Brad Jacobs: How To Build a Billion Dollar Company

0:00 So I looked at that org chart and said, this is a messed up org chart, which is great for making money. If you can find something that's messed up, And Easy to unmess up. Oh yeah, there's your money. There's your opportunity to make a lot of money. You've made a few billion dollars. What lessons have you learned about money and spending money and living with money that you wish you knew sooner? Yeah, especially you throw me off a little bit with the question because When you look at the the numbers, the real growth has been through MA, through acquisitions. What's been my secrets on acquisitions? Here's the gist. A lot of people have a rigid

0:33 business plan that's spelled out for many years and that's it and it's very that doesn't usually work. Why? Because life changes. Markets change. Economies change. And if you're rigid, if you're just rigid thinking, you're gonna have things come your way to make money for shareholders and feel, well it's it's nice, it's great, but it's really not our thing. Well that's a bad way of thinking. You said you can get a lot of things wrong if you get the big trend right. What major trend are you most interested in right now? I'm most interested in. 'Cause it is the trend. It it is the number one trend.

1:22 Welcome to the Knowledge Project, a podcast about mastering the best of what other people have already figured out, so you can apply their insights to your life. I'm your host, Shane Parish. A quick favor to ask before we start. Most people listening on Apple Podcasts or Spotify right now.

1:39 haven't yet hit the follow button. If you can hit the follow button now I would appreciate it. The more people who follow the show The better the guest we can get. Thank you. And enjoy the conversation.

1:51 If you'd like access to the podcast before everyone else, special episodes just for you. hand edited transcripts or you just want to support the show you love. join at fs.blog slash membership. Check out the show notes for a link. Today my guest is Brad Jacobs, executive chairman at XPO. Brad is a career CEO and serial entrepreneur.

2:15 With unique track record of starting multi-billion dollar companies. I think he's up to seven of them by now. Which have created tens of billions of dollars in shareholder value. His goal with all of his ventures is to generate outsized value for shareholders by hiring Talented people committed to thinking big. He recently wrote a book called How to Make a Few Billion Dollars, which is a playbook for creating outsized value.

2:39 Now, all of that sounds really simple, so I wanted to sit down with Brad for a wide ranging conversation. How exactly does he do it? Let's get into the weeds. We talk about AI, trends, human nature, mergers and acquisitions, running meetings. what he looks for when hiring, and so much more. Whether you're running a business or working in one, you'll walk away from this conversation with clarity and

3:03 around how to improve your results. It's time. To listen. And learn. Great.

3:19 Kurzwall, who wrote the singularity. is one of your heroes. And you recently met him. I'm curious what you took away from that conversation and what it was like. Well, I did recently meet him and it was like

3:32 Meeting Albert Einstein or meeting someone um on Michelangelo'cause when you look at his Context is wide context. He's looking at The history of the universe. Going back.

3:43 thirteen point something billion years. And how we got here. And then Looking at those trends. And Where are we going? He identifies the most important trend of all, which is

3:54 Homo sapiens. have created technology, created tools. Starting with stone pebbles and over a couple of million years ago and then Fire and then settlements and

4:04 And over the last couple hundred years, so much, so much more, so much more. In the last twenty years accelerating, accelerating. And now with AI, it's accelerating even more. And where's that going? Where's that going is the tools that we've created, the technology we've created is becoming

4:21 more capable than we are at certain of our traits. And Where Able to outsource A lot of our

4:28 Activities. to our own technology. And Ray predicts a singularity whereby Technology becomes

4:37 more intelligent, more capable than humans, and we merge. with technology. That we use so much technology in our own And our own bodies with wearables and nanobots and so forth that and AI and outsourcing our memory and sensory and so forth that That

4:51 you really can't call it homo sapiens anymore because the traits characteristics have changed so much. that will say Homo sapiens has become extinct and there's a There's a new New species and I I think it's

5:01 Probably right. What do you think the benefits of that are and what do you think the drawbacks are? Well the benefits are We should be able to accomplish a lot more. So if you look at us as a Planet. Eight billion people. There's a lot of things we do well, but there's a lot of things we don't do well. Primarily get along with each other.

5:17 and information sharing is not there, resource sharing is not there. I think with Advances in technology. We will be able to distribute resources more intelligently and

5:29 and and uh more uh abundantly and have more resources for more people. And I think uh medicine will be better and science science will be better, and be able to live longer. We'll be able to be more in touch with the way we think and to be able to think more constructively because that's one of the places where it's an area of improvement for humans is we don't Think rationally a lot of times.

5:49 And I think with technology and AI advancements. that we will think more rationally. Nonstop therapy, so to speak. How do you think rationally when you have all this the information coming at you from all over the world? You're emotional, you have big swings. I mean, you've lost billions of dollars in a market cap in a day. I don't always think perfectly rationally. I'm not a per perfect person. I've

6:11 paid attention to the way I think. over the course of my life and I've studied with various people who that's their specialty is analyzing how you think. And uh I did a couple years of Therapy for

6:23 three hours a week for uh for for a couple of years. So I I I have spent a lot of time reflecting on how I think, what my automatic thoughts are, what my biases are, what my cognitive distortions are, and I'm aware of those. And I apply various techniques and tools in the toolkit that you learn from

6:40 cognitive therapy, dialectical beh behavior therapy, positive psychology, et cetera, to To think more rationally and more constructively and more accurately. And I think that helps me in business quite a bit. In business. You need to keep your head

6:53 On your shoulders. You need to be calm. Need to be cool, need to be collected. You need to be dealing with lots of changing s unplanned circumstances. And then capitalizing on those.

7:03 and not being overwhelmed by those. Not being Beat up. But be but utilize what comes in, capitalizing what comes in to create money, to create money for shareholders. So I think the the human capital

7:16 In the in the psychological Uh uh sense. is very very important. So I I'm I I put energy into that. You said you can get a lot of things wrong if you get the big trend right.

7:26 What major trend are you most interested in right now? I'm most interested in AI. 'Cause it it is the trend. It it is the number one trend. Whereby our technology, the software, that intelligence.

7:40 will be able to consume so much information, much more than We human beings can even with hundred billion brain cells. The the power of compu computing is so much greater. And be able then analyze that.

7:53 And be able to spit things out and be able to Eventually I I'm looking forward to the point where Computers become emotional. Where they do have emotion, where they do have empathy.

8:04 Just like we have mirror neurons in the front of our br in the prefrontal cortex. I'd like to see That trend. fruit of materialize where Computers.

8:13 Can feel. Can have theory of mind. Can be sitting here. the conversation with Shane Parish. And and feeling what you're feeling.

8:21 And and feeling happy about what you're feeling happy about and feeling sad about Something you're not feeling happy about. I'm looking forward to that trend a lot. No s saying AI is sort of everybody recognizes AI as being

8:33 a trend, but you've spotted several trends well before people recognize them. And you were way ahead on the AI curve too, as I understand it. How do you spot the those trends before they become mainstream. Well I do spend a lot of time thinking about trends.

8:50 I look I spent a lot of time thinking about the wider context of things like Okay, here's a situation. What's the context of that situation? What's its origin?

9:00 What's his present conditions and characteristics? One of the ways it could go. And what would be the catalyst? Make it go right or straight or left. I I intentionally

9:10 think about trends quite a bit. Because in business in the business world You gotta get the major trend right. You've gotta get the major trend right. And that's my Main business mentor may he rest in peace, Ludwig Jesselson used to say. You can mess up a lot of things, but if you get the main trend right.

9:25 You're gonna make a lot of money. And conversely If you don't get the main trend right. You're swimming upstream, you can do a lot of Other things, right, but

9:34 You're not gonna make a lot of money. So I I intentionally spend time thinking about What's the where does all this fit in and where could it be going? What's your research process like? I like people and I like picking people's brains and I'm shameless about asking people their opinions.

9:48 Yeah, I liked it. Be a student. More than a teacher? I find a lot of people make the mistake as they get older or they get more successful. They they think they know everything and they start teaching all the time. I'm sharing through the book I wrote and through podcasts like this and so forth the few little things that I think I have insights that I can give back to, but I absolutely view myself as a student of life.

10:09 I'm I don't view myself as As a guru who's figured it all out. By a long shot. And I think if you keep that That element of profound curiosity.

10:18 of really interesting in being very interested to learn and being involved with the sensory experience, be involved. in the intellectual experience be involved in an analytical capabilities. I think you can learn a lot more and you can see trends that otherwise

10:33 You don't see it. Just in it. And you're living it, but you're not seeing the trend. You just kind of Going along. A lot of people

10:40 who reach your level of success, sort of outsource a lot of this work to other people. And by that I mean, um do research on this, come back to me, give me these points. But you seem very hands on, in the weeds, very involved in the detail. Why is that important to you? I do both, Shane. I do have a team. that researches things for me. But I also I sho I like to roll up my sleeves and get into it myself.

11:04 I like to find even like when I do M and A. So uh you know, my teams that I've led have done about five hundred acquisitions. I've been involved in those acquisitions. I I I get into the Details of What are we buying? And to buy those five hundred companies, we looked at

11:20 thousands and thousands of other companies. That we didn't buy. And I and I I love the process. I love studying each company. Figuring out. How'd they get to the point where now there are millions or hundreds of millions or billions of dollars of

11:33 They started from scratch and how do they do that? It's like a miracle. It's fantastic. I'm I'm very impressed. And excited and enamored with entrepreneurs and companies that have created huge growth and huge value.

11:47 And I want to understand that. So I wanna get into the detail of it. I I wanna pick their brains. I I I see a big value in Asking lots of questions, people. Now today You're the one.

11:56 Asking questions and I'm answering, but normally it's a role reversal. Normally I'm asking a lot of questions. If you go into a management meeting, I'm I'm usually asking lots of questions. What have you learned about asking questions that you wish you knew five years ago? I take questioning from the Therapist. So I wrote in the book. That

12:13 The only time my life that I've been depressed, but I was really depressed was In the mid two thousands. When I had Step down from being CEO of this big company, United Rentals, and now I didn't have anything to do. I didn't you know I was I was doing some art.

12:26 I was you know, studying art and buying art and I was doing things with my family and so forth, but I didn't have a business. And I learned from that that Everyone has their own thing that makes them excited. Me is running businesses. I've I've been a CEO since I've been

12:41 twenty three years old and I like being a CEO. I really like that job real a lot. Now I wasn't a CEO. And I felt a big gap. I felt I felt depressed. I was down. And had a lot of unconstructive thoughts and inaccurate thoughts and so forth.

