The Exchanges

Q So how would that work? Would Robinhood buy the real estate and then sort of tokenize percentages of it almost like shares? Like, what would be the mechanism for that?

A I think, I think tokenization Uh, as a underlying technology, uh, can be done, but it's not really permissible in, in the US. And, and the reason for that is, um, What you'd be tokenizing is essentially a company. And so when you tokenize a company, it goes into security regulations and security regulations have an established framework that is not currently compatible with, uh, decentralized finance and crypto technology. So that that's one of the things that is being worked out, but there's another mechanism in the U S using sort of traditional rails, Which, uh, which are called 40 act fund structures. And I, I think there's been, uh, well, there, there will be a flurry of innovation in this space, partly because the current administration has declared that they're open to using these vehicles to provide access to alternatives and privates. Um, and the limitations currently are that It's hard to take an individual asset, like a, if it's real estate, an individual property or an individual private company in the, in the, in the sense of late stage privates. Uh, and, and make that tradable, but you can do a portfolio of things. So at least as a passive investment vehicle, we can give people that type of exposure.

AI assessment note: “there's another mechanism in the U S using sort of traditional rails”

Q What's one thing the world still gets wrong about that time?

A I mean, I think the major thing is just that Robinhood colluded with hedge funds to shut down trading. There was also another false narrative that I think is funnier. I, uh, but yeah, Sequoia had to refute this. Someone put on the internet that, uh, the White House actually called, uh, Sequoia Capital, one of our venture capital investors, And got them to pressure us to shut down GameStop. So, um, yeah, that, that was a particularly funny one, but if you look on Reddit, that had like thousands of reposts, um, So, yeah, I think that, I mean, we don't really have any business with, with hedge funds. So the, the idea that somehow a hedge fund would collude to have us shut down trading of a, of a stock, um, I mean, always seems silly to me, but I think what we learned is A juicy falsehood is more powerful than kind of a, a boring truth.

AI assessment note: “the major thing is just that Robinhood colluded with hedge funds to shut down trading”

Q If I was looking from the outside in, is there anything about your hiring process that would stand out as unconventional that works for you?

A Well, I, I should say I'm not super familiar with How every company does it, right? So I'm sure some companies do many of these things, but, um, yeah, yeah. Perhaps one thing that's unconventional, at least in financial services is, uh, emphasis on early career people. I think from a very beginning, we put our company next to Stanford university. We would spend a lot of time, uh, You know, recruiting interns and, and engineers from there. And that was my alma mater and, and Beju, my co-founder as well. So we would spend time actually, when we were individually hiring everyone, going to career fairs at the top tech universities. And, you know, I still spend a lot of time with early career folks and interns. And I think it's very, very good for the company because A lot of the companies in our space tend to get older as they get further along, and the, you know, the folks working there can be more disconnected from, from the young people, and then that puts you, puts you at risk of becoming a more of a generational company in the sense that, you know, Charles Schwab serves baby boomers very well. You had E-Trade coming later that was really a Gen X company, but I think They've struggled a little bit getting the younger generation excited, and I know, you know, they, they try very hard to, to get there, but I think the best way to do it is to actually make sure that the company it…

AI assessment note: “one thing that's unconventional, at least in financial services is, uh, emphasis on early career”

Q something real. If you're ready to approach dating the same way you approach the rest of your life, With clarity and purpose, this is worth your attention. The League. Find someone in yours. Download the app and apply today. How do you think about urgency? That's one thing we didn't, that was not a word we used when we were sort of like thinking about, uh, American versus European mindsets.

A Yeah, I, I just think, uh, you know, urgency is, I, I try to build urgency into most things. You know, in my office, I have a, I have this, uh, this watch, this kind of clock, and it counts down the number, the days I've got left in, in my job. So it's not because I look forward to, to stop working because I love my job. But I have this thing on the wall, and so you come in and say, hey, Nikolai, we, we're going to work on this and, um, you know, I'll sort it by January. And I said, January? Look here. I've got 1765 days left. We need to do it now. And then you said, oh, really? You only have 1765 days left? Yeah, let's do it now. Let's do it now. So you just, you build urgency into these tasks. I love it.

AI assessment note: “urgency is, I, I try to build urgency into most things.”

Q Why did you take this job? Like, what did you see? Why did you, why did you want it?

