Taylor Holiday Sold CTC. Here's Everything He Learned. transcript

Common Thread Collective has sold to private equity. It is a huge piece of news in the DTOC and e-commerce space. And on this episode of the Andrew Ferris podcast, I have Taylor Holiday sitting down for a long conversation going through the whole journey. You're going to hear deep, juicy parts of the CTC story. And because Taylor and I get real honest with each other, the questions get pretty real along the way. You are going to hear about the time that Taylor called his own board and asked them to fire him as the CEO.

You're going to hear about why you should not give equity to your employees. And you're going to hear about all the things that Taylor thinks I'm already doing wrong as I have turned AJF Growth from a freelance business into a real agency. You're going to love this conversation with Taylor. Let's get into it. >> Do you want to start on this question? Uh, >> you can start wherever you want. >> What do you think? I mean, >> I'm not afraid. >> I know you're not. >> It's not the answer.

It's not that exciting. >> Well, okay. I mean, I just I don't know. >> Are we like live right now? Are you going to do like a setup at all or you just >> We should do some kind of setup >> cuz we're like I don't even know where to look. So we're in a room and Andrew's brother >> We definitely shouldn't do a behindthe-scenes setup. That's the worst hook to this conversation ever. >> Well, it doesn't have to be the hook.

You're going to say something weird later that we'll use as the hook >> as the intro. >> Yeah. >> Wait, do you when you record when you launch these, do you do your own intro also? >> I don't ever do an intro. >> You just go right in. >> Yeah. >> Okay. Joe Rogan style. >> Yeah. Well, >> you are the Joe Rogan of of DDC. Everybody's always saying that. And then I'm the oldest guy in the community. >> People are always saying that. >> Um, >> nobody's ever said that.

Um, but no, I don't I don't ever think about it. I don't know. That's that's probably why I suck at this. Like I think that there is and I actually think you do you spend a lot of time on this like you do it thoughtfully like in a way. Maybe you don't spend a lot of time but at least you do it thoughtfully to think about the hook and your titles. >> Yeah. Well, I don't write my titles. I don't have a hook. Chris, my brother who's shooting this right now, does my post-production and he's got a YouTube channel >> that he's grown organically. >> Do you think a lot about hooks?

Am I allowed to talk to the person? >> Sure, why not? Chris, do you think a lot about titles? >> Always. That's the most important part of your video is the title. Okay. >> There you go. >> But I I try not to think about it too. I like fire off a title and then I send it to Chris and if he thinks it's bad, he'll rewrite it. >> Like, it makes me It's like the beauty of post-production. I agree. It's the beauty of post-production being tied to your production thing because then it's like somebody who's thinking about the whole process when you give it to them. >> It's really helpful.

And then I'll change it sometimes. I'm like, "Yeah, too clickbay for me." You know, like there's a there's a brand uphold here, Taylor. You know, I can't be the click. >> Let's read your last three headlines and see how much your brand upholding. Let's see. >> Um, >> I know the biggest problem in your business and how to solve it with an M dash that was clearly written by >> No, that was written by me. This is actually a problem for me, which is I love M dashes.

Everybody's going to think that GPT is writing my stuff. >> From stalled growth to record profit. A deep dive. >> Why this 8 figure founder is joining my agency. >> I think that one was He's laughing. He's laughing. That was him. >> Yeah. >> No, you're going for it. I like it. I hate our titles. No offense, Richard or Corey or whoever is like I don't know. >> No way. Lay it on them. Tell those guys to shape up. >> I also I hate >> Richard and Cy.

They can do it. >> So the YouTube thumbnail thing is like weird faces. >> I don't do it. >> I hate it. >> It's so annoying. >> I'm like I want >> It makes me think less of people who are doing it. I agree with you >> and I'm not willing to do that. >> I just genuinely hate it. >> Yeah, >> I would love to never have my face on the thumbnail ever again if I could. >> Well, I mean, having a face on there that's smiling or something is fine. >> I'd love to, >> but I'd love to create some elevated visual aesthetic that doesn't just make it so obvious that I'm desperately trying to get you >> to click on it >> to like follow some YouTube hacks strategy. >> Yeah, but that's what I mean.

That's why I'm like I'm not going to do the like goofy thing, you know, whatever. or like me pointing up at like money falling down or something like that, you know? I just wanted to in >> I do have a video gift of you shooting a money gun. >> That's See, that's that is a classic illustration of this. You know where that came from? >> Aaron Ordorf, a professional content marketer, >> handed me the Santa hat, handed me the turtleneck, and handed me the money and said, "Go do this right now.

I'm turning you into a gift." And I was like, "All right, man." That was like in his first three weeks of being at CTC. And I was like, "What am I supposed to say? It's Aaron Ordorf." There you go. Well, now you're now you're forever. >> A money gun gift. Yeah. Although that gift has has um maybe I'll send it to Chris so we can we can >> It comes back every Q4. It'll be you'll run it back Q4. >> Well, no. I use it with my clients.

Anytime there's like, you know, a money gun gift worthy event in the in the thing. >> You should create like a >> happens a lot happens a lot with AF Growth. We there's a lot of occasions for that. >> We're driving a lot of profit for our clients. >> Let's put a pin in the word growth. I want to come back to that because there's a question you actually have about this and like >> Great. Okay. So, just that's a pin. That's a teaser.

That's a teaser, folks. >> Let's talk about what we're here to talk about. >> What are we here to talk about? >> Well, this is a random show. We do these >> long talk about all kinds of stuff. >> Just saddle up. >> We're going to be here for a while. Speaking of Joe Rogan, this is going to be more focused than usual. Yeah. >> Normally, we each have two or three topics we bring plus a bunch of little lightning round stuff. >> Yep. >> Today, there's a big thing that happened. >> Yeah. >> And so, we're going to talk about it. >> You launched an agency. >> I It is funny timing. >> It is.

No, >> it is funny timing. >> That's the big news. Uh, no. The big news is that Common Thread Collective Yep. >> has been acquired. >> Is that has been has partnered? >> We we call it a growth partnership. >> Okay. Yeah, I noticed that. I know. Thankfully, enough people on your tweet about this understood. >> Yeah, there's a PR PR spin there, but yeah. Yeah, it's a growth partnership. >> Well, that's it is a growth partnership, but the mechanism of that growth partnership is that a private equity company >> Yeah. >> acquired Common Thread Collective. >> Yeah. that you just you just But the point is it's not like >> I don't The point that I read under this you tell me if this is right is that it wasn't acquired and then like Taylor goes to the beach forever. >> That's right.

Yeah. >> The point is that they are there's a particular purpose. >> Yes. >> For what you guys are doing in this acquisition that is that is not just go away Taylor. >> That's right. And and that's why you choose that language. It's just a signal to everyone that everybody's not leaving. Um that that's not the intention at all is for us to ride off into the sunset. And anytime you're in a human service business, it's obviously really important for customers and employees and everyone else to send the appropriate signal.

So yeah, those words are chosen with intention. And um but I think like the basic mechanics are pretty simple in that sense that it's a it's a way for a partner to come in and build a platform for them to grow a service business to try to lead to a bigger acquisition for themselves down the road. That's like what private equity does. I don't think there's any mystery to the business model. They exchange dollars for equity. >> That's right.

In the hopes of selling it for more later. Like it's, you know, it's not a >> which means they need the business to be good >> to sell it to make a return on their money. The business has to make more money over time and they think they can help you do that and they think that you can help them do that. >> That's right. >> Yeah. >> Um, let's talk there's So, so this is what we're going to talk about. That's the main thing. >> Yep. >> Uh, I have a lot of questions.

This is the longest set of notes I've ever had for this. You and I have actually talked shockingly little about this part of it. I like we've talked a lot about some parts of it. >> Yeah. >> But we've talked relatively little about some Go ahead. What were you going to say? >> Well, I I just think that if you're listening and one of the things I'll say as a as a reason to stay is that I I put out this message of like, hey, if you're an agency owner, part of my hope here is that I could bring more awareness to the potential of these kinds of opportunities for you, the service provider.

So you as an agency owner sort of can act in proxy for a lot of people to ask the questions that I've gotten in my DMs that I'm setting up some calls with people to do in hopes that like one of my things that I genuinely deeply care about is to try to make people love their service business more and to understand the potential that I didn't for many years. And so I think I had a lot of people that were really >> Why didn't you Why didn't you love it for many years? >> Well, I don't know that I didn't love it.

I I just didn't understand how to make money with it. Um >> I think you didn't love it at times. I think I was around you. There was a lot of times when you I mean at one point you had to make a rule that we couldn't make fun of clients anymore or something where I couldn't couldn't complain. >> Okay. Yeah. And I think that's I think that's illustrative of the ways that service business is great on people and the reason people leave.

Everybody says the worst part of service businesses clients. That's what they say. >> So I think what happens is there's a trope that's woven into how you're supposed to perceive your agency business which is that this is a miserable existence and you're just suffering through it for the sake of >> financial outcomes. No, for the sake of even getting enough information to launch a brand one or something like so I think like I I feel like whatever externality I received about what an agency was, it was negative and it that was woven into the way I treated my own business was that like I shouldn't like this that much.

Yes. That this is kind of a second tier existence. Uh that this is a lower class model. Um and I think that I adopted that for myself and that sort of was woven in then into this idea that we hate clients. Clients are the worst. this business sucks. You've got five bosses all the time. All those sort of stereotypical tropes that I think get spoken over agency in a way that um I definitely absorbed early on. So, I think that's fair. >> Yeah.

So, uh did was did something shift for you? I feel like I I can't tell if this happened all at once or if it happened over time where you decided shift decided to love the agency. I mean, I do feel like partly I remember conversations where you sort of realized that you were going to need to think about it differently to be successful in it. And so yeah, the 4x400 going away. >> Like so like I said on my podcast that and you obviously were aware of this is that >> the vision that we lived under was that 4x400 was going to make us all the money and CDC was going to build this experience and missional purpose for us and we're going to >> be able to accomplish both at the same time with this thing.

