Unicorn Founder on Unseen Arbitrages, the Paradox of Wealth + Charlie Munger Wisdom
Bootstrapping, Venture Capital, and Charlie Munger's Wisdom - November 11, 2024 (5 months ago) • 57:34
Transcript:
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Shaan Puri | Today we're talking to ryan peterson ryan's an interesting guy because he started out working at a pizza shop bootstrapping his own company to 1,000,000 of dollars and now he runs flexport which is a multi $1,000,000,000 company so he's kinda done both sides the big silicon valley game as well as the bootstrap make something out of nothing form of entrepreneurship and we talk about 3 things the one big lesson he learned when he became friends with charlie munger what charlie munger really taught him number 2 is a master class in negotiation so things that he learned about negotiation back when he was in business school that still help him today and the paradox of wealth so why chasing money while money is great and you wanna make money and he says money is great too but how instead of chasing money directly you should do something else instead he calls this the paradox of wealth so enjoy this episode with ryan peterson okay today you have the silicon valley success story so you've got flexport this like behemoth of a company multibillion dollar company went through yc you did the silicon valley you won the silicon valley game which is great and I live in silicon valley I like you know I'm I spent 10 years trying to win that game the other side of it though that's I think a lot more relatable is you were you know working at domino's pizza as a team you flipped scooters on ebay you then built import genius which is a bootstrap company that I think had kinda like real ebitda like I think you were making 1,000,000 in ebitda along the way right | |
Ryan Petersen | so you're no still am still am it's still a good business | |
Shaan Puri | exactly so you've done both right you've done the bootstrapper game you've done the flipper game and then now you've done the big you know silicon valley disruptive game and so I think that's cool that you did them and not just that you did all those things but one sort of led to the other is that right like the scooters led to tape board genius which led to ultimately flex sport | |
Ryan Petersen | yeah I think that definitely drawing the lines backwards you can make that pattern really easily that really the scooter's I was working for my older brother and and his business partner michael kanko and we had a lot of frustration with freight forwarders and customs brokers and and we had a lot of frustration with finding good factories those were kind of the 2 big problems that we saw | |
Shaan Puri | I have this ecom business that has over I started it kind of right before or right during covid basically we launched right after covid and we've now done over I don't know 50,000,000 in revenue but I would not have found my factory had I not used import genius and I I remember I was like I'm kind of like a shortcut taker in general so I was like okay either I can go on alibaba and I could try every single supplier on here try to find a good one or I could go to whoever I think has the best quality and just try to reverse engineer who is their factory who is their supplier and actually I remember like buying the $99 or a $199 I don't remember what it was like import genius subscription and then actually there was somebody in your chat team that did the search for me because it wasn't showing up initially and they went back like further in the records 12 months 15 months ago and they found one manifest and so if people don't know how this works what you guys did was basically you took public data about the shipping manifest and then you organized and structured it so you could see for any business who's their supplier and for any supplier who are all the businesses they work with is that right is that the right way of describing it | |
Ryan Petersen | yeah that's what your poor genius does it's still it's still we haven't raised price as much either it's still about the same as you said 99 or a 199 we might have raised it a tiny bit but importgenius.com is the business that I started and you know you if I only mention alibaba because that's I started that business out of frustration I was living in china for a while and I would use alibaba to find a factory that would show up at the factory and they weren't expecting people to just show up and it'd be like fake factory like he's just a middleman right you know or like one time they I did give them a couple of the advanced days but I showed up and they were like very clearly like faking it like this was not a bunch of guys in a warehouse with no equipment or anything so yeah it was frustration for that I I think you've been poor genius kind of like the organic search results like Google you know if it was all adwords you you that's kinda like what alibaba is like people paying for price etcetera alibaba dotcom is of course the original business was b to b searching for factories but that that's not what drives their market cap their market cap is driven by taobao and alipay and all these other products right but yeah the original business is like finding factories I think import genie is a much better way to do that I do think that my brand is around seeing problems that somehow other people just kinda take for granted and they're blind to in some way that they just sort of accept it as oh that's just reality and then actually getting really curious about it and looking at what could you do to solve it and that's where import genius came from that's where much more came from and that's sort of that same problem it's annoying I'm kind of annoying in that way | |
Shaan Puri | like when | |
Ryan Petersen | I go to a restaurant I'm like doing bottleneck analysis on the cashier like what would I do to like you know get this get the traffic flowing faster through this place but yeah I can't help it | |
Shaan Puri | what what is paul graham's worth for this schlep schlep blindness right | |
Ryan Petersen | is he schlep blindness yeah I usually. People to that essay on on paul graham's essays called schlep blindness which is this idea that you're kinda blind to the biggest problems in the world | |
Shaan Puri | paul has a good quote about you I found in my research this is a this is the make you blush section alright so it says paul graham founder of y combinator says ryan is what I call an armor piercing shell a founder who keeps going through obstacles that would make other people give up a do you think it's true and b why do you think paul thinks that about you | |
Ryan Petersen | I don't know if it's true we we work we I do work really hard and don't give up easily paul and I have had a great relationship for a long time he's just seen me since the very early days I met paul when I was before I even I had started flexport but barely my brother did y combinator the year before me we were renting a house actually it used to be max levchin's house because we used to get his mail I don't know how long before it wasn't a long time before because it wasn't a very nice it was like a little apartment pre | |
Shaan Puri | paypal house | |
Ryan Petersen | it was like before he got rich but we were renting this apartment and it was near a dog it was there a park where paul would take his kid george who's now older but when he was and we would we would take my dog there to play so we would just like run into paul and my brother was in yc at the time so we got this striking up conversation so paul's seen me since like flexport was just an idea basically he's been a great adviser for us said nice things to a lot of people | |
Shaan Puri | what what did paul help you with because I've asked people this a couple times and I feel like everybody's got a great paul graham story of like there was a you know these there's these like crucible moments in every startup or there's these moments of uncertainty and paul either brings either a certain level of confidence or clarity or a question or a bit of advice that was was helpful early on do you do you feel like there was one of those for you | |
