Why We Hate Agencies – Andrew Wilkinson on Burnout, Delegation & Building Tiny

0:00we hate agencies you know an agency is one of the most stressful businesses in the world because you know if you look at a software business or a magazine or any anything like predictable that has subscribers they just go like this right if you look at the revenue numbers usually they go and if they go down they go like this right they just slowly go down and an agency looks like this yeah they're very unpredictable i don't like that i don't like that you can be killing it and then a month later you lose that contract and the pipeline slows down and stuff do I love the

0:31business that I started for nothing that now does over $50 million let's say of revenue like it's a big business yeah I love that but do I think that I can easily go out and start five more metals no i've been following Andrew Wilkinson for the past 10 years and he's probably one of if not the most influential entrepreneur in my whole journey so after exchanging a couple of emails about audio quality on his video my business partner Luca told me "Look why you don't invite him over on the podcast?" I thought he would never accept but turns out 3 weeks later I was on a plane flying to

1:08Canada British Columbia and I was ready to interview him as usual the sponsor of this episode is MEA my own company we're specialized in design systems so the intersection between design and development the collaboration the processes the tools the Figma the story book and how to make a product look better but also how to make the team work better together we've been working for the most influential and top dogs in the tech scene in Italy and if you want to learn more the website is in English you can find more information down below in the description of the video with further ado let's discover Kosa which means what does move the needle what does

1:50have an impact is loosely translated like that for Andrew Akinson i am Julio and I'm glad you're here listening to this episode shall we start let's do it fantastic so thanks for being on this episode Andrew uh I've been following you for years at this point reading Medium blog posts and then your newsletter following Metal and uh so thank you very much for having me of course great to be here so one question that I always ask is uh how big is your company today like revenue side how many people are working in the group i'm talking about now how long have you been an entrepreneur

2:26now man I've been an entrepreneur for about 20 years um about 20 years ago I was working as a barista and these guys walked into the coffee shop and they would sit on their laptops working all day and I walked over them and I was like "Don't you guys have jobs?" And they said "Well we're web designers." And they explained that they would go into small businesses and they would say "Do you have a website?" If they said no they charge them 500 bucks and make a website and that seemed like magic to me and so I just didn't want to be a barista making $6 an hour

3:01i wanted to be the guy drinking the espresso not making the espresso and that's how I started and I never thought I'd end up here um today we own about 40 or so businesses i also have some other businesses that I own outside of Tiny in my family office uh we own everything from uh a newspaper to a medevac business to a social network to software companies agencies Aeropress coffee maker company uh big fans yeah we Yeah I I would hope so yeah yeah it's uh it's uh being an Italian we need to make sure that we get your approval um and I mean I would just say between all the things

3:41across everything around 300 million uh employees probably I don't know the exact number right now I think it's 600 to 800 somewhere in there from your book you described once as a miserable millionaire at some point so what were you chasing that then it revealed to be just a mirage when I was a kid my parents were really struggling financially my dad was a architect and his architecture firm was always two weeks away from going bankrupt uh he was constantly taking out credit lines and trying to make payroll and really having a hard go of it and so you know when I was a kid money

4:22was a four-letter word it was very tense in our house my parents would fight about it quite a bit and in contrast I went to school in uh one of the wealthiest public schools in Vancouver and so I was going to school with all these very wealthy kids and they were living it up you know they lived in beautiful homes and they would go to Hawaii for Christmas and their parents drove new cars whereas my parents drove you know a rusty old Volvo that was 15 years old and so for me that contrast really spurred me i felt it's a it's ridiculous because I grew up comfortable

5:02like we always were fine and we had food you know there's no Charles Dickens story here you have the contrast here yeah there's a contrast and I think um you feel as wealthy as your five best friends right when you compare yourself to your five best friends or the houses on the block you live on and so I felt very hard done by and then my parents because they would fight about money and money was so tense i just wanted everything to be okay so my solution to that is make a lot of money because if I make a lot of money then everyone will stop fighting and everyone will be happy

5:33and at some point too regarding this I think you refer that you were seeking uh leverage a lot and now I feel at least from what I read on the book that you kind of looking for for longevity for kind of like a stability feeling so how your enough uh definition changed and matured from the book today i think everybody I talk to no matter what scale they're at always says "I'll have enough when I have double what I have right now." So you ask someone who's making a h 100red grand a year they want to make 200 grand a year you ask someone who's got 10 million they

6:12think if they just have 20 million and so and I've met you know billionaires who still feel like they need more um so for me what I noticed is that you know I too was on that treadmill where I just no matter what I mean even even now after writing the book the other day I was stressing about some money problem and I remember I was sitting um I went I was had this really crazy busy day yesterday actually where I flew to Vancouver and I didn't interview and it was just really stressful and I was I'd woken up at 3:30 in the morning for no reason so I was just

6:47really down and I Yeah it's it was yeah crappy day i feel great today um but anyway so I I get back and I'm sitting in my sauna at home just trying to like regenerate before the kids get home and I was looping on this thought of oh I got to solve this problem otherwise this thing's going to happen in the future and this business needs you know I got to do this or whatever and I I stopped myself and I was like oh my god i remember I felt this exact same feeling a year ago i felt it five years ago i felt it 10 years ago i felt it 20 years ago and if you'd gone back to myself 10 years ago and said

7:25"Hey you know 10 years ago I'm running maybe my businesses are doing 5 to$10 million of revenue." And you went back and said "Well now you're doing 300 million and you're doing dozens of millions of EB da and all this other stuff." I would be like "Oh everything must be fine i must be good." Um and the reality is that you know when you talk to people and they say "I need to travel." They always say "I need to travel to Europe." I don't know where people from Europe say this they need to go to Bali or something discover themselves right yeah we usually discover oursel in India

7:57or Australia Italy for some reason totally and and so everyone thinks they need to go somewhere else and so I think the same is true with money and success like people think they need to go to this next level but when they arrive when you go to Bali your brain comes with you your anxiety comes with you your all your physiology comes with you and so I don't think that um that's a solution and so for me it's been much more about discovering um a you know some of my own issues and doing therapy i did ketamine therapy which was really really helpful for me um and actually medicating myself