12:54 And that drew me to s to meeting a lot of Fantastic psychotherapist. And I mean fantastic at the top of their game. So There was a psychotherapist in uh New York City.

13:05 Called Albert Ellis. You died about. Ten, fifteen years ago. And he had formed A school of therapy called

13:13 rational emotive behavior therapy R E B T. But in short it was cognitive therapy, it was cognitive behavior therapy. He together with another psych psych psychiatrist actually, Aaron Beck, who's Family and friends call them Tim.

13:26 I got the privilege of meeting him too and spending time with him and his family. Tim Beck or Aaron Beck and Albert Ellis were the co founders. of cognitive therapy. And I find that Therapists.

13:37 Have of all the different professions. Are the best at asking questions. And the best of Getting a person to relax. Getting a person at ease.

13:47 And to open up. And what I learned from studying those psychotherapists first is you need before you start badgering someone with questions and inquiring and asking them all these important things Sometimes personal things, sometimes intimate things, private things. You need to create Need to create an atmosphere.

14:03 You need to create an environment that's a safe place. That's a zone where You're it's okay to be vulnerable. It's okay to Say what you really feel. It's okay to take off your mask. And show who you really are warts and all.

14:17 And that's really, really important. And to do that You need to be listening. And and I learned from studying them that The most Maybe the most maybe the single most powerful thing you can do in a

14:29 relationship, whether it's personal, whether it's professional, is to Give someone your One hundred percent like you're doing now. You're giving me one hundred percent of your attention. I can see it, you're You're looking at me, you're listening to me, you're actually paying attention to what I'm saying.

14:42 And that feels good, by the way. Yeah, that's that's making me put a little pressure on me to perform better. But You're doing something powerful. You're you're giving me your attention. You're giving me a hundred percent of your attention. And I find with therapists that's that's their

14:56 Their little s that's one of their tricks, one of their skills one of their techniques is you have your session for Forty five minutes or two hours or whatever it is. And during that time, they're all yours. They're all listening to you and and they've got all their attention on you. And

15:11 That has a certain effect on the person speaking. And secondly, They're not being judgmental. Mm. So they're not They're going with you. In other words, they're not

15:20 They're not disagreeing with you without first Finding a way of agreeing with you. Joining Than leading.

15:29 Validating Then disputing. or changing the way you're thinking and say, gee, is there a better way to look at that? Is there another way we can look at that, be more constructive? Before doing that, before that disputing, before that changing, that transforming. They're first joining, they're they're showing that they understood you.

15:46 They listen to you. They got you. They got what you said. Message received. And I find that's really powerful in business. Whether you're dealing with Employees.

15:54 Whether you're dealing with Someone whose business you're trying to buy. Or you're dealing with a vendor, or you're dealing with a Investor or An upset customer.

16:03 It's a it's very good to do that. It's very nourishing and nurturing to Give someone 100% of your attention. And listen to them. non judgmentally. I I call it non judgmental concentration.

16:17 I I think I made up that phrase. Maybe I didn't and I forgot and I should have attributed to someone else, but that's a phrase I use, non-judgmental. Concentration when you're Really taking all your consciousness in giving it to someone. And And not

16:30 Judging them. But going with it, trying to get into their way of thinking, their their way of feeling even. So not just What are they thinking?

16:39 But how are they feeling? So what's the emotion that's underlying that? And and I I use that. I use that quite a bit. And you in the book

16:48 I have a chapter on how to have an electric meeting, how to run an electric meeting. Which means a meeting that's powerful. A meet a meeting that Everyone goes away exhilarated.

16:59 Everyone goes away with Lots of things to do that can create a lot of value for the shareholders. Not just one of these whole home meetings. And and an element of that meeting is Everyone

17:11 in the meeting shuts off all their devices. And concentrates, concentrates, non-judgmentally, non-judgmental concentration. On the one person Who's speaking at a time. No side conversations, no talking over each other.

17:25 One person speaks the time, but everyone in the room gives them all their attention. It's a really powerful thing. I I like that a lot. It's sort of the secret to our podcast in a way, which is I wanna see the world through your eyes. I don't have to agree or disagree. That's not my job as I just wanna see what you see. Think what you think, smell what you smell.

17:46 And then that way I can truly understand where you're coming from. And I think that so often listening is transactional. In the sense of I'm waiting for you to stop so I can just say something or I w I have this point. You don't understand it. So I'm not really listening to you because you're talking about something else now. I think it's one of the biggest reasons we miscommunicated. Yeah.

18:07 Is the work with the uh the psychotherapist, is that where you learned about rearranging our brain and controlling the mind? You know, from my my main hobby since I was a teenager's been Meditation and various forms of meditation and And from meditation into learn self hypnosis.

18:32 And then and then from there I learned all the uh mindfulness and the positive psychology and cognitive therapy and so forth. So I've mixed and matched a lot of different schools of thought. And customized it. For me. my own personality and my background and

18:45 My individuality. So it's not just one thing. I've had a many different influences that have created the way I look at life and the way I I deal. with reality. And a lot of that's was my education when I was a kid.

18:58 was I studied music. I studied music and math. But in music. It is a lot about relationships. Unless you're a solo performer and I was not. I like playing a group. I like Like a a band. I like playing with other people.

19:10 Interacting with the other folks. is part of the magic of making really great music. That theft's had a big influence on me too. I I define myself, I Self identify as a as a musician. more than a business person, which you might find odd.

19:23 Because I've Spent a lot of time building big businesses and running large Enterprises, but When I think about myself, I I think about myself as a music musician Hmm.

19:34 Happens to be doing a lot of business. And has done well at business, but I I feel like a musician. And by that I mean my sense of sound is the dominant sense. And I'm I listen very

19:47 I listen to sounds. I listen to my heartbeat. Listen to my breath. I think the sounds in this room going on right now. I I Suffer, quote unquote. quotes on it because I don't consider it suffering, I consider it fantastic.

19:59 Uh Tinnitus. Where where you h have this ringing in your ear. From when I was a teenager. Probably from listening to music too loud.

20:08 And I have right now. I'm hearing very high pitched sounds. I love it. It keeps it interesting. It's my friend. It keeps me in tune. They sometimes they get louder, sometimes they get softer. Now some people have tinnitus and

20:21 They And I might be mispronouncing that, but you know what I'm talking about. Yeah. Yeah. And they say, Oh my God, it's a terrible thing, it drives me crazy, and they get all upset about the thing. I have just the opposite attitude. I feel

20:33 I'm lucky to have that. I'm I really am lucky and I I wouldn't know what life would be like. Without it. And

20:41 That's part of being a musician. Part of part of being a musician is Embracing sounds no matter what they are. No matter what they are. And that's that's the reality of the moment. And you should

20:53 be in that reality and and and go with that. What's the relationship? If you had to guess between music, math, and business. A lot. For me it is a lot.

21:04 So Let's start with the business and then that'll show how those other two things relate to it. Business is about making money for shareholders. At at court. Yeah, the report card for a business.

21:16 Is You take money from Other people, the form of equity, the debt you pay back, but the equity is dear and People invest equity into the business. And now you have to give them back that.

21:26 money when they sell their shares. But much, much more money than they Gave you. So In my companies we've been

21:34 fortunate that we've been able to give back thirty two times the money in one. Another company is over 150 times. So really really large, large, large returns like over the Top. Unusually high.

21:46 Returns. That Wasn't By luck. That wasn't

21:51 Um coincidental. If it was coincidental, it wouldn't happen. Five times in a row in in in large amounts. That was because there was a playbook. That's because there was a a method to it. And that method

22:03 Yeah. incorporates many, many different elements and I talk about quite a bunch of them in the book. That Together. give you an ability to create

22:12 what we call alpha in the business world, which is not just beta, which is The market's going up, so you're going together with the market. But alpha which exceeds the beta. Exceeds the overall uplift it.

22:22 Pretty much. All boats are lifting by the same tide. And Part of the part of the ingredients. To that.

22:30 Formula to make Huge, huge returns for shareholders. Involved. Analytical thought? Uh n careful analysis of numbers is all the math.

22:41 Uh making s order out of disorder, trying to see where how does this all fit together. And see the relationships between different things. How to reduce things to simplicity because A great mathematicians reduce very complicated things to

22:57 A formula, for example. Yeah expressed with Just a few hand strokes. So that's math. That's mathematics. That's the beauty of mathematics is Seeing the patterns.

23:08 Seeing the seeing the s the W how to make sense out of this. And On the music side. It's

23:16 Being able to improvise,'cause my training was originally classical. But then I had the fortune to study with Um uh African American musicians in in um in Bennington College. Built for graves.

23:29 Bill Dixon and Part of that whole training was to be Spontaneous. And to be

23:36 Improvising. And to be in the moment. And there is no wrong note. If someone plays a note That's just a new note.

23:44 It's not the wrong note. It's like okay, we changed key. Let's go with that. Come on, let's get going. So So that ability to Go with the flow in music. You need to have that in business shape.

23:57 A lot of people have a Rigid business plan. That's spelled out for many years and that's it. And it's very not non-flexible. That doesn't usually work.

24:09 Why? Because life changes, markets change, economies change. People change, results change. you get opportunities that you hadn't even thought of. At the beginning.

24:19 So you need to you need to Improvise. You need to capitalize on that and to Make money from that. And if you're rigid, if you're just rigid thinking. If you're not a musician.

24:29 You're not a musical business person. You're gonna lose opportunities. You're gonna you're gonna s have things Come your way to make money for shareholders. And feel well it's it's nice, it's great, but it's really not our thing. That's a bad way of thinking.

24:42 I I'll share with you one of the best business deals I did in my life was um I bought in two thousand fifteen. A less than truckload. trucking company called Conway.

24:51 It's based in In Arbor, Michigan. It's a few billion dollar deal. It was a pivot. Because this was a hard acid business that had tens of thousands of trucks and drivers. It was a acid heavy as acid heavy businesses.

25:03 How's you gonna get? With fixed costs and Depreciation and amortization was n was not an asset light brokerage business, which is why how I Started it. XPO is as an asset light.

25:13 non asset based business. But here was an opportunity. To buy something. Really, really cheaply, at a small fraction of what It was worth and even a smaller tiny fraction of what

25:25 I knew we could make it be worth within a few short years. This is a company that had a lot of excess overhead. The organization chart was not Mathematical. Going back to Symmetry and

25:36 Formula. Things that relationship make sense. I like to take And I love org charts. I just love to geek out on org charts.

