China's AI voter machine, Silicon Valley's 2 lessons, agency M&A truths & more

So, Neil, did you know the same 2 lessons that Silicon Valley relearns every decade?

What are the same 2 lessons?

First and foremost, if you're watching on camera right now, Neil and I are crying. We'll go over that in a moment while we're crying. But this guy, Ben Thompson from Startichery, Startichery, he was on the Patrick O'Shaughnessy podcast. So the same thing that Silicon Valley learns every 2 years, or every 10 years rather, is one, consumers do not want to pay for software, and 2, consumers do not care about being productive. What does that mean? Look at Dropbox. Nobody wants— remember early days of Dropbox? What ends up happening was this. Dropbox had to go more B2B because they realized that only businesses were willing to pay for storage, right? Because they were charging individuals like $20 a month, but most people don't want to pay for that. So ChatGPT is learning that most people, don't want to pay for these subscriptions. It's better— he was saying that they're better off just starting in advertising first, right? So he's saying had they leaned into advertising immediately, as soon as ChatGPT was hit, they would have a great ad product right now. And so charging people money is hard. Giving people things for free is easy, right? So you look at Meta, for example, Google as an example, right? Meta, Google, uh, Amazon. Amazon's a big ad business, but they didn't start out like that. Who else is a good example of this? Amazon. Oh, sorry, sorry. Meta, Google, who else?

All the social networks, X.

TikTok?

Yeah, TikTok, Snap.

X, yep. So when you have the volume, you're better off just giving it away for free or charging ads and then charging businesses too. So when Anthropic started, they started off just charging mostly businesses. They went businesses first, right? So I think it's really interesting that Ben calls this out 'cause he's been a tech writer for a very, very long time. Like you and I have read his stuff for years and years. And so again, the 2 lessons are, One, consumers do not want to pay for software, and 2, consumers do not care about being productive.

So let's go back to consumers not wanting to pay for software. If you wanted to talk specifically about the social networks, whether you consider it a service or a software, I get it, it's all similar concepts. Quite a few of them have tried charging for different things, including showing of no ads. But if you look, majority of the revenue still comes from ads and not subscriptions because the majority of the people don't want to pay for no ads. We rather see ads than pay money and not show ads because one actually costs us money. The other, you know, you can ignore, skip, check out your phone at the same time, and which is very common. There's a lot of people, and there's been studies on this, that have streaming services at the lower tiers, so they're being shown ads, but they pull out their phones at the same time as ads appear. And my sister is a great example. Did you know her Amazon Prime account shows ads? Like, no joke, her Amazon Prime account shows ads and she has money. Although I did, this sounds bad, but I think I'm pretty sure I logged into her TV with my username because I was tired of seeing the ads when I was at her house.

That doesn't sound bad because here's the thing, my Disney Plus I was watching last week and I think I was part of a bundle and they started adding ads into it. And I got so angry that I like went through my phone and I immediately added to the next level. So I will happily pay, but what's happening is Disney's, they're kind of squeezing other people. So like, if you're part of this legacy bundle, we're adding ads for it. And it almost doesn't even matter if you're paying, if you're at lower tier now.

Yeah, so I do see that. And if you look at software as a service, the biggest software as a service companies I know are all B2B. Microsoft is a great example. B2B Salesforce is a good example. B2B Atlassian is a good example. B2B SAP is another great example. B2B. I don't know if you saw the announcement that happened a few days ago. I don't know exactly when this podcast comes out. Salesforce announced a partnership with Anthropic. Anthropic.

Yeah, I saw that. Right. That was yesterday.

What is it called? Something Force.

Or Cloud Force. Cloud Force. There you go.

So, and that's going up. I think Salesforce stock popped 23-ish percent. I could be off. It was somewhere around there.

Do you know the details of the partnership? I didn't look into it. I saw the videos popping up on my YouTube.

So there's a whole interview with Dario, Mark Benioff, and I don't know who the other person is they're interviewing or filming. I do know Benioff also gave an interview with Cramer, but to go specifics about software, He straight up said on the interview, there is no SaaSpocalypse. Everyone said there's going to be seat compression. They're seeing more seats being added, more people paying and more companies paying for their software. And he said something that was actually quite entertaining. He's like, within a— and I'm paraphrasing here and I could be off on my mile radius. He's like, within a mile or half a mile or 5 miles, he's like, you can have 3 or 4, whatever the biggest AI companies, and And he's like, they've all added more, they all use Slack, they all use Salesforce. He's like, they've added more seats and they're paying more for the software than they did, you know, a year ago. And he was just breaking down how businesses keep paying for it. I do agree with that. I think there's actually another nuance here if you're actually going to leverage this for marketing. Smaller businesses also don't like paying for software. So if you can figure out how to give the low end of the market something for free, And then use that virality because you're giving it away for free to capture more word of mouth, more digital PR, and that helps you get a smaller percentage of larger companies filling out their form and applying to work with you or use your software, buy it or whatever it may be, or service. You can then create a really good flywheel that's affordable, Collect a lot of leads and sell them.

By the way, speaking of the SaaSpocalypse, right? You look at the stock market, right? So everyone's like, okay, this Nvidia, right? Nvidia's, you know, going up again. Like all the stocks are like going up. But here's the thing, without going too much into, you know, markets and finance, you look at the government, the Treasury is, they're doing buybacks, right? They're trying to bring the 30-year yield down, right? So interest rate, they're trying to bring it down. The reason for that is 'cause they're trying to, one of our mutual friends who listens to this podcast, George Gammon, I was watching One of his videos, and so he's saying, "Look, Treasury is trying to bring interest rates down because they are trying to make sure that these hyperscalers, when they're issuing bonds, right? These these they're issuing loans on their side that they can keep up because if their interest the the the thirty-year yield is too high, then you know they have to like if it's eight percent, they have to charge nine or ten percent, right? And then they're not going to be able to pay back those loans. And so his argument is that the Treasury is trying to make sure that the hyperscalers can continue to spend." 'Cause that is what's propping up the market right now. And the argument is like, I saw one of our mutual friends, you know, one of his videos today on like how many of you are actually productive with AI and it's making money for your company, right? And so like, I just want us to react to this 'cause you and I might have different opinions, we might have the same opinions, but you know, do we think that this is a bubble right now? Because, you know, Salesforce is saying they're seeing seat expansion, they're seeing more usage overall. You see the SaaS company like Atlassian is crushing it, right? And so do we think we're going to see more that growth? And is this build-out, this AI build-out worth it, or is it a bubble?

I look at it from a different lens on whether it's a bubble or not. I look at it as you have a lot of crap companies in the AI space, and you have a much smaller pool of amazing companies. I don't see— thank you. I don't see these amazing companies going bankrupt or anything like that. Forget this concept of Are people buying too many chips or do you actually need as much memory? Think about the world and how we're going to actually market within 10 years. My personal belief, there's going to be robots everywhere. There's going to be AI integrated into cars, fridges, homes, toilets. I'm not trying to create disgusting images, but it's already starting with toilets, by the way.

The Chinese toilet will go to you and you could, you know, get out of your bed and then, you know.

No, not even that. They're building toilets right now that analyzes your feces and tells you how healthy you are and what you need to do to adjust. I think that is actually very valuable.

You get auto-delivered to you.

Yes, it can roam around in your house, but I don't think people need it delivered to them. It's more so you can go to your bathroom and then—

No, no, no. I mean, you could have the supplements or whatever delivered to you where they—

Oh, I thought you meant the toilet would follow you around in the house.

No, there is one that follows you around in China. I'm like, dude, that's disgusting.

Yeah, yeah, that's disgusting.

Yeah.

For all of that, whether they can run these models in a more efficient way from a CPU or GPU or memory perspective, I think it doesn't matter because the usage is going to not be double, triple, quadruple. I think it's going to be way more than even 10x what it is right now. Secondly, I think this is going to open up a whole new opportunity for marketers. Let's use a toilet example. I don't want to get graphic here.

I like that example.

