Bootstrapping A Small Agency Into A Billion Dollar Business Empire
Hire 1, Hire 10, Delegation, and Storytelling - March 17, 2022 (about 3 years ago) • 52:24
Transcript:
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Andrew Wilkinson | Don't know if you know this, but Warren Buffett made like **97%** of his wealth after the age of **55**. So, it all happens very slowly. He started in his twenties or whatever, and he wasn't really well known until the **1990s**.
The same thing happened with us. We didn't really talk about what we did. People would meet us and they'd be like, "Oh, you're some schmoes from Victoria who own some digital agency. You seem to own all these really boring businesses."
You know, it requires being kind of underestimated and dismissed, and playing a very boring game while watching everyone else go and make, you know, tens of millions, billions of dollars taking risks in startups. Meanwhile, we're just going, "How do we take, you know, $100 and make **$10,000**, **$15,000**, **$20,000** a year on that money and just keep compounding?"
So basically, the mental model was to take **70%** of our profits and constantly reinvest, take the other **30%** to live a nice life. That number went down over time. And yeah, you do that for **17 years** and it turns into a, you know, a big number.
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Sam Parr | And something that you wanted to talk about today was whether it's better to own 100% of something and bootstrap it, or to give up equity to partners, whether that's for sweat equity or money.
We were discussing this, and I asked my audience about companies that were bootstrapped and quite big. There are a few that are doing $1,000,000,000 a year in revenue. I noticed two commonalities:
1. A lot of the things that were bootstrapped to be really big were easy to take bank loans against. This includes a lot of restaurant businesses. They may have taken loans against some equipment or loans against a building they owned, things like that.
2. I've also noticed that there are many agencies that were bootstrapped and became substantial-sized agencies or service-based businesses. For example, recruiting companies and IT services. In these cases, you basically bill out people's time for $100 and charge $300 or something like that.
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Andrew Wilkinson | Well, think about it. You don't need, especially if you're a young person and you have enough money to live for a year. You can go and start an agency because, at the end of the day, it's you who goes and sells.
You win a contract, and as soon as you win the contract, you go and find a developer or you do the work yourself. Then, before you know it, you're cash flowing, and you're always able to hire people just in time for the work.
So, at the end of the day, there's really no burn, and it's very capital efficient. You don't even need an office anymore. I mean, we almost never had an office. Over time, we had a couple of small ones or whatever.
But the big mistake a lot of these big agencies make is they start building these fancy, humongous $5,000,000 offices in New York, San Francisco, Spain, and you know, whatever. They're great businesses if you run them right.
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Sam Parr | and how many people work at metalab now | |
Andrew Wilkinson | I think it's about a 170 | |
Sam Parr | How often do you say to yourself, "I'm not sure if the headache of having 170 employees is always worth it?" | |
Andrew Wilkinson | Well, it's very abstracted for me, right? I haven't been in the business for 5 or 6 years. The way we run Tiny now is that we meet with the CEO once a year, and otherwise, they check in whenever they need help with anything.
When I was running it, at first, it was exhilarating. Running an agency is awesome when you're starting out. You get a seat at the table in all these places you don't deserve to be. I was like a 22-year-old pipsqueak, and I was meeting the founders of Pinterest, Slack, and all these amazing places. They were asking me for my opinion. It was crazy!
But at a certain point, you get so exhausted. You're making a good amount of money, but you don't want to get on a plane to San Francisco every second day to go and sell. At that point, it starts to become a much more intensive business. For me personally, I don't enjoy running businesses after about 15 or 20 people. So once I hit that, I knew I needed to transition to a CEO.
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Sam Parr | So, when we're in the document, you say the pros and cons of bootstrapping and owning 100%. What do you have under those?
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Andrew Wilkinson | Well, I mean, I think that I've changed my opinion a lot on this. When I first started, I was like a Jason Fried, David Heinemeier Hansson accolade—100% every business should be bootstrapped. I now think that's crazy and stupid.
I believe there are certain businesses where it's insane not to raise money. For example, if you have an opportunity to grow your business, the analogy I always use is: if you own a bakery and there's a line out the door, but you have a single oven and need to buy three more ovens, it's crazy not to raise money or go get debt. You need to buy two more ovens to service the people in line.
I just was never in that position. I think owning 100% or owning a majority in your business is like a dictatorship. Dictatorships can be very good, like Lee Kuan Yew from Singapore, or they can go terribly, like Kim Jong Un. The question is, what's your personality and what's going to work for you?
You can move insanely fast—there's no board, there's no committee, you don't owe anyone anything. You don't have an outcome; you don't have to IPO, you don't have to sell, and you have total integrity. When Chris and I buy a business, we can look people in the eye and say, "We're cutting a check; this is us."
That's very different on the cons. I mean, you're on an island. You don't have anyone who is really aligned and cares, and can tell you you're being an idiot. So, you can really drive your business off the rails.
You also think in a limited way. I know so many entrepreneurs who could 10x their business, but they're so addicted to their dividends or they're conservative, and so they don't.
So, I raise money for our podcasting software company, Supercast. I'm going to raise money for our news business. There are situations where it's logical.
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Shaan Puri | Alright, and then I forgot to tell you this, but this is the most important thing. I can't believe we didn't talk about this earlier, to be honest with you.
If you're listening to this and you like what you're hearing right now, and you haven't gone and subscribed to the *My First Million* podcast wherever you get your podcasts, then that's the thing you've got to do. There's nothing more important than doing that right now.
And don't do it because I said to do it. Do it because you want to do it. Do it because that's who you are.
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Sam Parr | What about that conversation of employees? Employees saying they want equity, and you don't give equity?
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Andrew Wilkinson | There are certain businesses where we do and certain ones where we don't, right? The big question is what I always say to an employee: **equal risk, equal reward**.
If the business is going to sell at some point, or we think it can IPO, great! We'd love to talk about equity, but there's a cost to it. If you want to make $300,000 a year and you don't want to give up any of that $300,000 in order to get stock options or buy equity, then it doesn't matter.