25:43 An org shard should be pretty. Or chart should be simple. They should be elegant, they should be geometrical. They should not be really complicated like You took some spaghetti and threw it like an abstract art on a canvas.

25:56 This was this was this is a bad orcsard. They're not going to be able to Three things of the s three different HRs and three different IT organizations and A lot of duplications and It just didn't make any sense.

26:08 And heavy heavy on the non revenue generating top part of the organization, which should be the lightest part of any organization. The heaviest part should be parts of the organization that make money, that generate revenue, that you're close to the customer, that generate sales.

26:22 So I looked at that org chart and said This is a messed up org chart, which is great for making money. If you can find something that's Messed up. And Easy to unmess up.

26:35 Booya, there's your money. There's your opportunity to make a lot of money. And that was it. Was just like I got so excited about the opportunity. Take this company and I saw a way we could significantly grow the profit margin of the cash flow.

26:46 That I pivoted. I pivoted and uh go ahead and did the deal. I got beat up real bad. by the market, they said oh it's a change in I said, Give me some time. And I remember

26:56 I remember Eli Gross. who now runs investment banking for Morgan Stanley, but at the time He was covering me XPO as a transportation. Uh banger.

27:05 And He said, You know, you're gonna be in the doghouse here for a little while because it's a pivot. And markets don't like pivots. But assuming you're right. And I know you have high conviction.

27:15 And you deliver the numbers. Over time you're gonna be a hero here. And everyone's gonna understand what you did. And fortunately he and I were right. And You look at that deal.

27:24 Even though it was a pivot, it was a change, it was an improvisation. We bought it for about Three billion dollars. Roughly half of it was equity. So really we bought it for a billion and a half dollars plus With some leverage.

27:37 Today it's worth Something like fifteen billion dollars. And that's after Having taken out Many like

27:45 five billion dollars of net cash from it. That's after selling off five hundred fifty million dollars of the truckload business. That's after taking its warehouse business, its supply chain business, which was called Menlo.

27:58 No subsidiary. That was after taking the brokerage business and putting that with our RXO brokerage business. So This was the gift they kept giving Conway. It's been an amazing, amazing, amazing ride.

28:10 And the returns it's been a I can't do it in my head, but something like a twenty bagger, fifteen bagger, it'll be a huge, huge return on Invest your capital. And uh had I not been trained as a musician.

28:22 And a mathematician. I don't know that I would have saw it, Shane. I don't know if I didn't have the mathematical skills. I would have been able to see Okay, this is a mess.

28:32 But we can make it clean. I don't know if I would have been able to have the Courage. To improvise. And to change from what the the script was.

28:43 for something that I that I had a high conviction would be very, very lucrative for our shareholders. And in business. The bottom line, the report card. Is

28:53 How much money did you generate for your shareholders? That's the that's the one it's a it's an examination with one question on it. It's How much did you make your stockholders? How much money did you make for your stockholders? How much How much bliss did you give to your investors in terms of

29:08 return on on on their capital they invested in you, they trusted you with. You're a fiduciary in business. You're you're a you have a Salom Sacred. Obligate responsibility.

29:21 Where You're taking other people's money. Debt and equity, particularly the equity. And you're the custodian for that. You're a custodian of it.

29:29 Temporarily. Using their their money. And your job is to Multiply that. They have a thousand other places they could put that money. They picked you.

29:39 Yeah. They picked you. Now you've got a big, big responsibility. And I think the The training of a mathematician The training of a musician And then all these experimentations I've done in

29:50 Meditation and therapy and so forth. I think that's been What largely explains, at least as as far as I can understand. Why my companies have created so much alpha. I have so many rabbit holes I wanna go down there. I I think the opportunity hiding in complexity is really interesting because The way that I think about this and correct me if you you see it differently

30:10 His bad ideas can easily hide in complexity. But they can't hide in simplicity. What's your reaction to that? I need to digest it. My immediate reaction is yeah, I I think I get that.

30:24 Because when it's well when so so I'll go back to that organization chart that I saw at Conway. Was just a mess. It's just like wow. It's all over the place. Triple dotted lines. Squiggly lines.

30:34 Yeah to have different colours and different s like that's not a real elegant word. Yeah, I I think I see what you're saying. In that you could hide inefficiencies. As opposed to when it's a Clean. Organization chart.

30:47 Everyone's got clear KPIs, key performance indicators, everyone has clear metrics. It has clear goals. And the compensation is tied to that. And people rewarded for achieving those goals. Yeah, it's hard to hide. The the other thing that I thought was really interesting is is you brought up the leverage point. How do you think about leverage and debt and employing it and

31:07 At what point does it become too risky? Uh and at what point do you think of future opportunity costs, you you mentioned sort of taking advantage of whatever the world brings. But it if you take on too much debt. Uh at now for an acquisition.

31:22 You're reducing your ability To adapt in the future. Should interest rates rise, should uh a company become available that you really want, that's a dream that wasn't available when you took on all the debt. How do you think about that? That was Zen Buddhist approach to debt. Not too much, not too little.

31:39 I don't think it's an optimal balance sheet if you have no debt. Because you can improve the returns by shrinking your Your your share count. Because you have fewer shares.

31:49 So the same amount of returns is is greater per share except. your return so I think it's good to have a little bit of leverage. I don't think you should have a lot of leverage. Particularly in today's world. I don't think you should have a lot of leverage because that's significant geopolitical risk.

32:04 the geopolitical risk in the Middle East. In Ukraine. In Taiwan. There's in United States politics is very volatile. So there's a lot of things that Could go wrong.

32:13 Real quick. And and uh a kind of shock to the system. Would would hurt companies that have too much debt.

32:21 Because business would slow down. Look what happened during Covet. If you were very highly levered during Covid, if you had way too much debt. And then everything slowed down and your revenues went down. You might not have been able to make your interest payments or your debt repayment payments and Could have gone bankrupt. Companies don't go bankrupt unless they have too much debt.

32:38 You go bankrupt from not being able to repay your debt. So I don't think you should have too much debt. In my new company that I'm former QXO. We're gonna have I think our target a healthy target should be one to two

32:49 Turns of debt. By that I mean. We take our free our our EBITDA, which is a measure of our cash flow. And and we say. Well let's have one or two turns of that.

32:58 So for EB DA ends up being, for instance, in a period of time, for example, a billion dollars. Well, let's have one or two billion dollars of debt. And then that's that's a comfortable amount. Not too much more now. You could have

33:09 For short periods of time. You could lever up. Like when I bought Conway. We levered up to about Four times, a little more than four times.

33:17 But we very quickly sold off I mentioned that truckload division. For five hundred fifty million dollars. Boom, we pay down a whole bunch of debt right from that. We generate a lot of free cash flow. We took that free cash flow instead of Doing more acquisitions, we pay down debt.

33:30 So you can Get your leverage under control by One of two ways. Buy him. proving your profits by increasing your Ibadah.

33:38 Or with paying down your actual Gross amount of debt. I I think you can manage that and That's a that's something a good CFO does. You've said in the past that you need to be liked and loved, and yet you're quite contrarian at times in your approach to things. How do you reconcile these two things?

33:54 I think you have to be contrarian. I think if you want to Make a lot of money. In business. You can't just be

34:01 a conformist to do at what is in in fashion and what everybody else thinks. If you're gonna do what everyone else thinks you're gonna get returns that everyone else gets, which is by definition average. So my companies have not made average returns. my companies have outperformed their indexes Not by one or two hundred basis points, but sometimes by

34:21 Five or six times. What the index was. So You have to do you have to think differently and take things that are from a different point of view. So one of my favorite investors in my companies has been Orbis. uh out in California in and in Bermuda.

34:36 And their contrarians. They're willing to Make a bet and a significant bet. If they have a high conviction about a trend or a company that the market's not seeing.

34:45 Something's out of favor. But the market doesn't understand something about a company. Maybe a company's not studied enough, it's not covered enough. maybe management's not good at communicating their story and and it's dislocated the price is dislocated. And you can get a real good value by buying those shares.

35:01 And then being patient. playing it out the cycle and make real good returns. And I've seen them do that With my companies. When Something happened place that

35:10 made us uh a cheap stock for for a short period of time. Boom, they came in and they bought a lot of shares and wrote'em up and then sold in there we're really high. I think that contrarian value approach to investing to business Is is profound.

35:23 I think that's important. And I remember I remember when I sold my first company, Amarx, my old brokerage company.

35:33 We started a company in nineteen seventy nine. Bunch of Broke scrappy kids. And we're in the right place at the right time. And uh

35:41 Iranian And the Shah kicked out and Khomeini came in and they took four hundred hostages and and the oil prices went way, way, way up. So it was a great time. It was sad time for the world. It's a lot of lot of chaos and prob problems, but it was really good to get in the oil business because oil business was really volatile and some young rippers snappers like us could come in and be taken seriously by Exxon and Mobile and Texaco and Shell and Gulf and BP and all the customers that became our big customers over time.

36:08 We built that business up over four quick years. To about little under five billion dollars in brokerage volume. So it's That was really big rapid, rapid growth chart.

36:18 Yeah, good team doing that around the world. And then I sold it. And I wanted to start a new business. And I wanted and I was ambitious. I was single, I wasn't married, didn't have kids.

36:28 I could take risk. I could afford to do that. I was remember speaking with my My uncle Howard. And uh May you rest in peace, he's long, long passed away.

36:38 Uh and Course, my Uncle Howard was born in the Nineteen twenties. Maybe in late late nineteen teenage. And

36:46 Grew up in the depression, obviously. And uh during world during the World War Two and so forth, and it was very tough times. So it's very c you know, he grew up in a time when there's a lot of emphasis towards being very frugal.

36:58 and very risk averse. He became an accountant and worked for the government. And I remember talking to him. And saying Yeah, I'm gonna I'm gonna start another company. Instead of being an oil broker I'm gonna I'm gonna go to the I'm gonna go to the adult table, instead of the kitty table.

37:12 I'm gonna I'm gonna be an old trader. Because I've been I've been making all this money for my clients Where they're making three, four, five dollars a barrel and I'm making five or ten cents a barrel. Of course I had no risk. But they were taking positions.

37:24 Say now I'm gonna I'm gonna put my money where my mouth is. I'm gonna put my money into into a bank. I'm gonna get a letter of credit. I'm gonna actually buy and sell as opposed to just broker.