8:32like I started taking uh SSRI like an anti-anxiety medication found out I had ADHD which explains a lot because I have so many different businesses and I love starting stuff um and treating those has been actually more meaningful than almost anything else so in a way knowing yourself was the ultimate hack to my girlfriend um she started tracking her period using a period tracker app and the period tracker app sends you these warnings and says "Today you might feel a little low energy m today you might feel a little irritable right here's what's happening your your hormones are changing or whatever and she was like "Oh my god it's so accurate." And for so

9:15long she had been building narratives oh like you know I feel bad because I'm stressed out because I got all these emails or I feel bad because I'm dealing with this problem but like she's started to realize like oh my god it's just that my body is pumping all these different chemicals through me and that's making me feel a certain way so I think for me the realization is more just I can't modify my external world i have to modify my internal world to actually feel better you went from building companies from scratch to uh buying them was there like a specific point when you realized I don't want to start new stuff from scratch m I think you know my first business was

10:00a digital agency called Metalab and what we would do for a living was make other people's businesses so someone would hire us to make an iOS app or a web app or or whatever and it would be a startup and I always wanted that for myself and so when I as soon as I could as soon as we were profitable I started starting my own startups and because I didn't know what I was doing I'd start anything you know I started a pizza restaurant i started a cat furniture business i started in an online DJ school dj oh right that's awesome that's awesome well now we own Sorado so that worked out well

10:39um but so so I started all these really bad businesses and I got lucky with a couple of them working but I found that for five to seven years or so after starting metalab I was starting all these businesses and it was just so miserable right starting a business and not having it work which when you start businesses one in 10 will work or two in 10 if you're lucky and so that's a lot of failure that's a lot of firing people that's a lot hiring executives and going through failures and shutting down businesses and losing a lot of money and I was doing it all with my own

11:15money and so after six or so years of that I had sold a business metalab was profitable but I was basically just burning all my profits um putting them into these money losing businesses and I remember I was on a hike with a friend and he's like "Dude you're miserable like you should just sell one of your businesses and relax." And to me it felt like somebody had said "Why don't you sell your firstborn child for liquor money?" Like it was just crazy unimaginable i think all founders kind of feel that right it's like your baby and eventually I wrapped my head around it and I decided you know what i would love to have security enough right and I'd love to be able to

11:58buy a house and buy a nice car and live it up a little bit and so I ended up selling one of our businesses and for the first time I had this big chunk of cash in the bank and metal was profitable and I realized I didn't want to run all these other businesses and so I shut them all down and I had this moment of reflection of just realizing like I can't keep doing the thing that's making me miserable and isn't working which was starting a lot of businesses and I was kind of resigned to the fact that I needed to go and learn investing and to me investing was something that guys in

12:33suits did like I had no interest is for bankers and those kind of people but I was like "Okay I have money i need to figure out how to what to do with it." And my dad had always had this book on his bookshelf called The Warren Buffett way which was the story of Warren Buffett and how he invests and when I read about him I was kind of shocked because most business people talk about how hard they work and Warren Buffett didn't work hard he did what he wanted which well he worked hard but he only did the things he loved and the only thing he loved was reading and buying

13:06businesses and very very high level business he wasn't getting involved in any of the day-to-day work and so here he was he's one of the wealthiest people on plan the planet and he'd just lie around on his couch reading all day talking on the phone to me that sounded pretty good as someone who'd been running businesses for seven years and so um when I read that me and my business partner Chris started rolling out similar strategies to what he does is and what he does is he hires CEOs to run all the businesses which was something I had never realized I could do i'd always felt guilty

13:38and felt like I had to run all the businesses myself and as soon as we did that we noticed the business had growing and so we decided let's go out we'll buy wonderful businesses we'll put in CEOs or leave the founders to run them and we'll just copy Warren Buffett in the 21st century i'm curious about your your thought about MATLAB as a compounding machine as opposed to a agency model that was kind of like burning you out uh do you think that MATLAB had a chance to become that compounding machine or do you feel that is reached its plateau and that's where he should be well I I would say that it could be both i can not enjoy running an agency and it can be

14:24a compounding machine i think the definition of a great compounding machine would be a business that can grow its profits every year but then can take those profits and invest them in a way that grows the profits even more that's true compounding the problem with an agency is there's nowhere to invest the profits you know you can't really go out and buy ads you don't really need a lot of money to hire people because when you hire people you tr pay you know you bill out their time you don't need a fancy office that's really stupid most agencies I find when they're profitable they go buy a really fancy office uh you know there's one that I know of where they had a basketball

15:02court in their office or they spin up um labs so it's like they incubate businesses within and that usually doesn't work so I'd say metalab um I mean it's a tremendous business if you look at our public filings it's a you can't quite parse what Metalab's doing but it's a big business and it's grown a lot consistently for 20 years so in that way it's a compounder now i don't enjoy running any business almost after about 15 employees um even 10 employees that's kind of my comfort zone um and so I've hired a CEO and we've got a great management team there um but yeah I mean I think

15:39you can have a compounder you just can't reinvest the profits in digital services businesses because it has like an organic growth and you can just buy more it doesn't need capital like when I talk to people and they're like "Oh I'm raising money for my agency." Yeah that's weird it's so weird right it's like go get your first client hire people and you're good right or or when I hear about people and they're like running an unprofitable agency and I'm like how like you're just your math is off like that just doesn't make sense it's usually people that care too much about the work it's a totally more than than the company people are artists sometimes yeah yeah i think you tweeted

16:16like couple of days ago about the ETH do you feel more a manager or an entrepreneur or an artist or a artisan and that's something that I think that becomes more evident with agencies because they're usually this very good skilled guy who starts something and he cares a lot about the quality of the craft so the problem I think I remember um arguing with my brother about this because he would always say we should have just kept metal adab small and you know the problem that I always shared is like how are we supposed to give people promotions you know if you have a five person or

16:56a 10 person agency that's great but you can never really promote people you can't really grow you if you can't grow your revenue in a digital services business without expanding the number of people there pricing taps out at a certain point and then what are you going to say to that 25-year-old who's working for you for 10 years hey I'm really sorry but we just can't give you a raise so you can't buy a house you know I think there are examples like Pentagram where they stay really small and they do very high-end work but there's only so many Pentagrams out there where you can charge a million dollars for a little simple logo yeah yeah it's a really hard trick to pull

