The Atlas Society Asks Peter Worrell

January 25, 2023 01:00:25
The Atlas Society Asks Peter Worrell
The Atlas Society Presents - The Atlas Society Asks
The Atlas Society Asks Peter Worrell

Jan 25 2023 | 01:00:25

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Show Notes

Join CEO Jennifer Grossman for the 137th episode of The Atlas Society Asks where she interviews Co-Chief Executive Officer Peter Worrell of Bigelow LLC about business and the influence of Ayn Rand on his entrepreneurial journey.

Peter Worrell is the Managing Director and Co-Chief Executive Officer at Bigelow LLC where he guides entrepreneurs seeking to sell or merge their businesses. In addition to his deep admiration of Ayn Rand, Worrell has a particular interest in the intersection of psychology and finance and its relevance to building enterprise value in the private transaction market.

 

 

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Episode Transcript

Speaker 0 00:00:00 Hello everyone, and welcome to the 137th episode of the Atlas Society. Asks, my name is Jennifer Anju Grossman. I go by my initials, my friends call me Jag. I'm the c e o of the Atlas Society. We're the leading non-profit organization introducing young people to the ideas and literature of Iran in fun, creative ways, like animated videos and graphic novels. Today we are joined by Pete Morrell. Before I even begin to introduce our guest, I wanna remind all of you who are joining us on Facebook, uh, zoom, Instagram, Twitter, LinkedIn, YouTube. You can use the comment section to type in your questions. You can get started now, queue them up. We'll get to as many of them as we can. Pete ll is the managing director and co-chief executive Officer at Bigelow, l l c, where he guides entrepreneurs seeking to sell and merge their businesses. Speaker 0 00:01:03 He is the author of Enterprise Value, how the Best Owner Managers Build Their Fortunes, capture their Company's games, and Create their Legacy. Uh, he also hosts the Enterprise Value Podcast, which I'm delighted to have, uh, been on as a guest. So we're turning the tables today. Uh, in addition to, um, we, we kind of connected first because of our interests in, uh, Ayn Rand, as well as in the Abundance 360 community. Um, Pete has also, uh, particular interest in the intersection of psychology and finance, and its relevance to building enterprise value in the private transaction market. Pete, thanks for joining us. Speaker 1 00:01:54 It's great to be here. Jag, I really, uh, have been looking forward to this. So looking forward to the next, uh, hour or however long we have together, Speaker 0 00:02:01 It'll be an hour. So let's dive in. Uh, one thing that I know our audience always likes to learn about is our guests origin story where grew up early, influences that fed your interest in, in entrepreneurship and your particular, uh, role. And, and, uh, I might say calling to help entrepreneur owners, um, unlock their value, the value of their enterprises, and transition to the next stage in their lives. Uh, and how you built Bigelow into an m and a powerhouse. Where did it all start? Speaker 1 00:02:40 So, JAG, I think I should mention that I, uh, grew up in the 1960s and seventies. I went to high school and college, both in the 1970s, and so in North America, when you grew up in the sixties and seventies, certain things were happening. And I would say that the reason that I ended up, uh, as an entrepreneur and working exclusively with entrepreneur owner managers is because as I grew up, I saw the end of the age of the, uh, bureaucracy. So I would say, you know, maybe coming out of World War ii, the forties, the fifties, maybe even the sixties, were a time where the bureaucratic world was at its height in North America. Uh, there was a lot of top-down hierarchical things that were going on and that were successful. And then, you know, maybe about 1980, suddenly, um, through a number of technology changes, the tables turned and the playing field was leveled for entrepreneurs. Speaker 1 00:03:34 And I, I saw this, I saw it in my own family. My parents are working people who owned a small business. And I, uh, as I got out of business school, I was trying to make some decisions about, uh, what my future was gonna be. And candidly, most of my, um, my job potential was with the big bureaucratic world. Because when you came outta business school, what'd you do? Did you go to work for Pepsi or did you go work for, you know, a computer company? Of which in the Boston area, there were, um, countless more then than there are today. Uh, but the, a great thing happened, which was the semiconductor chip grew in popularity. The I B M PC was introduced in 1981. The, uh, internet, we plugged into the internet in 1996, and like those combinations of things completely leveled the playing field for entrepreneurs, which is what attracted me to real, the realization that, wow, if you and I play a game right now, and I ask you to think about what are the few, what's the one or two of the things that have most improved your quality of life in the past four or five years, or even four or five months, I bet you you're going to name things that have to do with technology or podcasts or, you know, being able to, uh, listen to books online or being able to use video instead of business travel or things. Speaker 1 00:04:57 All of which, if you think about them, were invented by entrepreneurs. You didn't mention that the, um, social security was, um, clicked to c p I. You didn't mention a new government program in the agricultural department, because those aren't the things that brought you great quality of life. It's really the entrepreneur world and sector that did that. So I came, uh, out of, um, I came into adulthood really at a propitious time where suddenly the age of the entrepreneur was upon us. And it's, uh, just an extraordinary time to be an entrepreneur, owner, manager, and unlike it in the world ever before. Speaker 0 00:05:36 And of course, um, we connected over I Rand and Atlas Shrugged. Atlas Shrugged is unique in that it is, of course, it's a love story. It's a mystery. Uh, it's sort of a sci-fi epic, but it's really alone in being a story about, uh, business, about capitalism and, you know, the individual entrepreneurs and, uh, what their motivations are, what their challenges are, how they're perceived. So, um, at what point did Iran's books and and literature come into your life? And any favorite characters or, or themes? Speaker 1 00:06:19 So, um, I think for me, the, the, that she came into my life probably in my time in high school. And then I studied, you know, fountain had Atlas Shrug, maybe some other of her shorts, uh, of her short writing works in college or graduate school. Uh, but I'm really at autodidact. I really, you know, never stop, uh, learning