This guy sold his company for $2B (and used it to buy Pokémon cards?)

Key Takeaway

Start with "shitty quality" and continuously improve while keeping costs low—the Honda strategy. Whether building products or content, begin scrappy, deliver value cheaply, and incrementally raise quality without raising prices. This "shared economies of scale" approach passes savings to customers, builds loyalty, and creates unstoppable momentum. It's not about perfection on day one; it's about getting 1% better every day while staying accessible.

Episode Overview

This episode explores unconventional business strategies through the lens of Asian business models and investor Nick Sleep's philosophy of "shared economies of scale." The hosts discuss how companies like Honda, Costco, and Amazon built dominant positions by passing cost savings to customers rather than maximizing short-term profits, creating customer loyalty and long-term value that traditional metrics miss.

Full Transcript

Transcript of This guy sold his company for $2B (and used it to buy Pokémon cards?) from My First Million. Auto-generated from episode audio; may contain minor errors.

Sam, we've been doing it all wrong. This whole business thing, this building thing, we've been doing it all wrong. See, we thought you have to build a product. That product has to do something, has to add value, solve a problem. And here I will read you this tweet. This is from Next to TV. They say, "Dopine websites are the new trend in South Korea. These services let users endlessly browse food delivery menus, read reviews, fill their shopping carts, and even track their shipment. But the only catch, none of it's real.

You're not really placing an order for anything. There are also virtual smoke breaks where you can join anonymous people in chat rooms to recreate the feeling of taking a smoke break without having to smoke a cigarette. The idea is simple. Give people the familiar dopamine hit without them having to actually spend any money, leave the house, smoke, or do anything else along those habits. And these are becoming incredibly popular in South Korea apparently. apparently. apparently. Is this the same country that's having a massive birth rate issue?

Unrelated. Unrelated. Unrelated. It checks out if they're going to create virtual smoke groups and fake buy stuff. What the heck, guys? So, the the trend started, you know, this year and it's basically Korean Gen Z. They sort of realized that a lot of the fun in online shopping is just browsing. It's just putting things in the cart, hitting checkout. You know, getting the actual product is, you know, sure that maybe that that adds some value, but there's a lot of fun in just the other side of it.

And so, you can see uh here I can pull one of them up. Let me open. And so, this is a app called Food Never Comes. And uh All right. So, check this out. So, you open up the app and you could select rabbit or turtle delivery. So, fast or slow. Oh, do you want to you want should we pay for fast or slow? I guess we should pay for fast. I want to get it. I want to get my fix. Let's treat ourselves. Okay. So, now there's a fried chicken restaurant.

So, we can have the half and half crispy chicken. The cheese balls. Got to go with the cheese balls. Maybe the soy glazed chicken. We'll go spicy. We'll add a cola. Add to cart. And then we can go ahead. We could check out. We put in our info here. And then we could watch this delivery make its way to our house. Never actually come. And uh that's it. It's the blue balls of of entrepreneurship. Sam, are you in or are you out? you out? you out?

Dude, how can the this group of people who have brought us such amazing things like the Kia Tellyide or Samsung K-pop demon hunters? Yeah. Like go and do something so stupid. They're the Koreans. You guys really are like the barbell strategy of life. They're bringing us such amazing wonderful goodness and such silliness. I I guess I don't get this. Why are people doing this? On behalf of our huge, I'm sure South Korean followership, I will defend this by posting a picture of the White House this weekend where there was a giant motorcycle a motorcycle doing a backflip in front of the White House in preparation for UFC 250 to celebrate the birth of America.

The two dudes in their underwear beating each other up in the White House lawn. Yeah. You don't think that a fist fight on the White House lawn is appropriate? an organized fist fight where a Frenchman beats up a Brazilian. Yeah. Yeah. Dude, look, I didn't say that we we both can't be stupid. I'm just saying that this is this is wild. Are these things actually popular? popular? popular? No, I can't tell. I So, obviously, this makes for an amazing headline. There's also a reason that I open up the show with it cuz it's just funny to talk about and make fun of.

But are there there's not a lot of Korean people on Twitter, so they can't exactly we can't exactly refute this. It feel it feels like like Japan. It feels like Japan and America have like separate internets. Like have you ever gone to like a Japanese website? Like like when I It's kind of challenging to use obviously just even if it's just translated, it's still like totally separate and it's quite hard. And so like are there any like proper Korean people on Twitter to refute the story or can we just make up falsehoods about like like like I think we just make it up.

It's like the good version of like the Hunter Biden laptop story is the South Korean fake fake Door Dash story. Have you ever studied like eastern internet? You know, people study like eastern philosophy. Have you ever studied eastern internet? [snorts] Yeah, like I've uh Masa Sun um from Sawbank. I believe he's a Korean guy who lives in Japan or is he Japanese who lives in Korea? Anyway, yeah, I've studied him and then I've studied like some of the Chinese websites or the super apps. They're like so like mega that it's quite hard to understand what they're about.

Yeah, there's so many crazy um apps and sites. So that so just for example, I remember when we were looking into live streaming. So my first company uh that sold Bibo, it was in the live streaming space. We sold Twitch, which is the the big American player, but live streaming is far more advanced in Asia than it is in the West. And if you go look at like I forgot which ones it was y.com or whatever there was a whole bunch of these where you would see somebody on video and then horizontally from right to left streaming across the screen would just be the entire chat and it was the most bizarre experience ever cuz you would see that 7,000 people are watching this girl eat noodles while text flies across the screen and people are spending thousands of dollars sending her virtual roses.

And we were looking at this studying it like you know it's like uh you know when you study like a tribe and you're like so they they just eat it and they were just like yeah this is what this is exactly what they do. And then we tried to recreate as many of those variables as we could because these sites were incredibly popular. incredibly popular. incredibly popular. Isn't there uh isn't there one where I like where it's like fat people eating. It's like bang bang or is is this isn't this like a bang?

They don't need to be fat. Oh, I thought there was one guy like named Nico Avocado or something like that. He got really fat doing it and then he lost a lot of weight and came back. He's kind of a weird guy. Um, but yeah, the mukbang is basically watching other people eat. Just like you watch other people play video games, you watch other people play basketball. Turns out people want to watch other people eat and they like having that high definition sound watching them slurp and I get joy from that by the way.