17:32so we talking about delegating to cos and a lot of founders I found that they kind of like glamorize delegating but they don't actually doing so what made you actually stand back i think one thing I've noticed about a lot of people is that they're control freaks a lot of founders they love taking on more than they can chew i'm the opposite i'm lazy i don't like doing things I don't like doing and the moment that somebody else will do it I am so happy and so I struggled a little bit in the beginning with certain things that I loved here's the thing is like so everyone understands

18:16that like you should delegate like to a lawyer or to an accountant right it would be insane to be doing your own law work legal work or accounting work if you don't know anything about it and you suck at it but I think that's what a lot of founders do with most of the stuff in their business where they're like still sending all the invoices they're still uh doing all the sales even though they hate sales they're still you know uh they're still programming even though they're a bad programmer and I think for me the one piece that was hard to hand off was the stuff that I

18:48actually loved so for example I love design i my happy place is like headphones and back in the day being in Photoshop today in Figma but ultimately I realized that in order for the business to scale I had to stop doing that that was hard to say no to everything else I was so happy to not have to do it the moment that Mark stepped up Mark was my like college roommate who took over a lot of the day-to-day business early on once he stepped up and was like I'll be on the phone i'll do sales i'll fly to San Francisco it was a huge weight off my shoulders i was blissed out about that and I've

19:22always been like that i am so allergic to doing things I don't enjoy um probably because I have ADHD that I'm just happy to delegate those things i always say um I want to be teflon for tasks i don't want to do anything that I don't I'm not the highest and best person to do you don't sound lazy to me you sound like that you kind of like keep it as much as you can like yeah I'm doing it and as soon as someone at least from your story tells you I can take care of that you're like "Oh finally." I'm not don't get me wrong like I'm not like I am a lazy piece of crap i'm like I am

20:01lazy strategically anytime I'm doing something I don't enjoy I just get this feeling of just like oh I just I can't I don't want to do this could be anything could be simple it could be cleaning up clothes on the floor whatever i just hate doing anything I don't want to do and so if if you think about it that's kind of a lazy person right if you if that was your roommate you'd be like "Oh man this guy's super annoying." But when they're an entrepreneur and they win and their business gets bigger and they make more money as a result of delegating everything then it's a really good

20:33quality so in my personal life it's a harder quality in my business life it's a good quality yeah specifically about delegating what are the things that you look for when you are looking for for leaders or at the opposite what trades makes you instantly very cautious so when we hire most of the hiring I do at this point is hiring CEOs to run businesses okay what I'm looking for first and foremost I want to feel energized after I talk to a new CEO candidate i want to feel good if my stomach is a bit off if I've got a bit of a headache if I don't just you know it could be

21:11a great conversation but if afterwards I feel a bit off my gut's telling me something then that's a hard no stuck into that I also ask myself would I let them babysit my kids and if the no then it's like you know immediately obvious okay I shouldn't work with this person past that I'm looking for somebody who's already done the thing I need done so for example when we hired the CEO of Aeropress um Gerard who's the current CEO he had already built a huge consumer package goods business um for which uh SodaStream so he grew Soda Stream in North America it went from zero to hundreds of

21:51millions of dollars and in many ways there was similarities um and so I saw that and was like "Okay this guy knows how to do the thing we want." And then as I talked to him about what he would do with the business if we were to put him in charge I was nodding along and I find if I'm not nodding along with someone when they share how they're going to grow the business I can say actually you're wrong this is the right strategy so let's say that someone was let's say we're buying a software company yeah and the CEO candidate I was talking to said this is all going to be about

22:23enterprise sales but I don't agree it's actually all about marketing then that's going to be a misalignment because that CEO is just going to do enterprise sales doesn't matter what I say doesn't matter how much I try and push them they're an elephant and I'm just riding the elephant the elephant's going to go where it wants to go yeah especially if you're giving the whole company keys totally yeah so we kind of feel like in the belly most of it it's like does this feel right and if it's that if it's maybe it's a no yeah very hell yeah or no mhm how many people do you talk to to

23:01hire a SEO so we have a kind of a unique thing we do where we use a recruiter and the recruiter records the Zoom calls with people and so what I do what I used to do is I'd get on you know I'd get on the phone with six different people and then see who I liked what I realized is if I just have the recruiter record the Zoom video I can just watch the Zoom video and I know immediately do I like this person or not and if I don't like them I just don't talk to them and I would say really if I'm going to actually do CEO interviews I'm probably talking to three or four people at

23:35most um and I usually like to meet them in person if I can and but and this is the short list I guess but like the whole funnel of things Oh yeah it's probably 20 or 30 people but the recruiter is I I didn't used to like recruiters cuz I was like why would I pay someone you know $30,000 to go message a bunch of people on LinkedIn but now I've realized that it's worth having that broad swath of people and recruiters can be useful if they'll do the initial interviews and then record the videos i find that really helpful i read also that you struggle with accountability chart that kind

24:12of structure and also I I've read that you're into into EOS now so what do you what helped you move from like the 10 people unstructured chaos to okay no we need to make rules to our accountability chart to make things work so I would say like in the beginning there was no vision there was no structure it was me doing everything and then over time I started delegating to different people but I didn't really build a machine and I think the breaking the breaking point for me was um when I realized there was no process in the business and that everything relied on me um and around that

24:56time I read the E-Myth by Michael Gerber and in it he tells the story of a woman who loves baking you know and he says you know the woman loves baking and so she goes "Oh I'll start a bakery that'll make me happy." So she starts a bakery and you know cut to her she's covered in flour she's trying to you know deal with angry customers and ring stuff into the cash register and then she's running into the back to pull stuff out of the oven and she's been up since 2:00 in the morning and she's miserable and I felt that way i remember that idea was kind of shocking the idea that your