and reading. And so the more I dug into Iran, the more I loved her. Uh, I think, as you know, I have another business in addition to Bigelow, which is a real estate development business, which is name is called Dagney Taggart. Um, I guess I was in love with Dagney from the time that I met her. And part of my, um, appreciation for her as an individual has to do with her not only her willingness to be an independent critical thinker, but her lack of desire to justify her lack of need to explain or justify why she thought what she thought or why she took the decisions that she thought, which in the world that we live in, this mass popular culture that we live in is still largely a world of bureaucrats. Speaker 1 00:07:35 And so if you are an independent critical thinker like Dagney is, like you are, like I am, it can be a very isolating place to be. In fact, it could be kind of a lonely place to be. So it makes sense to me of why, um, when on that particular work, when Dagney met or put, met Hank Grier in, uh, that they, they connected so, so critically because if you're living the world that we live in, it isn't that frequently that you run into someone who feels that same way, that same independent critical thinking. And when you do, you have to, you have to put your arms around. I'm gonna hold on as tight as you can. So, uh, actually, uh, one of our, my businesses is named Dagney Taggart, another one actually is named John Gat. Um, so, um, yeah. Uh, and someday when you come to Portsmouth, New Hampshire, you'll see one of our pieces of real estate where we had a, um, a very talented muralist from Italy actually do a mural for us in the lobby of one of our big office buildings, which is right out of, uh, Ayn Rand. Speaker 1 00:08:38 It went, I don't know where he got the complete inspiration, but when you see it, you won't mistake it. And so, um, yeah, it's just a little, um, it's a little reminder to me and to people around us to be able to appreciate that different point of view. I, and, you know, uh, my position on this is clear through which all good things come right. So, uh, really, uh, my love for that began, uh, started early. It didn't ever ebb. I will tell you that, um, I watched the three part video of, uh, Atlas Shrugged. Um, I found it, I think, on Amazon. And, um, I may have watched it, uh, a couple years ago, maybe 2019 or 20. And I was, uh, shocked by how it was very difficult to discern the picture that Ayn Rand had painted, or that the directors had put together in this video that's different from the world that we live in. Speaker 1 00:09:47 It seemed to be the world we live in. It seems so much so that my wife, who was a family physician, so she's not connected to this world at all, but happened to be passing through the room and heard a couple of these things going on in the video and stopped and said, when did that happen, <laugh>? When did they decide that you could only own one business? And literally asked that question. And I thought, oh, man, we're just living in a world where this is too, too near to reality, b2b, that fun. So, um, yeah, I hope that answers your question. Yeah, Speaker 0 00:10:15 No, it's, it's interesting. I remember when we had, uh, Peter Thiel was our honoree at our gala couple of years ago, and, and he talked about also like you having read, uh, I Rand earlier, but it wasn't until, you know, the seventies that he started to say, well, wait a second. You know, this is, uh, this is starting to happen. And it just, he recognized the kinds of challenges that she dramatized and Atlas shrugged in, in what was happening in the world. But fortunately, I Rand, um, said, Atlas Shrugged is not a prophecy of our unavoidable destruction, but a manifest manifesto of man's ability to avoid it if you choose to change course. And I also liked something that you just said about, uh, the characters and the way that you identified with them, because a lot of times, one of the slams are, well, the characters are flat, but I think that they were in many ways poignant, particularly with regards to their loneliness. Speaker 0 00:11:29 And, um, I think that that is something that I Rand herself experienced even, you know, though she was famous, um, but she, uh, she was also isolated. If you think about the time when she was, you know, arriving in the United States and in, uh, and then the thirties and the forties, and she created Atlas Shrug in, in a way, as a way to not be so lonely to create these characters that would live within her mind. And, and, uh, and now they live withs. So, um, I wanna talk now about another very important book, which continues to live in my mind, and that is enterprise value. Very proud that I have a, uh, inscribed copy here. Good. Um, and, uh, also, you know, my usual thought, and I, I won't name names, but, uh, so often I'll, because I like to both read and listen to books, and, uh, so often they'll be a brilliant writer, but when he decides to narrate his own book or her own book, they just don't have the voice for it. Yours is the exception though, because you narrate it. And, uh, I, I think you did a, a great job. So, um, tell us maybe who you wrote it for and also perhaps who you did not write it for, and what was your process employing it together? Speaker 1 00:13:07 Yeah, so thank you for that. I, um, felt called to write this book because I had many friends, uh, and clients, uh, who after they had, uh, built a, an enterprise of great value, and after they had gone through a capital gain transaction with our firm, said to me, oh, Pete, if I'd only known that when I started, instead of finding out now. And I had this re reprise many times to me, and I felt, well, actually, you can know this stuff that I'm writing about in advance. And it is, it's better if you know it in advance. It's completely knowable. And so I set forth to write a series of stories so that entrepreneur, owner managers, who if they're curious and they wanted to learn about it, could see perhaps a little of themselves in these stories. These stories are all 100% true. They're not mockups of like wishful characters, and they're not stories that have been matched together. They're actually true piece by piece. I've just changed the names in them, but actually, um, my friends who have read the book know who they are. And I would say that, you know, going back to Ired for a minute, JAG, um, Speaker 1 00:14:22 You know, our, uh, mass culture makes it very easy for young people to conform. I mean, that's what our government school system is about, right? K through 12. This is about conforming. If you, if you conform, you sit in the front row in the right hand seat, and if you ask the teacher every time as they're about to leave, is that gonna be on the test? Well, then you'll know what to memorize and conform. And