So, I love giving people the option and saying, "Look, you can either give up some of your compensation or upside, and we'll give you stock options, or you can get the big salary and prioritize cash." A lot of people prioritize comfort and cash, I find, at least outside of the Bay Area.
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Shaan Puri | by the way andrew you mentioned the guy from singapore sam do you know this guy lee kuan yew | |
Sam Parr | I know a little bit about him. I didn't realize he was a dictator. I thought they called him like the CEO or something.
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Andrew Wilkinson | no he's literally a dictator but like a good the good dictator | |
Shaan Puri | Andrew, can you give us like a 2-minute summary of who this guy is and why he's awesome? | |
Andrew Wilkinson | So, effectively, he took over Singapore. It's like an island tropical state in Asia. At the time, it was like rice paddies and poverty—a bog. He literally took it over.
We know he had an autocracy and total control. He basically thought like a business person and was like, "Okay, how do we make this the most business-friendly place? How do we optimize taxes? How do we ensure we have a hyper-competent government? How do we pay the government really, really well? How do we incentivize the whole world to manufacture and export their products from here?"
He basically built it into Asia's, kind of outside of Hong Kong, the central banking and finance hub in Asia. So, it's a pretty incredible story.
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Shaan Puri | And I think his background is like, he's a math and computer science guy, right? He doesn't come from a political background; he came from a different sort of background. I think that's why you get different ideas from a leader in charge, totally.
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Sam Parr | you wanna tell me you | |
Shaan Puri | I want to add something. You tweeted out one thing that's related to how you run the business at Tiny, which is this "hire 1, hire 10" framework. What is that? Because that sounded interesting to me, and I think that from what I understood, it was a pretty useful concept. So, explain that.
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Andrew Wilkinson | Yeah, so our CEOs get super annoyed because I say this all the time. It's probably the number one thing I say, and it's probably the biggest hack that enabled us to build Tiny over the last 8 years.
So, think about it like this: if you had an army general who is commanding 1,000 troops but he's still telling individual soldiers what to do, personally restocking their ammunition, and shuffling people around, you'd be like, "What the hell is this guy doing?"
But I think a lot of people operate their business like this. I mean, I certainly did in the early days. I would swoop in and poop out ideas. Instead of hiring a VP of Marketing, I would go and hire a whole bunch of marketing people and just kind of become the VP of Marketing. Or I would bypass people and tell them what to do.
What I realized is you should never ever hire 10 people. You should always focus on hiring one person. That could be a CEO who will then go out and hire all the executives, or it could be hiring an executive who will hire an entire team.
It's such a hack, right? It's like the 80/20 rule: how do I do 20% of the work for 80% of the result?
Yeah, I mean, it took me ages to figure this out. I feel like I've only cracked this in the last 5 years, and I still... Chris will still catch me in this. He'll be like, "Hire one to hire ten."
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Sam Parr | then then but when you hire | |
Shaan Puri | that that mistake all the time | |
Sam Parr | And when you hire that one person, how much?
So, let's say your business is doing, let's say, $10,000,000 in revenue and $2,000,000 in actual cash flow. You hire that one person and pay them a lot of money—$250,000.
Do you only hire that $250,000 person when you know for a fact you've got the budget for like two more people?
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Andrew Wilkinson | Yeah, that... I mean, that's my approach. That's what I've shifted to.
For example, we hired the CEO of Aeropress. He asked me questions like, "Oh, what do you think about this hire or that hire?" I just said, "That's your hire. I hired you; I trust you 100%. You make those hires."
So, it's complete delegation. When I buy a business, I make two decisions: who runs it and how they are incentivized. Unless they do something dirty or horrible, or the business goes to shit, I just leave them to it.
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Shaan Puri | What's the trick on how they are incentivized? So, how do you think about that when you buy a business? You say, "Alright, the business today is here, and I think naturally it's going to get to there."
Then, you bring on this person to get it to be some inflection above that. I also know that things could go wrong. So, how do you think about that incentive structure? Is it case by case? Are you coming up with very unique patterns or packages, or do you have kind of one base that you go off of?
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Andrew Wilkinson | It's so different. I mean, like, everyone's incentivized differently. There are certain people who, for example, need to be able to say they're a partner and have equity. There are other people who don't care about that; they just want targets to hit.
I mean, we've done everything from saying, "Okay, let's say the business makes $100,000,000 and it's growing at 15%. Anything you do over 15% growth, you get 5% of." That's in its simplest form. We've also done things where it's like, "Hey, when the stock price hits X, you get a payment."
I remember I got to have dinner with Charlie Munger about two years ago, and I asked him, "What's the perfect incentive structure?" He just said, "I've done 100, and everyone is different. I still don't know what works." I think it's really an art, not a science, because different people are just so differently motivated.
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Sam Parr | and you actually | |
Shaan Puri | Have like stakes. So, you... sorry, one more time. When it's usually... or usually when it's like, ah, it depends. There's that... what that usually means is the winning formula is different a lot. But there's usually a common losing formula. So, what is the common losing formula for incentives?
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Andrew Wilkinson | The common losing formula is them not being aligned on risk. For example, if they're able to use my money and I can keep injecting money into the business, but it in no way hurts them—like they don't get diluted, or they don't have to pay a high interest rate, or if it goes bankrupt, they don't lose anything—that's a huge problem.
I've learned that over the last five years. Now, what I try and do is if somebody wants equity, I always make them write a check. Or, I loan them money, and it's literally a personal loan guaranteed by their house or something.
It doesn't have to be so much money that it's going to ruin them or be a problem, but if someone wants equity, I'm like, "Okay, you gotta put up something." Because if the business fails or goes down, you gotta have a sense of loss. People feel a lot; people feel lost more than they feel gained.
