362 - Building Connections in a Virtual World: The Importance of Empathy in Remote Work with Ben Gaddis

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started.

Ben Gaddis from Austin, Texas. Welcome to Listening with Leaders. You are one of the partners in a PE company, private equity company called Step Up Capital. You've written a book called Embracing Irrationality, which was pre-COVID. We were just chatting about it and you've got to be one of the most interesting guys I've talked to in a long time. So welcome to the show and let's find out a little bit more about you.

Well, thank you. Hopefully I can live up to that. But it's great to see you and excited for the conversation.

Absolutely. So just give me a— give us a quick backstory, how you got into private equity. It sounds like— well, I'm going to let you tell the story. I can do a lot of interpolation from looking at your website and LinkedIn profile, but I'm just curious from your own words how you got to where you are today.

Yeah, absolutely. 100% by pure accident. And isn't that the truth? It was meant to be the whole time. I grew up in a family that had been in the consulting space. My dad had an advertising agency. My mom had an advertising agency. They got married. My dad married a woman who had an advertising agency. And so it's literally like it's in my blood. And so I always thought I would do that. Went to school for marketing. Started working at an agency and very early on I got this one project that changed my life, which was I was working on American Airlines and my client came to us and said, this thing called the mobile phone is coming out and we have to figure out how we use it to sell more airline tickets. And I said, okay, well, I don't know anything about it, but I'd be happy to figure that out. And I accidentally became the head of mobile marketing for this agency and then the head of mobile for this entire agency group. And and I really fell in love with emerging technologies and the impact that they can have and how they change an entire business model or an industry. And so that sort of just became my path. And so I went to work at T3, created the mobile group there, and we were kind of first in that space. And as part of that, we grew and created some really cool programs and eventually sold to private equity. And along the way, I figured out what private equity was. I literally had no idea what it was, how it worked. And as part of that journey, I thought that there was actually a real opportunity in the space for an operator who had been in the seat, who had done this before and had something that maybe you talk a lot about, which is empathy for the people in that role. That is, in my role, I think one of the things that I've learned is most important. And so now we have a business where we partner with founders and we only invest in technology services businesses that we have, they're very similar to what we've run. And so we know a lot about them. And more importantly, we know about the challenges that the founders face as they have to run those businesses every day.

You got an interesting group of people that you're in partner with, with Step Up Capital. Tell us a little bit about your partners.

Superstep Capital. We made it really hard, uh, made it hard to say, but, um, yeah, we have, we have, uh, we have 4 portfolio companies right now and we only invest in businesses that implement SaaS technologies, services as software. So yeah, so we have a, a business that is in the Snowflake space. So if you need to implement Snowflake, which is a cloud data warehouse, our team at OneSix is the best in the business. But what they really do is they help people understand how to get the most out of a SaaS platform. And we have a number of companies that do that across different technologies. We have one in Shopify, we have one in an accounting software called Anaplan, and we have one in a platform called ServiceNow. The common theme there, though, is that these businesses are doing a lot more than just implementing software. They're really helping people understand how that software and how that technology can change the way that they do business and how they get the most out of it, which to me is kind of the most exciting part of the whole thing.

I got to ask you, last week, a lot of SaaS companies, especially in my arena, in the legal arena, took a hit when Claude came out with Cowork. AI is just as far as I can tell, is just disrupting everything. What are you seeing?

It did. Now it bounced back today and yesterday. So yeah, maybe a good time to buy the dip. But I think that there's two types of software. There is what we call systems of record software, and these are the big softwares like Salesforce and ServiceNow and Oracle. And what's actually happening with those is they sit at a position where all the data in a business sits in those platforms. And so I actually think they're almost more well-suited than most people are thinking, because when you leverage AI, you need data. And if you have all that data in that system, that's really compelling. And so I think those businesses will actually end up doing well. Now, they may not be valued at 30 times forward earnings. Um, so that's a very different conversation, but I think that their, their value will be, still remain to be high. I think what you saw in the legal space though, and the real challenge is if you have niche software that does one thing very well, it's very easy for another platform that has more data and is more of a system of record to just add that as a feature set. And those companies are going to get crushed because it's just so much easier to create that. Or a guy out of the garage can create that, uh, in no time by coding it. And I think that's really what people are more worried about, um, than maybe some of these bigger platforms, um, being completely disrupted. My time, at least.