yet you see people who can or have a difficulty conforming, or in some cases they can't conform. And they are brilliant independent thinkers, uh, and they are very isolated. Um, and what this book that I wrote made me think about was that this is for them. I, um, very affectionately call these entrepreneur owner managers, my a d d dyslexic misfits, who, um, typically, uh, hadn't done well in, uh, formal schooling who frequently are, um, absolutely expert in their domain. Speaker 1 00:15:22 They're not necessarily risk takers except in their own domain. Uh, and inside their domain. They are frequently world-class, either as technical prodigies or as, uh, understanding the need of their customer and being able to persuade their customer to try something new. And it's really an, oh, by the way, it's really an accident that in fulfilling this calling that they have, that they build something that's of great value. And frequently they get to a point where they realize that they've built something of great value, much greater value than they ever dreamed that they were going to have. And they, of course, like all of us can sense a little, um, uh, loss aversion, and they get to a point where they feel like, gee, I've really worked a long time. Wouldn't it be great to put this business together with a firm that could sustain it beyond me? Speaker 1 00:16:13 And if they've created something of great value, you see, actually they've created a big challenge because it's hard to ch to transfer the ownership of something of great value to something beyond me. I mean, usually it's not the management team because they don't have the capital. Usually. It might not be the family. Ditto, same reason. So there, there's a complex series of a, of emotions there, which are, on the one hand have to do with purpose and meaning and, uh, intention. And those things are all wrapped up with this thing that's called the enterprise, where it's, you know, uh, the bureaucratic, um, management schools would teach more about management, management, management. Whereas with entrepreneurs, it's really more about leadership. So that's the reason I wrote the book, is so they could see a little bit of themselves in the book. I love the fact when people call me, as someone did this week, they cold called me and said, I read your book. Speaker 1 00:17:06 I'm on page one 70. Um, and it really allows us to be able to find entrepreneur, owner managers who resonate with those thoughts. Mm-hmm. <affirmative>. And, um, some number of them probably we don't hear from because they read it and they didn't like it, and they closed the book, and, but they don't resonate. And that's, that's cool with us too. So we wrote it for entrepreneur, owner managers, seasoned, successful ones who've already gone through the startup phase. It's not written for it's Silicon Valley startup to sell out. It's not written for want to be entrepreneurs. It's certainly not written for corporate executives. I had a very funny situation the other day, JAG, um, I take yoga lessons and the fellow that I take yoga lessons from, I mean, he is really into it. I mean, he went to India for several years, he's the real deal, and he's, uh, 10 years younger than me. Speaker 1 00:18:02 And as we were chatting recently, he said something about, you know, something like, oh, this, you know, it's too bad that, oh, I know what it was. He was thinking about, um, psychedelics. And we were chatting about the prevalence of psychedelics and some studies going on at John Hopkins and other places. And he said to me, isn't it too bad that the psychedelics in, you know, domains gonna get taken over by those capitalist people and they're gonna turn us into for-profit? And I said, dude, wait a minute. What you're talking about is not capitalism. What you're talking about is corporatism, where big bureaucratic organizations with people at the helm who have no skin in the game, are making decisions that aren't necessarily in your best interests. Those aren't entrepreneurs. And he said, wow, no one ever explained that difference to me before. And I thought, Ooh, that's scary, right? Speaker 0 00:18:58 Yeah. Speaker 1 00:18:58 Here's a guy who should know better. Speaker 0 00:19:00 Interesting that your, uh, a fellow yogi, um, reminds me of Chip Wilson, who've also had on this show and honored at our day. He's become a big, um, supporter of the Atlas Society. And, uh, he, we, we tell his story also in one of our drama lives. And he, he definitely was a, a misfit growing up, and he did not excel in school. And, um, that was, you know, he didn't know what he was gonna do, and he ended up going to work on the Alaska Pipeline. Red Atlas Shrug changed his life. But, um, yeah, I, I, I think from leading his autobiography, it seems that there were many aspects of his transition that he wasn't, you know, prepared for. And I, so I, I thought it was interesting in your book that you talk about, well, when you start to contemplate, you know, at some point, like maybe you're 30, but 10 years, you know, 40, 20 years, however many lo long in, in the future, you're, you're gonna, you're not gonna be running that, that your company forever and kind of beginning early to, um, to identify and cultivate advisors that can really help to prepare you. Speaker 0 00:20:24 Yeah. Speaker 1 00:20:25 So there's, there, there's so many times, JAG when, um, when an entrepreneur begins an enterprise, and they're doing it because they see it, particularly see a need in a customer, and they fulfill a customer need, and, um, you know, time goes on and they do great things, and they build an organization. And one of the reasons that they started their organization was to increase their freedom. I mean, these are, these are people who, uh, for the most part, just to be ridiculous on this example, they can't go to work for Bank of America because they, they would be just clinically depressed, or they'd get fired so fast, it wouldn't work. They're not rule followers. And so, uh, when they built something, they built it to experience their freedom, but at some point, they may have inadvertently, um, hurt their freedom. Now suddenly they have hundreds of employees who are counting them on them to have the business be successful. Speaker 1 00:21:25 And so I frequently ask entrepreneurs, are you driven by the past or are you being called to the future? Because if you're being driven by the past, by those needs of the past, I kind of get what you're doing. But what is your future and what is calling you about your future? And frequently that's when an entrepreneur might say, Hey, you know, I've built this thing. I love it. But, um, putting it in the hands of a new investor who can take care of it for the next several generations, that's not a negative. That should be my crowning achievement, that