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Shaan Puri | I just imagine the Wilkinson moving truck coming in front of the house. They're like, "No honey, it's all gone wrong. You have to come and put your own furniture, your own art on the walls." They get to live there, but they have to know that it's your house now and they truly messed up.
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Andrew Wilkinson | We have done it. I obviously never want to do that, and it's always structured in a way where it's not, you know, we're not going to have to take their car or something. But I just want a feeling of like there's gotta be some downside, you know?
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Shaan Puri | Sam is gonna take this way too far. He's gonna take their car, and it's like a punch cross. I get to punch you just because if you lose my money, I'm gonna punch you.
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Sam Parr | I love this, Gabe. You also, speaking of that, of risk, you hire people really early. You told me, I don't know if you talked about those, but you were tinkering around with this bake. Do you want to talk about the bake? Can you mention the bakery or no?
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Andrew Wilkinson | yeah well the bakery is kinda sad | |
Sam Parr | So sorry, not the bakery. The ghost kitchen. Ghost kitchen. Ghost kitchen.
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Shaan Puri | you tinkered | |
Andrew Wilkinson | with this thing where you | |
Sam Parr | I hired a baker, and we were making stuff to sell on DoorDash and Uber Eats. I don't know if it was entirely legal, so we don't talk about it. But the point I'm bringing up is...
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Andrew Wilkinson | that well no I can I can I can tell | |
Sam Parr | well tell the story and then let me ask my question | |
Andrew Wilkinson | Sure, so basically, you know, I'm pretty interested in health and stuff. I was trying to get off sugar, so I went to a baker friend and I was like, "Look, can you try and make sugar-free cookies using modern... you know, there's always like crazy modern sugars." Have you guys heard of Magic Spoon?
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Sam Parr | yeah | |
Andrew Wilkinson | Yeah, like Magic Spoon uses allulose, stevia, and monk fruit and stuff. So he started making these, and I was like, "Okay, these are not as good as a chocolate chip cookie, but they're like 90% there." I bet a lot of people would be into this as a replacement.
Think about Halo Top; it doesn't taste as good as ice cream, but you can eat a lot of it, and it's not bad for you in the same way. So, I basically made that. We started making all these treats, cooking them out of our office, which is not technically legal.
What happened was I got a call from Island Health, which is the local health authority. They just said, "Hey, you're using an ingredient that's not approved in Canada." Unfortunately, allulose is not approved in Canada, so you just legally can't serve food with it, even though it's generally regarded as safe and everything.
I'm still going to do it at some point, I think, but I just legally can't. It sucks. It's insane to me that you can hit up against these regulatory issues. Imagine being a real estate developer and having this amazing vision, and then city council is just like, "Nope."
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Sam Parr | yeah it sucks | |
Andrew Wilkinson | that is insane to me as an internet entrepreneur | |
Sam Parr | And that's what I was going to ask. So, you hired a baker to do it, but then also with your newsletter business, your local news business, you hired... I forget the guy's name, but he's... I've talked to him a bit. He's a nice guy. You've hired him to be the CEO.
So, you hire people pretty early on. Hiring someone to do something, to me, is a huge risk because in my head, I'm like, "Man, if this guy's got a kid, his kid's now kind of my kid too." You know? It's a big risk. If he's quitting, that's what I felt when one of my first employees got married. I was like, "Oh, I've got a family now," because I realized some of the decisions I make are going to impact this entire family. That's really stressful.
It's also a huge conversation to convince someone who's in their thirties, forties, or even late twenties to leave their fancy gig at Salesforce to bail and come to my company, and I'm going to pay them $45,000. That's a huge thing. I go to bed at night, and that stresses me out.
But you seem like you overcome that pretty easily. You hire people relatively early, and you're like, "Yeah, it's no big deal. I'm just going to hire this person." What's that like? What are you thinking when you do that?
Alright, what's going on? Just a quick break, a quick interruption. Scroll down into the description box on YouTube, and you're going to see a link to The Hustle. The Hustle is a daily email that gives you all you need to know about business and tech news. I started it years ago, and it's awesome. It's kind of how this podcast got started, so check it out: The Hustle. Scroll down, do it.
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Andrew Wilkinson | Well, I've lost... I've messed that up a lot. I think you guys know my whole story about losing $10,000,000 building project management software. That was a perfect example where I got ahead of myself. The business didn't make sense, and I threw a bunch of spaghetti at the wall, and none of it stuck. I had to let a whole bunch of people go, and it was really horrible and sad. It was like a 10-year slow death, right?
So, I've been through that. Now, with the amount of scar tissue I have, I have enough signal where I can be like, "Okay, I'm gonna try this." And with the bakery, I was just contracting a friend.
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Sam Parr | right yeah that was the best example | |
Andrew Wilkinson | I said this is an experiment with the news business. I actually ran it for three years before I partnered with Farhan, and he took over as CEO. By that time, there was enough signal; it was slapping me in the face. I was like, "This is a big opportunity."
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Sam Parr | Is that the case with all the things that you start? Does it take that long?
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Andrew Wilkinson | Usually, if I hire a CEO, I'm pretty high conviction that there's something there or there's already a business that supports cash flow. What I would never do is say, "Hey, I have an idea for this," and then just go hire a CEO. I would never do that. | |
Shaan Puri | Andrew, I feel like you've reached this point. I used to wonder, "How did these motherfuckers do this?" I remember when I was doing a startup, and it was so hard to get my one thing to work. Then, I would meet people who were like, "Oh yeah, I have that past success, then I have my current success, and here are my three side successes."
They would say things like, "Oh yeah, I had this idea, then we just started doing it, and guess what? The line's out the door!" Or, "This other one is kind of cool; we just started it. You know, I accidentally... my hand just fell on my keyboard, and I accidentally wrote this app. It was amazing; it went viral!"
Then there was this other thing that I just tweeted about, and everything was coming together nicely. I just remember thinking, "What do they know that I don't know? Is there just an extreme luck component?" I felt that way for many years—five, six years straight—when I was pushing the boulder up the hill with my startup.