But that's an easy one because You just mentioned supplements. If something's wrong for you, I would partner with that toilet company and have them try to promote my supplement company before someone else's and do a rev-share deal. That's a great partnership. Or a fridge. Imagine your fridge. Imagine the ingredients in your fridge and it telling you what you can make that's remaining from it. Or it can even tell you, hey Neil, you're using Blue Diamond almond milk. Silk milk, we can give you a promo, a free carton. I saw the laughter is making my nose runny. We can give you a free carton of Silk milk.

Try it out.

It'll be delivered in the next 5 minutes and you or your kids will love it. Similar taste, but it's half the cost and it's organic. I'm making up this pitch here, but imagine being a food company and partnering with— I believe it'll be controlled more by like the Googles of the world because they already have the ad inventory and the advertisers. which people plug into them, just like how X has a partnership with Google, right? And this will allow marketers to push more products and services in the right moments in life when people are actually in that moment, right? In which they're on the— using their toilet or in their car or opening up their fridge. Those create very marketable moments that work out really well. And the closest example I have to this that people kind of see right now is end caps in grocery stores. So I don't know how often you go to a grocery store that's not Erewhon.

I only go to Erewhon.

Yeah, so Erewhon's probably a bad example of this because they don't have the tech for advertising. You can do— some grocery stores have a lot of crazy cool advertisements that when you're walking around, depending on the aisles you're in, they push you with stuff. You're like, oh, that actually looks interesting. Let me try it out. It's like right then, right there in your face, specifically when you're going down the right appropriate aisle. It's not like they're pushing me tomatoes. when I'm in the cereal aisle, right? They would push me a unique cereal being like, hey, check out this cereal. It tastes just as good, but it has lower fat, lower sugar, and it has protein, right? That's a great example of me trying to buy cereal and seeing an ad right then and there of a product that I can just pick up and get.

So here's what I think the future of marketing is going to look like from a Even the future in general, right? So let's use health for example. So I sleep on my Eight Sleep, right? It has all my health data. So then you imagine you have a toilet that's connecting, collecting data from your stools every day, okay? And then you have all these other connectors, maybe your Oura Ring, and then it's connected to like Function Health. All these platforms are going to connect with each other, right? They're probably going to share data. By the way, you're going to have to pay for these partnerships too, right? And then it's going to come up with custom supplements for you or custom whatever it is exactly. Here's the other thing. You're also going to have situations— Neuralink, right? We haven't even thought about that, right? Where you can just think your thoughts, whatever you're typing into your vibe coding right now, you're having all your different agents build. What if you just think it? And that just happens a lot faster, right? And then all of a sudden, you're going to have agents marketing to agents, right? And so there's going to be way more data sharing. Okay, that's an opportunity for money, which wasn't there before, right? Agents marketing agents, that's another opportunity over here. And then the more compute you have, the more agents you're going to have. And so It's not even— I think, I think Neil's being conservative on purpose, but I think genuinely you probably think it's 100x more. I'm probably a little more aggressive, maybe 1,000x more. And we probably can't even fathom this because we've never seen this before. If you look at marketing 20 years ago, there wasn't social media, right? Was it 20 years ago? Was there social? No, no real strong social media. YouTube wasn't even that strong yet, right? Podcasts weren't even that strong yet. Twitter was, was maybe just starting off, right? 20 years ago, you were, you're not even riding Uber. I was riding Sidecar.

It was MySpace back then, which didn't do well in the long run.

And look how much has changed in 20 years. You look at the next 20 years, the world is going to be unrecognizable to people. We're going to be dinosaurs by then. We're going to be 60 years old.

Okay.

We're going to be right. And so I think the way George is looking at it, it makes sense. But I just don't think we know what's coming. And I think when you have all these hyperscalers spending all of their free cash flow, like you have a lot of smart people that work there. They can't all be dumb at the same time. You know what I mean?

So, well, people hate on the Googles and the Amazons for spending so much on CapEx on data centers. Yeah. But if you look at their earnings, they tell you how they have much more demand in the billions, in many cases, hundreds of billions that they have to meet. I don't see these companies just foolishly spending money for demand that doesn't exist. They already have people that are throwing money at them. They can't collect the money fast enough because they can't meet the demand.

Yep. And let's just look at our companies for a second. Like, is demand slowing down? No, it's not slowing down. Am I looking at— am I working more? Yeah, but that's also by choice. But yeah, I am working more naturally. It's also more fun too. So I'm looking at my own experience. I'm looking at my company. I'm looking at other people's companies too. I'm looking at what's happening out there. I think, sure, there's definitely like a— maybe there's short-term, there's gonna be a correction.

Yes.

But I think long-term, like, it's just like the internet. Long-term, the internet worked out.

Yeah. And if you think about the bubble that happened in the dot-com boom, it was a lot of companies that were worth billions of dollars that were making little to no money. I think the big thing that's different here is you have a lot of companies that are actually making a substantial amount of money and they have high growth. The problem that you're facing is a lot of these companies have terrible unit economics or just economics in general, and they're losing a lot of cash, but you're going to have the ones who survive or survive. The others will fail and you're going to have a lot of dead corpses or dead AI companies and the stronger will just get stronger, similar to the dot-com era when it first happened in the early 2000s.

Yep. And I think you'll have a lot more getting stronger.

Yes.

It'll balance out. By the way, I want to check this out. So did you see that? So the CCP is— Chinese institutions are building AI models of American voters and testing political messages on them. So this is interesting to me. So this is a marketing I think there's a marketing angle from this for sure. So Fudan, the company Fudan, used 171 million X posts to create a multi-million account voter pool. A government-linked team testing a campaign message on synthetic Pennsylvania owners, uh, uh, users, okay, or voters. Uh, so it inferred the, the race, the ideology, all these things, right? And so what's happening right now, what this person Melissa Chen posted this, okay, so she's like, look, this is right out of Ender's Game, except the, the kids in school are Chinese state researchers, the simulations are real influence ops, and the the aliens are us. So what's interesting to me, Neil, is that in China, if they're our adversary, they can pull from X, they can pull from all these open sources, right? We can't do that to them because everything's closed off, right? So they can influence our politics. We can't actually do anything back to them on that. And so the argument with this is that if Chinese institutions are already building this, we're a lot more vulnerable to that. And she's like, yeah, we cannot build a million-agent model of the Chinese public. We cannot test messages on synthetic Shanghaiese factory workers or Chengdu nationalists. We cannot A/B test narratives about Taiwan. We live in a glass house while they live in a fortress. Every American rant, every demographic signal, every cultural fracture is harvested, modeled, and weaponized. Meanwhile, their population remains opaque, unmodeled, and unreachable. Beijing now possesses a live, continuously updated war game of the American mind. We possess nothing comparable about theirs. A whole new level of unrestricted warfare has been unlocked. We are not ready for this. Now, aside from the whole doomerism around this, I'm not here to talk about that. I just think I just think it's interesting going back to what we talked about last time. There are no solutions to anything in life, there are only trade-offs. So this is a big trade-off that we have operating how we operate and they have trade-offs in terms of how they operate too. But isn't that interesting?

Yeah, but we're also getting more strict on how we operate just with privacy. Like you saw the Facebook lawsuit, right? They owe $11—

$16 billion?

They owe $11 billion upfront. The remainder of the money they owe if the other platforms don't conform, from my understanding, maybe I misread it, And it can get to $16 or $18 or somewhere over that billion dollars in total. But the US government is putting much more strict rules for social media. And I believe we're going to start seeing more and more of this. Right now it's for the youth. I thought it was a huge win for the US population. Just me personally, this is just my opinion. I don't have any data on it. I Never thought it was so healthy for what a lot of the youth are seeing on social media. And the way I like talking about this is when TikTok was owned by ByteDance, the US version, right? One of their guys was in front of, you know, our politicians in Congress here in the US, and they were asking what type of content they show on TikTok here. And like, what kind of content do you guys show on the same version in China? And they're like, All educational content, things that help you be better. And they're just like, so you show the US citizens stuff that rots their brain, and then you show people in China stuff that helps them be better people. And they're like, what the heck is this?

It's different ideologies, you know, not just different ideas. I'm kidding. It's what's implanted.

It's what's allowed. Yeah. Because showing them brain rot makes them more money than showing them educational content. Yep.

