I'm Tom Billie and this is Impact Theory. We're standing at a crossroads where generational wealth, economic opportunities, and personal freedom are all in a blender and being world up. Here's the kicker, most people do not even realize that there is a game being played let alone know that they're being inflated into oblivion or that there is a way to sidestep all of this and still win. The economy is shifting, opportunities are being reshaped, and if you don't understand how to adapt, you're going to get left behind.
Today, I brought on somebody that really understands how to get ahead in today's economy. She is taking Main Street by storm, understanding that this is a unique moment in history where truly wealth is being passed from one generation to the next, creating these tremendous opportunities in the market. You know how to take advantage of it, you're really going to be able to leapfrog a lot of people who are blind to what this moment really is. You guys are going to want to dial into this one.
So without further ado, I bring you Cody Sanchez. Cody Sanchez, welcome back to the show. Thanks for having me. Truly my pleasure researching you every time is extremely enlightening and this time, something very interesting occurred to me and I want to see if you think I'm out of my mind.
What if I told you I think that there is a causal relationship between deaths of despair and plumbing? It's interesting because today we know that there are 7 million working age men that are out of the labor force and in the ages where they're supposed to be prime age working men, so 20 to 30, they largely don't have work they say because they can't find it. And I don't actually think that's the case. I think what we have is we have kind of like JD Vance popularized in hibiliology and normalized.
Now we have the statistics to back it up that a lot of people have lost dignity in their work and they don't believe that the things that they do have dignity any longer. They don't believe that the employee has dignity any longer and I think a lot of the despair we have in this country is attributed to drugs, rightly self-fentanyl, suicide, especially among men, but is actually because they don't have purpose. And that sounds touchy-feely except if you go to the data and you see the employment correlation between those who are working and have substance abuse overdoses or suicides and those who are not, you'll find incredibly high correlation between unemployment and deaths of despair, which would be things like suicide and overdose. And so what does that have to do with plumbing?
Well, I think in particular with plumbing, we have lost the dignity that we thought existed with the traits back in the day. And back when we were going up, there used to be a show called Dirty Jobs, right? Mike Rell. And his entire purpose was to bring dignity.
I was like in my 30s. Back when they came up. I'm not even trying to make it the same age. That's extremely generous.
Don't tell him how old I am. But he basically popularized this idea of like, dirty jobs have real dignity. And he tried to make that mainstream. And it was kind of like this niche on the internet that did get a cult following.
But then we sort of popularized huge TV stars, Twitch streamers. I was saying, how dare you? You know, youtubers, right? All these people who like, we really don't build anything.
I think we do serve a purpose. But we're not the person who you're going to call when your house is falling apart. And so I think one little good avenue about today is while in the past, there was a study that was fascinating that showed young people increasingly want to go into the trades, AK, plumbing, for the first time ever. We've seen a 40% increase in young people wanting to go into the trades.
But you know what? We haven't seen the change in their parents' perspective. Most parents, still more than 60% of parents, do not want their kids to go into the trades. They do not want their kids to be a plumber.
They want them to go to school, take a huge loan out, go work a very minimum wage job following it, the average college degree afterwards makes somewhere between $30,000 and $40,000 a year. A tradesman makes $75,000 a year on average. So they actually want them to make less money because of status, which is wild. And so I think the deaths of despair are because these people don't feel like their work is valued anymore because we don't value it.
And then simultaneously, they can't find other work because they're not skilled in the 21st century economy. And so the only good thing on this is I think it's starting to change. Like there was just a Wall Street Journal article last week and the headline was Millionaire, Millionaire's in HVAC in plumbing, like the next generation, something like that. Now we've been talking about this for three years.
I'm like, good job Wall Street Journal, you're catching up. But for the first time ever, they put the words plumbing an empire in the same sentence in a mainstream news campaign. And so I think we might be changing it. And there might be a way to get those seven million men and all the women as well back into the workforce and to believe the thing that I believe to be true, which is dirty fingernails is a sign of dignity and labor.
Yeah. So I'm always trying to figure out what's going on, what there's malaise, a deep malaise right now. Yep. And yet the economy rebroring and so trying to piece those two things together has been really jarring for me.
I think people have been sold, they build goods that everybody needs to go to college, get a degree, become part of the elites. And that model feels super dysfunctional. You, I think we're certainly the earliest voice that broke through the noise on this. But what is the opportunity?
So you've got the book, Main Street Millionaire. What is that trying to encapsulate? Yeah. Well, I think if you want to make money, you should follow the math.
Where are the numbers? You can make money more reasonably with a bigger surface area. So of course, if you become a Hollywood celebrity or an NFL athlete, you can become one of the top 1%. But what happens with most people?
Well, the 99% never make any money. And so that's really only good to go to the elite jobs if you are absolute best in class. If you're not best in class, you're probably better off actually being in finance or real estate or owning a business where most wealth is created. And so the idea with Main Street Millionaire is we started going down this road map and realized, oh man, the highest correlation between millionaires and wealth is one thing and it is ownership.
Do you have equity and ownership in a business? More than 80% of people who are millionaires have some ownership in a business structure or a business owner themselves. And at that point, you might say, well, must be nice. Maybe they got it all from daddy.
Well, no, it turns out more than 70% of millionaires are self-made. They actually come from very medium backgrounds. We don't see a lot of outliers as the norm. The norm is that they made it themselves.