37:33 You say, Oh, Brad, don't do that, don't do that. You should maybe take a small percent of your savings and put it into your new business. But take the vast majority of your money and just tuck it away just in case the next thing doesn't work out. And

37:48 Fortunately. I overruled my Uncle Hard. I'd go with what he said. I did exactly the opposite. I took a completely contrarian position. Where I took I think it was like a hundred thousand dollars or maybe at most two hundred thousand dollars. And I tucked that away.

38:02 I took all the rest of my money. I deposit it with Bonk Parryba. Now it's B and P Perry Bar. Back then it was Perry Bar. And they gave me a

38:11 billion dollar line of credit. And I swung for the fences. I I use sometimes up to nine hundred and ninety million dollars that line of credit. Doing Counter trade deals doing

38:22 pre finance deals, doing barter. Doing processing deals. Deals that I they were very complex, going back to the math. Very very complex. But

38:31 organized. R I knew what I was doing. And sometimes people would look at it and say Well, there's a lot of elements to what you're doing there. You're buying it, you're shipping it, you're refining it, you're hedging it. There's a lot a lot of moving parts there. Said, yeah, but I understand each one of these parts. And it's just math to me and I actually feel this is low risk.

38:49 This is basically just Execution risk. And I'm comfortable taking on the executioners part of it. I don't have Market risk. Even though it looked like I did, but I really didn't.

38:58 And and as a result of not taking his advice and taking contrarian position and having The courage or the guts, the The strength to believe in what I wanted to do. That I had a thought.

39:09 And I have the courage to say, okay, I'm gonna run with this thought. I'm gonna go with this, I'm gonna bet on myself, I'm gonna bet on this idea. We built a really nice oil trading company and and did very very, very well for for ourselves and for our shareholders. Where did that confidence come from? Well, I don't know. Probably confidence comes at a young age, I would think.

39:26 So when you ask a question like that, you know, you normally start thinking about like what did your mother say? What did your father say? Yeah. So if if I had to think about what did my mother say, what did my father say, that was Very uh Transformational. the first things that would pop my mind are with my dad.

39:42 Who I loved and I had a lot of respect for and he was a great dad and a very honest person and a Who's a very dedicated Good provider for the family. But he was very uh very uh blunt in what he said. He wasn't very um diplomatic what he said. He just said what he what he really thought.

39:57 And I I remember one time When we were doing we had been doing an errand. We're driving home. And he was in the driver's seat and I was in the passenger's seat. We're at a stoplight.

40:08 And my father turned to me. And say and he was a big guy with a low voice and you know, big laugh. And and said, Bradley and My mom and dad were the only people who've ever called Bradley, but.

40:19 Uh anyone knows me calls me Brad, but is it Bradley? It's really good that you have a Really good personality. Because you're surely not gonna get anywhere with those looks. I laughed real, real loud. And It that moment was a

40:34 Was a deep moment for me. Because On the one hand I was crushed. Just like thirteen years old.

40:41 You don't know whether you're good looking or ugly when you're thirteen years old. You just are. You just you you just are what you are and you just don't even think about that. But the message I was getting from my father was You know, I may not be such a good looking guy. Okay. On the other hand The other message he was giving me was

40:55 But you have leadership skills. You have personality, you have charisma, you can You get people to follow you. You can become the president of your class, you can become your group leader, you can Be the the leader of your band and so forth.

41:07 You can be president of the student council. And somehow or another, despite your You're what he considered b not ha pretty appearances, but not beautiful appearance, you were able to Be a leader. and accomplish things and get stuff done and get form teams and get people. So I think

41:22 In a very very very paradoxical kind of way. My father insulting me. On that. Uh

41:31 Give me confidence. It gave me confidence of Okay. So maybe I don't have Great all American good looks.

41:37 Who cares? I've got something else. I've got something in terms of being able to to lead. So maybe that that helped give me confidence because that's that's a an experience that I've relived many times over my life, my father'cause it's a big deal what your father thinks of you, what your mother thinks of you.

41:52 On my mother's side, If I had a thing. What was something that gave me a lot of confidence for my mother? Okay, so so my mom passed away about Ten, eleven years ago.

42:03 And You know, from the book, one of the questions I like to ask people'cause I learned this from Marty Seligman Yeah. Father of positive psychology is What's uh

42:13 What's the happiest moment of your of your day as opposed to how did your day go? And Just have a little different angle to that question. And We like to be validated.

42:23 We like to feel We're appreciated, we're recognized, we're understood, we're approved of. Particularly from our parents. And My mom was was

42:33 On her deathbed. And My brother and sister and I We're hanging out. on her deathbed for

42:40 A good couple weeks. And I don't know if he's been around people who've who've died, but you know, they they're sort of dying and then suddenly they wake up and Like talking to you like nothing's going, no no problem. And And then they lie down again and start dying again. And they go in and out and it's kind of half dying and half not dying so forth.

42:56 And My mother'd been lying there and that breathing funny when they're when they're dying. It's like really strange way of breathing. It's not normal way of breathing, irregular breathing. And then just then not breathing for periods of time and it's just a very bizarre experience, death. And You never we didn't quite know whether this was it. Like we're never gonna talk again, she's done.

43:16 And She suddenly like sat up. She looked All three of us in the eye. And said

43:23 I'm really happy each of you turned out so well. Oh. And smiled with a with a mother's love. And And then just kind of

43:31 Gracefully lie down? And continue the dying process. But that moment. That might be the happiest moment of my life when When

43:39 My mother, my mom, the the person who's Right from day one. Even before day one. Nine months before day one.

43:50 Approved of me. And uh validated me. And And gave me a stamp of approval. And uh that's given me confidence, even though that's later in life.

44:01 That gave me a boost. That was right at the beginning of starting XPO Logistics, which of all the different companies I've started, that was the one that was the The biggest so far, the most most Successful.

44:11 So I would say that confidence Later in life came from that boost that my mother gave me of Just approving of us. By the way, I've learned something from that. I've learned something from that. And I try to learn from all these things how I can apply this to business. I'm a business person.

44:26 I'm trying to make money for shareholders. That's my goal in life. So all these things that I'm going through life, learning about I'm then trying to take them. and apply them to business to make money for shareholders.

44:37 So what did I learn from that? I learned that the relationship between A parent, in this case my mom. And me, in the other example, my dad and me. It's a real important experience. It has a big

44:48 Influence on the person. With the authority figure. Thanks. About the person. And when you're in business

44:55 Particularly if you're the CEO. You're the authority figure. You are kinda like the dad. You're kinda like the mom of In my case, 150,000 employees. And You have to be careful what you say.

45:07 And it's not just It's not just what you say, Shane. You can't just be You can't fake it and and and If you

45:15 don't like somebody disagree with somebody, like say, Oh yeah, aren't you great?'Cause'cause people are smart. People realise when you're BSing them. They just know that. They know when it's phony. And they know when it's real too.

45:26 So what I've learned is You've got to rearrange your brain, going back to the book. You've got to rearrange your brain, your way of thinking. So that You are positive about people. There's nobody's all good and nobody's all bad.

45:39 Don't I know this? And If you can Train yourself to See the real good in someone.

45:46 And to reflect that to them. And to make sure when you're doing The change part. the improvement part, when you're giving them constructive feedback of how they could be Doing a better job.

45:57 Do that second. Don't do that first. First thing is be like my mom. And say You know. I'm just so happy how how well you all turned out.

46:06 That that say that first. You know, when when I do performance appraisals, when I do performance ab bu reviews my direct uh subordinates, my my reports. My direct reports. I always start out with the positive stuff. I don't start right off with Okay, here's some things that you're messing up that you need to be doing better.

46:22 It's important to have that part of the conversation too. Because You need to help the person Achieve more and do better. But you want to start the conversation with

46:31 I really want to congratulate you for X Y Z. I really want to appreciate. I was I wanna express my appreciation because You've done one, two, and three. But it's gotta be sincere. It can't be

46:41 Phony balloony. False flattery. That is like you're better off not saying anything. And do then giving Phony compliments.

46:48 But You should y I try to rearrange my brain so I appreciate a person and say, Well Why did I hire this person in the first place? What did I love in this person? What did I admire? What did I respect? What did I what really Got me made them real high in my estimation.

47:02 And then Translate that to okay. How is that materialized in what they've done and what concrete things have they done. Not have

47:10 compliments that are just like general compliments, but have very specific concrete complements of You know, you did this, this, and this. Kudos. Chip of the hat.

47:19 Good good job on that. And uh I I it goes back to the Psychology of validate. Then dispute.

47:27 Join then lead. I apply that to business. I do that with with customers. In in the world of business You know, we've had millions millions and millions of customers

47:37 They're not always happy because oh we're not no service provider's perfect. Once in a while you mess stuff up. And you have a you have a difficult conversation with a customer. Maybe they're not trained in rearranging your brain, and they go right into the insults and they skip the whole part about. Hey, we really like what you were doing here, they just go right to Darn it, you've been late on this, or you've been damaging that, or

47:55 Your invoicing is messed up or whatever it is. And What I learned from all that The answer to your question is I've got to empathize with that.

48:05 I've got to first underst I have to put my Mind in their mind. I've got to put myself in their shoes. I've got to I've gotta say

48:14 I've got to really un I gotta picture clearly how much What we did messed up their supply chain or cost them money or Cost someone a job or whatever, or just cost them an annoyance. Or just made it difficult shoot up their time or

48:26 And and and made'em frustrated or whatever. Whatever I have to figure out. What's upsetting them? Going back to Were they saying? And what are they feeling?

48:34 So I I've got I've got to get in tune with how they're feeling. And I've got to Show them That I've heard them, I've felt them. I've both heard understood them.

48:44 Uh what they're saying. Felt the emotion that they're feeling in. And and that I I get that. And that And then I'm I I'm I have a

48:53 An action plan. To solve it. That is a sequence to all that. I like your human centric approach to this. There there's a lot of people who sort of take for granted maybe positive feedback. And so they offer

49:06 Uh negative only. feedback to the people who the who they work with. Is that a blind spot, or what do you think of that? I think it's a mistake. I think it's a mistake. to give only positive feedback or only negative feedback.

49:19 So for example, right now, I'm in the middle of performance appraisals. And Where each person Is writing. Three things.

49:26 That they're really proud of that they've accomplished in the last few months. And that they really feel good about and they're It's definitely a A plus, not a negative. But also three things that

49:37 No, could have done better. Or we will do better going forward. Things that we didn't quite achieve that we hope to achieve. So it's a balance. It's three good things, it's three bad things.

49:46 But when I run meetings I like to make it like an Oreo cookie. I like to make the good stuff. The negative stuff, but then end on the good stuff. It's very important how you end a meeting.

