My guest on this episode is A.J. Wasserstein. Early in his career, A.J. founded Archives One, a physical records management business he operated as CEO for 17 years before selling to Iron Mountain. He then acquired One Source Water, which was eventually sold to Water Logic in 2016. He then began teaching at Yale School of Management where he has written ad nauseam about nearly every topic within growing and running small companies and search funds. His writings are my go-to resource for many questions and business concepts I want to learn more about, and I’m quick to recommend them to others.
A.J. and I talk about being a professor and how to get involved if you’d like to teach, why students do not pursue entrepreneurship through acquisition and work-life integration as CEO, a topic A.J. has written and thought very deeply about, among other topics. Please enjoy this fantastic conversation with AJ Wasserstein.
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Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
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(3:14) – What made you excited to publish a paper covering an unsuccessful search?
(4:26) – Is it a conscious part of your process to present both sides of an issue in your writing?
(5:45) – What was your experience like going from a CEO to academia?
(8:39) – What were some challenges you faced as a CEO?
(13:49) – In your experience, did you find your workload felt reduced as you grew different departments?
(15:20) – Is work-life integration as a CEO possible?
(18:03) – Are there any CEOs you know who have achieved this balance?
(19:39) – How do you think about the ROI of your time spent as an investor, professor, and content creator via research papers?
(25:52) – You said it takes 5 years to be a successful CEO, would you say it takes the same amount of time as a professor?
(27:04) – What are some best practices for being an effective professor?
(30:20) – What moments as a professor bring you the most joy?
(32:02) – How do you help students think by asking them questions?
(34:25) – For someone in the process of selling their business, how would you recommend testing out the waters of academia?
(37:59) – What were some interesting observations you saw in students after they went through the Search Fund curriculum?
(43:20) – For students wanting to pursue Search, what roles were most effective in helping them feel ready
(48:41) – Do you have any desire to turn your papers into a book one day?
(49:55) – Do you find there are any themes that come up consistently in your writing?
(52:15) – Do you get the sense more folks are thinking about work-life integration than ever before?
(55:18) – What strongly held belief have you changed your mind on?
(57:42) – What’s the best business you’ve ever seen?
Alex Bridgeman: I also really enjoyed one of your recent papers with Judd Larson. He’ll be on the podcast tomorrow actually to share kind of some lessons learned about his time as a CEO and some challenges he ran into and things he would do differently now. I’d be curious, what made you excited to publish that paper? It’s hard to get someone to talk about things not going well in a search.
AJ Wasserstein: So, Judd, you might know, is a former student, so I always like working with former students on writing projects. And Judd, you probably know, had some ups and downs, and I’ve been watching his movie for the past five years, six years since he thought about doing a search. And he generously was willing to share his story. And I think in academia in general and the search fund community additionally, there aren’t enough not so goods and really bads compared to the really goods. Everybody wants to be focused in the really good, I get that. But as an academic, I almost feel an obligation to try to present a balanced story.
Alex Bridgeman: What other ways have you tried to present both sides? I think your papers do a really good job of pointing out both sides of any particular issue. Is that a conscious part of your process or something that happens more organically as you chat with different folks?
AJ Wasserstein: Well, I try to provide students and readers a broad picture of reality. So that means highlighting different protagonists, different demographics, men, women, different colors, different genders, different industries, different geographies, but also highlighting when things don’t go well. It’s so easy in academia to sort of tell the story of a company that gets condensed down to 20 pages and an 80 minute conversation in a class of everything that went well, but students really need to understand, entrepreneurs need to understand that there are often many steps backwards to sort of move the ball forward. And trying to make people aware of that, both the decisions that might have caused that and also the emotional rollercoaster that CEOs and entrepreneurs are on when they’re living that up and down is important so people know what they’re signing up for.
Alex Bridgeman: Yeah, I would love to take a step back too and hear about your transition from being a CEO to a professor. I think being a professor is a pretty interesting role for kind of your post CEO career. I’d love to hear kind of what was your thinking maybe in the last couple years of being a CEO, if there were any kind of one step back, two steps forward moments, and then kind of your decision to move into academia?
AJ Wasserstein: Yeah, so academia has been absolutely phenomenal. So, in some ways, I feel like I’ve had two callings in my life. So as a little kid, I always thought of myself as an entrepreneur, aspiring entrepreneur. And I always knew I wanted to work for myself or be the owner of my own business at some point. And feel lucky, I did that for 25 years in two different companies. And that was great fun. Plenty of ups and downs, it was not all up. I promise you that. But plenty of ups and downs, but generally a great, wonderful ride. And after exiting my second company, I absolutely knew I didn’t want to be a CEO again. I was about 50 years old. I have three children. My two older children were in high school, and I didn’t want to lose the last lap with them. So they’re only going to be home for a couple more years. And I didn’t want to start over as a CEO and miss my two older children’s last chapter at home. And anytime you’re a new CEO in a company, it takes five years to sort of master the business. So that timing didn’t work out well. I always harbored a desire to potentially teach, and truthfully, I never thought I’d be able to teach. What would have made me think that I could teach at an elite university? But after exiting my second company, I had an opportunity to work with Rick Ruback and Ryce Yudkoff at Harvard in an educator capacity. I was sort of their apprentice. And that sort of evolved into a larger now full time role at Yale. And it’s been absolutely fantastic. I really, really love teaching. And I feel incredibly lucky and fortunate to be able to do it now. So, I get to work with amazing students, amazing peer faculty, beautiful campus. Students are talented, ambitious, curious, they work hard. And I hope, I say this humbly, I hope I’m making a positive impact in their personal lives and professional lives in how they think about what their post MBA career can look like in life. I really think that sort of post MBA, to be an entrepreneur, to not be an entrepreneur, I mean, that’s really intertwined with your life design, what you want your life to look like. They’re not separate, they’re intertwined.
