Mark Hunter – Lessons from a Career in Micro Private Equity

Live Oak Bank – Live Oak Bank is a seasoned SBA lender focused on search funds, independent sponsors, private equity firms, and individuals looking to acquire small companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.

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.

If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at oberle-risk.com. Or reach out to August directly at [email protected].

Mark Hunter is a treasure trove of insights and stories from a career in micro private equity. Mark is a co-founder of KLH Capital in St. Petersburg, Florida, and has been a part of deals all over the country in all walks of life. In this episode, he shares many counterintuitive methods he’s used in buying companies, how to develop emotional intelligence, be more thoughtful about who you work with and what felt like dozens of stories buying and running companies.

This conversation is loaded with advice and experience and I hope you walk away with a few ideas for your own life and career. Thank you very much for joining Mark, been excited to have you ever since you started sharing some of your stories on that Twitter thread a little while back. I know people got a lot of interest in that and I’m excited to hear some of those stories, but we’d love to first hear about your really unique background and story so far, it’s certainly one I haven’t heard before.

It’s an honor and I really appreciate the opportunity. Thanks for reaching out. So the idea here I think is that we’re really interested in how to think like an owner and how do we apply that to effectively making money. And anyone that has been involved in the deal business, people that are involved in lower middle market, private equity marketplace, people that are in search funds, people that are owner entrepreneurs. If you’re active enough for a long enough period, you end up collecting dozens and dozens, if not, hundreds of stories of things that go well, and things that don’t go right.

And oftentimes the things that don’t go well, they’re things that are very difficult to predict. And this is something that you can’t really learn in school, you kind of learn through trial and error. It’s one of those things that you’ve learned absolutely through experience. In fact, I think if you study education, or you study learning in general, you find that people learn the best through actually doing, through experience and that’s certainly been my style, it’s been my approach to doing things. I try to move very quickly and aggressively be very active and through those experiences become a little bit more refined, a little bit better at the things that we do.

So I’m happy to share those stories and hopefully some of those pearls that are buried within those experiences that can be actionable, some of that wisdom that comes out merely through the experience of people that have been there before us.

Yeah, I know, we might need to take multiple episodes to get through some of the stories you’ve just told me off the air. I know you’re from Omaha which is where my wife and I are headed here pretty soon. Could you start from there and work your way to the firm you founded and some of the other work you’ve done?

Yeah, I am from Omaha and I find now that I’ve lived in multiple places, not through the United States, but also globally. The Midwest has a unique culture, something that I really respect, especially in some of the smaller towns, the agricultural base towns, not necessarily Omaha, but outside of there, in South Dakota and North Dakota. Country folks, they’re my type of people. My brother, for example, he lives in southern Virginia, and he likes to consider himself a redneck, he identifies very much with that type of culture and I’m really fascinated with those type of things.

In fact, we’ve got a rule at one of the companies I found in KLH Capital based in Tampa that we would never do any deal based in South Florida. And the reason why is that there’s a different ethic, a different moral culture that exists there. And we’ve learned through experience the same is also true in places like Cajun Country. In Cajun Country, I don’t mean New Orleans, maybe the area near Lafayette and around there and in some of the smaller towns. If you’re not Cajun, don’t go in thinking you’re going to be able to buy a business and run it like the Cajuns do it. They have their own networks, and you have to be one of them. There’s a different style of doing business.

I wouldn’t do business in the south side of Chicago the same way I do business in Omaha, Nebraska. But growing up there was interesting. I didn’t spend much time there. I left when I was seven. But my parents would tell stories of running into Warren Buffett, he was just a normal guy because he lived just a few blocks down from the area we’re living in. He’d show up at Burger King, or whatever it was and he was just a normal guy. And later in retrospect, we realized that that was a unique opportunity to be one of the people that I consider a mentor now.

So how did you start KLH Capital? What was the story there?

Yeah, I think founding stories or origin stories are really interesting because those folks that are not yet acquiring and building companies or starting their own, they may be on the sidelines and they’re always wondering, “Is this something that I can do? Am I qualified? Do I meet the minimum requirement to be a business owner? Can I also become wealthy?” These are the things that were certainly in my mind growing up and throughout my schooling education. And I suffered from this inferiority complex.

So my hope and inspiration today is that folks that are listening that they hear stories like my own, and those that I’ll tell are some other founders that I’ve been privileged to work with that they gain that confidence. Like, “Hey, if some mediocre guy of average intelligence can do it, so can I.” And I think that’s a missing component of a lot of people’s growth and development is just that’s extra boost of confidence. There’s completely normal people that are doing really extraordinary things because they’re matching with the right environment, they’re matching with the right mentor, the right coach, the right business partners, the right employees, they’re able to find an environment in which they thrive and it’s something I’m really fascinated by and I’m really interested in how inefficient that is in our current economy.

It’s like, “I can’t think of a worse way to prepare people for accomplishing the things that they actually want to.” So most people, I’m thinking mostly people that are wired like me, people that are interested in having control over their lifestyle, people that are interested in economic freedom, people they’re interested even if it’s a power trip, it’s like, “Hey, I want to be an entrepreneur because I get status in society.” Or I wanted girls, the way that guys get girls is you get rich. And so it’s like there’s a lot of different motivations for going in business, but there’s not a clear way to do it and yet, there’s an enormous amount of value provided by understanding how to create that on ramp.

How does someone match with the perfect environment? And in my own case, so I had a little bit of a traditional background that in high school, I knew that I was either going to be a fighter jet pilot with the Air Force which was by far my number one choice. I didn’t think about anything other than flying and beating up bad guys. I’m totally wired for that. I want some action, I want some adventure or I was going to go out and make a lot of money. I was going to start in business. If I was 14 and I had the opportunity to quit school and just start business, I would 100% absolutely drop out of school. In fact, I did drop out of school when I was 16 because I was putting this program for kids that it was to basically prepare people for STEM careers.

In Virginia, it’s called a Governor’s School. So you go there for half the day and you learn bio and chemistry. It was the most soul sucking thing I’ve ever done in my entire life. I couldn’t stand it, it was horrible. I got A’s, I got straight A’s, I impressed my parents, it was great. But I wasn’t wired to be someone boring like that, I had to do something different. So I quit school and moved to South America randomly because I was like, “Well, I’m going to study poverty. I’ll study developmental economics. I’d rather be in a poor country learning about it instead of like reading from a textbook.”

So when I was 16, moved to South America for a year and really had no intention of coming back. It was like, “This is a hell of a lot more fun and interesting to go into gunnery school back in Virginia.” So did that. But then I was like, “Oh, the Air Force Academy is not going to accept me, I can’t be a jet pilot if I don’t have a high school degree.” So I came back to finish high school and then was unable to get into the Air Force Academy for a variety of reasons, mostly because of my eyesight, I think or I like to blame it on my eyesight. I got not qualified, not probably qualified and so freaked out and really cheap.