Now, I have experienced exactly what I was most jealous of. I have no idea what switched in between, but the last five things I've tried have all worked, and they worked pretty much immediately. It doesn't matter how big or small, whether it's the podcast, the course, my e-commerce business, or the new Milk Road newsletter business. Each of these has just worked straight away in a bigger way than anything I'd ever done before, with less work and less stress than the old stuff I used to do.
I have no idea what changed, or I have a kind of inkling, but I don't really know. Sam, have you ever thought about this? Do you know what I'm talking about, and what do you think?
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Sam Parr | I know, I know exactly what you're talking about, and I completely agree. You're on a roll right now.
What's your inkling? I have a feeling my answer is... it's kind of like a mindset. It's like an abundance attitude and being on offense versus defense. But what's your inkling?
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Shaan Puri | So, my inkling is that I switched up my situation. I was in one situation for a very long time. It was a nice situation, but it was like I was going to this office every day, working with these people in this hierarchy, with this boundary box of what project or projects we could work on and what success might look like.
As soon as I got out of that and it was just me, I was like, "Oh, okay. Now that it's just me that I have to look out for, I guess I could just do a podcast." I didn't have to have this big venture with a $1,000,000,000 outcome. I didn't have 20 engineers to go tell what to do; I had no engineers.
So, I just did what I could do with no engineers. I thought, "I'll do a podcast, I'll do a course, I'll just try to get big on Twitter. Let's just see what happens." And, oh, you know, like 5 tweets go viral and boom, I got 200,000 followers.
There were these things that I just wasn't doing before because I think I had a really set idea of what I needed to do. I thought, "Here's the only way to win." I had almost too much ammo; I had too many people at my disposal, too much funding, too much everything. Because of that, I had a very narrow window of what could work.
I was just trying to come up with ideas that might work versus saying, "Oh, let me just try this because I just kind of want to try it." Once I got into that mindset, I didn't have to worry about what other people thought. I didn't have to come in and manage anybody that day and tell them what to do. I didn't have investors to pitch to; I just did the thing.
All of a sudden, I feel like all the talents and skills that I had been building up over the past 10 years finally got to just be used.
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Andrew Wilkinson | Don't you think it's like dating or something though? Where it's like, you know, you date a couple of crazy girls and it's really exhilarating. Then over time, you're like, "Wow, that was horrible."
There's pattern matching. You're like, "Okay, when I go to a restaurant and a girl's rude to the waiter, that's a no."
In the same way with business, you go, "Oh, okay. I used to think I wanted to build all these kinds of businesses, but those were 10-foot hurdles. I don't want to jump 10-foot hurdles; I want to jump 1-foot hurdles."
So if you think about it, all the stuff you're doing is in your, you know, circle of competence, and they're relatively simple to execute. They don't require a lot of people, and they don't require funding.
I think learning that is like a 15-year overnight success kind of thing where it just clicks suddenly.
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Shaan Puri | right | |
Andrew Wilkinson | And I'll catch myself occasionally getting pulled down rabbit trails of like, "Oh, what if I did this crazy, you know, drone AI startup?"
But then I always go back to base hits.
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Sam Parr | And I think there's this third component of confidence.
So, I think that because of my work, I've become more confident. I understand that if I invest a dollar here, I can make at least $3 in the next two years. It's about understanding how money-making machines work—investments.
But then also, I think, Sean, because we get to hang out with each other, with Andrew, and with our circle of friends, it becomes more normal. Succeeding has become far more normal than not succeeding. Not succeeding is just like, "Oh yeah, it's going to happen," but then you just move on and do the next thing. Inevitably, it works.
So, it's not a matter of "if" or "when," it's "if." I think that confidence has actually helped a ton.
For example, real estate is an easy one because it's so predictable. With real estate, you're like, "Oh man, putting $100,000 down on this house is a lot of money. That's six figures." But then you think, "Well, dude, it's going to make 12%."
It's like, "Well, I don't know that." And I'm like, "Yeah, I know, but it's going to do that." So, you actually want to invest more. That confidence of just knowing the motions, the routine, and the process has actually helped a lot. | |
Andrew Wilkinson | totally yeah the other thing | |
Shaan Puri | I was going to say, which is what you guys both just said but framed differently. I was taking a **shitload of market risk** before, and now I basically take almost no market risk. I just take **execution risk**.
Before, even if I felt like I executed great—which I did, I feel like I did in a couple of the projects that we had done during my previous startup—the market risk was too high. It was like inventing a new science on new land. The market risk was way too high.
Now, I'm just doing things that I know work. I just need to do them well. E-commerce is nothing; there's no fancy science to it. I had buddies who did it, and I just used their model. I did my own thing in my own lane.
**Milk Road** is the hustle but in the crypto lane, which is the land I like. I just took your blueprint for the hustle and copy-pasted it over here. From there, it's just execution risk.
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Sam Parr | I know, dude. I saw that you literally copied and pasted the Twitter handle. It was hilarious! Your Twitter description is literally a copy.
I sent you some old resources from The Hustle, and we call ourselves "your smart, good-looking friend" or something who tells you everything.
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Andrew Wilkinson | you need to know about and you just copy that and | |
Sam Parr | you put instead of business attack you just put like delete crypto or something like that | |
Shaan Puri | And actually, the thing is, it wasn't even... you know why it did that? I remember 7 years ago, or 8 years ago, when you first said that to me.
The very first time, you kind of sat me down and you were like, "Look, people our age, we don't watch MSNBC and CNN and this stuff for our information. That's not the brand we trust."
You said it, you're like, "I just want to be like your smart, no bullshit friend who just explains and tells you what's going on."
And I was like, it clicked with me 8 years ago. So when it came time to do this, I was like, that's the exact description: the smart, no bullshit friend.
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Sam Parr | I think one more thing, Andrew, is that I look at... I used to, you kind of said that, Andrew, in terms of financial success, which is a big but not the only measure of success.