Alex Bridgeman: Yeah, that kind of ties in with a paper you wrote recently on work life integration and how CEOs running small businesses can now- some tools and strategies for them to balance their work and personal lives and maintain their health, faith, family, a couple other elements too. And from that paper, and you just described a little bit of your time as CEO and perhaps having some struggles with being a CEO and having a family as well. I’d be curious before talking about the paper and that concept academically, like what was your experience as CEO? Did you have- What were some challenges you ran into with trying to spend time with family while also running one of these businesses?
AJ Wasserstein: I’m not going to say I was horrible engaging in family, but I’m not going to say I was perfect by any means. I was probably average. Something like that. But yeah, I mean, being a CEO, Alex, is just so all consuming. It’s hard not to get completely engrossed. It’s fun. It’s exhilarating. You often get instant feedback. Yeah, the wins are incredibly high and adrenaline inducing, but the losses are very low and lonely. But it feels good. And you’re sort of nurturing this thing and shepherding it along. It’s really, really enticing and feels amazing. So, you often slip into this bad decision of misallocating time to these various parts of your life, and you allocate more time to business and less time to family. And there’re always emails or always phone calls or always acquisition opportunities. I mean, there’s always more. The list never goes to zero. So there’s always more. And you falsely think you’re so important that you have to do it or do it immediately. Yeah, so I was guilty of that. Look, I don’t think I was horrible because I used to get to my office pretty early, I was sort of at the desk 7am type of person. But I would leave shortly after 5. And I sort of felt like if you couldn’t move the ball a little bit and make headway in 10 hours, I’m not sure the 11th or 12th hour was going to be the difference. So yeah, that was what my day looked like. And I would try to get home to spend time with my kids and my wife and be involved in their lives. And I coached a lot of soccer. I wasn’t particularly good, but I coached a lot of soccer, and just tried to be present. I guess, in reflection, I guess where I was not good was being mentally present. So, I think I did an okay job being physically present. But I’m not sure I always did a great job being mentally present for my family. So I was at dinner, but I was thinking about work. I was at dinner, and I was literally on my phone. I was at the soccer game. I wasn’t coaching, necessarily, but I was at a soccer game, but I was the jerk on the sidelines on the phone. And yeah, look, I regret that because nothing quite says I don’t care to a child as loud as being on the phone at their soccer game, baseball game, whatever, track meet, and I probably made some mistakes there.
Alex Bridgeman: Do you think that evolved? Or did that balance that you struck, did it evolve over- like near the tail end of your time as CEO? Like did it improve, get worse? Was there some perhaps seasonality to it? How do you feel like it evolved over time?
AJ Wasserstein: I’m embarrassed to say I don’t think it got better. So as a business gets bigger, more complex, more geography, more people, the issues don’t abate, they increase. So it’s a better business. There’s more stability, more revenue, more earnings, more infrastructure, all those good things, but there aren’t fewer issues, there are more issues. And when you’re CEO, just a lot of those things either land on your desk or at least touch your desk. Everybody wants to check in or let me just bounce this off you. And I’m not saying they’re right or wrong. It’s not like they’re not doing their job, they just want to check in, and that’s fine. But there were more acquisition candidates, capital structure was more complex, more people involved in the capital structure. It just got more and more complex. I’m not saying bad. Just it wasn’t like the issues abated. It was a much better business but more complex and more demands on my time. Even though we had more and better people, it didn’t make my role smaller. The scaling of the business, both in geography and revenue, made my role more complex.
Alex Bridgeman: I’ve heard some CEOs talk about how, as the company- the hope is that as the company grows and you add different teams, like your finance team and HR, there’s now dedicated folks who are running those departments for you versus you doing it all yourself, the hope or goal is that that reduces that time and workload on you and lets someone else handle that. In practice, did you not find that to be reality quite the way it’s hoped to be?
AJ Wasserstein: It wasn’t reality for me. So, I’m not saying I was a great CEO. I’m not saying I had it figured out, how to manage, how to lead people. But that wasn’t the case for me. There were more meetings, there were more things that I needed to touch and more people I needed to talk to and just more issues, not in a bad way. I mean, it was all fun. It was great for the business. It just wasn’t necessarily good for me personally or my family. It made sort of being a good husband or good dad harder as the business scaled. There was more travel. And I really tried to match my travel tightly, but when the business is bigger, there’s more.