That's why we sent our best talent and people to 4x400. Like that's that was the point. It was like oh it's a better allocation of resource to send Andrew to 4x400 than it is to keep him in CTC. And that like turns out to be really really dumb >> cuz not only did that not work out and now you're a competitor. It's like worst of all the worlds, you know, turned out. >> If you like the way this episode of the show looks, feels, and sounds, if you noticed that Taylor and I look extra beautiful, which is of course saying something, you should be thanking my brother Christopher Ferris.

Hello. There he is right there. Chris runs Dream Productions. You can reach out to Chris at Christopherpool.com uh because he does a killer job with this kind of thing. if you've got a podcast or any other kind of content you're creating. Chris built his own YouTube channel to tens of thousands of subscribers totally organically, not paid. He understands the YouTube game. In fact, the production house is all organic YouTube focused as their primary channel.

And even within that, they've worked with like huge names, giant like big celebrities, Warner Brothers, all kinds of stuff. They can do incredible work on your podcast as well. Reach out to them. Christopher godream.com. Tell them I sent you. Tell them you like this show. You know, you know how to send an email. Just do it. Christopher godreamole.com. >> Let's talk about the financial part of it first. Okay. So, what I mean by that is you have a strong theory that agencies I mean last time we did a random show, you bered me about how e-commerce businesses are bad. >> Yes. >> Now, tell everybody why agency businesses are good. >> Yeah.

So, I So, I put this out on Twitter the other day. We've been sort of arguing about this on the internet about like what is worth more an agency or an e-commerce business. And I think Chris Fster like who Chris Fster runs um Propeller which is a large fractional CFO business, one of the biggest in our space. Have you ever interacted with Chris? >> Um and he responded I think he's great. Yeah. Um he responded perfectly when he said every multiple of IBIDA is just a model for a discount on future cash flow.

Y >> like that. And this is like I think the really important thing to understand about value that especially especially in the private equity world I'd say maybe less so for a strategic maybe less so even for venture capital but but in particular in private equity this is just a model of a discount on future cash flow not on future but on future cash flow because there's there's so many reasons for that not not the the largest of which is that most of these deals are the multiple is predicated on your capacity to get debt right like that that is a big piece of what funds these acquisitions.

And so >> you mean because the acquirer is going to fund the acquisition with debt. >> That's right. They want to they want to do what is functionally like it's a model built off of like leverage buyouts where you're you're going to put debt on the business to buy out um portions of the equity. And the the most conservative lender in the ecosystem is a bank. Like they lend almost exclusively on uh historical that's like in historical cash flow. >> Light your projections on fire. >> Yeah.

They don't they don't want to see your 24-month forecast, they want to see trailing 12 months, trailing 24 months cash trends. >> And so so if you want to get the largest multiple possible from a PE firm, then you they've got to walk in feeling really confident that they could lever your business up as many turns as possible and feel confident in their capacity to debt service, which is a question of a lender, right?

And so I think when you think about e-commerce businesses, they uniquely struggle at generating cash flow. Yeah. And whereas my my free cash flow to IBIDA ratio is like 95%. Yeah. Like IBIDA is cash in a service business in many ways. Um now there's I think there's probably like nuances to how people invoice that we've learned along the way to improve that. But >> but that's why when I think about >> that's a much smaller problem than planning inventory though. >> Totally way way smaller.

Right. And and so I think that is where what people don't understand about like that the idea of value is people just like think about like TAM or the potential total size and like that that's not really the consequential decision when someone comes to purchase your business. Now, it's a consideration for sure and and even when CDC was acquired, a big part of that was a market analysis of the potential total addressable market for sure, but at the end of the day, the what they're willing to pay for it is going to be about the window in which they're looking at the horizon in which they want to recapture value and your ability to produce cash flow in that period.

Um, and so I think that those are just really important things that when I look at e-commerce businesses, like the idea that they could very effectively, especially in this moderate smaller tier, produce like large amounts of future cash flow is just insane. It's insane. >> So my question about that is for as long as I've been in e-commerce, what everybody has said, I mean, you've just been way more in the M&A world recently than I have been and just in general with a lot of probably the clients and size you're at and all that stuff.

What everybody has said forever is that essentially what acquirers care about is a multiple of IBIDA. >> Well, but the multiple of IBIDA is just a proxy, right? Like so if you go to a lender, um they're going to give you usually the when people talk about like how much you're able to lever up your business. It's how many what the multiple is on your IBIDA that they'll give you in debt, right? So like in the middle of COVID historically when interest rates are really low you can get a they'll let you lever up more because if you just think about it it's just your debt service payment monthly yeah >> is a function of they look and go okay based on your cash flow how much can you afford to pay me service >> right and so when interest rates are low you can obviously lever up higher so like in co famously you could get six seven eight times leverage as a as a business well in today's world you can get like >> maybe two to four times two is conservative four would be very aggressive because interest rates are pretty high >> so if you just look at it and go like how much can you afford if every month you added to your it's a really obviously a balance sheet because it's like your your debt service is obviously below IBIDA right so um but how much could you afford to pay the bank every month that's a question of cash flow that's not a question of IBIDA right so it's not it's not really a P&L >> consider you think that's the driver of why IBIDA why multiples have gone down >> well you can look at multiples is a way of just sort of understanding the world like you could look at the our acquisition and listed as a multiple of revenue >> like we got a multip And you could say it, you could express it that way.

Um, it just doesn't it doesn't really matter. The question is how does how does the purchaser derive the amount of money that they're willing to give you? >> But what everybody has said for forever is like okay ecom brand e 2 million they get 3 to 5x. A brand 4 million they get six to 7x. So you think that's you think that those that calculation has changed? I well I think that there's a secondary consideration again relative to who the buyer is that has to do with how much free cash flow you produce as a in relationship to that IBIDA because again like if you are negative free cash flow on positive IBIDA like the bank's going to go you don't have any money to pay me. >> Yeah. >> Like there's no available cash to service an incremental line item >> and so the acquirer is not going to be able to get a loan. >> So they're not going to be able to get a loan.

So that means somebody's going to have to put entirety equity into the deal. And these guys don't want to do that. Like they don't want to take on that much. And so that will just lower your multiple. >> Yeah. >> Um and so I think that's a that's a piece of the consideration uh in the process is that how much debt service you can take on is going to factor into how much cash you're going to get out. >> And the net result of that calculation is that agencies are much better businesses than e-commerce businesses because they because they generate so much more cash. >> That's a piece of it.

I also think that the growth rate like the LTV to CAC of my customer acquisition is just way better than for e-commerce businesses by a lot. >> I think that's I think better than software >> in many cases. LTV to CAC. Now, part of that's because we I think we have a fairly novel customer acquisition mechanism that we've built over time. Yeah, exactly. So, I think that helps certainly uh that we and I don't think that that's like a traditional approach, but still like my customers are worth a lot a lot of money. >> Um whereas an e-commerce customer might be worth $30.

And like there's like a classic problem here, which is that the LTV on a lot of businesses is really crappy. So what happens in this argument is like you people show up and this is Daniel who's founder of Stars and Honey which is a cool Do you know Daniel? >> Uh maybe. But it's funny though the the move you're making right now is to do the exact same calculation we tell every client to make in their business which is like unit economics cact and all those things.

And so it's like the comparison you're making is like look at an agency LTV. >> That's right. >> And TAM and you make that calculation and it's like makes a lot of sense. >> That's right. And so people people I think they just assume consu Yeah. Right. They just think consumer is like way bigger. There's way more people. But like the the amount of what's funny is that like there's a direct relationship between if there's a lot of DTOC businesses.

The TAM grows for the service business too. These things are tied to each other in some ways, right? So um and I think that's what when they did the market research what you find is that like to get my business from the size it is now to double the size we have to win such a small percentage of what is a very big market and a growing market right >> so the TAM in my business is not a problem like versus I think in some cases like these e-commerce businesses what they're running into at their size is they are actually running into a TAM problem for the DTOC side of their business and they need to now expand it to retail or other things and there's just so much supply side competition and it's like the barriers to entry are basically nothing.

Now that's true in my business too and I'm aware of that but I think there are some unique ways in which we can create leverage against that sort of uh competition but >> what what ways >> uh time so I think I think one of the big big value propositions in the service business is that your network compounds so like just the amount of people that know and refer us business now is like 100x greater than it was when we started and so you get this like network effect of all the historical customers you've worked with that know you and refer business to you over time >> that is really hard Great.

Data is another one. Like the amount of money that has flown through our systems for us to be able to develop processes and models on top of is like you can't get that at day. >> I can't get that. >> Yeah. You can't get that at day. >> Yeah. Um do you um do you think that that network effect is something this is actually something I've been thinking about with some friends of mine who have a service business that's unrelated to it's not a competitor to me, but it's in our space.

Um, do you do you think that that network effect is generally true across e-com? Like the really quick and dirty way I've said that is just that everybody talks to each other in e-commerce, right? And that just sort of like delivering a great service is like essentially the like word of mouth on your uh service business post-purchase survey would be really really high, right? Like um because because it just it seems to me that yeah that one of the ways you build a great service business is like deliver a really good service repeatedly over time and you will not really have a customer acquisition problem. >> That's right. for for for many years have 80 plus% of your relationships go well and like the net effect of that moving over time grows really wide and so there's just a bunch of people that like care about CTC and that I have relationship with that are just kind and whether we like I think about somebody like Alejandro at Montbau we don't work together anymore but I love that dude and he would always say nice things about us in any interaction and so there's a bunch of things like that Edward at you know uh road ID like when I you know this went through he called he's always been so behind like you just you compound enough of those interactions over a very long period of time >> and it has an effect that you just can't recreate on day zero.

Like the way I think about it is like if I'm looking to remodel the my home, like the the sequence of like how I get into that interaction is like there's these very like clear like hub and spoke referral models that that come out of a contractor who has relationships to all the different vendors. And like if I'm if I'm a pool remodeler, like if I can own in Orange County the five largest contractors, like I I've kind of monopolized the market.