And so I started looking for a really inexpensive ways to accomplish my goal, which was how do I make money. So I wanted to go to school and get the minimum thing necessary in order to get into a career that is going to pay me a lot. So I looked up careers to get paid a lot. Number one starting salary for people with undergraduate degrees within investment banking. So I’m like, “Oh no, yeah, that’s a no brainer. Let’s go do that.” So I’m going to study finance. But with my record in high school, I’m not going to get into Ivy League school and I’m probably not interested in competing with the folks who go to Ivy League school.

So I applied to a local school, Virginia Commonwealth University in Richmond who gave me a full scholarship. And I was like, “Dude, let’s do it.” And the benefit of going to a smaller school like that … It’s not smaller, it’s actually the largest school in Virginia, it’s just not necessarily a reputable school, or at least wasn’t back then, it’s improving over time. But the field of that business school wasn’t really well-developed or well-known. It’s where the kids go if you don’t have any other options which is how I was able to get a scholarship, of course, but the cool thing about that is that they accepted all kinds of AP credits, and I could bend a lot of the rules.

So I love the title of your podcast, Think Like an Owner, I tried to think like an owner and take … But to me, that means taking responsibility for one’s actions. It’s like thinking the next step behind what’s actually happening. And so I was very clear as. I was like, “I’m going to school only because I want to make money.” And so that meant I need to get in and out of there as fast as I can because a year of experience is worth a lot. A year of earnings is so much better than a year of 25 grand a year of lost opportunity cost and tuition and room and board and all that crap.

So I was able to skip two years of university long story short, and then I cheated, I just went to like the University of Virginia McIntire School of commerce, I knew the big investment banks are recruiting there. I pretended like I went to UVA. Nobody could tell the difference. I did the same thing at Duke, I went to all the good schools and I met the right recruiters and that was my on ramp into investment banking and after two or three years of suffering through an investment banking analyst position, and realizing that my soul was dying and that’s true for a lot of people that are in that type of role when you’re working 80 or 100 hours.

Every week it’s like you can only do it for so long before you started thinking about other things. I was suffering from this inferiority complex. I didn’t go to the right school, I didn’t feel like I belonged there. I was like I didn’t see that I could become a managing director. I was very young, I got kicked out of a dinner meeting one time with a client because I was underage and there was a bottle of wine on the table. It was one of those scenarios, that internalized as, “Oh, I don’t belong, I don’t belong, I got to find something else.” And so I was concerned about getting fired, actually. I was a pretty shitty employee.

So very fortunate to have met two individuals that were what I consider be the OGs, the original adventures and this weird niche of micro p, what I would consider kind of micro p or they were doing very small leveraged buyouts. And they had started that way back in 1985 with a bank that doesn’t even exist anymore. It used to be known as Chemical Bank. And they had created their own fund of $5 million which to them was like a huge amount of money at the time. And they went out buying these small companies, especially in the southeast, and yet acquired 50, 100 of these companies, they did really well and they kind of and at that point that I met them, it was just a perfect time is that they weren’t too active.

They had met I think their own financial goals. And I was young, I was ambitious, 23, 24 years old, wrote them a letter, I was like, “I’ll do anything it takes. I’m super interested in learning the things that you guys know. Let me know how I can best learn from you. If you take me on, if you guys can be my mentor.” They invited me down and met them and one thing led to another, I was able to kind of go into business with them in which I basically ran most of the operation and they were investment committee and they did the things that I couldn’t do like talk to business owners at the time.

My first year I had no idea how to talk to a business owner and they were really good and were able to show me the ropes there. And I was very fortunate because they gave me kind of that freedom to go make my own mistakes. And so that’s how I got started in private equity as a very young person, and we were doing deals just on the side. We’d buy one to three companies a year just as individuals, not as a formal official effort, but I came to him after 12 months of doing that, it was like we’re finding a lot of really good quality deals, and I think we can make actual money here and I don’t think it’s going to impact your personal lifestyle.

What if we created a fund to do this formally? So that’s how KLH started. We weren’t very creative so we just took our initials, Kirtley, Leck and Hunter and we formed KLH Capital. And long story short, that company now, we manage about a half a billion of assets under management. And it’s been successful enough that none of the original co-founders, John Kirtley, Jeffrey Leck, or myself are actively involved in the operation now. That we’ve passed it along to the next generation.

So with the early days in that investor group, you said you weren’t talking to business owners. You didn’t know how to do that yet, but I’m curious, what lessons did they begin sharing with you during those 12 months working with them?

Let’s go back to founder stories. So one thing that I quickly noticed on some of my first trips to tour companies with them, and I was in a very privileged position because even though I was young, by the time I was 29, I probably reviewed thousands of deals on paper, and have personally met with in person and toured companies over 100 times of all kinds of weird companies and diverse geographies and industries. So I learned by being able to tag along with them for the first few trips, I saw that their style was unique, and that they immediately formed personal relationships with people. And it wasn’t so much about business as it was about learning about the things that mattered to them, the core motivations and are we good partners for each other.

It was this dance of like, “Let me know what you’re looking for. I’ll tell you what I’m looking for and this is how I kind of do business. And if it works, that’s great. If not, it’s cool. We don’t have to do a deal. We’re doing this because it’s fun and it’s interesting. We like to hang out with smart people that have been successful.” And so I learned that it was a casual thing. I’m used to high stakes like investment banking, I’m going to wear a suit, and we’re going to pitch this CFO of Raytheon and we’re going to do a deal. This is entirely different, more super casual.

In fact, one of the feedback I got from one auction process that we were involved with, of course, we tried not to get involved with auctions, but occasionally, it happens. So the feedback they’d rather gave us was like, “Yeah, you guys seem great. The cool evaluations on target, but you’re very sloppy. You didn’t tuck in your shirt. You didn’t take it seriously.” That’s what our approach was, but I think it taught me some really important lessons about what really matters and the game of buying a company is much more about the personal motivations for the people involved, it has to do with the things that you’re not going to see in a confidential information here.

And this isn’t going to show up in the offering memorandum, these are things that you have to meet with people in order to truly understand, in order to really understand if it’s a good match for you because not every deal is going to be a good match for you. Not every good entrepreneur is a good fit for a certain form of institutional capital. And the weird thing is that most of the people that try to get in between deals like business brokers, investment bankers, CPAs, attorneys, people like that are likely to come across an owner that’s looking to sell, they have no idea how to run a proper process, they have no idea because they focus on things that don’t matter. And they try to have like these power trips, and they try to control a process. And they’re like, “No, we’re doing this and you have to follow these rules. And we’re doing a big auction. Da-da-da.”

