The Mindset Behind Building Billion-Dollar Companies | Brad Jacobs

0:00So I looked at that org chart and said, this is a messed up org chart, which is great for making money. If you can find something that's messed up and easy to un-mess up, booyah, there's your money. There's your opportunity to make a lot of money. You've made a few billion dollars. What lessons have you learned about money and spending money and living with money that you wish you knew sooner? Essentially, you throw me off a little bit with the question because when you look at the numbers, the real growth has been through M&A, through acquisitions. What's been my secrets on acquisitions?

0:30Here's the gist. A lot of people have a rigid business plan that's spelled out for many years and that's it. And it's very, it doesn't usually work. Why? Because life changes, markets change, economies change. And if you're rigid, if you're just rigid thinking, you're gonna have things come your way to make money for shareholders and feel, well, it's nice, it's great, but it's really not our thing. That's a bad way of thinking. You said you can get a lot of things wrong if you get the big trend right. What major trend are you most interested in right now? I'm most interested in it.

1:02Listen, there is no conversation that's made me more money than this one. If you haven't heard it, now is the time. If you have, it's a classic and worth watching again. Brad Jacobs has started eight separate companies worth more than a billion dollars each. He's done about 500 acquisitions. So when he says that there is a way to make money that reduces the role of luck, it's worth listening to him. And this interview lays out exactly how he does it. The most surprising advantage, though, doesn't come from business at all. It's something we can all learn. Let's get into it.

1:37Ray Kurzweil, who wrote The Singularity, is one of your heroes. And you recently met him. I'm curious what you took away from that conversation and what it was like. I did recently meet him and it was like meeting Albert Einstein or meeting someone, Michelangelo, because when you look at his context, his wide context, he's looking at the history of the universe, going back 13 point something billion years, and how we got here. And then looking at those trends and where are we going?

2:08He identifies the most important trend of all, which is Homo sapiens have created technology, have created tools, starting with stone pebbles over a couple of million years ago, and then fire and then settlements. And over the last couple of hundred years, so much, so much more, so much more. In the last 20 years, accelerating, accelerating. And now with AI, it's accelerating even more. And where's that going? Where's that going is the tools that we've created, the technology we've created is becoming more capable

2:40than we are at certain of our traits. And we're able to outsource a lot of our activities to our own technology. And Ray predicts a singularity whereby technology becomes more intelligent, more capable than humans. And we merge with technology, that we use so much technology in our own bodies, with wearables and nanobots and so forth, that in AI and outsourcing our memory and sensory and so forth, that you really can't call it

3:11Homo sapiens anymore because the traits, characteristics have changed so much that we'll say Homo sapiens has become extinct and there's a new species. And I think he's probably right. What do you think the benefits of that are? And what do you think the drawbacks are? Well, the benefits are, we should be able to accomplish a lot more. So if you look at us as a planet, 8 billion people, there's a lot of things we do well, but there's a lot of things we don't do well, primarily get along with each other. And information sharing is not there. Resource sharing is not there. I think with advances in technology,

3:42we will be able to distribute resources more intelligently and more abundantly and have more resources for more people. And I think medicine will be better and science will be better and be able to live longer. We'll be able to be more in touch with the way we think and to be able to think more constructively because that's one of the places, where it's an area of improvement for humans is we don't think rationally a lot of times. And I think with technology and AI advancements that we will think more rationally. So it'll be nonstop therapy, so to speak.

4:14How do you think rationally when you have all this information coming at you from all over the world? You're emotional, you have big swings. I mean, you've lost billions of dollars in a market cap in a day. I don't always think perfectly rationally. I'm not a perfect person. I've paid attention to the way I think over the course of my life. And I've studied with various people who that's their specialty is analyzing how you think. And I did a couple of years of therapy for three hours a week for a couple of years. So I have spent a lot of time reflecting on how I think,

4:47what my automatic thoughts are, what my biases are, what my cognitive distortions are. And I'm aware of those and I apply various techniques and tools in the toolkit that you learn from, cognitive therapy, dialectical behavior therapy, positive psychology, et cetera, to think more rationally and more constructively and more accurately. And I think that helps me in business quite a bit. In business, you need to keep your head on your shoulders. You need to be calm, you need to be cool, you need to be collected. You need to be dealing with lots of changing,

5:18unplanned circumstances and then capitalizing on those. And not being overwhelmed by those, not being beat up, but utilize what comes in, capitalizing what comes in to create money, to create money for shareholders. So I think the human capital in the psychological sense is very, very important. So I put energy into that. You said you can get a lot of things wrong if you get the big trend right. What major trend are you most interested in right now?