I can tell you that I use AI every day and it is an enormous productivity enhancer. Leveraging— it leverages my time 3x, 4x, 5x. Stuff that I couldn't even do, I can do now. It's incredible.

It's incredible. It's absolutely incredible. It's changing all of our businesses. And, you know, when it starts to do things that you couldn't ever do, that's where it gets really exciting. And I think for us right now, one of the biggest things that we're looking for for is people who can understand what it should do, because what it can do is almost infinite. It's how do you point it at the business problem that's going to have the highest impact. And so there's almost like this new creativity that's coming out, which is how do you direct AI to do, you know, the thing that will have the most impact versus just doing what you're already doing a little bit faster.

Yeah, no, I agree. I got to ask, you had a guitar hanging up back there. You're a musician?

I, I have two of them. Um, best deal, best business deal I ever did. When we had T3, uh, we would pick one Austin company a year that didn't have enough money to afford our services, and we'd partner with them, let our creative team go wild, and they would pay us in whatever currency they had. And so these are two Collings guitars.

Oh wow.

Yeah, I see the other guitar group in, uh, in Austin. Uh, they make about 1,000 guitars a year. They're beautiful, handcrafted. And so, they paid us with 5 Collings guitars and one Lyle Lovett concert for all of our clients at Continental Club. And it was awesome. So, I love playing guitar. I don't do it enough, but these are—

I get it. I play jazz violin.

Oh, you do?

Okay.

Fun.

I know that as a guy that's got a private equity firm and you've got your portfolio companies, you sit on a lot of boards. I'm really curious about— I've got a lot of questions about that. But the first one is, how do you assess whether or not you've got good leadership? In a company?

I think for us, before we buy a company, one of the main things that we have to get aligned on is vision. And so for me, in a fast-moving world where SaaS is constantly changing, AI is disrupting everything, if the founder doesn't have a vision, then they're just not somebody that we should partner with. Because what we want to do is we want to, we want to draft off their vision, we want to help them accelerate, remove as many barriers as possible. But if we're in there telling them what they should do, we've picked the wrong partner. So when we think about leadership team, it's first, do they have the vision? And then the second part is, are they open to partnering with us to get into the nitty-gritty and figure things out, work together, roll up their sleeves and put some stuff on the whiteboard and just, you know, learn together? Because that's a big part of our value-add is I've screwed this thing up so many times that a lot of people don't, don't need to do that. And, uh, and we've learned some things along the way. It doesn't mean it's 100% right, but if somebody already knows all the answers, then they're probably not a great partner for us because we just can't add that much value. They should just go do it on their own. And so I think a combination of those two things are what we check for day one before we actually do anything. How you know that they're there, I think you can talk to the team. I think you can hear how they talk to their team. And I'm a real believer in just being able to sit in a room and see how they interact with the rest of the organization. Are people leaning forward? Are they leaning back? Are they kind of rolling their eyes without rolling their eyes? And just, you know, how do they talk to somebody in the break room and how do they talk to somebody at the reception desk? And there's a little bit of that. So I wish it was a scorecard that we could just say, and we do, we put people through an assessment and we do all of those things. But when you are— we've done this a number of times and you've had to sort of be in that role, you can— I think you can just kind of feel it in a way.

Yeah. So, it's pattern recognition after a while.

It is.

Yes. So, you've been in a lot of board meetings and you've seen board meetings that have gone really well and you've seen probably a fair number of conflicts. I'm curious, when you see a well-run meeting, what are you seeing that differentiates a well-run meeting from an average or a poorly run meeting?