49:57 Uh for for for whatever reason psychologically, how you end the meeting makes a big difference in how that person leaves the meeting. So ideally Even if we've had a tough meeting. We said, Look.

50:06 These numbers are in the red. They're not in the black. These numbers are down. They're not up. And we need to up our game. And here's our action plan and Here's how we're gonna hold ourselves accountable and here's how we're going to

50:17 tinker with compensation in order to reward people for doing better and to Not and take hit their bonuses. And maybe eliminate their bonuses if they don't get better fast. Those are tough conversations that that you have to have. But I don't like to end on that.

50:30 Yeah. I like to end on Exercises along the lines of Having everyone in the room. Okay, now we've done all the all the all the tough stuff. We've worked hard on the business. Okay, now let's Put that aside.

50:42 Take a breath. Now it's just Talk about Who I'll ask you to personally I'll go around the room. And I'll say

50:51 Tell me some so we've just been meeting for two hours. We've been working hard. Yeah, well some We identified some Really important problems we need to solve. And that if we solve them.

51:00 we're gonna create a lot of money for our shareholders. So good job team. It was tough, but good good job. We were like through a good rigorous process. And you worked hard. And and a lot of A lot of imperfections came up. During the meeting and that was was humbling in a lot of ways.

51:14 But now I want to ask you something. After working two hours collaboratively in a meeting like this. Difficult meeting. Whose star went up and why? Who said something?

51:23 That They maybe already held him in high esteem. But you even you hold him in e even higher esteem now as a result of The way that they thought their thinking process Or maybe the elegance and grace with which they expressed a difficult subject.

51:39 Or The way they tackled something from an innovative way. Someone who contributed to the magic Of creating alpha, of creating money for our shareholders. How did they do

51:49 They handle the situation a of conflict,'cause you have conflict in business. In a way that was Nice. That was kind hearted. That was not mean spirited.

51:58 So whatever. Why tell me every I go around the whole room and say Tell me someone in this room who Who said something or did something Or didn't say something, or didn't didn't do something that

52:08 And people feel r really good about that. And I have a whole series of exercises and questions that I do like that. When we have long meetings, sometimes we have like ten hour meetings, sometimes even twelve hour meetings, we have people coming in from around the world and We're doing a a quarterly operating review. We're really covering lots and lots of material. We take just few breaks. We just keep going at it, going at it. So people are are tired at the end of that. It's been a long, long day. We've been going from

52:33 Seven in the morning, seven at night, for example, with just a few quick Um ten or fifteen minute breaks. We work right through lunch, well right through dinner. I like to end with Sometimes with

52:45 Getting everyone. At the end of all that. We stand in a circle. And And I don't wanna say anything.

52:51 I just want And I just want to spend five full minutes. Five minutes is a long time. To be standing in a circle. With fifteen or twenty other people.

53:00 Not saying a word. And I want I want everyone to look at each person. And I want them to do two things. I want them to think to themselves.

53:09 Things in themselves. I really respect this person because Or I really admire this person or I'm so grateful that this person is on my team, is on the team with us. This or these these these this person has XYZ qualities that are so noble, so fantastic. So

53:27 Positive regard. the of each person. Each person one by one, I want them to look around the look around the circle. And the second thing I want them to do is I want them to say Not only am I grateful

53:37 Being on the same team with this person. I really wish this person a lot of success. I hope this person has A fantastic Future at this company.

53:47 Fantastic career. I hope they knock it out of the park in terms of their numbers, in terms of profit the generation they're going to do. And and I find those that two handed Experience of

53:59 Gratitude of praise. Gratitude the the gratitude that comes from Honest praise of of each person. And then the The wish the well wishing to each person.

54:09 It just it everyone goes away from the meeting just figuratively fly on air. People go away with a really good feeling and feelings count in business. In business I have I write about this in the book, the Love Vibe. Yeah. You want the love vibe.

54:23 You don't want the hate vibe. You want the you want the good vibration going around in the company. You want people feeling Good about themselves. Grew about the company. Good about the people they're working with. Good about the customers.

54:35 Good about the vendors. You want them to be like one big happy family. And You have to work at that. That doesn't happen just by itself. That's not a natural

54:45 event. That's something that requires effort. That requires intentionality. It requires some skill. You've made a few

54:52 Billion dollars. What lessons have you learned about money? And spending money. And living with money that you wish you knew sooner. Yeah, it's interesting. You throw me off a little bit with the question because

55:05 I don't define myself as in terms of how much money I've made. Like that's Like Just not like a big deal for me.

55:12 But it i it's it's a report card. But it's not It's not who I am. And it's not my be all and end all. I happen to be in a business that makes a lot of money, so I make a lot of money.

55:25 making money for shareholders. When when look at my motivation, if you want to understand my gestalt, how I Look at the world hard, look at myself. It's really I You take those psychological Test.

55:36 I score very high on need to be appreciated. So how does that translate into being a CEO? Where that translates into Well, I'll give you a perfect example. Last week we had a call.

55:47 With my seventy five Co investors in My new company, QXO. So My wife and I are putting in nine hundred million dollars.

55:56 And it's Sequoia. And uh a few dozen friends and family, like really friends and family, like my sister, my brother, my niece and nephew. uh are putting in another hundred million dollars. We'll have a a cool one billion dollars even putting into into this.

56:09 Come. And I told him at the end of the call was an hour call just to give him an update of what I'm working on. I thank them. Not for the hundred million dollars because I didn't need the hundred million dollars.

56:19 I could put another hundred million mine in. But I thank them for for giving me motivation. giving me inspiration, giving me a purpose. 'Cause I wanna please them.

56:29 I want to make them happy. I wanna make them a lot of money. I like being happy. I like being feeling good about myself. I like looking in a mirror. And like who I'm seeing. And how I define that is

56:40 pleasing the people that I love. And those are my investors, my co investors, my my close friends and family and the people who have been good to me over the years and I give back to them. Let's deep dive on MA. How do you think about it at a high level?

56:54 And then specifically walk me through your process for Not only evaluating companies. But beginning to end, including integration. MA has been a big part of my business career. Not in the first ten years. In the first ten years from

57:09 nineteen seventy nine to nineteen eighty nine. I was in the oil business. It was all organic. We didn't do one single acquisition. So I'll just Trading and brokering and Building up a businessally. But since nineteen eighty nine

57:22 I've been Doing roughly about five hundred acquisitions. I've done a lot of M and A. I love MA. I love MA.

57:29 as a way to create value for shareholders. Because I don't know of another way. on a risk adjusted basis on a Certainty level. That

57:39 is more likely to create Massive shareholder value. Then doing sensible M and A. In order to Understand.

57:48 How to create value I have to understand how am I going to scale up the business. I I I only know how to create Tremendous shareholder value. By growing a business tremendously.

57:59 That that's how I know how to do it. And Of course it's organic. And I've had very good organic growth the companies I've led are been well performing companies that have had good market share and growing market share and we've taking customers away, taking business away from our

58:13 less are not as our co competitors weren't managed as well. But the real when you look at the the numbers, the real growth has been through MA, through acquisitions. What's been my secrets on acquisitions? I'll try to be concise because I did a Hour and a half podcast with McKinsey a couple of years ago with Andy West. There was that was the only question. That's one question and I babbled on for an hour and a half.

58:33 It's still a big people still watch that that podcast'cause I really s told everything about it. Here's the gist. It just is You first have to select an industry. You can't just do

58:44 M A. So I spent the last year. Going around studying dozens of industries, looking at hundreds and hundreds of acquisition opportunities. Mostly with Goldman Sachs, Morgan Stanley and some other friend Sequoia and some friends.

58:57 Frigging out. Could I apply. My playbook. to this industry. Is the industry big enough?

59:05 Is the industry fragmented enough? Is there M and A to do? Is bigger better? That's not always the case. Are the economies of scale? Do you have a competitive advantage by being bigger? Is there a way to apply technology? My companies have always been tech forward. to the industry. Because the industry is a little sleepy on technology. As the way I run a business. The way I d do the intake of people and the culture and the

59:27 Where we interact with each other and so forth. Is that something that'll work in this industry, is applied in this industry? Is it It's something related to something I know about. Industrial services, for example. Most of my companies since nineteen eight, been industrial services.

59:40 And I looked at many, many different industries and I settled on The one that checked every single box, which was building products distribution. And the name of my company is gonna be Q XL. And M and A will be a big, big component of what we do. There are is eight hundred billion dollars of

59:57 distributors in Western Europe. And in North America, which is where I want to Plant my flag. I wanna build a company that's Caught fifty billion dollars.

1:00:05 I can do that. If there's an eight hundred billion dollar size I can take six percent of that. Through acquisition and through organic growth. I can get to$50 billion.

1:00:15 There's many other industries that are nice, but I'm not gonna be able to get fifty billion dollars. I wanna get you fifty billion dollars. So this industry there's a clear path. How I can do that. Now

1:00:26 I can't just buy and there's Roughly about seven thousand distributed here in the United States is about almost twice that amount in Western Europe. So roughly about twenty thousand distributors. You've gotta be very careful about who you buy.

1:00:40 There has to be a reason why you're buying that company. has to be a strategic a compelling Strategic reason of why you're buying that company. What what make What makes sense for that?

1:00:49 Why is that good for customers? Why is that gonna make our business a better business. Why does that fit with the other things that we've already bought and put together. How's it gonna integrate well? I like to look at The multiples that I pay. For an acquisition.

1:01:02 The price that I pay for an acquisition is very, very important. Because When I look at the levers of how we We create shareholder value. What contributes to that?

1:01:12 The biggest lever, the biggest component is The differential. Between What I raise capital at due to my relationships with mostly institutional investors.

1:01:21 And because of the track record. And what I can deploy that at On doing acquisitions. The second biggest leverage How much can I improve the businesses that I buy?

1:01:32 Those are the there's many, many levers, but those are the two biggest levers. So I pay close when I've studied all these different industries. I've studied historical

1:01:42 Acquisition multiples. And one of the reasons I like building product distribution is I believe that I'll be able to buy companies at lower multiples of their profit, then I'll be able to Raise capital that.

1:01:53 And that's gonna be a big that disagio, that spread, that difference, that delta is gonna create value, boom, just right away, right from the first day. Now you asked about integration. Integration is extremely important. Anybody can buy a company. It's not that hard.

1:02:09 You write a ch you send a wire trip, you sign a document it's few dozen pages, lawyers have gone over it and Wire the money. And You own it.