A Oh my, it was my, it was my dream job, right? So I had, um, I had run, uh, this investing company, investment company called AKO Capital, set it up, and, um, it kind of turned 15 years, and, and I thought it was time to pass it on to the next generation and do something else, so I wanted to go back to university and do another degree. And, uh, learn some more, more things. And then I had just before that taken a degree in, done a degree in, in social psychology and, uh, organizational development. And so when this job came up, it was just like, wow, you know, it combines, uh, you know, asset management. And asset management is the most interesting thing you can do in life. Because it's about everything that moves, everything you eat, wear, drive, all that kind of thing. It's about psychology, it's about markets, it's about greed and fear, it's about, Macroeconomy, geopolitics, defense, uh, it's about everything, right? So it is, it is the most incredible game you could ever construct. Then I could combine it with organization development and really see whether we could take this organization, you know, to a place that it hadn't been before, and then do something great for the country. So all my interests came together in one job.

AI assessment note: “it was my dream job... all my interests came together in one job.”

Q And it's insane, right? We're slowing things down. Anyway, we can get off this, but, um, I want to switch to How exactly do you invest your money? Walk me through step by step.

A Well, it's, it's not going to be a long conversation because it's easy. I dollar cost average into index funds. I hope to own them for 50 years, and that's it. My entire net worth is a house, cash, Vanguard index funds, and shares of Markel where I'm on the board of directors, and that's it. And I don't, I don't think it needs necessarily to be more complicated than that. I think it is very intuitive in finance to be like, I will do the best if it's, if my net worth looks like a Rube Goldberg machine, and it's just so complicated, and there's so many levers and strategies in this. And it's not, I don't discount that smart people can do well financially with complicated transactions. I just don't think it's necessary at all. And maybe there's an analogy to health in this. There are the well-known biohackers out there who are just trying, they view their body as a Rube Goldberg machine, and they're like, I gotta maximize this and do this and take these pills and this diet and whatnot. I don't think that's necessarily bad, but without being any, any bit of a health expert at all myself, I'm like, look, if you just eat a balanced diet and sleep eight hours and exercise a couple times a week, that's probably good enough. That's probably getting you 90 or 95% of the way, or maybe even a hundred percent of the way To the results that the biohacker is going to get. I think, I think tha…

AI assessment note: “My entire net worth is a house, cash, Vanguard index funds, and shares of Markel”

Q So that was one question. What's the other one you had around environment?

A I like, am I creating the conditions required for success? What is this room designed to encourage? Um, and then how can I make this behavior more obvious? And there are, there are a number of ways that you can do that. Like some of it is just, you know, Uh, if you want to go for a run, take your running shoes and your clothes, set them out the night before. I have one, I have one guy who, um, he sleeps in his running shorts, so he just gets up. All he has to do is put his shoes and a shirt on, then he's out the door. You know, he's just trying to make it as frictionless as possible. I found that, uh, to give you like another example, If I buy a six pack of beer and I put it on the, you know, shelf where I can just see it as soon as I open up the door, I'll grab one each night and have one at dinner just cause it's there. But if I tuck it down on the lowest shelf, like put it in the back, I gotta like bend down to see it. Sometimes I'll forget that it's there. It'll be there for like two weeks, you know, and it's just about what is obvious. Um, what is in front of you?

AI assessment note: “am I creating the conditions required for success? What is this room designed to encourage?”

Q Let's explore habits a little. Um, what exactly is a habit?

A The one, one that I like is that a habit is a recurring solution to a recurring problem in your environment. So something comes up again and again, and your brain is trying to solve it. Another way to describe it is that it's like an automatic or a mindless behavior. If we were talking to a researcher or an academic, they would probably say a habit is like brushing your teeth or tying your shoes or biting your nails, you know, something you do really fast and mindlessly, and you don't even really think about it. But if I were to ask you, hey, Shane, what are some habits you're trying to build? Like, you're probably going to say, oh, you know, I'm trying to go to the gym four days a week, or I want to write every day, or I'm trying to meditate for 10 minutes or something like that. And I know what you mean when you say that, you know, you mean you want it to be this regular practice, this ritual. Now, technically, in some kind of academic sense, maybe that's not, you know, a habitual automatic behavior, but in a cultural sense, that's exactly what we mean when we talk about habits, is we want them to be reliable, repeated routines. And then the third way you could define it, and this one I think is quite useful, is that it's a behavior that is tied to a Context in your environment, behavior that's tied to a particular context. So like your habit of watching Netflix at seven PM i…

AI assessment note: “a habit is a recurring solution to a recurring problem in your environment.”

Q I love these little sayings you have. You moodle thunder, you know, work backwards from magic. What other internal sayings do you have that really resonate with you in this moment?