5:49I'm most interested in AI because it is the trend. It is the number one trend whereby our technology, the software, that intelligence, will be able to consume so much information, much more than we human beings can, even with a hundred billion brain cells. The power of computing is so much greater. And be able to then analyze that and be able to spit things out, and be able to eventually, I'm looking forward to the point where computers become emotional,

6:20where they do have emotion, where they do have empathy, just like we have mirror neurons in the prefrontal cortex. I'd like to see that trend materialize, where computers can feel, can have theory of mind, can be sitting here with a conversation with Shane Parrish, and feeling what you're feeling, and feeling happy about what you're feeling happy about, and feeling sad about something you're not feeling happy about. Now, I'm looking forward to that trend a lot. Now, the saying AI is sort of, everybody recognizes AI as being a trend,

6:52but you've spotted several trends well before people recognize them, and you are way ahead on the AI curve too, as I understand it. How do you spot those trends before they become mainstream? Well, I do spend a lot of time thinking about trends. I spend a lot of time thinking about the wider context of things, like, okay, here's a situation. What's the context of that situation? What's its origin? What's its present conditions and characteristics? What are the ways it could go?

7:23And what would be the catalyst to make it go right or straight or left? So I intentionally think about trends quite a bit, because in business, in the business world, you've gotta get the major trend right. You've gotta get the major trend right. And as my main business mentor, may he rest in peace, Ludwig Jesseson used to say, you can mess up a lot of things, but if you get the main trend right, you're gonna make a lot of money. And conversely, if you don't get the main trend right, you're swimming upstream, you can do a lot of other things right, but you're not gonna make a lot of money.

7:53So I intentionally spend time thinking about what's the, where does all this fit in, and where could it be going? What's your research process like? I like people, and I like picking people's brains, and I'm shameless about asking people their opinions, and I like to be a student more than a teacher. I find a lot of people make the mistake as they get older or they get more successful, they think they know everything, and they start teaching all the time. I'm sharing through the book I wrote, and through podcasts like this and so forth, the few little things that I think I have insights that I can give back to,

8:24but I absolutely view myself as a student of life. I don't view myself as a guru who's figured it all out by a long shot. And I think if you keep that element of profound curiosity, of really interesting, and being very interested to learn, and being involved with the sensory experience, be involved in the intellectual experience, be involved in analytical capabilities, I think you can learn a lot more, and you can see trends that otherwise, you don't see it, you're just in it, and you're living it, but you're not seeing the trend.

8:55You're just kind of going along. A lot of people who reach your level of success sort of outsource a lot of this work to other people. And by that, I mean, do research on this, come back to me, give me these points, but you seem very hands-on, in the weeds, very involved in the detail. Why is that important to you? I do both, Shane. I do have a team that researches things for me, but I also, I like to roll up my sleeves and get into it myself. I like to find, even like when I do M&A,

9:25so my teams that I've led have done about 500 acquisitions. I've been involved in those acquisitions. So I get into the details of what are we buying? And to buy those 500 companies, we looked at thousands and thousands of other companies that we didn't buy. And I love the process. I love studying each company, figuring out how'd they get to the point where now there are millions or hundreds of millions or billions of dollars of revenue. And they started from scratch. And how do they do that? It's like a miracle. It's fantastic.

9:56I'm very impressed and excited and enamored with entrepreneurs and companies that have created huge growth and huge value. And I want to understand that. So I want to get into the detail of it. I want to pick their brains. I see a big value in asking lots of questions to people. Now today, you're the one asking questions and I'm answering, but normally it's a role reversal. Normally I'm asking a lot of questions. If you go into a management meeting, I'm usually asking lots of questions. What have you learned about asking questions that you wish you knew five years ago?

10:26I take questioning from the therapist. So I wrote in the book that the only time in my life that I've been depressed, but I was really depressed, was in the mid 2000s when I had stepped down from being CEO of this big company, United Rentals. And now I didn't have anything to do. I didn't, you know, I was doing some art. I was, you know, studying art and buying art and I was doing things with my family and so forth, but I didn't have a business. And I learned from that that everyone has their own thing that makes them excited me as running businesses.

10:57I've been a CEO since I've been 23 years old and I like being a CEO. I really liked that job really a lot. Now I wasn't a CEO and I felt a big gap. I felt, I felt depressed. I was down and had a lot of unconstructive thoughts and inaccurate thoughts and so forth. And that drew me to meeting a lot of fantastic psychotherapists. And I mean, fantastic at the top of their game. So there was a psychotherapist in New York City called Albert Ellis. He died about 10, 15 years ago.

11:27And he had formed a school of therapy called Rational Emotive Behavior Therapy, R-E-B-T. But in short, it was cognitive therapy. It was cognitive behavior therapy. He, together with another psychiatrist actually, Aaron Beck, whose family and friends called him Tim. I got the privilege of meeting him too and spending time with him and his family. Tim Beck or Aaron Beck and Albert Ellis were the co-founders of cognitive therapy. And I find that therapists have, of all the different professions,

11:58are the best at asking questions and the best of getting a person to relax, getting a person at ease and to open up. And what I learned from studying those psychotherapists, first is you need, before you start badgering someone with questions and inquiring and asking them all these important things, sometimes personal things, sometimes intimate things, sometimes private things, you need to create an atmosphere. You need to create an environment that's a safe place. That's a zone where you're, it's okay to be vulnerable.