25:30business could be a machine that you don't have to actually be a part of the machine that you're the engineer you choose the right people you incentivize them the right way you give them process and that the machine produces something at the end and what I love about that mindset is that you can put whatever you want into the machine and something beautiful comes out the bottom uh that is very appealing to me i love that idea and so because you can peak the bars that you like most totally i can do only so for example with tiny you know I talk to our CEOs um which I love

26:07and I look at the numbers and I strategize and then I go and talk about what I do publicly and me talking about what we do in storytelling equals uh leads from people that want to sell us their business and then that goes through the machine and I'm you know I play a little role in some of the approvals and the diligence and maybe talking to someone along the way but I know that if I feed a great opportunity in the machine that profit and a great acquisition will come at the bottom so for me it's just been about extrapolating that and scaling that over time but if you again hear

26:43that is a way for you to pick what you prefer out of the whole things that the word offer and engineer a way to uh to make that work like a real job something that you can actually do dayto-day well without feeling guilty about it i think a lot of people because you feel that it's taken care of yeah i mean there's someone who loves doing what you hate there's there's always somebody who loves doing what you hate even sweeping like there's certain types of people that like cleaning there's people that like programming there's people that like doing law but I've realized like there's always somebody that would be so excited to do the job that you hate

27:25and so giving that person an opportunity is a wonderful thing if you can find them let's zoom out a little bit and talk about your mental models the way that you see the world so I know that you're a bigger fan of the the inversion concept from from mangar it's really what I found is that is a really easy way to discuss about things it's a simple concept but it's really hard to grasp in practice so do you have a moment where inversion really helped you like you dodged a big mistake or you sold something through inversion i don't know that I have an example in the business world

28:03actually it's kind of in the business world so yeah the idea behind inversion is Charlie Munger says it's much easier to think about what you what you hate or what could go wrong than what could go right or what would make you happy so for example you know the earlier example you could imagine that if you moved to Australia everything would be great but that's a guess or if you had a Ferrari then you would be happy what you know for a fact is that you hate certain things so maybe you hate having a day where you have to fly somewhere or you hate having a day that's

28:40backtoback meetings or you hate when you can't see your friends or whatever it is and so I when I read about that concept uh Chris and I started doing this annual process we call anti goals and so we basically made a list of what are all the things we hate in our day-to-day lives and how can we avoid those things and so for us it was being away from our kids for more than a night having to travel for meetings being on Zoom calls all day uh having a packed calendar there's just you know a variety of these things that we just realize we don't enjoy doing and I found that incredibly

29:18helpful now we do that kind of annually but me and my girlfriend actually do inversions every day so we have this ritual where we wake up and we go sit on our back patio and we have our coffee and we do inversions for how is the stress lucky so for example I could look at my calendar and go "Oh my god I've got to do all these really frustrating meetings or I woke up to a

29:43bunch of texts from problems in the businesses or whatever it is oh my god the kids are so crazy." crazy Italian he mailed me to like he forced me to do a podcast and and so for example the inversion would be well I'm so lucky that I have children and what a gift that is to have kids that are healthy and happy and that they're so you know energetic uh another inversion would be I'm so lucky to own all these wonderful businesses and have all these interesting problems to solve or I'm so lucky that I so many people want to spend time with me right for the calendar and so we do

30:23that every single day and I find that is a very very clarifying ritual that no matter what's going on I always feel better after I do that and can you share one of the annual inversion things that you had for this year or maybe those couple of years so I traveled to New York for a meeting with somebody and it's a full day right get on the plane and fly there and you feel like crap and didn't really sleep well and then have a night in a hotel and you know away from the kids and I wake up and I look at my phone and there's a text from his assistant and it says

31:02"I'm really sorry but he's sick and he can't make it to your meeting." You're describing my nightmare for this episode exactly exactly right it's like It's just like you've wasted your time and when I thought about it I was like why am I in New York i easily could have just called this person talked to them on the phone done a Zoom why did I do this and so a big inversion for me is I won't travel for a meeting i'll travel for an event i'll travel for something I want to do or you know I want to go eat somewhere or you know something exciting yeah but I don't

31:36travel for meetings speaking about mental models again is there one one principle one model the the ones you believe like gospel and today you're like nah that's not it there's a lot of investors that get into this kind of mindset of like true happiness is compounding right and they talk about people in whispered voices that compound at 25% instead of 18% or 15% or 12% and I remember um I was having lunch with uh a really interesting guy who's one of our investors and we were talking about these people and he goes "These people have an accounting hobby what could be more boring than that?" And I think that I'm very much in line with that like I want to grow significantly

32:32and I want to outperform but I don't want to be obsessed with percentages i don't want to live my life according to percentages i want to grow the businesses as fast as we can as is logical um but I don't think a good life is compounding at 26% that's that would be something revealing for young Andrew then totally yeah well I think I you were very goal oriented well it's mimemetic right i think you know when you read I got really into value investing and the ultimate measure of value investing is your compound annual growth rate and so you know you read about all these people and you hear "Oh my god Henry Singleton from Teladine compounded at 28% and this person

33:13compounded at this percent." And you start wanting that without understanding why because for me enjoying my work and working with great people and owning businesses I love and knowing that everyone can continue to flourish or is it you know we compounded at 28% you know I'd rather be going at 18% than 28% if it means a happier work life and better companies so I don't know i just And it's not to say that I don't want to outperform it's just I don't want to think about that i don't want to think about that percentage number i think that's just a very perverted way to live your life you're hiring a lot of people you're I don't say I'm not sure if managing is the right

33:58word but for sure you're following the work of a lot of people so what's the most effective way you found to roll out incentives so I would actually say I'm not managing a lot of people um I hit a wall probably 3 years ago where we had so many I had you know 15 or 20 people that were not direct reports but close to direct reports in the holding company and then on top of that I had 30 30 or so CEOs and they all want to talk to me you know when you have a when you're the CEO of the holding company and you've got the CEO of Aeropress for example and they want to raise or they want to

34:41restructure yeah this is made up example but they want to talk to you they don't want to talk to your COO they don't want to talk to your VP of human resources or whatever and I found that um I got so overwhelmed trying to keep that many people's comp packages and incentives and problems in my brain at one time that ultimately I realized I was not the person for that um and we had this guy named Jordan who was running we commerce and where he was really strong was holding the bar for people and having all those conversations amongst a broad group of people my nightmare day is being

