Speaker 4: to very politely, very judicially, so we're not wasting their

650
00:33:36,600 --> 00:33:38,760
Speaker 4: time and asking them things that we can find out

651
00:33:38,800 --> 00:33:41,760
Speaker 4: from other sources. But we want to know all the

652
00:33:41,760 --> 00:33:43,680
Speaker 4: important stuff. And when we're looking at an industry, we're

653
00:33:43,720 --> 00:33:45,680
Speaker 4: looking at a company, what are we trying to figure out?

654
00:33:46,000 --> 00:33:46,600
Speaker 3: At core?

655
00:33:47,120 --> 00:33:49,840
Speaker 4: We're trying to figure out whether it's an industry or

656
00:33:49,840 --> 00:33:53,720
Speaker 4: a company fast forward five years, seven years, ten years,

657
00:33:53,960 --> 00:33:57,160
Speaker 4: what's the revenue going to be, what's the profit going

658
00:33:57,200 --> 00:34:00,760
Speaker 4: to be? And what's the cash flow whether it's inflows

659
00:34:00,800 --> 00:34:04,160
Speaker 4: or outflows over that period of time. All the hundreds

660
00:34:04,160 --> 00:34:06,880
Speaker 4: of other questions that we're using for due diligence are

661
00:34:06,920 --> 00:34:10,040
Speaker 4: all important, but they distill down to those three questions,

662
00:34:10,560 --> 00:34:14,560
Speaker 4: how do I figure out over the next half a decade, decade,

663
00:34:14,920 --> 00:34:16,680
Speaker 4: what's the revenue going to grow, what's the profit going

664
00:34:16,760 --> 00:34:18,120
Speaker 4: to grow? And how much cash is it going to

665
00:34:18,200 --> 00:34:22,240
Speaker 4: generate or use up? And in the end, it comes

666
00:34:22,239 --> 00:34:25,759
Speaker 4: down to how much money would we put in and

667
00:34:25,800 --> 00:34:28,080
Speaker 4: how much money would we get back, and it's no

668
00:34:28,160 --> 00:34:30,200
Speaker 4: more complicated than that. And if you stick to that

669
00:34:30,840 --> 00:34:33,880
Speaker 4: basic concept that I just mentioned, you will make a

670
00:34:33,880 --> 00:34:36,720
Speaker 4: lot of money, you will create alpha. If you deviate

671
00:34:36,760 --> 00:34:39,360
Speaker 4: from that, if you don't pay attention to that, you say, well, yeah,

672
00:34:39,560 --> 00:34:42,400
Speaker 4: the return on capital's not so great, but no, there's

673
00:34:42,400 --> 00:34:45,080
Speaker 4: no butt. You're gonna have a finite amount of money

674
00:34:45,560 --> 00:34:48,040
Speaker 4: and then five ten years later you're going to have

675
00:34:48,080 --> 00:34:51,160
Speaker 4: created a revenue stream and a profit stream, and you'll

676
00:34:51,200 --> 00:34:53,080
Speaker 4: have generating cash flow between now and then.

677
00:34:53,320 --> 00:34:54,520
Speaker 3: That's gonna determine.

678
00:34:54,200 --> 00:34:56,799
Speaker 4: What your stock price is and how valuable your company is,

679
00:34:57,080 --> 00:34:59,960
Speaker 4: and all the due diligence ends up being about that.

680
00:35:00,880 --> 00:35:05,320
Speaker 2: You do seem to have a connection with the physical space, though,

681
00:35:05,400 --> 00:35:07,600
Speaker 2: which I mean Joe and I clearly.

682
00:35:07,520 --> 00:35:09,520
Speaker 4: Share, and I take issue that it's not sexy.

683
00:35:09,760 --> 00:35:11,480
Speaker 2: Oh no, we agree.

684
00:35:11,600 --> 00:35:13,480
Speaker 1: We agree. That's why we spent the last three years

685
00:35:13,520 --> 00:35:13,879
Speaker 1: talking about.

686
00:35:14,120 --> 00:35:14,319
Speaker 3: Yes.