12:29It's okay to say what you really feel. It's okay to take off your mask and show who you really are, warts and all. And that's really, really important. And to do that, you need to be listening. And I learned from studying them that the most, maybe the most, maybe the single most powerful thing you can do in a relationship, whether it's personal, whether it's professional, is to give someone your 100%, like you're doing now. You're giving me 100% of your attention. I can see it. You're looking at me, you're listening to me. You're actually paying attention to what I'm saying.

13:00And that feels good, by the way. It's making me put a little pressure on me to perform better and give me good answers. But you're doing something powerful. You're giving me your attention. You're giving me 100% of your attention. And I find with therapists, that's their little, that's one of their tricks, one of their skills, one of their techniques is you have your session for 45 minutes or two hours or whatever it is. And during that time, they're all yours. They're all listening to you and they've got all their attention on you. And that has a certain effect on the person speaking.

13:32And secondly, they're not being judgmental. Hmm. So they're not, they're going with you. In other words, they're not disagreeing with you without first finding a way of agreeing with you, joining, then leading, validating, then disputing. So even when they are changing the way you're thinking and say, gee, is there a better way to look at that? Is there another way we can look at that and be more constructive? Before doing that, before that disputing, before that changing, that transforming, they're first joining,

14:02they're showing that they understood you. They listened to you. They got you. They got what you said, message received. And I find that's really powerful in business. Whether you're dealing with employees, whether you're dealing with someone whose business you're trying to buy, or you're dealing with a vendor or you're dealing with a investor or an upset customer, it's very good to do that. It's very nourishing and nurturing to give someone 100% of your attention and listen to them non-judgmentally. I call it non-judgmental concentration.

14:35I think I made up that phrase. Maybe I didn't and I forgot and I should have attributed to someone else, but that's a phrase I use, non-judgmental concentration. When you're really taking all your consciousness and giving it to someone and not judging them, but going with them, trying to get into their way of thinking, their way of feeling even. So not just what are they thinking, but how are they feeling? So what's the emotion that's underlying that? And I use that. I use that quite a bit.

15:05In the book, I have a chapter on how to have an electric meeting, how to run an electric meeting, which means a meeting that's powerful, a meeting that everyone goes away exhilarated. Everyone goes away with lots of things to do that can create a lot of value for the shareholders, not just one of these ho-hum meetings. And an element of that meeting is everyone in the meeting shuts off all their devices and concentrates, concentrates, non-judgmentally, non-judgmental concentration on the one person

15:39who's speaking at a time. No side conversations, no talking over each other. One person speaks at a time, but everyone in the room gives them all their attention. It's a really powerful thing. I like that a lot. It's sort of the secret to our podcast in a way, which is I want to see the world through your eyes. I don't have to agree or disagree. That's not my job. I just want to see what you see, think what you think, smell what you smell. And then that way, I can truly understand where you're coming from. And I think that so often listening is transactional

16:11in the sense of I'm waiting for you to stop so I can just say something, or I have this point, you don't understand it, so I'm not really listening to you because you're talking about something else now. And I think it's one of the biggest reasons we miscommunicate. Yeah. Is the work with the psychotherapist, is that where you learned about rearranging our brain and controlling the mind and the importance of sort of thought experiments and mindset, or talk to me a little bit about that. It was one of the places, you know,

16:41for my main hobbies since I was a teenager has been meditation and various forms of meditation. And then from meditation into I learned self-hypnosis. And then from there I learned all the mindfulness and the positive psychology and cognitive therapy and so forth. So I've mixed and matched a lot of different schools of thought and customized it for me, my own personality and my background and my individuality. So it's not just one thing. I've had many different influences that have created the way I look at life

17:11and the way I deal with reality. And a lot of that was my education when I was a kid. I studied music. I studied music and math. But in music, it is a lot about relationships. Unless you're a solo performer, and I was not, I liked playing a group, I liked a band, I liked playing with other people. Interacting with the other folks is part of the magic of making really great music. That's had a big influence on me too. I define myself, I self-identify as a musician, more than a business person, which you might find odd,

17:41because I've spent a lot of time building big businesses and running large enterprises. But when I think about myself, I think about myself as a musician who happens to be doing a lot of business and has done well at business, but I feel like a musician. And by that I mean my sense of sound is the dominant sense. And I listen very, I listen to sounds. I listen to my heartbeat, listen to my breath. I listen to sounds in this room going on right now. I suffer, quote unquote, and I put air quotes on it

18:15because I don't consider it suffering. I consider it fantastic. Tinnitus, where you have this ringing in your ear from when I was a teenager, probably from listening to music too loud. And I have it right now. I'm hearing very high-pitched sounds. I love it. It keeps it interesting. It's my friend, it keeps me in tune. Sometimes they get louder, sometimes they get softer. Now, some people have tinnitus and they, and I might be mispronouncing that, but you know what I'm talking about. Yeah. The ringing in your ear.