I get a chance to pick who that next investor's gonna be. So really in the way that we've thought about it, we try to turn the whole, that whole, uh, world upside down to be able to say to the entrepreneur, owner, manager, you can choose from a group of worldwide of the best investors who might be the next best investor for your firm, and thereby achieve your freedom again. Speaker 0 00:22:26 Well, it's interesting what you just said about going into an enterprise, wanting to be free, and then finding yourself all of a sudden, um, beholden responsible, right. Uh, feeling guilty even. And, um, it again, kind of goes back to Atlas Shrug, um, that these characters that, uh, felt that their business was almost even more important than themselves and their own, um, freedom as the government was making it more and more impossible for them to, to operate their, their businesses. And it's a contrast from sort of this caricature of A C E O or an owner as, uh, only thinking about himself and not giving a thought to others. And as you describe in the book, it's not been your experience that they feel so responsible for their employees and, and their customers and their suppliers that they, uh, they, they don't always, um, think about their own desires or their own needs. So Speaker 1 00:23:39 Yeah. Yeah. Look, uh, uh, we believe, I believe, and and our, our team at Bigelow believes that entrepreneur, owner managers are the most powerful pro-social force on the planet. They're the most powerful pro economic force on the planet. What do I mean by that? Very few people understand that when an entrepreneur, first of all, to build sustainable, uh, wealth in our world only happens one way. It happens exclusively by being an entrepreneur. So, look, Jeff Emmelt was the president of GE for, uh, 15 years. And, uh, when I checked this recently, he made more than 25 million a year every year for those 15 years. But there's no Jeffrey Inel charitable foundation at the world class level because he wasn't an entrepreneur. He didn't have skin in the game, he didn't have capital at risk, and he did, therefore didn't have a capital gain. Our clients all have these capital gains. Speaker 1 00:24:36 And what is a very little known fact about them, JAG, is that, um, in a, uh, 40 transaction look back that we just did, we looked back at 40 transactions, and out of those transactions, our clients, on average gave 10% of the transaction value to their employees. The variability around the average was from 0% to 33%, but on average it was 10 within, in some cases, 5% want to one group of employees and another 5% want to another group. These people have given an opportunity for the people on their team to have a capital gain that they never would've had otherwise. And so actually, um, they formed an enterprise to give themselves more freedom. They built it along the way, and when they are, when they do choose to exit it, what they choose on average is to give about 10% of the value to the people all around them, which is abs just remarkable. Speaker 1 00:25:38 So in those 40 transactions, I'm not gonna get this right, but there was, uh, I'm gonna say a billion dollars of, uh, capital gain given away to the, um, employees of those firms. So that's, that's big, right? That's, that's, those people don't get a chance to do that in any other way. And for many of them, it's, it's life changing. In some cases, they are part of a senior management team. In some cases they're part of an esop, an employee stock ownership plan, but it doesn't really matter. All of our clients, uh, virtually have this same discussion. So it's, it's a very fascinating thing that happens. Speaker 0 00:26:17 Now, um, we've got questions pouring in, and we're gonna get to some of those. I have many more of my own, but we just, uh, mentioned your team at Bigelow, which reminded me of, um, some research that you guys conducted independent research, uh, into the positive personality traits, most common among entrepreneur owners, and five rows to the top. Some were, you know, expected like, um, leadership and grit, but there was one trait that, uh, showed up in the top five that I wasn't expecting, uh, and that was gratitude. So can you tell us a bit about that research and any thoughts on the role gratitude plays in the careers of successful owner managers? Speaker 1 00:27:09 Yes. So, um, this research was done in conjunction with the University of Pennsylvania. It's using what's called the Via Values in Action. Uh, it, the website where anyone can go and go look at that website and take this via, uh, character strength test. There's 24 character strengths. We applied this to seasoned successful entrepreneurs where we had a very specific, uh, definition of that. And, um, you're, uh, we'd be happy to have you look and read the entire research, which was published in a white paper, or you can read one page. Either one of them is on our website, bigelow llc.com. The five character strengths of seasoned successful entrepreneurs are in order, authenticity, fairness, leadership, gratitude and zest. So what do we mean by that? So, authenticity. Well, that would be what Brene Brown probably calls vulnerability, fairness, how to create a win-win, uh, uh, positive sum game as opposed to a win-lose game. Speaker 1 00:28:14 I mean, entrepreneurs, they, they don't have the scale to, to win a win-lose game. So they, they create win-win games. Um, fairness, uh, sorry, that was fairness. Uh, leadership, not management, leadership gratitude. Uh, you know, a great, a great quote that came out of that research was, I'm so grateful that everything I have, I earned and zest and entrepreneur, owner managers scored two standard deviations higher on zest than the general population. And so it's really, um, if you are an entrepreneur, you can look at these characteristics and maybe learn a little bit about yourself. If you're an advisor or if you work with entrepreneurs, you probably oughta know this because those characteristics are right there. I mean, that authenticity is right there on their sleeve. Uh, I will just very quickly tell you, we did another piece of research with the Harvard Kennedy School on the risk tolerance of seasoned, successful entrepreneurs. Speaker 1 00:29:13 And it had a very surprising, at least to the media and to the general public outcome, which is that it was testing whether or not entrepreneurs are more or less risk takers than the general public. And what it concluded was they are less risk takers than the general public, except in their domain. So in their domain where they understand their domain beautifully well, they're willing to take risks that you and I might say, whoa, that's a risk that I wouldn't take. But they're not willing to take any risk if we just said, Hey, JAG and Pete and this