I always I I buy candy and sweets that I want to eat for other people and I just like I'll hand it to them people. people. people. Yeah. I'll hand it to them. I'm like, "Eat it. Tell me tell me how it feels." Like I definitely can get like secondhand like sugar highs from other people. people. people. Okay. So, you're in. So, we started out and now and now you're in. Dude, there's this whole genre of Indian barbers who shave people's heads who have dandruff and you could like it's like the oddly satisfying of like, oh, we found it.

Let's wipe it off the head. Yeah, the oddly satisfying stuff is crazy. There's other uh sites that I think are like the kind of the current trend of like what's big in the east that's not yet big in the west. So, so before there was live streaming, that was obviously a huge one. Mobile gaming. So, internationally, uh the biggest most popular games were all on your phone. there weren't Xbox, PlayStation that there really didn't have like big console or PC culture and so games like uh Freefire or PUBG Mobile were huge and then Fortnite became the the version of that in the US soon after.

And so you could sort of see these trends moving over. Live shopping has been huge in Asia for a long time. Now whatnot is the US equivalent of live shopping worth $10 billion. And so you can kind of look for these products that are over there and try to see when and how will they translate. So right now the big one is we've talked about this before but the short drama. So so serial drama. So basically it's Netflix but you watch on your phone vertically. Each episode is like 30 to 60 seconds and it's basically soap operas of all different types of genres that people get incredibly addicted to.

Huge in Asia. Uh so hu huge in kind of like the China, Japan, Korea area. Now getting big in India. Only a matter of time till it's also just as big in the US is my my guess. I just pulled up these notes that I have from I think 2016. So there's this guy named Kevin Ryan. He's been on the podcast, friend of the pod. And uh he founded a bunch of companies. The biggest one being MongoDB uh multi- tens of billions of dollars uh company, but he also famously was the co-founder of Business Insider.

And so I called him one time and he like gave me some tips on like how to start a media company because I like didn't know anything. And I emailed him so many times that he relented. And I have these notes and I I something always stuck with me on this framework. So we said on this show we have spent hours talking to some of the best investors alive. Well lucky for you the team at HubSpot they have pulled out the principles that matter most and turned it into a very simple easyto read wealth guide.

It's 35 principles from the top investors. We're talking guys who have been on the pod like Howard Marx, Manish Pbry, Morgan Howell, Kathy Wood, and a ton others. So, these are all their frameworks, their mental models, their rules. Basically, how to play the long game and how to avoid ruin. You can get it in the link below. link below. link below. He didn't he didn't use all these exact words. This is me like typing. This is before granola existed. So, he goes um he's like, "The business insider strategy is sort of what Honda did in 1985 versus General Motors." He was like, he didn't say this, but this is my notes.

[clears throat] Start with shitty quality and get traffic to our website and improve. [ __ ] quality, but we'll improve. Like, how he said it in his old hands, inspiring all of his employees. He did he didn't say it that way, but he was like, we're he said um like Honda in 1985 versus GM. Honda was considered sort of a joke. GM cars were these like big like heavy duty vehicles that made a big thunk when you like shut the door and Hondas were like rinky dink. But the difference is is that uh with Honda as well as with Business Insider, the quality uh of car that they were making increased but their cost they stayed the same which is why Honda eventually won.

And Business Insider we make content a lot cheaper than Wall Street Journal but we think that our quality is just going to continue to rise. And that was like his whole strategy. And I always thought that was really interesting. I thought that was a a really cool analogy, which is you can start like kind of like so so and just slowly get better while keeping your cost the same. And he always referenced he referenced in our call he was like Honda did this, Toyota did this.

And I started thinking about this and I've always thought about this like um strategy that a lot of Asian companies did. If you remember, do you do you know TCL TVs? I've never even heard of that. No. T. So TCL, if you were to go on Amazon 6 years ago and buy a TCL TV, they were the worst. They were like pretty maybe 10 years ago, they were junky TVs, but you get a 65 in flat screen TV for like literally $200. And over I'm like a gadget nerd.

And so over time, TCL is now a baller TV company and you could still get a 65 in highest def fanciest TV for $200. It's I don't even know how this is possible. And I've always thought about this strategy of like Asian businesses and I've noticed I don't know if it's particularly an Asian thing or because I he referred to Asian car companies now I always think of it that way. They'll offer something where like the quality is so so but just good enough but over time like it's sort of like Hyundai or Kia or Genesis like particularly you know Asian car companies that's how I think of them is they're kind of like crappy at first but they just get so much better and then the prices stay the same.

What I like about this is it's the opposite of the normal white guy referencing Asian culture thing where normally we take these like amazing Zen practices. We're like the Japanese use the word kaizen for the continuous pursuit of perfection and that's what we do here at our company or it's like wabishabi the beauty and imperfection. It's like always like these like high and mighty things that like we're borrowing and he's like we use the the term huntification where you start with [ __ ] and it stays [ __ ] for quite a while but eventually the [ __ ] becomes a little less shitty and that's what we do.

It's like the first honest white guy like we give him award for like he's doing all of the like the tone and the hand gestures but he's just saying the truth. truth. truth. And we didn't stop there. We took the [ __ ] that we had and the year after just a little bit less shitty because they they don't know the difference. And we told there should just be like a whole service just like honest business translation, you know, like Google Translate, but just like corporate translation. And it's like take any company, put their mission, values, and earnings calls into this the generator and it just tells you the truth.

Yeah, Yeah, Yeah, that's so funny. Uh, one of the greats, Kevin Ryan, probably no longer a fan of the pie. the pie. the pie. No longer friend of the former friend of the Kevin Ryan. Told you that in confidence, Sam. Um, there was a statute of limitations on notes, by the way. Uh, once it's been 10 years, I could talk about it. So like anything that happened it or you know from pre 2016 I'm allowed to bring it up. up. up. All right. So I was nerding out on something kind of related.

So I'll segue to that. So um you were talking about how for the TVs thing they're like they charge 200 bucks and at first it's kind of a shitty TV but eventually it's kind of a great TV but still for 200 bucks which is different than I would say most companies which assume you know over time the goal is to raise our prices increase our margins increase our profits. So I was studying this investor called Nick Sleep and the short version for those who weren't there.