Like you can't because to drive direct consumer purchasing through it, it's not really how it happens. like people don't Google >> well for eight figure brands. >> There's a really really really easy version of this is that you have some of the highest level of expertise of anybody alive in terms of uh paid and anything that you don't have knowledge of in the specific paid because you don't click the buttons as much as you used to. you have five people on your team who can do, you know, for every channel at an elite level and you probably don't spend very much on paid. >> And so it's because whereas like in reality >> and it's it's because of the who the customer is.

It's not because it's not because Yeah. It's not because you're bad at paid. The point is that like that's not how customers shop for this sort of thing. >> Exactly. And so versus in DOC like acquisition is sort of a commodity in the sense that the customer will buy through an Instagram ad. And so what that means is that your competitor just has to make a better Instagram ad than you. that's not how my customer buys.

You have to have trust and a referral network into those relationships. So, it's actually a harder barrier to entry for a newcomer to come in and you can't just like run Instagram ads and instantaneously acquire a bunch of million- dollar customers. Like that's not how those people buy. >> And so, I think there's a barrier on that side of it as well that one of the problems is that like the reality is right now if I wanted to, I could go win the number one placement on jeans on the categorical search.

I would just have to pay more than everybody else, but I could do it. And that isn't really that valuable for Facebook advertising agency. It's just not. And so I think that it makes the barrier to the space a little bit harder. >> One of the core advantages of my business at AJF Growth is my relationship with more staffing. More staffing is a hiring agency in the Philippines that helps connect you to incredible highquality Filipino talent for your e-commerce business.

They know e-commerce businesses and the e-commerce whole ecosystem because they came through US-based e-commerce businesses. That's how they were built from the ground up. And so, if you're thinking about uh Filipino talent in your e-commerce business as $5 an hour virtual assistant, that level of talent only, you are doing it wrong. You're missing out on the opportunity of getting incredible talent from the top of the Filipino market that is still much more affordable than equivalent talent in the US.

And by accessing that talent with more staffing, you can build a really strong, really profitable business while maintaining a lean opex and having great contributors to your team. I know because it's the bet I'm making in my own business. More staffing will help you um recruit, onboard, train, provide ongoing coaching to uh Filipino employees in your business. They're just awesome. You've heard Laura on this show before if you've listened to me for any amount of time.

She's fantastic. Get on the phone with more staffing by going to more staffing.co/af / aaf and get a conversation going today. more staffing.co. The link for that is in the description of this episode. Go check it out. >> Do you think that CTC at its worst >> Mhm. >> almost killed your ability to do that? How close do you think it got to killing your ability to doing that? Cuz cuz I have a question in here about biggest mistakes that you've ever made.

But when I'm hearing you talk, >> one of the things I'm thinking about in my mind is times when I've tried to send you customers. Y >> I remember one response I got from somebody once was unfortunately CTC just uh is a customer turn factory that just like takes the threemon deal takes your money and then turns you out and >> and I knew why they said that which is which is not that of and of course like I always like try to defend you in those situations like you don't understand like >> is growing your business hard because growing Taylor's business is hard too it's not because you're a monster when you like don't deliver the you know >> but I think that actually really matters like so I think one of the things that does >> and when you answer this question >> talk about talk about what went bad like so explain the context for people of how CTC >> I mean I'm putting words in your mouth now but almost failed uh >> what happened well so so what happens um is that the experience of CTC is an experience with an individual person likely at the very end node of our system around your individual experience of them running your ad account some Mike, >> you hire me and you are on the sales call or one of the sales people on the sales call saying this is the Taylor Holiday way of doing things.

This is our method and every like great Taylor's really smart and then I show up on the call to deliver the service. >> That's right. And and so your actual experience of CTC is about that, right? >> Um and so that is the thing that you have to protect is like the actual consistency of the promise is no different than like we say that in consumer too like the quality of the product has to match the quality of the ad. >> That's why I defend you on this is like saying like it Yeah.

So, so what happened for us in particular is we were a very in-person culture prior to co. So, we had offices in LA and New York and this obviously you were a part of this at that time. I would say our culture was very geocentric like it was it was part of the way people learned was like in listening to us all yell in the hallways and it was that kind of tribal transfer of wisdom. >> You you you and I would never yell in the hallways.

It's sort of like Yeah. It's like each other at a normal quiet voice and in measured tones. I would regularly be like, "All right, everyone, come here. Whiteboard. We're just going to talk." Or we did this thing called whack an ad where I used to walk around and I'd open up your ad account and I'd >> force people to turn off ads. >> Yes. Exactly. Well, prior to manual bidding, but yes. Um, yeah. So, yes, that was that was literally so there were all these like tribal mechanisms by which people developed knowledge.

Um, and then when we went remote, we didn't have any documented processor systems. And so two things happened simultaneously is that we were forced into a remote work culture and we grew really really fast. So COVID happens and all of a sudden demand goes through the roof, right? Shooting fish in a barrel. Everybody wants it. We have a good reputation at that time. We grow a ton and we have no system. And so we went from 60 people to about 180 people in about 18 months.

So what that means is suddenly 70% of the company had been at CTC for less than a year at one point. What that means if you think about like um the the quality of the the experience also being tied to the continuity of somebody like their tenure basically um well if 70% of the company's been there less than 12 months then that means more customers are having a newer experience. >> You just said a second ago 80% of people need to have a good experience with your service business right and and that was probably not happening.

Well, it well and let's not I'm not saying that all 70% of people were bad, but I am saying that of course our ability to our ability to train them um was we we under >> re you started by saying you had no processes. You're processing systems. Yeah. We like people the way I think about it is like it's really hard to understand that in the old world people would go to their desk and they'd sit in their pod and Andy would be there and Luke would be there or Michelle would be there, you'd be there and they'd be sitting next to two other media buyers and a strategist and whatever and they would work together. in COVID, they would go to a meeting, they'd shut their laptops, and they're in a room by themselves.

Like, it's a very different experience, right? And you have to build a completely different kind of company. And so, that combination of really rapid growth combined with like really poor operating infrastructure led to the end nodes of the system being really poor quality experiences. Now, additionally, a lot of those businesses were propped up by demand that was candidly fake. Like, it was the point of the graph where everybody was buying online because there was nowhere else to buy.

So when that stopped, you had not that good of businesses working with not that good of people leading to a bunch of hardship. Uh and so that period end of 2022 is I think when a lot of that culminated in a large batch of experience that was less than ideal and that was that moment for us for sure. >> Yeah. How close do you think it got to to being a death nail? I mean I know you guys Yeah. We had a uh because we were in ESOP we had a bank loan that we were servicing at the time that we used as part of the ESOPs.

The way ESOP works is you finance basically a debt finances a purchase of the shares from the shareholders and puts it into a trust for the employees and we use that to buy back a partner uh when when he left. And um so we owe a bank money and we were in breach of our covenants and I spent Brian Dumbar and I spent every day during Christmas break of 2022 on the phone trying to convince the bank not to take punitive action against us uh in that period.

And my lawyer at the time was like it got so like they were being so oppressive in terms of their language and demands that he was like you should just claim to be filing for Chapter 11 bankruptcy because you you need to call their bluff on whether or not they're actually going to foreclose on you because they don't want to own your business. But it got it like those are the level of conversations we were having every day >> about how we were going to move forward.

So it was like it was very serious. Yeah. >> Yeah. >> What was that like? >> Horrible. >> Yeah. I mean >> it was like really stressful. And >> um I remember calling like at the time one of the things that I had done that like again this this whole season of all this I had created an external board that had governance authority over me like I created it myself. >> This is a this is like a part of that that journey where I was uh so there was and I called one of our board members and I was like I think you should fire me like I I think that I have lost the emotional capacity to do this. >> Yeah. >> Um >> and that was like it was like a bad day for sure.

Um but that's where I was at. But I was just like, I don't I don't know the way out of this. I'm I'm exhausted. I feel like I've failed. Like I don't want to do this anymore. So I was definitely at a place where I was like done for sure. Every one of my clients, and that is not an overstatement, every one of my clients is using Intelligence to do serious CRO testing on their website. Intelligence has become the leader in the e-commerce world for how to do CRO.

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You don't need a developer to get involved with it. Uh go check out Intelligjs today. It's great. You got to point. Okay. How did you get out of it? Well, wait, hold on. I I wonder if we want to sit in the pain a little bit more first. Um let's see. But but what I'll say al so sitting in the pain what what I'll say is the thing that I had was most harmful to me is that I felt like I was lying to people like I it felt like I couldn't deliver on the promise and and what promise >> of like come to CTC we'll do great work for you >> like as if you'd get on a sales call and you'd say that people and and that was a sentiment that I had heard back and I was like I don't want that like that >> especially because CTC was so tied up with Taylor Holiday the two things the brand overlap on those >> and so I was like I don't I don't think I want to continue to create that level of dissatisfaction for me in my work.

I was like, I don't think that I want to continue creating that kind of experience that I'm so intimately connected to. And now it was sort of like looking back on it, that's sort of like the the cheap way out was to just say, okay, I think I'm going to stop and remove myself from that process. And it's not ended up what what ended up happening, but um that's how I felt. I just felt like if I say next customer come in, someone's just going to end up hating me and that sucks.

I don't want and so I didn't I didn't want to do that or some even worse like the other thing that had happened is we had had to lay off a hundred people. >> Yeah. >> And so I the same the same >> what was the most number of people you laid off in a single day? >> 30 probably. >> Yeah. >> Um and >> how many of those calls did you personally make? >> I don't know. We did them a few of them in groups. >> Yeah. Okay. >> 18 I don't know.

