The Exchanges

Q and they have so much to learn from you. And I, I would say so much to learn from the different parts of, you know, Cody's empire, the, the media business, uh, the investing side, The business building side. But for those who haven't heard your story, can you just give me kind of the quick and dirty around what your career trajectory has been and how you got here?

A Yeah, 30 seconds. Uh, long time financial person, did all the things, PhD, MBA, Goldman Sachs, traditional route, wanted to blow my brains out like you when I realized my life would be spent inside of a spreadsheet for the rest of my life if I stayed in finance, and so realized I was kind of becoming unemployable pretty quickly, so I went to become a partner at a private equity fund, and then I realized I didn't even like having partners. I wanted to kind of like do the thing all by myself, and so I started building, um, Up a media company right behind the back of having bought and invested in the, what I call boring businesses for quite a few years because I saw people doing it in private equity. And so, um, I didn't think that was cool. Actually, I used to never tell anybody that I own laundromats and car washes and landscaping companies. I thought it was pretty lame. And then I started explaining to a few people once COVID happened, like, ah, by the way, I own these things. And they thought it was really interesting. And then we've sort of paralleled that into now this big business where we talked to a Instead of, quote unquote, renters of both their time, employment, and et cetera.

AI assessment note: “PhD, MBA, Goldman Sachs, traditional route... went to become a partner at a private equity fund”

Q go all in on creating content on Twitter, TikTok, Instagram, YouTube, like, and you have leveled up the production value of your content a ton. Like, I watched your most recent YouTube video, and I felt like I was watching, like, a mini doc at a movie theater. So, Why are you spending so much time on that when you could be using that time to buy more boring businesses?

A Because the level 10 game is content. And I think, you know, what I've realized is content is really just a word for audience arbitrage. It's just, can I get people's eyeballs? And we are in a war for our attention. It is becoming the most valuable commodity out there. Not capital, because we're printing it like crazy. Um, it's not, you know, historically what it used to be, which is product. It's attention. And so Um, so we, I realized this a couple years ago when I started, and I've only doubled down and bet on it more and more because my audience, if I can create an audience of, right now we have three million, uh, followers and we do 60 or seventy million views a month. If I can create an audience of real humans who are bought into what we're doing, then alongside them, we can do just about anything. We can launch funds together. We can launch products together. You know, we can make real money together. We can have like Fun and experiment without having a ton of overhead together, and so I think it's the most important aspect that there is today is having a content engine.

AI assessment note: “Because the level 10 game is content. And I think... content is really just a word for audience arbitrage.”

Q One last question about your business is, What have you learned about yourself as a manager? So are you a good manager? Are you a bad manager? And what are a few of the biggest lessons you've learned to entrepreneurs who are listening to this that want to be better people managers?

A Oh, it's such a, it's man. I, if I could go back and learn one skill earlier, I already learned deal making early earlier. I wish I would have learned. Leadership earlier and really leaned into it. I always thought it was kind of fluffy. Um, so I think I'm a bad manager in many ways, such as, you know, I'm a chronic optimist, so I'm late all the time. Not a good move. Um, you know, I over, uh, I over, I think I can do more stuff than I can. And so I miss deadlines. Um, those are two really important things to not do for your team. So if I could change two things, it would be that, um,

AI assessment note: “I think I'm a bad manager in many ways, such as, you know, I'm a chronic optimist”

Q don't, and you don't have to naturally walk through the whole deal, but I want you to get an image of what the best deal was in your head, because I want you to talk through kind of like, as you play it back, what are the things that you did that you think are lessons in negotiation that people should take from that experience you feel really good about?

A Yeah, it's a good question. I mean, um, you know, let's just talk cash. So there's something called seller financing where the seller will pay you from the future profits of the business to buy their business. So when I think about one, uh, one of, or some of the best businesses that I've bought, it's because I had zero dollars at risk and I was able to buy a business based on how much I had shown that I was capable of running and being a steward for their business. An incentive aligning them on like, Hey, I'm gonna run this business really well. We're gonna make a bunch of money. And so you're gonna make more money by having me take over than you right now. Plus you're like miserable and tired. So why don't you give me the business for basically zero dollars? If I mess it up, I'll actually just hand the business right back to you after 12 months and we decide what mess it up means. Like if I don't grow by X or Y or Z. Um, but you're gonna give me this business and I'm gonna pay you back Uh, from the profits of this business over a five year period. And so what that allowed me to do is the business owner got an annuity, right? They got like a check in the mail every single month from the business, but so did I. So I started getting a check that was, you know, a five figure check the first month that I closed the deal from taking over this business and running it. And some of th…

AI assessment note: “incentive aligning them on like, Hey, I'm gonna run this business really well.”