Ryan Petersen | I think paul's got his superpower is like not he only sees what's possible and like how valuable or big could this thing be if everything works and he ignores every other outcome that's possible and that is probably the right way to do seed investing you know in a parallel world to find like that and so he always saw if flexport really worked the outcome is so outsized and enormous given the industry size and their and importance then and and then he could help us sell that story to other investors to candidates he would send emails early days to like top engineers saying really great things about us quotes like the one you've mentioned to different press and stuff like that he's also been a really big supporter of flexportdot org which is our humanitarian relief logistics division that that helps nonprofits doing refugee camp logistics or other sorts of disaster recovery logistics he's been he's donated 1,000,000 of dollars to us there and helped us get the word out about all that stuff so he's a huge supporter of flexboard | |
Shaan Puri | that's amazing yeah I always think about like the the first believer I think everybody has this person who believes in you more than you believe in yourself for a. Of time and it's sort of like a it's like a short loan it's like a short term loan that you can get of of conviction and is very helpful to an entrepreneur and it's actually very helpful to be that person especially once you have a little bit of success as an entrepreneur you now can lend a little bit of conviction to other people you believe in when they when they don't really have it | |
Ryan Petersen | yeah I mean paul's job is hard well he's he's retired now but the job of being a yc partner or leader of yc is just super hard there's a lot a lot most of those people are gonna fail so you have to kinda delude delude yourself if you really wanna say only focus on what could happen well it's probably not what's gonna happen in most of the cases but that's very hard psychologically I'm sure | |
Shaan Puri | yeah maybe he needs another essay that's like schlep blindness but it's on the investor side it's like you know fail fail blindness it's like the ability to easily forget | |
Sam Parr | alright so when I ran my company the hustle I think we had something like 2,000,000 subscribers and we made money through advertising and we didn't actually make that much money per person reading the newsletter because advertising in general is kind of a crappy business model and so I remember sitting down and I'm like what are all the different ways that I can make money off the hustle that aren't advertising and so to make sure that you don't make this mistake sean me and the hubspot team we went and looked at a bunch of different ways to monetize your business and we put it all together in a really cool document where we lay it all out along with our research and we call it very appropriately we called it the business monetization playbook go to the description of this episode and you're gonna see a link to that business monetization playbook it's completely free you just click the link and you can see it back to the episode | |
Shaan Puri | with import genius you took publicly available data you structured it you made it into a useful business that generates 1,000,000 of dollars a year profit it seems seems like your brother also did that same business model right in a different space with buildzoom can you explain maybe what is the underlying you know way framework of how to think about business ideas like that that might that might succeed because it seems like there's a pattern that there's multiple ideas like that | |
Ryan Petersen | that yeah builds in was born out of the frustration of finding a contractor builds in is my older brother david's company one of his companies and he was my cofounder with import genius and and my boss for a while and yeah he was sort of my mentor in startup world building was born out of the frustration of finding a contractor to work on your house and underlying it is this public dataset of building permits are largely public record but hard to access and we had a lot of experience of doing that with import genius so we built a search engine on building permits and once you look up any wherever you are any house you can see who the contractors were that built on that that worked on it which is pretty useful as a homeowner by the way as a tool see who who built the problem if you have a problem go find that person they probably can help you with it but also you're doing due diligence on contractors no you know being able to talk to the actual homeowner who worked like who worked with them making sure that the reviews are actually for people that hire this contractor like there's a great dataset out there so they built they built a nice little business on top of that dataset I think that government data is a big opportunity the government has tons of public records on all kinds of stuff and no real incentive to organize it in ways that are particularly useful it it makes it hard to build defensibility onto these businesses because other people can if it's public record other people can access the data too so you have to get distribution or build some kind of a network effect on top of it like in buildzoom's case it's like reviews that you're layering onto this and and sort of brand is always the ultimate network effect that you can build onto it but you know I think people overthink defensibility a little bit like how could you have defensibility you're a startup just like right you know if it was defensible how could you possibly do it yourself | |
Shaan Puri | yeah then we we did an episode recently on I was like I found this app that's called oasis it's a water water quality tracking app so basically like how much how much you know forever chemicals are in your water oh yeah this it's this kid it's this kid who did the same thing he basically was like he lived in I think minnesota where they had like clean water he drank tap all the time he moved to la he started drinking tap water it tasted funny he got a little bit sick he's like oh man I wish I could figure this out turns out every city has their own testing data that's publicly available turns out that you can request from every bottled water company their reports as well so then he created this app that basically presented to the consumer and then he goes viral on tiktok with these like kinda like fear based like did you know that blah blah blah but you can check this using this app and he's built a you know a thriving business on this thing I think he's at like 50 k mrr and he's just a kid in his twenties nice it's not the most defensible you gotta | |
Ryan Petersen | get this to rfk jr man he'll be the one you're in | |
Shaan Puri | I know that's right but I think it's kind of amazing that you could do this taking public data and making that happen | |
Ryan Petersen | yeah brand and network effect distribution getting users getting people loyal to it execute high velocity yeah I got I remember I got in a fight on twitter like 5 years ago with some guy talking about motes and I I was just making a play on words saying well you know the moat turned out to be not that useful once someone invented artillery right right we don't use the moats like when you get to put alligators to defend your business so I was talk like actually you know you don't really wanna hide behind some walls like the real ever ever since the blitzkrieg in like 1940 or 1939 whatever we learned that like high velocity attack is the way to win not like sitting behind defensive walls right and I don't know some investor like got really upset with me that I didn't believe in moats of course you know it's I'm just making a play on words but | |
Shaan Puri | right well you you wrote in here something that I found pretty interesting I didn't know you were friends with charlie munger and speaking of moats buffett munger famously talked about how defensibility in motes are super important can you tell the story how did you become friends with charlie munger | |