Andrew, you're like a grand slam at the moment. I imagine you're incredibly wealthy and you've built businesses that are incredibly large. So by that measure of success, you are way out there.
For a while, I think I viewed you as mystical, where I was like, "How is he doing this?" Now it's changed to where I acknowledge that you definitely have talent that makes you special. You for sure have skills that make you special.
But really, a lot of it is also... I don't know what percentage of it is each, but let's just say a third, a third, a third. A third of it is that you've just been doing it for like 15 years now or a certain amount of time. You took the risk of raising or building the business, and then you raised a little bit of money for the fund.
So it's not a matter of "How is he doing this?" It's just like, "Well, if I want that life, I probably could do it. I just have to dedicate 15 or 20 years and go through the same motions that he did." And that may or may not fit the...
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Andrew Wilkinson | well it | |
Sam Parr | what I | |
Andrew Wilkinson | Like the interesting thing is, I don't know if you know this, but Warren Buffett made about **97%** of his wealth after the age of **55**. So, it all happens very slowly. He started in his twenties or whatever, and he wasn't really well known until the nineties.
The same thing happened with us. We didn't really talk about what we did. People would meet us and they'd be like, "Oh, you're some schmoes from Victoria who own some digital agency. You seem to own all these really boring businesses."
You know, it requires being kind of underestimated and dismissed, and playing a very boring game while watching everyone else go and make, you know, tens of millions, even billions of dollars taking risks in startups. Meanwhile, we're just going, "How do we take $100 and make **$10,000**, **$15,000**, or **$20,000** a year on that money and just keep compounding?"
So basically, the mental model was to take **70%** of our profits and constantly reinvest, take the other **30%** to live a nice life. That number went down over time. And yeah, you do that for **17** years, and it turns into a big number. Ironically, I still feel just as at risk and terrified as I did **15** years ago.
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Sam Parr | think that's real | |
Andrew Wilkinson | and I think it's the classic thing of | |
Sam Parr | You're not actually scared, are you? Because I have liquidity now, and I'm scared, but I'm like, "Am I as scared as when I only had $20,000 in my bank account?" I can't decide.
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Andrew Wilkinson | No, no, no, no. But it's... maybe it's different for me because, you know, I have an... If you told me 10 years ago how much cash we have or what our cash flow is, it would blow my mind. I'd say, "How could you ever feel at risk?"
The problem is that the stakes are bigger. You know, we have almost 1,000 employees now, right? So there's a lot more... you know, there's stuff that can go wrong. Do I feel that I've built out a castle with a whole bunch of moats and stuff? Yeah, absolutely. I'm better diversified than I was 10 years ago.
But there's still that kind of dust bowl farmer mentality, right? It's actually something I want to talk about. We all kind of have this feeling of... the way I'd put it is, I started chopping wood just because I was anxious, right? Like 15 years ago in my backyard.
My neighbor pokes his head over the fence and he's like, "Hey, can you chop some wood for me for my fire? I'll give you $20." And I'm like, "Okay, amazing! I didn't know this was a business."
Then, before I know it, I've hired 3 or 4 buddies. We're all chopping wood in the backyard. We're a merry band, we're selling to the whole neighborhood. It's awesome! I love it.
Then one day, 15 years later, I wake up and I'm in a sawmill. I own 15 sawmills, and all I do all day is file papers. But there's still this part of me that beats myself up for not chopping wood, right? I still have this mindset. Even though all the machines do all the labor, there's still this part of me that's constantly saying, "You need to chop wood, you need to chop wood."
So I think you're gonna... you guys have this for sure. It doesn't matter how much you have, how diversified, whatever it is, you have a need to do labor. And there's an anxiety that you're harnessing to perform.
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Sam Parr | that's a good ass analogy | |
Shaan Puri | I'm not gonna lie. The first 30 seconds while you were explaining it, I thought you legitimately took up wood chopping as a hobby. I was like, "Oh, that's cool. It must be cathartic."
Then I realized I was inside of a Charlie Munger or Warren Buffett analogy, like a parable. You have this thing on here that's pretty cool. Bad guys usually win. As a bad guy myself, I would love to hear...
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Sam Parr | how this how this what | |
Shaan Puri | what you mean by this | |
Andrew Wilkinson | Oh man, okay. So, do you think you're a bad guy? I've got a story. I don't think you're a bad guy.
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Sam Parr | what are | |
Shaan Puri | you talking about go ahead | |
Andrew Wilkinson | I think a bad guy is a fun con artist who lies | |
Shaan Puri | I I call myself a bad guy as | |
Andrew Wilkinson | an achievement | |
Shaan Puri | Rather than calling myself a "good guy" and having all the comments on YouTube tell me I'm a "bad guy," it's easier just to call myself a "bad guy" and have people tell me the opposite.
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Sam Parr | or bad meaning not bad meaning bad but bad meaning good that's that's how it is | |
Andrew Wilkinson | So, I'm sure you guys have had this experience, and I'll kind of anonymize this story. In this case, it's a bad girl. Bad girls usually win.
This happened to me almost 10 years ago. I was really overwhelmed; I was running like five businesses. I got introduced to this older woman who had just sold her business for $20,000,000. She was super successful and said, "Hey, I'll mentor you. I'll help you out."
So, she comes over to my office, and we start whiteboarding. I'm just like, "Holy crap, this person is a genius! She could help me so much." At first, she was an advisor and mentor, and then eventually she said, "Hey, how about I come in and I'll help you with marketing and sales?"
I inject her into the business, and she starts killing it. The business takes off; everything is going great. But I did zero diligence. She legitimized herself by being this super successful person, and because she was so successful, I was just grateful to have her. She was like a miracle and made all these problems go away for me.
Then suddenly, the cracks started appearing. People began saying she was lying. She was spending money in weird ways; her expenses were out of control, staying in crazy hotels, all sorts of stuff. It turned out that she was lying and falsifying documents. She hadn't sold her business; she wasn't rich or successful.