It’s a huge disservice for entrepreneurs, it’s a huge disservice for capital providers. And so I got so annoyed with that, that I started becoming active in the industry Association for Business Brokers because I want to teach them or, “You guys got it all wrong. You’re not focused on things that matters.” So I joined the National Business Brokers Association, I started going to the workshops as if I was a business broker myself and I loved it, I started telling them, “What you need to do is just get out the way. If you can get out of the way, that’s going to help us out a lot. And we’re going to be able to get your deal closed.”

In fact, I’ve got a higher probability of closing without you involved and with you involved. And I started telling you about the different ways that diligence that it works out. And that’s been one of the major hurdles that we run into. In fact, all those people that are out there starting to search for companies, I’ve got a situation right now, one of my buddies here, in the Tampa Bay area, he’s looking to buy a small business, and there’s a great company that’s for sale, and he can’t get around the business broker. And so I wanted to write an entire memo, an entire essay about how to get around this guy because you have to go talk to the owner directly.

You have to live with that owner, you’ve got to know them so intimately that you’re going to catch that one thing that’s going to cause you to lose a lot of money. And even if you don’t, you need to learn the things that that guy’s learned over 30 years of doing that. That’s how you’re going to learn and grow in the business. And I’ve got a few examples of situations like that where during diligence, I just went to go basically live with the people that I was about to do business with. Literally I try to invite myself over to when I have to visit the company, I try to sleep at their house.

I want to be so close with them that it’s a natural invitation like, “Dude, don’t stay in the hotel, we’ve got a guest room.” And that’s happened and I’ve lived that and in fact, I lost a ton of money on a company in Jackson, Mississippi because I discovered something while living at the dude’s house. I was staying at the guy’s house. So let me back up. I’ll give you the full story on this one. I don’t like reinforcing stereotypes. But here’s one of them. Here’s a redneck from the mid south. I love rednecks, believe me, I love working with rednecks because I totally like that style. So I get along with these guys really well.

So he runs the second largest auto repo company in the country and I love the industry. It’s on sophisticated, it’s dirty, it’s like nobody’s smart you’re competing with. You can innovate, you can be creative, you can really build an amazing professional company in this industry. It’s one of those things, I was like, “Man, I’m going to go sell everything I own and put more money in this company.” And so we do the deal, the seller stays on, he’s still running the company. And I’m staying at his house with him and his wife. And this is two or three beers into the evening. He’s like, “Hey buddy, come over here. I want to show you something. Hold my beer.” And it’s like the classic meme.

It’s like when a dude says, “Hey, hold my beer, I want to show you something.” It’s like, “Oh shoot, what’s going to happen?” I got that feeling in my gut. It was like, “Oh-oh.” And so he pulls up Google Earth and this is in the early days of Google Earth and he’s like, “Look at this. Have you ever seen this before?” I’m like, “Yeah, of course, I know what Google Earth is.” He’s like, “Well, you know that door knocking service that’s really profitable for us? Let me show you what we’re doing.” I’m like, “Okay, well, how do you do it?”

And he’s like, “Well, the companies, they really like to get updates on their accounts. So we’re the best in the industry. We provide those updates, and we’re better than anybody else. And you know how we do it? We use Google Earth.” I’m like, “What are you talking about?” And he zooms in, he’s like, “All we got to do is tell them we sent a driver out there and this is a one story brick rancher, and there’s nobody home, but the utilities and all, we’re going to try again tomorrow.” And that’s an update and they get paid 40 bucks to going out and do that.

I’m like, “So you tell the customer that you go and do this thing, but you’re not actually doing it?” He’s like, “That’s right.” And I’m like, “Oh, crap. That’s what you call fraud. That’s a major problem.” And I didn’t say it out loud because I was living at that dude’s house. But it’s like, “We got an issue here.” Long story short, that’s where of course all the margin of the company was. As soon as you get rid of that service, you got a problem. We were highly leveraged, that was the end of that story.

So maybe one of those lessons, don’t do business with people that have strange ethics that think that cheating customers is okay, maybe really profitable. That’s not to do that. I unfortunately learned the hard way of doing business with people in many different industries that think some things are okay where it’s really not.

Is there another story are dealing particularly can remember where you feel you learned the most from?

Well, in other really quick lessons that my first ever deal was a complete write-off. And this was a company that I would call it, it’s involved in the cosmetics industry, they blend certain things like lotions and it was very highly profitable. And we had two guys that were industry veterans that really had the distribution relationship. So like, “Hey, we can take this really small company. We make a few phone calls to our friends and these big companies, and it’s going to be three times the size it once was. Just wait, we can show you how to do this. It’s going to be amazing. We could buy any company really cheap.”

It’s awesome as a management buy in so we weren’t too concerned about the seller. So we always hire a private investigator to do due diligence, background checks on people and we do really intense background checks. We pay a lot of money to do … I want to know the size of underwear that people wear. I want to know everything there is about somebody and so our PI comes back to us like, “Hey, I don’t know if you know this, but this is a dude who was pulled over for a traffic incident, a very minor thing. But as he opened the door, according to police report, there was a crack pipe in his jeep.”

And so he got busted for, not cocaine, not anything else, but for smoking crack. And so I bring this to my partners, I’m like, “Hey guys, this is weird. We’re doing business with a crackhead. I don’t know if we want to do this deal.” And so we talked through it. It’s like, “Well, we reconstruct the financial statements, we know, it’s a myth and buy in like. We got confidence in numbers. The guy’s not staying around, maybe we want to do the deal.” Lesson learned, don’t buy a company from a crackhead, okay? Just don’t do it. I’ve done it, you don’t want to do it, you’re going to lose all your money, that’s exactly what happened, it was a write-off. One of the many things I’ve learned over the years don’t buy businesses from crackheads.

Speaking of destructive behavior. I know you’ve talked a lot about emotional intelligence or definitely thought a lot about it. And we’ve discussed it before, I’m curious how you’ve seen emotional intelligence play into deals that you’ve worked in over time?

Absolutely. So I currently work with a really wonderful guy. I think he’s brilliant and he’s super fun to work with. And he likes to be very precise with this language. So we often ask things like, “What’s the question behind the question?” In other words, let’s go down to the pith of what we’re really talking about here. What are these core motivations?” I think what we’re talking about here is what are the ways that I can increase the odds of being lucky? What are the things that I can do that level up my game that make it more likely that I’m going to meet my objectives?

If those objectives are making money or building a business or whatever the case may be and it’s an area that I’m fascinated with because of course, this is not something that school covers. School completely ignores this. School actually trains you to be the complete opposite of an ideal entrepreneur and it takes many years to unwind that thing. But there’s things that I’ve noticed through like repetition just from enormous amount of action and experience in the real world that allow someone to be really lucky. And it has a lot to do with the core question of, “Who do you want to be in business with?” And this is where emotional intelligence comes into play. It’s very undertheorized, I think it’s very underappreciated.