entrepreneur, uh, Jennifer, are gonna go and, um, buy this apartment building together in Beverly Hills. No, no, no, that, that, that's not of interest typically to entrepreneurs. They would say, I wanna be in my domain. So yeah, we have a, a, a great deal of that. We also have one more study I'll mention, uh, which, um, is a study that we did with, uh, seasoned successful entrepreneurs before and after they had a capital gain transaction on what were the most important qualities to them. And it was, uh, absolutely fascinating, um, and will disabuse anybody who thinks that entrepreneurs are in this exclusively for the profit, because it really wasn't about that. Speaker 0 00:30:22 Fantastic. Well, speaking of gratitude, someone is with us that, uh, has pushed the Atla society to, to do more philosophical and creative work on gratitude, gratitude as a self-interested and entrepreneurial value. And that is Jane, the pair, of course, chairman of the board of the Outlook Society. He says, uh, Pete loved your book, great tool for entrepreneurs considering the next stage. And he has a question. Pete, can you explain your view of agency and why private owner companies better align with your view of business versus the incentive problems with scale in public company and agent managers? And any thoughts on how to better align incentives in public companies? Speaker 1 00:31:19 Wow. So Jay, that's a, that's a great question. I'm gonna take it in small bites. So I think what Jay's referring to, JAG is what we would call the principle agency problem. Um, def definition is, uh, a, an entrepreneur, owner manager is a principle. In other words, they have their capital at risk. They don't have just the opportunity for a capital gain or a rise in their capital. They have the opportunity for a complete capital loss as opposed to an agent, which would be an advisor to an entrepreneur. Uh, an example would be a wealth advisor who advises their clients. They could be a great wealth advisor, but they're an agent for the principal, which is their client. In the case of Jay's question, a, um, uh, well, I'll go back to picking on Jeff ml. Um, since he was the c e O of ge, he would be an agent for the stockholders. Speaker 1 00:32:11 He would not be the principal. Uh, that would be the stockholders. And there's, uh, great, uh, literature on this research literature, both in the finance and in the behavioral finance area. Uh, uh, an economist at Harvard, Richard Zeck, Houser has a book, I think it might even be called the Principal Agency Problem. Anyone who's interested can, can learn more about this by just Googling those things. But essentially, um, in my world, chag, I am not interested in anyone's opinion if they don't have skin in the game. I'm like not interested in anyone's opinion. I'm not interested in someone's academic opinion because the, as we know from our current, uh, society, uh, there are opinions about everything that are, uh, of no cost. What interests me is someone who's got an opinion, who's got skin in the game because they have something to lose, and they have that, that means accumulated scar tissue or experience. Speaker 1 00:33:08 To me, while that is super valuable to me, I really want to hear that. So I think what Jay's referring to and what I have a really hard time with, and it's why, for example, I am not an investor in any public companies except for one, which I'm locked up in. But, uh, with that exception, all my investments are in the private market because I dislike the principle agency problems so intensely I see it, by the way, in public companies. I also unfortunately see it in not-for-profit organizations where, um, the profit motive is conceived of as being a very simple thing. But it's not just the profit, it's for an entrepreneur, owner, manager is, as we talked about, it's their, often their identity, it's their sense of purpose, it's their intention in the world. All those things together with their capital at risk mean that they really have skin in the game, their opinion about their business, I'm super interested in. Speaker 1 00:34:06 And so how do you get that to happen more in a public company? Gee, I think we've tried all kinds of things. And I think at the end of the day, uh, it could be that scale itself is part of our issue. I mean, when I think about, uh, Dagney and Hank Reardon, I think about them going forward to, in their organizations, and I don't know if Iran would agree with me on this, but I think the way I read it was that they ignored the public opinion around them. They more or less ignored what the public sector was doing, and they said, we've gotta do this because to do this is gonna bring about great positive impact on people's lives. I see entrepreneurs doing that all the time. I unfortunately don't see public company CEOs who have that same inspiration mostly. Speaker 0 00:34:57 All right. Um, you got a question from Instagram, my modern vault. Good to see you, my friend. Back with us asking. Pete, what do you think is the biggest factor holding people back today from starting their own enterprise? Bad market government regulations? Speaker 1 00:35:19 I think the, uh, three most addictive substances on the planet are heroin, carbohydrates, and a monthly salary. Speaker 0 00:35:33 Interesting. Speaker 1 00:35:33 And I think if you see yourself as existing on earning wages from others, that it is enormously challenging to pry yourself away from that heroin and to think about doing it on your own. But the rewards of doing so, I have seen over and over, and now look, my friends and my clients have these successful businesses, and they're the top 1% of all businesses. I think the s b A, the small business administration would say in fairness, that 50% of all bus startups fail by their fifth year. So I, if you take the plunge and don't succeed, that happens too. But I think that right now, there are so many ways for us to be comfortable in our current existence. And I think comfort is overrated. And I think security is an illusion, and it's up to us to be the entrepreneurs to bring about the positive change that we wanna see in the world Speaker 0 00:36:41 That's going on A meme <laugh>. All right. Also on Instagram. Ha, Callum Fch has a question asking, Pete, do you have any thoughts on small businesses being forced to close while large businesses were able to continue working during the lockdowns? Speaker 1 00:37:01 I was incredibly disappointed by the lack of character shown by our country during the quarantine. People say pandemic, pandemic, pandemic, but really, when they want to talk about the negative stuff that was done to the country, they ought to be saying quarantine, quarantine, quarantine. There was a, uh, pathetically, unscientific, uh, and I would say maybe even illegal view taken by public health