Ever since you brought him up, I've been on him. on him. on him. Yeah. So you know his story in short is he was an investor basically raised money was an investor about 15 years average more than 20% compounding billions of dollars. He won the game shut down the fund and moved on. And most of the fund was concentrated in three positions Costco, Amazon and Berskshire Hathway. For the longest period of time he was just holding those. And so the interesting part isn't, oh wow, here's a guy who picked right.

You know, it's kind of like, oh, I'm the lot I'm interviewing a lottery winner to ask how they how they guessed the numbers. Like this is his daughter's birthday. It's not not really that. It's if you ask what is Nick Leap's philosophy, his core investing strategy. He had this idea of consumer surplus. So his his main realization was look, there's many ways to invest. Uh you could do what Buffett and Ben Graham were trying to do which is buy a company that's trading for less than it's worth or you could look at some of these companies that today look overvalued like Amazon at that time in you know the 2000s is like wow this thing's got a crazy price to earnings ratio and he realized that the best predictor of long-term value for him was something that he called shared scale economies.

All right so what do those mean? So scale economies is usually when let's say you're Amazon, you have a large customer base, you're able to open warehouses in a bunch of different places and you get what's called economies of scale, which is that over time your cost to serve each additional customer go down because you've you're serving so many customers, you're able to like almost like amortize the the investment cost across a large customer base. Now what he what Nick Sleep identified was called shared uh economy sales.

sales. sales. Was that a word that he did he make this up? up? up? Yeah. So he I don't know if he made it if he invented it, but he was the one who really who really who really Yeah. he really bet on it and he really like made it the foundation of his investing strategy. So he realized like let's take Costco. So Costco's goal is to basically get economies of scale, meaning they buy in bulk. They have tons of locations. So they have a lot of pricing power.

They're able to buy things in bulk at cheap prices. And instead of what most retailers do, which is they buy wholesale, sell retail, right? They buy cheap and they sell it at a markup. Costco's goal was to make the markup as small as it could and pass all of the savings of buying in bulk to the customer. So he did the math and he realized like, okay, let's say that a Costco membership Costco membership Costco membership costs $100. Let's just use round numbers, right? And he realized that if for the average person who shops groceries at Costco, they're gonna save on their grocery bill, let's call it $1,000 a year on just by buying Costco because Costco's passing on all those savings of buying in bulk to the customer.

So the customer saves $1,000. They spend $100. And so the surplus that they they've generated this $1,000 surplus and then they're only charging $100 for it's a no-brainer proposition. and they basically take the So what what happens is instead of increasing their prices and increasing their their profits and increasing the money to their shareholders, they pass the profits to the customer which makes a juicier value proposition which attracts more customers which gives them more scale which allows them to create even more surplus. And so what he realized was that the companies that would do this that would start early on and pass on the the savings to the customer, they would run away from the competition because they would have such a such a juicy value proposition, they would build so much trust with customers and have such a incredible offer to the customers that they would pick up all the customers.

And so Costco for example, they make no money essentially on any of the food that they sell. They make all their money on the membership, which is like pure profit is the membership uh cost. How much um so I'm just looking this I I knew that they were it was a baller stock. It does 300 billion a year in sales. How much in uh subscription in the membership sales? Do you know? Five billion. Five billion. Yeah. So So what he realized at that time was he said, "Wow, everybody just looks at I think let's just say it was a billion dollars at that time." He's like, "When a traditional analyst will look at this company, they'll just see a billion dollars of profit.

But what I see is 5 billion of surplus that they're passing on. And they passed on 4 billion last year, 5 billion this year. It'll be 7 billion next year, 10 billion the next year, and they're just going to keep passing on so much surplus that it's going to run away from the competition, and it'll create so much trust and so much loyalty that they'll never have any problems attracting customers. And so, he's like, that's an invisible metric that doesn't show up on the balance sheet.

It doesn't show up on the P&L. You have to sort of manually calculate the shared economies of scale, how much of the surplus they're giving to the customers. And if you track the growth rate of that the you what you want is companies where that growth rate is increasing. He said Amazon was the same way for 20 years. Bezos basically did not try to extract profits. He just reinvested all the capital to give people wider selection, faster shipping, and lower prices. And he realized that every year they're investing more money in giving people wider selection, faster shipping, and lower prices.

The three things that consumers care about the most. And they have the Prime membership just like the Costco membership. And so he invested heavily in that. And I just thought, "Oh, wow. This is like a pretty brilliant insight, a way a way of looking at businesses that I've never thought about." thought about." thought about." Yeah, that's actually it sounds stupid, but that's sort of like a I don't know if I need a lesser word, but a groundbreaking like stat, you know, that's that's like a that's actually very interesting.

I've never ever have heard of a company that measures that like just how much savings we are passing on to you. That's pretty interesting. But who else does that? You you have to do it with a company that's huge and where mass appeal or mass and then you need like a membership, right? like a prime thing. Well, it doesn't have to necessarily be a membership. There's other ways to do it, but you know, the two biggest examples he did was the membership because it's the beautiful way to monetize, right?

It's like I'm going to give you so much value in the thing you're buying that giving me a annual me recurring revenue membership is a no-brainer for you. And that's what Prime is. That's what the Costco membership is. And so, it worked out beautifully for in those two cases. But it's not it doesn't have to be that it's just that. So for example, like I was talking to AI today and I was trying to say like well what other study other companies if there's these thousand companies which other companies would Nick Leap see as having a high surplus and how would he look at it right and so it's it's a AI is not great at doing analysis like this but one of the examples it brought up was uh was SpaceX and basically it's like look SpaceX is going to lower has been it has already lowered the cost to orbit by 100x so it's it's reduced its cost by 100x but it didn't keep the prices to the government or anybody else.

It also lowered it passed on the savings to the government, which is why it now takes like 80% of all payloads. It like it took all of the the business. It took all the market share by doing that. And they're trying to reduce another 100x and they're putting up all these satellites and they're trying to again pass the the the savings on to to the subscribers for the for Starlink internet. And so here you're going to have again recurring annual membership, a no-brainer value proposition to a mass market of people.

