How To Build A Second Brain with Tiago Forte + Bonus Interview

Welcome to Bacon Wrapped Business. This is Brad Costanzo and I am happy to have you guys with me today on an episode I've been wanting to have for a while about a topic that I love to geek out on.

I've actually talked about this topic quite a bit with some of my friends and in some previous episodes. This really has to do with, for lack of a better term, personal knowledge management and understanding the way we learn, retain information and take notes so that we can not only just comprehend them at the time we need them, but to go back in time when we need them in different contexts. I kind of do this naturally. I've got a little bit of a. I've got a good memory, but I support that through just organically the way I take notes and throw information out so that I think I can remember it later. I, however, always been very unstructured in the way I do it. I kind of wing it and I throw caution to the wind and hope it works out kind of the way I run my life, it feels like sometimes. However, today's guest, Thiago Forte, is an absolute expert in this concept and he's got a website, a business, a course called Building a Second Brain. And for those of you who geek out on this stuff, like me, you've probably heard his name because he's one of the, the thought leaders in, I guess.

Capturing and retaining thoughts. So I invited him on the show today. We're going to talk a lot about what he does and specifically how he does and I'm going to be asking really personally selfish questions. And then at the same time, Tiago just mentioned to me that he'd like to talk to me about some of the things that I've done that might be interesting to him as a course creator. So I welcome you to eavesdrop on this conversation that I've been wanting to have for quite a while. Tiago, welcome to Bacon Wrapped Business.

Yeah, good to be here, Brad. Really. I've been really looking forward to speaking with you and sounds like we have a number of common interests to talk about.

Yeah, I think so as well. So let's talk about this.

Let's talk about your expertise here of personal knowledge management. Do you call it? Besides the Building a Second Brain, which is your brand, do you have another name for this.

Concept of what we do and how we codify information?

Yeah, I think depending on the situation, there's three terms that I use. The more kind of technical academic is pkm, like you said, personal knowledge management, which actually I didn't make up which people often, it's often the first time they've heard that it's an existing kind of academic field of study. There's journals, there's papers written. Started in the 90s out of libraries actually. But then sometimes I use building a second brain. That's the more like the brand, the marketing. That's my upcoming book, my course, my product methodology. Exactly. That's more specific to me. But then the kind of everyday, most relatable term is just digital note taking.

In a minute we're going to talk about that. You've really created a system that not only works for you but has worked for a lot of other people. How did you get into this? Because a lot of times we create the course or we create the system that we need most for ourselves. They say we write the book we need to read. So what was the genesis of this for you? Like your background as it applies to this?

Yeah, you know, it was quite a journey. It was a long journey.

Let's see if I can summarize it. It was really a combination of needing it, like you said, in different areas of my life in different ways. So one way was I was in the Peace Corps, which is a US government run program to send Americans abroad as volunteers for two years, for two year terms that's been around since the late 60th. I did this right out of college and I was in Ukraine, so they basically shipped me off. I had a few months of training, but really I hardly knew what I was getting myself into. And I find myself in this little town in the far east of Ukraine in Eastern Europe, kind of like almost to Russia.

By myself. They purposefully didn't place you with any other Americans. You were just on your own. And I was a teacher. I had to teach five, six classes a day. This was my. Not I had to.

This was teaching English as a second language.

Yes, English, English. And suddenly I just have a lot of demands on my information management skills. Right. Like I have to manage student records, I have to plan exercises, give quizzes, do the different games we would play. So really I started with my needs as a teacher, but then there were other areas of my life like my health. I had this, I've written before about this initially very mysterious health condition that affected my throat. It was like an unexplainable pain and tension in my thro. I spent years and years going to every kind of doctor. I mean spending insane amounts of money doing everything that western medicine could offer. And what I eventually realized is that it was like so many health conditions, it wasn't just one thing that you can take a pill, right, and oh, it's fixed or do a procedure. It was a holistic thing that was basically just too much stress and imbalance in my life. And so I had to. And actually the way I discovered this was piecing together all the. Some test results over here. You go to a doctor and they don't know about all the other things you're doing. They kind of act like you're the only doctor that you're seeing. They're the only doctor that you're seeing. And so I would have to kind of put together the different doctor's notes and cross reference them and compare things, do my own research, try different experiments. And so I really used my, what I eventually came to call my second brain to just figure out my health and get to a place that I could live without pain. And there was a few other areas that I used this like my first job and starting my business. But eventually I just realized, wait, if this need to more intelligently manage my knowledge is so fundamental to all these aspects of my life, maybe there's other people that could use these skills and these tools. And once I started talking about it, it was like a dam breaking. Because people have incredible frustration and pain and challenges in this area of their life. And they don't even know that this is a thing you can do. They don't even know it's a skill and a practice you can train. They just put up with it. Oh, of course. Everyone is complet overwhelmed with information in their life. Is there any other way?