officials and by public officials, which caused our country and our place to have great, uh, negative consequences, the extent of which we haven't yet seen. I was appalled that we could go into Walmart, but we couldn't go into the corner store. I did not understand how the virus was so smart. It knew not to go into Walmart, but it was gonna be in the corner store. And so I, I feel like that's an example of where we gave up our freedom to some nameless public health official, which don't get me wrong, I'm sure they were all well intentioned, but none of them were educated or experienced in this kind of thing. And so they gave us what they got, and, uh, it was a tragedy that we had that happen. Speaker 0 00:38:17 Yes. Uh, one of our senior scholars, Richard Salzman, wrote a great piece on this. He said, follow the science in every aspect, which includes following economic science as well. And, um, certainly was just very heartbreaking to see, um, lot of people who had spent their lives creating restaurants or, um, you know, gyms or whatever, not, not make it through. And, um, and also, as you say, I mean, the appalling thing, you know, whether you think the motives were good or bad, um, probably not as, uh, sort of forgiving about that as, as you would be. But, um, you know, there, there was a, once you get a taste of power, it's, it's hard to, that that might be another one of your addictive substances in addition to a month, you know, weekly salary. Oh, that Speaker 1 00:39:16 Salary. Look, I think I'm in, in complete agreement with you, and I, I would say it this way, uh, JAG I would say that when, as Americans, we give up our individual freedoms, unthinkingly, like we gave up the freedom of assembly, and we gave up a lot of other freedoms, just crazy. You're absolutely right. It becomes like, well, we did it then why can't we do it now? And also, I think there's a tendency on the part of even well-intentioned public officials that they want to build the empire, right? They want to build and do it better and better, and they know better than we do. So that's why we end up with that. But I, I felt it was just a, a tragedy that that was the case. And yet there have been some pockets of people who didn't behave that way, who exceed, really excelled, and are further ahead than ever. Speaker 0 00:40:04 I I would say that for the society, 2020, uh, no events, but we managed to find a way in California, in Malibu, California to host our gala <inaudible> outside. You know, we've had rapid tests and all of that. And, um, and we also rejected government bailout money. And that I think was a turning point for our organization as people, uh, respected the integrity and also just the will, we'll figure it out, we'll make it happen. We'll take some risks. Um, and I, I think the risks were maybe more legal risks. Fortunately, no one, uh, contracted covid from that, that outside event. All right. Um, another question now from Twitter. Alexander Ricci asks, people get intimidated by the number of enterprises that fail in their first two years, but isn't this also a learning opportunity? Speaker 1 00:41:04 Yeah, look, um, I'm not at all, um, cavalier about, um, failure. Um, I think that, um, when, you know, I was a, I think a junior in college, my parents' business was forced to file for chapter 11 bankruptcy. Uh, and they, um, you know, had personally guaranteed loans to the bank. I remember the bank officers coming to our house and telling us, telling my parents they were gonna have to sell the house. And I, my mother cried every night for three years. Um, wow. It turned out they didn't have to sell the house. It turned out they worked their way through the Chapter 11 bankruptcy and came out of it, again, a smaller business. Uh, but, uh, there's either success in life or there's learning. And so for me, that chapter, which was extremely painful, was a lot of learning. I mean, I got an MBA in my junior in my summer of my junior year between college years, because I saw what happened. Speaker 1 00:42:13 I saw mis uh, decisions that were made on the part of my parents, and on the part of others, which I could see at the time were the wrong ones. I could see that people were trying to help. I could see that if you let yourself get into the legal system in our country, you are absolutely a, uh, you are absolutely dependent upon being in the system as opposed to trying to resolve issues yourself. And so I'm all about, uh, with your question or about, yeah, the, um, sense of failure is a big one. Uh, I don't like to fail. I've had spectacular failures, but, uh, I've chalked them up to lots of learning. And look, just in case I forget, I keep, i, I journal like mad, so I could always go back and see what a knucklehead moves I've made Speaker 0 00:43:01 <laugh>. Yeah, I'd say, um, I've also made a lot of mistakes. And in a way, one of the upsides of them is, um, you survived. You know, it, it wasn't fun, but, uh, it was embarrassing or lost you a lot of money or whatever, that you, you just keep trucking, and that sort of frees you up in a way to say, no, it's okay. Um, I can fail again. You know, so that you don't become overly risk averse, uh, and loss averse. So, um, sticking on that psychological theme in the, in your book Enterprise Value, you write not just about the financial transactions and the financial transitions, uh, that enterprise and entrepreneur owner managers face when exiting a business that they've grown and they've managed on day-to-day basis for decades, but also the challenges and opportunities for their personal transitions as well, specifically surrounding identifying a new purpose. Can you tell us a little bit about that and maybe provide some examples? Speaker 1 00:44:11 Yeah. So, um, as we started out by saying, many entrepreneur, owner managers began their, uh, enterprises for a reason. Sometimes they get fired, sometimes they had a brilliant idea. Sometimes they tried three other things that didn't work, but they started for a reason. Um, sometimes they're trying to help out their family if they go into a family business, and frequently they get to a place where either maybe they've, uh, got some other, uh, ideas in their mind personally or professionally, maybe they wanna start another business. Maybe they want to learn to paint. Maybe they want to take more time off and, and go for that trip to New Zealand. Maybe they wanna move to New Zealand. Maybe they, there's things that they want to discover about themselves to unlock some of their potential. And so, um, I became fascinated with the whole field of positive psychology, which really builds on strengths as opposed to clinical psychology, which tries to fix, uh, sickness, weaknesses and the intersection between positive psychology and behavioral finance. Speaker 1 00:45:17 And I could