687
00:35:14,320 --> 00:35:15,680
Speaker 2: And the other thing I was going to say is,

688
00:35:15,719 --> 00:35:18,080
Speaker 2: when I first went into financial journalism, I wanted to

689
00:35:18,120 --> 00:35:21,440
Speaker 2: be a commodities correspondent because there was like a romanticism

690
00:35:21,680 --> 00:35:25,800
Speaker 2: with this idea of like moving large amounts of stuff

691
00:35:26,000 --> 00:35:28,919
Speaker 2: around the world. So I guess my question is what

692
00:35:29,120 --> 00:35:33,200
Speaker 2: is the attraction there, Like, is there something innate about

693
00:35:33,200 --> 00:35:35,560
Speaker 2: the physical space that attracts you to it, or is

694
00:35:35,560 --> 00:35:38,400
Speaker 2: it more about the market opportunity. You mentioned this earlier,

695
00:35:38,440 --> 00:35:40,920
Speaker 2: the idea that you know, like people are always going

696
00:35:40,960 --> 00:35:43,799
Speaker 2: to have to move things. This isn't a business that

697
00:35:43,920 --> 00:35:45,360
Speaker 2: is going to disappear overnight.

698
00:35:46,160 --> 00:35:50,760
Speaker 4: It's more opportunistic than conceptual and abstracts, more concrete. It's

699
00:35:51,280 --> 00:35:55,280
Speaker 4: here are industries that my playbook, the Brad Jacob's Playbook,

700
00:35:55,400 --> 00:35:58,640
Speaker 4: is applicable. And that playbook involves a lot of M

701
00:35:58,680 --> 00:36:01,400
Speaker 4: and A and a lot of and a lot of

702
00:36:01,440 --> 00:36:06,480
Speaker 4: optimization of what we buy, and those techniques apply to

703
00:36:06,560 --> 00:36:09,600
Speaker 4: the industries I've been in some of the industries that's

704
00:36:09,640 --> 00:36:12,160
Speaker 4: really not the play that's not fragmented enough. You really

705
00:36:12,200 --> 00:36:15,799
Speaker 4: can't buy enough. Bigger isn't necessarily better. Maybe the long

706
00:36:15,880 --> 00:36:19,239
Speaker 4: term trend is not so so fantastic. So I looked

707
00:36:19,239 --> 00:36:21,719
Speaker 4: into many, many, many other things, but I dismissed them

708
00:36:21,760 --> 00:36:23,479
Speaker 4: because they didn't check all the boxes. That's one happened

709
00:36:23,520 --> 00:36:25,439
Speaker 4: to check all the boxes. But I looked at many

710
00:36:25,440 --> 00:36:28,359
Speaker 4: other things. I looked at many other industries that well,

711
00:36:28,360 --> 00:36:29,880
Speaker 4: I looked at I spent a lot of time going.

712
00:36:29,719 --> 00:36:30,440
Speaker 3: Back to my roots.

713
00:36:30,520 --> 00:36:32,600
Speaker 4: As you probably know, my first ten years in business

714
00:36:32,640 --> 00:36:35,000
Speaker 4: were in energy, was in oil and gas. So I

715
00:36:35,000 --> 00:36:36,680
Speaker 4: spent a lot of time down in Texas looking at

716
00:36:36,680 --> 00:36:39,960
Speaker 4: oil and gas properties. And there are some really cheap

717
00:36:40,239 --> 00:36:43,120
Speaker 4: properties for sale and like two or three times cash flow,

718
00:36:43,520 --> 00:36:45,920
Speaker 4: and they have twenty thirty year lives, so you can

719
00:36:45,920 --> 00:36:48,560
Speaker 4: get your money back in a couple of years for years,

720
00:36:48,840 --> 00:36:50,920
Speaker 4: and then you have just pure profit year after year

721
00:36:50,960 --> 00:36:52,880
Speaker 4: after year for a long long time. So I got

722
00:36:52,960 --> 00:36:55,960
Speaker 4: really excited about that. As a generally, I'm a value person,

723
00:36:56,239 --> 00:36:58,520
Speaker 4: so I said, Wow, this is really really deep value.