Yeah, absolutely. You know, it's funny that when I, when I looked back at how like I did this, I guess I was.

What's the word?

Unconsciously competent of this. Like, I would just, I retain information well and I could recall it really well. And for a while I thought, well, maybe I'm just, maybe I'm just a genius. But then I, when I went back and through and I was like, no, there actually is a method to my madness. And I realized it actually started for me. I tried, I tracked it back to high school. I was a.

I was. I don't even know how to phrase this. I tried to cheat in high school. And it all stemmed from trying to cheat but not being able to cheat. Because what I would do is I would, I would create these amazing little crib sheets right where you like, okay, I'm going into this class and I'm going to take like a little 3 inch by 3 inch piece of paper, I'm going to put it up my sleeve and I'm going to cheat my ass off on this because I don't like studying. So I would. That night, I'm cramming and I'm writing it all in the right context, almost codifying it so that I could understand with very few words what it was about. And I was really proud of this. And I was, like, looking forward to going in and being like, I'm going to ace this shit without even trying. But what I realized is by the time I got to the course, the act of writing it down and putting it in the context just ingrained it in my brain. I never needed to cheat, so I was like a failed cheater.

That's funny. That's really funny.

I laughed when I looked at that. I was like. But that's how I learned to retain it, because you have to really distill down and synthesize the things you learn and put it somewhere. And just the act of actually writing it out and putting it somewhere, there's something magic, right? Like it engages your kinesthetic senses and your visual, and you're seeing it. And I remember I would often, by the time I would need to recall the information, I could see not only where I pulled it from the book, but I could see where I wrote down. And that's what started to solidify it. And then as I started to go back through, like, how do you retain information from the books you read? I just realized that when I read a book like a Kindle, I love Kindle because you can highlight things. And I'll read for context, like, is this highlightable? Is this highlightable? And I read really quickly because I'm only thinking, okay, this is an anecdotal story. I already get what he's trying to say. I'm going to skip to the next one. And as long as I review those notes one time, it's like, it sticks in here. But it took me a very long time before I would then synthesize all those out, pull them into, like, Evernote. Or I use Roam. Now I used Workflowy. In the past, I've used a million things, like, I'm sure you have, but. So that's kind of how I went down this path. And now when I do it intentionally, it's like magic, even though I don't do it methodically. So I'm intentional but not methodical, which is why I love having you here. Talk to me some more about what you discovered about with Your methodology, because you've got some cool acronyms and you've got some cool ways that you've put this out so that people can not be overwhelmed by what seems like it could be a herculean task of consuming and recalling this information.

Yeah, yeah. I liked your example of the Kindle highlights because that's many people's gateway to this. What I really try to do is not come in and say, okay, we're going to change everything. We're going to overhaul your entire life, give you two dozen new things to do and do them all the time, every day. What I really try to do instead, and this is the reason that the course I teach, it's not a bunch of prerecorded videos, it's not self paced, it's what I call a live cohort based course. It's delivered via zoom. Because I need to interact, right? I need to listen. Like you just said that you read Kindle books. Great, that's an entry point. And so what I would say, like a great starting point for you or for your listeners. If you do that, you highlight ebooks, for example, either on a Kindle device or the Kindle app, which is free on iOS and Android devices, export those highlights, right? You've already done 90% of the work, which is reading the book. You've done an extra 5%, which is highlighting. Just do the last 5% or less and you can either hit the share button within the Kindle app and just email just those highlights, just those excerpts that you've highlighted to yourself. Or if you want to get fancy, you can use a service such as one called readwise, which kind of automates the syncing process, taking those highlights.

I was using Clippings IO on a little Chrome plugin.

Yeah, that's another one.

Yeah, I like read wise. Yeah. And then once you get those, don't just read through them. Like don't you. You talk about now synthesize those a little bit more for the look for those big ideas. Is that correct?

