Bradley Jacobs: The Man Who Started 5, Billion-Dollar Companies

Sam Parr

So, the guy I'm going to talk about today, his name is **Brad Jacobs**—or **Bradley Jacobs**, I think he goes by. But we're going to call him **Brad Jacobs**. This person is super interesting because he has started five companies that have either gone public or are worth over **$1 billion**. He started at age 23, and he's 64 now. Google him: **Brad Jacobs**. He's worth somewhere in the range of **$3 to $5 billion**. He doesn't invest passively like a venture capitalist; he buys companies. He's bought something like **600 to 700 companies** across a variety of industries. He has used the same strategy over and over again in different industries, and it's incredibly interesting. This guy is very fascinating to me for a variety of reasons that I'm going to explain. But, Andrew, have you heard of this guy **Brad Jacobs**? Do you know anything about him?

Andrew Wilkinson

I don't know anything

Sam Parr

that's kinda why he's cool he's kind of on the under the radar if you Google him he's he's got like a bald head and he looks like a finance guy because he wears a tie and he's like pretty well spoken and you think that he's just like a private equity person and I guess maybe he is but he's really an entrepreneur he's very entrepreneurial and he's far more interesting than just a lot of the typical new york hedge fund y type of folks and so I'm gonna give you a quick story about his background so he started 5 things that have been quite meaningfully sized so the first was it was called amarex oil associates he started it when he was 23 and it was an oil biz it was basically like an oil brokerage firm which I'm not entirely sure what that entails but I imagine it just means connecting folks who created the oil to large businesses who are buying the oil and within a very short amount of time only about 4 years remember he started this when he was 23 so by the age of 27 amarex's oil business was doing $4,700,000,000 in gross gross oil bookings meaning he would that's how much oil they're buying and and selling now I imagine his company kept a tiny% of that like 1 or 2 or 3% but incredibly impressive for a young guy and after a few years he sells that business for a $1,000,000,000 then only a couple months after that he starts this thing called hamilton resource hamilton resource he starts it out of england he convinces a french bank to give him a $1,000,000,000 line of credit which he was quite successful already even though he was crazy young but he made it happen and he went and secured a a line of credit and here's what he said he goes we moved physical cargoes of oil from one place to another the eighties turned out to be a great time in the oil business and I built hamilton up to about $1,000,000,000 in revenues and did business in dozens of country dozens of countries before I moved back to the states in 1989 so between 83 89 he started this business and it also was huge I believe he ended up selling it for a $1,000,000,000 north of a $1,000,000,000 so that's business number 2 business number 3 a little bit of a of an odd one was waste management I don't think there's anyone out there doing waste management stuff now that's brand new but there's a ton of companies that at the time started in the seventies eighties nineties like waste management the company waste management and what they did was they would go out and find tons of mom and pop waste management companies because back then that's how it was and probably is a little bit to this day but he started this thing called united waste management which eventually became the 5th largest solid waste business in america and it had a very very very simple business plan which was buy landfills and small markets buy many of the local trucking companies that were serving those markets optimize the truck routes maximize the pricings get margins up achieve size so that they have the capability to scale and they did that and the strategy worked really well and in just 5 years our earnings compounded annually by 55% and the and he took the company public something like 8 months after starting it and the stock price went up as well 50% every single year for like 5 years eventually that company grew to $3,900,000,000 in revenue and $1,200,000,000 in ebitda with 750 locations and 13,000 employees is this freaking crazy oh sorry that I just gave you the numbers I gave you the numbers for his next business but the waste management grew to $2,500,000,000 in revenue oh sorry $2,500,000,000 in in exit to waste management nuts right

Andrew Wilkinson

That's crazy! So, I always think there are four different types of entrepreneurs. First, there's the **innovator**. Let's take Chipotle as an example. There's the guy who rolled the first burrito and was like, "Oh shit, this tastes really good." Then, there's the **remixer**. This is the person who creates Chipotle. They take the burrito, package it up, and create a brand around it. Next, we have the **scalers**. This is the person who scales Chipotle to 100 locations. Finally, there's the **optimizer**. This person just sits on top, makes sure it doesn't blow up, and gets as much juice out of the lemon as they can. This guy is a great example of a scaler. He takes something that already works, something that's already proven, and just does a much better job of it. He rolls it out, makes it scalable, and builds something massive. It's super interesting because I'd say I kind of fall into this camp. At the same time, I feel like what's sexy about this guy is actually how boring the businesses are. They're so basic; these are things that are like **undisruptible**. When you build them, it's like a 100-year business or something, which I think is really cool. Whereas what we do is like... you gotta think in 5-year chunks.