Q Yeah, no, there's something beautiful about the local coffee shop and the feeling of community it creates. You have grown on every platform rapidly, um, and there's just such virality around boring business content, which, by the way, before I get into YouTube, why do you think boring business content is so viral?

A People are tired of, listen, actually two things. Corporate trust has shifted to individual trust. People are tired of, uh, working for big corporations. And so they're tired of, you know, being, uh, consumers of big corporations. And there's a feeling of, man, like nobody at the top is kind of looking out for us anymore. You know, it, there's a difference in a feeling between when you go into, you know, A mega store, and when you go into a normal store, and I think in every aspect of our lives, when we were locked up for two years, we basically realized, man, my community matters a lot, especially if I can't travel around. Man, my job matters a lot if I'm spending all this time at it, and I can't be distracted by the foosball tables at the office, and you know, the, the things that I spend my life doing have a real impact, and so I think boring businesses get people excited because like, ah, I don't have to start the next Tesla in order to like make money and have an incredible life. I could just take over a boring business. It seems reasonable and it seems like noble work and it seems like something they can do.

AI assessment note: “boring businesses get people excited because like, ah, I don't have to start the next Tesla”

Q You did a thread on finding operators for your businesses and what makes great operators great. And I think for entrepreneurs listening to this, even if they're not operators of say a laundromat or a carwash, I still think there's probably a lot of through lines they can take. So what. What similarities do you find in the best operators that you've placed in businesses that you've bought?

A Oh, yeah. I mean, a couple things. First, I really like to hire people that have done it before. I know this sounds obvious, but it's not obviously done, actually. Lots of people hire operators that have never done the thing before, and for the first hire that you make, that's really not what you want to do. You want to do the opposite of that. Um, the second thing I think is these people really have to have a pretty high pain tolerance, because you have to assume that if they need to be able to take the work off your plate, you don't want to do. And so that means that there has to be a level of humility And grind and hustle that, um, that that human's going to have, and it'll feel weird for you to push the stuff that you really don't want to do, you know, for that individual. You know, some of the other stuff I've found with the best operators overall is the best operators are typically those who are super systems and processes oriented, because these aren't starters, you know, you're a starter, Alex. A lot of people listening are probably one of the two, a starter or an operator. Um, And the best starters typically aren't the best operators. We have to like morph into that. It's been a struggle for me over the years. I have to hire people to be my operators because I'm not detail oriented enough or, um, you know, relationship management of the business enough to kind of see i…

AI assessment note: “First, I really like to hire people that have done it before.”

Q And, and just in that point, like when you say the language of deal making, what does that mean? Is like that the actual, like the, the idioms and phrases you use in deal making, do you mean something else by that?

A Multiple things. One, terms. Really, really important. And the terms are complex. You know, it's what's the periphery to return. It's who has the rights to the IP, who licenses it for certain amount of time. What is the difference between licensing and royalties? Um, you know, what's a liquidation preference? What's a one X versus a three X? All of those things are actually pretty intimidating to people. And like, if you're not in our world, you're probably going to have to Google it, you know, unless you subscribe to the morning brew and you're reading their financial terms stuff, right? But, um, but for the, for most people, they don't even know the language. So if you don't speak with the right words, then you can't master anything, right? You're not going to be able to give a Ted talk if you can't speak English in, in English format. And so I think that's first, but then you have fun with like the two Oh two level, which is, we haven't talked about this. I was like, all right, if I was Alex, you were like trying to, you wanted to like renegotiate a lease or something somewhere. Remember? And I was like, oh, You were like, I'm just going to pay into it. I'm like, whoa, whoa, whoa. Like, no, we got to negotiate this, and this is how we should play this game, and here's what he cares about, and here's what you might say back to him, um, and here's why I think you could get tha…

AI assessment note: “Multiple things. One, terms. Really, really important. And the terms are complex.”

Q You, one thing you failed to mention is that you were a journalist first. I'm not sure why you failed to mention that, because it's a very important point. How did you decide to go from journalism to finance, and what are a few skills you picked up in journalism that you actually think helped you in a unique way as you entered finance?