Yeah. So people move through stages. Okay. So like in the beginning, usually people will think, I don't really know what I want to do with these highlights. In fact, I don't know if I want to do anything with them. They're just kind of in a gathering. It's like a harvesting phase. They just need to get in the habit of collecting in one central place. So they do things, you know, they're like, try a web clipp and save some websites. They'll get the app on their phone and Try jotting down things. They might try a voice memo app, they might save some emails. They just gather stuff. But then there's this very natural evolution where once you've gathered the stuff and it's all in one place, you look at it and you're like, crap, this is valuable. This isn't just random bits and pieces. This is real ideas and insights, theories, evidence, research. I could really do something with this. I should do something with this. And then that kind of leads into the phase of like structuring, organizing, linking, tagging. There's all sorts of methods which we can get into that. I teach on how to do that, like add structure, add order to it.

Yeah, that's what I. That's the. Just really this year I've been going down that. Like, I think my first real introduction to this was maybe the whole Zettelkasten method. And then that got really confusing as I was reading through it going, okay, wait, what I don't have. I'm also add. So.

It'S gotta be simple enough to where I'm actually going to do it. And I'm not researching things for a PhD thesis. I want to just recall the stuff. So I'm always looking for that. 80, 20, what is that? 20%? I can do that. It's going to get me 80% of the recall. And speaking of books, most books, let's say nonfiction books, if you retain one or two big ideas from even books that you really enjoyed the whole time, you're like, ah, this is amazing. It's blowing my mind six months from now, if you can retain one or two big ideas, that's actually a big feat. And then when you synthesize it a little bit more, maybe you retain four or five big ideas. But realistically, the best books in the world are like, they have one or two big ideas around it and everything else is just kind of filling in the blank. But I just realized that by going through that, going through my notes and then distilling them down to say, look, if I had to teach this to somebody else, if I had to give a five minute summary to somebody of why they should read this book, or one big takeaway, what would it be? That's kind of the way that I look at it. Like I look at my notes going, how can I summarize this for somebody else? Because that's where you really, as you know too, is once you teach it to somebody else, that's where the real learning gets integrated.

Exactly.

In fact, I'll annoy some of my friends or business partners. Sometimes I'll say, hey, listen, I just read this great book. Let me explain to you what it's about. But that's actually not for you. I'm telling you what it's about so that I remember it.

That's great.

Just sit back and shut up. I don't need your opinion.

Not trying to teach you. I'm trying to teach me.

That's so great. No, Brad, I think that's you've hit on a incredibly important strategy which, you know, like a lot of people have observed the best way to learn something is to teach it. To me, that's not just like a little, you know, fun side fact observation. That is fundamental to the nature of knowledge. Right. Like if you think of a scientist, a scientist is not allowed to scribble something privately in their notebook and say, this is knowledge. It's not, it's only publishing. Yeah, they have to. Exactly. They have to get peer review. They have to have it replicated. They need other people to critique it. And I, you know, not that we always need to have the same standard of a scientist, but like, say you know something, you think you know something about marketing or about product design or about racing fast cars. Well, the only real way to know if that's has any connection to reality is to try it, apply it, teach it, share it, and then you get feedback from the real world or from other people. And that way it's sort of like trial by fire.

Absolutely. Now, are you familiar with the concept of the trivium in classical education?

No.

Okay. Oh, you'd love this. You'd love this. So the trivia, this goes back to like, I think ancient Greece. And this is the way that they taught back then, like, school system. You know, our current school system is based on the Prussian education system, which is really just factory schooling. And let's just get people to try to, you know, cram for tests and be obedient. But classical education was based on three concepts. They called it grammar, logic and rhetoric. And in those orders. So grammar, learn the fundamentals. Like let's say you're learning a language. Learn the fundamentals of the language. This is the grammar. This is the building blocks of it. Then the next step is to learn the logic. How does it all connect together? This works. That doesn't work. You're starting to piece it. This is where you're trying it. The last one is rhetoric. Rhetoric is now can you go basically give a, a speech about, can you teach it? Can you pass this knowledge on to others? Because Only when you've kind of gone through all levels of the trivium, understand the fundamentals, got in there and tried it, and then taught it to somebody else, do we actually think you know it. And then the quadrivium is more like, you know, math and science, et cetera. Those are like the subjects. But the method of trivium is really, it's really brilliant and it's funny. One of my, one of my clients and now business partners is a, is like a five time UFC champion named Frank Shamrock and known as the legend in the sport. He was one of the very first big champions. And in his speeches, books and his whole thing, he talks about how he came up with the secret to learn and to master anything. He calls it plus equals minus. Find your plus. Like find the person who's above you, find your mentor, find your equal, like your person on the mat that you're going back and forth with on the same playing field. And then find your minus, somebody that you can be the mentor for because then to teach it. And he goes, plus equals and minus. That's the secret to mastering anything. So it all kind of goes back to this. Learn it, try it, teach it and that. Yeah. So when I do that, that's, that's how I integrate it. And people like, wow, how do you know all this stuff? It's because I'm teaching you, that's why I'm.