35:20on the phone more than two or three times jordan's day his dream day is talking to 30 different people on the phone he just talks all day and he's just he's just a master of that and so it became very obvious to Chris and I that we needed to elevate him and fire ourselves we realized we're not the best people to be doing that job and so we ended up joining the board becoming chair and vice chair and so now we are back in what I would call our zone of genius we're doing the things that we are exceptionally good at and we're not doing that piece um and so the way that

35:54we're thinking about incentives is very very high level we're thinking about how do we incentivize Jordan how do we incentivize the key members of the team that you know people running M&A and that kind of stuff how do we inform um the holding company team on how we should incentivize within but we're not having to roll it out as much um in terms of incentives I mean we've tried everything uh we've tried giving equity we've had people buy equity we've given them loans to buy equity we've given options we've given people funny bonuses like we bought someone a Porsche once uh we have tried cash bonuses we've tried target- based we've done it all um and what we found is that certain

36:38things work with certain types of people and it's very hard to predict exactly what's going to work but the general formula that's worked best has been aligning the CEO with the thing that we want out of the business and so if we want long-term equity appreciation and we're less concerned about short-term earnings and cash flow so let's say this is a business that has to undergo some real transformation and requires some reinvestment and it's really about what it'll be earning in 3 to 5 years then it makes sense to do equity or some kind of long-term plan other CEOs it's we bought a business it's already the way it needs to be it just needs to slowly grow those are those are

37:19businesses where we'll literally just structure a deal where every time we get a dividend you get a percentage or every dividend over a certain amount you're going to get a cut of that and those are very clear you know we make money you make money i find that works really well and I find that ensuring that the targets are reasonable and they hit them immediately is very helpful because when someone starts getting a check for 20,000 $30,000 $40,000 a month they very quickly start paying attention to the numbers i can see that so it depends both you said on the longevity of the plan so for example the the equity price that you were talking about and the kind of person but you

38:01didn't find a way to hack a way to understand what might be the right incentive aside from aligning the long-term goal to the company to the person so for example the Porsche example that was very funny i remember seeing like we can buy you a car from tiny website some time ago maybe it's still there uh so that part is still Jordan job or is it just something that you gave up you're like depends on the person so we would certainly talk about it right when there's let's say there's an incentives problem we would talk to Jordan about it we talk to Jordan almost every single

38:37day um he would be the one to actually implement it or someone from his team would implement it but we're informing how we do it i mean the what I try and do is I just talk to someone and I ask them about their life so in the Porsche example um you know we were talking to this guy and he's an amazing guy who works for us and he's made us a lot of money and he's very well comped but we said you know what's your stretch goal what's the thing you know if you had a really big year what would you do for yourself and some people will say oh I just want to put it in stocks or I want

39:10to buy a new house or I want to have a cabin and this guy goes "You know I really want to buy a 911 but I don't know if my wife would let me." And so in the back of our heads Chris and I remembered that and we said you know he had a really big year this year let's buy him a car and because we bought him a car his wife can't say no and so he was super happy he's like you know he's still making a ton of money he got this Porsche and it cost us three grand a month or something i don't

39:43remember what we financed it for but to him it was like giving him $40,000 a month because it was something that money couldn't buy which is uh beef at home exactly exactly all right and is there any like sexy sounding incentives on the other hand that it never works out profit share profiture yeah I think profit share is really hard because you know you can give everyone in your company profit share but usually the checks are quite small and I think the if you say to someone oh you mean like whole company the whole company like a lot of people love the idea right it's like let's give everyone their fair share of the business and they'll usually do something like

40:25hey we'll take 10% of the profits of the business and we'll distribute it to everyone yeah what I found is it's so diluted you know if you have a million-doll a year business that's making $500,000 of profit and you're distributing 10% of it that's $50,000 and you distribute that across 10 or 20 people the checks are not very big and so it's just not enough to move the needle for people and then also they start doing the math and they say "Okay well if it's only 10% and we're getting this and I get my $5,000 that means you get you know $200,000." And I to me it just encourages

41:03um issues whereas it's so much cleaner to say to somebody you make a h 100red grand a year if you want to make 150 grand a year or 200 grand a year here's the simple way you can do that and you make sure that it's something they control so for example you never say to a designer hey if we hit this profit target you're going to make more money because the designer is like "What do I do do better designs." They don't they don't move the needle on profit they're there to do their job and so I think with creative people you want to pay them really fairly you want to bonus them when

41:33they do an amazing job or they're working super hard on something or whatever but it's very hard to come up with a bonus structure that's tied to a number because there's no number that comes out of creativity so for me it's like salespeople CEOs executives people that control the costs in the P&L there it makes a lot of sense to give them a number based reward staying on the agency field so at some point I felt that agencies were tin DNA um so the profitable simple sticky for cash flowing uh recently I read that you exited some of those i wonder if something changed we hate agencies um you know an agency is one of the most stressful businesses in the world

42:17because you know if you look at a software business or a magazine or any anything like predictable that has subscribers there is a to be reach quote here somewhere totally 100% i mean they just they just go like this right if you look at the revenue numbers usually they go and if they go down they go like this right they just slowly go down and an agency looks like this and hopefully the agency is going like this so it's slowly going up over time but they're very unpredictable i don't like that i don't like that you can be killing it and then a month later you

42:50lose that contract and the pipeline slows down and stuff do I love the business that I started for nothing that now does you know I don't know over $50 million let's say of revenue like it's a big business um and it produces you know tens of millions of dollars of cash flow yeah i love that i love doing that that's a great business yeah but do I think that I can easily go out and start five more metal lababs no we got lightning in a bottle we've been doing it for 20 years we have this amazing portfolio there's a reputation there's a team there's a DNA um what we've

43:26had success with with acquiring agencies is buying we basically bought um we bought a smaller agency that did similar work to Metalab and we just said to Metalab hey you have all this excess deal flow like companies that are like they have a $25,000 budget is there Z1 yeah Z1 so Metalab couldn't do those projects and they would just say no to people yeah so we started sending them to Z1 and we were able to grow Z1 like 10 times so that was a very effective strategy for buying an agency every other agency deal that we've done has been a bad deal and most of them uh the ones that we sold