A Um, one of the biggest things I learned from my grandfather was he, his little saying was PMA, positive mental attitude. So in any scenario, you try to have a positive outlook regardless of the current circumstances. And that sounds a little kind of woo wooey sometimes, or, you know, always think positive or whatever, but I have tried to become better at practicing it and teaching my kids how to practice it. So one way that you can do it is when you run up against something that feels kind of difficult or feels like, um, you don't feel confident about it. You try to rehearse it visually and you emphasize the good portions of what could happen. Uh, and this can, this can happen either in retrospect or it can happen, uh, pre visualization before the thing happens. So I'll give you two examples. In retrospect, when I played baseball and I was like 10 or 12 or 14, after each season, we would go sit on the back deck at my parents' house, and my dad and I would talk about the, the year, and we would talk about the good plays from the year. My best plays, my best games, the games that we won. We would, we would try to highlight, I didn't know this at the time, but what he was doing was he was helping me highlight the wins from, you know, small and big from that last season. And Uh, I can remember some of the conversations that we had, like one, I got into high school and I was never t…

AI assessment note: “his little saying was PMA, positive mental attitude.”

Q And then once we've identified a habit that we want to replace or eliminate, what is the mechanism by which we can do that?

A Broadly speaking, I think there are four things that you should do if you want to build a habit. And this is true if you want to, you know, replace an old one and install a new one. So roughly speaking, what you want is your habit to be obvious. So you want it to be easy to see, easy to notice, easy to, um, you know, get your attention. You want it to be attractive. So something that's appealing or fun to you, as we were just saying, um, you want it to be easy, simple, frictionless, you know, easy to apply and, uh, install. And you want it to be satisfying. The more enjoyable or satisfying a habit is, the more likely you are to stick with it in the future. So I call these the four laws of behavior change. Make it obvious, make it attractive, make it easy, make it satisfying. And you don't need all four every single moment of the day or every habit that you build, but the more that you have those four forces working for you, the more likely you are to stick with it. And in fact, we can actually learn something very Compelling about our habits by looking at behaviors that we often call bad or like that we waste time on and you see what do those things have in common? They often are very obvious, attractive, easy, and satisfying. Those are the things that get them to stick. Um, you know, like if you just take scrolling social media, for example, it's obvious cause your phone is on…

AI assessment note: “I call these the four laws of behavior change. Make it obvious, make it attractive”

Q From the outside we hear these stories about how CEOs pay attention to the top 50 of the top 100. How many people inside were you really monitoring and trying to develop and having a personal, a real one-to-one personal relationship where you're doing this and you're in the weeds and you're in the performance report and you're trying to build them?

A I think there's about three or 400 that were corporate assets, and one watched them all the time, because these are people who in 15 years could be CEO. There's something about them that, you know, you sort of caught your fancy when you were in a meeting, or in some project that they were on, they had brilliant ideas. Not brilliant ideas that reinforced your thinking. Brilliant ideas that challenged your thinking and took us to a better place. Because you don't want yes people around you. Um, you want people who say, why don't we push the boundaries of our thinking? What if we approach this creatively? And people who put the company before themselves. I look for that all the time. Uh, and so, there were three or 400 people that we actually called them corporate assets, and we tracked To make sure that we game plan them, give them the right assignments, and even if they couldn't move, could we give them interesting assignments so that they could get the experiences without constantly moving? So that's the number of people that we tracked.

AI assessment note: “I think there's about three or 400 that were corporate assets”

Q and use this episode as a means to sort of teach people inner excellence and how they can perform under pressure and also live a life of more meaning. But before we get there, I want to talk about the book. How did the book come about? Let's spend a beat on this for a second, because my understanding is you wrote this book and then almost nobody read it.

A Yeah, that's right. So the book came out in 2009. And, uh, I wrote the book because I wanted to write the best, best book ever on mental toughness. I wanted to use that as a manual for my clients to use that, that I can give them and say, here's how you train your, your mind and your heart. It worked great for that. It wasn't a big seller, but it worked great for that. And interestingly enough, I have on my phone, I, I, I recommend to all my clients that they, they have these reminders, silent reminders that come up with these affirmations every day throughout the day. And one of mine was that I'm a New York Times bestselling author. And it had been 15 years, 16 years, and so, and that hadn't happened, so after a few years, I took it off. The book was, was doing great for what I wrote it for as this manual and, and for other clients to, to get other clients. So that was amazing. But it wasn't a big seller. And then, so, 2018, I got the rights from McGraw-Hill, and then I spent two more years of, of, uh, part-time, maybe 20 hours a week revising it. So that came out in twenty-twenty. The book, I, I thought it was going to be 15% different, but it turned out to be about 85% new stories, and same concepts, but new stories.