1:02:18 So that's not the hard part. The hard part is After you've selected the right industry, after you've selected the right companies within that industry to buy. After you Mm we're mate.

1:02:30 had discipline. So that you don't so that you pay the right price for all those. Then you have to integrate them. I've never run companies that have like hundreds of different companies all running separately with different names and different

1:02:44 SIF systems and different back offices and There is some level of decentralization where you need to be closer to the customer. But I have a very strong appetite for standardization. Standardization of

1:02:57 The ERP system. that you close the books with. Uh so you close the books promptly, right after the close of the month. And that you can have Standardized Dashboard so all the managers have

1:03:08 The same format of the numbers they're looking at, the KPIs. And they see them graphically very easy to understand. I like to see so they can benchmark every comp every location to every other location, every district to other districts, every region to other regions.

1:03:24 And For that you need standardization. I like to have very standardized H R I S human resources system. Where All the people in the organization.

1:03:34 And we'll build build this company up. We'll have hundreds of thousands of employees. I need to have a standardized data system for all of our employees. Everyone's on the For four or one K, it's the same exact way of doing it. All the benefits are the same. All the performance appraisals are the same. Compensation I can see right away. I need to

1:03:51 have transparency to the information about I need to have the organization charts. Very accessible right away. And every time we do an acquisition, I need to pull that information up right away while we're studying it. quickly so we have a competitive advantage. Against other bidders to see what would the synergies be. So I need standardized

1:04:08 H R technology. Got everything. I need a standardized CRM customer relationship management system like Salesforce.com or there's several others as well. And

1:04:19 For that. to be able to make sure we're looking at customers the attractiveness of those customers, the profitability of those customers. the size of their spend, so therefore the potential of those customers going forward. All the interactions we've had with those customers.

1:04:34 I need to see that in a standardized way, all across the globe. Everywhere, every country we're functioning in. So I need to standardized technology for Customer. relationship for sales manager. So I'm I'm giving the I need a standardized Internal social media.

1:04:48 I happen to like I've used um Workplace by Facebook. It's not the only one, but I like that one really well. It's nice and The interface is really, really good. So I like to have everyone on the same one'cause I like to have one company with one culture. where everybody can ping each other. Like I don't want to have these silos of companies like

1:05:04 Sometimes you see these companies Roll up. Many different companies, but it's all a mishmash. It's all separate. I I don't like that at all. I I I see a lot of these.

1:05:14 S middle market. private equity firms do that. They roll up these small companies that are doing five, ten, twenty million dollars Ebita each and they bat they just buy a bunch of them and now they're up to a hundred million, two hundred million Ebita and They just get a bigger multiple because they're bigger, but it's a mess. Whoever buy those Whoever buys those companies, there's a lot of work to be done.

1:05:31 You've gotta now standardize everything and integrate everything and opportunity to improve them, plus a lot of cost and time. To fix all that stuff up. So I I integrate From the moment That we agree to buy a company.

1:05:44 We're starting the integration process. And the day we close the acquisition Gazam. We're in there and and we're standardizing everything as much as we possibly can. And we're communicating and communicating quite a bit. A big part of the success.

1:05:58 For M and A. is forming the relationship with people. and making sure we get off on the right foot. And making sure that we don't lose The great talent.

1:06:09 And making sure we on the at the same time we're identifying The weak players. And Gracefully and generously exiting them. So there's a lot of different components to M and A.

1:06:20 I'm summarizing a lot of different factions. Each one of those things we could talk for an hour just on that that block. But those are the kinds of things that go through my mind. my approach to MA. You have some unique questions when you interview sort of the top ten to fifteen people. As part of the diligence process. Can you walk me through what

1:06:37 At least two or three of those questions are where you get the most useful information. Yes. So You see some companies when they're negotiated by a company do this very lengthy and detailed and bureaucratic diligence process and they hire

1:06:51 A firm and they write this big huge memo that nobody ever reads and some wonk reads it, but nobody important reads it. And It's basically just to cover their butt. I'm not trying to cover butts. I'm trying to make money for shareholders. My goal is to make money for shareholders. Period. And so

1:07:06 What I'm looking for in diligence is I wanna know how they make money. I wanna know the history of this company. I want to know the current state of this company. I wanna ask those people I like to interview the top fifteen or so people.

1:07:18 One on one. Like an hour, hour and a half. I like to ask him. If this was your money, would you buy this company? And

1:07:27 What would if you did buy it. What would you change? What would you do differently where's the opportunity to do something differently than it's been done? And I like to ask them. Okay.

1:07:38 If you were born buying this company. What would you not change? W what is so good about this company that's making it successful that's attracted a big bidder like ourselves that we should make sure we we'd be crazy to change that. So I like to ask questions like that. Questions that Give me insights into How the business got to where it is.

1:07:58 what are the what's the future of this company? How could we improve the company going forward? Where where are the things that we're going to do? There have been blind spots of the current where the company's been run. That we could fix.

1:08:08 And one of the things that are working well that maybe we could put more resources into. Where have we not been spending enough money? Where have we been not investing enough money into something that could be a good return on investment. On the other hand. Where have

1:08:21 We've been where has the company been wasting money? Where has the money been going into things that why are we doing that? Doesn't really help customers, it doesn't delight customers, doesn't make customers happier or Doesn't improve our Our customer b business reviews.

1:08:35 So why are we even doing it? That's a I like to ask those questions. And they're really revealing the the first person who I talked to who had questions like that was Cat Cole. who is the vice president now at Athletic Greens.

1:08:50 When she turned around Cinnabon. That's what she would do. She went and worked in the stores and asked the employees what they would do differently. And it was so revealing in terms of what they ended up changing. I find So many times. And corporations.

1:09:06 People don't ask those questions. Yeah. I'm big in asking those questions. I'm big at surveying Using town halls.

1:09:15 one on one interview, small group interviews. Asking questions about How are we gonna win? How are we gonna win? What do we do, Ron? What what can we be doing better?

1:09:23 What what are we doing right that we should do more of? And I find it um Very valuable. Very, very valuable. It yields a a great return on Time

1:09:33 And As I write about in in my book. There's only two things a manager manages. Return on capital. And we're turned on time.

1:09:42 And I believe that asking the employees and getting them involved in the process. is a great return on time and a great return on capital. What's the role of a board?

1:09:51 And a a strong founder led company. Like Q XO. Well, you're you're investing nine hundred million of your own money. You're the founder, the CEO, largest shareholder.

1:10:04 What role will that play? H how does that change the role of a board, especially when it comes to Mine? Advent. really fortunate to have fantastic boards. Boards that are very strong. pe comprised of people who are really competent.

1:10:16 people have in they're invested in the company, they're leaning in, they take the job seriously. They they're passionate about the company. And My relationship with the board is a little bit different than most most boards. We're completely transparent, completely open. Any board member.

1:10:31 can reach out to any person in the company any time they want. And ask them anything they want. And there's no supervision or People have to accompany None of that. So I want board members to be very, very informed. I want board members

1:10:44 To get copies of the customer surveys. I want the good and the bad. I want them to see that. I want and I want them to see the analysis. I want them to see the analysis of The customer surveys of where we're doing well and where we're falling short. I want them to know that.

1:10:57 I want the board members to have All the employee surveys. They see all the word clad word cloud analysis that we do, all the trend analysis and all the benchmarking we do. I want them to see where the pain points are of employees. I want them to see where employees are happy. I want them to see the trends of employees. I want the

1:11:14 uh directors to be invited. to every operating view and every monthly operating view, every quarterly operating view of any part of the company that Tickles are fancy. I want them the more they're involved, the better off we're benefiting from them. So I like to have board members that are Very involved, very knowledgeable.

1:11:31 And we have s good conversations about Important stuff. And I don't run board meetings the way most Fortune five hundred company boards are run. Most

1:11:41 Fortune five hundred company. Board members, board meetings. are kind of they're very scripted. And They sometimes they even rehearsed.

1:11:50 And There's a careful Story that's being told by management. And it's done by PowerPoint. It's done by Rehearsed presentations that come up.

1:12:00 And just complete waste almost a complete waste of time. Uh, you could do that whole thing just by s sending them a document. There's no reason to convene a meeting for that. It's just a Just a kabuki dance. I like to have

1:12:12 real board meetings where ahead of time Everyone's read all that data. And between board meetings, they've been in the business. Thro what I've been talking about. And

1:12:22 They come to the meeting and we bring in over the course of a day Somewhere between ten and twenty managers, executives. Sometimes senior ones. Sometimes mid level managers.

1:12:33 Sometimes front level exec managers. Employees. And And I I go around the room and I like every single director to ask Whatever they want to ask.

1:12:42 I don't wanna ask I don't want them to tell me ahead of time what they're gonna ask. And I don't want them to tell The man the managers who they're interviewing. to to know what the questions are ahead of time. I don't want

1:12:53 our executives or our frontline employees to waste time and I'm using the word waste deliberately. preparing for the meeting. Some sp Some script. Some

1:13:02 Sometimes phony baloney. Sales story about how great things are. I want to ask real questions. I want to include in the tough ones. And I want people to Answer them honestly and spontaneously in the moment.

1:13:13 And completely. So that's Those I love our board meeting. So I'm now chairman at the moment of three different companies. uh XPO, G XO, and R XL.

1:13:22 And so we tend to have our board meetings Every three months around the same time. Around the same two week period. It's some of my favorite meetings, the whole Yeah. Because I had highly engaged directors.

1:13:34 who are knowledgeable about the business. And who asked. Really good question. I learned a lot. I learn a lot at the board meetings. I don't dominate the board meeting with I'm the person speaking all the time. A lot of times you find that the

1:13:45 The chairman or the CEO is like making a whole big deal about themselves. Board meetings should not be about The chairman and the CEO. With the chair and C the board meeting should be about The directors.

1:13:56 getting the information they need to get, they want to get, they should be getting. Should it be focused on problems or what's going well, or how how do you think about that from a a board level? And then I want to get into more specifically management meetings, but like at the board level, how how would you organize that around How do you craft an agenda for that? I don't craft the agenda. So I what I craft is

1:14:18 I figure out who are the right people to bring in. But even that terms of the management we should bring in. I don't do that all by myself. I get input from

1:14:27 The lead independent director, I get in p input from the vice chair. We come up with something together with the CEO. And then I distribute it around to the whole board and say, What do you think? How how does this look? I don't have any changes. People usually have changes. People say, That's great, but I'd also like to have a section on HR. Just even yesterday. We're preparing for a board meeting and

1:14:45 one one of my vice chairs said, You know, that's that's good, but I want to have a a section on human capital management, uh people management. So we s we rearrange things and We're bringing some HR folks. So

1:14:56 My goal is to get the right people in the room in front of the directors. And and then let the directors ask. What they feel is right to ask. I don't wanna Micromanage the agenda.