A One of the smartest things I, uh, have heard people talk about from a formula standpoint is Scott Adams' skill stack. Um, and what I didn't realize early on is that I couldn't have better picked a path for me to be a private equity investor, to run a media company, to be on the internet talking about things, then to stack the fact that I was a human trafficking and drug smuggling journalist on the back of investing at one of the largest companies, Vanguard, To then being at Goldman, to then doing all the PE stuff, to the whole time having that ability to write, ask questions, um, and really be curious about the world around me. And so most people in finance, you know, there's almost like a downside to being curious. People think, well, your intelligence must be lacking because you don't have all the answers, and that's how a lot of financial people think. And instead, what I realized is, oh man, I don't know the answer to this, and that has nothing to do with my IQ. It just has to do with the fact that I do not have this particular piece of input. And so I think that took me a lot farther than most because I was never scared about looking stupid. And then now that I run this media business, I realized, wow, in order to invest, you have to ask the right questions so you don't lose your money. And in order to build a media company, you have to ask the right questions and know the…

AI assessment note: “having that ability to write, ask questions, um, and really be curious”

Q your paid newsletter. You'd have to be spending a shit ton of money borrowing audience from platforms that own that audience in order to possibly have a chance of driving the revenue you're driving today. And it, it both is not sustainable. And also it's not building for the longterm because it means if you haven't built this audience, How do you have affinity with the people you're selling to?

A Yeah. And it also feels a little, I mean, thankfully, since we never did it, and I know you didn't in the beginning either, is like, when you have to start that way, I think it also leads you to, you know, users. It's not just affinity. It's almost like disaffinity. It's almost like there's a negative correlation to ad spend. And so what if in fact, it's not only that you're stealing time. So you have a shitty click through rate is, as Chen says, but also that Every time you put an ad out there, you're also kind of pissing somebody off instead for every person, or I don't know what the actual ratio is that you get in. It's really hard to do stolen audiences with creative enough ads where they feel like you're not stealing your adding value. Damn hard.

AI assessment note: “It's not just affinity. It's almost like disaffinity.”

Q And just to bring that deal to its fruition, do you still own that business? Did you sell it? What's, what's kind of the last chapter?

A Yeah, I don't own that business anymore. Um, I own lots of other laundromats, um, and other car washes, but since then, you know, what kind of happens in buying, I should have kept every business I've ever owned probably just like real estate. I did an analysis the other day that was horrifying, which is like, don't do this if you're listening, but if you've ever bought real estate and sold it, Like pretty much a bad idea. You know, you should always try to hold onto your real estate and businesses are typically like that too. As long as it's a good business, you can continue to have, you know, the business actually appreciate as long as the business fundamentals are sound. It's called the Lindy effect. If it's been in existence for a long period of time, it typically stays in a business for a long period of time. And so I probably should have kept them, but at some point there becomes this level where you're like, all right, my first house is a studio that I'm going to buy. And then I'm going to buy You know, a little condo, and then I'm gonna buy a townhouse, and you stair-step your way up, and that's what I've done in businesses, too.

AI assessment note: “Yeah, I don't own that business anymore.”

Q I feel like, you know, every, I feel like every good deal as it relates to laundromats, Car washes and self storage have been sucked up from the planet. So first of all, do you think we're in ending five or six, or is that a wrong take? And what are you attracted to right now? And what do you want to stay from away from as much as possible?

A It's a really good question. Well, I think we're in the first part of a recession. That'll probably be a double-dip recession and we'll actually see inflation come back up again. That's my assertion. Um, which means that I think Businesses are still too expensive in the private markets because, meaning these small businesses, because they have not had the public market flush that a lot of the publics have just had. They haven't seen, had to, you know, go out on their earnings calls and start to tell people that they're going to miss expectations. And so the, the private markets typically follow the public markets. So we haven't had our full public markets pullback, which means we, we definitely haven't had our full private market pullback. There's good deals all around always. But I am very thoughtful about the valuation I'm buying businesses at. So I think you're right. I think we might be in more like inning seven or eight, and inning eight or nine is coming over like this next couple year period where it's going to be really gnarly out there. I think it'll be really gnarly, and a lot of people will get into a lot of trouble, which is super sad, and then during that period there'll be a lot of businesses that, um, It will come back full circle basically. So now is the time to learn. I'm not sure now is the time to allocate immediately. Um, so, so that now the ones that I don'…

AI assessment note: “I think you're right. I think we might be in more like inning seven or eight”

Q clubs. I also think there's an interesting world to think about of like, is there a way to almost do an honor system or a system where people can pay and it dispenses It unlocks the clubs and balls for you where you don't even need someone there at all times because also mini golf has like set holes where do you really need maintenance on it during the day?