Yep. And by the way, this is the trade-off with us being a very capitalist society.

Yes.

So whatever, you look at the newspapers or you look at socials, like social media, what is rewarded the most? Remember, whatever, when it bleeds, it leads typically, meaning that if the story bleeds, if the topic bleeds, it'll lead. So because we're on this topic, something similar here. So Paul Graham tweeted this. So Paul Graham said, he showed this graph. So LinkedIn users have been editing their work histories to add AI and remove DEI. Okay, so look at this. And you can see AI is being added to every— a lot more people's titles. Work from home is starting to trend downwards. Okay. DEI had a sharp drop over here. Maybe it like went up a little bit, but it's so interesting to me that—

What's the red chart?

The red chart is net share of edits, net share of edits. Oh, descriptions. So titles up here, and then these are descriptions on the bottom.

Got it.

So you want to describe what you're seeing on the chart?

Yeah, so it's job titles and the top chart is of people are changing their job title. The bottom chart is people that are taking the job description from my understanding. And the chart is broken into 3 parts. The first one is how many people are putting AI in their job title? It's climbing up and to the right. On the bottom, how many people are putting AI in their job description? It's climbing up and to the right. The middle is, what was the middle again?

Work from home.

Work from home. In the title, it is—

Down slightly.

It's roughly flat, right? When you look at the line in the middle, it's almost flat. In the description though, you're seeing it go down, which means I'm guessing that more people will have to come to office. The right side is DEI, way less people are putting it in their title. They're still kind of including it in the description, but it is down substantially.

So the reason I'm even showing this right now is because it's never been more powerful to think for yourself instead of just following the trend. Like, I get it, AI is a trend. I love talking about it, don't get me wrong. But you don't see me— like, I don't even think I have AI in my description or my title in my LinkedIn. Definitely, I never had like anything around work from home or DEI, right? The only reason I'm saying this right now, like, if you truly believe in that stuff, great. But what I noticed during 2020 is like more and more people started adding DEI because it was the trend, right? The trend du jour. Work from home is the trend du jour, right? And that's also when the pendulum had swung more towards employees, right? It always swings back and forth, right? Employees and employers, right? Now, AI is clearly trending right now. People know they can get jobs from it. Of course, they're going to take advantage of that, right? But what I would just say to this is it's more beneficial for you to think for yourself because the vast majority of people, 99% of people won't think for themselves, right? And I will say this, right? Maybe I'll get canceled for this, but like, Okay, you have the DEI thing there.

Like, do you—

like, when I ask— when I have asked people just during the interview, like, what does that mean to you? They couldn't really explain it, right? Sometimes I'll even ask, so what is the, you know, the pronouns? Can you explain what they mean, right? Because sometimes I'm like, I don't even know what they mean, right? But like, I can't— if I can't get a straight answer and I can't get a strong point of view, it actually means that they were just following the trend. And the Overton window has switched, that like has shifted where it's more okay to say this. So I'll say it. Neil doesn't have to say anything here, but I will say it openly. Openly, right? It's more powerful if you think for yourself again versus just following trends. And this tweet got like over a million views on it. So that's my thought.

I think just in general in life and in marketing specifically, Eric and I have been marketing for, call it 20 years. Typically if you're following trends in marketing, you're not going to do as well compared to if you think for yourself. Following trends in marketing usually means You're going after very saturated channels that are expensive. It doesn't mean you should ignore the trends. You should just pick and choose wisely on what works for you. I'll talk about TikTok. I was at a conference in Laguna Beach earlier today, and that was a whole cool experience, but I quickly realized I am not a fan of the ocean.

Why?

They gave me a hotel room right on the water, which was really nice of them. Like right on the water, nothing obstructing me. You can hear the ocean, the sound. And I was like, one, I'm like, man, what is all this humidity? And I forgot how humid it gets. The second is you keep hearing the ocean and I'm like, man, I just want to go to sleep.

That's white noise.

Yeah. And the third is I didn't care for it. So within 5 minutes of getting into the room, And I got there in the afternoon. I closed my blackout so I didn't have to look at the ocean.

Wow. This guy.

I feel like when I see an ocean environment, I feel like it's time for me to retire and just hang up my spurs and just be done with it.

So you weren't with family? I thought you were with family.

In Laguna?

Yeah.

No, they're speaking at a conference at the hotel. Oh, I see.

Yeah. So when you called yesterday, I thought you were with family. That's why.

No.

Yeah. Yeah. Okay. But what Neil's point here is that you know what you like and you stick with it.

Yes. But going back to the marketing example of this, I was getting carried away here or sidetracked. I was talking to the audience about TikTok and a lot of people believe TikTok doesn't have their audience.

All right. So I wanted to take a moment to tell you about my podcast co-host Neil's agency called MP Digital, and they work with a whole host of global companies or a global organization. Also, Neil has SEO tools such as Ubersuggest and AnswerThePublic. All you have to do is go to npdigital.com to learn more, and we'll see you on the other side.

I agree, TikTok is not right for all businesses, even though the trend is TikTok's booming, you got to be on it, leverage it. If you're not, you're missing out on a lot of revenue. You and I would agree that a lot of our ideal customer is not on TikTok. I'm assuming you agree with that statement, right?

Mm-hmm.

It is what it is. There's other businesses where the ideal customer is. Just because the trend is to leverage TikTok, it doesn't mean Eric and I do because that's not where our ideal customer typically lies. But we pay attention and we pay attention to things like Google and a few other platforms have deals with TikTok for their data. So even if your ideal customer is not on there, our ideal customers for sure are on Google. So we will go and post content on TikTok Because it feeds Google's algorithm, which helps with attracting our ideal customer, even though they may not be on TikTok, but posting on TikTok helps us get more visibility on Google, which is where our ideal customers do live.

So here's the last thing I'll say about this, right? So it's not about DEI or pronouns or remote work or AI. Ultimately, if you believe in something, it's easier to just believe in something that you genuinely believe in versus just following the fads, right? So I'm not saying, you know, remote work is bad or DEI is bad or pronouns are bad, but when you get pressed on it and you don't have a good response and you don't have a point of view on it, it means you don't genuinely believe in it. And so then why should I believe in you to join my company when you're not firm on your beliefs and you don't stand for something? Because if you don't stand for anything, if you stand for anything, you stand for nothing, right? If you stand for everything. Yeah.

So yeah, I'm with you.

That's my point there. So, and by the way, I'll say one more thing there. Like if you're susceptible to all these trends and you don't have a point of view on it, that means you're susceptible to everything in your life. And that means that you're just going to let trends carry you and that's not a way to live, right? So anyway, by the way, I was listening to this podcast with, you know who DHH is?

37signals? David Hensel or something.

David Hanemeyer or Hensel or something?

Yeah, something like that.

Or maybe David Hensel, 'cause I know David Hensel, so I'm just putting that in there. David Hanemeyer or something.

I just know he likes sports cars and I think he lives in Malibu.

Yes, he does. So he was actually talking about when they raised money from Jeff Bezos, the first thing he did was to buy a sports car because he's like, you know, I deserve it and we're going to make the money for it, right? That was his take on it. So it was an interesting podcast, but there's one thing that sticks out to me and I think you have a point of view here, right? He's like, it's always better to out-teach versus outspend when it comes to marketing. Out-teaching is the best way. And that's how we grew in Basecamp. You know, we did all these blog posts, blah, blah, blah. But the interesting thing is later he's like, well, you know, the blog posts aren't working that well today anymore because da, da, da. So I'm like, don't get me wrong, I love teaching, but I don't necessarily agree that out-teaching is the best way to outspend. If you have a lot of money to spend on ads and you have a good offer, you have good messaging behind it, I still think that's better than out-teaching. Yeah.

On a side note, do you want to hear something interesting about Basecamp?

What?

So Bezos Expedition did the investment. I don't know why they did it. This was years ago. I talked to Melinda who runs Bezos Expedition. I don't know her well, but I've had a few phone calls with her over the years. They ended up investing in Basecamp. Did you know they've— Basecamp does distributions, but they've gotten paid all their money back plus a lot more over the years. It's been a great return for them.

Do you know why Jeff Bezos invested?