Ryan Petersen | yeah rip what oh what I don't friendly with charlie munger let's say I I had dinner at his house 7 or 8 times before he passed I went to his 99th birthday party last year actually I I I'm a huge fan of he has this essay which I think every young for every person should read especially young people trying to figure their way through the world called it's called the art of worldly wisdom yeah definitely if you go to worldly wisdom charlie munger you'll find it I actually found it on paul grims' website I believe pg published it to the y combinator website at some. And I had read it when I was young and feeling uninspired or like trying to figure things out what should I do with my life and the essay basically argues that there's in every discipline like biology or chemistry or whatever the dis there's a you know you can define number of disciplines however you want sort of but somewhat arbitrary but just say there's few 100 disciplines in the world and that in each one there's 2 there's 2 or 3 big ideas that carry 80% of the freight that if you know those 2 or 3 big ideas you kinda will get 80% of that whole discipline like in biology it's probably like darwin you know darwinian evolution and something to do with genetics which are obviously related but like when you can get those 2 or 3 big ideas you'll have enough biology to be dangerous right and that you can learn these ideas by going to read the textbook and so if there's only 300 disciplines and 2 or 3 ideas you're like okay I've got to do about 600 to a 1000 ideas that if I could learn them I'd be like what munger calls worldly wise it's an interesting concept that set me off on a journey of I'd probably read 100 of books as a result of that and so search | |
Shaan Puri | searching for the big ideas in every space | |
Ryan Petersen | yeah I'm like what are these disciplines I like disciplines I don't really that that I found boring well like okay whatever I'll just go find still learn the top ideas from it no I'm not saying I've succeeded there are some disciplines I just can't bring myself to | |
Shaan Puri | and by the way his essay isn't just saying there are these ideas he actually lists a bunch of them so he's like for example things gravitate towards winner take all therefore it pays to be number 1 or number 2 or just be out and then he gives example right so he'll give he the essay isn't just the concept that these ideas exist he gives a bunch of examples that yeah | |
Ryan Petersen | and that there there there you know he calls them like mental models if you build these mental models from one discipline it turns out they're often applicable in another and that's where a lot of the good ideas can come from and a lot a lot of innovation comes from applying an idea like richard feynman is a great example of this famous physicist he spent like 2 years as a biologist and like I did some groundbreaking work in biology just because he took ideas from physics that people hadn't really thought of frameworks and applied it to biology right anyways I was very inspired by munger for many you know decades really cilium and I was at a party at one of my investors' houses and I was just talking to this older guy neither of us knew anybody at this party or didn't know many people and out he asked me what my favorite book is and I started talking about poor charlie's almanac which is a great book that stripe just reprinted by the way I told him that book is my favorite and he started telling him why and I told the story of the you know worldly wisdom and how I was living in china I was bored out of my mind sometimes and so I bought all these books and just started reading books like hours a day every day and he let me talk for a long time before he was like yeah I know that book really well I wrote that book | |
Shaan Puri | and | |
Ryan Petersen | it turned out the guy I was talking to was a guy named peter kaufman who wrote the book poor charlie's almanac he's like one of charlie munger's best friends and he just thought got such a kick out of me telling him so much about how great his book was that he brought me to charlie's house for dinner and many what many times became friends with a few other of charlie's friends and gotten involved invited to lots of dinners and charlie I remember when I first told him about what flightsport does he was like oh this is that's great you have a great business because the key to success is dumb competition and he started ranting about like all of his experience working with freight companies and I I I I also think that's a great little tagline too it's like remember you know when you're trying to think of what business to do all these guys doing ai startups like make I I think applying ai to some old school frozen industry is a great idea but just going straight head in head on against other ai geniuses is like a recipe like who wants to compete with people that smart like you rather compete with knuckleheads wherever you can | |
Shaan Puri | yeah exactly that's a very simple principle like in poker table selection is like probably the most important decision you make so everyone thinks poker is about like you know the the bluffs and the advanced betting strategies or whatever it is and a huge amount of your success comes down to which table did you choose to sit down at if you chose to sit down at the fish table you're gonna do pretty well and that one decision was the most important decision you could've made if you sit down with all the sharks well good luck doesn't matter how good you are you're probably just gonna you know bash your head against the wall for a while | |
Ryan Petersen | that's why I don't play poker | |
Shaan Puri | when you met this guy I I like how you said you were at a party and you're like well bill didn't know anybody there's this like alliance of the outcasts that happens I I don't know if you you've heard the story about ben and jerry's but they they asked ben you know ben how'd you meet jerry and he goes well they go were you guys friends immediately because they've been friends for a long time he goes no he goes we we just were in the same pe class and they had we had to run the mile and both of us hated running so we were the only 2 guys walking and eventually if you're just walking at the back with one other guy eventually you'll start talking and he's like that was the foundation of ben and jerry's also I wanna ask you about this you said you moved to china what was the thought process that got you there and then what'd you get out of doing that | |
Ryan Petersen | it was 2,005 it was clearly booming it seemed like the future we were at that time I was working for my brother we had this scooter company buying dirt bikes and road we say scooters but off road vehicles doing buggies all kinds of cool motorsports products and we were buying everything from china but not like they were buying everything off the internet no one had been to china right and during college I lived in south america I lived in chile and brazil and I learned I speak spanish and portuguese so I was like I can if anyone can learn chinese I could probably | |
Shaan Puri | learn chinese | |
Ryan Petersen | I learned these other two languages which was very naive so I saved up a little money and just like moved there | |
Shaan Puri | did you plan to be there for a while did you buy a one way ticket what what was the what'd you tell yourself going in uh-oh | |
Ryan Petersen | I don't know I didn't have an exit plan I was just gonna learn chinese and and learn about chinese culture and history and economics and what's going on in | |
Shaan Puri | the boom what what's your tip if somebody's in their twenties and they're they're kind of intrigued by this like the adventure path what would you tell them like how would you tell them to think about this now that you've | |
Ryan Petersen | done it I I think it it's really about your values you know and and really introspecting you can select your values too well a lot of people just kind of go through life without thinking about this I I did and my value without knowing it consciously my number one value in life until I was about 25 or 26 was adventure and I just wanted to like try all kinds of go all over the world and remember this was pre iphone so it was like pretty adventurous like I didn't have gps in my pocket or translation apps or any I mean I just had to like figure stuff out walking around asking people for directions and hoping they'd be nice to me which they were but it was definitely an adventure I I and so at that time that was my value was like chasing adventure that's not for everybody but if it is like it's pretty easy to achieve going to cheap places it's a lot less adventurous these days I mean you show up you call now now you go to china you call uber or didi or didi I guess and you got Google trans you got maps you got translation apps it's like a little too easy I once rode my bicycle from china to vietnam and no map the map we had was all wrong which is worse than no map almost and we just had to figure it out we slept at people's houses at certain times like it was like yeah old school adventures I I | |