And so the idea with Main Street Millionaire is like, wait a second, where are people making a ton of money? Where is the biggest indicator for wealth? And if it's ownership, then how do we get more people to get it? The only thing that's fascinating is basically since the 40s, we've seen stock ownership and equity ownership in companies come down.
So we saw the youth get really excited about it during Robinhood, et cetera, right? And game stop and they started taking stock ownership, but actual ownership in a direct company down significantly from double digits to less than 4%. And this is a profitable business that exists, not LLC signed. So tax returns as opposed to LLC is created.
And if you measure by LLC is created, you'd say, boom, everybody's got business ownership. Well, no, people have like dabbled in things, but they don't actually have real ownership. Because they're creating their own little LLC? Yeah, there's lots of like, you know, you and I have done it.
I mean, how many little one-off businesses or LLCs have you created over your life? Probably a lot. I mean, it's a stressing number. Exactly.
We should all actually own part of an accounting firm instead. Yeah. And so the idea on Main Street Millionaire is like, let's get normal people back into ownership. And we can talk about sort of the waves happening in the economy right now that I think are generational wealth creation event triggering.
But the one thing I want people to understand more than anything is if you don't understand ownership and how to get it eventually and how to trade your skills for some type of contract that allows you to earn, even if you were no longer able to work, which is what equity is, the statistics say that you have a much lower likelihood of becoming a millionaire. And so it doesn't mean you should go become your own boss, by the way. Not everybody wants to run a company. It can be totally miserable.
It's just me and you should become so valuable and know how to negotiate to do a business that you can at least get a part of it. Yeah. I'll say that even more aggressively. You're never going to get rich if you don't have ownership.
Getting ownership though is harder than people think. I know you're going to make it simple and we'll go through that. But ooh, it is a real shift in thinking. Before we go there, I really want to put a fine point on what I think is going on in this moment right now.
And I want you're going to know the details of it a lot better than I do. But the big divide right now is between young and old. As I try to piece together, why do people feel really like, hey, the economy's great, jobs, everything, wonderful, and yet on the street, it's like, this is madness. I feel like I'm being gasslet.
But I don't know that they're lying. Let's just assume that it's all true. How can those things be true and there's still be a problem? I think it goes something like this.
A lot of the jobs being created are second and third jobs. They are not first jobs of somebody who wasn't working and is now working. I think it's somebody who's working but still not able to make ends meet because of inflation. Despite it being down, we were high for so long.
It's not like we've started reversing the trend. We're just not growing as fast anymore. So you hit this plateau. That was already brutal.
So people are still having a hard time paying for things. But if you own assets because of the way that the debt is working and now my long-term listeners will feel very comfortable right now. So we've got so much debt that we have to keep money printing to deal with the debt, which devalues people's ability to buy things. So even if the cost isn't going up, your purchasing power is going down.
But the way that money gets into the economy is with people that have assets. Right now, that's old people. So old people are able to take advantage of this complete distortion in the economy, which is the debt and the money printing. And young people are like, hey, bro, you're yanked up the ladder.
Like I'm not sure what I'm supposed to do here. But to me, looking at what you're doing, it's not going to be the only hope there's never only one thing. But this really feels like a huge opportunity, which is for better or worse, all of the people that have accumulated that wealth, they're going to die or retire. And so we have all this wealth trapped inside of the baby boomers is an easy way to think about it.
But how do we get that back out? How is that wealth not just dissipated when they die and the business just folds? Which is one way, because we could fumble this moment. This can either be a tremendous wealth transfer from old to young or it can be wealth destruction that poof just goes away.
That's the part that nobody's talking about. Is that right now today, if you want to get rich, what you should realize is there $68 trillion of wealth that may be transferred in baby boomers to the next generation? Right. Or it could be completely destroyed.
And a lot of people go, oh, great. Well, they'll just hand down their house to me. They'll give their money to their kids. Here's the problem.
Of the $68 trillion in wealth transfer, what do we know? We know that most baby boomers, so more than 60% of baby boomers own a small business. What do we know about business owners? We know that business owners have 90% of their net worth on average tied up in the business.
So what does that mean? It means that $68 trillion likely is tied up entirely in businesses in a number that we can't quite imagine. We're talking somewhere between $20 and $40 trillion of the $68 trillion is tied up inside of businesses and assets. And so if we just say, OK, baby boomers, we wait for you to die.
We take over your houses. We take over your cars. What will we be left with? Well, not the $68 trillion number because a lot of their wealth is tied up in small businesses.
And so we only need to look to Japan to realize how real this is. So Japan's a fascinating case because in Japan, they're like maybe 10 to 15 years ahead of us. And you can see that Japan has the same issue we have. They have an older demographic population than us.
They have a lot of baby boomers times two or three. And they have a slowing younger population from a growth rate perspective. And they have no immigration. They really don't allow immigration in Japan to meaningful numbers.
And so they have this generation of business owners who are literally shutting down their businesses. And you can read about it. It's in the Wall Street Journal. And it's been such a detrimental force in the economy that the government created a task force to essentially help pair baby boomers who want to sell their business for $0, just transfer the assets basically to the younger generation, meaning that they have grants, they have systems and processes, they have matchmaking agencies, they funded M&A agencies because they realize if they don't do that, one in 10 jobs in Japan is tied up in those small businesses owned by the baby boomers.