I think it was something to do with design or principles or some of the stuff that they're doing that he liked.

No, he was just curious. He was curious and he liked working with founders and he liked what they were doing. And they had reached out to Basecamp a few times. So Amazon, his team had reached Jeff. It's like, Jeff wants to meet you. They're like, no, you know, we don't need VCs, right? Da da da. And he's like, well, no, Jeff really wants to meet you. He's like, well, fine, it's Jeff Bezos. Well, they'll meet, right? So that's when they took on money. But DHH, by the way, when he came to the US, he only had 50 grand and he spent all that money on an Audi. Clearly couldn't afford it. And he said it himself. So sometimes, by the way, you know, if you want to— I've seen entrepreneurs where it's like they clearly can't afford something, but they will buy the thing and that will inspire them to work harder. So, you know, to each their own.

I have a bad habit of pushing people in sales to spend more money. So then that way they close more. It actually works really well. Give an example. So you don't have to name names, but you can give an example. I'll give a real-life example and I'll be pretty public about this. This actually worked out for my co-founder. My co-founder—

Oh yeah.

Bought a home in Las Vegas years ago. It was a big home. It was 3 levels. It was expensive. It was expensive even for Los Angeles.

You pushed him so hard that you helped.

It helped, but then he sold it for a profit and then he bought a home at that time in the community I lived in or a piece of land, and then he was building. And that's turned out really well for him as well. But what I find is when people do transactions that make them uncomfortable, a lot of times, specifically with good people, I don't do this with people who suck, but with good people, it brings out the best in them. And you see that fire being lit all over them.

It's pressure.

And they just perform really well. And I never push people on things that are bad decisions. So like example would be a car. I wouldn't tell someone to go spend money on a car, even if they were doing well or not doing well. But a home, like things like that. I had a friend this morning who called me about a home. It's a little bit out of his reach, but I know he can afford it. And I said, you should do it. And he's just like, you sure? And I'm like, dude, you have a view of a golf course. You have a view of the water. This is amazing. You got a good price. The seller needs to sell because they're in a jam, so they're willing to give him a steep discount. And I'm like, rates are high right now. You're taking on a mortgage, but within 5 years, rates should drop. I don't know what they will. I doubt they'll go back to where they were, but they'll drop. And as rates drop, in theory, and the market starts turning around, in theory, his property should balloon up. And he's getting a steal of a price right now in which the seller's so desperate, they'll do things like Give them furniture, reduce costs. They even said, oh, if the appraisal comes back different, let us know. We're flexible. Like, they just have to get the transaction done and they're willing to lose money just because they're in a jam.

That's good. It's, again, I think that the pressure, the good people can take the pressure. It's a booster. The bad people, you don't want to pressure them because they already couldn't take the pressure anyway.

Totally agree. And even with him, when he was going through the process, he's like, this is a little expensive. I'm like, You have 2 cars, right? He's like, yeah. He's like, the other one is a collector's car. I'm like, are you losing money on the collector's car? He's like, no, it's up. I'm like, does it go up a lot? He's like, no. I'm like, sell it. He's like, yeah, people hit me up all the time about it. I'm like, sell it. Use that money towards a house. And I started going through all the things he has in his life that he doesn't need. And I bet you he'll pick up another like $80,000, $90,000, which will then make the property more feasible. And then his current home that he lives in, he wants to sell it. I said, Why do you want to sell it? He's like, then it'll be really easy on me. I'm like, dude, you got a property with, I believe, a 2.25% interest rate. I'm like, rent it out. He's like, I won't cash flow much, maybe $1,000, because he's on a 15-year mortgage. I was like, take the $1,000 cash flow, use that money to pay down the current home you're in, have both, because then when you retire, you'll have a rental property that's paid off that's also producing you income.

That's good. So by the way, Neil, you called me yesterday and you had talked about somebody's agency, right? So I want to talk about that, the hairy part about agency M&A today, because last week you had a— we had talked about another thing that I brought to you and then you brought something to me and it was a good price, right? For the revenue, it was a good price, right? And I gave you my thoughts around it. And so I want to give my— I want to share my thoughts here without revealing anybody's identity here. Let's say, you know, this deal was, let's call it like, you know, they're doing $10 million a year in revenue, okay? Neil's like, okay, you might be able to get this for like $1 million or something like that. Good deal, right? But my immediate reaction was, I spent so much time getting my team AI native this year, right? We talked about the 10 to 55, 60% or whatever it is, and I know how much pain it is, and I am not willing to have to go through that culling. Right now with this, with this business, right? So there's just a lot of work to do and it's a very people-intensive business. And like hearing from my team today is like, dude, this is what I stayed for, like this moment, like the traction we have now, like, like everyone's like collaborating, all that. Like, I don't want to bring in a completely different culture and then have to cull and then like ruin their, their time and all that. And so I'd rather just not deal with it. And similar to the thing that I brought to Neil, I'm like, hey, you can get this thing over here, you know, maybe you can work something out. And Neil immediately within the first 5 minutes of talking to that person, he was like, No, you know, I think you should go do a deal over here just because it's a lot of work, right? And so at least for right now, you know, there's, I think what isn't being talked about is the, it's really hard to discern. It's not really hard with these M&A deals. You need to figure out who you actually want to keep and who you don't. And I would say a vast majority of people who are AI-pilled in a company are, it's very low.

I'm going to word it in a different way. With a lot of deals and transactions, whether you're buying a company or not, everything comes down to if the juice is worth the squeeze. When you start derailing from your main vision or you have to deal with a new problem that you weren't planned for, if it's worth it and the outcome can be amazing and it can be life-changing for you, it may be worth taking the derailment. But a lot of times, in the example here with the M&A deal that Eric mentioned, when I was looking at it, And I was looking at it on the way when I was driving to Laguna. I randomly called them up, just catching up because I did a text intro for them, for someone else that could just, that may need their services. And they were telling me how a deal didn't go through that they were trying to do. And I was just like, oh cool, what's the business? And then, or not what's the business, I knew what the business was, but I'm like, what are the numbers? They sent me the access to the data room within 3 hours. Team reviewed it really quickly. We quickly learned it wasn't for us. It's not that it's— It's a bad business. I would actually say it's a good business. The problem is the amount of time that my team would need to spend to fix that business would cost us way more revenue and profit than if we just focus on our core business because of the size and scale of that company. That is why I referred it to Eric. I don't mean that in a bad way. I know the revenue is meaningful for most companies, almost every company, But Eric quickly figured out that revenue, even though it's meaningful, the headache that it creates and the distraction that it creates goes away from where he's trying to take his company in 3 to 5 years. And he doesn't want to be a quote unquote traditional agency. So he decided to back away from it. And Eric's already done 2 deals, right? You did 2 agencies that you already bought?

3, if you include Single Grain.

3. Let's not count Single Grain, but let's count the other 2.

Single Grain doesn't really count.

Single Grain was pennies on the dollar.

Single Grain was $2.

Yeah, that's why I don't count that. You still bought it and you had to take on the losses and all the issues.

So that's an example of a hairy situation, right?

Yes.

And then like, I wouldn't even blame your— so Neil's cousin was the founder. It's not on Sujin. It was not a good situation, but I made it go worse. But that's for a story that I've told before. So listen to an old podcast.

Yeah. And to summarize, Eric learned that you just don't let— a lot of people have this style in management where, oh, people made a mistake, they'll learn on their own and they'll get better over time. And Eric quickly learned that that doesn't work for him.

I want to say it's quick. It took me a while to learn that. Neil learned that lesson quickly.

I took a while. I learned it very quickly.

Yeah.

But I think it's also personalities and I don't think there's a right or a wrong way. IBM had that philosophy for many years and they're a much bigger company than I am in which people learn from their mistakes. So why would you fire them? Let them keep learning and getting better.

I don't know about that. There's a whole nother thing I'll talk about in a second, but finish your point. Yeah.

I've just always been a big believer, either good or you suck. If you suck, bye-bye. I know that's cutthroat, but it really is the reality for most entrepreneurs. If you're good, great. And if you're not good, but you have potential and it's very obvious, most organizations are willing to put in the time and energy to make you great. But crappy people who just suck, it is very hard to turn them around because they just don't have Potential, and there's a lot of them out there.