Alex Bridgeman: Yeah, absolutely. And when you started approaching the topic for the paper you wrote recently, and I imagine you were bouncing the topic off of CEOs you know or folks you admire and think do things really well, what’s been your conclusion? Is your conclusion that this work life integration is achievable and possible or that a CEO role is just so all consuming that it’s nearly impossible to achieve the balance that you would hope to have?
AJ Wasserstein: Yeah, of course, it’s possible. It’s all about boundaries, intentionality, and sort of managing your calendar. Look, one of the best things, we wrote about this in that paper, is as a CEO, you largely control your calendar. So, you have a high degree of flexibility. Whether you have a meeting at nine o’clock on Monday or four o’clock on Tuesday is often within your decision making ability. Whether you go to a geographic location, whether you go to the Orlando office in the first week in February or the second week of February, probably might not matter, you could probably control that. So, you have a lot of flexibility. I think the riddle is having the intentionality and purpose to make sure that your calendar doesn’t get overwhelmed exclusively with professional obligations. And you literally have nothing left for your family, either in time or physically or emotionally when you go home. So even if you- I was guilty of this. So, you come back from a trip, you walk in the house, kids are crawling all over you, and it’s all good. But you’re so spent. And that’s not healthy either. So, I think the work life integration, and we talk about balance being elusive and maybe even a mirage. So, it’s how you integrate these two things. Yeah, a lot of its intentionality, a lot of it’s around managing your calendar. It’s a lot about defining your values, what you care about. And I think it’s also being humble to realize that being an entrepreneur, being a CEO isn’t necessarily the most important role or only role in your life. And if you value being a spouse, being a parent, being a friend, your health, if you value these other things in your life, you really have to be purposeful and get them on your calendar. Otherwise, who wants to be the middle-aged guy or gal that is super successful, divorced multiple times, kids are estranged, poor health? I mean, who wants that? I’d rather be a great spouse, great parent, great friend, than a great CEO. I hope I’m remembered for those personal things, not professional things. Of course, you want both. But if I were only going to pick, I’d pick my marriage, my family, and my health.
Alex Bridgeman: Are there any CEOs you’ve gotten to know who you feel integrate work and life particularly well? And what things do they do?
AJ Wasserstein: Yeah, that’s a great question. I think there are different chapters. So, it’s hard to do in the earliest chapters because the business is so embryonic. So, whether you’re buying a business or starting a business, the first 3, 5, 7 years, whatever it is, there just isn’t infrastructure in the business, and you’re at best a glorified one man, sort of one person type of show. There isn’t the backup. But I think as the business evolves and gets better, there’s at least an opportunity to think about managing your calendar a little bit better because there are more people, more infrastructure. So, I’m trying to think, do I know anyone that does it extremely well? Yeah, that’s a tough question. I’m not sure I do to be honest with you. I’m not sure I know anyone that I could point to and say, wow, they do a great job at this. I’m not sure. Disappointing answer.
Alex Bridgeman: It’s definitely a- no, that’s fine. It’s just really, really hard. I’m not sure I can off the top of my head think of someone either. But I’m sure both of us will have six names, the second we get off this call.
AJ Wasserstein: Of course, of course.
Alex Bridgeman: Such is the nature of ideas. One thing I find so interesting about your writing and teaching is that, from the folks I’ve talked to, it seems like a lot of folks, when they stop being CEO, they sell their business or retire or what have you, they have a desire to give back in a number of ways whether being an investor, professor, or writing and talking about their journey and helping others. You’re doing all three of those, if you think of it, investor, professor, and creating content through your research papers. How do you think about the ROI for each of those buckets? You kind of mentioned earlier how you enjoy making an impact on students, and you hope that each of these is helping folks. And there’s kind of like, it’s almost like a broad to local level. Like you have the broad helping a large number of people in a small way through papers, and then a fewer number of people in a larger way through being a professor, and then a few number of people in maybe even bigger ways as an investor. How do you think about the ROI for each of those segments of giving back? I’d be curious about your view there.