Well, part of it is maybe how we run our businesses. We are not waiting for a quarterly board meeting to see a big reveal where something is a surprise or not, and we get revenue for the first time and we see that it's missed by 30%. We talk to our founders and management teams every week, and the best board meetings to me are ones where a lot of those conversations have happened already in the quarter. And what we're actually doing is we're spending the time together with a group of really smart people to solve a really big strategic problem. And it's not a readout, it's not a fight, it's not a battle. Those things can happen back channel, they can happen through reporting, they can happen frankly through email. But if you get a bunch of high-powered brains in the room and all you do is just read them a bunch of slides, that's not an effective use of time. And so the ones that I think go the worst are the ones where there's just nothing that happens or comes out of it. Now, again, we're very different. We're not trying to have a board meeting where it is this big reveal and we're trying to kind of instigate that. Some people use board meetings that way. They actually use them as a way to hold the team's feet to the fire. I'm not a huge fan of that. But it happens. So I'd say it's just, did you come in prepared? Did you solve a lot of the problems before you're there? And are you using the time really effectively to get the most out of the people on your board so they can add some value?

That's pretty wise. I haven't heard a lot of that before because most of the times it is the big reveal. You're getting people, it's death by PowerPoint, right? This is what we've done in the last quarter and there's no time for strategic thinking. Which seems to—

I think it comes down to maybe, you know, if you have a firm or an owner who's going to do it that way, you know, and you're an employee, maybe you're stuck in that model. But think about all the tools we have today. We have reporting, we talked about AI. I mean, how many tools we could do an easily a summary every week where we do a readout of revenue, key issues. We can share that with the board. We can keep them up to speed so that we're actually solving problems in more real time. I mean, yelling at me for something that should have been done in December in late March isn't really that effective. We've already, we're already a quarter down the road. And so what I think about is how could you use things like, I'll give you one thing and I'm so, I'm pushing this so hard. Video, what we're doing right now is such an amazing tool to communicate one-to-one, but also one-to-many. And so I could have a conversation, I could pull up 3 slides. I can hit record on my computer and I can just talk through, this is what's happened in the last month. Here's a little bit of why it happened. And in 5 minutes I can do more than I could ever write in an email. People will want to listen. They can watch it on 1.2x if they really want to, or 1.5x, right? And I can send that out to every single board member and they could walk into the room and in 5 minutes have seen the entire first 25 slides. Of a presentation, and I don't need to do that. And I can spend the rest on things that are much better in person. And so, I just think there's better ways to do that right now.

Yeah, I like that. I'm actually working with a big ag company. I live in California, and you just gave me some ideas on how to help them because the last board meeting I went to was just as you described, death by PowerPoint, no time for strategic thinking. And they need help. They need help. They really need to spend more time doing strategic thinking. So yeah, that's what a great board meeting to me is.

It's, hey, here's the bets we're going to make. Here's the things that we're not sure of, and we really want your input, or we want to have a frank conversation about that.

Yeah.

And when we should do, we should do that. Yeah.

Let's talk a little bit about empathy. You mentioned it earlier. Tell me about how you see empathy in the business world.

Well, it's, uh, you mean you're the expert here, right?

But it's You're the operator. I'm not the operator. I want to hear from the operator's perspective.

Very, very underutilized as a tool. And I think that it's very easy to skip that as you become a leader because I think empathy is actually really hard. You and I talked about how empathy can oftentimes be considered weakness. And I think it can also be considered something that takes too much time, just sitting there and listening to somebody. My wife, she often reminds me, I just want you to listen. I don't want you to solve this problem. And I'm really bad about that. I like to just go to the solution.

How are we—

let's put this in a 5-point plan and we can solve this by tomorrow. We'll get Claude to help us build a model around it. And it's like, no, what we're really doing is we're just trying to have a conversation so you to understand where we are. And I think for a lot of leaders, they have a lot on their mind. They're impatient and they want to move fast. And empathy is hard. I just think for me, it is empathy and being a little bit self-facing and making fun of yourself are some of the best tools I've ever used because it just disarms people and it just allows you to really connect with them in a different way. And when people know that you actually care about them and you're thinking about things through the lens of what it might mean for them and the rest of their team, they'll go like, they'll go run through a wall for you. And to me, it's just, I don't see it enough, but when I do see it and you see it and it's genuine, because there's also fake empathy, which is the absolute worst.