I'll just say this. The more cutthroat I've become, and I'm not saying you should be cutthroat, but I'm saying that the tougher I've become, the easier time it's been with business, right?

Yeah.

And like, it seems counterintuitive to people listening. You might be younger listening to this right now, but I'm telling you, we have both been young at younger at some point, right? What you're doing is when you're tougher, like if you don't apply pressure, pressure's going to be applied to you. What ends up happening is that if you are able to move someone out quickly, they're able to do their best work somewhere else, right? It's not— and then you're also able to help your team too, because your A-players want to work with A-players. The problem is if you have a bunch of B and C players, the A players have to take on that work and it becomes unfair and all this resentment starts to build up and there's a lot of pressure that you feel from the company and you don't know what to do, right? You still want to be this like this nice guy. You want to be this the boss that's cool and all that. It doesn't pay the bills at the end of the day.

Yes. And one thing to note about A players, Eric sent me a CMO the other day and he's like, you should hire this person. Someone's A player could be your B player and your A player could be someone's B player. It doesn't mean your A players are better than someone else's. A lot of it also has to do with cultural fit, your industry, and some people are just a better fit for your company than someone else's company. Yep.

So by the way, because we're talking about agencies right now, I want to talk about a tale of 2 agencies, Neil. So we just, you know, we like to test out these contractors for the brand team, right? One is doing well on LinkedIn right now. The first post he put out, like 500 comments on it, right? He put out another one today, like 300 comments already, right? And so I'm like, oh, this is pretty cool. Like, you know, I'm like, hey, I'll refer you to like my friends and all that. Like, he, the way this guy operates. So this is a LinkedIn, you know, we'll call him a LinkedIn agency. Okay. Then another one is like a short-form content agency. Okay. So this guy, let's talk about this guy over here. He shows up, he's always trying to talk to us inside of Slack. He's always trying to learn about the business, right? He's very AI-forward. He's trying all these things. He's only 18 years old, by the way. Wow. But he's got a bunch of staff with him already, right? Like he knows his stuff, right? So he's proactive, he's very AI forward, and he's always trying the newest things, okay? And he's very communicative with us. The other side, the short-form agency, which I fired in like a week, and I had let them go before, but let them go a week ago. They're like, you know—

Wait, you let them go? So this is the second time you fired the short-form? Second time, yeah.

'Cause like I believe in the founder, like she's very strong strategically, right? Very good with the short-form formatting. Like that's important. Like I saw Neil record a video, by the way, recently. You have the SEO, AEO, GEO one. I'm like, Neil has the formats now and that one did really well. I'm like, I'm for sure that one's going to do better than the other ones. So the formats matter, right? So she knows the formats like the background. I think she's one of the strongest. So she gives us account manager. Cool, right? And then there's an account manager under the account manager. Okay, so the account manager is like, oh, you know, we don't, we don't do Slack, you know? And then when we sent them a Riverside link, right, because we use Riverside to record stuff, like, oh, we don't use Riverside. Can you put it all into Google Drive? And we're like, Can you just— one of our guys was like, can you just do it yourself? Like, you just set up like a thing. Like, oh no, that's out of scope, blah, blah, blah. And then like this and that. Oh my God. I'm like, at this point, man, like, like, what are you even doing? Like, as an agency, right? What we do is we help people solve problems. We take things off their plate. Okay? You're putting more and more shit on our plate and then it's coming all the way up to me and I'm already, I have enough stuff going on. I'm like, how is this even getting to me? I'm like, just cut it, right? This other guy, It's just going, growing, growing. Like, we should try this, we should try this. My point is the difference between these 2 is one person that cares and one person that is biased to action and loves learning. The other one, they're not adapting quickly enough. And that's what's going to cause a lot more churn because I was willing— I referred her to a few other companies and then I had a poker game the other night, right, with a handful of entrepreneurs and they're not going to work with them anymore. Because they heard of this experience. And so word travels fast too.

That's all I'll say. Yeah, word travels fast. And because Eric referred her out to a few agency or a few of his friends, he's going to notify them on his experience because he doesn't want his friends to get burned as well.

One guy, like he's trying to grow his brand. His company does like $160 million a year. That would have been a great client, right? But I referred and I had a bad experience. I can't, I can't keep that referral up anymore.

Oh, of course, dude. I got an interesting text from Shiv. You know Shiv, the guy who also owns the agency?

Yeah. AI, he wrote, Shiv wrote a book around AI and marketing.

Do you remember? Yeah, but it was really good. He sent me a text of the same thing. It's just a video of me filming in my living room and they made the mirror in the background, they just put some images over it. And he said, so many Neils, because there's 3 of me. And he said, your videos are so focused on what you guys sell. Still figuring out my strategy. And I learned this one the hard way years and years ago. Don't chase the views, chase the revenue.

Neil actually learned this during blogging days, like 15 years ago when Neil, when I would read Neil's posts on SEO, but then sometimes he'd have some ones on like his clothes. I spent $600,000 on clothes and I made this. And at my mom's funeral, I think you met, I don't, you met one of my friends. I don't know if he walked up and he's like, hey, I read your post on like, did he walk up to you?

I have no idea. So I've had a few of your friends walk up when we were eating dinner in Vegas. One of the girls, Mentioned about the clothes.

Yeah. So the funny thing is these are not your ICP. These are like my friends from high school and elementary school, right? And then they're like, oh yeah, you know, I'd read Neil's stuff on that. But those aren't— to that point, it got— it went wide, but it was not the right people. It generated zero revenue.

Yeah. And I think that's really important. I think that's really what most people forget. They chase the views and they don't really look at total revenue. Someone just posted something on X, okay? And I didn't respond to it. I've had this post—

About you?

Yeah, about me. And this person posted a comment on one of my posts and they're like, why should I take advice from you? Look at your traffic and your reputation over the years. And more so they were just using a chart with my traffic and it was just going down and to the right. So instead of up into the— up into the right, it was going down and to the right. So he's pretty much saying like, I've lost most of my traffic and that is Spot on. I responded to this years ago when we were in this transition. I used to rank on Google for terms like how to get more Instagram followers, got tons of traffic from it. I used to rank on page 1 for the term Discord, literally Discord, the network, right? And tons of these terms. And what I found was I was getting all this traffic and zero revenue from it all. I was also getting leads and a lot of these leads were wasting my salespeople's time. I'd have people call in and be like, hey, I want to help my daughter become more popular on Instagram. Can you help us out? And what they would fill in on their budgets and all this kind of stuff in websites wasn't related to what they were asking for. They were just putting the company they worked for, and then they would ask us for advice for their daughter or their son who wanted to be Insta-famous. We cut all of that out. I focused on my ideal customer, which is a mid to an enterprise company. When I say mid, I think everyone's definition is a little bit different. So for us, like a mid-market company could be doing like $5 to $10 billion a year in revenue to enterprise. And ideally they're global and we try to help them with their marketing in a lot of different countries with their systems, their processes, and just help them scale. It drives a lot less traffic. It drives us a lot more revenue. And you know what? Our churn on those customers are 4 to 5x lower. So the business is also more stable from it.

So here's what I'll say related to that. So I was looking, I was talking to, so at the poker game, so Mark Manson creator, right? He creates like a lot of relationship stuff. So he's looking at my Instagram, right? And initially he did an audit like as we were playing, right? He's like, dude, like I feel like you're at least 3 to 6 months ahead on the AI side. Like every time I see something, right? And then he looks, so he's like, You know, my suggestion for you is like, you need to do more, right? More quantity, right? And I'm like, oh, okay, yeah, more quantity. And then he starts really analyzing my page. He's like, wait, wait, wait, wait, wait. He's like, no, you have too much quantity. You need to do less quantity, higher quality, right? Because he's like, you do know your stuff. And so my whole thing— and by the way, this is an ad for me right now. We are looking for a short-form strategist. So if you got something, send it over to me, DM it over to me, and we can talk. Right. But anyway, so he was saying that, I was like, okay, that's interesting. And then the— I'm looking at mine, I'm like, okay, that's what I need to do. And I look at Neil's page because Neil's page in relation to how many followers he has, followers is not the biggest thing, but the average is like, it should be higher, right? And to me, finally, when I saw that, that GEO one where it's GEO, AEO, and there's like 3 Neils in it, it's like mirror video, right? I'm like, okay, that format, everything's about the format, right? Like formats come in and out. And that format, I kid you not, I think it was like 31,000 views when I saw it. But most of your other videos were like, I don't know, 5,000, 7,000, 8,000 views or so. So it's like a lot of it does come down to short-form strategy. But to Neil's point, like as long as he, his short-form strategist like keeps capitalizing on formats and he keeps covering the right topics, he does generate leads from that too. I've generated good leads from Instagram too, but it was just, you don't have the time to think about it. I don't have the time to think about it either. I was talking to Mark. I was like, how do you do it?