see that, um, many entrepreneur owner managers would make decisions that were, um, not rational. My definition of rational would be, would not be in their own best interest. They made decisions, uh, sometimes because it was, it was a mistake. But more often they made decisions that I began to see that you could systematically sense that they were gonna make these decisions, that they were gonna make decisions, which were, they made 'em over and over again, which were incorrect decisions, which were actually, uh, predictable. And so, really, we brought positive psychology into our practice to be able to think about how do you build on the strengths of the person, the organization, the whatever that are trying to get you to unlock your potential. And part of that could be that, um, that you haven't fully discovered your potential in your organization, that you want to go beyond that. Speaker 1 00:46:12 And that's an area that, uh, I have found great resistance from entrepreneurs. So many of them, JAG have said to me, yeah, yeah, I, I really want to do, do that next thing with my potential, but I have to finish this first. And really, there's two ways to bring about change, right? You can walk away from something or you can walk towards the next thing. And like, I think it makes a hell of a lot more sense to walk towards the next thing. But it turns out that's a really, really challenging thing for people, entrepreneur, owner managers to do. And so a lot of our work with them is starts there. It really starts with, is your life exactly the way you want to have it to be right now? No, mine neither. Well, what are those things that you're trying to get to be a destination for you in your life? Where do you want to take this part of your journey? And does doing a capital gain transaction get you closer to that or not? And so we spend a lot of time talking about that frequently, months or sometimes years with entrepreneurs in advance of a cap gain transaction. Speaker 0 00:47:20 Uh, this reflects some of the, the questions that are coming in over the transom. Thoughts on the impact of E S G and d E I initiatives on business in general? Any concerns about such initiatives negatively affecting the morale or the independence of business leaders? Speaker 1 00:47:43 So, um, I think those two initiatives, d e I and E S G, were probably formed to fix something that was perceived as being wrong, or to right or wrong. That is just completely out of my vocabulary. I mean, I do recognize that if you have a broken arm, you have to go to the doctor and get it set. So if there are some things that are true wrongs that we need to fix, let's fix 'em. But what interests me more than D E I or E S G, which are these, fix it, uh, type of programs, is really how do you not fix something temporarily, but how do you build on strength? How do you build the organization or the family or the individual that you're trying to unlock? Now that's a lot more interesting to me than these, uh, short term, uh, fixes, which I don't, it's like someone going on a diet. Speaker 1 00:48:51 It just doesn't work. If you want to lose weight and be in shape, you have to, you know, you have to have certain habits, and those habits lead you to a certain place. It's the same thing here. So I'm afraid I'm not very, uh, bullish on those kind of initiatives. And I, I've seen them and I've been actually very close to them in some organizations, and I've just felt like the people who were behind them, their intentions were really great. Uh, but I, I don't believe in trying to, uh, get in shape by going on a diet. I want to get in shape by changing my life plan and joining a fitness club and getting strong and being healthy and sleeping well, blah, blah, blah. Does that help you? Speaker 0 00:49:32 Yeah, no, definitely. Um, now one, you know, interest of, of mine having you on and having you involved with the Outlet Society, obviously I'm in charge of running a nonprofit, and I think in many ways, um, because I spent the vast majority of my career, uh, in business at a private, um, fruit vegetable company, I tend to bring that kind of for-profit perspective to, to what we're doing. And, uh, I remember, you know, even when I was back at Doll Food Company and I, I went to, uh, to talk to somebody who was, uh, leading another nonprofit, and I was trying to get them interested in social media, and I was trying to get them interested in videos and, um, you know, which were just disrupting business at the time, and, you know, unfortunately still have, have yet to kind of, um, made it fully into the, into the nonprofit sector. Speaker 0 00:50:37 And, um, you know, they just weren't, they weren't interested. They just did things the way that they had always done things. And my attitude was like, well, you may technically be a nonprofit, but you still do have competitors, right? So, um, the, the revenues, you know, that the people that are your, I'd say your customers as opposed to necessarily con consumers, your donors have a lot of alternatives. And so you need to be able to provide, uh, a competitive value proposition. So, um, now you, cause of your, uh, your success and also because of your orientation, your gratitude, um, you have experience of being on, uh, the board of several nonprofits, um, in that capacity, what lessons from the business world, um, would help nonprofits flourish and be, uh, more effective in accomplishing their goals? Speaker 1 00:51:38 Well, so, so, um, I am gonna say some things which I'm interested to find out if you think that they're controversial or not, because you're a CEO of a not-for-profit, a very successful one. But, um, what I'm gonna say start out by saying is, uh, I've been a member in the past 40 years of 30 different governing boards for-profit and not-for-profit. I happen to know that cuz I had to count them for a different reason. And what I learned is that there's no difference between not-for-profits and for-profits that the, for the best ones, they all need mission, vision, energy, shared purpose, great people, they all have to have what in the for-profit world we call profit in the not-for-profit world, we call surplus. And I mean, it, it's all the same shit, okay? And we just call it by different names. If anything, I think the thing that concerns me about the, for the not-for-profit area is the lack of accountability in the for-profit world. Speaker 1 00:52:39 In the entrepreneur order manager world, we have in a sense perfect accountability because the entrepreneur order manager has all the capital risk. And so they're totally accountable for what goes on in the public company world. We have less accountability because there's a principle agency problem in the, uh, not-for-profit world. I would argue, in my experience, I've seen even less accountability