AJ Wasserstein: Yeah, I love the combination of teaching, writing, and some investing. But Alex, if you ask me what I do, I’m an educator. My day job is being an educator. So, I woke up this morning, and I spent the morning before connecting with you working on my lectures for this week. I didn’t think about any investment activities. So, I’m constantly thinking about writing. I’m constantly thinking about preparing for classes. I find that super rewarding. I think, for me, some investing is incredibly fulfilling. And it’s synergistic with the academic work I do. It’s sort of like research and development. But for me, I’m only talking about me, I’ve learned that more and more investing isn’t necessarily better or more rewarding. It’s like a lot of things in life, the first couple units are incredibly satisfying and gratifying. And the nth unit might not have nearly as much value as the first unit. So that’s sort of how I feel about some of the investing activities. But yeah, look, I don’t want to overstate the work I do. But I really enjoy teaching. It’s a ton of fun. I feel fortunate that I think I’ve developed an audience for the written work that I do. I get to see not names, but I get to see internet locations of who reads my stuff. And I’m sort of flabbergasted by the countries all over the world. And I get emails from people all over the world. And periodically, I go to these various conferences you go to also and meet people and they they’re very polite and kind to say that they read my things and they appreciate them. So, it feels awesome to feel like making a positive impact. So, using your framework of ROI, I think there’s a super high ROI. There’s a degree of permanence in the written word – you know that. So, I really love the notion idea that my, I don’t know what the right word is, but my student audience is not necessarily limited to those people that sit in my classroom, although they’re my primary students, but there’s a broader context of aspiring entrepreneurs, sitting CEOs, and students at other MBA programs, and maybe even investors. And I’m just solely trying to share information and knowledge with people, not autobiographical, but bring together information and ideas for readers to help make their lives better, both as individuals personally and as businesspeople. And I was talking to a friend about this yesterday. I say this humbly, but I have a small bully pulpit. I’m not going to overstate my role, but I have the power of the podium in an academic classroom. And I’m trying to influence people to conduct business in a positive way. So I’m not explicitly telling them but I’m trying to show them a path through both my classroom experiences and my written work that there’re good ways to be a CEO, and there are not so good ways to be a CEO. And they both can be lucrative. I mean, you can be a jerk and still make a pile of money. I’m trying to convince people you can be a good person and still make a pile of money. Yeah, I mean, I guess if I have an ulterior motive, that’s it. I’m trying to positively influence people to be leaders in a constructive, enlightening, and lifting way. So, I hope I get operating leverage through my written work and my classroom experiences where I’m planting the seeds for people to think about how they want to be an entrepreneur and how they want to be a leader. So, at Yale, Yale School of Management, we talk about our mission as being educating leaders for business and society. And I buy it. I want people to do well, but I also want them to be positive agents of change and constructive in the businesses and organizations that they lead. So that’s really fulfilling. And I hope I’m making a very small impact in some way. Yeah, as an investor, I enjoy investing when I see people conducting their CEO role in a constructive way or they’re operationalizing the ideas and theories I’ve thought about and they’re putting them into practice. It doesn’t mean they always work. But it’s always sort of interesting to have a front row seat at the movie and see how it unfolds. And that helps me be a better educator, better author.
Alex Bridgeman: Yeah, you talked a little bit about how it takes five years for a CEO to really understand the business. Do you think it took the same amount of time to learn how to be an effective professor and learn how to lead classes and set up syllabuses and all that?
AJ Wasserstein: Yeah, no question. I’ve been at Yale now for six years. And I finally – I’m not going to say I’ve mastered everything because that’s not true – but I finally feel like I’m in a place where I am not a rookie, for sure. Where the first year, two years, three years maybe, you’re still sort of stumbling forward, figuring things out. I’m not saying I have it all dialed in. That’s not true. But I’ve been there six years. And I think it takes time to build your classroom style, to codify some of your thoughts, to build up a portfolio of written work, really to discover your voice as a writer, to build an audience in the classroom, to build an audience for publication. So yeah, it takes time. It’s not the first year, that’s for sure. It definitely takes time. But it’s worth the investment and it’s a ton of fun.
Alex Bridgeman: What are some things you do as a professor today that maybe you didn’t do in year one and two? I’d love to hear some of the best practices of being an effective professor.
AJ Wasserstein: Well, no shock, I’ve written something about that. So, I wish I had more resources when I started teaching on how to be a good educator. So I’ve written some things on that. And Rick and Royce were great when I first started teaching. Dave Dotson was really helpful. Peter Kelly was very helpful. So, I’m just trying to pay it forward. So yeah, what has evolved or changed, I hope I’m a better listener in the classroom. So, I try not to give opinions and answers. I tell students all the time, I’m an educator, so I don’t give answers, I only ask questions. But trying to realize that when a student doesn’t understand something or a student has a question, me giving them a quick answer isn’t really providing them with the best educational opportunity. Often to learn, you need to struggle and feel the pain and the thought process that hurts. So, I try to guide them through their learning experience through questions, a very Socratic method as compared to this is what I would do. And students always say to me, well, why won’t you say what you would do? And I try to tell them, it’s irrelevant what I would do. What we’re focused on is what you do and you discovering your own leadership style and voice, which can be very different from mine. And they can both be correct. But you shouldn’t try to be anyone but yourself. So, I hope I do a better job of that. I try to really push students to make quantitative decisions using quantitative data. So too often, very busy MBA students want to make quantitative decisions with qualitative input. So qualitative is always part of the analysis, but don’t ever forget the quantitative. And I tell students, you could underweight the quantitative, you could ignore the quantitative, but you have to do the quantitative analysis. So I try to draw the analogy that pilots don’t cover the dials when they’re flying the airplane, they look at all the dials. Now they can make whatever decisions they want, but they look at the dials. So as a CEO, you need to do all the math and look at all the dials. Now the art, Alex, is intertwining and blending the qualitative and the quantitative. You can’t run a business exclusively through a spreadsheet, but you can’t run a business and ignore the spreadsheet either. So how do you blend and integrate the qualitative and quantitative? That’s the laboratory of the classroom, trying to get students as close as possible to feeling what it’s like to be a CEO.