Everybody on Earth wants the internet. And they are getting economies of scale because as they improve their their uh launch costs and their launch rates, they're not going to raise prices. They're going to pass it on and they're going to create a membership. So it's like SpaceX would be in a weird way like again same thing as Amazon today looked at as highly overvalued but potentially undervalued if you if you could figure out how to measure the surplus and see that the rate of the surplus was growing every year.

Um you it might look like one of those businesses. Now I'm not again I'm a noob at this stuff. So like I'm just sharing kind of like my beginner my learnings with this just with you. I'm not saying that this is is or is not the case. It's not financial advice or anything like that. But I do find this idea to be pretty interesting. It's an idea I hadn't really heard popularized before. before. before. This guy is so interesting to me. He's he's got everything that I want.

And uh does he have like long hair, nice calves? calves? calves? Yeah. Like he you Google his name, beautiful he's got a beautiful set of hair and only one photo. If you Google him, it's the same head shot used for everything. everything. everything. Nick Sleep, come on the podcast. I mean, how many times are you going to let me podcast uh make out with you before you just finally get on here? Okay. Yeah. Do you want to break decades of being anonymous? being anonymous? being anonymous?

Come on. Come on. Come on. Uh there's literally only one photo of them. I'm for real. Um it's like uh I got to this hotel and I paid like paid like paid like disgusting amount of buddy, but they had free snacks when I walked in and I was like honestly love this place. Great value. They gave me this they gave me like, you know, cake pops for free when we walked in. This is incredible. My kids are so happy. And I feel like that's our pitch to Nick Leap.

It's like, yes, you've been anonymous for 20 years and you value your privacy and you've turned down uh, you know, every opportunity under the sun, but we got peanuts and snacks. If you want to come on our pod, it'll be great. He uh he's 58 years old. He's he's not old. This guy's cool. There's an article um called How to Retire at 45 and it's about him. So, I guess he's taking it easy. But, I would love to have this guy on. That would be so fascinating.

Him and Paul Graham. just there's something so mysterious about people who who claim uh I've had enough and they like opt out. I I think that's interesting. Um well, one of the other takeaways real quick is you only need one or two, forget the word insight, I'll call it secrets in the Peter Teal terms, right? You only really need to understand one or two secrets in your lifetime to become fabulously rich. And this is one of them. For example, I think Peter Teal did this with uh network effect businesses.

So understanding you know PayPal, Facebook early on and just understanding like the power of a network effect and how unbreakable those those monopolies become. And then you know the other uh you know another example is you know Buffett for example he doesn't invest in network effect tech companies or or anything like this. What he looks at is what's not going to change and he's basically like the moat which is the pricing power. So you he gives an example of I don't know if you s saw this exchange but Elon was talking about how lame moes are.

He's like a I don't like the idea of moes. If you need a moat, that's lame. You should be innovating faster than everybody else. That's how you win. If you think a moat is going to protect you, you know, that's not what protects you. Fast innovation protects you. This is Elon. You're like, you're like, Elon, I don't think the word moat means what you think it means. Uh cuz you definitely have a moat. Buffett replied and he was like, I don't know. He's like, let's say you go to a corner store and you ask for a Snickers and they say, hey, I got a Musk bar for for 10 cents less.

He goes, I don't think anyone's buying the Musk bar. And he's like, "In fact, if you go test this, if if one place doesn't have a Snickers and they have an unbranded, unlabeled um chocolate bar with with peanuts in it, but the place across the street has a Snickers bar, the customer will just walk across the street and go buy a Snickers." And he's like, "So, yeah." He's like, "I I look for Coca-Cola, Snickers, you know, Gillette, American Express. I look for these brands and franchises where you'd have to pay someone to switch and even then they they wouldn't want to." Um, he's like he's like that that was his core insight of like you just need to find these great American franchises and invest in them.

Did you see I want to bring up a person who we talked about somewhat recently but we didn't dive into, but really quick. Did you listen to the Lloyd Blankfine interview that we did that I did with uh and he talked about like his family finances and stuff like that? No, I only I've I've listened to the first five minutes but I'm on vacation so I hadn't hadn't had time to like get my phone and uh and listen to it. Why what what did he say about his family?

By the way, did you know this guy before? Am I dumb? I never heard of this person. And then you were like I knew of him all about this guy suddenly. Well, when you and I were younger, probably in high school, uh that was like his peak prime. And so like during the the the So you knew him back then or only now? I I knew him as a famous like he was like the face of banking. He was like the Jamie Diamond of '08 particularly when um when um when um Occupy Wall Street was a thing.

He was like the face of evil because like the name Goldman is like and and and there was this funny line that he told me where he was like, "Yeah, they like protested outside of my house and everything." And I was like, "How does that feel?" He's like, "Well, two things. Like one, like go and try to get a mortgage from Goldman. Like you can't." So like I didn't cause the mortgage crisis, so I don't know why they were so angry at me. And second of all, they, you know, were camping outside of my house protesting, but like that's a door metaphor.

He's like, I shouted out from the window on the fifth fifth balcony in my house. We wouldn't give you a mortgage even if you tried. you tried. you tried. That didn't seem to help. No, dude. He was super likable. He was so charming and charismatic. Basically, Lloyd is um I like you could look up his career earnings at Goldman because when Goldman went public, he was like 43 years old. And I think at that time his he told me uh his shares were he told me uh his shares were worth like $160 million.

And this was when he was 42. He's 72 I think now. So 30 years ago. And then he the course of his ear his earnings are all public while they it was public. And it was many many many hundreds of millions of dollars a year. And so presumably I would have to imagine he's worth like two billion plus. but he grew up in a poor Brooklyn family and he somehow and he's very self-deprecating. His father was a post office worker. His mother, I think, was a stay-at-home mom.

He's like a pretty like he calls himself the bluecollar CEO. And he was like, "I wasn't even that smart, but somehow I got into Harvard and they paid for my school." And he's like, "One time when I went to Harvard, I had to go to the like the office or whatever they call it, the the financial aid." He was like, "I don't have any money to eat. Like, can I please have money?" And they're like, they gave me $500 back then and it like changed my life because I had food.