So that would be almost great depression level of unemployment if those businesses just disappear. And so it's kind of scary on a macro level to think about it that big and that we could have this huge looming wealth transfer that could go sideways. But on the other hand, if you think about it opportunistically, there are so many small business owners that don't even realize their business has a value. And a lot of them might think the value is much higher than it is or should be.
And a lot of them might not even think to sell the business. They think to just shut it down. That's what happens with most small businesses. It's like only one in 11 small businesses inside of a year will sell on average.
And so if we know that, then we have to realize that there's this big huge supply issue that's sitting out there. And at this point, people will go, oddly, nobody's ever handed me a business before. Where are these? Oh, there's just profitable businesses running all around.
I'm not saying it's not work. You have to know how to look for them. You know, we call it the, our version of the particular activating system, right? So, you know, when you activate your particular activating system, it's basically your brain saying, I need to care about this thing.
So I always use example, like when you go buy a Porsche, before you bought the Porsche, you don't really notice Porsche is anywhere. You buy the Porsche, all of a sudden, every motherfucker in LA has got a Porsche. What happened? Everybody bought them on the same day?
No. So, it's just so important to our survival because we're paying a bunch of attention to them. Now we're going to see it everywhere. And, and so if we can turn people's brains on to that, what we found in the three thousand students we've taught to do M&A is then they start to see deals where they did it before.
It's kind of like you start to see the matrix, right? And so you, you all of a sudden are talking to your buddy and his dad and his dad's like, yeah, you know, I got to go do the plumbing business again, man. It's, I can't, I can't be doing this for 60 years. And you're like, yeah, well, just Brian, buddy, do you want to take over the business?
No, I'm a lawyer. I'm happy. I don't want to run that. Huh.
I'm happy to see them. And you start to have meaningful conversations that allow for what we used to have in this country, which was a business, an apprentice and a transition. Instead, we replaced that with a business and private equity IPO in or closing down. And we allowed the institutions to get them.
And I think we should push back on that. More with Cody Sanchez after this. Let's talk about the worst investment most guys make on repeat cheap clothes. You buy them.
They look fine. But six months later, they're pilling, shrinking or just falling apart. So you replace them. You do it again.
And again, you're spending more over time and you never actually have anything worth keeping or wearing for that matter. That's the whole model behind Quince. I've got one of their 100% pima cotton tees and the quality is immediately obvious. From the second you pick them up, they're soft, well constructed.
The kind of thing that holds up over time. And that is the point. Refresh your everyday with luxury. You'll actually use head to quince.com slash impact pod for free shipping on your order and 365 day returns now available in Canada to that's quince Q U I N C E dot com slash impact pod for free shipping and 365 day returns.
It's dot com slash impact pod. Let's talk about the most powerful force in wealth building compounding. There's a reason that people have talked about this forever. You put an asset to work.
It generates more of itself over time. The curve bends way in your favor. Every serious wealth builder knows how compounding works. Most gold owners though have completely opted out of it.
Monetary metals changes that equation. They've built away for your gold to earn yield paid not in dollars but in more physical gold up to 4% per year. More ounces stacking every single month compounding in one of the only assets that can't be printed inflated or debased and storage and insurance are included by the way. So hidden fees don't eat your yield.
The average person is passively absorbing inflation. This is how you compound your way out of it. Click the link in the show notes or visit monetary dash metals dot com slash impact to learn more. This is a paid advertisement.
Let's talk about money. You're leaving on the table. Every time you pay full price for a health product out of pocket, you could be missing out on 30% savings. There are over 40 million HSA accounts in the U S holding a hundred and fifty nine billion dollars in pre-tax dollars.
That's where TrueMed comes in. TrueMed helps qualified customers use pre-tax HSA dollars on health products that can qualify as medical expenses under IRS guidelines. You complete a health survey. TrueMed handles the documentation and the purchase.
And you can save an average of 30% on products like eight sleep, Peloton, AG1 and others that studies show can treat or reverse many common chronic conditions. Stop paying full price for products your HSA was built for. Go to truemed.com slash impact and check out what things you want that may qualify. It takes just a couple of minutes.
TrueMed is for qualified customers only. HSA FSA tax savings vary. We're back. Let's dive right in.
Okay. I can't stop myself from talking about this, which is I think that everything moves in these cycles and it is very hard for us to avoid the sort of boom bust of it all. Because what happens is getting into finance right now is a G way to make a ton of money. Like if you've got the brain power to pull it off, go into finance.
You can get obscenely wealthy, even just working for somebody else. Eventually it's going to stop working, but it works right now. So there's something really, really difficult to deal with happening right now. You said something earlier that I think is important to now bring forward in what you're saying now, which is if you can, if you're not going to be best in class, then hey, go buy a mom and pop shop or on that, whatever.
No one is going to believe that they're not capable of becoming best in class, at least that's listening to a podcast like this. So how do you help people either get their feedback on the ground, be realistic, assess the situation as it actually is? Yeah. How do you get them to navigate that self identification part of this?
Yeah. Well, what I would say, let's let's let's buy for Kate two things. Let's cut them in half. A lot of times people start a business because they want to make money, right?
So they're like, I want to start a advertising agency. Why? Is it because your life mission is to create an advertising agency? Is it because you can't sleep for the want of this advertising agency to be in existence?
Is it because you think you were so uniquely skilled at it that you want to spend the rest of your life on this mission? If that's true, go do it. Go do the startup. Thank God that you exist.