Alex Bridgeman: And as an aviation geek, I can definitely confirm that pilots do use dials and window and their own judgment in flying. What moments as a professor bring you the most joy?
AJ Wasserstein: Well, there are in class experiences and out of class experiences. So, in class, when students clearly get it, when something clicks in the classroom, so they literally sort of nod their head and get the either idea or the math, where it was very obvious where students or a group of students didn’t get it before the beginning of the session. So, feeling like they walked out of the room in a better place than they walked in the room is incredibly fulfilling and satisfying. And watching them develop and evolve. So, outside the classroom, I love the sort of one on one or one on few interactions with students. And I love talking to students about how they’re thinking about their lives. I find it fascinating because they’re so talented and ambitious. But sometimes they’re going 100 miles an hour. The only problem is they don’t know where they’re going. So, they want to get there quick, they just don’t have a destination. So, really talking to them and hearing and understanding what they want out of their lives and then trying to help them understand what they need to do today to get to where they want to be. So I guess I find it either fascinating and maybe a little frustrating when students articulate they want to go somewhere but make decisions and use time in a way that doesn’t propel them to where they want to be.
Alex Bridgeman: So if someone’s in that position, you said you don’t give answers, you prefer to ask questions, what kind of questions would you ask someone who wants to get somewhere quick but doesn’t really know where or doesn’t know what they will find the most fulfilling? How do you help someone think through that process?
AJ Wasserstein: Yeah, the question I love to ask students the most is where do you want to be when you’re 40? So most of my students graduate when they’re approximately 30 years old, plus or minus. And a decade out is a reasonable amount of time to think about. You can’t talk about two decades or three decades, and talking about next year is irrelevant. Who cares? So talking about where do you want your life to be in a decade, personally and professionally? Do you want to be married? Do you want to have kids? Do you want to spend a lot of time with your kids? Do you want to be healthy? Do you want to live in a certain area? Do you want autonomy in your life? Do you want to have freedom and flexibility? Do you want to be on a path to financial independence? Do you want to be building equity? Do you want to be intellectually stimulated? What do you want and what do you envision for your life? And the truth is, many students really want the same things. But if you want those things, what seeds do you need to plant today to be able to get there in a decade. So if you want be somewhere when you’re 40, you can’t start working on it when you’re 38. It doesn’t work. So you need to start working on it pretty quickly. And having a directional path day by day, month by month doesn’t matter. But you need to have a directional path of how you get to where you want to try to go. So, what else do I really enjoy? Look, I can’t help but have a mild ego. I love when students tell me I’ve been positive influence and helped change their view of the world. I’ve opened doors for them metaphorically. And so, I’ve created more options for them to think about. So that feels good, that the time we spent together, the written work that I’ve done has changed the way they’re thinking about their choices and their path.
Alex Bridgeman: For someone who is in the process of selling or considering selling their business and pondering that next chapter, how would you recommend folks, if they’re interested in being a professor, how would you recommend them either test it out and be maybe an adjunct for a semester and try it or find their way into academia? What are some pieces of advice you might offer?
AJ Wasserstein: Yeah, I think it’s hard. So, I don’t want to say that there’s a straight line on how to do that. I think while you’re CEO, if that’s something you’re curious about, you should connect with academic institutions and see if you can host lunch and learns, which are non academic, outside of the classroom type of events. If you could get to know some faculty members, to be a guest in a class, to help the entrepreneurship club, the startup club, the private equity club. But see if there’s a way you could sort of get a small role, however infrequent, on campus just to get to know people. It probably doesn’t hurt if you could write something, whatever that might be. But written words matter in academia. So, trying to establish yourself a little bit as a thought leader and sharing some ideas. And then, it’s hard because the number of spots at academic institutions for faculty members are small, especially in the pond that you and I traffic in. So it’s not like there are endless seats. But connecting with institutions to express an interest and see what roles exist, no matter how small they are. So I got really lucky to connect with Yale. And when I initially started, I was teaching one course, a traditional search fund entrepreneurship through acquisition type of course. I’m now full time and I teach five courses. And it’s been a ton of fun.
Alex Bridgeman: What was the search fund curriculum like prior to you joining as a professor?
AJ Wasserstein: At Yale, there was none.
Alex Bridgeman: I think that’s really interesting. It’s like being a CEO again. Like you’re kind of building this program in a way, like you’re adding in these new topics and courses in this curriculum that didn’t exist before. And you’re creating something new that impacts people much the same way that a CEO does. It’s kind of a small dream of mine and a few folks I know to go back to their original schools that maybe don’t have similar curriculums and kind of bring that teaching to those groups of students. That must have been a really exciting and fun journey, albeit challenging I imagine at times, too.
AJ Wasserstein: Yeah, yeah, for sure. But I think it’s less like being a CEO. It’s more like being an entrepreneur. So each course that you launch is akin to a startup. But yeah, you’re trying to build a program, you’re trying to create awareness in faculty members, you’re trying to create awareness in students, you’re trying to deliver a successful product in the content and curriculum. So yeah, I think that’s true.