I think if you talk to a bunch of old people in the industry that have bought companies, it’s something that they’re all going to … They may not call it that, but they’re going to talk about it as being one of the core things because business is all about humans. It’s all about relationships. It’s like relationships with investors, relationships with owners, relationships with employees, and management, and suppliers and customers. And it’s all driven by relationships and you want to be someone that everybody wants to work with. You want to be someone that they go out of their way to say, “I choose you.”

So if you’re a searcher looking for a company in today’s world, the market is so red hot that there’s going to be competition for it. And so your question is like, “How am I going to stand out?” And you’re going to want to have somebody on the opposite side of the table say, “I don’t really care so much about economics, what I really care about is being able to work with you.” So what are those traits? What are those characteristics? And what I interpret that to be is it’s a form of maturity, it’s being highly evolved. So I heard somebody really smart on some podcast, it may have been Reid Hoffman or like Marc Andreessen, someone that’s an all star.

They were asking a question like, “Who do you hire? What’s your criteria for hiring people?” There’s just one thing you could look for and they mentioned, “Well, I really want someone that’s conscious, someone that’s aware.” And that is exactly what my experience points to. It’s very natural that that is the type of person that you want to work with and if you’re in the presence of someone who is highly evolved, that is very aware, that can concentrate their mind, that can focus, they become someone that’s an ideal partner and I’ve been fortunate to be in business with a wide range of folks from people that are highly evolved to those that have the moral development of a crustacean. And you learn from every one of those experiences.

And so rich people, people that have control over resources have a lot more choice. And so they’re going to be more selective in who they choose to work with. And what I found is that if you can level up your game to be more highly evolved so that you are more selfless, so that you’re more patient, so that you’re more humble, so that your ego doesn’t get in the way. So you’re a little bit less disagreeable, so that you’re in a position to tolerate pain and suffering while keeping your eyes on the prize, so that you can make sacrifice on behalf of other partners that you’re working with. Those are things that build the integrity of the core of the type of person that I would want to work with. And that’s the type of people I’m looking to do business with.

And what I found is that that is not ironically, it’s exactly what you find when you look into any kind of wisdom tradition. By wisdom tradition, I mean the keepers of like the core tenants of truth within a society or any culture. Most people tend to refer to religion as a religious wisdom tradition. And so looking anyone like and this is a little bit weird. But if you look into the Bible for example, you’re going to find that all of Jesus teachings help you to become incredible at business. It’s a very unusual take, but it’s one that I totally believe in. And it doesn’t have to be like the Bible, it can also be look at the Bhagavad Gita. Look at the Pali texts from the Buddhist scriptures.

Look at the Torah, look at the Quran, look at any wisdom tradition, and all of them are pointing towards the same thing which is become selfless. If you could summarize the Bible in one word, it’s like be selfless. It’s like think of others before yourself and that’s exactly the type of person I want to work with and I think most people want to work with somebody that way, somebody that is simple, that’s humble, that’s patient and you think of even stories from the Bible that I just love, things when Jesus says he’s like, “Hey, if you really want to follow me, go sell all your things, give the money to the poor, and follow me.”

So what does that mean? What that means to me is what I’m hearing is focus, what I’m hearing is something that I can apply to the business world, because what would happen if a potential employee or a business partner came to me and said, “Look man, I love what you’re doing. I love this style of thing. I don’t know how you’re doing this stuff of thing, but I love it. I want to be part of this thing and I don’t really care about my selfish interest right now. What I’m really interested is in learning. I’m going to go sell everything I own. I’m going to pack into my car. I’m going to drive wherever you are, and I’m going to learn from you.” If anybody approaches me like that, they’re hired. I’m going to business with you right away.

How can I invest in a person like that? And I think that’s what someone like a spiritual leader like Jesus is pointing to and I don’t see a difference between the spiritual teachings and wisdom and the actual world. To me, they’re exactly the same, they’re teaching the same lessons.

I know you’ve also talked about his personal awareness becoming a more likeable person, but also be more aware of just in the pursuit of money and how there’s a sense of maturity that you’ve found to be really helpful for that. Can you walk us through a little bit of the way you see the pursuit of money and becoming a more mature person over time and how those two concepts interact with each other?

I think the question is about what game are we playing? What are the core motivations for us going into business? Why do we want to search to buy a company? And I think that root question is about ultimately what makes us happy. I think that that drives all of human behavior, every choice that we make every day, if we’re conscious and aware is driven by this desire, which one of these is going to make me happier, and most people feel that resource is that’s the route. If I just was rich, then I would be blah-blah-blah. So it’s just future projecting. The trap with that is that it doesn’t allow you to be present and happy in the current moment, it’s always going to set you up for disappointment.

Naval Ravikant says it really well is that it’s like a contract for odd happiness or disappointment. And that’s exactly what Buddha says, it’s exact same thing. And so I think of maybe I’ve got four maybe things that I really like to focus on is key qualities or takeaways or lessons, and one of them is focus. So focus is the thing that I see first before I see success. It’s one of those things when I’m evaluating new people to potentially hire as a manager that maybe I want to back somebody I want to invest in. I see how focused they are. There’s hacks and learning how to get that is that they can remove distractions from their life and that’s exactly what you see from the ancient truths is that there’s a lot of people they’ll refer to as renunciation.

Renunciation sounds horrible, nobody sounds excited about doing it. It seems the opposite of what we want to do. It’s like, “I want happiness, I don’t want to get rid of the doughnuts. I don’t want to get rid of the fun things.” And what it really is thinking about is thinking about the timescale. It’s like, “Am I interested in that that is immediate for that instant gratification or am I interested in something that’s longer-term? Can I pass the marshmallow test and give up in the current in order have something better later?” That’s a sign of maturity and the ultimate sign of maturity is that, “Hey, in the really long run, we don’t have bodies.” And so what happens then?

So there’s people that have theories on what happens after death, and everybody speculates, but there’s this idea that you can train yourself to have certain impressions and benefit your current state by having that super long horizon, by thinking about the non-physical, I like to think about, I always evaluate people, businesses, mostly people because that’s what all the business is I’m evaluating how focused they are, because that is the key determinant to how successful they’re going to be and I see it, everybody knows this. So if you’re going to go to a big fight like MMA or boxing match, they spent months in seclusion at a fight camp so that they can focus exclusively on one thing.

Same thing, if you’re going to be the best golfer in the world, you’re just going to get rid of everything else and you’re going to golf and golf and golf and golf and it’s like if you imagine energy coming in the top of your head, it immediately it becomes fractured and dissipated by thoughts and worries and concerns and hangs ups and melodrama and projections and memories and theories. And if you evaluate the top performers in any field, you can examine their focus and their people, they’re absolutely obsessed with what they’re doing. And it’s just that they’re a little bit more focused than the other people. That’s how you’re out-compete people it’s not about IQ.