724
00:36:59,320 --> 00:37:00,160
Speaker 3: But I I.

725
00:37:00,200 --> 00:37:03,879
Speaker 4: Talked to the seventeen or so sovereign wealth funds and

726
00:37:04,160 --> 00:37:08,959
Speaker 4: pension plans that have invested in XPO in the past,

727
00:37:09,000 --> 00:37:11,600
Speaker 4: we have a great relationship with, and almost all of

728
00:37:11,680 --> 00:37:13,719
Speaker 4: them said, hey, I get it, but we're not going

729
00:37:13,800 --> 00:37:17,759
Speaker 4: to invest in that. And because ESG and because the

730
00:37:18,239 --> 00:37:20,080
Speaker 4: oil and gas business went through a bad patch there

731
00:37:20,120 --> 00:37:22,080
Speaker 4: for a while. But I like going industries that have

732
00:37:22,160 --> 00:37:24,040
Speaker 4: gone through a bad patch and get better values there.

733
00:37:24,040 --> 00:37:27,120
Speaker 4: But I couldn't see a way that I could raise

734
00:37:27,800 --> 00:37:30,080
Speaker 4: many billions of dollars to finance energy. In fact, I

735
00:37:30,080 --> 00:37:32,359
Speaker 4: even read in the lobby waiting to come up here

736
00:37:32,440 --> 00:37:35,600
Speaker 4: in Bloomberg, I saw a new fund is being raised

737
00:37:35,640 --> 00:37:38,520
Speaker 4: by a couple of guys, talented guys who left Warburg

738
00:37:39,120 --> 00:37:41,040
Speaker 4: and they were in their energy department, and they're they're

739
00:37:41,080 --> 00:37:43,680
Speaker 4: raising a seven hundred and fifty million dollar fund. They

740
00:37:43,680 --> 00:37:46,040
Speaker 4: could probably deploy twenty billion dollars. They're not going to

741
00:37:46,120 --> 00:37:47,879
Speaker 4: raise twenty billion dollars. They're gonna raise seven to fifty

742
00:37:47,880 --> 00:37:51,239
Speaker 4: million dollars. That's my point. So part of my strategy

743
00:37:51,400 --> 00:37:55,080
Speaker 4: is to go to my good old friends in Singapore

744
00:37:55,160 --> 00:37:58,040
Speaker 4: and Canada and Middle East and get funding to go

745
00:37:58,080 --> 00:38:00,359
Speaker 4: out and do M and A. And I don't see

746
00:38:00,400 --> 00:38:02,200
Speaker 4: how I could do that in energy, for example.

747
00:38:02,560 --> 00:38:05,400
Speaker 1: Last question for me, so you mentioned that you have

748
00:38:05,480 --> 00:38:07,719
Speaker 1: to start with the nuts and bolts. What is the

749
00:38:07,719 --> 00:38:09,799
Speaker 1: cash that this company is going to throw off over

750
00:38:09,840 --> 00:38:11,960
Speaker 1: the next three, five, ten years, et cetera. And then

751
00:38:12,000 --> 00:38:15,200
Speaker 1: you said people come up with a button to justify

752
00:38:15,280 --> 00:38:18,319
Speaker 1: something that's not. What are the lies that investors tell

753
00:38:18,360 --> 00:38:23,200
Speaker 1: themselves or entrepreneurs tell themselves that cause them to make mistakes.