Um, but the other thing was that employees fa felt that way. I'd say in some ways that was the bigger I'd say more employees felt uh that I had like deceived them than even did um clients where it was like CTC like you promised all this amazing care. >> Yeah. >> And now I'm harmed and I feel personally let down. And um and that was very much aimed at me like I had >> I had represented something faulty. Yeah. >> Um and that what sucks is that when you when you so genuinely wanted to do the opposite >> like it was so real for me that that I cared too much looking back on it about that >> um >> that it just felt like if you had tried >> with all your earnest to do one thing and you did the exact opposite you'd be like well what what the heck I don't I want to stop.

I think this is the part of the story where we need to go through some history a little by little. I'm I'm thinking about what the listener is hearing there and they don't have the context for all the things you're saying. I do and so I'm tempted to go into it, but I think we'll be missing some things. >> Sure. >> So, I think what we should do is think about the the journey here a little bit and my my hope is that first of all, this is interesting.

You you you're a really important figure in the DDC space. You know, you you >> small pie, but yes. >> Yeah, I know. But but it's people keep people care. I mean, you mentioned earlier the the general attitude in DDC. It's one of the things I tell people who don't work in our space a lot is that it's awesome. >> Generally speaking, people are kind and root for each other. Totally. Agency owners who are competitive will get on the phone and tell each other how to do better at it. >> The most helpful people to me in this process were my direct competitors. >> Yeah.

Yep. And um and I think that's because there's an awareness that there's like enough fish in the sea and that it's just was helpful. Yeah. Anyway, so so but so you matter in the space. You've contributed a lot to it. uh you know it's certainly to me personally but the I think people will be interested in your story around all this because you you've played a significant role in the community. Um and then I also think that my experience talking with you is that when you reflect on leadership moments in your journey you're really good at picking out things that just as you talk about them that are valuable to you.

So it's like I mean I remember listening to the Howard Schultz acquired and you just you hear little things from him you're just like oh that's he's just telling the story but and like little offering little things. because it's really helpful. So that's that's my hope is that people will just kind of hear um people have always said you're the Howard Schultz of TDOC and Joe Rogan. Those two those are the two that you always get. >> Um okay, in the beginning of CTC >> Mhm. >> it was essentially an offshoot of Kao slash not really an offshoot of Kao but like happened at the same time as Calo and I I would call it like glorified freelance small team something like that.

I don't know how you want to frame it, but just what I'm thinking about is the early days with you, Jordan, >> and maybe Josh. Well, Josh came on later. And >> there's an important there. We actually started something called the Arch Network with me. >> Yes, that's right. >> Me, um, Jordan, >> and then Clark >> Jordan Palmer. >> Yep. Clark Hardman, who's now the founder CEO of Thread Performance. Shout out to Thread. >> Uh, and a guy by the name of Tyler Vaughn, who was a a guy that we I played baseball with at UCI and then worked with us at Powerbounds.

Um, those two could not work with me. understandably. I'm uh I'm not >> Jordan and Tyler. >> No, Clark and Tyler. >> Oh, Clark and Tyler. Yeah. >> I'm not the easiest person to like uh partner with, I would say. Um and so it was like really hard in those days. >> Do you think that's still true? >> Yeah. >> Why do you think that? >> I don't I don't have uh >> I Yeah. >> I think I've gotten It's probably gotten easier.

You'd have to ask people. it it's important that that we're clear on the roles and responsibilities I think that we're going to occupy and if there's overlap between my domain and somebody else's domain I think that becomes challenging I think that's why Jordan and Aaron are good examples of partners that were yeah that were really effective what's his job >> he's our head of sale VP of sales here at CT previously basically had that role >> same role >> and and they both represent that neither of them thought of themselves as an expert in my domain and so there was no like butting heads over the ideas in my world and they were that both of them are these charismatic, outgoing, >> love to go be with people and I hate that.

And so there was this like part of this experience that they both represented that I go Jordan is so uniquely gifted at a thing I know I'm not. >> Like when I go to a gala with Jordan, he's 6'4, I'm 5'9. I stand next to him and I feel like an idiot. Everybody's looking at him. I'm not dumb. I can see it. >> They all want to talk to him. He's got good stories. he knows all the famous people like and so I just go like I don't need to be here and I love that and and he thrived in that space and so it was just like >> and he also is not a Facebook ads expert and would never pretend to be and so he would just be like yeah Taylor's you should talk to Taylor and then I'd be like great I'll talk and then so I think in those ways those complimentary skill sets are really important.

This is one of the things that I think will be interesting with you and um >> Patrick >> Yeah. Yeah. I think you guys are masquerading as two different people but I I I wonder if you actually are. We'll find out. Well, yeah. I think that's one of the big questions for us and it's we've talked about this. >> Yeah. >> Yeah. Uh we we'll get to hopefully some of that at some point, but so I think that that's the distinction of partnerships.

So going back to the early days, anytime that there's more uh of an overlap, it's been hard. And I would say I was I was immature for sure. It was a lot of a me problem. Well, I think when I think about I was never a partner with you at quite the level and quite the way that others have, but I I think maybe my role in the ecosystem has been the the closest thing to that without being that along the way, right? Like without being in most cases like in you know I didn't start it with you.

I didn't whatever and there was always kind of a mentoring relationship especially in the early days. Um, I found it actually mostly really easy to do that. But I think it's also because >> that's ultimately why you left is because you want my sense of it and again we're just here in the space here. We're in the tree is that you wanted to be at that partnership level and there was never room to do it. And so you didn't want to be the junior partner anymore.

You wanted to be the full partner at the table with everybody at an equity level and at everything else level. Yeah, but I think because of 2021 or because of excuse me, because of the 4x400, >> yeah, but even in 4x400, I think a lot of the narrative was around your equity position in the hatch. Yes, definitely. >> Whether that was commiserate with the responsibility and the opportunity and all those things. Um or even coming when we talked about coming back to CTC.

Yes. >> I think there was like >> when you guys said no to me. Yeah. >> Yeah. Um you guys, not you guys, but um >> but yeah. Um, >> but but I think that that like that didn't rise to the level of the kind of offer that would have made you say yes. >> Yeah, I think that's right. >> So, I I think those are >> but but I Yeah. Anyway, I I just I think I've been in a lot of partnership rooms with you. Yeah. >> And I think what people just have to know is what they're getting into.

Uh, you know, in the sense of like who you are and what it is. And I think there's a there's a reality in which it's like >> it's just who your your presence and capability and way of being is a double-edged sword. And what I mean by that is not even necessarily negative and positive. I just mean like if you want somebody in a leadership position and I've noticed this in plenty of other organizations too with people who have somewhat similar personality types or whatever is if you want somebody who is going to aggressively push something forward and follow believe that their ideas ought to be put into actions and uh believe that their ideas matter and think hard about things in ter then what that's going to mean is at times you're going to have to let them make decisions that you disagree with and and I sort of just think That's other people's fault if they did if they weren't ready for that.

Now, of course, you're talking about the very earliest days of the thing when everybody's still trying to figure that kind of stuff out. So, I understand you're talking about, you know, Clark and Tyler or whatever not wanting that and that's fine if you figure that out in six months. >> I think my worst though, like I'll argue to be right versus caring about what's actually best for >> you usually come around. >> Yeah, I I think it matured in that way.

But that was like there was definitely moments where I I would try to like I just wanted to like almost intellectually defeat you. like that would be like the feeling that would come out of me and it was like all of a sudden we've lost sight of like what are we trying to do for the business and I'm now in this like >> destroy like win mode you know and I think I I found myself in that space and I would leave conversations going like what did I just do like did I I just harmed something and that wasn't really very valuable like I've had that like it's like my wife and I like it's that shows up in a lot of places for me where I've learned to like >> need winning less I think.

Um, but it's funny because so so much of the problem in organizations and certainly for me as a leader is is the exact opposite, which is like just being >> too willing to step aside on things that I actually believe are true. >> Oh, really? >> Well, I mean, obviously I'll sit and argue with you a lot. Uh, >> I don't know what it's like inside your organization. You got a lot about a lot of people disagreeing with you.

I don't think so. >> No, my organization is too small for that. But, uh, but just I don't know, just in general, I I'll eventually give way and a lot in a lot. Well, I'm this is again I'm excited for you and a partners because even like when I'm going to listen to your conversation with Patrick, one of the things I noticed you do is like you have this way of being like kind and differential to him in these ways where you're like pointing out areas that like you expect him to have a better opinion or authority than you and but it's like you've carved them out and you're like you're serving him like oh this area you're you're the guy.

But what I wonder what happens is when he has an opinion on like an area that you haven't carved out that you haven't like that you're like no actually I have an opinion about this and I I I actually really think a couple of those already. >> Yeah. >> So, um I think those are the ones that are harder. >> Yeah. I I agree. I I'm totally happy to talk about that. I just want to maintain the focus a little bit more is >> also there's a lot of ego and money.

I think that was another thing that like I made some decisions and this goes to like what I thought was the right thing to do versus what my ego was actually ready to handle where I let let people come in at levels of partnership I shouldn't have. And that led to a certain perception that was different than what was actually in my head. Um >> you mean sorry perception what you mean is their perception of their value creation was different than what >> their position in the or the organization like so just and look I love these guys and we've worked through a lot together but like when Ian and Josh came in I was very much just like equal partnership. >> Yes. >> But in my head I was in charge like and so I didn't I didn't understand the mechanics of saying oh we're all equal >> but you're all going to listen to me.

Um, and what that actually signaled was like weird that didn't make that was actually like a improper signal. And so I and I did this a lot where I think I had this like sense of I don't know if it was morality or fairness or like wanting to be generous, whatever idea I had in my head that was different than my actual behavior sometimes. And I think those things would be in congruent for somebody at a partnership level. >> Okay.

So we're still talking about the early days. So let's let's clarify the comment about Josh and Ian and when they came in because that's fair. So you go from freelance Arch Network to then what happens cuz I'm going to come back around to the equity. Your thoughts on equity are extremely helpful. So I I'm going to bookmark that and come back to it. But uh >> so it goes down to Jordan and I and we that's when we transition.