It doesn’t matter what your SAT score is, it doesn’t matter what your GPA is, what matters is can you concentrate your mind? And that’s really the essence of education. It’s the basis of entrepreneurship and so if you want to be wealthy via entrepreneurship, I would first talk about things that nobody else is, which is clarity and concentration. What’s your actual mission? What are you actually looking for? Related to that are things like desire because desire is a great tool to concentrate the mind. If you really, really want something, you just focus on one thing and everything else goes away. And so it’s like how do you cultivate that burning fire, that burning desire, and also becoming likeable?

And I think likability is one of those things that people that naturally get their ego away, they become much more pleasant to work with. And people that have resources, that’s who they choose to work with.

Yeah, absolutely. And to the point of becoming more likeable, you’ve talked about just the personal growth stories of some of the people you’ve worked with, and can you think of a person you’ve come across in your life and business that has one of your favorite turnaround stories where they started recognizing those things, and really transformed their life and career?

I’ve got dozens of stories like that. Let me pick one. This is a fun one. So this is also one of the most profitable deals that we’ve done. So this was a company that if you’re driving on the interstate, and you see these big aluminum style steel containers that transport bulk liquids, anything from chemicals, paint, gasoline, you name it, it’s transported in these big containers. The largest company in the country that does that is based out of Tampa called Quality Distribution. They ran into some financial hiccups, they needed to raise some money and pay off some high yield bonds, the CEO decided that they would do that by selling off an orphan division.

They cleaned those chemicals and paints and eggs and chocolate and peanut butter, everything else that is transporting these things. They clean in between those loads, so that you don’t contaminate the next load. And we had met this guy that was the general manager of that division. Now, this is a dude, that if you can imagine, he’s 350 pounds and maybe three years ago, he was a truck driver. So that’s his career path and he’s an amazing, awesome dude. And I met him just through the magic of coincidence, and that I went to a conference out in Las Vegas to talk to business brokers, frankly, about how to get out of the way and in one of his workshops, and so after that, I was on a plane, I was connecting through Charlotte, and one of the guys on the plane, he recognized me as being at that conference.

He’s like, “Oh dude, were you at the Ivy League?” “Yeah, that’s me man.” And so he introduced himself. He’s like, “Yeah, yeah, I’m a broker. I’m out of North Carolina.” He’s like, “You know what? I’m actually working on a deal near you guys. But it’s a little bit late in the process, we already had three groups come through. We’ve picked our guy, we’re moving forward. I wish I would have known you before.” He’s like, “Oh, bummer man. But dude, if it’s local, you’ve got to let me meet the people, at least, what do you have to lose?” And so I really try to sold them, sold them really hard. I was like, “Give me a chance man. I want to talk to this guy.”

So we get in, I go in with both of my business partners. So it’s the three of us and we pitch this guy and so I thought it went really well. It’s like, “Oh man, we’re totally winning this deal. This guy loves us, this is wonderful. This is going to be great.” So a few days after that meet, I don’t hear anything. So I call the broker and like, “Hey man, just looking for some feedback? How’s it going? What do you think? Can we make this work?” And he’s like, “We really are very selective and we brought in three groups originally at [inaudible 00:37:28]. And honestly, you’re in fourth place. We got much better options man. But thanks, but no thanks.”

And that was it. Okay, great. So what do you do then? I think most people at that point they just give up. It’s just like, “Okay, well, I can’t do anything.” So I’m a former juvenile delinquent and so I like to break all the rules and I love people that break rules, I think it’s a really necessary thing for society. In fact all times, when there’s an innovation or there’s a breakthrough or anyone that pushes society forward, they’re always breaking rules. We should encourage this all the time, rules are for people that are compliant which is exactly what school teaches you. It’s not for entrepreneurs.

So the rules of the game was that I was supposed to give up and so I was like, “Perfect.” Now I get to put on my helmet and get in the game. So I hired my private investigator, I’m like, “Hey, there’s this guy. Here’s this name, he runs this little division of this company, I need to meet with this guy. Give me his cell phone number. I can’t get his number any other way.” We hack his phone number, I call him like, “Hey man, it’s me. You may remember me.” It came in, whatever. “I understand, we’re not moving forward. It’s totally cool. But because you’re local, why don’t we meet up, let’s have a beer, you bring your wife, just get to know you a little bit better and we’ll share some stories.”

So I called my friend who’s ran this restaurant and I was like, “Okay, I’ve got special guests, they’re totally VIP. Here are their names, I need a custom menu that has their names printed on the top of it.” So I was like, “I’m going to really blow these guys away.” They’re going to remember me even if they never want to work with me. I have these custom menus printed, also invite partners, they came along, it was really cool. So I sit next to this guy and we’re just drinking a beer, having a really nice glass of wine. And I’m telling him all of my deeper values.

So he knows a little bit about my character and why I’m in business, what I’m doing, what I’m interested in. And so once he starts trusting me a little bit, I really start opening up. I tell him all of the things that I know that private equity groups are going to do to screw the management team. “You need to look out for this, your documents, watch out for this, da-da-da.” And keep going through all these things. And like, “Look, not all people do business the same way.” And long story short, at the end of that dinner, the guy shakes my hand. He’s like, “Dude, so nice meeting you. This is really wonderful. You’re the guy we’re going to work with.” “Perfect.”

So I turn this situation completely around to the point where we became his key partner in that deal. So this is a guy that I would say, blue collar hustle. This dude had hustle like nobody else, and I loved it. And that’s why I wanted to bet on them. This was a very asset-intensive business. So it doesn’t fit a traditional private equity profile. Yeah, we’re spending like $2 million a year on CapEx, there’s a lot of things not to like about the company, but I love this manager. And so he’s the type of guy that grew professionally so much out of just raw desire.

This was his chance to finally make it he was going to take care of his family through this deal. He was so motivated by that and what he didn’t have in terms of educational background or any of this up he made up for from just desire and that’s all it takes. Long story short, we buy majority control of that company with a $3 million equity check. So we own 75% of the company. We end up buying the number one competitor using some really creative financing without having to put any more equity in the company. And within like two or three years, the company is valued over $100 million and we still own 70% of the company that we bought for a $3 million check and that sets up our fund.

All you need is one or two deals like that and it’s like, “Boom, we’re now in the big leagues.” We can now raise money, we can now show that we’ve got something special and the big pivot point there is just hustle, it’s hustle from management team, but it’s also hustle from the guy like me that was searching for the company. I knew I was a loser, I knew I missed out on that. But by going the extra mile, and building a personal relationship, I was able to turn a non-deal into a deal. And that became kind of like my mantra is, “I’m going to turn all the non deals into deals, just wait.” And that became my personal mission. And we did it a handful of times. And I love telling these stories because they’re, in fact, the top three most profitable deals I’ve been involved with we’re all that way, the deals that I pulled out of the trash can.

Yeah, I’d be curious for some of the other stories about what are the most creative ways you found to buy a company?