Shaan Puri | I think back to my question about why paul graham called you you know an armor piercing shell who just you know who figures things out I think I think this is where you get the reps in right like it doesn't start the problem solving and confidence that I'm gonna I'm gonna figure things out doesn't just start the day you you incorporate your you know your startup in delaware it starts by getting a bunch of reps earlier in life maybe | |
Ryan Petersen | I think learning a foreign language in that country is extremely it's not a good roi from like you probably won't make any money off of this especially now with chat gpt it's incredible I can do live translation into every app and every language I mean but like the humility of like peep everyone thought I was a freaking idiot I mean I was like I couldn't speak and like you know bus drivers think I'm an idiot and having that over and over and over again every day is pretty good for your ego and your humility and also for relating to other people like in your country | |
Shaan Puri | and when you went there so you're like I'm gonna go I'm gonna learn the language I'm gonna travel eat but you're a business junkie like you said something I saw in the research which was like you know I was like oh this guy's my kind of people you go my form of entertainment is making a landing page one night and sending some traffic and seeing if people click to buy right so did you were you kinda scheming and dreaming about business while you were there what what what were you doing on the business side while while you | |
Ryan Petersen | were there so we were we were sourcing all of our products from china and so I was like I would go to factories find like evaluate quality manage shipments I would I would do a lot of everything make websites we do marketing customer service | |
Shaan Puri | was that was that scooter business any good did you make any money doing that or what was the result | |
Ryan Petersen | it was pretty good for like you know you made salary like sal like w two level income that was above all of my all of our friends at the time but not like change your life kinda income | |
Shaan Puri | right you know this podcast the title of it is called my first million and one of the things I at the beginning the premise of the podcast was always gonna be let me bring people on ask them how they made their first million and that's that's where it started I ended up pivoting to someone else and kept the name because when something gets popular changing the name's a little risky but I still do like the question of like when you when you did make your first million what changed because I view money as a tool to improve the quality of your life and I think it's very easy to slip into money as this kind of measuring stake or just think this thing you accumulate over time and so I'm curious for you once you kinda had a win probably during the import genius days where okay you've made some some like real money that frees up your time how'd you use it and how did it feel and what'd you what was your mindset you know during that time can you share anything like that because I think that's where a lot of people wanna get to or they're they're just that who listen to this and I think that'll be pretty relatable | |
Ryan Petersen | for them | |
Shaan Puri | the first year I | |
Ryan Petersen | did when I started making money was paying for all my student debt okay that that that felt great I invested it wisely put a lot in the wealthfront index fund investing bought a couple of like real estate cash generating real estate properties I made some stupid decisions too I once invested invested in a nightclub that failed that was stupid but it didn't change much well first off people would tell you that money's not important or won't I I don't believe these studies that say like oh like you know you stop | |
Shaan Puri | at 75 | |
Ryan Petersen | years improving your life at a certain. I'm certain that that can't be replicated you know most most of these psychology studies turn out to be not there's a replication crisis in psychology and I'm certain that that's one and and like you know that money is great because the more people have the more they want must be great right | |
Shaan Puri | must be amazing | |
Ryan Petersen | can't get enough of it | |
Shaan Puri | wait can you say more about this paradox of wealth because I saw you write down this idea I wanna read you a line from this and and just kind of hear hear you talk about this so you here's what you wrote you wrote paradox of all focusing on making money will cause you to make less money nobody wants to give money to people who are too focused on money they perceive them as greedy and self interested to try to avoid them they give money to people who add value for them it is fine to want money it's great in fact money is one of the best things in the world but it's a paradox the more of it you want the less of it you get so hack your brain into instead focusing on the things that are upstream of making money what's upstream of making money | |
Ryan Petersen | yeah I think upstream making money is solving problems for people at the end of the day which means learning you gotta build your skill set up so you can learn upstream of that is learning what the problems are and and developing a set of skills and capabilities to let you solve them salespeople can suffer from this or they can be great like great salespeople are really consultative like good at asking questions good at diagnosing problems understanding what their product or their firm can do to solve that problem and you know you bring those together you win yeah everybody wins creating win wins but but the perception of | |
Shaan Puri | a salesperson is a pusher that I'm gonna make you I'm gonna try to get you to buy something you don't want or pay | |
Ryan Petersen | oh there's a lot of bad salespeople that are on it | |
Shaan Puri | a bad salesperson yeah | |
Ryan Petersen | poorly but that's the image that most people have when they think of salespeople and and you know this is true because we can't even call people a salesperson account executives account executives because sales is such a bad word | |
Shaan Puri | yeah we had to rebrand it we had to go aioli instead of mayo | |
Ryan Petersen | there's only a couple of this may have changed I think it did in fact a few years ago when I looked into it there were only 3 universities in the united states that offered a major in sales wow you know like it's part of everybody's job it's like probably 10% of all the jobs in the whole world are sales explicitly and then everybody has to sell their ideas and we've yeah kind of been wrongly scapegoated as though this was like a terrible profession when in fact they're the key driver of every company even tech companies so many good tech companies fail with good technology because they can't ever learn how to sell it get customers and then there's companies with where the tech is just they don't even have tech and they're just good at selling | |
Shaan Puri | so right | |
Ryan Petersen | yeah I think hacking the brain I used to say things are correlated with money but I think it's better to go upstream and actually causing right the generation of wealth and the more you can study that then you'll get lots of wealth and I I don't think it's bad to want money but you just have to realize like it it it might cause you to get less it's a bit like love by the way someone's obsessed with finding like a girlfriend or husband or something like it get kinda creepy like you know work on yourself instead | |