44:02at least we made our money back and then some and they're okay investments um but every time we've dabbled in buying agencies it's generally been a bad uh bad decision it's really hard business model it's really hard yeah yeah i'm curious this one is a question for a fellow follower from the podcast he asked me about evaluation of agencies like what you look for what are the metrics that you obsess over if you could share multipliers as well i don't know cuz I don't buy them really i mean we've bought um we've bought one we've done one larger agency acquisition i think it was an error because we um somebody at Tiny had a strategy that they felt they could

44:46play out that was kind of similar to the Z1 strategy right if we put 1 + 1 equals 5 yeah and that just wasn't the reality and the business that we bought was worse than we expected in in some ways it's a still a good business um but I think because of that it didn't play out and so um I just find a great agency if you you wanted me to tell you what the best possible agency would be it would probably be this and you wouldn't want to work there but it would be um a digital services business that builds um payroll software for the government and has a 10-year contract and it's

45:25the only agency that knows how to fix the code and so the government's completely reliant on it and it's been doing it for 10 years and it's probably going to have the contract for another 10 years that is so depressing i don't want to own that business so boring but in terms of a good cash flowing valuable agency it's all about predictability right like when we're buying businesses we're really just making the bet that this will exist in five or 10 years or 20 years and how much can it make over the course of that time and with an agency you could come to me with

45:57an agency that's doing $5 million in profit this year i don't know if it'll be even around in five years i just can't predict that very easily i have another uh question that all of my listener ask me specifically for uh which is tiny stock so uh tiny stock value is down by I would say 80% or so what's your read on that gap between the execution and what the market understand what is going on and have you changed your playbook to adjust for that um you know Warren Buffett has this great story he talks about uh you know if you own a farm and you have a really wonderful farm and you know

46:37that it generates $500,000 a year of profit he says just because some yokal comes up to your fence and starts saying I'll buy your farm for 500 grand that you have to listen to them right those are just offers and all that the stock market does is it shows offers every single day there's bids and people decide to sell and that moves around the stock price the ultimate intrinsic value of the business in my mind is very different than where we trade today and I think that um there's a few pieces in our business that confuse people mostly that we don't do one thing most businesses

47:14in the stock market they either do one thing or they're very good at saying "Hey we have a formula of doing XYZ." Yeah and so um you know the public market loves software businesses like uh you know if you came out and you said we are a golf course management software company we have $50 million of recurring revenue and we're growing at 20% a year the public market loves that all day every day they'll give you a huge valuation when you come out and you've got 40 different businesses and you're doing social networks and software and you own a coffee maker company and you know there's all this complexity in it they don't know what to make of that and I I don't think we quite

47:59recognized um that you know you have to look like a duck and quack like a duck and so I think part of it is a little bit of the they call it the conglomerate discount of having a broad group of businesses and not really being valued fairly the other piece is that we have all these businesses in a fund so we have a $200 million private fund that sits beneath Tiny and we've invested almost $40 million in it and we own all these amazing businesses like Aeropress and Letterbox and a bunch of other ones in there but none of those financials are reported in the the public company

48:35numbers all they see is we've put $40 million into it and it's a black box and so there's some of these I think sometimes like being a public company is so frustrating because you're you're just tearing your hair out going like I just want to explain everything and show everyone what's going on but there's all these legal rules of what you can disclose and how and in order to disclose certain things you have to get audits and you know it's very frustrating so we're really just learning how to be public and how to communicate with investors and I think over time the market will understand our value and get closer to what I would think intrinsic value would be uh I mean

49:16it's quite frustrating for me like when I talk to people who are in the private market you know I just talked to a guy who he's doing exactly what we do he's only been doing it for three years he's at about $60 million of revenue and making about $10 million of IBIDA he's raising in the private market at over $500 million valuation tiny itself trades at $200 million Canadian okay so I don't know how to you know make sense of some of this stuff that I see but um it it is frustrating for us yeah I feel that thanks for answering to it was a hard question so speaking about the conglomerate

49:53thing you own a lot of different companies um well a business that you worth owning is one that you never want to sell when is the other case when is time to part ways with some business yeah I think I've learned this one the hard way in a few situations where especially in the technology world um if you had went back and you told me 10 years ago that Google's moat would be gone in you know a few years I wouldn't believe you uh even two years ago I wouldn't believe you but now with LLMs and Chad GPT like I don't use Google anymore i'm just on Chad GBT all day and um I think the

50:36challenge is really trying to evaluate those modes and predict when they're weakening and then when you see them weakening to be very decisive so um there's businesses that I've held that I've gone "Oh I never need to sell this." you know X and Y and Z will always be true but then something shifts in the market or a new technology comes out or something disruptive happens and so I think over time we're just becoming more and more conservative about what a moat needs to look like and that may even lead us to have to get into the physical world because the technology world is becoming so incredibly competitive with vibe coding and all this stuff that's happening in

51:17software um but yeah it's it's it's the sort of thing where when you see your moat eroding usually you're the first to know and you should act quickly but very few people do i think it's very difficult to uh a have a CEO who's you know there's a great quote um by Optin Sinclair he says

51:38"Never expect a man to understand something that his paycheck depends on him not understanding." So like people people don't like believing that you know if you own a chain of um photo mats photo developers before digital cameras came out and digital cameras come out you dismiss it you say it's a toy the quality isn't good enough because you're making millions of dollars from your photo mats the logical thing is to say this might be a toy now but I can see that this is going to progress i need to sell my photo mats immediately is there any business that you had the opportunity to buy but you didn't that it still haunts you mhm we almost bought um meetup.com we looked

52:20at it when we were was selling it and which is Italian though now it's Italian but it was actually full it was sold to an American and then they got resold to bending spoons and it was one of those things where it was March 2020 the world was completely shut down nobody was hanging out in person and we were really nervous about buying this business that we were we were going this could burn a lot of money for an unknown period of time so for example if it's illegal to go and hang out and meet up how long can we go let's say maybe it's a year maybe it's two years what does that