Okay, let’s talk about, here’s a fun one. So this is a government contracting business based in mid-Atlantic area. And we saw the company and my interaction was with the CFO. And so I learned a little bit about the business. And I try to go really deep and diligence. Even if I know it’s not a deal I’m going to do, I want to learn as much as I can from the people that have been there and done that because I’m going to learn a lot about the industry to see if there’s might be other opportunities. But I’m also going to learn about just the nature of running a profitable company.

There’s a lot of interesting human stories that come out of the tragedies and the excitement of being in the deal business. And so I met with the CFO, and he’s like, “Yeah, here’s the situation. And talking to this guy was like talking to a normal CPA, just boring as hell. It was just like, “This guy’s got no personality and he presents a company this way.” He’s like, “Yeah, it’s family-owned, there’s a lady that owns it now. And there’s a son-in-law that is involved.” And he’s like, “But I got to be honest with you that 80% of the company is tied to this one government contract and that contract is up for renewal in 18 months or something like that. And yes, we are qualified as a woman-owned business.

Cool. That’s enough for me to kill that deal. And that’s what every sane, normal person and the deal business would do. It’s like you can’t take that risk. That’s not okay. That’s not smart. That’s not what smart people do. That deal we quickly passed on. But at the time, I knew that I was going to pursue other things outside of private equity. And so I was trying to share some of the things that I learned through experience with the younger guys. And I have to introduce a guy that I think the world of, he’s become a good friend. And he’s a dude that we literally met at a bar. We met him at a bar after work one day and he’s just a normal awesome dude that has a hell of a personality.

And everyone can be a friend with this guy and we met him. And he was selling insurance at the time. He’s 22 or 23, something like that. So just starting out in the insurance business. And I met him, I recognized, “Dude, this guy’s personality is awesome. He can talk on the phone for days. What would happen if we hired a guy like this? A guy that doesn’t have the traditional finance background? Didn’t go to Ivy League school? What if we brought him into the company?” And so I was very fortunate that my partner Will, agreed to that. We’re like, “Okay cool. We’re doing this. We’re hiring him.” And so we started working with this guy, Kyle. And long story short, that guy becomes by far … I think he’s like the number one guy in terms of origination, finding good deals to buy for lower middle market companies.

He’s incredible, he’s an absolute machine. And so at that time, I was trying to show like teachable moments about how to do proper diligence on companies. And so we had this federal government contract company. And so I’m like, “Hey, this is a deal we’re not going to do. It’s a really crappy deal and here’s why. But let’s just go chat with the guys that are involved because I’ve got three pages of questions and it’s this process of asking question that is going to teach us a lot about doing deals. It’s going to teach us a lot about how to evaluate companies and what’s good and what’s not good.”

So we’re like, we’re going through with the CFO, all these questions which is boring, boring. It’s like, “Oh.” It’s just, “Okay. Time to move on with our lives.” And finally, we got to something he’s like, “I don’t really know the answer to that. But I’ll tell you what, there’s a guy here, our VP of sales that probably does. And let me just grab him. He’s in the next office.” And so this guy, he gets on the speakerphone and then the moment he starts talking, two or three minutes, Kyle and I look at each other, we’re like, “Holy crap, we’re doing this deal. Where did this guy come from? This guy’s a dynamo. This guy is amazing.”

And so by that weird, extra effort, we learned something about that company that everybody in the world would have missed. And so we came back to the investment committee like, “Hey look, we know that this company looks like it sucks. This is not a good deal on paper, but if you peel back the layers of this onion, there’s something really interesting going on.” And I think we can get over these things. Let’s do this deal. So long story short, that ends up being a massive winner for the company. It was really a home run for both the management team, as well as investors.

What did the salesperson say or do that made you so excited?

This was a young person that you can quickly tell when somebody understands their business really well. And they understand the path for growth in the future. So one of the things we’re always looking for is, is there a clear path to growth and so if you start asking questions like that, a really good manager that’s poised to grow is going to have an absolute plan. They’re going to be a drill sergeant, and they’re going to say, “This is what we’re doing, we’re going here, we’re going there, we’re going to do this, da-da-da-da.” And it’s just what they think about all day long.

And so it was just crystal clear and every objection we had, he had a perfect rebuttal for it. And so he knew what our concerns would me because he’s, of course, evaluated his own company. He also doesn’t want the business to go bankrupt. So he’s always concerned about customer concentration, he’s always concerned about where the next revenue is coming from. And so by having really good answers for all the things that we were coming up with, we knew that this is a guy that’s very aware, he’s very conscious. And he’s got the energy and the drive to take this company to an entirely different level. And he could see in the industry things happening that I’m sure the other leaders of other competitors weren’t seeing.

And so it was like a lot of is intuitive hit. And over time, you just get to recognize those patterns and intuition becomes stronger and you get a little bit more confidence in it. I’ve had many situations where I’ve relied on intuition and somewhere I didn’t, and I end up losing big. And this is one of them. I’ll tell another story about there’s a company in South Florida, this was before I had that rule of never buying a company in South Florida. So this is a business that is one of the largest companies in the nation that distributes lawn and garden equipment. So this would be equipment that’s sold not to a homeowner, but to professional landscape crews and things grow like crazy in Florida.

So this is a big industry. Not a sophisticated company, not as sophisticated industry, it’s a dirty sweaty startup style of business. And we buy the company from a retiring owner. We buy it very inexpensively and the general manager is who we back in taking kind of an ownership position and this was his first chance at ownership. He’s really excited about it and things go really well for a few months. And then all of a sudden, we start noticing that the margin shrinks, things aren’t working the right way and like, “Man, this is bizarre.”

And so because it’s a Florida company, and because I really wanted this deal to work out, I was tired of having write-offs. I spent more time with operations. I rolled up my sleeves and I started crunching numbers and trying to figure out why we’re not doing as well. And through that analysis, it’s just like I couldn’t make sense of anything so I had to go on site to start asking more questions. So that’s the essence of science, the essence of any inquisitive process. It’s like you have to ask questions and keep asking question and that’s what just as an aside, I’m a bit troubled by this dance we have in America that’s popular knowledge is we believe in science.

It’s completely nuts. It’s like you can’t believe in science. It’s like the essence of science, it’s the essence of like being skeptical and being inquisitive. And so I go to West Palm Beach to be really inquisitive with the general manager and the owner of this company and the controller and I can’t put anything together so I stay there a long time many, many days, and then eventually, I get deep enough into the organizational chart where I’m talking with like the hourly employees, salespeople, and that’s when I learned something really interesting.

So a lot of the landscaping crews, some of them are maybe not documented immigrants, and so they don’t trust banking systems. And so they will buy $12,000 of equipment with cash, that’s just how they operate. And so I start tracing how … I asked this guy at the desk like, “Okay, so if somebody comes here at 12K, where does that K go?” He’s like, “Oh, we’ve got a rule, we always have to give it to this one GM, and then the GM takes care of everything.” So by auditing cash procedures, I started becoming a little bit suspicious.