Shaan Puri | yeah that's a great one there's a great story about buffet I don't know if you heard this one where he goes to a classroom and there's a bunch of kids sitting there and he says alright let's play a game and he basically says I want you to. To one person in this classroom you could choose any classmate not yourself but somebody else and you get to get 10% of their earnings for the rest of their life write down on a piece of paper the name of the person you're picking and why and so have you heard this story before I don't wanna bore you | |
Ryan Petersen | I not yeah but maybe it's not gonna | |
Shaan Puri | surprise you but like it's it's interesting the first I think it makes the. Well so he everybody writes down the name and then he brings it up he's like you know okay | |
Ryan Petersen | who here just raise your hand | |
Shaan Puri | did you pick the person with the best grades and nobody raises their hands so already that tells you something right about school and what we think is the valuable thing versus what everybody intuitively in their gut knew is the valuable thing he says okay did you just pick the person with the highest iq and a couple of people raised their hands did you pick the guy who could throw the football the farthest nobody raises their hand and so he then he finds he starts asking he said what qualities did you pick and basically that's where you know it came down to some version of the following characteristics that buffett ultimately used for for picking people which is you know he talks about like energy so it was it was people who are really they're really obsessed with things really into things when they get when they put their mind to a project they just never stop they just never give up they just kinda have an endless energy towards something another one was like integrity right because if this person is gonna act out of bounds then you know owning 10% of their future if they're in jail is not gonna do me much good I gotta have somebody who's gonna play by the rules and play by the law they know what rules to break and what rules not break and then last one was intelligence which was somebody who's good at figuring things out specifically so not your grades or just your raw iq but somebody who tends to figure things out and he's like great so now you have the formula of what you need to be right like if that's what you would pick in others that's what you need to be and there's that sort of reminds me of the the paradox of wealth which is like if you put a 100 people together you're like alright who's gonna be the wealthiest I think intuitively we would know it's not the person who's gonna just like sort of only chase money and try to just extract as much money as they could out of some system it's probably not gonna work as well as somebody who does the things you talked about | |
Ryan Petersen | speaking of school I I took a negotiations class once and it was one of my favorite classes everyone everyone should try to get into one of these things because the way you do it at work is your I've | |
Shaan Puri | always wanted to take this I kinda wanna go to business school but I'd love to take a negotiation class yeah | |
Ryan Petersen | they're you're given like a case study where both parties read this document you have slightly different rules to play and then you negotiate with each other under those conditions but what's what's amazing is that in a class there's 30 other pairs if there's 60 people in your class there's 30 other pairs or 15 whatever however many people doing the exact same thing so you can compare yourself how you did against other people in the same seat as you and that was over almost 20 years ago and it's very interesting because I've stayed in touch with a lot of these people and you can track the people who are the best negotiators in a classroom environment or not the most successful mhmm because they're very good at extracting too much in a one off negotiation but that's not how life works right in life there's repeat games like you gotta let the other guy win you gotta you know if you just took advantage of someone like they're never gonna wanna do business with you again guess what like you're not gonna do that well so it's kind of an interesting a light like long longitudinal study that someone could do on these things | |
Shaan Puri | I worked with my dad for about 9 months and working with your dad's an interesting experience in a bunch of different ways but one of the things you actually get to see your dad in a new context I got to see my dad at work and one of the things that I asked other people at work I go what's my dad good at what's his strength and they all said you know he's a good negotiator he's a great negotiator but he's a little too tough and I go okay interesting that's the because I asked strength and weakness and they kinda said the same thing so I got into the situation where it was 1 like high stakes negotiation basically like the future of the company was like kind of up for grabs somebody had leverage somebody else had leverage we all sat down to this table and my dad did one thing really great which was he was like we didn't really like the options on the table and he's like oh okay cool I'll always go with the 3rd option then no I was like no what like what's your counter he's like no counter no and he's you know he's like basically in a negotiation he's like I was like well how are you gonna you know explain this he's like oh it's not about explaining you know in a negotiation the more irrational person tends to win the more stubborn party wins because the other person will just realize this person's irrational so I just have to play by their rules so he was super stubborn and he won and at the end they took a break they just kinda like okay let's go break before we kinda come back and finalize and I asked this other guy who was kinda the arbitrator sitting there I said what do you think and he goes I think you took too much and my dad kinda smiled he took that as a. | |
Shaan Puri | Of pride and I sort of was like well what do you mean by that he's like he's like you you were at a poker table and you tilted the table and all the chips went towards you there's no way this deal gets done eventually gets done right because they have nothing to gain you've you've taken everything away from them so they have nothing to gain out of this transaction today they feel forced but soon they'll just realize ah this is not even I don't have to do that I'd rather not and that's exactly how it played out and I you know I learned a lesson sort of at my dad's expense about in a negotiation you you sort of both sides need to leave a little wanting or or even if you take too much you seem to need sort of need to give back at the end in order for something to be sustainable or especially if you're playing a repeat game where have you had you know negotiation in in in your life since then right because negotiation is not a not a not everyday thing it's a it's a once in a while thing | |
Ryan Petersen | oh man we run a global logistics company where we're we have to procure ocean freight and air freight and then we have to sell air freight and ocean freight | |
Shaan Puri | I mean it's a standard thing for you | |
Ryan Petersen | trucking custom services everything else that we do on the end to end basis so there's a huge amount of negotiation I think one of the big opportunities we have in this industry is I think the industry is very short term focused and transactional almost mercenary and some of these things you have to kind of go with the industry you can't change everything about the industry at once but being able to play the long game and say hey we're gonna win we're gonna make tons of money by building trust with people and showing them where the profit pools are and not not taking too much of it and figuring out how do we create the right win win scenario and not I think it's a good framework actually for evaluating any company is kind of there's 6 stakeholders at the table that for every company you have your customers you have your vendors which in some cases don't matter that much but for us they matter a lot you've got your employees your investors you have regulators and you have like the communities where you live and operate and so you've got these 6 stakeholders and you gotta create a win win and it's a very simple way for each of them they need to win in an ideal scenario and you can go through almost any any company and say okay let's score them a through f on for each one of those things very rare to find a company where every single party is winning right somebody's usually you know like so | |