1:15:08 'Cause that's my agenda. I won't I am never going to be smarter. Then The sum of

1:15:15 All the directors. That's never gonna happen mathematically. Or you have the wrong directors, right? Very much so. Yeah, yeah. And I I I like directors who are smart. And we're engaged. and really want to improve the company. They want to play their role. They want they take their fiduciary duty

1:15:29 Very very carefully that Strong duty of loyalty, they have a strong duty of care. When you think about decision making How often are decisions made by Committees.

1:15:40 In the companies you run versus made by individuals. Well, I hate the word committee. Period. Committee's just like a bureaucratic red tape.

1:15:49 Slow kinda low energy kind of word. I just can't stand the word. So I try not to call things committees. I just to the nomenclature. However. There are some times when a group of people will have to

1:16:01 Make a decision because It's more than one discipline that's required to get to the right Decision. There might be a task that we have that has a financial element, you need someone from financial accounting.

1:16:12 That certainly has an operational uh element to it, you need ops person there. Well also may have a big people element, so I need an HR person there. And so I could have uh if it's a big decision with big impact. then I'm gonna have C level, remember the C O O, the C F O, the C H R O.

1:16:28 That's a big decision. I'm not gonna waste those very important people's time with Small decisions. F P and A financial planning analysis. Plays a big role in my company. More than in most companies.

1:16:38 The F P and A people are the ones who are turning all these ide they're in a meeting, you're listening to all these ideas. And they're turning them into numbers. They're turning them into forecasts, they're turning them into projections. They're turning him into probabilities. They're turning them into the look.

1:16:51 We we have this These ten Things we're gonna work on to create alpha for our shareholders. They're attaching probability to each one of those. I got a ninety percent chance that this is in the bag. This is gonna happen.

1:17:03 This is a long shot. This is like a t ten, twenty percent chance of happening, but it's not at zero percent. It's ten or twenty percent. And it's got a high return if we achieve it. So it's worth putting the effort in. Well I'm only gonna give ten or twenty percent credit. Maybe even gonna

1:17:15 Give less credit than that. And and they're also doing Budgeting. Constant iterative budgeting. We don't do budgeting

1:17:22 Once in a while. We do budgeting. Every day. Every single day. Where we've got our our

1:17:29 Or but our are numbers. That our plan is our plan. And Where are we tracking versus the plan? And

1:17:37 The FPA people are are are are really good at figuring out Who's sandbagging? And who's exaggerating? By that what what I mean by that is

1:17:48 You have some managers who just do their personalities or for whatever reason. Maybe they're playing games with their bonus. They want to lower expectations. So they come out looking like heroes. Well, that's not good.

1:17:58 Because We wanna know the real li likely outcome so we Can plan around that. On the other hand

1:18:05 Yeah, some people who are Um Overly self confident. And they think this is definitely gonna happen and I'm gonna grow this. But if you look at their history, if you look over the last three years

1:18:16 They've missed their predictions by three to five percent, like pretty much every year. So they're gonna discount them based on the Past, predicting their future. likely to succeeding. So the FP and A people play a big, big role in that and figuring out

1:18:29 What is the highest, lowest, and likeliest outcome. for all these different endeavors that we've got. And they're also playing a big role for allocating capital. So we talked before about

1:18:41 The two big things that senior executives do is is Decide. what kind of ways we're gonna spend money, allocate capital,'cause it's finite, even if it's billions of dollars. It's not trillions.

1:18:52 Or gazillion is it's billions, it's finite capital. How are we going to sp invest that capital? Of all the different ways we can invest. What's the highest and best uses. That capital.

1:19:02 And how are we going to manage time? How are we going to get everyone focused on the things that really matter? And not waste their time on the silly stuff that Really doesn't matter. It's not going to create Massive value for our shareholders, which is

1:19:15 What our mission is. The FPA people help with Understanding that and putting it into numbers. Sometimes you can get Very

1:19:23 inspired and motivated and just a really Really creative, fantastic. uh inspiring project comes up. But when you analyze the numbers, eh, it's really not a really good return on time, return on capital. So maybe we shouldn't be spending so much time on that. So we're we're also Managing how much time are we spending as an organization on what kind of projects. You find a lot of time in corporate America.

1:19:46 Somehow or another, they get lost. Management gets lost on these Tangents. That are not central to their main mission of Creating value for shareholders.

1:19:56 And the F P and A people keep track of that. They're the score keepers to Keep everyone honest though. How we're investing capital. How are the returns on that capital versus what we expected it to be? We planned on.

1:20:07 How we spending our time. Is how we're spending our time Proportionate. to what has the highest impact of how we're spending our time. And this is a very important role.

1:20:18 So FP and A ends up being kind of omnipresent. throughout the organization any time we're making big decisions. 'Cause they're really good at getting all this down to to reality, to real numbers. And they report to the CFO. Is that the structure internally? Uh FPN A has has a

1:20:33 Two lines. One is to the CFO on the and they have a dotted line. to operations and to me. So I I rely on my FPN A person. Like every day.

1:20:42 I wanna know. For two reasons. I want to know internally. How are we doing on the projects that we're We're we're at ta attaching high priority too. I also want to know how are we doing on our commitments to shareholders, to investors.

1:20:54 When you're a CEO of a public company You have a Really important mission. In that You've promised

1:21:01 what your numbers are are going to be in the f in the future, how much your profit's going to be, how much your organic revenue growth is going to be, how much your margin's going to be, what your return on capital is going to be, how much your free cash flow is going to be. And now you've got a you've got a promise out there. You've got a guidance, you've got a forecast. And and you're working really hard to achieve that. I need to know. And F P N A is the best place to know that.

1:21:22 How are we tracking against that? And if we're tracking higher than that and significantly higher than that. There's a big deviation from that. Well we'll talk to to legal and we'll talk to IR and the investor relations and and we'll say Should we update the the investment community ahead of the quarter, ahead of

1:21:38 when we normally produce our results. And equally importantly, maybe even Maybe even more importantly. I wanna know. God forbid if we're tracking below our estimates. And

1:21:48 Once I know that. Then I have a meeting and I say Whoa. We're me of our of our six or seven top metrics that we've promised to our investors.

1:21:57 We're doing well on these five or six, but on these one or two. No no no it's not doing very well. What are we going to do to get back on track? So constantly Using our

1:22:07 sensing, information gathering, and then Getting back on track. Getting back on track. Do you do the forecasting because you're gonna be going to the capital markets for for capital at some point in the future within a

1:22:20 acquisition strategy. Or would you not do that if you knew you weren't going to raise additional capital? Well, I I am a big user of capital markets'cause all my companies have grown Through uh acquisitions. Yeah. And I've I've needed capital to grow those acquisitions. We've raised money from

1:22:37 the largest sovereign wealth funds in the world and some of the largest pension funds in the world, some of the largest Long only funds and No, all endowments and a lot of different people whose money we've taken and given back a lot more money than they than they gave us. So in order to do that

1:22:52 You've got to hit the you've got to meet your promises. Your results matter. Results matter. They're very, very important. So Even if we weren't raising capital

1:23:01 The fact that we've taken capital and sometimes we've gone for years without raising cap well, we've maybe refinance debt to take advantage of changing interest rates or something like that. But in terms of raising equity, which is the dear thing, raising equity, sometimes we've Done some acquisitions like in 2015. We did two big acquisitions. And then we digested them.

1:23:19 And we integrated and optimized and doubled and tripled the profit without doing any acquisitions. During that period of time we didn't need to raise equity and we didn't. So But even though we weren't raising equity, even though we were not going to the back to the capital market chain. We still paid

1:23:34 Extremely rigorous attention. Two. How are we doing on the numbers? That's our job. Our job as executives, as managers, as

1:23:42 custodians of this business. Is to produce results. And that's measured ultimately. And financial results. So also produced Infinite in operating results. It's also in terms of

1:23:53 customer satisfaction, employee satisfaction, but all those things lead to financial metrics and You've got to stay focused. You have to have the whole organization focused on delivering those financial metrics. And that's how you deliver them. It's it's a

1:24:08 Conscious Intention. And a sense of honor and a sense of I need to do this. This is this is what we need to do. This is our promises. Promises made.

1:24:17 Promises kept. When people tell you they're not motivated by money, you get suspicious. Why? Well, I actually respect people Highly if they're not motivated by money. Uh, I know a lot of artists. I know a lot of musicians.

1:24:30 I have Um Friends and relatives who are professors or retired professors in academia. This shot into money. I mean, they're not into money. They don't think about they don't read the Wall Street Journal. They're not interested in

1:24:42 That whatsoever. And and I respect that. They're they have a higher calling in a way. They they're they're focused on Some deeper parts of life. Um But that's not who I want in my company.

1:24:53 I want my company people who are Absolutely motivated by money. who are raw capitalists who people who Wanna make money for themselves and their families. And that

1:25:02 We can figure out a way that By being part of our company. They can help us make money for shareholders. So that we can pay them more money here than can make somewhere else.

1:25:13 I've met people on the senior level make Many many people make Become millionaires, multi millionaires. I've had people become tens of millionaires. I had one person who made over a hundred million dollars.

1:25:25 I have couple of people now who are on track to make very large amounts of money. This is a good thing! This is a This is a Outgrowth of success.

1:25:33 Because We've tied everybody's compensation. We've been very thoughtful about compensation plans. We've tied their Compensation. to contributing to our big goals.

1:25:43 And the only way they can make All this money is if they're making money for shareholders. So I love compensation plans for the senior executives.

1:25:53 That have a big component of Equity. That's tied, it's dependent on T SR, total shareholder return. So we look at What are the

1:26:03 How does our stock perform? versus Called S P five hundred. And What percentile are we?

1:26:11 If we're less than call it the fifty fifth percentile. I'm not so sure they should get any that equ I don't not sure that equity should best. I could argue that If we're only getting Roughly half

1:26:22 We're roughly we're very middling in the results. We're giving. That's not why people invest enough. People gave us the sovereign wealth funds or pension These big investors, they've given us money'cause they expect us to be

1:26:34 much, much higher returns than the average company. So I like to have people bet on themselves. So that If if our if our shareholder returns are less than fifty five percent or so. I don't want it to vest.