AI assessment note: “I wrote the book because I wanted to write the best, best book ever”

Q And then I assume most people found it the way I did. I was watching the NFC playoff game and saw AJ Brown on the sideline reading this book, and then that became the focal point of what everybody was talking about all of a sudden. Where were you? What happened there?

A Yeah, so I was in Dallas, Texas. Um, I was there to write, to do an Interactionals retreat. And, uh, I'm in my hotel room. What was amazing about that week, it was such an intense week for many reasons. So January 12th was that Sunday. My mom died January 16th, and she was 91. She had an amazing life, had a huge impact on my life, and taught me so much. So it was an answer to prayer, because she was suffering. But it was a very somber week, and also kind of a slow week, um, in my life, and, and just, it'd been years of kind of my, both parents died, and my sister died, and Trying to care for them. And things were slow, and business was slow, and I actually didn't pay off my credit cards in January. I had money in investments, but I didn't have any in my checking. And I look up at the skyscraper in downtown Dallas that Sunday afternoon, and, and I had just written a book called The Best Possible Life, How to Live with Deep Contentment, Joy, and Confidence No Matter What. It's a, a much smaller, easier book to read, and on the spiritual life, and kind of a summary of inter-excellence. And so that book had just come out, and I remember looking at the skyscraper that afternoon, and, and the thought came to me was, Jim, would you rather own that skyscraper for whatever hundreds of millions of dollars it's worth, or would you rather have written the book The Best Possible Life? And I…

AI assessment note: “Yeah, so I was in Dallas, Texas. Um, I was there to write”

Q Is that what you were trying to do with the concept essence document is like hash that out?

A Totally. Concept essence was what we started every business and every business we're in today. And we should talk about the multiple businesses we're in today. Every business that we're in starts with a concept essence document. What is a concept essence document? It's essentially a script for regional theater. Think of it this way. If you're in a multi-unit business, I'm running thousands of, of, of regional theater shows that are performing 18 hours a day. And so what is that script? What is the aesthetic of the environment? What is the food and the food attitude? Um, what is the humanity? What are the people like? How do you experience it from a consumer's perspective when you walk in? And we try to really go deep and use words that mean something in writing that script. Or that vision for how we're going to compete. And that becomes an organizing tool. I mean, just imagine at Panera, we had a 125,000 people. How do you get them all aligned with what we're trying to create if you can't put it into words?

AI assessment note: “Totally. Concept essence was what we started every business and every business we're in”

Q Is New York a good barometer then? Like if it works in New York?

A No, it's the funniest thing. People come from Europe all the time. They all go to New York. It's the worst market because it's not the rest of the country. It's not representative. I'll tell you a quick story. And we'll go back to the act three thing. Uh, one of the first discussions I remember having with Brett Schulman, our CEO down at Cava, I said to him, Brett, right? You, you know, you and the sweet green guys, you all went out, you know, you started in DC, and then you went out to LA as your second market. I said, here's the deal. I said, what really matters is not how you do in LA, in Malibu, in West Hollywood. What matters is how you do in Fredericksburg, Virginia. Mm-hmm. You, you make it in Fredericksburg, Virginia. You do two to three million a unit. I'll show you a thousand locations in America. That's the key. And, and I will tell you that if you're building a business of mass scale, it isn't New York City that matters. Um, it isn't LA that matters. It's everything in between. And can you offer people something of quality and substance? Uh, it's, it's a different environment to compete in. Um, New York City costs are three to four times higher. It's, it's, if you're an, you know, if, if you're really good, you can make it, but it's very difficult.

AI assessment note: “No, it's the funniest thing... It's the worst market because it's not the rest”

Q you're serious about selling, the tech behind the scenes matters as much as the product. Upgrade your business and get the same checkout that I use. Sign up for your one dollar per month trial period at shopify.com slash knowledge project, all lowercase. Go to shopify.com slash knowledge project to upgrade your selling today. shopify.com slash knowledge project. And then what are the major clicks to get us to Kavanaugh?