When I called a bunch of people she worked with in the past, many of them had terrible experiences. So, we fired her and moved on.
Now, I'm in this very odd spot where, ethically, I want to say, "Okay, this is a bad person. I want to shoot up a flare and say, 'Everybody watch out!'" I'm thinking, "Okay, people will do diligence on her; they'll call me. She won't be able to keep pulling this off."
But legally, I don't know what it's like in the U.S., but in Canada, when someone calls you for a reference, you're quite limited. You can basically just say, "I wouldn't work with them again," and advise them to do their diligence.
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Sam Parr | I usually say, "I’m not allowed to talk about it," and they get the hint.
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Andrew Wilkinson | Right, that's smart. I said a bunch of stuff like that, like, "You know, I would never work with this person again. It's one of the worst professional experiences of my life," whatever. But almost always, those people go on to work with them.
You realize these people are just incredibly charming, and they always assume you're the bitter ex-girlfriend, right? Because they've obviously buttered you up and told some story.
So this woman, you know, I see her on LinkedIn, and she's still succeeding. Every year, she's somewhere new. People like this, they don't get super rich; they're so short-term. If they only knew how much money you could make by not being a crook, they would probably be ethical.
But it was just so sad to me, and my sense of justice was like, "I gotta put a stop to this." You just realize, like, no, you just have to let go.
Never wrestle a pig; you'll both get dirty, but the pig will enjoy it. So, you know, these people are out there, and they continue to succeed. Unless they're Elizabeth Holmes and they get, you know, in the Wall Street Journal, they're fine. | |
Sam Parr | I wanna know who the person is | |
Andrew Wilkinson | I will never say | |
Sam Parr | You had another example of a guy at a famous company who, you know, had some fraud or issues with people not being honest as well. Remember you told me about that one person?
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Andrew Wilkinson | I don't know... I don't know which one that is. I mean, look at, like, you guys talked about Navin Jain on a podcast maybe like 10 episodes ago.
I mean, there's a perfect example, right? There's this guy who basically did a "pump and dump"—that's my understanding, alleged "pump and dump." But these people go on, right? Unless they're criminally indicted.
And even, you know, people who are criminally indicted—look at Michael Milken. Michael Milken was literally front-running his own investors, committing tons of outright fraud. If you were his investor, you would hate that. He went to jail for 10 years, and now he's lauded as a philanthropist. I mean...
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Sam Parr | or how about | |
Andrew Wilkinson | always win I mean | |
Shaan Puri | do you | |
Sam Parr | Do you guys know the guy? I think his name is Gurbash. He's what people would call him. I think he's Indian, an Indian American. He started a thing called Gravity... something. What was it called? Gravity 4? And then he started another one called Radium... was that what it was? Radium 1?
He got arrested. He was on Oprah as this like, you know, "$150,000,000 man under 30" or something like that. He was labeled the best bachelor, most available bachelor, all this stuff. He's a good-looking guy.
But he got in trouble two or three different times. Both times, he basically locked his girlfriend in their apartment. There was a camera there; I don't know what he was thinking. He was hitting her and just being... I mean, he's just a horrible guy. He got arrested and spent months in jail.
He got out and raised money again for starting the same company. Now he's overseas because he's kind of burned all of his bridges here in San Francisco, in America. I think he raised money again for another ad tech company. | |
Andrew Wilkinson | This is the hard part. If someone is... I mean, typically, someone who does bad things, like truly unethical things, they're either a psychopath or a narcissist.
They're very, very charming. They're compelling, fun to hang out with, fascinating, and great to listen to. It's hard not to like them.
One heuristic I developed after having that experience is that I actually had a company I looked at investing in. I liked the CEO so much, and he was so compelling that I didn't invest because it made me suspicious. Right or wrong, I was just like... I left the meeting and thought, "I would buy anything from this guy. I just want to give him all my money right now."
I stopped myself and thought, "This is that feeling. Don't invest." I probably made a mistake, but you know, maybe I'm too concerned.
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Sam Parr | it's crazy no | |
Shaan Puri | I'm the same way, and I'm willing to throw out the good with the bad just to steer clear of the bad. I know how intoxicating that type of grifter is.
You know, I've actually put in some... like you talk about air gapping for security purposes. I've now done that on decision-making for some investments as well.
So, Andrew, you sent out an email to me, Sam, or a couple of others about a business that you're raising money for. It's a really great email; it's a truly great email. I gotta give you a lot of credit, and I actually wanted to ask you...
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Andrew Wilkinson | sam sam help me with it | |
Shaan Puri | oh okay I was gonna ask you what goes into writing an email like that | |
Andrew Wilkinson | I hired a master copywriter | |
Shaan Puri | you have a secret weapon okay | |
Andrew Wilkinson | so for the record for | |
Shaan Puri | the record which is | |
Sam Parr | I barely touched it I barely touched it I | |
Andrew Wilkinson | barely touched it | |
Sam Parr | I read it now like this is actually great | |
Shaan Puri | And it wasn't like, "Oh, the writing! Wow, this sentence structure was so fantastic." Right? Obviously, that helps, but it was the thinking. It was the way of framing the business and opportunities.
Telling how you stumbled into the opportunity, what type... you know, like your analogy to, you know, Chipotle. You really did a good job of framing this business.
It was so good, in fact, that I said, "I am not gonna reply to this for at least 48 hours because if I read this email, I'm gonna say, 'Give this person my money' instantly." Like, it was almost like whatever out of 10 the business opportunity was, it was a 10 out of 10 pitch.
When I look back at businesses that I invest in that go on to do well, it's usually actually a 9 out of 10 business opportunity with a, you know, sort of 5 out of 10 pitch. In fact, it's only midway through the conversation with this person that I'm like, "Oh wait, so you basically have X?" And they're like, "Yeah." I'm like, "Well, why didn't you just say that?" And they're like, "Well, no, I did kind of."