18:45And they say, oh my God, it's a terrible thing. It drives me crazy and they get all upset about the thing. I have just the opposite attitude. I feel I'm lucky to have that. I really am lucky and I wouldn't know what life would be like without it. And that's part of being a musician. Part of being a musician is embracing sounds, no matter what they are. No matter what they are. And that's the reality of the moment. And you should be in that reality and go with that. Every few years, a new platform earns its place

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20:02I wanted to see what it would feel like to have an AI version of me challenge my own thinking. So I built one with Hey Jen. Let's see how this goes. Hey Shane, I'm running second order thinking on your morning. Specifically, that third coffee you had at 10 AM. Hey now, I need my coffee to get going in the morning. It was a long night. First order, you feel alert. You're sharp for the next interview. Second order, you sleep worse tonight. Hope you're foggier tomorrow. You reach for a fourth coffee to fix it. You didn't buy energy.

20:32You borrowed it at interest. You're probably right. I should calm down on the coffee in the morning and maybe have a matcha instead. That's Hey Jen. Record yourself for 15 seconds and get an AI avatar that delivers professional video on demand. Your first three videos are free at heyjen.com slash TKP. That's H-E-Y-G-E-N dot com slash TKP. What's the relationship, if you had to guess, between music, math, and business? A lot. For me, it's a lot.

21:04So let's start with the business and then that'll show how those other two things relate to it. Business is about making money for shareholders at core. The report card for a business is, you take money from other people, the form of equity, the debt you pay back, but the equity is dear and people invest equity into the business. And now you have to give them back that money when they sell their shares, but much, much more money than they gave you. So in my companies, we've been fortunate

21:34that we've been able to give back 32 times their money in one. Another company is over 150 times. So really, really large, large, large returns, like over the top, unusually high returns. That wasn't by luck. That wasn't coincidental. If it was coincidental, it wouldn't happen five times in a row in large amounts. That was because there was a playbook. That was because there was a method to it. And that method incorporates many, many different elements.

22:05And I talk about quite a bunch of them in the book that together give you an ability to create what we call alpha in the business world, which is not just beta, which is the market's going up. So you're going together with the market. But alpha, which exceeds the beta, exceeds the overall uplift that pretty much all boats are lifting by the same tide. And part of the ingredients to that formula to make huge, huge returns for shareholders involve analytical thought, careful analysis of numbers is all the math,

22:40making order out of disorder, trying to see where, how does this all fit together, and seeing the relationships between different things, how to reduce things to simplicity, because the great mathematicians reduce very complicated things to a formula, for example, expressed with just a few hand strokes. So that's math. That's mathematics. That's the beauty of mathematics is seeing the patterns, seeing how to make sense out of this.

23:12And on the music side, it's being able to improvise, because my training was originally classical, but then I had the fortune to study with African-American musicians in Bennington College, Milford Graves, Bill Dixon. And part of that whole training was to be spontaneous, and to be improvising, and to be in the moment, and there is no wrong note. If someone plays a note, that's just a new note.

23:43It's not the wrong note. It's like, okay, we changed key. Let's go with that. Come on, let's get going. Now we're on. So that ability to go with the flow in music, you need to have that in business shape. A lot of people have a rigid business plan that's spelled out for many years, and that's it, and it's very non-flexible. That doesn't usually work. Why? Because life changes. Markets change. Economies change. People change.

24:14Results change. You get opportunities that you hadn't even thought of at the beginning, so you need to improvise. You need to capitalize on that and to make money from that. And if you're rigid, if you're just rigid thinking, if you're not a musician, if you're not a musical business person, you're going to lose opportunities. You're going to have things come your way to make money for shareholders and feel, well, it's nice, it's great, but it's really not our thing. Well, that's a bad way of thinking. I'll share with you one of the best business deals I did in my life was I bought in 2015

24:48a less than truckload trucking company called Conway. It was based in Ann Arbor, Michigan. It was a few billion dollar deal. It was a pivot because this was a hard asset business. It had tens of thousands of trucks and drivers. It was as asset heavy businesses as you're going to get with fixed costs and depreciation and amortization. It was not an asset light brokerage business, which is how I started XPO as an asset light, non-asset based business. But here was an opportunity to buy something really, really cheaply at a small fraction

25:21of what it was worth and even a small or tiny fraction of what I knew we could make it be worth within a few short years. This is a company that had a lot of excess overhead. The organization chart was not mathematical. Going back to symmetry and formula things that relationship makes sense. I like to take, I love org charts. I just love to geek out on org charts. An org chart should be pretty. Org chart should be simple. They should be elegant. They should be geometrical. They should not be really complicated. Like you took some spaghetti and threw it like an abstract art on a canvas.

25:55This was a bad org chart. This had three different HRs and three different IT organizations and a lot of duplications. And it just didn't make any sense. A lot of silos and heavy, heavy on the non-revenue generating top part of the organization, which should be the lightest part of any organization. The heaviest part should be parts of the organization that make money, that generate revenue, that get close to the customer, that generate sales. So I looked at that org chart and said, this is a messed up org chart, which is great for

26:27making money. If you can find something that's messed up and easy to un-mess up, booyah, there's your money. There's the opportunity to make a lot of money. And that was it. It was just like, I got so excited about the opportunity to take this company. And I saw a way we could significantly grow the profit margin and the cash flow that I pivoted. I pivoted and go ahead and did the deal. I got beat up real bad by the market. They said, oh, it's a change. And I said, give me some time. And I remember, I remember Eli Gross, who now runs investment banking from Morgan Stanley.