There was only one person involved in that process. Sure enough this guy was stealing from the company. And more than that is that we started looking at credit card bills, and I started seeing stuff from like Zales, a jewelry company, it’s $4,000 and the weird stuff. It’s like, “Why are you buying jewelry? We’re a freaking lawn and garden company.” And he was like, “Oh yeah, he was going to reimburse it.” I call him out on it, I immediately fired the dude and this is such like an unsophisticated industry that there’s no institutional management. There’s no professional management in any one of these companies, we’re one of the largest companies in the country.

And so it’s like all the vendors, they’re used to working with Bob the owner. And so that person relationship is so important. And so to have the volatility of having a kick out, a key manager, the guy that’s known as the owner and the guy that you’ve always worked with for 20, 30 years, it’s not good. It’s not good for vendors, it’s not good for anything. The customers have known this guy better. It’s like, “Oh crap. This is not going to be good.” Well, we find another guy through a headhunter that is perfect on paper. That’s just he’s got the best experience possible to run this company.

He knows the industry really well, he writes white papers about how to improve certain operational things. He knows all the vendors are ready. He’s super well-respected. It’s like, “This guy is awesome. We are so lucky. We should double our headhunter fee on this one because this guy’s amazing. He’s going to save the day.” So we bring in this guy, and I’m doing my diligence on him. I spend as much possible time with them in person as I can. So I’m driving around in his car, we go to lunch or something, we come back, and he opens and this is a day or two before the guy starts at work.

We decide, “This guy is just perfect. He’s awesome.” And everything I learned about him, it checks out. The guy is amazing. And so, but there’s this one situation so I’m in his car, he’s driving an SUV, and I get out of the passenger side, and a bowl of toilet paper rolls out of the car. It’s just the weirdest thing. I’m like, “Okay, that’s awkward. But okay.” So I grabbed the thing of toilet paper and I hand it back to him. And he’s smiles and chuckles and laughs it off. He’s like, “Oh yeah, just in case of emergency or whatever.” Yeah, it’s good. But something hit me. It was a weird intuitive hit.

It had nothing to do with toilet paper. It had nothing to do with the situation at all. But I just start feeling like, something’s off with this guy. He’s perfect, but I don’t feel, something my gut hits me that it was like the universe was telling me at that time that this was about to be a shitty situation. This was about to get messy and it was like this wonderful Gestalt that happened in that moment and I was stunned. And I just intuitively didn’t want to work with this guy for no reason. I had no reason to explain this, I couldn’t articulate it to my partners. So I don’t do anything about it, I didn’t have enough confidence.

And so we ended up hiring the guy. Two and a half weeks into the deal of him being on the job, I noticed, I’m tracking this company really closely because we’re close to financial distress at this point. So I’m seeing weekly cash flow projections, things like this and I noticed that our payroll expense is going way up. I’m like, “That’s interesting.” So I ask around and try to figure out who’s new at the company, what role they’re doing, how much they’re getting paid as compensation structure. And my new buddy Paul, who works at the sales desk and makes like 12 bucks an hour, I talked to Paul, and he’s like, “Oh yeah, there’s this new lady, nobody really understands her because she doesn’t know a thing about lawn mowers. She was hired as a salesperson and she’s number two in the company. But we don’t know why or anything like that. She seems weird because she doesn’t fit. I don’t know why this person’s here.”

So I call my friend, the private investigator. So I get this lady’s name. I’m like, “Run this lady, figure out what the deal is.” Sure enough. This is the new CEOs ex-wife. Not current wife, not girlfriend, but ex-wife. It’s so weird, so bizarre.” And so I knew, I was like, “Oh, we got a huge problem here.” So of course, we got to fire the guy again, this whole thing and he holds us hostage. So we ended up because of the vendor relationships all that, we end up having to pay the guy to comply with the transition to get out of the company. It was just incredible. It was one of those lessons where I think over time, one can learn to trust one’s gut, trust one’s intuition to make better decisions and I wish that my balls were big enough back then to do something about that situation, it would have saved us a lot of money, potentially saving that company.

Did the toilet paper lead to anything or is that just an odd thing that happened?

It was just weird, odd thing, but it’s stuck in my memory. That moment I knew something was off. And it was like sometimes I believe that the universe has these wrinkles and that you can see a little glimpse into the future, a little glimpse into what’s going to happen. When I was like 25 or something, I went to go see a psychic. One of my business partners, he gave me this book, this Autobiography of Michael Crichton called Travels and it really opened my eyes to all kinds of weird stuff. It’s a fascinating book. And Michael Crichton is the dude that wrote Jurassic Park and a whole bunch of other cool stuff.

But he’s got an amazing story. He’s a Harvard-trained physician on the side of things, but I actually recommend the book. It’s amazing. So anyway, I got fascinated by the cold and weird stuff. And so I go to see this psychic, and not like a storefront psychic, but a person’s house. There’s just like, “Oh, I know this person. They’re like, totally clairvoyant. You’d go talk to him.” Yeah, sure. Whatever. I’ll go try it later. I’m out for kicks and giggles. So I go, the first thing is we opened the door, and it’s this older Polish lady. And the first thing she says, “Oh my gosh, I want to touch you.”

I’m like, “That’s a very strange way to introduce herself.” But it’s like, “What? What’s going on here? Do I have to be concerned about my personal safety? This is weird.” So I ended up in this session, and she’s like, “No, no, no, no, you’ve got a money energy.” And this is someone that I’ve never met before. She doesn’t know people I know. It’s like, “What? This is weird.” She’s like, “No, no, you’ve got great money energy. I want to get some of that. So I want to touch you. Can I touch you?”

I’m like, it’s so weird. She’s like, “Oh, yeah.” And that was at that time just to paint the picture a little bit, I was living on my friend’s floor. I didn’t even have a bed. I was paying a few 100 bucks to crash on the dude’s floor. And I had a car, a 1994 Geo Metro that I bought for 1,300 bucks. I wasn’t a very successful dude. I was just struggling to make it and trying to save money and stuff. And so I meet this person, and she’s telling me like, “Oh no, you’re going to be really wealthy.” She’s like, “Oh no, you’ve got this thing and people around you are going to also be …” And that’s actually one of many, many, many, many things that have actually been totally true is that people that have been associated with me, I think all of them have become multimillionaires.

And even those people that started at very different places. Yeah, I’ve got a good friend, Lamar who he’s a dude that he grew up on the wrong side of railroad tracks so to speak. And everyone he knows has been to prison. His brother was murdered, his parents have been on drugs, still on drugs, the whole thing. The dude’s got a tragic story and I met him because he was sentenced for five years for cocaine trafficking. And so here’s a dude who’s starting with not a lot of advantages, but man, I’ve started hanging out with him and we start hustling on the side some real estate deals and he’s well on his way dude.