I was like, "Oh dude, you have no idea how to pitch your own business." But that, to me, once that happens, I know, "Wow, I'm actually like I underweighted the opportunity because the pitch was so bad," versus overweighting a business opportunity because the pitch is so good.
That's become like a standard practice. Yours was just one example, but that's become a standard practice for me: beware of the 10 out of 10 pitch. Beware of the 10 out of 10 charm person that you want to hire or that's gonna help you with your business.
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Andrew Wilkinson | The biggest one that I've seen is you get this uber charming pitch. Then you say, "Okay, what could go wrong?" and they say, "Nothing," right? And you're just like, "No, this is insane. This is terrifying."
I've had like 5 or 6 different pitches where that was the one signal, and it went to 0, or bankrupt, or criminal.
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Sam Parr | how's the news business going | |
Andrew Wilkinson | It's good. It's really good, actually. We just hit a profit in my hometown, Victoria, at our first market. We're now in 8 different cities, and I'm super stoked about it, as you can witness based on that email.
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Shaan Puri | That email... how quickly? Because you might have a knack for just understanding and framing businesses. That's probably a superpower of yours.
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Sam Parr | I think he has that | |
Shaan Puri | how quickly did that come together for you | |
Andrew Wilkinson | How quickly did I write it? Well, I mean, it's something I've been thinking about and kind of talking about a little bit publicly for 2 or 3 years now. So, I had all the analogies and stuff formed. I mean, I wrote that in like an hour or two, and then Sam just helped me touch it up.
My typical writing structure is that I'll write something in the first draft, and then I'll sit with it for 2 weeks or something like that. So, I sat with it for a week, and then finally I sent it out.
But it's crazy. I don't know if you guys get this, but something that drives me insane is I get all these emails from people who are raising money, and it's literally just a template. It almost looks like they're sending it out with Salesforce or something. The formatting is wrong, it's generic, and it's not properly addressed to me.
I always think, "What I was trying to do with that email is I wanted the first sentence to hook you." So, I think the first sentence in that email was, "In 2019, I was pissed off." Right? And then, you know, line 1, you're like, "What's he pissed off about? What's going on?" Right? There's a bit of a hook.
Nobody knows how to use those copywriting tools to pitch in written form. I think a lot of people are very good at pitching, you know, in an actual pitch setting or whatever. But yeah, it's been a great tool to be able to do those tweet storms and emails and stuff.
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Sam Parr | the most important sentence of of anything you write it's the it's the first sentence that's the subject | |
Andrew Wilkinson | Well, I love that one. What's the line that you said? "Let me be very clear." Right? And you're just like, "Oh shit, this person means business. What's going on here?" Yeah.
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Shaan Puri | Sam is really good at this. In fact, I made the criminal mistake when I asked you this question. If you go to Michael Jordan and you say, "Mike, how do you jump so high?" he'll, if he's being nice, try to answer something, but it's not going to actually tell you the real reason.
The same goes for Steph Curry. If you ask, "How do you shoot your jump shot? How do you shoot better than anybody else?" People who are truly great at something have very low awareness of the actual "how," "why," and "what" that makes them so great.
There is a way to ask questions about greatness, but it's not about how they do the thing they're great at. People will sort of fumble around and try to tell you something, but it really has nothing to do with how they achieve greatness.
For example, what you did great in that email was first, you decided not to make it a template. That decision probably comes from your worldview and the observation you had about pitches that were coming to you, which most people just don't have.
The second thing was when you framed the business, you used the analogy of local franchises. That was because you had studied other great businesses just for fun. You probably studied the business of Chipotle, McDonald's, and other companies—not that you were ever going to start a restaurant, but you stored that knowledge somewhere in the recesses of your mind.
So when you saw something else that was a local franchise, you knew how to apply that. It’s very hard to actually describe what goes into the art of making that happen, right?
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Andrew Wilkinson | Well, not only that, but being able to communicate a moat... you know, why does this have a competitive advantage? In this email, I kind of go through the history of the news business, local news, and why local news is so much more... why it has a better moat.
Right? And you think about it, and you go, "Why would that be interesting?" You know, 50,000 people to 300,000 person cities seems like a small market. But in reality, it's the stuff nobody wants. You're fishing where the fish are, off the beaten path, and you can dominate a local market.
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Sam Parr | You've always done this. I actually read your email when you sent it to me in Google Drive, and I was like, "Oh, this is really good."
I'm putting together this course where I aggregate good writing and send it to people. I thought, "Oh, I gotta use some more of his stuff."
So, I went and read all your pieces on Medium, and I think there are like 10 or 12 things.
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Shaan Puri | very good | |
Sam Parr | And you follow the same format over and over again. You clearly are influenced by Warren Buffett and traditional storytelling techniques.
But if you go to your Medium, you're actually pitching your business on Medium constantly. You're just not including a call to action, so you don't actually care if it seals the deal.
There are things where you have a headline called, "So you didn't mean to do this, but you could have done this." It could have been, "We're raising $1,000,000 for our company." But instead, the headline was, "Joe Rogan could be the world's first podcasting billionaire." Is that what it was? Was that it?
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Shaan Puri | no it was he got ripped off | |
Andrew Wilkinson | Joe Rogan... first, is Joe Rogan got ripped off, which is funny because he just signed a $120,000,000 deal.
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Sam Parr | That's what it was, counter. So that was a good headline. Then you explain, so the emotion there was shock, which always does really well.
You're shocked, like, "What the hell?" You're saying that he got lowballed $100,000,000. That's so much money, and you're like, "No, you see, it's nonsense." You see Howard Stern does this; Rogan could have done this. It just so happens that we have a company that does that. That's how I know about it.
Then, if you wanted a call to action, you have your attention, interest, and desire already there. If you want your action to make this a full AIDA formula, you could have been like, "P.S. We're, of course, raising money for our company."