27:00But at the time he was covering me, XPO, as a transportation banker. And he said, you know, you're going to be in the doghouse here for a little while because it's a pivot and markets don't like pivots. But assuming you're right, and I know you have high conviction and you deliver the numbers over time, you're going to be a hero here and everyone's going to understand what you did. And fortunately, he and I were right. And you look at that deal, even though it was a pivot, it was a change, it was an improvisation. We bought it for about $3 billion.

27:32Roughly half of it was equity. So we really bought it for a billion and a half dollars plus some leverage. Today it's worth something like $15 billion. And that's after having taken out many, like $5 billion of net cash from it. That's after selling off $550 million of the truckload business. It's after taking its warehouse business, its supply chain business, which was called Menlo, and putting that into our GXO subsidiary. That was after taking the brokerage business and putting that with our RXO brokerage business.

28:05So this was the gift they kept giving Conway. It's been an amazing, amazing, amazing ride. And the returns, it's been a, I can't do it in my head, but something like a 20-bagger, 15-bagger. It's a huge, huge return on investment capital. And had I not been trained as a musician and a mathematician, I don't know if I would have saw it, Shane. I don't know if I didn't have the mathematical skills, I would have been able to see, okay, this is a mess, but we can make it clean. I don't know if I would have been able to have the courage to improvise and to change

28:40from what the script was for something that I had a high conviction would be very, very lucrative for our shareholders. And in business, the bottom line, the report card is how much money did you generate for your shareholders? That's the one, it's an examination with one question on it. It's how much did you make your stockholders? How much money did you make for your stockholders? How much bliss did you give to your investors in terms of return on their capital they invested

29:10in you, they trusted you with? You're a fiduciary in business. You have a solemn, sacred, obligate responsibility, where you're taking other people's money, debt and equity, particularly the equity, and you're the custodian for that. You're a custodian of it, you're temporarily using their money. And your job is to multiply that. They have a thousand other places they could put that money. They've picked you. They've picked you.

29:40They've got a big, big responsibility. And I think the training of a mathematician, the training of a musician, and then all these experimentations I've done in the meditation and therapy and so forth, I think that's been what largely explains, at least as far as I can understand, why my companies have created so much alpha. I have so many rabbit holes I want to go down there. I think the opportunity hiding in complexity is really interesting because the way that I think about this, and correct me if you see it differently, is bad ideas can easily hide in complexity.

30:14But they can't hide in simplicity. What's your reaction to that? I need to digest it. My immediate reaction is, yeah, I think I get that because when it's ... So I'll go back to that organization chart that I saw at Conway. It was just a mess. It was just like, wow, it's all over the place. Triple dotted lines and squiggly lines. Squiggly lines and you had to have different colors and different ... It's like, that's not a real elegant ... Yeah, I think I see what you're saying. In that, you could hide inefficiencies as opposed to when it's a clean organization chart.

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

31:10And at what point do you think of future opportunity costs? You mentioned taking advantage of whatever the world brings, but if you take on too much debt at now for an acquisition, you're reducing your ability to adapt in the future should interest rates rise, should a company become available that you really want that's a dream that wasn't available when you took on all the debt. How do you think about that? I have a Zen Buddhist approach to debt. Not too much, not too little. I don't think it's an optimal balance sheet if you have no debt because you can improve the returns by

31:45shrinking your share count because you have fewer shares. So the same amount of returns is greater per share. I think it's good to have a little bit of leverage. I don't think you should have a lot of leverage, particularly in today's world. I don't think you should have a lot of leverage because there's significant geopolitical risk. There's geopolitical risk in the Middle East, in Ukraine, in Taiwan. United States politics is very volatile. There's a lot of things that could go wrong real quick and a kind of shock to the system

32:17would hurt companies that have too much debt because business would slow down. Look what happened during COVID. If you were very highly levered during COVID, if you had way too much debt and then everything slowed down and your revenues went down, you might not have been able to make your interest payments or your debt repayment payments and could have gone bankrupt. Companies don't go bankrupt unless they have too much debt. You go bankrupt from not being able to repay your debt. So I don't think you should have too much debt. In my new company that I'm forming, QXO, we're going to have, I think our target, a healthy target should be one to two turns of debt.

32:50By that, I mean, we take our EBITDA, which is a measure of our cash flow, and we say, well, let's have one or two turns of that. So if our EBITDA ends up being, for instance, in a period of time, for example, a billion dollars, well, let's have one or two billion dollars of debt. And that's a comfortable amount, not too much more than that. Now, you could have, for short periods of time, you could lever up. Like when I bought Conway, we levered up to about four times, a little more than four times. But we very quickly sold off, I mentioned that truckload division for 550 million dollars.