Sam Parr

I completely agree. If you scroll up to this document that we have open and click "source," you'll see the source that I'm using for a lot of this. This is so interesting. We're on business number 3. I'll get to 45 in a second, but what this guy does—and then when I wrap up all 5, I'll explain to you what my lessons learned from this guy are. I'll say one of them right now: what this guy does is he raises money like a madman. It's not like a ridiculous amount. I mean, saying you're raising tens of millions of dollars, I guess for the average Joe, yeah, that is a ridiculous amount. But he's got a track record and he turns them into multibillion-dollar ventures. So, tens of millions of dollars is not that much money. But if you click that source thing, what does that take you to?

Andrew Wilkinson

to the sec

Sam Parr

Okay, I found this file on the SEC [Securities and Exchange Commission] and I don't really know what this is, but I don't even remember how I came across it. But this is what interested me: it's a Q&A session of him having written it out, and he basically lays out the strategy of his 4th-5th business. So what this appears to be is a Q&A that he prepared, and they showed this to a ton of potential investors... a ton, a ton of potential banks. And they decide to invest in him. I think this was before the company even started. Is that what that is?

Andrew Wilkinson

So you're saying this is what he raised on? Like, there's no deck, there's nothing. It's just this is the thing. He goes out and he says, "Read this document and you can invest."

Sam Parr

I'm not entirely sure, but I think that is part of it. This is called a Schedule 14A, which I'm not an expert in the SEC. I believe that is something you have to answer before a board of directors at a publicly traded company when it raises money. But it's interesting, though, because he writes in wonderful, straightforward, simple English. You could read his entire strategy, which I'm going to go through in a second. But skim that while I summarize the next two businesses that he did. So he started, I told you, he started two oil businesses, but those were oil brokerage businesses. Then he started a waste management business. Now, his fourth one is called United Rentals. I don't know if you see this in Canada, but if you pay attention to this now, and if you're listening to this and you live in America, go on a drive in downtown, wherever you live, and look at the big box trucks. Look at the rental equipment, like the Caterpillars or the Bobcats, or the construction equipment, as well as the portable potties and anything involving construction or trucking. Go and look at those things, and I guarantee you, on a lot of them, you're going to see United Rentals. Well, that is the fourth company that he started, and he started it with the idea of the same thing as waste management. He wanted to go out and find a massive industry that was highly segmented by small businesses that were profitable and great, but they didn't have enough capital to grow, and they were kind of bad at sales. That's what he did. He founded it, and in just five years, it grew to $4 billion in revenue and $1.2 billion in EBITDA.

Andrew Wilkinson

Is he growing via acquisition, or is he just rolling this out and crushing competition across the country?

Sam Parr

We're going to talk about that, but what he said was, "We got there partly through acquisitions and partly through organic growth developed by developing greenfield locations." He goes on to say, "We grew by using the same strategy at United Way. We bought about two-thirds of the branch locations and cold-started another third from scratch." I actually prefer cold starts, is what he said. The business plan for United Rentals was to become the largest equipment rental company in the world and leverage our purchasing power, branding, and other advantages of size. Within 13 months, we became number one, leapfrogging Hertz, which had become the number one equipment rental business in 1965. Another thing we did was we went fast. We went public fast. We formed the company on Labor Day weekend, and we were trading on the New York Stock Exchange by December. Labor Day weekend is in May, I think, right?

Andrew Wilkinson

mhmm

Sam Parr

So, they started the company in May, and five months... is that five, six, or seven months? That's seven months later they were public. Merrill Lynch said it was the fastest growing, or the fastest IPO they have ever seen. I stepped down, and he stepped down from United Rentals in 2007. This is only five years after starting to start the next company. But when he stepped down from United Rentals, if you look it up now, I believe their market cap is $25 billion. So, he spent five years on this company, and it's worth $25 billion. It's crazy! So, listen to what he did after this. After I stepped down, I began looking for my next big thing. I studied tons of industries, and I ended up concentrating on transportation and logistics. It's larger and more fragmented than the industries I've previously been involved in. It's a $13 trillion industry. And here's what this guy says. This guy, at the time, is already a multibillionaire. But let me see if I have... he wrote out what he does, which was basically he spends three months reading tons of reports. Then, he calls 100 experts in each industry, and he just goes and sits down with them and asks them questions. It might as well be a podcast. That's exactly how he learned. So, he's this multibillionaire, he's this big shot, he's done all this amazing stuff, and he calls these people and just sits down and listens. That's all he does. It's pretty amazing. And he did this, and then he's in this new thing called XPO Logistics. Have you heard of this?

Andrew Wilkinson

I have heard of this. I think it's a delivery and logistics company, like a competitor to FedEx. At least, that's my understanding.