Shaan Puri | so so what's the goal is it mostly as and but nothing below a c what's the whole | |
Ryan Petersen | be as but but where you have something that's bad like you've got a lot of risk and that's no good right it could all come to a stop like if they're especially if that like the regulators are not happy communities are like I don't know protesting you trying to run you out of town like I think it like airbnb's a good example I think it's a great company guests pretty much love it the the homeowners definitely love it they're making free cash off this unused asset vester's done really great the employees seem really happy over there the regulators they not thrilled in some cases they right did manage it sometimes they like it because it generates tax remnants communities I don't know I don't want people throwing a party in the house next door to mine and so that's an area for them as as they have this framework okay where should we emphasize what are we doing and they have they they look at this I don't know how to use that exact framework but they certainly are going okay let's ban partying what else can we do to make neighbors like us more right like and so it's a it's a pretty simple framework I think someone looking for a job at a company they should definitely take take the time to score each company they're considering on this framework or investors the same way because it you know if everybody's not winning then the thing might not be sustainable for the long term and all the good returns as an investor come by holding for a very long time and letting the the the compounding machine run | |
Shaan Puri | yeah the risk accumulates it may not be a problem right now but it's it's accumulating yeah eventually that's a powder keg you are also a partner | |
Ryan Petersen | at founders fund right yeah a venture partner | |
Shaan Puri | a venture partner at founders fund your linkedin says looking for a generational company to back how's that going | |
Ryan Petersen | great I mean I founders fund I've been a very loyal part of the founders fund network for a while they they were our 1st series a investor they lent our a and our b and participated I think in every other round that we've done basically and when they asked me to join it was kind of a no brainer for me I mean it would take me a little while I said no a bunch of times I shouldn't say no brainer but the only fun that we can center joining because I think they're really unique in their refusal to follow the herd and to think for themselves but I joined actually full time as a general partner and then I came back to flexport I took about 6 months where I was the chair executive chairman and then I realized I had to come back and be the ceo again at flexware and so I kind of scaled my role way back at founders fund but I'm still part of the team | |
Shaan Puri | you said like you know they're unique in how they do things I've I've interacted with them a bunch too and felt that but I'm always interested like what's the cause of that effect so like what what is an example of something that they do differently on the input side that leads to the output of being you know sort of independent thinkers or contrarian or willing to make bets that others don't | |
Ryan Petersen | well a lot of it it just comes from peter being refusing like he's just like that's his whole life thesis is that people are mimetic and they will chase the same outcome that same goal the same object the same mimetic desire everybody wants the same thing and if you can avoid that that is a huge arbitrage opportunity if you can go look where other people aren't looking and so a lot of it just comes I would say probably it's just from peter but they've they've really trained it into the team it's how does that manifest itself it's a very high paying job foundersone actually has a better compensation structure it's almost all tied to the outcomes the performance but like a lot of vcs just make super huge you'd be surprised how high the salaries are yeah at a lot of the at other vcs so they make a lot of money get a job that can't really be measured except on a 10 year time horizon | |
Shaan Puri | and even on that | |
Ryan Petersen | it could be luck and so and and you don't have like an overseeing like a boss breathing down your neck like you can do it from anywhere kinda nobody's every time I email a vc they seem to be in france so it's it's a it's a job that like is kind of a dream where you just so what's the incentive structure there for like just don't get fired and it's hard to fire you for performance because it takes a long time for these things to mature and again it could be luck so the way you get fired is by everybody consensus agreeing that you're doing dumb things it's not by doing dumb things it's by having a consensus form around you that this guy's making dumb decisions we gotta fire him and there are a lot of cases where funds fired someone who it turned out a few years later had like been their best guy but they didn't know it so therefore the way to avoid getting fired in vc again this is not founders fund this is what I like about them that they're very different but is it the way to avoid getting fired is to be well to double check everything you do with other vcs | |
Shaan Puri | right | |
Ryan Petersen | to make sure everybody agree and you don't wanna do it internally because then you look like you got no opinions you can't operate so you do it with all your buddies at all the other vcs so it's just a collusion massive collusion racket on per like there's no the the incentives are restructured such that everybody's talking to everybody to double check and make sure and then that leads to regression herd mentality regression to the mean it leads to people not wanting to take a lot of risk which is just a lay is is just lame right like venture capitals reveal about risk taking but it's not often it's not and I think founders fund is very good at not participating in those things they don't really go to conferences the conference they do do is called hereticon it's like literally about heretical ideas that you know how to | |
Shaan Puri | say out loud that's probably the most unique conference most people probably don't know what it is can you explain what hereticon is and then maybe some some examples of what a talk at hereticon might be about | |
Ryan Petersen | it's hereticon is idea but most conferences people on stage are like can't say anything that's not fitting the mainstream narrative right and heretical and the idea is that you come up into a stage and say something that would like get you canceled or some heretical idea the definition of heretical again they don't publish the talks online I don't think because of the nature of it all but I'm I I I'm working on I'm gonna do a talk if if I can make maybe next year I'll try to do a talk I have no ideas | |
Shaan Puri | the definition of heredit a person holding opinion at odds with what is generally accepted I texted a bunch of friends who went I said hey what was the best thing and they were like well like you know somebody gave this to I like my belief in the probability that aliens exist has like has like actually meaningfully changed based on x talk or this person gave this talk about you know the conspiracy around x y z and it just sounds fascinating sounds like you know one of the few conferences where I I would get there early and stay late yeah it would just like the the market would be great again | |
Ryan Petersen | like one brand right like don't don't just follow the herd and they they're not trying to like just reference check every deals they'll put their neck out there make some crazy bets what's amazing and I didn't haven't yet figured out is how they have such an amazing track record because I don't think just yolo ing it in the they're very good at picking founders I think | |
Shaan Puri | right | |