We need people like you in the world that are crazy psychopaths willing to do the startup grind, right? You and I have both been there. You cannot win long term in being a startup, in my opinion, in this environment where there are more businesses that have been created than ever before, so it's easier to start a business than it's ever been. It's harder to have a profitable business.
It's what's called the Four Valleys of Death, which is like before you make your first dollar, before you make your first million, after you make your first million until 10 and from 10 to 100. And so at those points, most businesses die. So if you can't sleep for the want of the business, go do it. But if what you really want is I want cash flow and freedom, then you should look at it numerically.
What is cash, cash as numbers? So now you should be saying, okay, where do I have the highest likelihood of success? Yeah, maybe I'm a smart motherfucker and I'm better than everybody else and I'm elite. Okay, incredible.
You still want to be smart in the games that you play, right? So I would much rather, even though I think I'm quite smart and clever, I would much rather go and compete against my local handyman in my region, go compete against my local landscaping business and compete against Jeff Bezos. I am going to pick the game in which I have a higher likelihood of winning against my competitor and I'm also going to pick the game in which most of my competitors make money. And so where do most people not make money?
Startups, that's why there's big VCs that have to fund them all the time. Why are small boring trade businesses easy or interesting? Because nobody funds them. Nobody's giving plumbers and landscapers, et cetera, money to start.
They can't even get a loan. So what does that tell you? That means that the first dollar that you invest in that business has to come back to you pretty quick. Otherwise, you're not going to continue to run that business.
Those services businesses end up being profitable pretty quickly. So you already know that. And then how could I really do risk my ability to win upfront? Then I can create an empire later if I want to, but if I just want to win faster, what would make more sense?
The average startup costs you somewhere from $20,000 to $100,000 to start. Average is not that useful. It's probably less if you look at the median, but let's just leave it and say, so a couple tens of thousands of dollars at least. The average startup isn't profitable for the first three years.
So you pay for the privilege of eventually potentially making money. And then once you do hit profitability, the average founder of a business makes during that first 10-year cycle about $40,000 a year, which is great, but maybe not for that much risk. Now, if you could go to a business that was already making money, so already has revenue, already is profitable and has been profitable for the last three, six or 10 years, you walk into something that has already beat that startup curve and has a higher prediction or a higher likelihood of continuing to make money because it has historically. And then somehow we got sold a big lie that because things are old, they're outdated and they're not no longer relevant.
Actually the biggest risk to a human is when they're a newborn. That is when you are most vulnerable, not when you're a teenager, right? The biggest risk to a business is not when you're a teenager, when you've already existed, you know how to feed yourself, you know how to dress yourself, AKA profitable business, not when you're a baby. I mean, and instead when you're a baby.
So that's how I think about the two. Like, yes, you can be elite, but pick the game that you have a higher likelihood of playing. Okay, so what does somebody have to be good at in order to pull off buying a business? Because I think most people can imagine running the business.
What they don't understand is what they're going to have to be good at to find by the business. Yeah, well, we teach 10 steps to buying a business. So basically what I did is I worked in private equity and asset management and investing for a long time. And I was like, what are the bare minimum things you have to know in order to steal the private equity guy's homework, who buy businesses all the time?
That's what they do for a living. And what I realized is there's not that much difference between doing a $100 million deal and a million dollar deal or doing a million dollar deal and a $10,000 deal. It kind of has the same steps. And the steps basically go like this.
One, you got to realize that there's an opportunity. Cool. Two, you've got to figure out what a good deal looks like for you. We call that deal clarity.
Some people call that creating their deal box. Three, you've got to figure out how to find a business to buy. That's called origination. Four, you've got to figure out how you're going to finance that bad boy.
How are you going to make money? How are you going to get money in order to buy the business? Most of us don't have maybe money to do that. How are you going to sell the owner on why you, Tom, should be the one to buy this business?
How are you going to do diligence, the business, to make sure that you actually want to buy it and you believe the things they're telling you? How are you going to negotiate the deal in order to get the best deal possible? How are you going to structure it and put together the documents? Because Wall Street gate kept that for us for so long.
Then finally, how are you going to close the business? So what does the last segment look like? So you transfer everything correctly, like when you go buy a house and you have the mortgage docks and you go to escrow and all of that stuff. Very similar for buying a business.
And then what's your first 90 days and you're going to look like running the business? And so when you put together that framework, you can see just like anything in life. It's not that you don't have the money to do it. It's not that you can't do it, most likely.
It's that you don't know how. You have a knowledge gap, not a resource gap. And so the book is trying to say, hey, this doesn't have to be as big and scary as maybe you think. And what if you could buy a business just using your expertise?
What if you could buy a business just using your time? What if you could buy a really small business to start the first time? Like a $5,000 business. And then once you figure out how to do it at $5,000, you can scale up, scale up, scale up, just like you would in buying a house.
So that's what we're trying to teach people is can we make it more democratic and can we help you really think about what you might want to buy or own or buy a part of or own a part of because if we can get your first deal to be good, then you're more likely to do more deals. All right. What you just said is awesome. It was not the answer to the question that I asked.
So what I'm trying to figure out is what to do people have to be good at because people die in the face of tactics all the time. So I have a university and the one thing that I see all the time is if I lead with, hey, here are the tactics you're going to learn. I get people to sign up. But if I actually tell them the thing that they actually need to do, they don't sign up.
Now here's what I'm going to say is the answer to the question. You tell me if you think I'm crazy. If you want to buy a business, you have to do all the things you just said. But the thing you have to be good at before you can even get there, you have to have balls.