And so he goes to Harvard and he uh gets a job as a lawyer. He's like, this sucks. I don't want to do this. And so he gets a job at a rag tag like subsidiary of Goldman. And he's like, I don't even know what Goldman is. I don't know what banking is, but they thought that I was this like hard-nosed bluecollar guy who went to Harvard. And they're like, you check the boxes. Because he um was a commodities trader at this little like ragtag group, which at the time was considered a very lowbrow thing.

And so he slowly over the course of many years worked his way up to eventually become partner and then CEO of Goldman. And when he was in my office, he had this very bluecollar vibe where I could tell that he it was it felt very authentic. He like looked me in the eye and like knew how to like riff on like silly stuff, but also I'm like, "Dude, you're like acquaintances with Putin." Uh like you know, like he's like like I could see my see my see my in your phone as Puty Putty call.

Yeah. Yeah. Yeah. Like I could see how this guy is charming and how he worked his way to the top. And can you imagine being the shark in the sharks? Like how how much how insane it is to work your way up at Goldman amongst all the sharks and become the CEO? Can you what does that even take? Like that's sort of mind-boggling level of difficulty. Like I know people that that have made more money just building a company, but that's actually not as hard as playing the the the like corporate game inside Goldman and rising up amongst all those kind of like corporate sharks.

He he's wild, but he he came off I like during the podcast I told him I'm like, "Man, you are making Goldman seem likable, which like is not easy. Like you're making it seem relatable and likable. That's a very hard thing to do." And for some reason after talking to you, I'm like, "Oh, I can do this even though obviously I can't." He told this story. I I asked him about personal finances. I was like, hey, who how does your personal finances work? Because he told the story about how he grew up poor and he's still cheap.

He was like, I buy the is there like a cheaper tier of Netflix that has ads? He's like, I won't even pay for that. Um I do the cheap one because there's something about it that like because I grew up poor, it still bothers me. He was like when I uh he he said um I I think he said 80% of his net worth is in public equities of which 90% of that 80% something like that he still day trades. And he was like I day trade.

I'm obsessed with it. I love the game so much and I want to check my phone all the time but like when I do research on different stocks I'll get to like um a Bloomberg publication or Wall Street Journal or something like that and I don't buy the subscriptions because like it kind of hurts me to like pay for it. And I just thought that was incredibly fascinating to hear like how a billionaire manages their finances. How a billionaire mismanages his finances is what I heard.

Well, he did the right thing. None of that makes any sense. The the the top I wasn't there so I could talk [ __ ] If I was there, I would also be like blushing and saying how great he is. But, you know, just hearing it from the outside just to be the outsider for a second. You're day trading a billion dollars while not paying for Netflix cuz you you're cheap. Like I don't even understand what you're talking you don't pay for for for you know premium news.

The point being it's not a logical thing but it was like he was kind of like saying like here's all like how I messed up just like the average Joe. average Joe. average Joe. And uh it was so fascinating. And at the end of the interview did I tell you what I try to do with him? I was like hey like I'm I have this like Instagram. Do you want me to like I was going to do this this this secret handshake. Well, I was like, I I was like, I have an idea.

Like, um, I can like act like I'm reviewing your book, and I'll just be like, ah, screw it. I'll just bring Lloyd in. Lloyd, just tell him what your book's about, will you? And he was like, he goes, I'm too old for that stuff. I'm not acting cute on Instagram. That's the most likable thing you said so far about him. I was like, oh Lloyd, it's not like none of the like billionaires, they're just like us. But just that one of like, I'm not going to do that.

I was like, I wouldn't describe it as cute. I mean, it is cute, but that's a it's more like fun. You don't like fun? He goes like, "That's too cute, dude. I'm not doing that." And I was like, "Yes, sir. "Yes, sir. "Yes, sir. I'll walk you through the elevator." Yeah, Yeah, Yeah, it was pretty good. But he was fascinating. Um, and then another guy who we had um a guy on the other name, Barry, who talked about David Rubenstein. Had you ever heard of him before David or Barry told you about him from Carile Group?

Yeah. Do you know anything about this guy? guy? guy? Yeah. uh only only surface level stuff. Yeah. Yeah. Yeah. I I want to fill you in on a little bit about a story because I've actually always been a fan of his, but I mostly knew him as an author of history books, not particularly of like a business guy. And um I was researching him. It's pretty fascinating. And he's kind of like my new man crush a little bit. He kind of like got his foot in the door because when he was in his 20s and 30s, he uh he was a lawyer, but he quit being a lawyer because he wanted to work for the Jimmy Carter administration.

and he like made a joke where he was like when I joined Jimmy Carter he was up by like 31 points and then he eventually won by one point and Jimmy Carter went to David and was like so what contributions did you make? Uh and so he like had like this kind of like funny um self-deprecating humor, but he like worked for Jimmy Carter and it eventually Jimmy Carter was a one-term president. He doesn't get it re-elected. So David Rubenstein, he's 31 years old. He's like, "Well, what do I do now?" And there was this amazing article that I found written by Michael Lewis.

you know, Michael Lewis, the the famous author, he wrote this amazing article in 1993 1993 1993 called The Access Capitalist, and it's a 10-page or so article written about David and it's from a while ago and and I love that. And he said um David got his um start using what people are calling the great Eskimo tax scam of 1987. 1987. 1987. Tell me more. So, the story is is basically David had this amazing rolodex. He was really wellconed in Washington DC. He was known as being likable and like a really good networker and reliable.

And so he just like knew a little bit of everyone. And so he's out of work at the age of 31. He's like, "What do I do now?" And he hears about this like weird tax loophole where uh if you were a native of Alaska, you were given a certain amount of tax loss losses automatically. I I don't know why. I think it was like to incentivize people to live there. And so what he did is he organized a bunch of buyers and sellers. Meaning if you wanted you could they could sell $10 million in tax write-offs to willing buyers for $7 million in cash.

And thus the buyer got a reduced taxable income of $3 million. And David like heard about this and he's like that's interesting. And so him and a couple friends organized roughly $2 billion in these like in like or in uh transacting these tax losses. And after doing that for two or three years, they had made something like $20 million. And that's the money that they used 3 years later to eventually start Carile Group, which is now one of the largest PE firms in the world. I believe they have $500 billion uh in companies that they own.