33:21Boom, we paid down a whole bunch of debt right from that. We generated a lot of free cash flow. We took that free cash flow. Instead of doing more acquisitions, we paid down debt. So you can get your leverage under control by one of two ways, by improving your profits, by increasing your EBITDA, or by paying down your actual gross amount of debt. And I think you can manage that. And that's something a good CFO does. Let me tell you about the best new product that I've used in the past five years. It's the Matic vacuum. This thing vacuums, it mops.

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34:57drinkelement.com slash TKP. That's drinkelement.com slash TKP. You've said in the past that you need to be liked and loved, and yet you're quite contrarian at times in your approach to things. How do you reconcile these two things? I think you have to be contrarian. I think if you want to make a lot of money in business, you can't just be a conformist to do what is in fashion and what everybody else thinks.

35:27If you're going to do what everyone else thinks, you're going to get returns that everyone else gets, which is by definition, average. So my companies have not made average returns. My companies have outperformed their indexes, not by one or 200 basis points, but sometimes by five or six times what the index was. So you have to think differently and take things that are from a different point of view. So one of my favorite investors in my companies has been Orbis out in California and in Bermuda,

35:58and they're contrarians. They're willing to make a bet and a significant bet if they have a high conviction about a trend or a company that the market's not seeing. Something's out of favor, but the market doesn't understand something about it. Maybe a company is not studied enough. It's not covered enough. Maybe management is not good at communicating their story and it's dislocated. The price is dislocated and you can get a real good value by buying those shares and then being patient, playing it out the cycle and make real good returns. And I've seen them do that with my companies.

36:28When something happened in the marketplace that made us a cheap stock for a short period of time, boom, they came in and they bought a lot of shares and wrote them up and then sold and they were really high. I think that contrarian value approach to investing to business is profound. I think that's important. And I remember when I sold my first company, Amarax, my old brokerage company, we'd started a company in 1979, a bunch of broke, scrappy kids,

36:59and we were in the right place at the right time. And the Iranian revolution took place and the Shah got kicked out and Khomeini came in and they took 400 hostages and the oil prices went way, way, way up. So it was a great time. It was a sad time for the world. It's a lot of chaos and problems, but it was really good to get in the oil business because oil business was really volatile and some young rippersnappers like us could come in and be taken seriously by Exxon and Mobile and Texaco and Shell and Golf and BP and all the customers that became our big customers over time.

37:30We built that business up over four quick years to about a little under $5 billion in brokerage volume. So that was a really big, rapid growth curve. I had a good team doing that around the world. And then I sold it and I wanted to start a new business and I was ambitious. I was single. I wasn't married. I didn't have kids. I could take risks. I could afford to do that. And I remember speaking with my Uncle Howard and may he rest in peace. He's long, long passed away. And of course, my Uncle Howard was born in the 1920s, maybe even late, late 1910s and grew up in

38:08the depression, obviously. And during World War II and so forth, then it was very tough times. So he's very, you know, he grew up in a time when there's a lot of emphasis towards being very frugal and very risk averse. He became an accountant and worked for the government. And I remember talking to him and saying, yeah, I'm going to I'm going to start another company instead of being an oil broker. I'm going to I'm going to go to the I'm going to go to the adult table instead of the kiddie table. I'm going to I'm going to be an oil trader because I've been I've been making all this money for my clients where they're making three, four or five dollars a barrel and I'm making five or ten cents

38:43a barrel. Of course, I had no risk, but they were taking positions. So now I'm going to I'm going to put my money where my mouth is. I'm going to put my money into into a bank. I'm going to get a letter of credit. I'm going to actually buy and sell as opposed to just broker. He said, oh, Brad, don't do that. Don't do that. You should maybe take a small percent of your savings and put it into your new business, but take the vast majority of your money and just tuck it away just in case the next thing doesn't work out. And fortunately, I overruled my Uncle Howard. I had to go with what he said.

39:14I did exactly the opposite. I took a completely contrarian position where I took I think it was like a hundred thousand dollars or maybe at most two hundred thousand dollars. And I took that away. I took all the rest of my money. I deposited it with Bank Paribas and now it's BNP Paribas. Back then it was Paribas. And they gave me a billion dollar line of credit and I swung for the fences. I used sometimes up to nine hundred and ninety million dollars of that line of credit doing counter trade deals, doing pre-finance deals, doing barter, doing processing deals, deals that they were very

39:49complex. Going back to the math, very, very complex, but organized. I knew what I was doing. And sometimes people would look at it and say, wow, there's a lot of elements to what you're doing there. You're buying it. You're shipping it. You're refining it. You're hedging it. There's a lot, a lot of moving parts there. I said, yeah, but I understand each one of these parts and it's just math to me. And I actually feel this is low risk. This is basically just execution risk and I'm comfortable taking on the execution risk part of it. I don't have market risk, even though it looked like I did, but I really didn't. And as a result of not taking his advice and taking contrarian

40:24position and having the courage or the guts, the strength to believe in what I wanted to do, that I had a thought and I had the courage to say, okay, I'm going to run with this thought. I'm going to go with this. I'm going to bet on myself. I'm going to bet on this idea. We built a really nice oil trading company and did very, very well for ourselves and for our shareholders. Where did that confidence come from? Well, I don't know. Probably confidence comes at a young age, I would think. So when you ask a question like that, you know, you normally start thinking about like, what did your mother say? What did your father say? So if I had to think about what did my mother say? What did my father say?