52:57look like in retrospect I think I probably should have recognized that the pandemic is not going to go on forever and it'll be a great business on the other end and I don't know that uh I think Benning Spoons bought it for 80 million or something like that i don't know what that future looks like for that business with Facebook Marketplace and stuff but I know that um based on the price we were looking at it back then it would have made a lot of sense hm you talked a lot about modes about predicting how the war will be the fact that for example software is very quick to change um

53:30I'm curious like how you feel about the concept of permanence if you're still kind of like optimizing for that or you made peace with impermanence and the fact that like everyone everything is changing and I'm okay with that like how do you feel about this well I don't think that there's such thing as permanence i mean if you read the history of um Berkshire Hathaway or even last night I was reading a book about Jimmy Patterson he owns the best known business he owns is Guinness Book of World Records and please believe it or not but he is probably the one of the I think the

54:03fifth wealth wealthiest person in Canada um runs a very big kind of 20 billion plus a year business and I was reading his autobiography and he's always been somebody that I look at and I go "Oh he's got permanence and he owns all these you know traditional businesses and supermarkets and that sort of thing." But if you go back you realize that even when he was in his 40s and 50s he would buy these amazing businesses that did something very simple in the world like he owned a a carpet or flooring manufacturer and tariffs there was a tariff there were tariffs and inflation and interest rates changed and that became the world tourist business and he had to sell it and so

54:45it's a reminder that it doesn't matter how good a business model is there's always some exogenous factor that can sweep your legs out so for me it's about continue to continue diversification and then getting better and better over time at discerning what is a truly exceptional mode and I think for us like when we think about digital businesses is the moat that we see is um we call them airport businesses because when you go to an airport you have to if you want to leave town you got to go there that's where there's maybe there's two airports in town three but usually you got to go to a airport people have to congregate there and wait for their planes and when they're there

55:26hanging out you can sell them stuff you can sell them massages you can sell them hot dogs you can sell them magazines whatever it is and I think of communities and social networks on the internet like that if you have a dominant social network in a space where uh it's the largest and there's a network effect I think that's a sustainable competitive advantage over the long term so we we find those really really interesting um but there's not that many businesses on the internet that have a real moat you know ultimately like I think most software is like feature not a product like Apple can do it or Google can do it or AI can build it yeah there's a term for when Apple makes

56:05you a feature totally yeah well the famous story is Steve Jobs met Drew Hston from Dropbox yeah and he was trying to convince Drew to sell to him and just build Dropbox in Apple and Steve Jobs just said "Your business is a feature not a product." And it was true i mean if you think about it Dropbox turned out to be an okay business it's a multi-billion dollar public company but it is ultimately a feature now and over time yeah Google and Microsoft and Apple and Amazon are all slowly eating their lunch and you know it's a harder and harder business so the theme of the of the

56:40podcast is Kospa kospa translate to what moves the needle what has the most impact so for you what are the things that radically shift the outcomes like what are the things that move the outcome more than anything else the right people um a moat or a business model so the right business um and then incentives in business those are the three things that I think really really move the needle like you can't miss any of those right so if you have the right people and a great business but the wrong incentives you won't do well and if you have a great business and incentives but you

57:18have the wrong pe people it's not going to do well either and if you have great people and incentives but you chose the wrong business doesn't matter what you do that business won't do well that's a soldier dinosaur so Um and and speaking about Andrew then um what is the thing that you have that kind of spasta so what is the skill that you know that you are very asymmetric in what you do that you bring a lot of value you move things uh what is that thing what do you feel that is for you well I think one it's I've done a lot of things I have a lot of experiences um I have good

57:54and bad experiences with businesses with operating businesses with investing with people I've been through a lot like I look quite young I'm I'm 39 but I've been doing this already since I was basically 16 i started my first business really which was like a online news site yeah at 16 so I've been managing people and managing businesses since then and so uh that ultimately comes down to a filter right you can tell me a business idea and I can tell you or at least I can tell myself hey this is a probably a good this will probably work or it won't or it'll be easy or hard i can

58:30poke holes um I have good like a good sense for that second of that it's pace so I think that um my number one skill set is I move things forward immediately so like you know one story um me and my girlfriend went to New Zealand for a vacation and or actually I was going to a conference then we took a vacation and I was in Auckland and I was thinking like who do I know in Auckland and so I started going through LinkedIn and I realized that um there was this guy named Matt Buchanan who I had met uh I think at South by Southwest or something in 2010 and we'd known

59:07each other from Tumblr and I was like oh what's he up to and so I messaged him and and he he ran an agency and then he started this social network called Letterboxed which was like a social network where you'd share the movies you're watching and you'd rate and review them so all these film nerds used it i' I've been a user and my brother had used it but I wasn't really that aware of how big it was and so we go for coffee and I'm asking him how things are going and he starts saying these numbers like you know Letterbox has at the time it was like 8 million registered users and I was

59:43like whoa that's like way bigger than I thought and he started sharing the revenue and how it was monetized and stuff and I said you know what's the endgame like what are you going to do and he goes well I'll probably sell it at some point i don't know i don't know if we're there yet uh and I said 'Well what do you think like what's the number in your mind where you're like oh yeah like if I sell for that I'm set for life or whatever and so he says this number and I just say okay and he's like what do you mean and I'm like yeah like let's do it like I I'll buy it like how about this like you

1:00:16know he's like well I'm not really done yet and I was like well why don't I buy 60% you guys keep running it i'll leave you alone and he was like let me go talk to my wife and he literally went home and he talked to his wife and then I said uh we were both flying out the same day he was flying to New York and I was flying home and so we met at the Auckland airport in the Air New Zealand uh lounge and we hammered out a deal and I sent him a letter of intent and I think like if we'd been a traditional private equity firm that would be a very slow process um you know they

1:00:49spend a lot of time having a lot of conversations before they ever make an offer i am just like I will immediately make an offer with somebody if I have a gut feeling about something I will move it forward and that includes a business idea so let's say like I think of a business idea I will make a logo i will tell people i will launch a website like I just move really quick i'm surprised by one part that I feel that it's missing i always saw you as an excellent communicator like maybe it's a thing of me because I saw a lot of your adventures and the book and everything so