Alex Bridgeman: It definitely seems like a fun next chapter to focus on. And I know that one topic you’ve thought a lot about recently is, within your search classes, many students decide not to search and they’re not interested for a plethora of reasons. You wrote about this recently and we’ll add this to our show notes. But just anecdotally, what were some interesting observations you found through writing that paper and that survey?
AJ Wasserstein: Yeah, so I think it was at the end of the spring semester, I was having lunch with some friends at HBS. And we were sort of all baffled. Why don’t more students do this? Because we’re biased, we’re unabashedly biased. But we think doing a search fund is sort of the greatest thing in the world for post MBA students. So I can’t help but evangelize a little bit. So, we’re sort of talking about why aren’t more people doing this? What do they see as the impediments or encumbrances to do this? So without answers, we had theories, but we didn’t have answers, we identified as many MBA programs as we could who taught search fund courses. We asked the faculty member to share a survey with those students asking them, why don’t you do this? So I think we in aggregate, don’t hold me to these numbers, but I think we identified maybe 5000 students that were at representative institutions with search fund curriculum, and then we got the survey in about 800 students hands, and about 50% of those 800 students completed our survey, maybe it’s a little bit less than 50%. So yeah, I think the big reasons- I think the biggest reason was don’t have enough operating experience. And the reason why we’re asking these questions is we want to fine tune our curriculum to better address what students see as encumbrances. So, if people don’t want to do a search fund, we want to help them and wish them all the luck in the world with whatever they want to do. We’re not trying to convince them to do search fund. But if students want to do a search fund, but don’t feel ready to do a search fund, that’s on us as faculty members. What do we need to do to help you do something that you want to do when you want to do it? So, we’re not trying to convince anyone to do something they don’t want to do. We want to reflect and think about how we could do a better job helping people achieve their dreams and goals. So, I think the largest reason people don’t do a search fund is they weren’t ready. They didn’t feel like they were ready with operating experience. And I think that’s fair. I tell my students all the time, you’re more ready than you think. Running a small business, in some ways, is really hard. In other ways, it’s not that hard. And if you’re sort of 85% ready today, going to a large consulting firm or financial institution helps you grow, mature, season, learn, maybe you go from 85% ready to 90% ready. So I’m not sure there’s a huge difference between 90% ready and 85% ready, but I try convince my students they’re more ready than they think. So that was a big reason, the lack of operational experience. I’m not sure going to work at a financial institution or consulting firm gives you more operational experience. But that was the number one reason, and that’s often what students do after school. Students were really concerned about geographic location. So, they didn’t want to wind up somewhere that didn’t fit their personal needs in a search fund. And I get that. I think that’s fair. We try to explore the ways you can influence those outcomes of where you’re going to be in a search, but I think that’s a bonafide issue. This wasn’t at the top of the list, but some students don’t discover search until sort of too late in their MBA journey. They’ve already committed to a job, or they feel like they’re behind. Some are concerned about raising capital, which I’m not sure that’s a real gating mechanism today. There’s a lot of capital out there. What were some other big ones? So, the spouse dynamic, if your spouse was on board, or they could get a job in the same location where the company would be, which is totally fair, totally fair question. But yeah, it was really interesting to hear what students were concerned about. What was pretty fascinating is, I think, of the people- there’s a really, really high percentage of students who were not going to do a search fund after graduation but hoped to do so within the next five years.
Alex Bridgeman: So folks in that bucket, students who wanted to search in the next couple of years but wanted more experience first, what types of roles did they get? And from talking with CEOs who took that path, what roles were most effective in making them feel more ready?
AJ Wasserstein: Yeah, I can only speak about my students. And at Yale, the biggest post graduation destinations are consulting and finance. So, I’m not saying those are bad pitstops if ultimately you want to do search fund, but I’m not sure they really give you the operating experience that you might want or need. I think if you don’t think you’re ready to search today, and you’re really curious about doing a search within five or seven years of graduation, getting some type of operating role, preferably at a small business, is really the closest thing you can do to being a CEO. So, working in a search fund like business, preferably at as senior level as possible. So being the chief of staff for the CEO or taking a leadership role, or really trying to understand what running a business is like by sort of being in the business as compared to being either a capital provider or an advisor as a consultant or an investment banker type of person. I’m not saying at all that those are bad post MBA choices. I think you learn but I’m not sure they’re really operating roles.
Alex Bridgeman: Yeah, that’s true. What I find interesting about the experience point is the- it seems like the search fund model, a big basis for it, is that you don’t need to be this very, very seasoned 40s, 50s operator to be able to successfully run a business and that you can be a very successful operator from a much younger age. There must be some value to some experience. Do you think the amount is just much lower than but not zero for what you need to be an effective CEO?
AJ Wasserstein: Yeah, I think I’ve written something else. I don’t know if you’ve tripped on this, Alex. But what do CEOs actually do?
Alex Bridgeman: I did enjoy that paper. That was great.