754
00:38:23,280 --> 00:38:26,120
Speaker 4: They go for the shiny object of the moment. What

755
00:38:26,280 --> 00:38:28,799
Speaker 4: happens to be to go back to the sexy thing

756
00:38:29,040 --> 00:38:31,879
Speaker 4: sexy at the moment, and what's sexy the moment may

757
00:38:31,920 --> 00:38:34,080
Speaker 4: not be very sexy in five or ten years. You

758
00:38:34,120 --> 00:38:38,239
Speaker 4: have to look at what's the real business here, and

759
00:38:38,280 --> 00:38:41,680
Speaker 4: what's the demand going to be over time, and what's

760
00:38:41,719 --> 00:38:44,840
Speaker 4: the supply of that service or product over that period

761
00:38:44,840 --> 00:38:47,040
Speaker 4: of time. And you have just look at it in

762
00:38:47,040 --> 00:38:50,480
Speaker 4: a very elementary, fundamental way like that, and then you

763
00:38:50,520 --> 00:38:54,400
Speaker 4: can predict how much value going to create. Many many

764
00:38:54,400 --> 00:38:58,000
Speaker 4: investors and many many business people, many boards even don't

765
00:38:58,000 --> 00:39:00,680
Speaker 4: even think like that. And it's shocking, really because it's

766
00:39:00,719 --> 00:39:02,720
Speaker 4: so fundamental to value creation.

767
00:39:03,640 --> 00:39:07,200
Speaker 2: I have a completely self interested topic as my last question.

768
00:39:07,600 --> 00:39:09,600
Speaker 1: It's going to be about the shed that you're building.

769
00:39:09,800 --> 00:39:12,680
Speaker 2: No, actually, it was going to be about journalism, which

770
00:39:12,719 --> 00:39:14,839
Speaker 2: is you know, the book and a lot of your

771
00:39:15,640 --> 00:39:21,319
Speaker 2: businesses today have been about technological opportunity and disruption, and

772
00:39:21,480 --> 00:39:23,480
Speaker 2: you have a sort of throwaway line in the book

773
00:39:23,480 --> 00:39:26,759
Speaker 2: about AI and how it's going to mean that many

774
00:39:26,880 --> 00:39:30,319
Speaker 2: jobs in journalism are likely to become obsolete, which you know,

775
00:39:30,560 --> 00:39:34,080
Speaker 2: fair enough, I won't necessarily argue with that, But as

776
00:39:34,120 --> 00:39:38,600
Speaker 2: a thought experiment, what would be your play on AI's

777
00:39:38,760 --> 00:39:42,160
Speaker 2: impact on journalism, Like if you had to do something

778
00:39:42,239 --> 00:39:44,960
Speaker 2: in the journalism space, right now, what would it be?

779
00:39:45,400 --> 00:39:46,400
Speaker 3: I looked at media.

780
00:39:47,000 --> 00:39:49,320
Speaker 4: I looked at it, couldn't find the right thing. I

781
00:39:49,360 --> 00:39:52,359
Speaker 4: looked at a number, a handful of companies actually that

782
00:39:52,440 --> 00:39:55,560
Speaker 4: were doing media ads, advertising in media.

783
00:39:56,040 --> 00:39:57,319
Speaker 3: But I got nervous.

784
00:39:57,000 --> 00:40:00,879
Speaker 4: About what's going to happen from a regulatory front when

785
00:40:01,160 --> 00:40:03,040
Speaker 4: some of the European rules, which are much more stringent

786
00:40:03,080 --> 00:40:05,879
Speaker 4: about the advertising, the cookies and sharing the information, when

787
00:40:05,920 --> 00:40:09,960
Speaker 4: that comes over here, and maybe that business would get disrupted.

788
00:40:10,000 --> 00:40:12,399
Speaker 4: So I get nervous about that. I didn't didn't see

789
00:40:12,600 --> 00:40:13,640
Speaker 4: the right ending for that.

790
00:40:14,520 --> 00:40:15,720
Speaker 2: Okay, can I have the lumber?

791
00:40:16,160 --> 00:40:16,359
Speaker 3: Yes?

792
00:40:16,600 --> 00:40:19,279
Speaker 4: I will, definitely, You're going to be customer number one, Chase,

793
00:40:19,400 --> 00:40:20,200
Speaker 4: I probably will.

794
00:40:21,080 --> 00:40:23,560
Speaker 1: Brad Jacobs, thank you so much for coming on ovlogs.

795
00:40:23,600 --> 00:40:38,040
Speaker 1: That was a bladder my pleasure. Thank you, Tracy. I

796
00:40:38,080 --> 00:40:39,800
Speaker 1: think I know how to make a billion dollars.