And David was like, I thought I had a pretty good IQ myself, but I was seeing a lot of people make a lot more money than I was who I thought maybe weren't as smart as me. And so I decided to try this PE firm. And so he raises a little bit of money, uses the money that they made from the uh the the tax saving scam. Scam. Sorry. No longer. I guess he just canceled his booking with us. Scheme. Scheme. Never friend of the pod.

Sche. I meant to say scheme. It was cold outside. him. It's the same scheme and he used this thing and he started in the PE business which at the time in the 80s was like like just killing it like it's felt like that's when all the big PE firms were built because this idea of a leverage buyout was brand new and so he raised a little bit of money and he like did a couple deals. It didn't really particularly work that well. I think he said his first deal that they tried to buy was a Mexican restaurant called Chi-Chi's.

And he's like, "Yeah, like it wasn't going so hot." He went from the Eskimos scam to Chi-Chi, right? Chi-Chi, right? Chi-Chi, right? Yeah. He's like, "Not doing so hot." But then he had this idea where he was like, "Well, like I know everyone in DC and I know that like a lot of jobs in DC are pretty cyclical. Like after four years, you're like quit and you're like, "What do I do?" And I know a bunch of interesting people. And I know those interesting people know a bunch of interesting and powerful people, but you don't want to like sell access to these people.

That would like be borderline unethical and sometimes illegal. And he's like, well, what if I just like got all of these like powerful people who no longer have jobs at the government to come and like work at this PE firm and we start or when we start buying companies where it would help to have like friends in government so you can get meetings to like big powerful companies. And so Carle eventually specializes in defense contract style companies. Um, and so that is sort of how it took off.

But the more interesting part about all of this is what he's done while he was building the company. So he has like five or six books, which is how I've met him or know of him. So he's got a book called like the American stories about like where he just interviews mass um historians. He's got a book called How to Lead, the American Experiment, How to Invest, The Highest Calling, which is conversations about different presidents. He has a show on Bloomberg called the David Rubenstein Show.

He's got u Yeah, that's what I've seen. His interviews this amazing thing. But listen to this [ __ ] He owns all this amazing stuff. He owns one of the um I think it's one of the last privately owned copies of the Magna Carta, which is a historical one of the most like historical documents of all time for $21 million. He bought it. He owns one of the last pieces uh one of the last uh bits of the Declaration of Independence. He owns a Lincoln signed Emancipation Proclamation.

He uh funded the Washington Monument when it needed to get rebuilt. He funded the Lincoln Memorial when it needed to get re rebuilt. He funds all these amazing things. So like the Kennedy Center he helped do he helped produ he helps produce a lot of Ken Burns documentary. He funds them. He's just like this crazy guy that does all of this interesting stuff and and his side hustle is basically like buying these documents, meeting the people who are like around the documents, writing books about the documents, becoming bor on the board of the museum in which he loans the documents to and he just has this like crazy like crazy like crazy like that's fascinating.

I mean, that's an epic shutoerie board career, you know what I mean? Like, just a little bit of this, a little bit of that. They work well together. You know, he's kind of like the white knight of Washington DC. I kind of love it, you know? Like I I always love people who are not sort of onedimensional in the way they operate. You know, the onedimensional people I appreciate for their laser focus and obsession, and I take inspiration from it, but I don't take guidance from it.

You know, I I take more guidance from people like this who I think have a more interesting, varied career. Personally, I I find that like just really compelling. compelling. compelling. I love this guy. Google or go to his Wikipedia page and like look at the things that he's contributed to. I I mentioned just barely any of them, but it's like it's like it's like David Beckham's wisdom teeth. We just play a game things, you know, two truths in a lie. Rubenstein's collect collectibles. collect collectibles. collect collectibles.

Dude, it's a it's so awesome what he does and I just think that guys like this are really cool and he's actually coming on the podcast um in August and um so you know, sorry Dave, I didn't mean to insult you if I mean to I didn't mean to insult you if I got any details wrong, but um he's coming on. Okay, I'm so excited now. That's amazing. Yeah, it's amazing. I think that he's been doing this kind of like baller giving philanthropic stuff and like history stuff.

I think he's been doing it along the way and not just like in the end of his career, which I find really fascinating. and he like makes this joke where first of all he says like my whole shtick is I love self-deprecating humor because it disarms people and like he's kind of like a a self-deprecating guy which makes him very likable but he was like I'm not really like that good of an investor I just like work pretty hard and I know kind of everyone and I'm pretty good at connecting people and I also have really good business partners who helped me start carile and that's one of the reasons why it's the way it is and I thought that was really fascinating.

fascinating. fascinating. I like that a lot. It it also sounds like he had a, you know, a cool second act to his career. Maybe a second and a third act uh to his career. Can I tell you about a a business that I think is really cool that is someone's second act? And I think you know I think you know the person but I I don't know how much time you spent thinking about this business. And so, um, the business is PSA, PSA, PSA, and PSA is, if you ever want to go buy a a rare, uh, you know, Charizard, well, you'll want to know the PSA grade of that card.

And this guy on Yeah. So, Nat Turner bought this business. And Nat Turner, I think he I think his last company was like in healthcare or something. He sold it to Ro. And he's always been a nerd, a collector. and he raised some money and he took private or he bought uh this company. I think it's called Collector's Universe or something like that. They own PSA and I just found this category of business to be pretty fascinating. So, let me let me tell you a little bit about this business.

Here's here's one way of of looking at it. So, it's a business that controls something like 70% of its market. So, absolutely dominant in its market. They have $400 million of orders just sitting in the queue. queue. queue. Haven't even got to it yet. 400 million. What? What? What? If I'm wrong, we'll fire a researcher. But that's that's what we have here. have here. have here. Cancel your cla subscription. Don't give Claude a nasty talking to um basically they they just they've dominated this space of uh of grading cards.

And if you think about what that is, the broader category of problem that they solve is something called credence goods. And so I was kind of nerding out on this and what a credence good is basically it's a good that even after you've consumed it, even after you have it, you still don't really know the quality of it. So like medical care is a good example. You have surgery. Oh, how'd you like your surgeon? I don't know. I have no idea. I have no way to assess the efficacy of my surgeon if they were if they were, you know, I could probably tell if they're terrible, but I can't really tell the difference between good, great, and world class.