Ryan Petersen | there's no formula for it because people are unique but it's it is a really interesting and they're writing they're very big fun these days and they write large checks with conviction but without being like spreadsheet monkeys who are just you know it's not all and then of course they do a due diligence and analysis and stuff but there's a they're much more built on who the founder is and what they're all about right | |
Shaan Puri | before you came on I asked I in the I sent this like doc to every guest and I one of the questions I asked is like what are 3 strong opinions or life philosophies you live by so one is related to what we're talking about you have this quote from emerson it says the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude and you had some examples under this can you talk about that what what that means to you and what are some examples | |
Ryan Petersen | well there's some great very practical examples that you can use in your life and you'll be able to see that this is true okay and literally related to crowds and next time you are entering a stadium watch your brain will wanna just follow the people mindlessly into the stadium but if you are able to snap out of that and go wait let me think for myself right now these people have no idea most of them have never been to this stadium before they don't know where the entrance is there's always another entrance that nobody's lined up for and you can just walk right in always like or parking I'm a big skier whenever you go to the ski resort there are these guys that are like waving parking attendants and their their job is to park all the cars but their job is not to park your car as close to the mountain as you could be like their job like there's not a 1,000 spaces right next to the chairlift so they're gonna. Everybody to where there's a 1,000 chairlift spaces which like for sure you're gonna have to take some kind of shuttle | |
Shaan Puri | right | |
Ryan Petersen | it'll take you an hour to get to the ski lift but if you just ignore that guy I mean I don't wanna be rude and figure out a way to do this it's not like breaking the rules or whatever but go straight to the front and there'll be a spot right next to the chairlift because somebody leaves somebody's always leaving and and so yeah you could you can apply this at the very practical level of like moving your own body around when there's large groups of people and watching the herd mentality play out it's very difficult often for people to do like people are terrified of public speaking for good reason like for 1000 of tens of 1000 of years if you were standing in front of a large group of other humans they were probably about to kill you you're either their leader or they were going to kill you | |
Shaan Puri | something bad's going to happen | |
Ryan Petersen | this should be of course it's terrifying and learning how to become their leader is not instinctual I think it maybe for certain sub you know certainly not for me it took me a long time to get practice some some degree of just practicing to not feel terrified in front of groups and then to enjoy it and like I don't think leaders are terrified they they love the crowd or like but even bruce string bruce springstring says he still gets nervous when he goes and plays and then he has to like hack his brain to believe that that that's like energy he can harness to give the fans what they want | |
Shaan Puri | yeah like you've mentioned a couple of things like just like that bruce springsteen the mindset hacking your mind are you big into mindset | |
Ryan Petersen | I think any founder is is it's very hard for people to understand what a roller coaster it is emotionally and how painful like the lows are pretty low and the high and the low can come in the same day you get punched in the face constantly and yeah you can get pretty down you need to have release mechanisms and hacks and ways to get yourself back up because it's not it's certainly not not for everybody | |
Shaan Puri | can I tell you a little hack I do that maybe maybe is useful for for anybody out there so I have a slack channel called literally highs and lows and what I do is that anytime there's a high or a low I'll go post it there and the beautiful thing about it because it's a slack channel you could just scroll up and realize you know like 3 months ago oh yeah I remember that felt like kind of the end of the world that felt really bad and now I I don't it's like a stubbed toe it's like do you remember how your last stubbed toe felt | |
Ryan Petersen | like is this like a private channel is this for yourself | |
Shaan Puri | it's me and my cofounder so we do this and I do this in across every business I have and so whether it's a high I and then I go back and I get humbled immediately by a low I'm like okay don't don't get too high on your own supply here or it's a low currently and I'm like well I've already gone through if you just scroll up I've already conquered a bunch of mountains like this before I've dealt with this I'll be fine and it's like a immediate like kind of perspective machine and it's not even like somebody else's perspective it's like I also was in the same channel 3 months ago saying the same thing crying wolf basically about this high or this low and neither neither are as good or as bad as they seem in the moment | |
Ryan Petersen | it's yeah I I like that I might try that but it's it's very hard for another a non founder to appreciate how difficult that is my wife is a former journalist tech reporter in fact | |
Shaan Puri | oh nice | |
Ryan Petersen | and her watching my ride firsthand watching is the wrong word participating in it has really kind of I hope she's like man I wish I would have known this side of the thing when I was writing about tech companies you know understood like because you know I think tech reporters are they all reporters play a very important function of like holding the powerful accountable but like founders are not that powerful we're kind of suffering through like | |
Shaan Puri | right | |
Ryan Petersen | you know we're we're up against some very powerful forces in the world like we feel like we're the ones like trying to you know speak truth to power and fight for the lower guy and stuff and then meantime the the narrative within the media has been like oh the tech the you know the founders are the ones that we have to hold accountable we're like what about this like multibillion dollar trillion almost tens of $1,000,000,000 mega corporation that I | |
Shaan Puri | compete with like I'm right | |
Ryan Petersen | I'm kinda pathetic sometimes I mean we we we beat them every day but like sometimes they're better than us at certain things and like we're trying to get better we get better at what's faster than they do but we're not always the best we're starting out like especially as an early stage founder | |
Shaan Puri | you have another one of the life philosophies that was simple it had no extra words so I want kinda want you to hear I kinda wanna hear your explanation of it you said you can just do things what what what does that motto do for you | |
Ryan Petersen | oh I I don't know I think there's this idea that you need somebody's permission to I mean you should have it's why by the way the a law class is useful for people if you're in undergrad take try to get like into a basic class | |
Shaan Puri | a law class | |
Ryan Petersen | yeah law like don't break the law but you should have an understanding what's legal and what's not chatt gpg is pretty amazing for this but in general like it's not illegal you can just do it and there's a lot of things that people are expecting you know we come up through this like education system where it's everything's gated and you can't get to 12th grade math until you finish 11th grade math or whatever and you don't get to go to college unless you get these grades it's not so within the institutions of the world like yeah there's you can't just do things you have to follow the rules but like in the real world that's not how it works like there's no boss like waiting to tell you what you can do a lot of people are believe that they have to raise venture capital to start a company for example and we're like well maybe you should think of a different idea that doesn't need any money and just do it and that's what we did and we raised vc after 10 years of doing companies without | |