1:01:25uh the the the poking holes in the business the pace there is another thing like you know everyone like you are really I don't know if known is is the right word you know you know that's new you know like for that really no like I think we're like you know we joke on our website it says uh an overnight success story 20 years in the making right it's always and it's like I used to go to conferences I remember I went to this tech conference and I sat next to this I was in a you know those circular tables And I sat next to this very famous venture capitalist from Silicon

1:02:00Valley so I know who he is i'm kind of excited to talk to him and he kind of he looks over at me and he goes "Um what's your business?" Or or sorry he goes "What's your startup?" And I say "Oh I I don't really have a startup i've never raised money i bootstrap my business and I've got this agency and then I have you know my software business and I start listing off some of the other stuff." Horrified and he just goes "Oh a lifestyle business." And then he just literally like we're at a circular table and he just turns away from me and he starts talking to the guy on my right or

1:02:30on his right and I'm there sandwiched my face is all beat red and there's two people on either side facing away from me and I'm just like [ __ ] this like I I hate this feeling and so it's so weird i used to go to conferences and I was a nobody and I would have to make build up my courage and go say hi to people or whatever it is and I remember um I was at the TED conference way back in 2009 or 2010 and you know I didn't deserve to be there like I somehow got in but I didn't deserve to be there and I met this guy named Derek Civers know who he is and he was the opposite you know he had

1:03:06sold his company for $20 million and I knew who he was and I just walked up to him like an eager beaver and said oh Mr civers not a huge fan and he was so sweet he asked me all about myself he said "You know me and my friends are going for lunch why don't you come with us?" Yeah I agree guy and so for me a um you know I always did want to be known i didn't want to have to you know embarrass myself and and have to walk up to people and do that and it came really slowly you know it wasn't until 3 or four years ago that I could go to a conference and actually have people walk up

1:03:39to me and know who I am and I always try and be more like Derek Civers um because because like I remember how horrible it felt so whenever I meet a young entrepreneur I'm always just like super warm and I get to ask them about themselves and I like being known because it's a shortcut you know you read my book i don't have to tell you about myself you you know it all and we can just talk you know if we were having coffee I could just ask you a million questions and learn about you um and I I love that so for me um I have gotten a lot of value out of doing podcasts and writing the book

1:04:14and being more public with stuff um and it has a lot of great benefits but it it was a long time before it happened yeah yeah it takes a little time derek as well I think you read his blog and books and stuff because he's very good writer he's such a great writer there's so many I remember the moment that I realized how powerful books are yeah um somebody said I don't remember what the situation was but they said "Ben Horowitz from Andre Horowitz is a jerk." And I said "No he's not what are you talking about?" And they said "Oh do you know him?" And I thought about it and I was

1:04:52like "Wait I don't know Ben Horowitz i just read his book." Yeah right and I was like "Whoa that's crazy like I have a relationship with Ben Horowitz and he doesn't know it you know?" Um so that's that's the cool thing about books yeah yeah right speaking about the book uh so is there a question from your experience in Never Enough because you ready to process everything and such uh that you wish someone would have asked about that but you never had the opportunity to answer you mean like about the process of writing the book yeah about the process the content of it something that you

1:05:25expected people be curious about you're like well nobody asked about that really no I don't know oh I think um writing the book it started out as oh you know I'll write a book that you know you share some business lessons it's a Sunday where student and I was kind of like you know I started writing out some of it and building an outline and it was like oh here's my experience going through this or that or whatever and as I started writing I I realized two things one the best books that I've read the best business books they show they don't tell so they use storytelling that teach lessons

1:06:01the most boring business books are the ones that say the best way to hire is this and then at the end of the chapter they say here's my six bullet points on how to hire and I I I did a lot of spent a lot of time reading great business books and then also fiction so I read a lot of fiction to try and figure out how do you build a thriller how do you build a business thriller effectively and um as I wrote the book I ended up kind of almost um you know at the time I was 35 i was going through a midlife crisis i got divorced in the middle of writing the book and so it ended up

1:06:37being kind of a form of therapy to work through my own muddled thoughts um and it didn't start out as a book that was a memoir it started out much more as a business book um but I I love you know I love how it turned out and I think um you know I've been really happy with the reception that I've gotten from it and I've got to meet all these amazing people and I think that's the best part of it is like I get to meet all these people who let me live in their head for 5 hours and uh and that's really cool for me there was the last serious question we have now a very

1:07:08interesting segment which is a quiz are you ready sure all right so private equity or public equity i don't think there's a difference i think equity is equity okay buffett or Mer uh I think both like they're both amazing but I'd say like I've said this a lot but like Buffett is like blues and uh Mer is like jazz so they're different you know Buffett is very consistent he says this a lot of the same things but what he says are very profound and very well explained mer is just so all over the map he'll he'll you know insult somebody and then he'll deliver an amazing quip and you know

1:07:47he's he's he's amazing okay digital services or digital products digital products for sure podcast or blog post i'm a big fan of both if you had to pick one if I had to pick one I'd prefer a podcast I think yeah all right tim Mortons or Italian espresso italian espresso for sure uh Kday or Okay computer oh man I love Okay Computer that's actually what probably my most go-to album if I was if I was gonna It would be That or um uh Oh my god in Rainbows those are my two favorite radio hit albums so I would say Okay computer all right sam or Sean from My First Mutant oh

1:08:31man that's so hard i don't think I can choose i'll cut them in half cut the baby in half launching a memecoin with Logan Paul or interviewing strangers on the street with Noah Kagan noah Kagan for sure my first million or Kosa kosa for sure exo out no doubt sorry Saman thank you very much i introduced you that was great dude that was awesome that's really fun if you enjoyed this episode well let me know comments are open feel free to like the video subscribe to the channel we mostly post in Italian let's be honest but sometimes I will have more interesting guests also in English kaspa

1:09:12is available also on podcast platforms uh namely Spotify and Apple Podcast if you're listening the podcast right now on a podcast platform make sure to subscribe and put five star on the podcast so you help me spread the podcast to as more people as I can i think this is a great interview so I'd be happy to help more entrepreneurs into their journey as always I am Julio the host of the podcast and see each other in a couple of Sundays for the next episode of Kosa ciao