Sam Parr

Well, we'll put this in the show notes, but in that document up top, that is the document from where he was raising money for XPO Logistics. In plain English, it...

Andrew Wilkinson

It looks like it's about the supply chain. It's about getting people the things they need that are critical, on time.

Sam Parr

well in there he in that document that I sent to you he I didn't I I I couldn't study the whole thing but in plain english he explains kinda what they did and his reasoning for getting into it and he just says well I just studied loads of industries this one seemed industry interesting I went and interviewed a 100 people who are experts on it I hired really good people and we're gonna do x y and z and that x y and z is exactly what he's done in his last businesses and now I wanna wrap up by by giving you guys incredibly detailed stats or incredibly detailed strategy on what he does so his first thing that he does he looks for huge industries with lots of fragmentation that are small and profitable but don't have capital to to scale so here's what he says he goes in a nutshell this is how you ramp up a business you buy a brokerage or some type of small business with $30,000,000 in revenue and you add 30 to 40 bodies to it and you double revenue in time I've looked into companies that have executed this plan but most of them don't have the capital to sustain it I try to find those businesses and I bring all the capital to do it the second thing that he does is he hires salespeople so he says I like to hire hungry talented salespeople at a low base but big upside for incentives I fund their training for a few months and it's not that hard for the winners to build a $1,000,000 book after a year or so it's a business where you have to make 99 calls a day and do 1 or 2 deals so you have to hire people who are psycho I I actually don't know the word what's this we have to hire people who are psychochromatically test high on the need to win scale and low on the need to be liked scale a salesperson will have a base of 25,000 or 35,000 but can make many times that amount through an incentivize a really good incentive program once you get the right people in the system and integrate them on the right it it can be really powerful and finally speaking of it when someone asked him what was the best acquisition of all time they ever made he said they made a powerful software acquisition with a politically incorrect name called rental man and we used that to integrate all of our rental businesses we rolled up into that company we couldn't have made the hundreds of acquisitions we did without rental man and that was his best acquisition all the time and that my friend is brad jacobs and I can go on

Andrew Wilkinson

So he sounds... I both love and find these guys kind of mysterious. I kind of wonder like, what's the thing that's missing in all this? Like, what keeps him going? What's his purpose? How does he use his money? And why does he do this? What's the driving force?

Sam Parr

I researched him, and the guy looks like a Wall Street stiff. Did you look up what he looks like?

Andrew Wilkinson

Yeah, he looks kind of like... there's a character actor that he resembles. I'll try and find a photo of him. I know, I know. [He's a] nerdy, bald, Steve Ballmer-looking kind of guy.

Sam Parr

Yeah, he looks like he would be in Biden or Trump's cabinet. But I've actually seen interviews with him. He's very endearing, and I think that he's not just a stiff Wall Street type who just milks all the numbers out. I actually think that this is his bill; this is his urge. He just loves to build. He constantly talks about integrity. He says, "The common denominator of everything we buy is the people we buy from. They have to have high integrity." Also, one of our modes is that we take care of the people in the businesses we inherit. In fact, the biggest risk of our plan is that the people we buy companies from might leave. So, we treat them all really, really well. I don't think this is actually bullshit because when I got his energy from interviews, I truly believed that he was a good dude and that this was just his art.

Andrew Wilkinson

What do you think, though? What do you think he does with his money? Does that kind of public figure do any philanthropy or anything? I always find it so interesting. I mean, there are two ways to look at doing good in the world. It's like, okay, you do capitalism, right? You employ a whole bunch of people, you make an industry more efficient, global GDP... you know, good things happen because he does this, right? But on the flip side, what's driving the need to make more money? Maybe it is just continually, maniacally going industry by industry and improving them, optimizing them. That's his gift or whatever. But the guy I'm going to talk about next is really interesting because he basically uses all his money to do crazy good things, right? Which is really fascinating. I'll talk about him in a minute. But do you have any sense of what this guy does with his money? Like, does he buy a bunch of jets?

Sam Parr

I... I don't... I cannot figure it out, but I will... I can wrap this up by saying there's a few things that I've learned from this person. The first is like "taking the red pill," which is... like, have you heard...? I don't know, someone just used that phrase to me the other day and I'm... and I'm picking it up.

Andrew Wilkinson

You should be careful. It's associated with all sorts of not-so-positive connotations.

Sam Parr

Oh, well I didn't know that. What I mean is... yeah, I guess when you look at what this person is capable of doing, you think, or when you read what he's done, if you didn't know it was true, you would say, "Oh, that's impossible. No one can do that." But the person has done it repeatedly, over and over and over again, and he seems pretty nonchalant about that. So, what I'm learning from him is that you can create these amazing things, and it's hard, but maybe it could be kind of simple.