Oh, actually that's not when we transition to CDC, but we're still our >> still first time I ever met you. First time I ever met Cory, you were still Arch. >> That's right. Corey becomes our first employee. >> Wearing a bucket hat still at CDC. >> He was wearing a bucket hat when I met him and he's probably still wearing one now. >> Yeah, he might be probably. Yeah, he's >> he was early to the bucket hat. >> Yeah. Yeah, he's he's got a weird look right now.

Um but uh there was the three of us and at the time Jordan was in this weird state where Jordan so Jordan played in the NFL for eight years and he got called to go play for the Bears and so he actually left. I remember this >> in the middle of our partnership and and again it's another example where I just let him keep all of his equity despite not being present and and >> having to go play professional. >> So it was really Cory and I for a long time and then that's when Casey came to us and the Kao thing started. >> Yeah.

So your brother, founder of Cao. >> That's right. And he came to us with the idea for the silicone wedding ring. >> We said, "Okay, let's do this. We'll take a piece of your business to as a service." So like we owned a portion of Kao. >> This is still from a bag of returns from who knows how long ago. >> That's right. And so that's the story. Me, Casey, and Corey above the Blue Frog Bakery. That's where really we started CTC.

We had two clients. We had Evo Shield. We had Eat the Ball. And we had Kalo. Three clients. And so that's where we started to learn Facebook ads, running them for Calo and that sort of thing. And eventually where you come in. So that's that's like sort of really the impetus for where it goes from there. And then >> along the way, Ian ran a production company that did all the photo shoots for Kayo. So photo and video, hype media. >> They did all of our content early on, big photo shoots, athletes, influencers, and Ian and I, >> they were beautiful.

They delivered they delivered beautiful >> work. Like he's a really gifted creative, runs creative for Bamboo Earth now. Like uh and so Ian and I would just talk all the time and it was like, "Hey, this makes sense. We you do creative, we make we run ads. We should come together." And so we brought um Ian on before that actually Josh came on. Josh was my boss at Power Balance and >> yeah he had married no. Yeah he was one of them and he had married Natalie Gold professional golfer and had kind of been traveling the world catting for her and hanging out with her for a while and was coming back into the workforce and it was like hey come work for us you can be the ops guy.

So is Jordan will sell the things, I'll do the bis the work and you can run finance and uh hiring and HR and all those things and that was like the triumphant and then we added into that and we were all four equal partners. So each time I just divided the pool up equally but in my head >> you were the leader. >> Yeah. And and that >> and not only in your head >> and I was the CEO and that that that's how it was >> and in uh soft power you were the head. >> Yeah.

And so I think I think that but but that at first like we all took equal salaries like there was all these ways in which it was trying to be this like like I think in many ways I was still in this like communal living socialist Christian thing and it was expressing itself in my business in many ways. And so it was just like oh just divide it all up. We're all equal and I won't care. We'll all do our best like and the reality is I didn't actually feel that way.

And so there was times where I changed my salary like and it would cause all these like little minor conflicts along the way. So that's that's some of the early stuff. >> The e-commerce help desk space is uh dominated by legacy companies that are costing you too much money. That is gorgeous and zenesk and you should be considering right now if you're running an e-commerce business switching to rich panel. Rich panel guarantees you that they will save you 30% on your help desk software bill if you switch to rich panel from gorgeous or zendes.

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Y >> when a dividing line happens which is that you start handing work to people who aren't you. >> That's right. >> And that was me. That was where I entered the story actually. I was with you at Kao. Yep. Uh, I was the first strategist at CTC besides you. Yep. And I I will always always always remember the email you sent me when I was after I had agreed to be to come with you where you were like, "Here's the 10 clients we have or whatever." And you were just sort of servicing them all yourselves, working your butt off like at the time, which is what you do in that stage of business.

And here's the split. Here's the ones you're going to take. Here's one I'm going to take. And you said >> and you said in that email, uh, you're explaining what each client does and you know, how much money they're worth to us, whatever. One of them was worth zero dollars to us because it was a supplement company that had no that had they had like a zero rowass on Facebook ads and it was like we were paid on percentage of revenue.

So that wasn't good. >> Um and then the other one was uh was quote the golden goose and that was a hangover cure company called Drinkwell. I don't mind saying great. >> Uh and yeah uh anyway there's a lot to be said about that. Um, but I think they were worth like I think they had had one month where they build 17 grand, which was a lot then. >> Yeah. I think probably it was probably 10% of spend on 170 grand or something. >> Yeah.

Right. Something. And so it was like pretty good. And you handed that to me. >> Um, and so anyway, so you start doing that and hiring people and start building a team. Yep. >> Uh, anything you want to say about that phase of business? This was a long time ago. I think this is where agency owners make the biggest have the biggest problem is that they are so precious about this and this is where I think this idea that you are going to screw up the quality of service is an inevitability and like >> you should accept that and you should understand that the way that you get better is actually through those mistakes like it's so obvious like we would all say logically that you learn from through screw it up fix it screw it up fix it.

Screw it up. Fix it. But we're a I see service providers, they build this story, this bubble around themselves that what we don't want to do is ever degrade the service or overpromise. And so they stay paralyzed as the service provider. And they like they think that the second they bring someone into it, it'll make everything worse. And the answer is yes. And so what? >> Yeah. >> Because the next like it's like FC goods.

If you go from hand sewing every wallet to manufacturing them, Yeah. they might get the first batch might not be good like and then you'll improve it and then you'll go back and you'll improve it again and and that iterative journey is what you have to be willing to >> the interesting thing about that is that I think the end state is actually that the service at some point can get better >> exactly >> uh better than if you had delivered it so this is this is one of the things I'm experiencing with the agency growth thing for me is that like part of the motivation for me to start like really trying to beef this thing up and and grow it is not that I believe there won't be any problems right >> it's just that I actually now think I don't deliver as good of a service for the needs of my clients, especially relative to when they were like I got them at $3 million in revenue. >> Certainly not for every client because not everybody likes you that much like or like the personality the the the best guy in the world. >> Exactly.

This specific kind of problem like so so it's totally true but it's a big hurdle and it's a fear and it's it's a roadblock that I think people experience. >> I agree and I certainly have experienced that. But it is funny to play that off of something you said a little bit ago, which is that you were also got to a point where you were delivering a service that you could not get on a sales call on and feel like you were promising something with integrity.

That's right. Like you said, you said just a little bit ago that you were selling services that you thought were bad, right? >> And you didn't want to do that either. So there has to be some kind of middle ground there, right? >> There of course there it's it's there's a spectrum of really really shitty work and really really good work and you're on it somewhere all the time. >> Um you don't want it to go too far. some dividing line. >> But I believed in you. >> No, no, I know that.

But I mean I I know that in those days, but I'm thinking about what you were saying later when you got to 180 employees having >> But I think what I lost accountability for is that I didn't know the person at the end of this. >> So where where you might screw it up, but I like believed in your integrity. I believed in your desire to do good work. Whether you made the right decision all the time or not, I knew you were going to try your best. >> Yeah.

And probably learn from it and all that stuff. And I don't know that I could represent that towards the end of it in a way that like I felt like I had capitulated to a standard all along the chain that I couldn't feel that way about. Like cuz again, it's one thing if someone called me and was like, "Andrew is an idiot and screwed it up." Like I could >> One time a client did do that in so many words, emailed you and said it was a client from Drinkwell. >> Oh, it's great. >> Do you remember the I remember the the last two words of that email. >> Yeah. uh he sent me an email saying that I had done some math wrong and the la and it was like period end of sentence and then there was one two-word sentence at the end of the email and it said simple arithmetic period >> and then you were like hold on a second and you got on the phone and called him >> you were very unhy >> I was very unheavy well you called him and said come on what are you doing to this guy like why you why you there's a point at which you're holding your agency accountable point which you're just being a jerk um but also he was wrong about the math >> so so I was right about the math and so he he was like berating me for that and I would like the record to to be set straight here that back 10 years ago I was right about whatever that math was at the time. >> I even feel that now is that like >> there there is there there is times where I know a lot of the people delivering the work and I I I I know their intention now.

I I know that that is in some ways inconsequential. The business outcome matters like and they can hold us to that standard and that's okay. And so you're allowed to be disappointed in the experience that you had. And I can say that I would stand by it. That that person went in and whether they made the right choice or not, I know they were thoughtful and cared. Like they didn't screw it up because they were frivolous.

They didn't screw up because they didn't care about your money or were screwing around or whatever. They may have messed up. That's certainly possible. And they will and will again like, but I feel very confident and that that really matters. Like that's to me what the most important part is is that I can look around the team and go like yeah if Brian Sakansky gets on call I'm just picking a random employee now I'm going to I got like I'm proud of whatever interaction happens. >> That's right. >> And that that matters a lot. >> Another thing about this is that in that stage of business something you are great at as a leader that I've learned from a lot is that I have never once I'm sure you've done it at some point but I've never I have never heard you undercut your team to a client. you you pretty much always in my experience working with you at least you would take your employees side >> on the call with the client defend your employee and then come back to the employee and work through whatever the issue was including if there was anything that needed to be addressed or something the you know and you were also not unwilling to listen to the client by the way like it's but it's just like you were ne you I've never seen you like sell out an employee to the client >> one of the things I've learned is that they are me and so like >> who is >> the employee Yes. >> So if I if I undercut them I've cut yourself and and this is this is actually a really important lesson for leaders.

I remember a very clear conversation. So I'm going to call out my boy Nick here. Nick and this might even >> Yeah. Yeah. When Nick was the head of growth strategy. >> Yeah. >> Uh there was a dispute about an employee bonus. Um and Nick is a very empathetic leader. And this is the kind of mistakes that I think that people make in those positions when they really care about their people is that we reviewed the results and we determined that they didn't meet the requirement for it.