Yeah, if you really want to master a subject, teach it.

Yeah. So now you've got, I know you've got some, like, you've got some acronyms. PARA is yours, right?

Yeah.

And explain what PARA means.

Yeah, PARA is the kind of, the second stage that we talked about that you said that you're out of the organizing, adding structure. It's my technique for organizing digital information, like all digital information. And that's an important part of it. It's universal. What people tend to do is we all use many different tools to manage information. There's no way around it. There's never going to be a tool. Think about, you're managing information in your email, in your web browser, in a word doc, in Google Docs, in a project management tool, like there's dozens. And so what Paris says is instead of organizing all of those in a completely different way, which, like, if you really think about it, is insane. Right. Like throughout your day, going to all these different places that have a completely different organizational method, just it fragments your attention and the switching costs of having to go from here to here and use those two things together. Is too high. And so what para does is has you organize all those places the same way. And that same way is to organize all of it in four groups, which are the letters of para. Projects, areas, resources and archives. Right. Which are categories that. And you have to see this to believe it can encompass anything, any kind of information from any source on any topic, for any use case.

So give me a couple examples of how you use this.

Yeah, good. So we can go through them. The first and most important is projects.

So this I think is the fundamental kind of insight of para, which is that our work is becoming more project centric. Right. Like no matter whether you're an employee or you're a contractor or an entrepreneur or a consultant, or you're doing side gigs, whatever it is, the unit of work that is becoming most central is the project. You can say this is the project. It has a beginning, has an ending, has a goal, has metrics, It's a finite thing.

That's something that is across all your tools. Whether you're interacting with an email over here or a website or a document or some notes, it's likely that all those things relate to a given project that you're currently working on.

Now, would project also be. Let's say you've got a business. Right. You've got. Let's say you've got an E commerce business, for instance. Right. Would that be considered a project? Or would that be considered. Or would it be the things inside that. That you're working on would be more considered projects? Like, where would that kind of fall into the.

Yeah, good. So this is one of the distinctions that really is impactful for people and it's actually kind of a segue to the A area. The difference between projects and areas is so key. Okay. And the difference is projects have an end date. They have a specific outcome within a certain time frame that you are trying to achieve. And then when that moment arrives and that outcome happens, you will check it off your list and the project will be finished.

Great. So in context of a business, and this is something we'll talk about in the second half of this interview, is you may be gearing up to sell a business. Right. Okay. I have an exit in mind and.

I need to know everything I can about what this takes because there is a definitive end date.

Exactly.

But let me guess. Something like health is an area, maybe.

So they always come in pairs. Okay, so let's look at a few examples, actually. First let me kind of define areas. In contrast, areas is anything that there's a Standard of performance that you're trying to maintain, but it's indefinite over time. It could end someday, Right? Like a good example is a relationship. Relationships are not projects. There's no like, oh, we're trying to achieve X and then I will cross this person off a list and never talk to them again. Right. But relationships can end, right? So it's not that areas go on forever, it's just that it's indefinite. Right. So let's look at some examples of the different pairings. Health is an area. You're never done with health. You never cross health off a list. But losing £10 is a project. Or being able to have a certain vertical jump is a project. Or being able to make 10 hoops on the basketball court is a project. It's a finite thing.

Gotcha. Sustaining general wellness and just making sure you've got a dietary program that works for you for the rest of your life, et cetera. That's more of an area. But I'm trying to get in shape. Like, I want a six pack for summer. That's gotcha. Okay, cool.

And this, this is everywhere. So like finances. Finances is an area. But make a certain amount of money is a project. You know, marketing in your business is an area. But hire marketing director or launch marketing campaign is clearly a project. And you really, you really need both. And in fact, what you'll notice, Brad, is people tend to favor one or the other. Right? Like, let's take both cases. So some people are very good at projects. They're good at like, you know, like all hands on deck, just like grit their teeth, really push and drive and get to the outcome. But then they don't sustain it. It's like they're always starting and stopping things. There's always a new project. You know, your friends like this, okay, the new thing that, the new kick that he's on, right. But then, you know, in a month from now, it's going to be over and so there's no sustainability, you know.