A You know, it's interesting, so I, I, I left Panera. I had always had interest in a number of other little businesses, and I was doing, after I left, I was doing a lot of speaking on the pervasive short-termism in the U.S. capital markets, and how, not just our, our body politic, but our capital markets, and how that was Essentially making us less competitive. It was, it was not helping our GDP growth. If we're not thinking long-term, we're not going to have innovation. If all we want is, is to pop the stock, it's short-term cost-cutting that drives it. One of my, my associates, a guy named Keith Pascoe, oh, I, had worked with me at Panera, said, why don't you take your own money and put your money where your mouth is? And I ultimately took Roughly two hundred million dollars of my own money, no LPs, no external folks, just my own money and a bit of money from some of my partners, um, some of the people that chose to join us and took some of the people I had worked with and decided to go do it. And essentially I created a investment vehicle, because it's not a firm, it's called Act III. You can figure out where that comes from, Obonpan, Panera, and now Act III Holdings. And within eight weeks of, of, of leaving Panera, had gotten involved in our first really real deal, which was Cava. I had been an investor in Cava, uh, when it was two restaurants, just a little something. And a…

AI assessment note: “gotten involved in our first really real deal, which was Cava.”

Q And the term you're talking about is Pampered Chef. Can you walk me through that? What was that like?

A It was really interesting. So I took the role at Pampered Chef having no prior experience operating a business. I had been at Berkshire for about five years. I really had a view that the investing landscape was shifting, and more value would be created going forward on the operating side, but that very few investors actually have operating experience, especially on the more buyout side. You see it more in venture, but less on buyout. And I thought I'd be a better investor if I went and Got out of the boardroom, got into the war room, and actually went and operated a business. So I decided to become CEO of Pampered Chef. Pampered Chef was a business that was in need of transformation. It had been in decline since Berkshire bought it for about 10 years, and the fundamentals were intact. It had a really strong brand and a strong channel, so the moot was really there in terms of the business, but it had lost its way. Not dissimilar from a lot of ebbs and flows of consumer businesses, Where you grow, but your customer changes or the world changes. And in that case, the world had changed quite significantly. And the internet had come along in the early 2000, which had fundamentally shifted the business. And then the customer started shopping differently and shopping online. Um, Pampered Chef was originally started 45 years ago now by Doris Christopher in the basement of her home to r…

AI assessment note: “I took the role at Pampered Chef having no prior experience operating a business.”

Q And then you immediately went to HBS after. What was the decision-making process like to just do an undergrad and then right into HBS? You knew what you wanted, I assume?

A I think there were a couple components. One is I had a mentor who had done something similar at a different school, and she had really advocated if I knew what I wanted to do, that it was a path that allowed more efficiency and also not having to revisit it later in life. At that stage, I had found business. I had found investing. I knew I was passionate about those areas. I felt like I had a Clear direction of what I wanted to go do. I also think going straight from college to business school, which I advise the students now, is you're really on three metrics. You need to make sure you're ready. Socially, you're going to be with students who are much older than you are on average. Academically, can you bring something to the classroom that's valuable and insightful? And then career-wise, you're going to be competing for jobs with other people who have more experience than you. Socially, I'd always felt You know, like I was older than my peers. I think the nature of growing up again in a farm or a family business is you oftentimes just get more independence and you age a little bit quicker. Second, I think in terms of academically, I hadn't been in a traditional career, but I had run our family business from, you know, a young age, and so I felt like I had experiences to draw from that would help me in the classroom and be relevant. And then third, from a career perspective, I …

AI assessment note: “I think there were a couple components. One is I had a mentor”

Q We've already talked a little bit about management, and I think most of our listeners will understand a little bit of immersion of safety enough for the conversation anyway. What did you mean by more potential? Is that like a lottery ticket?

A No, it's less a lottery ticket, but really, like, where's the opportunity to sort of grow this business, and what does it look like? So, for example, we partnered with a company, Marine Concepts, sells boat covers. Now, when we partnered with the company, it was started by a gentleman Randy Kent, based at a lake of the Ozarks, He had a facility and a market in Lake of the Ozarks. He had great market share there, great NPS. The product was incredibly, um, you know, strong. He had moved a little bit and sold some in Florida, but really he hadn't expanded beyond that. So the more potential there was, can we take this company that has a great product, has a great reputation, great NPS, great margins, and expand it? And in this case, we wanted to build out a dealer network. So can we expand that through a dealer network and growth? So that was the more potential in that business was How do we expand it and doing something that they're not doing today versus a business where you may come in and it's already at full potential, right? The business is operating super well, not as many growth drivers or growth opportunities left where, what are you going to go do? Like, it's growing in GDP probably, like, it's going to be hard to really go accelerate growth in Coke, whereas for us, playing in the mid-sized market, there's a lot more opportunity. Or JM Tess, that was a forty-year-old busi…

AI assessment note: “No, it's less a lottery ticket, but really, like, where's the opportunity”

Q What are some of the lessons you remember from growing up on the farm and the responsibilities that you had at such a young age and how you think about that in relation to parenting now?