So you've got to have a high risk tolerance. So even if you're buying something small, you're going to put your life on hold, you're going to get into this thing, you are almost certainly going to get in way of your head. You have to have an ability to learn. You're going into something unless you're already a master in that space.
You're going to have to learn about this thing. There is a methodology to learning. You have to have a willingness to suffer. This is going to be hard for sure.
And most people should go work for somebody else. So don't own the plumbing business. Be a plumber for somebody who owns the plumbing business because they're going to have to deal with making sure that we make payroll and all of that. And so just by being honest with yourself, you have to have an ability to convince people.
If nothing else, you have to go and convince that person that they should sell to you. If we're talking about a no money down thing, this is going to be, hey, dear person, I know that you spent your whole life building this thing up. I'm not going to buy the money. I'm not going to buy the same for money outright.
But you can trust that I'm going to buy it out over time with earnings from the business. So you have to be able to convince them that you're the person to be able to do this. And above all of that, you have to have a belief in yourself. You actually have to, you can't be trembling as you take that step forward as you walk into the business.
So did I miss anything on that list? Like if you were to think about the people that have gone through your program that absolutely murder it, is that what they all have in common or is there something else? Well, no, I think they all have that in common. But they're still scared.
I think pros know that you do it scared. They just understand what is a true fear, like what is an acute reasonable fear and what is an influenced fear, somebody else puts it inside of you, or what is a future state fear. So like something that could be, but maybe it's not so reasonable. And so if an acute fear might be, I'm buying a business and it's a million dollar business and I'm putting my life savings into this business.
And I've never done a deal before and my house is on the line. Acute fear. You should be scared about doing that. Please don't do that until you're a really good deal maker.
You don't want to put your entire life on the line. An influenced fear might be somebody saying, but you've never done this before. There's no way you can. You shouldn't do that.
Why don't you just say it employed by somebody else? That's somebody else influencing you and implanting a fear in you. And then a future state fear is like, what happens if this happens and this happens? And you're not really actually, you're not modeling the problem and seeing like how reasonable or likely is that to happen?
You're just stuck in the future and not in a current state. And so I think the only thing that I would add to what you have is you're exactly right. If you're going to do anything, there's never any risk in education. So like you learning the thing and becoming a deal maker and learning how to do deals, I've never had anybody go, God, I wish I didn't know how to do that.
I wish I didn't understand what equity meant. I wish that I didn't understand how to do the distributing deal versus a normal deal. I wish that when my boss came to me to negotiate my salary, I didn't take it three steps further because I realized the game of negotiations, nobody said that to me. They're not like, God, I wish I didn't have that knowledge.
Now, where's the risk, the implementation, the doing of the thing? So we have to get people to obsess with the part upfront, which is can we get you to learn as much as humanly possible? Not only about how to do it, but about who you are and what you want. Because when you know what you want and you know what you're capable of and you know how to do it, then you really decrease the risk.
And let me give you an example. Like, you know, I had a guy buy one of our newsletter businesses back in the day for $8,000. It was like not really a lot of money for him at all. He already ran the newsletter business.
This newsletter business was a marketing business. It was basically a glorified list and he integrated it right into his company. He felt no fear on that bad transaction. He had never bought a business before.
But why did he feel no fear? He already knew newsletters. He was running it already. He had a little model that was like, I think that we can sell 3% of all users on this list so I can make my money back in 30 days because $8,000 with our purchase price, this is going to make all the sense in the world.
And then the deal was small enough where he's like, if I lose $8,000, I'd be annoyed at that. But it's not going to bankrupt me. And so can we get them in this sphere where they know themselves, they know how to learn and they know how to do a deal? So I guess the only part that you missed is you need to know yourself.
Like you need to be honest about what you want, not even what you're capable of. Because I think most people are more capable than they think. But one thing I see people do sideways sometimes is they're like, Cody runs laundromats and buys laundromats. I'm going to buy a laundromat.
That's called a mimetic desire, right? That's you saying Cody's life looks cool and she started with laundromats. So I should start with a laundromat. As opposed to taking in a little bit of time, which we call the deal clarity worksheet and walking through, what do I want?
How much money do I want to make? How much risk do I want to take? Where should I be based? Like, what am I willing to do?
What am I not willing to do? What's the outcome that would be worth the work? And if you do that, then your risk decreases substantially on doing a deal. But skip that.
Just go buy a business after you listen to this podcast with Tom and I and say, Cody said that I could and not really know yourself and don't follow tools and resources and don't know that I self. Yeah, you'll probably regret it. You shouldn't do that in my opinion. What's harder figuring out how to do the deal and getting that done or running the actual business?
We're taking a quick break, but trust me, what's coming up next with Cody Sanchez is worth sticking around for. All right, we're back. Let's get into it. I think most entrepreneurship is like, it's like war.
It's like long periods of boredom punctuated by extreme periods of fear and misery, right? And so I can get people to believe you. Their lives will be a lot better. You know, it's I also heard Emma Grande, Emma Grenge, the woman who runs a bunch of the Kardashians businesses.
She talked about something that I loved, which is true in entrepreneurship. It's called the Rule of Thirds. Typically think about that in like cameras, you know, how to play something on a field. But in business, she said a mentor told her that when she was when she was younger, a third of the time in business, you're going to be great.
Like you're going to be like, I'm the fucking CEO. Like this is so fun. Get me a coffee, you know, whatever, like it's you off. It'll be amazing.