A Yeah, I agree with that. I think the reason why it's probably 300 K does, I mean, I would assume that they have somebody that operates it. Like you don't want to get the call when little Sally like wax her ball across the, you know, whatever pond. And so that's gonna, that's gonna cost like a hundred K probably to have somebody who You can inherently trust who will handle everything. Like, do not call me. I am on your do not disturb list, except, you know, when we talk strategy. And so usually that's like hundred, 150 K for like my businesses. Definitely. You could get them for cheaper, but I kind of prefer good to super cheap on that. And then payroll is probably just things like plumbers and electricians and like these sort of one-off staff, like, you know, maintenance for the website, Google ads, that kind of stuff.

AI assessment note: “I would assume that they have somebody that operates it”

Q Well, it's going to be the morning goo. Obviously, but, but so even for say peachy babies is say the business is doing ten million dollars a year. Let's just say it's 70% margins on this, right? So they're doing seven million dollars a year in profit. How do you think about what you'd pay for this business?

A Yeah. Well, so, and a couple of things. So the way that I got to the revenue numbers were basically each order size. She said publicly, I have to do a hundred to 300 individual batches or, or whatever these are called boxes of these. And so then I did that by the number of slimes she drops each week, which you can also see that you give me the 200 K number. So I think we're probably pretty close on that. I mean, for these types of businesses, I'm cheap. I like to buy businesses at anywhere from two to six X. I really try for the two to three X, but I typically buy boring businesses that don't have a lot of profit. Excuse me. Yeah. But this has a lot of growth trajectory. So I guess it just depends. You know, if this young woman is still loving doing this, then you're probably going to have a hard time getting it for two to three X. But my bet is like, could you imagine she's been doing this since 2016. Could you imagine hand doing slimes every single day for like weeks? She's gotta be like

AI assessment note: “I like to buy businesses at anywhere from two to six X.”

Q So what's the, what's the dream? Like, uh, in the sense of you're building up this, this, uh, battalion of Cody Sanchez's, um, friends, troops, and followers. Like, what do you hope to be able to launch five years, 10 years down the road that you only have the capability of doing when you have an audience of this size?

A This is going to sound like a fucking politician nonsense actor, but like, uh, I was at dinner last night at, uh, this little steakhouse here. And like the, you know, guy came up to me at the table and was serving us, whatever. And he was kind of nervous and, you know, went away. Then he came back and he's like, I'm so sorry. This is so inappropriate, but I just wanted to ask, like, are you Cody Sanchez? And I was like, oh yeah, that was really nice. But then he started telling me about the businesses that he's doing on the side and how he got kicked out of school And he couldn't go back and afford it anymore and what he was going to do now and how he's working on this stuff. And, um, at some point, you know, you make a certain amount of money and then you realize that like, that's not the only end game. And then you wonder what your impact could be on this planet, whether it's from ego or altruism, I don't know. But at some point I was like, huh, like what's the point of it all? And wouldn't it be cool if I could actually make some meaningful difference? So that was, that's one thing. Um, it's not that I want to launch something else. It's not that I want more work. I got plenty of it. I really like what I'm doing right now. It's really just like, that's so cool. How come I can make a video? This guy can watch it and then his life can get changed. What? That's wild. And then t…

AI assessment note: “It's not that I want to launch something else. It's not that I want”

Q You a hundred percent did. Um, it was one of those deals where, uh, just to be associated with it was, was the reason enough to put money into it. Um, but before the, uh, our conversation started, you were talking about Reese Witherspoon and her business. You were talking about Aerosmith and their businesses. Why are you so fascinated with the way they've monetized themselves?

A So I've become, so there's levels to every game. And the way I think about it is like this. Um, have you ever had an employee and, you know, with employees, once you have them and you're paying for them out of your pocket, you're like, what are you doing over there? What, what are you going to work on that? Like, is that going to, like, what's the, are, are they actually working? Like you have this anxiety, right? And I think about my money that same way. It's like, is my money working hard for me? Is it lazy over there just lazing around? Is it getting paid in an assistant level when it should be getting paid a CEO salary? Like, What are you doing over there, money? And, um, so I think about that a lot, and then I think about that with my- Only person I know that talks their money like that. Come on, buddy. Come on, let's go. Um, so, uh, I feel like that with my time, too. So now time has become so precious, it's like, everybody thinks about scoreboard. How could I make a million bucks? How could I make ten million bucks? Wrong question. The question I would ask is, what is the fastest, funnest, Least time intensive way to get to a million bucks or to get to ten million bucks because you would , you would know inherently it will take me longer to walk through To the park than it will to drive to the park. We know that there's like Google maps, right? What there's not Google ma…

AI assessment note: “what is the fastest, funnest, Least time intensive way to get to a million bucks”