A I joke, I spent much of my life trying to get off the farm and now I want a farm for my own kids because I think it's such a valuable landscape to learn and to learn work ethic and commitment and problem solving all the things that come with, with being on a farm. My dad, you know, he owned this farm and he loved it. And so the first Lesson I learned. When you find something you love, it really is a passion and something that you enjoy, and you're not really working. My dad worked harder than anyone I've ever seen, you know, late at night, early in the mornings, all summer long, all throughout the winter. He took a small break, but that was about it for him, and it wasn't working. It was what he loved. That passion was something that I recognized and saw early on. Second, I learned a lot of independence. On a farm, just the nature of it is you're figuring things out. There's a lot of inherent dangers or risks I was driving when I was, you know, 1112 years old on the farm, not necessarily on the road yet, but I learned how to navigate unfamiliar situations, which was an important lesson for me early on. And then I also learned, you know, in essence business from a very fundamentally young age. When I was probably in third, fourth grade, I started running my own farmer's market stand, and so my dad would take me down in the morning, drop me off, I would run it for the day, and he…

AI assessment note: “now I want a farm for my own kids because I think it's such a valuable landscape”

Q And then when you talk about sort of like rallying your, the people like you and making, is that spreading your surface area out? So it's like, you're not just attacking me, you're attacking everybody who's like me.

A Yeah, so I, I sometimes refer to an equation in physics, which is P equals F over A. The pressure equals the force divided by the surface area, and it, it's very intuitive, right? Like, the same amount of force, if you spread it over a wide surface area, doesn't exert a lot of pressure. So think of, like, a big sheet of paper that's pushing down, versus if the surface area contracts, then the same amount of force creates a lot of pressure, so, like, a needle can puncture through. So, like, uh, A sheet of paper, really hard to puncture through. Needle can puncture through. Or it's the same when you're trying to rip fabric. If you're just tearing fabric, it's really hard. But if there's a tiny nick already, the whole thing just comes open. And so the way to think about this is if you're trying to relieve pressure, you don't get to change how much force is coming at you, but you can change the surface area. You can spread it out over more surface area. You're not just attacking me. You're attacking all of us. You're not just attacking, let's say, Sub stack or a sub stacker for a specific post. You're attacking all independent writers who are trying to assert their freedom of expression. That's a way to diffuse the pressure on you and rally people to you in a very powerful way. And then if you're ever on offense, not that you want to be the antagonist and go after someone and attac…

AI assessment note: “you don't get to change how much force is coming at you, but you can change the surface area.”

Q Yeah, definitely. One of the things you said that got my attention in a previous interview was that you have second strike capability. What does that mean? Unpack that for me.

A It's, it, it goes, it relates to, to deterrence. So you might not want to be the aggressor. You might not want to be out instigating and starting fights, but you want to establish that you're not a soft target. And being a hard target can look a bunch of different ways. So at Shopify, one of the things that we're really proud of, I'm on the board, and we have this wonderful general counsel, Jess. One of the things that we've been really proud of at the company is that Shopify has been in the past a victim of patent trolls that just go over, they just go out to companies and attack them, and then they settle, and then they get money that way, and Jess and her very strong team have decided that they're going to fight it every single time, and in the short term, super expensive, huge Huge pain. Again, you, you take the pain up front so that you don't have to live with chronic pain for the rest of your life. You get the surgery now so that you don't have to deal with it, and now Shopify gets no patent rules. Zero. Zero. And so just establishing yourself as a hard target, or we talked before about Palmer, and if you cross him in any meaningful way, he will guaranteed head back. He will not let it stand as a matter of principle. Doesn't matter legal advice. Doesn't matter PR. But like, He won't let it stand. You need to have something about you that's a little bit spiky. You need to …

AI assessment note: “It relates to deterrence. So you might not want to be the aggressor”

Q Actually, walk me through that. Why does he love inventory?