I call it performative empathy, right?

I mean, it's just, and it's so transparent, but when you see it and it's real, one of, I mean, we have one of our CEOs who is just, she's amazing and she truly feels for team, but she does it because she's down in the nitty-gritty. She knows them. She knows— I used to talk about, do you know people? Do you know their dog's name? You know, if you know somebody's dog's name, like it just says a little bit about you and it says that you took the time to do that. And those people will do anything for her. And guess what? That business is killing it right now.

That's right.

That's right. In a tough market.

So, my definition of empathy is that empathy is the learned skill of naming the emotional experience of another person. So you have to be able to recognize another person's emotional experience and then name the emotions. And the reason that I used it— this is cognitive empathy— and the reason that it's so precise is because brain scanning studies show that when you name somebody else's emotions, the centers of the brain associated with negative emotion are inhibited, while at the same time executive function is reactivated. Because when people get upset or they get emotional, the thinking part of the brain shuts down. And how do you get those people back online thinking again? And you do it by naming their emotions. And I stumbled on this 20 years ago, ended up working in maximum security prisons for 10 years, teaching lifers how to stop prison violence. And the skill that I taught them was how to validate emotions. And when they did, the temperature went right down. And to your point, when you're able to do this, your wife, yeah, that was such a perfect example. People don't want their problems fixed. They just want to be heard and validated. And when you can do that, and by the way, it's a lot faster than doing any other way. When you can validate somebody else's feelings, they feel heard. And to your point, they'll walk through a wall for you. So the next time your wife is upset, don't fix her problem. Say, honey, you're really frustrated.

You're pissed off.

You're really annoyed. This is really bugging you. And just say that. And then watch what happens. And she'll say, thank you for listening to me with a lot of gratitude. It's amazing how it works. It's so counterintuitive and yet it's so powerful.

It's a great tip. And I think that one of the things that I've seen that I frankly feel a bit lucky that I'm not a CEO today is that for me, a lot of that empathy happened in person. To pull somebody into a room, you could read them a little bit and you could very quickly just say, "Hey, Doug, in that meeting, I saw that you seemed a little upset about that." Right.

What's going on?

What's going on? What, you know, what, what's, uh, what, just, just tell me what's up. And that is hard to do when you got to schedule a 30-minute Zoom call to do that. It feels like now all of a sudden the boss puts something on my calendar. I feel a little nervous about it. And it's just, it's different. And so I think our CEOs are doing a great job, but man, it's harder for them to deal with a more virtual world than it was back in the day.

That's right. Let me share a quick little research nugget with you. Um, the researchers took mothers and their 14-year-old children. Could be boys or girls, and they fitted them with caps, electrodes, to measure brain activity. And when they were in the same room talking to each other, the researchers found that there were 9 channels of communication open in the brain between mom and teenager. When they put them on video, 2 channels.

Wow. I believe it though.

Yeah. And the reason there's Zoom fatigue is because there's so less much information being conveyed over Zoom. Our brains have to work overtime. To make meaning out of what people are saying and doing. And it's exhausting. That's why you get this Zoom fatigue. So you're right, the virtual has opened up the world to all of us, but we've sacrificed a lot of connection as a result of that. And we just, we have to find the way to do that. We have to find the balance.

Yeah. Yeah. And we try to do it. It's kind of, we're about to get all of our portfolio companies together in 2 weeks.. And I just see the amount of time because they come together, we have a great meal, they start sharing the same problems, they start speaking the same language, and all of a sudden we're talking together and we're real people, we're humans. And it— that's got to be really great, the dynamic. And all of a sudden it's just the relationship steps up. So we have to sort of orchestrate those events to make sure that they happen.