Andrew Wilkinson

What's so inspiring, right? You basically go find an industry that has... Let's look at the restaurant industry in general. Restaurants are disorganized. They're very difficult businesses with very low margins. People have essentially done this in restaurants by building fast food chains. So, you go in, you build systems, you do training, and you incentivize people the right way. You can make a lot of money doing that, but you can't usually make a lot of money in an individual restaurant. What he has done is gone out and found these fragmented, disorganized industries, like waste management or logistics, and he says, "Okay, I'm going to do the fast food chain, except for that industry."

Sam Parr

Yeah, and it's really, really cool. The second thing that I learned is he actually does the same thing as you. Well, I actually don't know your numbers, but I bet they're similar. He likes to buy companies between 5 and 10 times earnings, and that's like his number. That's what he looks at.

Andrew Wilkinson

Yeah, I'd say I love to buy businesses for that valuation or whatever. But the problem with buying a business at that valuation is that you're often buying kind of a crappy business if it's going to be that low.

Sam Parr

well these are trash

Andrew Wilkinson

Companies... what he's doing? Yeah, exactly. What he's doing is kind of building a platform where he's like, "I just need one so I can build the systems, and then I can go and acquire a whole bunch more."

Sam Parr

And the final thing, and then we can move on, is that the guy loves debt. Oftentimes, that ends badly. But I personally have zero debt in my life, and I've never really had debt. I actually think, though, that not having debt or not having some type of leverage is silly. I've read articles about him, and he talks about it very unemotionally. He seems like a really charismatic, emotional guy, but he's like, "Yeah, look, this makes total sense because I can grow this business at 30%. Therefore, if I look at the cost of capital, I should allocate capital to this, and it just makes sense." I hear that, and I'm like, "Yeah, everything you're saying makes total sense." I'm just so fearful, and it's really cool that you don't seem to have that fear. I think that's interesting.

Andrew Wilkinson

Yeah, and I think debt goes back to not having fatal potential blow-ups in your life. I've heard everything from, you know, I was talking to a guy, and he was saying, "I'm a super rich guy, and I've paid off my house in full. I never have a mortgage or whatever," and it just gives him that sense of security. Maybe this guy is so rich; he's already made a whole bunch of money on other stuff that he can take a little more risk, or he knows how to structure debt. You hear both things, and the problem is you only hear the stories about the guys who leveraged up and did really well. There may be a whole bunch of other Brad Jacob types who went out, leveraged up, and it totally messed them up. They hit a speed bump and lost all their money. The interesting thing about this, though, and the difference between what we do and this guy is that this guy is essentially starting a new business. What we like to do is find a business that's already working, where we can actually just leave it and make it better. Maybe we'll help plug in a new CEO or something like that, but we're actually not messing with it. We're not changing the DNA. This guy is modifying the DNA; he's doing like CRISPR on these businesses, and he's working on them and turning them around. He's working really hard. I get really excited when I hear about people like this. I'm so glad they exist, but I'm like, "Oh my God, this is a big lift. I don't want to."

Sam Parr

Do this big lift, but it does seem cool. It's cool. This is like cornrows or sleeve tattoos. I think they're cool; I just don't want it.

Andrew Wilkinson

They're cool for certain people, and it works great for them. Exactly. Face tattoos? Not for me, but great for some people.

Sam Parr

that tattoo it's pretty sick that someone else has it but I don't know if I want it

Andrew Wilkinson

Totally, totally. Yeah, and I think, again, going back to this guy, he does make the world better because he employs a lot of people in industries where, you know, people aren't getting laid off because of him. Right? Because he's managed this business better, he can probably pay people better and give them more opportunity. He's not going to lay them off because he's got this global business. So it's very, very positive. But what I would want to understand is, what does the guy do with the money? What's driving him? Is he like a sad, empty hole where he's like, "I have to keep doing this all the time," or is he, you know, donating it all to charity or views this as super philanthropic in and of itself? I'm super curious about that.

Sam Parr

I don't know. The only thing that I saw is that he has a good Glassdoor rating, which I actually think is huge. Everyone dismisses Glassdoor, but I'm like, "Yeah, there is..." I got made fun of from the Michael Saylor podcast because I brought that up. I'm like, "Yeah, it's not like facts, but it's like there's a signal that you can learn a little bit from."

Andrew Wilkinson

It's the Glassdoor people only go on Glassdoor when they really hate you. So, it's like the voices are from the people who hate you most. If the people who hate you most are saying good things, or at least okay things, that's a really good sign.

Sam Parr

right