A Well, because everyone else hates it. I think it was a contrarian element to it. Everybody went to business school and learned that extras inventory is, uh, evil and carries working capital costs, et cetera. But he's in his business, which is airline, airport, airplane parts, aviation, aviation parts, uh, having excess inventory means you can provide the part on demand, any part, and you have it. No one else does. So people are willing to pay a real premium if you're, especially in aviation. If your line is down or your plane's not flying, we have a whole branch of logistics called Air, Aircraft on Ground Logistics, AOG, Aircraft on Ground. People will pay any price. I once, um, Fluent. This is not what Flexport does, but I know this guy's a billionaire and his plane, his G-Six-Fifty Goldstream, uh, private jet broke down in Antarctica or, uh, in Southern Chile, like right next to Antarctica. Somebody crashed, uh, like a tractor into the wing and he called me. He's like, can you get me a, I need this, I have the wing. I need to fly it to Chile. I will pay any price. Like, and then connecting with this guy, he told us, like, 10 times, like, if there's a way to pay more to get this there faster, we will do it. And so, being the guy with all the parts, uh, for that type of customer.

AI assessment note: “having excess inventory means you can provide the part on demand, any part”

Q So let's go back to Y Combinator. In your, you're there with your brother. In your, you apply, you get in. Uh, at that point you have the idea for Flexport?

A No, we'd already gotten licensed. Um, and that was the thing, like we had the idea of a debate between me and my brother and our other partner who had the idea for Flexport. We all claim it. Uh, but first email that I can find like discussing this was like in 2008 or nine. But it took a long time to get licensed by Customs of Border Protection. Had to go through an FBI background check. Had to do a whole bunch of, yeah, it just takes years. Um, so it was when we got the license from CBP that I left, stepped down, and started Flexport, and that was about six months before YC started. I forgot the timeline of the application, but about six months before. So we had, we didn't, like, we had maybe one customer. We really didn't have any customers, but we had a V-One of the software app, Had the license, like, had a bit of a strategy for what we were gonna go do.

AI assessment note: “No, we'd already gotten licensed... started Flexport, and that was about six months before YC”

Q What happened when you told PG you were stepping down?

A I didn't tell him until later. I forget when, but like after I'd, I was the chairman, so I think I was already at Founders Fund. He was pissed because he thought I should go be a partner at Y Combinator instead of Founders Fund first off, but I went for a walk with him when he came back to Palo Alto one time, and he, um, he asked me why he did it, why I stepped down, and I said, well, I thought, I think Dave's going to be better at the job than I am. That was genuinely true. That's why I did it. It wasn't because I was burnt out or something. I just thought he would be better for the company. I thought we needed to mature and be better at operations and better at building tech than we were. And I thought he'd be better at that. Um, and Paul had this amazing line. He said, uh, that's like saying this other guy would be a better husband for your wife. Might be true, but like, don't act on it. Like, this is your company. You need to stay in there. I thought that was funny. Super hilarious. And he then told me, okay, if he's better than you at these things. And he asked me, is this your life work? I heard you say that earlier. Is this your life's work? Is Flexport your life's work? And I was like, yeah, it is. And he's like, well, then you need to figure out all the things that he's better than you at and go learn them. Go learn them from him, learn them from other people. Like fig…

AI assessment note: “He was pissed because he thought I should go be a partner at Y Combinator”

Q Are there any particular lessons or memories that stand out for you?

A There are two of them that I speak about, so one is that I was, I was a psychologist very early on. That was, that was very clear. I, I wrote an essay, and before I was 11, Remember where, because it was, it was a German counterattack. It was during that period. We were in Paris, and I wrote an essay about faith and religion. And it was a very pompous essay. I had a little book that was, that was titled What I, what I write about what I think, something pompous like that. But the essay started with another pompous thing that I quoted Pascal. My, my sister had passed her exams, and I had read, you know, she studied some Pascal, and I had read it, and Pascal had said that Faith is God made sensible to the heart. And, you know, little me, I said, how true. That's what my essay said. And then, but then, I said, but faith is really hard to get. You don't say it's God all the time. So that's what religious pomp is for. Cathedrals, organ music, they give you, and I call that ersatz faith, sort of a substitute faith, because it's a, it's a similar feeling. It's got to do with God. And that's what you must do with it. That's, that's a psychologist. So it's clear that, you know, that was my calling, and so that's one significant memory of my childhood.

AI assessment note: “that's one significant memory of my childhood.”

Q Do you have any insights on how to do that?