because candidly, the governing boards frequently are not strong. They don't necessarily know what their role is, they don't have experience in governance, and they don't have experience necessarily in the domain that the not-for-profit is in. So that makes it really challenging to be a good governing board member. And so what I've seen is that in the not-for-profit world, there frequently is a feeling like, wow, um, we're doing a good job at this, so now maybe we can serve this bigger group and maybe we can serve this bigger group and we can serve this bigger group. Speaker 1 00:53:32 And so there's a lack of, uh, accountability to strategy. There's a lack of accountability to who, where the principles are because the principles are hard to find. There are some organizations that are really membership driven that really do have accountability to the members, but I think that there are a very large number of them, which you would expect to be membership driven, but there's no accountability to the members. So that troubles me a lot. And actually, um, my experience, which has been from the tiniest t not-for-profits, like a startup of, uh, a little, um, prenatal clinic, uh, that turned into a large organization, which Karine and I both were involved with the startup of to, uh, a multi-billion dollar post-secondary, uh, not-for-profit. Um, those experiences have to a certain degree at my advanced age of 65, turned me into feeling like, you know, maybe the for-profit investing that I do that's in the startup phase for people who are doing some great positive life-changing stuff is actually the way that I'll, um, make the, what I formally would've called the charitable, uh, organization. Speaker 1 00:54:49 Because, um, frequently you lose your money in those startups. So it's kind of like a charity. You, you, you give it away, you write it off. Uh, but sometimes you can also just be coaching. They can be a mentor, they can do great things, and they can turn out to be as, uh, world changing as the, the non-for-profit world. So I, I, uh, I think there's lots of non-for-profits which do great work, including Atlas Society. Uh, but I think, um, what I've experienced is that there's not as much accountability as I'd like to see to the constituencies, whether it's, you know, in post-secondary education, I think there ought to be accountability to students and parents. Um, and in other not-for-profits, there ought to be accountability probably to donors. And I know in many times there's lip service given to that, but I'm not satisfied. Speaker 0 00:55:36 Yeah. Well, I think I'll say for the society, part of our advantage, uh, is that we have a board of trustees pretty much all of whom are entrepreneur owner managers. And so they, they bring that kind of, um, orientation, uh, and help me manage and, and, uh, and they hold me accountable. And I, I wouldn't want it any other way. Um, but also obviously they have a, a passion for Ironman. But I do agree sometimes there is a bit of a disconnect. So none of none of them are on social media, for example, right? Oh, and let's, I'm gonna spend a huge chunk of our, you know, revenues on, uh, social media and on artificial intelligence and uh, on, on all of these disruptive technologies. Um, and it's hard for me to explain to them what, what we're we're doing because, um, because there's a gap there. But Speaker 1 00:56:39 Yeah, I, I, there's been a, I mean there, I don't know if it's historical or not, JAG Speaker 1 00:56:49 Not-for-profit governing boards frequently have not respected term limits. Maybe it's because they need talent so desperately if they are out there seeking talent that they, when they get somebody on their board, I've seen lots of board member leaders, which I'm sure you've seen too, which they have a few terms that frequently the board, uh, is lets them go off for a term they come back on sometimes. I mean, so what I've done in my own life, actually to the consternation of some is I've absolutely insisted on strict term limits because I think that without term limits, not-for-profits, aren't forced to go out and recruit and retain new talent, which is new talent, new energy, especially in a governing way. It's everything, right? It's everything. But wouldn't it be great if they could go out and attract and retain people who had governance experience, so they weren't learning how to be a member of a governing board for the first time. And I, I see that as a big challenge. Speaker 0 00:57:47 That's a great idea. I'd be on board with that. Yeah. So, um, right here at the top of the hour, anything that, uh, that we didn't get to cover that you wanna leave our audience with, Speaker 1 00:58:03 I think that, um, one of the things that makes the best entrepreneurs is the same thing that you see in Ayres writing, which is, are you willing to take personal responsibility for your own financial wellbeing and your own psychological wellbeing? And if you're not, you are inadvertently becoming dependent on somebody or some other entity to do that for you. And I call that being a victim, and you've just given away your power because you say it's somebody else's problem. Instead, the best entrepreneur, owner managers, and I think you see this in the writing of Iran, say, I'm gonna take personal responsibility for my financial wellbeing. You know, if I succeed or fail, I'm gonna, I'm gonna do my best and it's gonna be up to me. I'm gonna take personal responsibility for my own psychological wellbeing, which in this case may be turn off cnn, Fox News, NPR r do whatever I have to do. Then I'm gonna take personal responsibility for doing that. So my, um, ending salvo to you, I hadn't intended this to be this way, but I would just think, I think the things that I see that make the best entrepreneurs are the same things I see in an in ires writing, which are those two things. Speaker 0 00:59:26 Fantastic. What a great note to end on. Thank you, Pete. This was spectacular Speaker 1 00:59:32 Jag, fun to be with you. I enjoyed your questions. Speaker 0 00:59:35 I hope to see you on, on this, uh, west coast. So, uh, we'll look forward to that. I wanna also thank everyone who joined us today. Um, thank you for listening. Thank you for all your great questions. As always. If you enjoyed this video or any of the other materials that we produce at the Atlas Society, please don't be a free rider. Uh, make an investment in helping to, um, bring the ideas of IRA to the next generation. And be sure to tune in next week when Timothy Sandifer will return to the show, uh, with his wonderful new book on, uh, reading it for the second time. Freedom's furries how Isabel Patterson Rose Wilder Lane, and Ein Rand found Liberty in an Age of Darkness. We'll see you next week. Thank you.

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