Yeah.

So I just have a short-form strategist that like just gives me the stuff and I just record. I'm like, oh, that's so nice. Right.

So the only thing I don't like about recording is people start seeing more of your life. That's the only part I hate about recording.

I can tell you don't really enjoy recording it.

Yeah. And I also don't like people in my home. I know that sounds a little funky. You is different or Noah is different, but like, I don't like people in my home trying to record me.

Real quick, if you want to acquire customers faster and more efficiently this year with the latest strategies and tactics, then check out singlegrain.com. That is my ad agency. Again, www.singlegrain.com. Check it out. And if it seems like a fit, we'll get in touch and help you with a free marketing plan. Usually, like, I get what you mean. You like your friends at your place. You don't like, you know, strangers.

Yeah. But also I don't want to go to a studio to record, so it's just easier for people to come to my house.

There's no solutions, only trade-offs. Yes.

Yeah. Yeah. Because I'm like, man, then I got to drive. I know these are first world problems and laziness, but it's easier for people to just come to my house.

Yeah. Well, good thing Neil's here. This makes it easier for me. So I wanted to talk about one more thing because I was talking to an entrepreneur today and, you know, this is a good topic, right? So what to do when things get really tough in business. So this is an entrepreneur and he's like, you know, I'm really overwhelmed right now and this and that. And I think about, We can share our moments where we're most overwhelmed, right? I think about 2021. I'll go deep in here for a moment. We did 2 acquisitions, okay? Everything started crumbling. We had a GM that was sabotaging the business, right? And so we're losing employees at the same time. We're losing clients because of that sabotage that was going on. I had also, that's a very personal thing. I'll just leave it at that. But I have a personal situation to deal with as well. And so when everything was crumbling down, you know, I was like, man, I think I might just throw in the towel. 'Cause there's like, you know, there's like debt situation as well. There's just everything, like the walls were compressing on me, right?

I told you to throw in the towel, remember?

And Neil called me, he's like, hey, I have an idea. I was like, what? He's like, you should just bankrupt it. I was like, yeah, that's pretty reasonable, right? But like in that moment I'm like, you know what, if I keep going, Right? And we make it work. It's going to be a great story at the end of the day, and I'm going to learn a lot too. Or I could just throw in the towel right now. It's still debatable right now if that millions of dollars going back into things to save it was worth it. But I will say that in terms of how I got through it, it's just every day, it's that you look at this as an elephant, right? Just a little piece of it every day, right? A little piece of it. Just one step forward every day. Sometimes it might be 10 steps back, but just one step forward every day and things will get really tough. And I was just telling this entrepreneur today, I'm like, look, man, I get that you're overwhelmed and I get that you need to think about it on all these things. But the reason why people succeed is because they keep going, right? It's really, you don't have to be that smart. You just have to kind of keep going.

But in your situation, and you can cut this if you don't want this in here, you got royally screwed by someone.

By many people.

Yes. And they wanted money for something that they didn't deserve money for. And it was a lot of false promises. Eric's a nice guy. He can be stern. I would say I'm a little bit more cutthroat than you. Oh, for sure. I would've just been like, I'm suing you. I don't care. You're not going to get anything. Eric's much more nicer. I was like, you should bankrupt him and give him zero. And I'm like, you know, and there's other ways around it where he could have saved it or done some different structure things. But I'm like, the other people are just trying to take advantage of him. They lied to him and they screwed him over and they didn't Tell him, they didn't disclose everything that they legally were supposed to disclose.

Yep. No, it was, I would say one deal screwed me. The other one didn't. The other guy was like a good guy. I structured that wrong. I should have kept the founder there. That would've worked out. But then there's like the hire we made that had screwed, you know, like a mutual friend of ours in a company before.

Oh yeah, yeah, yeah, I remember that.

So, but that was a tough time in business where there's tough things going on personally. There's pressure coming in from all sides, but you either, you can throw in the towel or you keep going. And it's the people that keep, like, you think about James Dyson, the Dyson guy, right? 14 years of failures, thousands of, I think it's 1,400, something like that, vacuums that failed. And he had 3 kids. His wife still stuck with him and look at him today, right? I think it was the lion's share of the business.

Although the last few years, I don't think Dyson has been doing as well, but they're so big. They still do well relatively.

It's okay. He has an exit every year. Yeah.

Yeah. No, they make a crap ton of money, but Dyson's had a lot of competitors and companies. that are just taking a good chunk of the market share. Like Shark is one. Miele has vacuums that are really popular and really good now, but there's tons of players who are copying Dyson's fully.

I like how you know the best vacuums.

Uh-huh. Dude, we have so many of them in my house. Yep.

And you even have the one I told you to buy and you still haven't taken it out of the box yet.

I know.

See, that's the one you can give to your kids and say, hey, you know, you can say, hey, Matic, follow me. And it just follows you around the house and you can clean this.

But I have a full-time cleaner, 8 hours a day, 7 days a week.

But it gives the kids something to do.

No, I want the kids to clean up their own stuff and do their own chores.

Oh, you want them to pick it up with their own hand?

No, I make them do it and my wife makes them do it. And then at the end of the day, after they make their bed, the housekeeper comes in and remakes their bed because the kids—

Because it wasn't good enough.

But it doesn't matter. They need to learn to go and do stuff. I'm not gonna raise lazy kids. They need to have some grit and grind and they need to be responsible and they need to understand that Mom and dad worked hard to deserve this life. They did not work hard to deserve this life. They got born into it. I do appreciate them. I brought them in, so it is my responsibility, but that doesn't mean that they should just be spoiled and not have to do anything.

So let's talk about— so I just gave an example, what to do when things get really tough in business. Why don't you go for one?

Mine's actually similar. Every time I've had things that get really tough, I push through. I usually figure out how to— typically when things get tough, it's usually tied to money. Either you're not closing enough revenue or the profit isn't there or something bad is happening and that you could say people solve it or better product will solve it. But I look at the root as in if you had more money, it buys you time and you can hire the people or buy the companies that are competitors. Or build better products. Money comes down to a lot of it. What I usually do during hard times, I haven't done this in a long time, is I liquidate everything that I owe, like a home, literally my homes. If you look at how many times I've moved, think about how many times I've moved. My average hold time for a house is 1.5 years, 1.5 years. Anytime things get tougher in business, Or I see opportunity, it's one or the other. I will liquidate whatever I need to so that way I can double down on the business. And that has worked out well for me, but I only do it when I really have conviction. But I will say this, the other day my co-founder asked me, he's just like, you got a mortgage on your house, right? And I was like, yeah. He's like, Why'd you take out the mortgage? And I was like, dude, I get a really cheap rate. Call it 4.5%. I believe it's interest only, which is dirt cheap in this economy. And I was like, dude, there were some stocks that were, I believe, at 60, 70% discounts that I just put the money into. And he's like, why'd you do that? I'm like, I believe I'll make more than the overall mortgage, like the dollars that I owe, like the debt I owe on the house. And in 12 months, I bet you I'll be able to pay off the mortgage and keep the same amount of money that I pulled off. And I only did it for that reason because I thought it was a very low risk. But generally speaking, he's like, so then why would you want to pay off your home after? And I'm like, well, whether I do that, the stock sells or not, I would just pay it off in the next 12 months. I don't want a mortgage. And he's like, why don't you want a mortgage? I'm like, I have a family, I have a wife. If I pass away, I don't want less— I want less worries for my family. So then that way they don't stress out. So then he asked me, if we found this amazing business opportunity and it required you to liquidate everything, would you do it? And I said, one, at this point in the business, I don't think that's realistic and we would have to, but two, I'm open to it. I would have a family discussion, but I don't want to. And he's like, why don't you want to? And Eric mentioned this to me, or was it someone? No, I think maybe Eric did, but also my head of EMEA, Mark Fagan, mentioned this to me. He's like, have a nice home with a big backyard, and a backyard's hard to find in Los Angeles, so that way your kids can run around and be happy. And they're so happy. And the moments I have with my son when I'm home and I'm not traveling, I play soccer with him almost every single day in the backyard. We do foolish stuff like trying to kick the ball on the roof or get it stuck in a tree. I know we're not supposed to do that and mess up the roof tiles, but I don't care. Those memories to me are priceless and worth more than how much more I can make in the business.