And so Nick came to me, we had a discussion about it and I was like, "No, that like they didn't meet the requirement." And he went back to them and said something along the lines of like, "I don't agree, but XYZ." Uh, and so I called him and it was like the only time I really ever like yelled at him. Like you don't understand that what you just did is you actually undermine your own leadership. Like that person now knows that you have no authority to get them what they want by not owning that decision. like you've created the circumstance that they now know if I need a bonus, Nick can't get it for me.

So instead of owning that like collectively disagree and commit together or you and I working it out until we got to a level of consensus, you left, you undermine me and you undermine yourself. And that's what I recognized in the same thing with the client is that if I undermine their authority, I've actually undermined my own because all I've said is I can't hire people. I put people who I don't believe in in the position.

And so I think it's really important. Now, that doesn't mean that you don't own mistakes, but if the if there's a mistake, you own it as you yourself, too. >> That's right. >> Like, yeah, we screwed that up. I screwed that up. We're going to fix it. >> Yeah. It's a we. >> Yeah. Yeah. That's good. >> Um, so I think those are just in the human service business there. CDC is who they're paying. It's not Anmar or Taylor or anybody else.

It's like they're paying CDC. >> In those days, it's funny to think back. The pitch to clients was you should use Facebook ads. They will work for your business. >> That was what the pitch was. That was a sales pitch. You had to explain to somebody like, "No, no, when you give money to Facebook, you get more money back and it works." >> There's the early article is like uh what is it? The something something and the genius genie. >> Yeah.

That was the first article you ever wrote. We wrote it together. >> Exactly. It was about like convincing people that meta worked. >> Yeah. >> Yeah. Um >> shouldn't you spend more when the genie will give you $2 for every one you put in. >> That's right. Yeah. >> That's funny looking back on it now. It's like >> maybe you're giving the genie too much money. >> Yeah. >> Maybe maybe the genie was playing a long card. Yeah.

Yeah. That's funny. Okay. 4x400 launched at some point. Uh that's that's when I launched the team grew, of course, did all the normal things and at some point you made the decision to launch an aggregator. Let's talk about 4x400 for a minute in the story because it's probably something you would classify as one of your biggest mistakes along the way. >> 40400 was our aggregator. Um that eventually I started as the head of growth there.

I eventually became the CEO. That's when I left CTC. Um I mean the story up to that point is just sort of the usual agency growth stuff. You're hiring people, adding clients. I I'll always remember when we crowded around the diff Google analytics dashboard when diffware came to us and it was like and they had made like you know >> whatever million >> 15 million or something over a year and it was like whoa yeah anyway um that's that's the timeline of that and 4x400 comes around and is an idea of we're going to have a brand holding company and this is an important moment in CTC's thinking and leadership structure because there's an equity group owning not only that not only CTC but 4x400 there's a couple things in there somewhere that's called Dream Labs.

And the idea was like we're going to build this >> family office style of like portfolio of companies across these different industries. They're all going to service each other and all this kind of stuff. But forever was like the platform one of those where that was going to be worth the most money in the ecosystem. And so we were going to go launch all these brands and do it. I when I was there we ended up getting up to six brands at a time in our portfolio.

So talk about 4400. >> It cost me five years of my life. Like I the reason it took me so long to get to where I'm at in CTC is because of this whole side quest like is >> um and this is all this is the number one thing even today that there's just nobody will ever just believe this that like it's a bad idea to use your agency funds to start a brand and like every agency owner does this like there's just you're doing it right now like there's just no way to avoid the temptation that you're watching all these brands be successful and you think you can do it and >> it see it just it's so compelling.

Um, so I I I I empathize with it while also regularly telling people, "Please don't do this. Please stop. Don't use your money in this way." Um, >> do you really think that's true for everyone? When you look at like here's the example I think of when you look at what Zach seems to be accomplishing at Homestead right now. He's got a couple brands in his portfol that uh that they've got or whatever, but Hollow seems to be successful.

He's got another brand. I know he's talked about some being pretty successful. Um, you know, as far as I can tell, he puts much less of his time >> into Homestead these days, right? And Zach, if you're watching this or listening, like I don't know the full deal here, but I'm just reading reading between the tweets. >> Yeah, I'd rather I know a lot about that situation. I'd rather not speak specifically to anybody because what I mean to say is like it seems to me that Zach is really when I hear him talk when the times when I perk up and want really want to listen to what he has to say it's about like >> it's about like building funnels for brands to sell stuff you know like he's like it seems to me he's really good at that and so perhaps the highest leverage use and this is sort of the this is sort of just taking the other side of these argument because I actually don't have a super strong opinion about this when I think back to 4x400 I think maybe it wasn't a model problem.

Maybe it was an execution problem because we sure executed a lot of things poorly in that process. Um if we had acquired better brands, maybe it would have gone differently. If we had done, you know, anyway, if I had been better, maybe whatever. So, so the point is um if that's your skill set, there are really good e-commerce businesses. Why not go build that? >> Well, you can't like do what you want. To me, it's like is the expected value of a pullside fly ball higher than a ground ball up the middle? >> Yeah.

Does that mean that everybody should try and hit pullside fly balls? Probably not. Like maybe D. Gordon, but maybe maybe D. Gordon shouldn't. I don't know. Maybe he should. >> I don't know. Like I don't know what the math is, but I I think that like this is where when you speak about what is true most often, that doesn't mean it's true all the time. So like it doesn't mean that somebody can't do this and win. Um >> I just think that >> that's I think that's fair. >> What I what I'll say is that I don't think it benefits the agency. >> Yeah.

Yeah. So why do you have a business that's successful and working and you as the leader don't act in the interest of that thing? >> Yeah. >> And the people in it. And so what you'll hear often is about the stories of the brands maybe working, but I don't I don't know many of the stories where it benefited the agency or not both where the agency benefited. And I think that's a lot of the trope, too, is like, oh, we'll learn from our own money and brand and that'll make the agency more successful.

But when you suck the resource and talent and time >> from the thing and put it over there. >> Yeah. >> The we at CDC, we took the money, which I again I know that's what people do. They take the capital out and they deploy it somewhere else. They take the people, the best people, they put them over there. >> I don't understand how that could possibly benefit >> the agency. >> If I worked at an agency that happened, I would leave.

Yeah. is what I'd say is because wait, I'm an employee here. >> How does this benefit me to take the money and talent from here and put it over there? >> Um, and so I think that's like the question and what it says is that if you think about just capital allocation, it says I don't have a mechanism to deploy capital here. That's a better return than >> what I was going to say was like >> and it's a heinous math decision like you have a thing that is growing and producing free cash flow. >> Yeah.

And so you think the better EV bet is to take that dollar and put it into this thing. >> Then the yield that is like produced the cash to begin with. >> Yeah. >> You would have to look at your business and go there's like no growth here. Um and that's where I just I I I started sort of looking >> let's ask a question about agency growth then. Okay. Because so so how ought let's say let's say uh I mean I don't know maybe maybe you're dealing with this CTC all the time but like let's say you're you have to go uh expand your services and create more demand for you to generate more value right like I mean you got to create more you got to get more clients you got to get more people to service those clients okay >> and let's say you don't have them yet >> so you you you need to hire people and you don't have enough revenue to support it yet or you need to hire or you need to get more client clients and you don't have enough people to support it yet.

Something like that, right? Um like how do you handle actually deploying capital aggressively in an agency because what everybody can say is that an e-commerce business is sort of clear, right? You like buy the ads or whatever it is and you keep trying to grow the business. But with an agency, there's like a process expansion that has to happen and you have to like hire the next person and some of those things. So, so can you aggressively deploy capital in an agency to do those things?

Besides on, I don't know, maybe marketing or something. >> Yeah. Well, besides on marketing, the number one thing that agency owners don't do is they don't sell. >> Yeah. Interesting. >> Like even you. >> Yeah. >> What is your sales process? Do a podcast >> needs to be addressed. Yeah. That's the number one content. >> So if you wanted to grow faster, if Andrew spent 40 hours a week and I told you that your primary obligation was to drive pipeline for AJF growth, you could do more than you're doing that >> and the business could grow faster. >> Yeah. >> Agency owners don't sell.

Like usually a lot of them are stuck in this like duality of service and sales. >> And so sales >> certainly where I'm at. Yeah. >> Sales is like this thing that as referrals happen you'll go get on a sales call. >> That's what sales is. Sales is every day I wake up >> and try and sell stuff. >> I try and sell stuff. Yeah. >> And that's what you should do if you want to make your business grow. And if you applied resource against that problem, >> you would do it. >> Yeah. >> And you would try things.

You would try advertising. You would try going to events. You would try sponsorship. You would try hiring people. You can deploy endless amounts of capital in sales and marketing. Like there's no shortage of of that. And I actually think this idea that like the operational side of hiring people is like hard to scale is kind of just a it's a way of like hiding like you're telling me that finding another designer in the Philippines would be hard for you. >> No designers I'm not worried.

It's more about the growth strategist and stuff that that feels like hard. >> So what you do is like you know what you do? You have someone work 60 hours for a little while. >> Yeah. Sure. >> Like you you flex the resource up. >> Yeah. Yeah. And I think that's what >> and you can pay them for it to do it. Um, >> but but what'll happen is like or you know what you do? You hire a recruiter on contingency that's working for you all the time. >> Yeah.

It's funny. I was just reading double your profits which is Have you read that? >> No, but you told me you market >> I wondered if you Yeah. Yeah. I wondered if you had read it because it reminded me of some things that you said but one of the little principles he said this is a Matab Bogle recommendation. Mab gave like six books like you just read these six books you read all the business books you need. I'm like I should listen to that.

Mab's read all the business books. So >> he speaks so directly. >> I know he's great. Um he so I'm just trying to listen to that advice. And in double your profits he says he says you should aggressively deploy capital against things that make you money. In fact you should be willing to deploy more capital than anybody else because if it makes you money makes you more money and you should aggressively reduce capital for things that cost you money.