797
00:40:39,840 --> 00:40:40,000
Speaker 3: Now.

798
00:40:40,000 --> 00:40:42,319
Speaker 1: I'm going to call up my friends in Singapore. I'm

799
00:40:42,360 --> 00:40:44,960
Speaker 1: going to call up my friends at some Middle East

800
00:40:44,960 --> 00:40:48,520
Speaker 1: sovereign wealth funds, and I'm gonna talk to the people

801
00:40:48,560 --> 00:40:52,759
Speaker 1: that I know who have built incredible software technology for

802
00:40:52,880 --> 00:40:55,399
Speaker 1: the world of physical distribution, and then find a new

803
00:40:55,400 --> 00:40:58,560
Speaker 1: industry to take over. Okay, I got the playbook.

804
00:40:58,600 --> 00:41:00,279
Speaker 2: Now you have to do it, and you're gonna are

805
00:41:00,520 --> 00:41:02,520
Speaker 2: a CIA investigator as well.

806
00:41:02,560 --> 00:41:03,200
Speaker 3: Right, I got it.

807
00:41:03,440 --> 00:41:04,759
Speaker 1: I feel this is it.

808
00:41:04,960 --> 00:41:08,080
Speaker 2: Okay, well great, I'm glad we've solved that. No, that

809
00:41:08,200 --> 00:41:12,360
Speaker 2: was such a fun conversation and it is interesting. Like, Okay,

810
00:41:12,400 --> 00:41:15,080
Speaker 2: Brad has clearly done a lot of businesses, five or

811
00:41:15,120 --> 00:41:17,640
Speaker 2: seven depending on how you count, as you mentioned, but

812
00:41:17,680 --> 00:41:20,879
Speaker 2: there does seem to be this common thread throughout all

813
00:41:20,920 --> 00:41:22,960
Speaker 2: of them, so like a a lot of them have

814
00:41:23,120 --> 00:41:27,280
Speaker 2: been in the physical space, and again, like it seems

815
00:41:27,320 --> 00:41:30,640
Speaker 2: like there is that perpetual opportunity there in that the

816
00:41:30,680 --> 00:41:34,120
Speaker 2: business of moving stuff getting rid of stuff isn't going

817
00:41:34,200 --> 00:41:36,400
Speaker 2: to go away, and Brad was talking about that. But

818
00:41:36,560 --> 00:41:39,479
Speaker 2: also the idea of all of that, I guess because

819
00:41:39,520 --> 00:41:42,680
Speaker 2: of the way it developed, is just so fractured to

820
00:41:42,760 --> 00:41:46,000
Speaker 2: the point and like localized, so that that's a place

821
00:41:46,080 --> 00:41:49,560
Speaker 2: in the economy where there are still opportunities for scale

822
00:41:49,880 --> 00:41:53,400
Speaker 2: and efficiencies. So even though the businesses sort of range

823
00:41:53,600 --> 00:41:56,400
Speaker 2: across a large variety of things, like it does seem

824
00:41:56,440 --> 00:41:57,680
Speaker 2: there is this commonality.

825
00:41:58,000 --> 00:42:00,440
Speaker 1: It's super interesting too to think about. Again, Yes, the

826
00:42:00,600 --> 00:42:04,080
Speaker 1: unequal distribution of technology today, the idea that there are

827
00:42:04,120 --> 00:42:08,359
Speaker 1: some warehouses around the country that are very automated and

828
00:42:08,600 --> 00:42:10,840
Speaker 1: very up to date, and others that have never felt

829
00:42:11,040 --> 00:42:14,400
Speaker 1: perhaps the competitive pressure to need to do so. Or

830
00:42:14,400 --> 00:42:16,400
Speaker 1: even in freight brokers, the idea that there are some

831
00:42:16,640 --> 00:42:20,319
Speaker 1: brokers that resemble giant trading floors and some not. I

832
00:42:20,400 --> 00:42:23,680
Speaker 1: find that to be really fascinating. Also this idea of