AJ Wasserstein: Yeah, I think that was two summers ago. But it’s sort of interesting when I talk to students or aspiring entrepreneurs, and you talk to them about what CEOs actually do, and they think it’s strategy and capital raising and capital allocation, and all these sort of MBA-ish type of skills and sort of sexy, glamorous type of functions. And in that paper, we surveyed a whole bunch of small company CEOs, and most are spending their time on people issues, some operational issues, selling issues. In the survey, people indicate they spend a lot of time on strategy, and I don’t want to refute the data we got, but I really think they were articulating we spend a lot of time implementing the strategy that we are trying to achieve. I don’t know how you spend a lot of time on strategy every day. If you do, you don’t have one, or it’s not working. But I think what CEOs do are working on implementing the strategy. So yeah, seeing that mismatch between what students think CEOs do and what CEOs actually do in a small business was really interesting. A little twist on that also was asking CEOs what you wish you did. So, what you wish you’re spending time on, not what you are spending time on, but aspirationally what you wish you’re spending time on. And the number one answer was culture and values. That was really interesting, that they wish they spent more time on culture and values. So back to do need operating experience to be a CEO in a search fund type of business, $1 to 3 million in EBITDA, you need some type of experience. But if you’re a 30 year old person that’s had one or two jobs before business school, you went through business school, I think you’re ready. Are you going to break some glass? For sure. But if you buy an appealing, durable, profitable business, you’re going to be fine. You’re going to figure some things out. And year ones can be a lot uglier than year five. But somewhere in year three and four, you’re going to start to grow into yourself and feel pretty good. And, yeah, I mean, some of that stuff, there’s no way really to learn it by doing it. So if post MBA you go work for another company, and you’re in sort of an operating role, you’re learning on someone else’s nickel, you’re learning by watching, you’re learning by doing, maybe not in the CEO role, but I’m not sure going to a consulting firm, a private equity firm, or an investment bank teaches you how to hire people, fire people, train people, motivate people, make sales, organizational design, systems and processes. Those are the things you spend time on as a CEO.
Alex Bridgeman: You’ve written hundreds of pages through your different papers. Do you have any desire to turn them into a book of some kind eventually?
AJ Wasserstein: I don’t know, a book’s hard. So I wrote a book. I don’t know if you’ve tripped on this, Alex, I wrote a book for my kids about five or six years ago. Writing a book is really hard. I really like writing these 20-ish page, 25 page papers, notes, because they’re sort of a defined duration. You can work on multiple ones concurrently. And a book is a one to two year project. So the papers are sort of bite sized chunks. I don’t know. I’d like to think that a lot of what I write is if I aggregated all together, it would be a book and I’m just sort of releasing the chapters, and sometimes they’re out of order, but releasing the chapters as I work on them and chapters- and different ideas come to me and different ideas get out the door. So you’re kind to ask.
Alex Bridgeman: It would certainly be interesting at some point if there’s maybe one or two different topics that you find have been really consistent through your papers that could become a book. Are there any themes like that that stick out to you that are consistent throughout your papers that maybe you wouldn’t turn into a book, but you’ve just found are interesting points that come up over time?
AJ Wasserstein: Yeah, what fascinates me the most is sort of how you build a whole life around this. So, I really try and motivate students, readers, entrepreneurs to sort of look at their world holistically, because who wants to be a great entrepreneur, a great CEO, and have the rest of your life fall apart. So, I’m most impressed and have the most admiration for people that have figured out how to have the complete package. So they have a great family life, they’re healthy, they’re engaged in their community, they’re benevolent CEOs and leaders that create economically vibrant organizations where people want to work, they provide great customer service, they are leaders in some ways in their industries or geographies. To me, that’s who students should aspire to be. Those are the lives that are richest, not necessarily the person with the most money. So I think I have been- I have a long list of ideas in an Excel spreadsheet of things I could write about, but some of these profiles in excellence, but excellence, it sort of has a broad definition of personal and professional. I’m not saying the criteria are objective at all. But sort of people you would really want to be or you would want your children to be. You would never wish for your child to be professionally successful and personally miserable.
Alex Bridgeman: Yeah, that would be very miserable.
AJ Wasserstein: So just trying to explore, look at people who have figured out how to get the whole package. And I’m not sure you could point to objective decision making or choices that got them there. But at minimum, maybe it’s inspirational.
Alex Bridgeman: Do you get the sense that more entrepreneurs, searchers, CEOs are thinking about how to integrate their working lives better? Do you think there’s more folks thinking about that today than there were maybe five or more years ago?
AJ Wasserstein: I’m not sure. I feel like I know a lot of young people that want to build big, great businesses, and their scorecard is a lot about the balance sheet, their personal balance sheet. And I’m not saying they’re wrong. In some ways, I think I was that guy. But with age, you have different perspectives and goals and ways that you measure fulfillment, happiness, and success.
Alex Bridgeman: It is interesting hearing some folks talk about trying to integrate their work and life better with the aim of longevity. A few folks have said like, I probably can’t work 100 hours a week for 10 years, but I could do it for three or four. And then eventually it would- maybe you fall apart. But if I design my life around 50 hours or 60 hours, and there’s more balance on either end, maybe I can actually be a CEO longer. And then that actually figures out my own financial balance sheet, and the company can be more successful because I’ve been able to run it more.