And the same is true and same was true for collectibles. So, let's say somebody had a original, I don't know, Sammy Sosa rookie card and the big kind of home run boom was happening when him and Mark McGuire were hitting a bunch of home runs and people were buying up these cards. And the problem, you know, the problem uh without a third party, a trusted third party here is that one, you know, the owner says it's in excellent condition and then they show it to a buyer and the buyer says, "I don't know, it seems fair." and then the buyer owns it, then he says it's mint condition and there's ar all this arguable uh and you don't and that's just the condition let alone is it even authentic.

Is this real? Was this actually a first edition? Is this a second edition? Does this actually have this? Does it have actually have that? And so you need third party trust in these systems where there was no structure. And so coins was like this, cards was like this, Pokemon cards, sports cards. And so there was this like entire like industry of in of uh collectors who were very passionate but it had no structure and it needed third party trust and this exists in many industries. So for example if you ever go through an M&A process you'll have to go get a QoE or you'd have to get a a third party audit.

you know, Deote, Ernston Young. Um, they built built multi-billion dollar businesses just doing an attestation, just saying yes, this company's financials are sound so that the seller and the buyer can do a trusted transaction because the buyer knows that they don't have to go and verify themselves that the the company's uh books are actually what they say they are. And so attestation um credentiing these are are huge businesses that are just some of the most beautiful business models because you become a basically a trust tax on an entire industry.

You don't have to be the best buyer or seller. You don't have to own anything. It's super capital light. All you have to do is become the trusted third party and that's hard to do but once you do it it's an incredible position to be in. And I think what Nat Turner did buying this company is absolutely brilliant. I think they bought it for 800 900 million. This is going to be a multi-billion dollar company because being the dominant market share and there's a network effect, right?

Like if I have a card that I think is valuable, am I going to go to the third rate greater because I can save a little bit on my on grading my card? No way. I'm going to go to PSA because if it's PSA certified, PSA 10, that makes my card more valuable. And so the trust sort of compounds and it becomes the known unit of account on the street. just see everywhere you go. You're just going to keep seeing PSA, which means when you need to get your cards graded, PSA.

And then they add it on top of grading. They have a vault. So they store a million cards in their vault cuz they're basically like, you know, a hybrid. It's like, you know, one part Moody's where they're they're grading a asset class. And on the other side, they're Fort Knox where they have this giant vault storing a billion dollars worth of cards or whatever it is in their in their vaults with this business. So I'm just looking it up. So, like it's called collectors.com now. It's like a it's like a portfolio.

I think they own like um the ones you mentioned plus like three or four other ones. And the like they have this cool Jackie Robinson card um like on their photos and it's created by Topps Topps cards when I was a you know I bought so many of those and Topps is owned by fanatics because it's not like a regulated thing. It's not like money or gold or anything like that. What's to stop fanatics from making more? Like it's not like a limited supply. Do you know what I mean?

And it's not like is what stops them. So So yeah, it is a limited supply. If if TOPS can't be trusted to not flood the market with more cards, people will stop buying TOPS. The more supply there is, the less valuable each card is. So Topps has an incentive to control the supply tightly to manipulate the supply artificially. And so Topps has an incentive to do that. That's in line with the incentives of the buyers and the holders cuz they we need they need scarcity for this to be valuable.

And then PSA sits as a layer underneath both which basically grades and authenticates that this is this is real. It's not a fake card and that it's it's in good condition and it's valuable. And they also because they see so many cards, they know the absolute scarcity. So they know how many of these cards really are out there circulating in the market. They know the liquidity of each card market. So there's like a market cap there's like a market cap for like Charizards. There's a market cap for uh Jackie Robinson cards cuz they know how much how much liquidity there is, how much circulating supply there is.

They know the the relative value of a card because they know, wow, this is in mint condition versus this is in good condition. And so they're all kind of in cahoots with each other and in a way that is symbiotic. It's sort of like um have you ever like seen how McDonald's does the the like Monopoly game? Like the way the Monopoly game works is there's only like four or two winning pieces and like they guard it like kind of like crazy. Although they were scammed once.

There was a whole documentary they were like one of their like janitors. Yeah, Yeah, Yeah, they like took them. And they like took them. And so it would be very interesting like they found the like the corner of the office where they kept them and they're like, you know, yoink, it's mine. I would have loved to know like uh when they're making these cards, they must know in advance which ones potentially might be valuable and how they place them in a pack cuz they're just like in little like bubblegum like $5 or five packs.

packs. packs. Love to see that. Yeah, dude. Nat Turner was 35 when he did this. So he had recently sold Flat Iron Health, I think that's what it was called, for I think like $2 billion in 2018. So he must have sold so I think he sold one company for $40 million when he was 23. Yeah, it was an ad tech company. I forget what it was called, but it was like a cool thing, whatever. He sold it for 40, I think 40 billion to Google.

Then he starts this cancer thing cuz someone in his family I think uh was sick. And him and his partner, I think his partner is Zach, they're like whipped smart. Like you could I could just tell by the way Zach is like kind of a feisty guy online and he like he's very sharp with his words where you see guys talk like this and you're like that's not someone I want to argue with because not only is he sharp, he's argumentative and he won't back down.

Yeah. He calls [ __ ] Yeah. Uh and so this guy Nat seems like a little bit more of a nicer version of that but still has it. They he seems so smart and wise at a very young age. I've been very fascinated by him as well. And I also thought when he did this I was like huh? like it was like totally like out of like that's and then you go to the website and you're like this is this is awesome. This is good for the soul.

I mean the the math on the just the queue alone, right? 14 million cards in the queue. The p the cost to grade a single card is, you know, 20 bucks on the low end,000 plus on the high end. Let's call it like 30 bucks on average. So 14 million cards in the queue times 30 bucks is 400 million sitting in the queue. It's probably more if you if you think the average cost of the card is higher. And so that's if that's just their backlog.

And by the way, this is one of the reasons he bought it was because there was a one-year wait to grade cards. He's like, "Dude, this is terrible." And so he bought it to try to modernize it with technology, with efficiency, with just intensity, and say like, "We have to be able to do better than that, and I'll take it public again once we've implemented like a more tech forward approach to doing this because you can't just have like a multi-year backlog and cards waiting to be graded." If you go to his Instagram, um it's called Nat Turner's Cards and it's just photos of him showing off his card collection.