Yeah. Well, also they're old enough to know what's going on now, right? And like, Before, when Neil built the home and he moved out like a month after he finished building it, like they didn't know what was going on yet. Now it's like they're building, they're building something here. They're like making friends and all that. You have a community here now, so it's harder to pull it out.

You nailed it. My son, when we moved into the house, you know what he said? Mommy, I love my room. I love this house, but don't let Daddy sell this one. I want this one.

Yep. So when you say family meeting, it's never a family meeting. It's Neil's decision.

So yes, my wife would be down for whatever. Yeah, she's always down for anything. And she doesn't care too much about homes and stuff like that. If she had to pick the number one thing she cares about other than health and family, it would actually be kids' education. If I said, hey, we had to pull our kids out of the school, that is a very hard conversation that I won't win.

It's nice to have stability, right? Speaking of stability, so we've been interviewing like these people to join the company, and I always anti-sell them at the end. And this guy was like, you know, the company I'm at right now, like this guy's an SEO leader, right? He's like, the company I'm at right now, they're just not AI for it. I'm like, how many many people a year come to AI Forward, right? Like he's like 5%. I'm like, he's like, yeah, you know, I really want to grow. And he's like, you know, what's also really important to me in this point of my career is stability. I'm like, wait, but you want to grow. And he kept using the word stability, right? And so at the end of the interview, I was like, look, man, I'm going to anti-sell you right now. And this is for anybody that wants to join and work with us, right? First of all, if you're going to work with us, it's not a 9 to 5, it's a startup environment, okay? So don't expect to clock in, clock out. So the second thing Don't expect stability, right? It's like when you're growing very quickly, I would say that it's stable from a, you're going to learn a lot, it's a good job, and we have great clients and all that. But inherently, if you're trying to grow, like if you're lifting weights, for example, you're tearing muscles in your body all the time, right? Like that part is unstable. And I also said, what else did I say? I said, oh, expect direct feedback and expect it in public sometimes too, right? So by the way, Neil does a good job with anti-selling people. Sometimes it works, sometimes it doesn't, but you're better off from a toughness standpoint doing that because if you end up hiring these people and they're not a fit, it's way more painful. So stability is not something that's necessarily in my vocabulary right now because of the nature of where things are.

You have quite a bit of stability. You and I are actually very similar. If you think about it, either we're stable on our personal life, or stable on our business life.

Yeah.

We're very rarely ever stable on both. You are stable right now on your personal life.

Yep.

I'm very stable right now on my personal life. Both our businesses are chaotic. I wouldn't say they're chaotic in the way they're doing bad.

Yeah.

We're just changing a lot of stuff. We're pushing, we're putting a lot of pressure, we're trying to grow faster. There's a lot of chaos in business. I would say personal life is very stable.

I prefer the chaos of business. So yes, I don't know how to create chaos. The good chaos, not the bad chaos. Not the whole like 5 years ago. Now it's like, yeah, yeah, yeah. I don't consider that chaos.

I look at that as a disaster. I look at chaos as in like you're changing a lot of stuff. So it creates pressure. People get uncomfortable, but from that usually causes more growth. So I like that. Dude.

Yeah. No pressure, no diamond.

Yes. But I found that When things— I've never had both very stable. I have to have one that's somewhat chaotic because I get bored.

As long as I've known you, you've mostly had stable, you know, personal stuff for the majority.

Yeah, it's usually business.

Yeah, you've never— on a personal side, I've never seen you that unstable.

Yeah, it's usually business.

Business side, but the business instability is caused by you wanting to grow. So it's been good.

But the business chaos is usually stuff like me yesterday. I get my CEO on the phone, I get my CFO on the phone, I get our head of legal on the phone because we have in-house counsel. And I'm like, hey, I got a deal. A buddy wants to sell his company. These are the numbers he told me. He needs to close in 30 days. Let's make it happen. You have the data room access.

See you guys later.

In less than 3 hours.

And I'm right.

I was like, see you guys later, but let me know if you want to call. They're like, how about we have a talk tomorrow morning? I'm like, analyze the data room today. But I was like, I'm speaking in the morning, so I won't be able to do the call. We did analyze the data the day it came into the data room within an hour or 2. And then the chaos went away because we quickly realized the numbers don't work out. And it wasn't that it's a bad company. The numbers that I was told over the phone versus what the numbers were really were 2 different things.

So then Isn't it funny? What percent of the time are the numbers that they tell you versus the real numbers accurate?

Dude.

0%.

No, not 0%. Are you talking about banker processes or non-banker processes?

Let's go both.

Non-banker processes, almost 100% of the time their numbers are off. That's what I'm saying. Banker processes, the numbers aren't really off. It's just how they move around numbers. But in non-bank processes, someone could be like, I'm doing $3 million a year in profit or $5 million a year. And you look at the numbers, you're like, this is not $5 million. a year in profit. This is $3 million a year in profit. You're off by $2 million.

Mm-hmm.

You know, when you do $3 million, I don't know how you think $3 million is $5 million. There's a big difference. You should know the cash flow. And I saw this firsthand when I was talking to someone and we were trying to do a deal. They're like, yeah, we grew really fast. In a year and a half, we're now at $3 million a month. So they're growing extremely fast, more than tripling. And we are trying to analyze, see if we can do a deal. And then within a few weeks they're like, oh, we were off by your numbers by 8 figures. And I'm like, how the heck are you off by our numbers by 8 figures? 8 figures is more than $10 million. You should know in your bank account if you can see the money or not.

Mm-hmm.

Non-banker deals almost always are off. Banker deals, they're pretty accurate on their revenue. They're pretty, they're not as accurate on their profit because it's what they classify as profit. I had another deal that we were about to do. We walked away from 2 deals literally in 2 days that we thought we were going to do. The one yesterday, it was a long shot. We didn't really think we were going to do it. We're like, if the numbers are true, I told the person on the phone, I'm like, we'll do the deal. The numbers weren't, so I don't feel bad. But the other one we were talking for a month, dude, they added back a lot of salaries and they consider that profit. And I'm like, but when I buy this company, I have to pay all those people, right?

Yeah. Yeah.

So that is not profit.

Yeah.

And I'm like, it doesn't matter how you classify it. That's not profit. I got to pay these people. And I see it all the time. But when it's banker-led, like we were dealing with a business 6 months ago, their profit didn't decrease much, but it was because a lot of people took pay cuts. And I was like, well, if I bought that business, I'm going to have to pay people what they're really worth. So then there goes a lot of the profit. I'll buy you on what the real profit is, not on you guys all getting pay cuts and expecting a pay raise the next day.

So this is why even though Neil doesn't declare himself a CEO, officially doesn't have that title, I also declare him a CEO because the CEO causes the thing called the lightning bolt CEO, where you find something amazing and you strike the lightning bolt and it's like, here's the problem, right? Goodbye guys. And you're back again, right? And so that's a very CEO thing to do. So 2 more things. There's a case study I want to talk about with this massage place. But one more thing. So when you look at Cursor, Whisperflow, Replit, HeyGen, Victor, how many active ads do you think they have at any given time? So these are kind of the— these are AI startups that are pretty hot right now. Gamma's in there, Framer's in there, Superhuman's in there.