Exactly. That's he's like you just make you just make that >> we call it units of growth. Like when we think about my opex, I think about each component of it as I I want them almost all to be variable expenses associated with revenue. But even every employee I have is has some capacity to produce money and some of them don't. And I want to make sure that the money goes to the things that do. And you know who the most obvious people are that create incremental revenue?

Sales people. They're the most obvious nodes of the system that if you give a salesperson money and a quota like the math is very clear and simple, you know, >> and and by nature, there's selection bias for who goes into sales. Those people are motivated by that. >> That's right. And they they actually respond to it. And so I think um my biggest mistakes uh in CTC history are not deploying more capital into sales and marketing and not doing the LTV to Cal.

But that's not true. That see the thing is that's not true at your at the moment that you were talking about earlier when you got to 180 employees. >> No, but that again that was this like remote infrastructure problem that I didn't understand what was happening to me. >> Yeah, but but you can't wave that off like that. But no, no, you can't because what happened is your promises outstripped your ability to deliver on them.

And and so if you could you could say all you want to me right now, for example, right, which is what you're kind of doing. Go deploy more money into sales and marketing and just deliver the service. except that you you just told me that you were basically figuring out if you needed to claim that you were going to file a chapter 11 and you fire take out a bank loan while doing the process. Don't also try and initiate an massive internal cultural effort towards DEI and uh dream days and all of the other things that are happening simultaneously as well. >> And then you probably won't end up on the phone with the bank. >> Yeah.

That doesn't change, right? Isn't everybody gonna make those kinds of mist? I mean, I I just think I mean, you're that's what a conversation like this is. You're trying to you're trying to listen to it and think, how do I not make the mistake that Taylor made? And how do I do the things right that Taylor did? That's the point of a conversation like this. >> What do you want? What do you want? >> Well, I I'm not I'm not worried about me.

I'm just trying to play it through the play it through the audience's lens here. How do you how do you how do you think about I think what most people >> I mean I do think I do think your principle is right that more agencies ought to think about how deployment of capital generates return and they're not thinking aggressively about that at all. They're just kind of like I don't know somebody else wants our business so I'm going to hire another strategist or whatever. >> I don't think so we've talked about this a lot.

I don't think anybody has the end in mind and that's >> the end in mind. >> Yeah. >> What do you mean death? >> No no no like this. That's what I think. >> How much are you trying to sell AJF growth for? >> I don't know. So you have like so so you're building towards an unknown end. >> I have a I have a working theory but I so I agree that this is part of the problem. This is actually part of the reason why probably very likely uh Patrick and I will adopt EOS for AF growth because it forces you to answer that question because this is the whole point.

You can't build a strategy to nowhere. >> Yes. That's right. >> So so that's what most people are on. They're on a path to nowhere and so the decision-m framework for the next decision is just totally >> ambiguous. um or or unknown. Like one of the things I'll say at least about Dreamland was at least we sat down and we wrote a >> clear number 250. Right. It was >> the thing we didn't have any ideas how to get there.

But but like at least we tried to create that. >> We said we wanted to create a system that has was valued at $250 million. >> That's right. And so we had this way in which 4x400 was going to accomplish that. Failed at it. Yeah. We failed at 300 million >> totally. And so and uh so I got to do it again. Like for me with CTC there was like >> I wanted to get to a number and I worked towards getting to the number like that was the framework for every decision.

Um >> and so I just think that like if you get clear on what you want it's easier to get >> like but I just don't I think most people are sort of discovering what they want. >> Yeah. I think that's >> or than they like are clear on it. >> Why do you think people don't get clear on what they want >> because it's really hard and we're fickle. Like I think it changes constantly. >> Well, this is something I say to people. >> You don't actually know what it's like to get there.

I also say this to people on calls all the time, which is whenever I ask that question, I'm not actually asked a question about where you end up. I'm asking a question about what you think today. >> I also think that like there's a whole bunch of people who think it's bad to say that they want money. And so like >> the idea that what you would say is I want this much money is like not a thing you're supposed to say. >> Yeah. >> So I I think that >> it's funny.

I don't think it's bad to say that you want this much money in a situation like that. Uh in fact, I like money as a scoreboard for that specific reason. I think people will be unsatisfied if money is the end end end end goal but that's a broader life question like yeah uh but I do I actually think in a business setting or something like that I think um >> so I think when you substitute an alternative scoreboard it's like you've signed up to play basketball and you're going to track your RBI's like >> yeah you just played a game where like the measurement is not >> you got to you got to play with the right >> yeah I just uh I think the problem with that analogy still is the is the notion that it's inherent ently your score is competitive to somebody else's.

I just don't think it has to exist that way. I know what you mean. >> But like I just look at your business like you you're about to make this big partnership decision with this person. And the question is like why do you need him? >> Yeah. >> To get to what? >> Because I Oh, I know the answer to that question very clearly. The answer is that I do want to grow the business now >> and I have some ideas of what those numbers are.

I have a couple ideas. I'm I'm not quite ready to say publicly, but I have a couple ideas. >> Can we bleep it out? >> Uh yeah, sure. Chris, you ready? We're going to bleep this. Okay. Somebody somebody write a dance >> not to author >> editor. Uh yeah, I think that right now the number I'm looking at is between >> Oh, but how much So you What do you want? >> Uh I think that would uh I think that would trade I don't know.

I think that would trade something like four to 5x probably. >> So let's say it's bleep it out. Okay, >> right now let's assume there's nobody else. You own 100%. The deal is gonna be somewhere between >> I'm gonna walk away with Yeah. And half of it's going to be in uh earnouts and rolled equity. >> So you're gonna end up with cash after taxes and another earn after that you'll get seven like >> So here's part of the problem.

I actually don't really want any more money. Like I I >> that's a huge problem. >> I what personally >> if I was Patrick I would be like dude I'm out >> personally. Well, that's why you set a goal on the scoreboard and say you're going to commit to it and >> but you don't want this is actually one of the biggest problem I even think with Patrick is that I don't I think he's going to suffer the same problem. >> I agree >> is that he doesn't want money either because he's already got it.

So, you're going to like how do you like >> Yeah. >> Yeah. Well, we have to decide. I mean, it could go wrong. Actually, another thing that from my conversations with you that has been helpful in this process for thinking with Patrick has been >> that uh and we should link that episode in case anybody wants to hear it know what the heck we're talking about. >> Sorry, Patrick. We're talking about you. He'll he'll be he'll be glad.

He'll want to come on and talk about it too. Um, Patrick, uh, one of the things I was gonna say, what was I just talking about? Um, >> like you might get further giving your homie that is like your GS. Yeah. >> Like because he'll work like infinity hours. >> Yeah, he probably will. Um, >> he'll do all the things you won't. >> Yeah. Yeah. Uh, what was I just going to say about this? Gosh dang, I had a really good thought and I lost it. >> It's going to be so many. >> It was going to be really important. >> But but my point is like it's probably so close because even I'll make you faster.

How about that? If that's really the end game because >> Yes, that's the point. It's not the end game. >> So, but then it's like, well, what is like, so is it 200 million? Like, no, >> there's no amount of money that's the end game for me. >> See, it's just like you're So, then you just meander around until you don't set a goal in it to generate some kind of uh outcomes in in life that are related that I can use the money towards, right?

So, I have a couple ideas about how that might look in my life, right? U but it's not for me. The goal is not like in fact if anything I see a lot of cost with getting much richer than I am now. So I I that's that's where my current that's where my >> hard to transfer money around. I'll tell you that. >> Um >> yeah, that's that's my current best assessment of life. Yeah. >> Oh man. >> Yeah. >> Then you should just shut it down. >> Why? >> Because what's the point? >> Uh well I can do all kinds of things with the money besides keep it. >> Well, but you just said you don't want anymore.

It becomes more problematic. >> Yeah. That's that's how you get rid of it. >> So you want to you want to create a funnel for sending it somewhere >> possibly. Yeah. Or possibly doing other things in a way that the m the the necessity of what a business can accomplish which is value creation for humans. Okay. Uh that that >> so them making money >> partly. Yeah. >> Okay. >> Partly. Yeah. that and I think that I mean this is actually where I think your position on a lot of these things in mind kind of come together nicely in the way I'm thinking about this which is like you you've been really insistent that a business's job is to generate profit and in fact that a lot of the social enterprise type stuff that CTC did which we should get to next in the story um is that that um that that didn't serve CTC well it didn't serve clients well it didn't serve you well it ended up being a bad use of business as a mechanism totally >> that's the way that I hear you talk about that story okay so in my you I think that's right.

I think that's and I' I've actually kind of thought that for a while and in some ways think I actually >> I feel like you were consistent with that. I think I voiced that to you at the time that I thought it was a bad you you know the example I always give of this is like there were a lot of studies that came out when is you know 2020 2021 when when the DEI conversation was as most live in business settings in particular right um and and I think there's a lot of well-meaning people having these conversations in fact when I disagreed with you on some of the things that were happening at CTC I have never once questioned your motivations part of the reason I was like great let's try it let's see what happens okay maybe I'm wrong um the there was this there's this stat that got kicked around it was some study Who knows what the original study is, right?

Which was like uh teams perform better, >> diverse teams perform better, right? We've had this conversation, right? And the question I always had back to that is what if they don't, >> right? >> Is the is the business it let's say somebody created a landmark study that was unimpeachable and proved beyond all shadow of a doubt that homogeneous teams performed better? Yep. >> What is the moral obligation of a business particularly for these giant publicly traded funds which is more of a thought exercise cuz it's fun because I don't have any influence over that but like uh or these publicly traded companies like like do they still have to create diverse teams because there's a moral imperative to do it and I think different people depending on the world you're going to answer that question a little bit differently.

In my view the answer is probably not um within a certain ethical framework that is make sure everybody's being treated fairly. Yeah. You can't treat people you can't treat people uh unethically and we'll just leave it there. whatever that exactly looks like. But I think that that's that's the way that would look. So I think in whatever mechanism that I see the value of life and my time and the kind of value creation I want to have in the world, right?