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Andrew Wilkinson | See, this is like you've always said: the most valuable skill is copywriting. I think both of you guys have said that, like, 100%. I chalk up the only reason Metalab worked to the fact that we would pick fights. We'd write these controversial articles, and we knew how to... if there's one thing I'm good at, it's just taking a boring topic and finding a wedge to get people going on it.
That always results in people knowing of you, passing your name around, and you become a topic of conversation. It led, in our case, to lots of client work and other stuff. So, I think everyone used to read the book *Made to Stick*. That was the book that really clicked for me. I don't know if you guys ever... Dan?
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Sam Parr | and chip heath out of stanford it's awesome | |
Andrew Wilkinson | They talk about this totally, and it's that one... the first line. The first line just has to hit you.
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Shaan Puri | The best thing you do... So, I think if I was going to break it down, the middle of your writing is inspired by or influenced by, you know, some ways Warren Buffett. But his stuff is very dry, right? Warren Buffett grew up without the clickbait generation; he doesn't need to do that.
But like 37signals, with DHH or Jason Fried, to me, your writing is so similar to theirs that I can tell, you know, that was like a pretty major influence on it. One thing that they do amazingly well is they will basically pick a fight while simultaneously taking the moral high ground. I think you do that amazingly well too.
What I mean by that is you'll say, like, "Joe Rogan got ripped off," but you're not criticizing Joe Rogan. You're actually saying, "You know, Joe, you sold yourself short." An artist and a creator like you should not sell yourself short to some company that's going to take advantage of you.
So, you're taking the moral high ground while going against the grain and sort of doing a call-out, which is amazing. Most call-outs are just somebody, you know, slingshotting from the crowd, and they're sort of a sniper that's, you know, angry at them.
I've never been able to do this, but I've noticed that you do this, and 37signals does this amazingly well. They'll say, "Facebook is overvalued," and they'll talk about why Facebook is overvalued. Then they'll talk about, you know, "We're sorry, we're just the kind of guys that like businesses that have actual revenues and profits." But, oh, you know, call us crazy.
So, they're taking the moral high ground and saying that Facebook is valued at the time—remember, it was famously like $1,000,000,000. Well, I...
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Andrew Wilkinson | would I would argue I would argue those guys would not be where they are today without copyright | |
Sam Parr | without a doubt | |
Andrew Wilkinson | And I think that's like the sawdust from their sawmill, right? It's like, "Hey, we got screwed on the App Store." What would most people do? Okay, we'll just go in with Apple. They used that as the biggest marketing opportunity ever. They were on every talk show; their names were everywhere. I mean, they also got kind of canceled as well, so there's a cost to that. But they've done an amazing job.
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Sam Parr | I call it | |
Andrew Wilkinson | and that's a 100% where I learned it I I worship those guys for years | |
Sam Parr | I call it the **Malcolm Gladwell effect**. With Malcolm Gladwell, you read his books and you have to remember that a lot of what he's saying is just theory. There's some proof that it's real, but it's not proven.
He's such a good storyteller that you think, "Oh, what you're saying is just a fact." Have you heard the story about David and Goliath? It's wonderful. He argues that David and Goliath wasn't that hard of a contest because, it turns out, Goliath was like mentally challenged or had some issues. He was also blind; he couldn't see. He had this condition where he was so big that it caused him to have gigantism or something like that.
On the other hand, David was a shepherd, and they were actually so good at throwing these rocks that they could take a bird out of the sky. So, it's really like just taking a big, dumb, blind giant and shooting him in the head with a gun. That's his argument about David and Goliath. It's nonsense.
Is he right? I don't know; there's no proof. Who knows if David and Goliath is even real? We don't even know that. But you hear this story that changes you.
The problem I have with Basecamp and other good writers is that this is something you have to be really careful about. I work on this all the time. I can be such a good storyteller that I can get you to think something's real, even though I'll tell you there's no proof. But I write it in such a way that Basecamp does this all the time. They write something, and I'm like, "Oh, this is the truth. This is how the world is."
But it's like, "Well, no, let's not forget this is an opinion."
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Andrew Wilkinson | Right, totally. And there's lots of nuance. Going back to what we're talking about with bootstrapping, I read all their stuff. I drank the Kool-Aid, and I love those guys. They built an amazing business, but you can't just have that perspective.
It's very nuanced. There are, you know, like I said, so many situations where it is logical to raise money. If you talk to DHH [David Heinemeier Hansson] 10 years ago, he'd say Salesforce and Facebook will be bankrupt in 10 years. This doesn't make sense.
Again, I love these guys, and I know them both. They're awesome guys, and I'm a huge fan. I wouldn't have built my business without them. But I do think they present everything in a very black-and-white way, which I think benefits them because it makes them more compelling. No one wants to hear nuance.
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Sam Parr | this has been a good pod what do you think sean | |
Shaan Puri | Yeah, it was good. I mean, there are a couple of others we wanted to do, but we're way over time. So, we should wrap it up and do another one soon. | |
Sam Parr | I know we didn't get hit | |
Andrew Wilkinson | yeah I think we got like we have like we have like 20 topics to do | |
Shaan Puri | So, I mean, there are two things. Here are the **five pillars of happiness**: Do I want to be happy? I should probably ask about that one. I would like to be happy, and then...
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Sam Parr | The Jamie Dyson thing... there was the whole, "You wanted to come on because you're like, I read this book about Dyson. I want to come talk about it." We didn't even talk about it.
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Andrew Wilkinson | oh man I'm so excited to talk about him he's incredible alright | |
Shaan Puri | Well, let's do another one. I don't know unless you have time. We could keep going if you want, but otherwise, let's do another one and we'll do Dyson and then some others.
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Andrew Wilkinson | I gotta I gotta roll I gotta lunch in 12 minutes | |
Shaan Puri | alright man good good seeing it | |
Andrew Wilkinson | k see you guys that was fun |