You'll be really proud of yourself. You'll be doing work that matters and you'll stretch yourself to a point that you're like, I didn't know I was capable of this. Great. A third of the time you'll be stretched, but neutral.
You'll be like, all right, this is work. It's, you know, I'm going kind of neutral on it, but like slightly uncomfortable. And then another third of the time you will be miserable and you will be like, oh my God, I can't figure this out. I'm going to be a nightmare.
I probably will become a massive failure and everybody will hate me. And as long as you realize that those thirds exist, then I think it's a lot easier to get through it because when you're in a great period, you go, okay, awesome. But like I know it's not your last forever. And when you're in a neutral period, you're like, okay, cool.
And when you're in a miserable period, you're like, please God finish. But I do know that another period is coming. And so that always makes me feel better, at least. Yeah, this too shall pass.
I have said that to myself a million times. Also when things are going well, like, uh, don't get too complacent here because this too shall pass. And it always does. Always does.
Even miserable stuff. I really do break. I think that most people will emotionally break in that success as a game of resilience. How long can you stay in the game?
And if you're really getting better and you stand it long enough, you'll be fine. Let me ask you. But can I add one thing? Yeah, please.
I do think that you're right though. Like I don't think that everybody has to go be an entrepreneur and a founder of the business. I think it's a really fair point. Like my, the people who work for me, for instance, why do they come and work for me?
It's not that they couldn't go become entrepreneurs. Many of them have been entrepreneurs before and run businesses. But they come because they think or they know that they can get equity and upside in my businesses eventually. And they see a path for them to get in the game.
And simultaneously they're like, God, I did that thing before and I don't want to go be the person in charge 100%. And if that's somebody listening, I think there's two types of humans. There are types of humans that are like, I want the risk. I want to be in charge and I want to try my hand against the universe.
Let's go. Right? And then there's another person that's like, I just don't want to work in this job anymore. And I'm kind of miserable and I wish I had more control over my fate, but I'm not sure I want to fully dive in.
Maybe ever or at least right now. And for that second type of person, it is perfectly okay to learn deal making and figure out how to get part of a company or part of the risk or transfer some of your salary and earnings into a company that you get ownership for instead of taking straight up compensation, but not be the person where the buck stops with you. You can just take less of the risk but take some of it. The only thing I'll add though is you can't get ownership without some risk.
There has to be risk if you're going to become an owner. And so I think you're very right on that point. Right. So going back to the idea of deal making versus running the business.
Do those skills dovetail or is that just general intelligence? They dovetail, I think because nobody taught us. I mean, I was breaking this down with somebody yesterday. Nobody taught us the language of money.
Like they taught us. It's like, you know how most people in the US speak Spanish? Like kind of. Yeah, like that much right there.
Like, don't they fall on you? You know, like, say, right? But like if you were to go deeper and say like, let's talk about the meaning of life in Spanish. Uh oh, nobody's going to be able to do it.
Right. And so because of that, we train for Spanish, but we never actually implement, utilize and integrate Spanish. And so we can't actually speak the language, even though we might be able to understand pieces of it all over the place. I think it's the same with money.
So we understand budgets, maybe we understand savings. We may be understanding investing in the stock market. We might understand salary. Like what should I earn broadly?
I mean, God, some of the best entrepreneurs I know don't even know how do I structure a deal? Like, what does it mean? What are the levers that I can use price and terms and inside of those price and terms in order to get a percentage of ownership? Like that is not taught.
That is taught in private equity. And I mean, it's not private equity and finance. And that's about it. Maybe if you're like, if you have a VC startup, you learn a little bit of it because you're giving away the equity.
So you learn it in reverse. Um, but for the most part, nobody learns that. And because we don't learn that, we can never actually manipulate money at the highest level. And so I think they dovetail and we've got to learn this language of money.
So we have a whole point basically talking about structuring, which most people would think is boring. Like, why would I want to learn how to structure a deal? What does that matter? Well, I give the example of like, all right, if I'm on a stage, sometimes I'll pick somebody out of the audience and I'll say like, who here owns a business and then somebody will raise their hand.
Okay. How much revenue does your business do a year? I'll be like $10 million. I'm like, awesome.
I'd love to buy your business for a billion dollars. Would you take that deal? And they're like, fuck yeah. Where do I sign?
I'm like, cool, right here. But you didn't look at the structure and the terms which tell me that I am going to pay you a dollar a day until I pay off a billion dollars. Is that a good deal now or a bad deal? It's a bad deal.
And structuring is all about that, right? It's like, hey, I remember one time my attorney didn't catch a deal where what was the exact terms? It was they missed gross profit instead of net profit. The average person does not know the difference and the average person can't actually calculate that.
So gross, so I ended up having to pay out a partner on a gross profit basis, which means basically revenue, like basically top line revenue to simplify instead of the actual money we took in hand. Now that could have bankrupted me if that was the only deal that I did. And so if we can learn these terms, we actually make money more money by doing the same thing we're doing right now. Because you would know, if you read the book or if you obsessed with finance, you would know, oh, I don't want to structure a profit share deal because if I just structure a profit share deal, then Tom could run all of his outfits in the business and take all of the profits out of the business.
And when he pays me a percentage of profit, it's much lower. I want to do a revenue share deal because I want a percentage of top line revenue, the whole every dollar the company brings in. And if you don't know these terms, it's hard for you to actually do deals. Very similar to health care, I think.