Yeah, I, I'm just had the picture of that in my head and I For somebody like you, that has to be really gratifying to bring together all these really smart, driven people and watch them start bouncing off of each other and growing right before your eyes as they, as they listen and learn and explain and talk. That's gotta be a great experience.

It's very cool. It is. It's something we're, we're really fortunate to have all those people together. And we're doing a session around AI.

Oh, fun.

In 2 weeks where they're all gonna share best practices. And I'm just, yeah, I'm excited to see what comes out of it.

So tell me what happened. Where does Ben get us in 10 years?

That's a great question. I actually think about this a lot. I think hopefully my role continues to evolve. And I think about, for a long time, I've really thought about leverage. So when I had T3, I was focused on T3. That's all I did. And, um, no matter how much and how hard I worked, I could only affect so many people. And now, as I think about Superstep, one of the really cool things is when I learn something, if it works for one of our portfolio companies, I can get on the phone and I can talk to the 4 other portfolio companies, and all of a sudden, you know, that impact is spread across now, you know, 750 or 1,000 people. And so for me, we'll continue to grow those portfolio companies, um, and, and hopefully kind of spread that reach and the impact that we can have. But I also think about personally, for me, I've been very fortunate and very lucky, and what I try to think about is how can I then take that impact maybe that I've been able to have a little bit in business and start to apply that in people's early careers and particularly in the education space, which I'm pretty excited about, and really try to focus the back half of my life on giving back. I think I've been able to receive a lot, and that to me is like a pivot that I'm very excited to make.

I'll endorse that. I'm 75. I know I don't look it. But I have never been happier in my life. I serve more people in a week right now than I did 50 years ago in a year. And that's what life's all about. It's amazing. It's not about the money. How, to your point, leverage. How many people, how many people can you serve in a week and help them improve their lives? And that's where the real meaning is, I think. And I think a lot of people lose that. They lose that idea and they, they end up kind of wealthy and bitter. I'm thinking of Elon Musk, right? Wealthiest guy in the world, and he said, "I'm not happy." Pretty interesting.

So it is, uh, it is. But I like that. I like that. And that's good to hear. And I think that that leverage, when you start to be able to apply it, maybe that's right on business, is something that I'm pretty focused on.

Good for you. One more question, and I'll let you go. What's one thing about yourself, Ben, that we would never know about unless you revealed it to us?

Oh, that's a great question. I, I go to the thing that you would know about me if you read any of my, uh, reports or personality reports or had a conversation with me, which is I am probably the most extroverted person that you'd ever meet. I'm off the charts on all of those scales, but I am extremely drawn to and have seen the absolute best success in my life with people who are extremely introverted. And I have this really interesting partnership that's with my wife, with a lot of my business partners. And when I am able to make that connection, it's when I'm at my best. And most of the time they want to kill me, but it enables me to do so many things. Yeah, it's something that I've learned about myself.

Interesting.

I would say that I've done 360 episodes of this podcast now, something like that. I think you're around 360. I would say that 90%, 95% of the people that I've interviewed, leaders, executives, are introverts, and only a small handful are extroverts. Which is really interesting. I'm an introvert myself, but I just think that's really, really fascinating. Good for you.

Yeah, yeah. I think people, you know, introverts are often able to call me on my bullshit and pull me back down to the real world, but also take all my ideas, make them much better. And yeah, it's kind of a, kind of a cool thing.

Well, great. Well, Ben, thank you so much for your time today. I really, really enjoyed our conversation.

Same here. Thank you, Doug.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnull.com/podcast. If you got something out of this interview, would you please share this episode on social media? Just do a quick screenshot with your phone and text it to friend or post it on the socials. If you know someone that would be a great guest, tag them on the social media to let them know about the show and include the hashtag #ListeningWithLeaders. I love seeing your posts and guest suggestions. We are regularly putting out new episodes and content. To make sure you don't miss any episodes, go ahead and subscribe. Your thumbs up ratings and reviews go a long way to help promote the show and mean a lot to me and my team.

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