40:56That was very transformational. The first things that would pop my mind are with my dad, who I loved and I had a lot of respect for. And he was a great dad and a very honest person. And he was a very dedicated and good provider for the family. But he was very, very blunt in what he said. He wasn't very diplomatic, what he said. He just said what he really thought. And I remember one time when we were doing, we had been doing an errand, we're driving home and he was in the driver's seat and I was in the

41:27passenger seat. And we're at a stoplight. And my father turned to me and said, and he was a big guy with a low voice and, you know, big laugh and said, Bradley. And my mom and dad were the only people who've ever called me Bradley. Anyone who knows me calls me Brad. He said, Bradley, it's really good that you have a really good personality because you're certainly not going to get anywhere with those looks. I laughed real, real loud. And that moment was a deep moment for me because on the one hand, I was crushed. I was like 13 years old. You don't know whether you're

42:03good looking or ugly when you're 13 years old. You just are. You just are what you are and you don't even think about that. But the message I was getting from my father was, you know, I may not be such a good looking guy. Okay. On the other hand, the other message he was giving me was, but you have leadership skills. You have personality, you have charisma. You can, you get people to follow you. You can become the president of your class. You can become your group leader. You can be the leader of your band and so forth. You can be president of the student council and somehow or another, despite your, your, what do you consider that not pretty

42:35appearance, if not beautiful appearance, you're able to be a leader and accomplish things and get stuff done and get formed teams and get people. So I think in a very, very, very paradoxical kind of way, my father insulting me on that gave me confidence. It gave me confidence of, okay, so maybe I don't have great all American good looks. Who cares? I've got something else. I've got something in terms of being able to lead. So maybe that, that helped give me confidence because

43:06that's, that's a, an experience that I've relived many times over my life, my father, because it's a big deal what your father thinks of you, what your mother thinks of you. On my mother's side, if I had to think, what was something that gave me a lot of confidence for my mother? Okay. So, so my mom passed away about 10, 11 years ago. And you know, from the book, one of the questions I like to ask people, because I learned this from Marty Seligman, the father of positive psychology is what's a, what's the happiest moment of your, of your day,

43:36as opposed to how did your day go? And just have a little different angle to that question. And we like to be validated. We like to feel we're appreciated, we're recognized, we're understood, we're approved of, particularly from our parents. And my mom was, was on her deathbed and my brother and sister and I were hanging out on our deathbed for a good couple of weeks. And I don't know if you've been around people who've died, but you know, they, they're sort of

44:07dying and then suddenly they wake up and like talking to you, like nothing's going, no, no problem. And, and then they lie down again, start dying again. And they go in and out and it's kind of half dying and half not dying and so forth. And my mother had been lying there and breathing funny when they, when they're dying. It's like, it's really strange way of breathing. It's not normal way of breathing. It's irregular breathing. And then they're not breathing for periods of time. And there's a very bizarre experience, death. And you never, we didn't quite know whether this was it. Like we're never going to talk again. She's done. And she suddenly like sat up. She looked all

44:41three of us in the eye and said, I'm really happy each of you turned out so well. And smiled with a, with a mother's love. And, and then just kind of gracefully lied down and continued the dying process. But that moment, that might be the happiest moment of my life. When, when my mother, my mom, the person whose body I came out of, the person who took care of me from young, right from day one, even before day one, nine months before day one, approved of me and validated me and,

45:17and gave me a stamp of approval. And that's given me confidence, even though that's later in life, that gave me a boost. That was right at the beginning of starting XPO Logistics, which of all the different companies I've started, that was the one that was the, the biggest so far, the most, most successful. So I would say that confidence later in life came from that boost that my mother gave me of just approving of us. By the way, I've learned something from that. I've learned something from that. And I try to learn from all these things, how I can apply this to business. I'm a business person. I'm trying to

45:48make money for shareholders. That's my goal in life. So all these things that I'm going through life, learning about, I'm then trying to take them and apply them to business to make money for shareholders. So what did I learn from that? I learned that the relationship between a parent, in this case, my mom and me, or in the other example, my dad and me, it's a real important experience. It has a big influence on the person, what the authority figure thinks about the person. And when you're in business, particularly if you're the CEO, you're the authority figure.