Like he owns like what looks like a Yao Ming rookie colle like a rookie card and it's just him showing it off. This is so cool. I wonder what their office is like. This is awesome. The Yoing the Yoing rookie card just for some reason got me. Um yeah, I don't know. I don't know what their office is like. I don't know what they're I don't know what any of it's like. I just think this is kind of an amazing move. No, I've never met him.

I would love to have him on. I think this would be really fun to to kind of I also just think just think just think this is my my sickness, my disease is anytime I discover a great business model, the the envy in me is like, oo, how do I have one? I want one. And so there's a question of like where else are businesses like these or where could you build a business like these? And um you know, my brain goes into like human capital.

So, like how do you like for example, could I create a PSA grading system for the top 1% of Ivy League graduates? Like, could I basically score them in some way? Could I do this for sports, right? Just like they do with the combine and the NFL or NBA. Like, could you do this with youth athletes? Like, basically, where would there be an aligned set of incentives? the demand for it. They want to have structure and a sort of a scoring system that can be trusted by all parties.

And where's the economy big enough? Like, you know, collectibles was a big enough economy. I think it's like a whatever 10 billionish industry. It was big enough to support um the these types of revenues. And so, I wonder where else you could build one of these like third party trust, third party grading systems, grading systems, grading systems, dude. But there's also I mean you're you're you're just scratching the surface with different collectibles. So if you want to get really nerdy uh I'm part of like all these like vintage denim communities online and people will post.

Yeah. Look for tons of us. If if you're going to say this guy who's got an Instagram who's 38 years old dedicated to his magic it was cool when he did it but when you said it I felt differently. What? You don't like Lee Jeans from 1947? 1947? 1947? But but there are all these like they like they do this for purses. Tell me when you when you appreciate denim is it a like with wine you're tasting it with uh you know colog you're smelling it.

What what do you even do? Is it a feel? Is it a smell? Is it a look? What do you even look what what is the what traits do you even evaluate? The the premium the best stuff or the worst stuff. worst stuff. worst stuff. There's all types of terminology. You want to look at the honeycombs, which is the fading that's on the back of the knee. You want to look at the the back patch near the butt. You want to see, does this patch, is it made out of cardboard and paper, or is it made out of leather?

And has it shrank a little bit or not? You want to look at um are the are the copper rivets just a little bit green so you know it's real copper. Are they hidden or a famous pair like of jeans like the Honus Wagner baseball card or like the the rare Charizard? What is the most valuable collected denim? denim? denim? Yeah, so Levi Strauss was um invented um Levi Strauss was a man. He invented it in the 1800s to help uh gold miners in San Francisco.

So California and Nevada. And so if you can find it's called um uh buckle back. So where they have the buckle on the back to like it's called like a cinch. If you could find any of those in an old mine and assume that's and you you can date it to the 1800s, those could be worth 20 grand. Um, and so collectors, particularly Japanese collectors, love them. But then there's this whole subgenre of people who make reproductions, predominantly Asian companies, Japanese companies, they're the ones who make the best ones.

Japanese replicate American [ __ ] So good. I'm wearing a pair right now of Levis's. Levis's. Levis's. Stand up. Stand up. Let's see it. Let's see them. see them. see them. Look at this highrise. Give us a twirl. Give us a tour. It's highrise. Look at the roping. The roping. This is beautiful roping fades. That's what you're looking for. You're looking for that chain stitch hem. That's not made by a normal sewing machine. That's made by a union machine they don't even make anymore. You got to find you got to find hemming that.

Yeah. You got to find that cost $70 to get hemmed. Okay. You got to find that good good and it's actually quite challenging. Um, and so like a What is the most expensive denim artifact art piece you've bought? Uh, Uh, Uh, are you are you a buyer or are you just a casual? Are you a voyer? I'm a I'm a voyer, but I like $500 for like a a vintage jacket. Have you considered Have you been tempted to be like, "Ooh, 15 Sarah, do we need that 15 grand?

Do we need to go on vacation?" on vacation?" on vacation?" I have. So there's like um like a 19 a pair of 1947 Levis's that used like the green uh for the pockets because back then we were like provisioning out materials and so every material was green for the war and getting some of those real deal, you know, the real deal Holyfield ones. Yeah, I want those stuff. But my point is is that there's this whole subreddit dedicated to two things. One, looking at the fade of your denim.

It's called uh Reddit raw fades is what it's called. So it's raw denim that fades nicely. I swear to God, it's literally just photos and photos. It would be hard to make this up. It's beautiful. But I do know there's people who do this for other types of clothing which are far more desirable like purses. like purses. like purses. So, you're saying you could do niche PSA if you if you if you specialized in different uh clothing, you know, clothing and bags. Yeah. Denim is too niche.

Uh but like uh but maybe there's a long tale of things like denim. like denim. like denim. Well, particularly handbags. I've seen this all the time on handbags. uh like on eBay and stuff. Like I bought my wife like a vintage one for like two or three grand on and I'm just trusting the person's eBay profile that they have like five out of five stars. But yeah, there's like a bunch of like cool collectible like uh genres that are still really uh primed for some of this stuff.

stuff. stuff. Yeah. So, by the way, like I know it's amazing that like a woman has decided to marry me even though I'm still into this stuff, but stuff, but stuff, but we exist, guys. Oh my god. I Nat Turner. Um, obviously we are nerds as well. If you'd like to come on, we would love to have Rubenstein. Nat Turner, come on the podcast, guys. Don't we seem like a good hang? Look, we've we've insulted ourselves just as much as we've insulted you. So, it's like we're good.

Uh um that's something. You should wear um a white tank top more often. I think that it brings out something special in you. you. you. Should I just go skimpier and skimpier with each episode? I just saw the flex on the shoulders. Congratulations. Um, it seems like, by the way, for the past two years, everyone is commenting about on your body every single episode. That's great. Love it. Yeah. All right, keep it coming. Go to Spotify in India who is continuing to comment on how how how much better I look and how how I'm getting in great shape and it shows.

Keep it up. It's working. working. working. PSA is going to grade you. They're going to give you a they're going to give you a uh it's fine. Fair condition. Fair condition. Fair condition. Yeah, that's fair. That's fair. Um All right. That's it. That's a pod.