He’s an amazing light beacon for his community, and he is going to do the same thing. It’s incredible to see those type of stories, those things happen and it makes me wonder it’s just like, “The universe is so complex. It’s so interesting. It’s fascinating. There’s so much more that we don’t really understand.” It reminds me of this like Jesuit priest that before class everyday I think it was like at Notre Dame or maybe it’s Creighton, one of these awesome schools. He would write before the classrooms. He’s like, “There is more, there is so much more.” And he just leave it like that. And I love that kind of line of thought because I think it applies to business.

Stuff happens that we have no idea why we meet the people we do. And I’m so fortunate, so lucky that I met John Kirtley and Jeffrey Leck at the time I did it and they’re just … That is like winning the lottery because they’re just so gracious, so easy to work with, so forgiving. All the mistakes I made, they were still there, they’re back made, they gave me the freedom to play. And it was just like, “I could have never had a better environment to grow up in. It was just amazing.” And so, so thankful for them. It’s amazing to have that experience.

Absolutely. Yeah. You’ve been down on school through these stories. I’d be curious on as a closing question, what class would you teach in college if you had to teach a class?

I love that question. Of course, I think school is an abject failure. It’s so off that I would scrap the whole system and start with something entirely brand new and that has nothing to do with the current system. And I would actually only focus on one thing, I would just forget everything we know about school and education. There’s only one thing that matters which is can you concentrate your mind? I would only do things through experience, through taking actual action to develop that level of concentration because once you have that, you’re going to be world class at whatever it is that you want to do.

It could be athletics, you can be an Ironman athlete, you could be the best fighter in the world. You could be an amazing pilot. It doesn’t matter. But if you got focus, you’re going to hit a golf ball farther than anybody. That’s the superpower. So I’m interested in people leveling up their game and it all comes down to that one thing, how well can you focus? And can you concentrate your mind?

I like it. What’s a belief you used to hold strongly that you’ve changed your mind on?

If we have money, then that makes us whole, complete, and perfect. It’s a total trap and it’s super hard to learn that lesson without actually going through it. So if your life is miserable before making money, your life is still going to be miserable after that. A lot of people are saying this, it’s so true. But it does help provoke the next evolution, if one can complete that insecurity in their life. So I grew up with a weird economic scarcity complex and so I was driven by this need, “Hey, I’ve got to go make a ton of money because I don’t feel safe. I don’t feel secure. I need to protect myself. I need to protect the people around me.” I don’t know why. But that’s just how I was …. Maybe it’s because my grandparents went through the great depression and the Dakota Strike.

It’s coded into your DNA that there’s bad things coming, and you need to start saving now. And so I still suffer from it. I thought like, “Well, if I ever made a million dollars, I’m done, I live very inexpensively. I don’t need anything else.” And what I found is that if you’re interested in making money, it doesn’t turn off. You get addicted to the game and I realized that I’m still really excited and stimulated by the creativity of business. And so it was a big surprise. I thought, “Oh geez, once that’s done, I’m never going to be involved in business again. But I love doing it more for personal reasons and seeing other people succeed now than my own personal gain.”

What’s the best business you’ve ever seen?

Certainly I’ll name the one that I’m currently working on all my ventures. It’s so creative. It’s so innovative and it’s a really, really boring, fragmented industry which is real estate. I think real estate is one of those areas right now that I used to look really down upon real estate just because that’s where people that are not very smart go. But that’s actually why I love it so much now is that you can be totally a mediocre and average and you’re going to do really well. If you took a stopwatch to any construction site, it’s just appalling.

I’ve never been in one engineering class my entire life, but I guarantee, I can engineer a better way to build a house. And so construction tech property tech, I’m fascinated by … OMA Ventures is doing some really, really cool things. But that’s a cop out because I’m currently involved with it. Let me name a better company. There’s a company called Red Head Brass. This is a company again, it’s a total write-off, but it’s one of those I could have just absolutely swore that this company was going to be a home run because it had a natural monopoly and here’s a weird, interesting fact.

So all fire hydrants in the United States that are west of the Mississippi have a standard thread pattern. So a pattern to connect a fire engine hose to a hydrant. It’s all standardized. But east of the Mississippi, it’s very different. Every municipality has their own unique thread pattern. And the reason why is because counties and municipalities, they would go steal each other’s water. And so it’s just like you had to have a different thread pattern so no one could hook their hose up to your thing, you had to have this unique thing that nobody else had.

Well, there’s one company in the country that owns the thread library for all these municipalities. And so it’s like every time you have any fire equipment being manufactured, a new fire truck, any fire hoses, old hydrants, anything in that industry that’s happening, you have to go to this company to buy your stuff. It’s amazing. They have a natural monopoly, their margins are 45. It’s something you never find out. It’s like, “Oh my gosh, I’m going to sell my house, I’m selling my dog, I’m selling my boat, I’m selling my girlfriend, I’m selling everything I own to raise money, to putting in this company. This is my ticket, I’m going to make it big.”

What actually happened is that a hourly employee that worked in the warehouse, I don’t know if it was his own idea or if he was coached by somebody else. But he ends up stealing the library, the thread pattern library. He goes across the street, they set up an operation and they start competing. So very clear, obvious case of intellectual property theft, theft of trade secrets. Now, we of course hire a private investigators, they go and work for this new competitor. And sure enough, the thread library has our logo on it. And so the private investigator takes photos, these guys were manufacturing using stolen intellectual property.

We’ve got an amazingly low case, we’re going to shut these guys down right away. We hire some top notch lawyers, they litigate, they go to Ohio, and a small town judge in Ohio he asked three questions. “Well guys, did anybody get killed?” “No sir. Nobody’s dead.” “Anybody do illegal drugs?” “Nope. No sir. That’s not what this case is about man. Did you read notes? Three cases” “Well, you’re American. You believe in competition, don’t you?” And that’s the end of the case. So long story short, lose in every dollar of investment in Red Head Brass, but I love the company. I think it’s amazing, one of those natural monopolies that you don’t see very often.

That’s wild. So there was no way to get any recourse on that property theft? There is no other court that could have been tried in or anything like that?

I would love to think that there would be a way. I like to think that the world is just and fair. I learned a lot about law. I learned that sure win doesn’t always win and in leverage cases which is the case that most people are going to end up buying companies, they’re going to use some form of debt. You’ve only got a certain amount of time to turn a company around if things don’t go well. And in litigation, things can get pushed out, and there’s nothing you can do about it. And so cash just went to zero and it wasn’t worth fighting.

Man, that’s brutal. Well, thank you so much Mark for sharing your time on the podcast today and we’ll have to do another episode because it sounds like there’s so many more stories to go over. But thank you for sharing this initial bunch. I’m excited to have you again soon.

Thanks Alex. Appreciate it.