46:20You are kind of like the dad. You're kind of like the mom of, in my case, 150,000 employees. And you have to be careful what you say. And it's not just, it's not just what you say, Shane. You can't just be you can't fake it. And if you don't like someone, disagree with somebody like say, oh yeah, aren't you great? Because people are smart. People realize when you're BSing them. They just know that they know when it's phony and they know when it's real too. So what I've learned is you've got to rearrange your brain, go back to the book. You've got to rearrange your brain,

46:54your way of thinking so that you are positive about people. There's nobody's all good and nobody's all bad. The one I know at least. And if you can train yourself to see the real good in someone and to reflect that to them and to make sure when you're doing the change part, the improvement part, when you're giving them constructive feedback of how they could be doing a better job, do that second. Don't do that first. First thing is be like my mom and say, you know, I'm just so happy how well you

47:27all turned out. Say that first. You know, when I do performance appraisals, when I do performance reviews, my direct subordinates, my reports, my direct reports, I always start out with the positive stuff. I don't start right off with, okay, here's some things that you're messing up that you need to be doing better. It's important to have that part of the conversation too, because you need to help the person achieve more and do better. But you want to start the conversation with, I really want to congratulate you for X, Y, Z. I really want to appreciate, I want to express my appreciation

47:59because you've done one, two, and three, but it's got to be sincere. It can't be phony baloney, false flattery. That is like, you're better off not saying anything than giving phony compliments. But you should, I try to rearrange my brain so I appreciate a person and say, well, why did I hire this person in the first place? What did I love in this person? What did I admire? What did I respect? What really got me, made them real high in my estimation? And then translate that to, okay, how is that materialized and what they've done? And what concrete things have they done?

48:31Not have compliments that are just like general compliments, but have very specific, concrete compliments of, you know, you did this, this, and this. Kudos. Tip of the hat. Good job on that. And it goes back to the psychology of validate, then dispute. Join, then lead. I apply that to business. I do that with customers. In the world of business, you know, we've had millions and millions and millions of customers. They're not always happy because we're not, no service provider

49:02is perfect. Once in a while you mess stuff up and you have a difficult conversation with the customer. Maybe they're not trained in rearranging your brain and they go right into the insults. They skip the whole part about, Hey, we really like what you were doing here. They just go right to, darn it. You've been late on this. You've been damaging that, or your invoicing is messed up or whatever it is. And what I learned from all that to answer your question is I've got to empathize with that. I've got to first understand. I have to put my mind in their mind. I've got to put myself in their

49:32shoes. I've got to, I've got to say, I've got to really, I've got to picture clearly how much what we did messed up their supply chain or cost them money or cost them a job or whatever, or just cost them an annoyance or just made it difficult to shoot up their time or, and, and, and made them frustrated or whatever, whatever. I have to figure out what's upsetting them, going back to what are they saying? And what are they feeling? So I've got to, I've got to get in tune with how they're feeling. And I've got to show them that I've heard them. I felt them. I've both heard, understood them,

50:07what they're said. And I've also felt the emotion that they're feeling and, and that I get that. And that, and that I'm, I'm, I have an action plan to solve it. So that is a sequence to all that. I like your human centric approach to this. There's a lot of people who sort of take for granted, maybe positive feedback. And so they offer a negative only feedback to the people who, who they work with. Is that a blind spot or what do you think of that? I think it's a mistake. I think it's a mistake to give only positive feedback or only negative

50:39feedback. So for example, right now I'm in the middle of performance appraisals and where each person is writing three things that they're really proud of, that they've accomplished in the last few months and that they really feel good about. And they're an achievement. It's definitely a plus, not a negative, but also three things that, you know, could have done better or we will do better going forward. Things that we didn't quite achieve that we hope to achieve. So it's a balance. It's three good things. It's three bad things. But when I run meetings, I like to make it like an Oreo cookie.

51:12I like to make the good stuff, the negative stuff, but then end on the good stuff. It's very important how you end a meeting for whatever reason, psychologically, how you end the meeting makes a big difference in how that person leaves the meeting. So ideally, even if we've had a tough meeting where we said, look, these numbers are in the red, they're not in the black, these numbers are down, they're not up and we need to up our game. And here's our action plan. And here's how we're going to hold ourselves accountable. And here's how we're going to tinker with compensation in order to reward people for doing better and hit their bonuses and maybe eliminate their bonuses if

51:47they don't get better fast. Those are tough conversations that you have to have. But I don't like to end on that. I like to end on exercises along the lines of having everyone in the room. Okay, now we've done all the tough stuff. We've worked hard on the business. Okay, now let's put that aside. Take a breath. Now let's just talk about who... I'll ask each person. I'll go around the room. I'm supposed to have a dozen people in a meeting and I'll say, tell me something. So we've just been meeting for two hours. We've been working hard. We identified some really important problems

52:19we need to solve and that if we solve them, we're going to create a lot of money for our shareholders. So good job team. It was tough, but good job. We went through a good rigorous process and you worked hard. And a lot of imperfections came up during the meeting and that was humbling in a lot of ways. But now I want to ask you something. After working two hours collaboratively in a meeting like this, difficult meeting, whose star went up and why? Who said something that they maybe already held them in high esteem, but you hold them in even higher esteem now as a result of

52:53the way that they thought their thinking process or maybe the elegance and grace with which they expressed a difficult subject or the way they tackled something from an innovative way. Someone who contributed to the magic of creating alpha, creating money for our shareholders. How did they do? Oh, they handled a situation of conflict because you have conflict in business