What they did to us in health care, they're like, organic. Asterix. There's no definition for organic in the US health care system for food. So it's like, all right, what does organic mean?
Grass fed? Well, that must be better because that means the bulls out in the field, right? No, have you ever seen the thing with a cows in a row and they're just spewing a machine with grass at them and they're in all their own shit? It's actually not better.
So it's like, if we understand the words real meaning, that's where the money is. And that's what we're trying to kind of like pull the current back on for people. How can somebody watching this go? Okay, wait a second.
Either I'm going to be good at the deal side or I'm going to be good at the laundromat side. How do you help them bridge that or shut me down and show me that this really is one and the same? But it feels more like I'm going to look into, well, certainly you, it's obvious. You know that you can scale just by being so good at deals.
But I have a feeling if I look into your audience, your students, excuse me, I'm going to see the same thing, that they're going to be good at either the deal or the running of the business. And it's really about bringing those two people together. Yeah, it's a good point. So my point before is not that deal making and running a business is similar.
It's that if you do a partial deal and or you run the entire business, that's or you buy the entire business, that's similar. So it's basically my point was basically you don't have to be good at running a business to do a deal. You don't buy the whole thing. So if I was unclear on that, I want to make sure that's clear.
Now you're totally right. It's kind of like EOS, how they talk about in business a lot of times. Are operating systems? Correct.
It's kind of like in business often they talk about having a visionary, right? Somebody who comes up with crazy ideas, you know, what do we do next? Yeah, I want to do this. It's going to be magical.
And then you have your integrator, the person who goes, Jill Tom, like, what's the budget on that? What are we going to do next? Here's the timeline. Here's the follow up.
It's a little rare in business to have both crazy ideas, big vision and ability to execute on the vision. And I do think in some ways I got lucky. I'm not lucky to have both of those. I definitely err more towards the, hey, big ideas, but I'm also pretty maniacal on the details.
And I think you could say, like, who would be best at this? Elon, right? He's like crazy about details. I can't believe that people hate on that guy.
It makes me want to crawl through the YouTube screen and bite somebody. I don't want that in my mouth, you know, buys his politics. What he's done is unreal. Unreal.
Anyway. Yeah, why? I think it goes. No, like, if I'm probably a measure of your bank account is whether you like Elon or not.
Like if you don't like Elon, I bet your bank account's not very big. Or some big big big boys with bees after their... Well, or you have an ulterior motive. Yeah, there you go.
Because they're getting in swabbles now over politics for sure. Yeah, those are status games at that point. But if, you know, if you're not on Elon's level and you don't like him, that's okay to not like him as a personality, but to not respect what he has accomplished or at least want to learn from it, even if you hate the guy, going, oh, by the way, he built three multi-billion dollar businesses simultaneously that had never been created before. Like I could probably learn something from him, you know, actually a funny story.
We had a member of one of our teams we have a podcast to, you know, the big deal podcast and on it, I had a billionaire friend of mine, Joe Long's deal, who built Palantir. And what was funny is we had a vendor that worked on the podcast. And about like three days before we had Joe on, the vendor reached out to my head of content and was like, the thing is I don't feel morally right working on this podcast. And so you can give me anything else, but I'm going to opt out on that.
And I hope you respect my moral compass on that or something like that. And at first I was like kind of categorically baffled because this was a business podcast. We weren't talking about Joe's politics. We weren't talking about Joe's background.
We were literally talking about how do you build, he's built five multi-billion dollar businesses. I want to learn how he did that so that I could even if I hated the guy, I want to steal his homework. Wow, you could only learn from somebody you like, what a limited worldview that would be. But the second thing that I thought was fascinating, I was like the point of podcasts and all this media that we do is to beat up ideas, you know, it's to see what ideas stay on the test of time.
And if you can't do that, you can't be on my team. And so we said, you know, with all due respect and not a ton of it, you're fired. And no, I don't appreciate your moral compass at all. I think that you have a very limited worldview and I think it's very sad for you.
And if you only ever can talk to people that you 100% agree with, you'll never have friends. And oh, by the way, you'll never become intelligent because nobody will push back on your ideas. And so if you have an opportunity to talk to somebody you hate, that's a beautiful opportunity, because you can understand why, why do you do this? That doesn't make any sense to me.
And then you can become better. But yeah, I don't understand people who don't like Elon either. It's madness. So you brought up Elon, he's the best at balancing the two, which I think is really important for people that don't understand, give them a primer.
So you're able to do both big ideas, set the vision, but you're also able to get into the details. Talk about that. That certainly by default personality, I am a big idea person, but I found that my progress in business was held back until I could get in the operations of it all. Why does the integrator matter?
What exactly are they doing? Yeah. Well, a couple of things you can do to figure out, can I run a business likely? And do I have what it takes?
Is there's tons of personality tests out there? So I think a few times it's interesting for you to take something like a Colby test, which we have a lot of our people who work at our companies run through. And it basically shows you fast action and how fast are you to move on things, which is a pretty high indicator of a visionary. I never liked that word because I feel sort of weird.
It's like, I just sit up here. Too pomper to me. Yeah. Yeah.
If there was a countervailing cool name for the integrator, I'd be okay with it, but like you, right? It does. I can't have one without the other. You have to be both.
So they're pretty equal. Maybe the only difference with the visionaries that they take risk, like that again, is I think how money is made. But you can take a Colby test and you can find out how fast action are you versus detail oriented and you think an operator is just detail oriented? No, it's like a spectrum.