Um if it's going to happen through a business, the business needs to be profit focused to do it because that's what businesses need to do. So in that respect, I think there's a coming together. I think what happens with the money afterwards and how motivating that is to me relative to the money, I think is a is a fair question that you should always needle me on because it's helpful for me. >> Yeah. >> No. So I I would I would totally agree that there are different kinds of vehicles that there are charities, there are corps, there are churches, there are all sorts of different kind of entities that exist for different stated purposes and a for-profit entity is >> exist for profit. >> That's right. >> Yeah.

And I think that's right >> and that's what it's in service of whether you like if you want to try and pretend that it's not. The problem is that all of the structures and the mechanisms will constantly drive you back towards that evaluation criteria. >> Yeah. And I I think your clarity about that's been really helpful to me as I think about trying to generate some kind of value in life uh beyond that where where money as we've talked about this plenty times like is not the motivating factor for me.

It has to be in the business because that's what the business is for. So there has to be a way in which that's still the case. Um okay let's talk about uh so let's wrap the 4400 conversation. We did that. It went badly. You wore a lot of my mistakes. Thank you for that. I I I didn't exit that I think at the best that I possibly could have. But the um but uh give me the summary idea maybe you've already done it about that stage of CTC and 4x400 and sort of like if you have any one biggest takeaway is it just like is it more about stay focused on the agency is about e-commerce as a models of aggregator models like what did the what what's the is it about the equity split which was a big problem in that business like >> it's I think it's all those things I don't I don't think there's any singular thing I think that aggregator as a business model has a lot of flaws there aren't um these synergies uh that you presume when you start.

Um the reality is like every business we had had a wildly different supply chain, wildly different customer persona, no shared data, like there there's just like no actual >> wildly different cap tables. >> Yeah. Exactly. Like different incentives between all the participants and you end up with this ultimate capital allocation problem is that if the money's held at the whole co level, every individual operator of the individualized cap tables all want it to go to them and there's like a fight for scarcity and ultimately the right decision is to continue to deploy capital into the thing that returns the most which is going to be one of them not all of them you know and so I think that model has a lot of flaws uh in it to begin with.

Um, as a result of that, I think that using the AY's cash to do that was foolish and naive and a poor capital allocation decision. I think raising capital in the way that we did, we actually raised a million dollars for that entity and then stopped raising treated it like it was bootstrapped. >> Exactly. It was just all of it was just like that was naive and having never and and even I think looking back on it like we had this relationship with one of the investors that like we look back on and go like what a jerk but I think he was right about he was totally right than we realized at the time and he was just like you guys don't understand the game that you're playing. >> There were two investors who were like that actually who both >> one of them was more gracious and willing to teach and the other was just like like treated us like stupid children but in some ways we were and so I think there's there's learning from that.

Um, >> yeah, >> but I but the thing that makes me the saddest is that I don't think I think it was all ego. Like >> I think everything we wanted was to have the coolest thing >> and we thought the way to get the coolest thing was to have a brand. >> Yeah. >> And I still think this goes back to the idea that an agency is a secondass citizen in the entrepreneurial world. >> And so if you like the coolest people are the brand leaders and it's probably even turned to like software probably even elevated over consumer product to be honest.

And now maybe AI is AI is at the well I think about Mark Zuckerberg and all the like oh like big tech. Yeah I was say the the SAS companies in our space. I don't think that's true. >> Yeah. Probably not in our space but like ultimate entrepreneurial pinnacle. >> Certainly. Yeah. >> So I I just think that agency's at the bottom of that list and so it was all about what was the coolest thing we could have and it felt cooler to me to have a baby sporting goods company than it did uh agency. >> CDC.

This is the reason I tweeted the other day that like you need to to decide why you're making less IBIDA when you're growing your e-commerce business. Like if the answer is ego, you need to be really clear about that, you know, because I think the same thing is happening for brands that are pushing their growth too hard to get a bigger topline number. PE people will and people replied to that tweet honestly. They said, "Yeah, there's economy scale.

There's value in some of those things." And that's true. There is, you know, um but realistically also it's ego. It's like that's that was actually from a conversation I had with a potential client and I really appreciated his clarity to his answer. He was like it's ego like that's the reason why I'm doing it and it it's it it will really hurt you. >> I also think like when you have no money you don't really understand the distinction be between having like $100,000 a million $10 million and $100 million.

And so you like don't really know where to like you're not actually clear on the life that you're trying to build or what it actually would cost. And you don't ever stop and go like what are all the things that I want and what is the total amount that that would cost like you're just aiming for big and cool and status and like that felt a lot of my youth was like that was what I wanted you know like was a cool thing that everyone went like that's cool. >> CS Lewis has a essay called the inner ring that everybody ought to read.

It's I mean sis is a Christian author. You don't have to be a Christian to get a lot of value out of the point, but he basically says like huge huge huge amounts of the behavior of people in the world is motivated by inner ringism which is essentially >> that there's always a group of people more inside than the next group and and and people will say the classic example is like you call your wife uh if you're at work or you call your husband and you're like I'm sorry babe I I I got to the boss is having me work late but inside you're thrilled that you get to work with the boss.

Um and uh and and that inner ringism is the motivation for many many many bad decisions in the world and it's so insightful >> when I when my experience at power balance I was just on the outside of that inner ring and I wanted so badly to be in that room. >> I I definitely felt that at CDC. >> Yeah. And so I think I think everybody feels that and so I think whatever I perceive >> as a leader you actually have to be willing to keep people out of it even if they want to be in. >> Totally.

And so I I do I think that's very true and that was probably a primary driving motivator when I was young and wherever the wherever I had applied the idea of like the coolest ring that I wanted to be in. It's also like when I I look back so the way we raised money was kind of interesting like we held an event. We like invited a hundred people to an event and we did a presentation and we said if you want to write a check, email us in 24 hours. >> And like even that was just a play in like >> get all the people in our life together, show them something cool and make them want to be a part of it, you know?

It's like which I think is not necessarily it worked really well. like it was a good it actually turned out to be a decent fundraising mechanism but um >> but even that as like an idea is like that's not >> it was in some ways it played to your strength though which is like a exciting entrepreneur who somebody would want to back right they're they're looking at you going this is the kind of person I want to be with and I think that's yeah but I but I see your point okay so let's talk about equity a little bit more um because now a few of the stories come together here so there's first of all the point that you made about um Ian Josh Jordan you guys sorting all the equity split out there some of mistakes along those ways. 4x400 was an equity disaster.

Um I would say like we talked about raising money poorly. We talked about acquiring businesses poorly with different motivations and different cap tables on every single business. All those kinds of things. You talked about the ESOP earlier where you brought employees, you sold equity in CTC to employees in the business. Um all of these little things along the way. Um so a little phrase I've heard you use that I think is a really helpful lesson from all of this is equity is the lifeblood of the business or something like that. life force that aimed that you want aimed at the business. >> Okay.

So, so say it right and then expand on it because I think it's a really helpful thing from your path. >> The phrase I'll use is equity is a life force and you want it pointed at your business. And if someone leaves with equity, they take with it a force that you can't recreate. Um, and so you need as much of the equity aimed into the goals of the business as possible. And the second somebody takes it and has a different direction with it, you lose a thing that is really powerful.

Um, >> why is it so powerful? Because when is bad, employees have no incentive to work outside of their compensated obligation. Partners do. And so when things get really bad and it's Saturday and you need to call somebody, like you call the people with the equity and they step into those moments. And they also have a constant perpetual incentive to do a thing outside the bounds of their present responsibilities. Um, and that just happens.

And they step through that door constantly in moments of hardship or in moments of positivity. they were making referrals, connecting you. You still behaved this way even when you were outside of CTC constantly helping us. >> Yeah. >> And it's because you had an incentive to do so. You so even though you weren't working in the business, you still aimed your energy into it. Um and I watched that happen um >> most powerfully with co- people that are in it with you every day. >> Uh so yeah, so I think that that's like >> I I left too I let too much of the life force leave sometimes um and didn't get it back. >> Uh and so I think that's a big lesson.

But and like what I'll tell you is if you want to sell your business like >> you want simplicity in this process. I created the most complex structure for selling a company and it caused endless disputes because I ended up with all these counterparties with different incentive structures um in the transaction. >> Yeah. >> Um so yeah it's just like simple clear and if someone owns the the the equity should be owned by the people working in the company as much as possible. if it leaves, you should get it back as fast and at the best price possible that you can.

Um, I think that's like a a really important rule to hold to. Yeah. >> Um, the other thing I'll say is like the ESOP's a beautiful mechanism. Employees got equity at zero cost. They had to write zero checks. There was zero tax obligation and they valued it accordingly. >> Um, is that part of the importance of equity is it's has both risk and reward and they're both important motivators. And if you rob people of the risk, you actually rob them of one of the really powerful motivators of it.

Um, and so we had another moment where a bunch of people wrote checks that was way more impactful than the ESOP. >> So do so let's say I want to bring people into AJF growth, my my team members uh into ownership in the business. >> What what mechanism what mechanism would you recommend me doing that? >> Write a big old check the highest value you can. >> So okay. Okay. So you think so instead of giving them that as part of their compensation, you would have let's you think they should write and check into it. >> Yeah.

Uh >> what if I want to set a set a 5% employee total shared equity pool? >> I think I think you should assume that the value you're going to do that to help educate them on the potential and distinction between capital and labor and because you care about them, but not because it's going to change their behavior. >> Okay. So this is something I've watched happen over and over again in these businesses is that people do not respond to I mean this is like a classic economics principle which is that the the further out the the >> um the incentive the less people respond to it and equity is extremely far out equity and a loss aversion it's not worth anything. >> Yeah and it's completely illquid so it's Yeah.

So there's just nothing Yeah. So, so do you think a profit sharing would be like a better mechanism to accomplish something similar? >> That either again I I want I so Jamie Diamond, CEO of JP Morgan Chase, like biggest bank in the world, like probably