1:26:45 If it's sixty five percent, invest some. If it's seventy five percent, it best more. If it that if it if if It's eighty five percent, ninety percent, ninety five percent. I wanted to I want them to make I want it to double vest. I want them to make twice as much as as they would otherwise. So I want their interest.

1:27:02 aligned with the shareholders. I want it to be so that The shareholders are saying Wow, I really hope senior management team makes a fortune because the only way they're gonna make a fortune is if

1:27:13 We're beating all the competition in terms of the returns with our investment. So I like to I like that to happen. One thing I liked about Goldman Sachs's compensation plan that I took for them uh years and years ago when they were partnership. A big chunk of their compensation plan. I'm not up to date in their compensation plan now, but Back when they were a private partnership.

1:27:31 A big chunk. Like a significant percent was based on How many other

1:27:39 partners said that they helped them with what they were working on. Yeah. In other words, I didn't just work on what I was trying to work on. But I helped you, Shane. With your custom with your client.

1:27:48 And that group effort going back to being a super organism. So if we can have People on the front line and the mid level management. Be rewarded. Financially,'cause that's the biggest reward. Not the only reward.

1:27:59 But financially. Financially rewarded. For helping other people achieve their goals. That's a good thing too. So we have all these bespoke compensation plans that are well designed

1:28:11 That a lot of thought go into. That result in The magic, meaning creating outsize returns for shareholders. That's the that's how we do it. Now we also do

1:28:21 Just general recognition. That's not as powerful as p as financial rewards. But it's it's still a good thing. So we have all the usual things of

1:28:30 People getting awards and Rewards and Trips to to places and presidents' clubs and Employee of the month, all all th kind of things where people feel

1:28:39 Good about themselves'cause they're recognized for going above and beyond. But if I had to pick just one or two. The feel good stuff. Or the money? I'm going with the money.

1:28:48 Powerful motivator. I like how everything's tied to sort of like win win. Everybody wins, right? You're it's not one of those places where you're you can get outsized. compensation even if our shareholders lose. That's a terrible thing. That's an unfair thing. That's that should never happen. You should You shouldn't you should have a complete alignment.

1:29:07 Between How shareholders do with their investment in the company. And how the employees do. I either both of those groups should be making A lot of money?

1:29:18 Or not a lot of mic. Now the shareholders Can't control that. All they're doing is investing their money. The employees control that. If the employees Are selected well.

1:29:28 are working together in a good culture well, are using technology, are using Ways that they they can succeed or have good feedback loops. And they're They're making good decisions and being held accountable for those decisions and they're exceeding them. and delivering the numbers and the share price reflects that. The share price goes up.

1:29:44 That's great. The Sherwell should make a fortune. And the employees should make a fortune. Neither one should make A lot of money. at the expense of the other. That's not fair. That's just not It's not right.

1:29:54 What CEOs do you think are underappreciated capital allocators? When I look at Um the companies that have Uh Take in money. and y and had small amounts of money and turned it into huge amounts of money.

1:30:09 Immediately I'm thinking Mike Moore at Sequoia Sequoia. He was chairman of Sequoia Capital. Now he's retired from that. He's at Sequoia Heritage. He's a senior advisor to Sequoia Heritage. But if you look at his career, Everything he's done over the decades. And I've studied Mike very, very well. He was

1:30:24 One of my first outside investors Square capital came into my You know, the waste systems way back in Nineteen eighty nine, nineteen ninety. And

1:30:33 What is he the chan what is she the genius of? He's the genius of Taking small amounts of money And turning them into using money. So you look at

1:30:42 at Google, at Yahoo, at Netscape, at SunMicros, all these companies that He invested relatively small amounts of money and it end up being worth Like ten billion bucks. That's

1:30:53 That's good capital allocation. That's really, really intelligent capital allocation. So I I I immediately think of I think of a Mike Moritz for something like that. I think in the industrial sector There's also people who

1:31:06 Who have going through the same kind of processes I've gone through. And been been disciplined at how to allocate capital. and achieved high ROIC as a result of that. You think of the academy level

1:31:20 C CEOs over the years. Dave Cody, for example, when he was Honeywealth years. very, very rigorous at this. Very mathematical, very dispassionate. Very intelligent. About

1:31:30 Okay, guys, this is how much money we've got. where we're going to get the biggest returns and allocating it very, very carefully there. So those are the people who come to mind are Off the top of my head. Talk to me about the relationship between quality and speed. You need both. So

1:31:45 You see companies sometimes Be really good on quality. But oh my god, they take forever. So it's It's really not achieving what you're trying to achieve. You see other companies that

1:31:58 Move real super fast, but It's at the sacrifice of of QAQC of quality shirts, quality control. The real Golden mean is

1:32:08 How do you move fast? But move fast intelligently. So that You're not sacrificing qua quality. In fact you're moving fast and improving quality at the same time.

1:32:19 That goes back to mathematics. That goes back to engineering. That goes back to planning. Understanding The lay of the land. Understanding

1:32:27 What exactly is the inefficiency that we're trying to take out of the system. What's the biggest lesson you've learned from the past year? You could pick any time frame, whether it's last twelve months, last Ten years less. My whole life.

1:32:41 And ask me what's the biggest lesson I've learned? For sure. I'm gonna immediately default to something with people. It's First I'm gonna default the people and then I'm gonna default to technology.

1:32:51 These are the two things. Because these are the two biggest Needle movers. These are the two biggest categories of things that Make a difference.

1:32:59 So in the last year, what have I learned about people? Okay, one thing I've learned about people is I'm working with a team now. At my my new company. That's largely the same. They were on my teams before. They were either XPO or one of the XOs.

1:33:12 And what I've learned is It's great to have the band back together. It's great to work with people That you know. That you've been in the battles with

1:33:21 You've shared the glories, you've shared the pain. It's great to be work Work with people who We've been in the dark days together, we've been in the strong days together, we've won together, we've been victorious together. We can complete each other's sentences. We we get each other. We know each other's spouses. We know each other's kids. That's that's a beautiful thing. I haven't always had that.

1:33:41 I have brought some people from company to company usually. Initial founding management for Q XL were all XL people. And uh One thing I've taken away from that is

1:33:52 I really love these people. These are people I Really Just respect and admire and I I just

1:33:59 I'm just so thankful that I get to work with them. Like I feel And I think we all feel this way. I think all of us feel That each of us Is getting the long end of the stick.

1:34:09 by working with the rest of this team. They're very hard to find A team, a group of people this size. That all love each other. That all respect each other. That all admire each other's professional and personal

1:34:21 characteristics and traits. And that's that's a beautiful thing I that's a Big takeaway for me. Now I'm I'm gonna Go for two for on this. What's my biggest takeaway on technology in the last twelve months?

1:34:32 A technology. What I learned was I went through this process of studying dozens of industries. And I went through the checklist and one of the checklists

1:34:43 One of the things on the checklist was Can I play Can I take technology and apply our tech forward mentality and our willingness to invest in technology and Put put our mouth money where our mouth is to put money in technology.

1:34:56 in an in an industry where we'll get a competitive advantage. And I found an industry building product distribution. That I can do that. I found a company an industry that's got twenty thousand companies.

1:35:07 And there's about six or seven that are doing really cool things in technology. That's pretty much it. I hate to s say that so negatively. But I think that's an objective assessment of it. I think there's Half a dozen or so cup companies, the biggest ones.

1:35:20 That are Of a a couple of of s medium sized companies too, but mostly the biggest ones. who are Approaching technology In the same spirit.

1:35:29 That we approach technology. Now we're gonna double down on that and spend a lot more money and have the best technol technologists involved. Like we always have in our companies. But

1:35:39 If you look at the ninety nine percent of all the other companies there where other industries were twenty years ago. Now I like that, Shane. I like going into an industry where I got something I can bring to the industry that's gonna help. That can be transformational.

1:35:52 I can be a catalyst. to improve the quality of the industry. I'm happy to Get everyone all excited and share the vision about Investing in technology, but we always uh or I guess I always end with the same question, What is success for you? Uh

1:36:06 On the professional level, it's very simple. It's continuing My tradition of Generating superlative shareholder returns, like off the charts great returns for investors.

1:36:17 That's my report card. That is success. Period. There's a lot of other things that Build up to that.

1:36:24 I have to have an engaged workplace. I have to have gr good relations with my local communities. Have to do all those good stakeholder stuff. But at the end of the day The report card is one question. What is my share price performance?

1:36:37 Versus the benchmark and not only relative, but absolute terms as well. So it's it's about stockholder appreciation for sure, professionally. All the things I'm doing of hiring people and putting in technology all the things we've been talking about the last couple of hours.

1:36:51 That all comes down to to making money for shareholders. If you're not making money for shareholders, It's just jabber jabber. It's just talk. So for me Success is defined by

1:37:01 How is my stock price performance? versus everybody else's. So that's that's clear for me. It's very clear in my mind. Personally. No, it's about my family, it's about my friends. It's about my relationships with them.

1:37:12 It's about Can I create ways Where in the limited time so I had I don't have as much time as most people because I'm really into the business. But in the limited time that I do have. Can I make those enriching experiences? Can I make those experiences where There's a lot of love in the room.

1:37:27 There's a lot of good stuff going on. There's a lot of Positive vibes. And um Uh they're very symbiotic, wonderful relationships where I'm helping the people I I love and And they're helping me. And if I can achieve that

1:37:39 That's success. That's amazing. Thank you so much for your time today. This was a a fascinating and wide ranging conversation. I really appreciate the opportunity, Sha. Thanks for listening and learning with us. For a complete list of episodes, show notes transcripts and more go to fs.blog slash podcast or just Google the Knowledge Project. Recently, I've started to record my reflections and thoughts about the interview after the interview.

1:38:13 I sit down, highlight the key moments that stood out for me, and I also talk about other connections to episodes and sort of what's got me pondering that I maybe haven't quite figured out. This is available to supporting members of the Knowledge Project. You can go to fs.blog Slash membership. Check out the show notes for a link and you can sign up today. And my reflections will just be available in your private podcast feed. You'll also skip all the ads at the front of the episode.

1:38:40 The Fernham Street blog is also where you can learn more about my new book, Clear Thinking. Turning ordinary moments into extraordinary results. It's a transformative guide that hands you the tools to master your fate. Sharpen your decision making. And set yourself up for unparalleled success.

1:38:58 Lear more at fs dot blog slash clear. Until next time.

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