833
00:42:23,719 --> 00:42:25,880
Speaker 1: just like, Okay, if you have access to the capital,

834
00:42:26,280 --> 00:42:29,160
Speaker 1: you can get scale from day one. And obviously so

835
00:42:29,160 --> 00:42:31,040
Speaker 1: many entrepreneurs like are what is going to take to

836
00:42:31,080 --> 00:42:33,360
Speaker 1: get scale? Well, in theory, if you have the money,

837
00:42:33,400 --> 00:42:35,719
Speaker 1: you can be big from day one and get the

838
00:42:35,719 --> 00:42:37,200
Speaker 1: best prices from the vendors.

839
00:42:37,360 --> 00:42:39,680
Speaker 2: Yeah, and we have to have what was his name,

840
00:42:39,719 --> 00:42:41,120
Speaker 2: Dick Houston on the show.

841
00:42:41,800 --> 00:42:44,480
Speaker 1: Also, just one other thing that is interesting is just

842
00:42:44,560 --> 00:42:47,320
Speaker 1: this idea that there's some businesses that are very attractive

843
00:42:47,360 --> 00:42:49,400
Speaker 1: but the capital isn't there. And so that comment at

844
00:42:49,400 --> 00:42:53,640
Speaker 1: the end about certain energy assets being cheap but no

845
00:42:53,640 --> 00:42:55,239
Speaker 1: one wants to put up the money for them, like

846
00:42:55,360 --> 00:42:57,799
Speaker 1: someone is going to capture that alphas.

847
00:42:57,640 --> 00:43:03,960
Speaker 2: Yes, except in the media business, I guess there's no hope. Okay,

848
00:43:04,160 --> 00:43:04,920
Speaker 2: shall we leave it there?

849
00:43:05,000 --> 00:43:06,040
Speaker 1: Let's leave it there, all right.

850
00:43:06,200 --> 00:43:09,080
Speaker 2: This has been another episode of the Oudlots podcast. I'm

851
00:43:09,120 --> 00:43:12,200
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway.

852
00:43:11,840 --> 00:43:14,640
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.

853
00:43:15,320 --> 00:43:15,919
Speaker 3: Check out our.

854
00:43:15,840 --> 00:43:18,839
Speaker 1: Guests Brad Jacobs's new book How to Make a Few

855
00:43:18,880 --> 00:43:21,160
Speaker 1: Billion Dollars. You can have the playbook to Make a

856
00:43:21,160 --> 00:43:25,200
Speaker 1: Few Billion Dollars yourself. Follow our producers Kerman Rodriguez at

857
00:43:25,280 --> 00:43:29,520
Speaker 1: Kerman armand dash O Bennett at Dashbot and Kelbrooks at Kelbrooks.

858
00:43:29,840 --> 00:43:32,279
Speaker 1: From our odd Lots content, go to Bloomberg dot com

859
00:43:32,280 --> 00:43:35,000
Speaker 1: slash odd Lots, where we have a blog transcript and

860
00:43:35,080 --> 00:43:38,680
Speaker 1: a newsletter. And check out our discord discord dot gg

861
00:43:38,760 --> 00:43:41,560
Speaker 1: slash odd Lots, where listeners are chatting twenty four to

862
00:43:41,560 --> 00:43:46,080
Speaker 1: seven about these topics, including lots of a transportation channel,

863
00:43:46,160 --> 00:43:48,600
Speaker 1: which I suspect there will be much a much discussion

864
00:43:48,640 --> 00:43:49,360
Speaker 1: of this episode.

865
00:43:49,400 --> 00:43:52,120
Speaker 2: And if you enjoy odd Lots, if you want us

866
00:43:52,200 --> 00:43:55,480
Speaker 2: to record more episodes on how to do due diligence

867
00:43:55,520 --> 00:43:59,160
Speaker 2: with the help of polygraph examiners for the CIA, then

868
00:43:59,239 --> 00:44:03,200
Speaker 2: please leave us a positive review on your favorite podcast platform.

869
00:44:03,239 --> 00:44:04,040
Speaker 2: Thanks for listening.