And so you have to be, there's four pillars that are in it. Not that I think that this test is perfect or any of them are, but part of it is attention to detail and part of it is a finalization of execution. So like do you take something all the way to completion and visionaries also typically have a less likelihood to be attention to detail and a less likelihood to follow the execution. And I think most businesses and people's bank accounts die at the altar of 80% done, you know, and it's not actually that you guys don't start.
It's not that it's not a good idea. It's that you don't finish and that's why you're poor. And, um, and so if we can change that, then we can be successful in business. So you have to ask yourself, am I really good at taking risk coming up with ideas, understanding complex structures or buying large, am I really good at finishing things, doing what I said I was going to do and paying attention to the details?
And wherever you fall, as an entrepreneur, I think the biggest mistakes we usually make is we hire somebody like us because we hire people we like and my business has started to change when I hired somebody, not because I liked them, but because they had the opposite skill set of mine. They love to do the things that I hated to do. And because of that, we worked well. And so that's what I would ask yourself first is, which one are you and then whatever you don't have, you're going to either have to really compensate for that or you go find somebody to go on the journey with.
How long do you think this opportunity is going to play out? So we've got this $68 trillion trap to baby boomers. You're teaching people as fast as you can, how to do the deal structure, how to get in, how to be an operator, but this is a limited window. So, um, yeah, what, how quickly do people need to get in this?
Yeah. Well, let's think about it this way since. So if you think this is an interesting idea, very categorically, by 2030, we think a large majority of the $68 trillion in wealth will have been transferred or in some way destroyed. No, you could push that like five years.
You could push that to 2035. And the way that we calculate that is basically baby boomers to retirement age, to degradation of business, when businesses start to plateau due to length of existence and, you know, no new things added to the business complacency, because you know, the only thing we know for sure is if your business isn't growing, it's stagnating, which means it's going to move into decay. And so retirement age, degradation of businesses, and then the average lifespan in the US. And so, um, so I think it is eminent, very, very eminent.
I think this is the next 10 years, we have to figure this out. And it's just math, like how many 85 year olds are really coherent and can handle the game of business or like it anymore? Not very many. Um, and so if we don't transfer before that, then I think that's not great.
And simultaneously, how many 75 year olds are still moving their business forward? Or is the business starting to decay? And so we want to catch it before that period where we can sort of, we can continue and maybe even grow it. So the, the, it is eminent.
And the, the second part about that, that is, that is very, very true is you know, private equity is the other alternative. So if we don't do something, we'll all 68 trillion get wiped away. No, but wealth will continue to get more and more concentrated. All right.
Talk to me about that. I'm literally writing an old caps right now, BlackRock. Yeah. Uh, so why not?
Why not just let BlackRock gobble it up? Man. Yeah. I mean, we basically have, we have a situation which BlackRock and 20, oh gosh, I should look at the exact number.
I think it was in 2000, but check me on the internet owned. So private equity in 2000 owned about 4% of US businesses last year, meaning stock market or everything private, private businesses last year, 20% and that is accelerated. We're seeing more private equity funds continue. We're seeing increased fundraising levels.
We're seeing more companies get owned by the few. And it's actually really, really scary because if you look at the food market, like there are 11 companies that we buy things from Procter and Gamble, Kellogg's, um, we actually think that we have like 200 companies or 300 companies. We buy things from, we don't, we have 11. And if you look at all the brands that they own, you realize, Oh, wow, this is why policy actually really matters in the food industry, because 11 people control anything you put in or on your body.
Whoa. That's a little scary. And then you might go, well, maybe that's just the food industry and you'd be wrong, because if you were to look at the S&P 500, you have four companies that own 40% of fucking S&P 500 are biggest companies in the world. And that is the, the Black Rocks and the vanguard's of the world.
And I used to work at Vanguard. So my biggest competitor used to be Black Rock. I played with these guys all day. I have met with the CEOs of Vanguard and back in the day, I met with the founder of Vanguard.
And these people are not evil people. We are in send of aligned little chimpanzees that do things according to whether we could zapped or whether we get a treat. It's kind of how humans work. The problem is the incentives are really skewed.
So if you went to Bill McNabb, right, the CEO of Vanguard, and you had asked him, which they did publicly, you can see his response. People would say right now, well, those companies, Black Rock and Vanguard and the like, they don't actually own everything because they're passive index investors, right? I was literally just going to ask for clarification on this. Right.
So they would say, no, no, no, it's not up to us. We just buy whatever is in the stock market and we don't have any influence on it. On your behalf, a lot of times, you go and get money to Vanguard. You go get money to the platform.
Exactly. And by the way, we're Vanguard and we're very nice and kind. And so we just lower your fees. They actually have incredible economic structure separately.
But that's their mantra, right? You know, Bogle was famous for driving the same car continuously all of his life. He's very Warren Buffett-esque, right? Why people love that so much.
But yes, I know. Yeah, I'd rather know who you are for real. I really maybe who he is. But anyway, I won't be able to see it yet.
OK, so the point is they say, hey, we just buy these passively. It's not up to us. And when I was in the industry, I sort of, I believe that a lot. But then Bill McNab came out and said something he shouldn't, which is people think that we're passive and we're not.
We absolutely talk to these companies about things like ESG and things like corporate governance. Yeah. Right. So this is his whole shtick.