Shaan Puri | right yeah you don't need to have like the victim mindset you have you on the yc application there's this question about like what I mean the yc application is not long either so if the question's on there it must have some value there's only like 7 questions on the on the whole application mhmm and it was it's what's an example of a real world system that you've hacked meaning like kind of like this like you could just do things or not following the crowd finding the side door into something I asked friend my friend shiel who I think invested in flexport early on I go hey I got ryan on the podcast today what's a good ryan story from early days he goes oh there's a bunch he he he gave me one he goes he bought adwords for the keyword uber promo and just put his own promo code there and just got a bunch of cheap uber rides for himself that way is that true did you do that | |
Ryan Petersen | I got I I became uber's best customer lifetime probably because I did I got like $10,000 in uber credits by doing that and then I treated uber like it was free because it was free for me for a while and I've probably net out netted out to spending like I bet you that you know I I spent way too | |
Shaan Puri | much uber | |
Ryan Petersen | as a result yeah that was a good hack I didn't come up with that I copied it from a friend but | |
Shaan Puri | you know what's funny is I had 2 friends that did that and I never | |
Ryan Petersen | it never occurred to me | |
Shaan Puri | to also do that right like I just assumed it was done because other people had done it and I don't know | |
Ryan Petersen | they kinda shut it down I'm not sure I'm not sure it was even bad like I think I paid for google's adwords campaign for or uber's adwords campaign for them so | |
Shaan Puri | we had this dude call into the podcast once and he's a guy in india and what he was doing was he realized there's an arbitrage where uber had this like credit like kind of you give credits to somebody and then you'll get credits right that was the the the kinda like the paypal give 10 get 10 type of model but what they didn't do was they didn't account for geographic differences at the time so he would just get a bunch of people in india to sign up he'd give them you know $10 of uber credits which is like a big deal and they would sign up and they would take a ride and then a ride in india is really cheap and he would get $10 of credits and he would sell it to americans and so I bought 1,000 of dollars of credits off this guy and I rode really really cheap because you could buy like $5 of credits for like $1,000 because this guy was farming them in india basically and this worked for years and he called into the podcast and he was like literally in like a small apartment in rural india and he was like it's a he's like I make you know like and I forgot what it was like $15,000 a month which is more than like my entire village makes basically doing this he goes I don't know how long it'll last that's why I'm still living here I'm just saving it up for now but eventually they'll close this loophole and when they do you know that'll be a a sad day but it was amazing to see that that loophole that hack | |
Ryan Petersen | yeah I I definitely sped through the credits pretty quick and then just became uber's biggest customer for a long time now now I'm mostly riding my bike and I stopped riding uber to work | |
Shaan Puri | one thing I find fascinating is you have a side hustle and I I find this interesting when entrepreneurs have these like side things that just work right off the bat you did this one about phone booths like phone booths and companies could you just quickly tell this story because I think it's kind of inspiring | |
Ryan Petersen | yeah well unfortunately it closed down they sold the company and I didn't make any money I think it was kind of mismanaged to be honest | |
Shaan Puri | okay fair enough | |
Ryan Petersen | we we basically it it started at flexport we never had enough conference rooms or and so I made of I got these carpenters on craigslist to make a couple of phone booths out of just like wood built a phone booth in our office at flexport and put like a lot of foam padding in there to make it somewhat soundproof and they were terrible the ones I made myself on craigslist because I didn't put we put a fan but not enough ventilation so you'd come out of this thing just dripping in sweat and yet people were in there nonstop using it I was like if the product's this bad and yet everybody wants to use it there's like something here yeah so my friend henrich who's the founder of airhelp really ran with this idea I should give him all the credit he built it into a company I kept talking about it this is another thing to do is like talk about your business ideas at parties and stuff and if everybody want every time I talked about this idea with founders they'd be like I want to buy 5 of them they were like oh man I should just start this company I've got like a waiting list to buy this stuff so we made like these really nice swedish design and now that the company's failed or been sold I can tell you the ip's the secret here the intellectual property was we didn't we put 3 fans in that thing | |
Shaan Puri | the genius the genius hack | |
Ryan Petersen | so he's doing like $50,000,000 in sales | |
Shaan Puri | 50 yeah | |
Ryan Petersen | we sold 1,000 of them and somehow he couldn't make money I was very frustrated | |
Shaan Puri | we hired a ceo just the unit economics wrong or the overhead yeah | |
Ryan Petersen | they had too many people on the team spending money on ps I'm not sure what happened I'm I'm a little pissed about it because it's like dude you're selling $59 off the phone but you should make 10,000,000 profit at least like the high margin | |
Shaan Puri | alright somebody should reboot this idea and just do it without the mismanagement | |
Ryan Petersen | I I believe so now they might have become very competitive space like there's a lot of people at the time there was no good cheap phone booth out there trying to make like I think we sold 1 for like $3 but you can make a phone booth for a $1,000 like come on it's not | |
Shaan Puri | that hard so yeah I think I think in the you could just do things category I'm gonna put this in there I think somebody can just do this again yeah | |
Ryan Petersen | yeah feel free to run with that one because that company didn't work they sold to somebody but I think the founder had ambition to be like $1,000,000,000 unicorn company instead of like dude let's let's sell this thing to staples for $50,000,000 and like be happy right | |
Shaan Puri | exactly ryan thanks for coming on man this has this has been fun I'm a user of flexport I use it for my ecom biz you've you've helped me forward a bunch of freight I here's how I know you've helped me I still don't know what freight forwarding really is and we've done you know tens of 1,000,000 of you know a year in revenue and that's the beauty of it I don't have to know I just know that our shit gets taken care of it's a low price it's the easiest to use tool so thank you for for making that happen thank you for import genius also because I would have never found my supplier had I not used that where should people follow you and and find out more | |
Ryan Petersen | I'm on twitter my handle on x.com/types fast is my handle and go to flex4.com if you're a ecom business or you run any kind of logistics you need to ship things from anywhere to anywhere we we started in freight forwarding which is well I joke it should be called freight email forwarding sean is like passing emails around the world to get a container or some air freight moved but last year we acquired shopify logistics and now we do direct to consumer fulfillment all the way to the door as well as like distribution into amazon fba handling that problem with like getting appointments and managing all of that so helping brands solve problems in their supply chain is what we're all about | |
Shaan Puri | there we go by the way your at your handle is types fast and I love it your brother's is types faster ultimate big brother move for him to do that it was true | |
Ryan Petersen | he does type faster than me so he does | |
Shaan Puri | alright ryan thanks so much man | |
Ryan Petersen | thank you |