How much they spend on ads or how many ads they have in their platform?

How many active ads they have at a time.

Like when people are using their app, how many ads do they see?

No, how many active ads in like Meta ad library or something like that?

Oh, I get what you mean. I don't know, maybe 3,000, 4,000.

At an average, any given time?

I'm assuming they're using AI and just testing a lot of ads.

So Cursor's 1,100, Whisperflow is 820, Emergent 410, HeyGen's 400, Victor 620. And to Neil's point around testing, Cursor 6,400 tested, okay? Whisperflow's 3,300 tested, Emergent 7,000 tested, HeyGen 1,700. And so So this is from Ira Bodnar, but it's often more ads than you think you actually need. And people think it's like, it's a whatever thing right now and you can just kind of get by. So just wanted to call that out that paid ads still exists.

Yes.

Yeah.

So let's wrap up with a case study and this will be a fun case study. Eric and I have a friend who worked at a 5-star hotel in the spa. He was giving massages. The hotel wasn't doing well and they shut down the spa. So you had to figure out what to do. So Eric and I were like, dude, we, you live in Los Angeles. Why don't you just do, uh, I think it's called outcall where you go to people's houses, right? Is it outcall or in-call?

That's an escorting term, I think.

I don't know. Like, what is it called when people go to out— I think it's just really outcall. Okay.

So outcall massage. Okay.

Okay. So, you know, I was just like, all right, how do you make more money? Now, this person was doing outcall massages and making $5,000 a month, which may seem like a good income, but keep in mind, you got to drive to people's houses. You got to pay for—

Parking, maybe?

Parking. Gas. You got to— it takes time out of your day.

It's like 3 hours for a 1-hour session.

And then you got to pay for materials, right? Uh, towels, hot stones. Oh, that actually sounds nice. You know when you take the stones and they push it on your back?

They don't push it. They rub it on your back.

I thought like they push it.

That's something else.

Okay, so, uh, uh, or cupping, you know, like when they put the cups on there. Uh, although that may be, uh, not chiropractic. What is that called? Like the needling?

The lavender scents, you know, all that stuff.

Lavender scents. Oh, the aroma, you know, those machines that blow Smoke and stuff like that.

Yeah, yeah, yeah, yeah.

The table costs money, wear and tear on the table over time, you have to buy a new one. Yeah, I could be wrong.

Yeah, yeah. So let's— so here's what happened, right? So for this, this, um, this massage, um, this masseuse, so basically he was charging around, let's say, you know, uh, $300 per massage, right?

And it was less than that. It was, uh, call it $200.

Okay, $200. Now here's the thing, it's a supply and demand equation because this person was getting around 30 leads, 30 inquiries a day, right?

So, but 30 inquiries a day, most his clientele were people that worked in offices, like people who could pay money.

These people make good money too.

They make good money. The issue though is most of them wanted him to massage after working hours from like 5 to 7 o'clock or something like that.

So really had 2 slots.

Yeah, exactly, 2 slots. And that's if you're not driving. People want to be done before dinner.

Yeah.

But they didn't want to do it during the day because a lot of these people did not work from home. And out of the 30 inquiries, he mentioned how 6 were real that would've really paid money.

Yep.

Because a lot of tire kickers being like, yeah, I'm interested. Oh, I'll book it when I have time. Or, oh, how much is it going to be? Oh, I don't want to spend that. Can I get a coupon or a discount? But he had 6 really solid ones. The first thing we told him to do, because he was like, hey, how do I increase my pipe? How do I do more marketing to get people who Massage services during the day, kind of like a hotel and spa. I'm like, that's a different clientele than what you're getting for marketing yourself online. And the first thing Eric and I told him was, one, you have some no-shows. Everyone should Venmo you the money in advance because then if they don't show up, at least you got paid.

Yep. By the way, OpenTable does that all the time. They take a reserve.

Yeah. For a lot of restaurants. 2, we also told him you should increase your price. So call it instead of $200, we said go to $300 right away because you have 6 people that'll take the spot, but you only have 2. He didn't want to charge $400. Eric and I said we should just double up the pricing.

I said go $500.

Yeah. And he's just like, that's too much money for people in Los Angeles. So I'm like, dude, if you're massaging people in places like Beverly Hills, Century City, these are, there's big office complexes here in Century City with a lot of executives making tons of money, tons of private equity stuff.

Yep.

So we're just like, you should charge more. He did increase pricing 50% and it's doing well and it hasn't affected the take rate and all the slots are still getting full.

In fact, of a sample size of 10 people, 4 declined, but 6 took it.

Yeah.

The higher price.

And then the other thing we said is start making everyone come to your house, set up a room.

In-call.

In-call instead of, uh, having to drive because you lose a lot of time and money on the transportation. And if people want you to go to their house, charge even more money because of your costs.

Quadruple.

Yeah. I didn't know about quadruple, but—

Quadruple the original rate, you know, or maybe triple, maybe triple. But my point is like—

Or $500, like you were saying.

Yeah. But like to have to go through the— it's very tiring to have to do like 2 outcalls in a day.

Right.

That makes it not worth it. But if you can bring them in, you know, whatever, and then the deposits, you end up making net more. So instead of $5,000, which is amazing, you end up making what?

Well, the best advice we gave is he was working 6 to 7 days a week. He was having just not brain dead, but like he felt just worn out, tired. Because you have to remember, if you're massaging people using your muscles, I don't know what muscles, but in your hands, your fingers, I bet you they hurt after a while. Your wrist muscles.

I don't know how to massage. I'm really bad at like this, you know, Like sometimes it's fresh.

I have a Theragun. You know what a Theragun is?

Yes. Yes. I know what a Theragun is. I have one. I don't use it though.

Those are amazing. I don't use mine either that much. Yeah. So what we said is increase your pricing, work only 5 days a week, and then that way you make more profit and you also have relaxation for yourself, for your muscles, your brain, and you're just more energized.

It's all more peace of mind. The in-call piece, like that's going to save you time and energy. The deposits, you're going to be making that more money so you don't have to work as much. And so it's all about making these little tweaks as you're going through it. And then this person now has a menu that they're optimizing, right? Yeah.

I give them really cuckoo ideas like, hey, while you give them a massage, offer them like a face mask. Like, you know, like the aestheticians, what is it called?

Whatever, like beauty aestheticians?

I don't know.

I don't know how to pronounce it.

You know, like people put, like you see on the TV shows.

When they go to sleep.

Or movies, people have like those cucumbers and a green mask over their face. And I was like, dude, offer upsells.

Those are all upsells.

Yeah.

The hot stones that are real, like if you get it at Encore or whatever, you're adding like another $30 or $60.

Are you talking about Wynn Encore?

Yeah. Wynn Encore. Yeah.

Man, that's Encore. They're going to charge you double.

I know. But when you get a nice massage, it's at least $300 to $400, right? And you add this and then the lavender, $30 here, the hot stone here, $30 here. Oh, you want to, you know, you want an extension to like 90 minutes or whatever, and then 2-hour massage. And before you know it, you spend like, you know, An arm and a leg. Yes.

The other thing Eric and I also recommended was hire an apprentice because some of his clients are couples. And instead of doing one back to another, you could do couples massages and you can have apprentices charge more, 2 tables, and then you can knock out more in the day versus just doing one and then doing another.

And by the way, what we're talking about here, you might— why are they talking about massages? Well, because this applies to any service business.

It's also a fun We talked about so many upsells and downsells, ways to charge more, reduce. In this case, there's no refunds, but there is people who book you and then they cancel on you last minute and you don't get the money, which is just as bad as a refund.

Yep.

Because you can't do something else.

And then you can play with other stuff too, like your favorite customers, they give you referrals or whatever. You can do like a, you know, give them some, give them free referral or something like that. Free massage from referral.

That's true. He's been getting referrals.

Yep.

And we told him about setting up referral programs where people give a lot of referrals, let them have the older rate.

Yep.

So it just ends up being— Grandfathered in.

Uh-huh. So there's all these things that it's, these things carry over into whatever business that you're in. So we hope you enjoyed that one. If you want more case studies like this, let us know and we'll see you tomorrow.