A Keeping them short. You know, I'm not a professional at fixing meetings, so I, I have, I have a few ideas, but not an incomplete view. The, the question of structuring the meetings to be discussing topics one at a time, that I think is, is really useful. I'll give you an example. I mean, it's something that I suggested when I was consulting. But for some reason, people didn't buy that suggestion, so you, when an investment is being discussed, say, by an investment firm, some staff people, if it's a big investment, staff people will prepare a briefing book. With chapters. Now, our recommendation would be that the staff should end each chapter with a score. How does that chapter, taken on its own, independently of anything else, affect the likely decision? And then you could structure the meeting that discusses this, and the meeting of the board, say, to discuss these scores one at a time. That has the effect that I was talking about earlier, making the decision, making the judgments about the dimensions, we call them mediating assessments, is a little jargon term. The mediating assessments come first, and then you have a profile of them, and then you make a global judgment, and you can structure it. So if the staff has presented a score, And you discuss in the board, do we accept their score? You're forcing people to have a look at the evidence.

AI assessment note: “structuring the meetings to be discussing topics one at a time”

Q What do you wish that everybody knew about psychology that you don't think that they do? If that was class one, what's class two?

A You know, class two, which is a development from class one, you know, it's, it's the same idea extended. Class two is that behaviors don't necessarily reflect the personality, but behaviors have a lot to do with the situation. And so if people behave in strange ways, look at the situation they're in, and what are the pressures in the situation that make them act as well. So there is a bias that the social psychologists, well-known social psychologists call the fundamental attribution error, and that means that when you see people acting in some way, you think that it's because of their personality that they do it. That may not be the case. It's Quite likely that the situation is making them do it. I'd like people to know that motivation is complex, and that people do good things for a mixture of good and bad reasons, and they do bad things for a mixture of good and bad reasons, and I, I think that there is a point to educating people in psychology is to make them less judgmental. Just have more empathy and more patience, And being judgmental doesn't get you anywhere.

AI assessment note: “Class two is that behaviors don't necessarily reflect the personality”

Q You mentioned that there was procedures for thinking in organizations. Are there any that stand out in your mind that we could use to elevate thinking, and if not elevate, but give feedback on the quality of thinking to improve it?

A Well, I think one of the ideas that people like the most is an idea by Gary Klein, what he calls the premortem, and that's a, that's a universal winner. People really like that idea, and this is that when you're about to make a decision, a group, uh, not quite, because if you've made it, it's too late, but you're approaching it, and then you get people in a room, can be the people who are making the decision, And he said, suppose it's two years from now, and we made the decision that we're contemplating, and it turned out to be a disaster. Now, you have a page in front of you, write the history of that disaster in bullets. That's the premortal, and, and it's beautiful as an idea. It's beautiful because when people are coming close to a decision, it becomes Difficult to raise doubts or to raise questions. People who are slowing the group down when the group is nearing a decision are procedures really, you know, it's annoying, you know, there's, you want to get rid of them. And the premortem legitimizes that sort of dissent and that sort of doubts. Not only legitimizes it, you know, it rewards it. And so that's a very good idea. I don't, you know, I don't think that it's going to prevent people from making mistakes, big mistakes, but it could certainly, it will alert people to possible loopholes, to, to things that they ought to do to make a safer decision. So that's a, that's a …

AI assessment note: “one of the ideas that people like the most is an idea by Gary Klein”

Q How, how did you develop that skill? What does that look like? Like, how do we make other people world-class or better at storytelling?

A Practice really helps. You know, now I get to do, like, the knowledge projects. It's like, this is a big podcast. I'm not trying to, you know, blow smoke or flatter you, but this is a big podcast. Um, I didn't start by doing the Shane Parrish podcast. I started by doing a lot of tiny little local podcasts and watching them over and over again. You know, I know there's some people that, that hate watching themselves on camera. Uh, maybe this sounds like narcissistic or something, but I, I don't mind. I actually like the, I like watching it because I was able to remove connector words. For example, I say, um, A lot less than most people do, because I've watched myself do it a lot, and I'm like, I'm gonna fix this particular issue. That's the first thing. The second thing is, I think a lot of people end up trying to emulate other speakers. I see a lot of, in tech in particular, there was an era where, like, everyone kind of sounded like Gary Vaynerchuk for a little bit. I know Gary well. He's a friend. I think Gary is an incredible, you know, speaker, and his keynotes are legendary, but that's his style. And then, You see other people that try to do the whole Rogan thing, or the Shane thing, or the Tim Ferriss thing, and, and I don't, I never tried to be somebody else. I wanted to be my, the version of me, which is a little bit excited, not always as perfectly articulate. I speak …

AI assessment note: “I started by doing a lot of tiny little local podcasts and watching them”