AJ Wasserstein: Yeah, 60 hours a week is long. That’s a lot of time. I just think, look, this whole journey, this sort of building- being an entrepreneur, being a CEO, and I’ve written a lot about longer is better economically and qualitatively in lots of ways. But designing your business and your life to have long term fulfillment and happiness is really important. And I truly believe they can coexist. And we can all do anything in the short term. So you could sprint and work as hard as you need to work for a very short period of time. But as you just said, that’s not sustainable over decades. It just isn’t. Like no one can go 100 miles an hour forever. It just doesn’t work. So, I’m a huge fan of longer term hold periods and then figuring out how that integrates with your life. And as I said earlier, trying to focus on the personal as well as the professional. So yeah, I guess when you asked, Alex, what excites me or what themes in some of my writing, I’ve written about all sorts of wonky stuff like working capital and technical things, and look, those are important things to understand as a CEO, but I also hope, in aggregate, my writing gives students and aspiring entrepreneurs a path to really building a creative, fulfilling, meaningful life with personal and professional elements intertwined.
Alex Bridgeman: And along these same themes of teaching and changing hearts and minds, what strongly held belief have you changed your mind on?
AJ Wasserstein: Yeah, so I used to think CEOs had something really special. So, successful entrepreneurs or CEOs had something really special and magical that I didn’t have or didn’t know about. And when I was younger, I used to probably be a pest; I used to pepper any successful entrepreneur or CEO who would give me any time whatsoever, I would pepper them about their business and all these different things to try to see if I could get them to slip and tell me their secret sauce, the magical answer, which I did not know or understand yet. And after a couple decades, I realized there is no special secret sauce. They’re not superhuman. I try to tell students the only difference between entrepreneurs and non entrepreneurs is entrepreneurs took the first step on a long, scary, lonely, nebulous journey. So, they’re not better in any way whatsoever. So there’s nothing particularly special about entrepreneurs or CEOs. And I think also, with a couple decades of experience, I totally give credit to people who work really hard. I think there are a lot of really smart entrepreneurs. I think being gritty is super important. But also having the humility to understand that anyone successful has been incredibly lucky. There’s been some break or two that they’ve caught that made things come together.
Alex Bridgeman: It kind of reminds me when I was a kid, when you’re a kid, you’re like five, six years old, and you think your body is just this mass of pixie dust that runs itself. And I remember, I distinctly remember going to a science museum in Portland and going to the Body World’s exhibit where you can see like muscles and bones and tendons, and you’re like, Oh, this is actually very mechanical, there’s nothing magic about it. It’s all very- there’s all these manual processes that happen. There is no magic fairy dust. So that reminds me a little bit of that. That’s a great exhibit. What’s the best business you’ve ever seen?
AJ Wasserstein: So I’m going to exercise my faculty prerogative here and not answer the question with an answer. I’ll only answer it with questions. So, I’ll tell you the characteristics that I look for most, and I’ve written about and try to talk to students about don’t fall in love with a business label, fall in love with the economic characteristics, the underpinnings of a business. So what excites me as a leader, investor, author about businesses are asset light businesses in highly fragmented industries with negative working capital, contractual recurring revenue, high margins, possibly the ability to raise price, high operating leverage, true value to customers, some organic growth, so being in an industry that’s sort of in the second or third inning as compared to the 12th or 13th inning, high returns on invested capital, no maintenance capex, history of high behavioral customer switching costs. But those are the things I look for. So what are some industries that might pop up? So software, so niche software is very popular for obvious reasons. I have a friend that runs a fantastic insurance brokerage business that meets a bunch but maybe not all these characteristics. Some property management businesses, warranty type businesses where you get paid in advance and have some actuarial risk but asset light. Franchisors meet a lot of these characteristics, not franchisee, franchisor, although I’m very curious about franchisees also. And I think wealth management meets a lot of these characteristics as well. So I gave you a non answer.
Alex Bridgeman: That’s great too. Very on brand as well. That’s the fun part for, I think, the question is finding out what do folks find most exciting or best about certain businesses? One of our earliest guests Karen Spencer from Search Funder talked about how she loved Ringside, this steak house in Portland and how it had amazing customer service. And that’s why she liked it. So, there’s a whole bunch of different reasons why people like businesses, and I find that illuminating for just finding out what a particular guest finds most exciting. Thank you so much for coming on the podcast and sharing a little bit, continuing your teaching. I always enjoy our conversations. And I hope we can have more like this on the podcast soon.
AJ Wasserstein: Alex, thank you so much. I’m so flattered to be included in your show and really appreciate the valuable time, and congratulations on all the work you do and sort of raising awareness about small businesses to so many different people.
Alex Bridgeman: Thank you for listening. I hope you enjoyed today’s episode. If you enjoyed the show, please consider leaving us a review and telling a friend to help more folks find Think Like an Owner. I also want to thank our show’s sponsors Live Oak Bank, Hood & Strong, Oberle Risk Strategies, More Staffing, and Oakbourne Advisors for their support. For full episode transcripts and more information, please visit our website at alexbridgeman.com/podcast.
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