Interesting to that point. I think I first heard about this from Dan Sullivan. Do you know who Dan Sullivan is? Strategic Coach, strategiccoach.com He's great. One of the top business consultants, really in the world. But he's got this concept. I even think he may have written a little booklet about it. But he says one of the big mistakes people make when hiring, they'll hire a project manager. And he goes, they don't understand that there's a distinction. There's two types of people. There's a project manager and A process manager. And the two are almost never the same. Ment manager loves what you said, start and stop. And they're really good. They'll run fast and they're sprinters. Right. And if you give them a new project, what they'll do is they'll say, oh, my God, shiny object. I love new projects. And they'll put it ahead of the other one and the other one won't get done. Right. But they'll marshal all the resources, they'll push through, and you want them because they're going to finish it. A process manager is different. Right. You're going to get them to maintain the project. So he goes hire a project manager to get it off the ground, move them off that and get them into somebody who can just maintain and make sure, because they're the one. They love stability. And if you give them a new project on top of the processes that are already doing, they'll say, great. This is secondary. I got to make sure my processes are in place. Don't screw up those. So I've tried, perfect example. I've tried to take that into account when hiring people to go, I need you for short bursts or I need you to just make the ship sail.

Yeah. Interesting. Yeah, that's exactly what it is. Projects versus processes require different approaches, different mindsets, different tools, different way of thinking, and often, as you said, different people.

Yeah. It's also a reason why a lot of startup entrepreneurs, myself included, are not good managers and operators. Like, that's why we jump from thing to thing, because we love the thrill of get in, get it.

Yes.

And then we get the minute. Then there's no end date or there's no goal. We get bored and we're like, I need a project.

Yes. Yeah. It's something quite fundamental, I think, in.

Our temperament and the world needs both. Right.

They do.

Process people don't like unknowns. They just, like, this is known. I just know what to do to keep it up. And if we didn't have both, it's almost like a masculine, feminine energy, if you would. And together it works really, really well.

So.

So we've kind of talked about projects, areas, resources and archives.

Yeah. So projects and areas that you kind of understand are like ongoing things in your life, whether they're one time or ongoing. But then there's a third category, which is resources. And resources is a very broad term to encompass anything, any piece of information or knowledge that is not currently actionable. Like, there's no project you're working on that it has to do with. There's no area that it's relevant to, but you. You still see that it has some kind of durable value. This could be like a statistic about your industry. It could be like a marketing swipe file, like an ad that you want to use sometime in the future. No current use for it, but you just like to keep it.

Exactly.

And then archives is just anything from the previous three categories that is no longer relevant.

Yeah, exactly.

So with digital information, there's no need to throw anything away. It's not like Marie Kondo, like, oh, if it's. It doesn't spark joy, trash it, give it to goodwill. Like we effectively have now infinite information storage capacity. So you don't want to delete everything, but you also don't want to keep it front and center staring at you in the face all the time.

Bingo.

You want to just hide it once.

You sell the business. All right, cool. I'm going to go do other stuff. I might not need to ever sell another business, but I don't want to lose that information.

Exactly.

I may need to tap into that. I may need to teach it to somebody else.

Right, exactly, exactly. It's the archive. I think of it as the cold story. Things can stay in cold storage for years if necessary, but if I need it, I just pull open the freezer and it's there for me.

Yeah. Now the other acronym, and I heard you talk about this, I see it on your site on Building a Second Brain is code capture. And we've kind of talked about this a little bit. But capture, organize, distill it and express it, I love that acronym and I don't think we need to go into too much detail on. I mean I think those are really self evident. Capture the information, organize it it, distill it down and then express it. But I want to hear more about your specific process. Let's get a little bit more nitty gritty into the tools and techniques you use whenever you're exploring a subject or even just on the day to day.

What are some of your go to strategies there?

Yeah, in terms of tools, I use Evernote, which is kind of the. It's like the industry standard, tried and true. It's been around for a decade plus Note taking app, it kind of defined the category of note taking apps. But I also am experimenting with roam research which you mentioned. It's kind of the. It's like the hip, trendy, up and coming innovative new startup. So it has some really interesting advanced features, but it's also quite rough. It's not this, like, very easy, seamless user experience.

I remember the day that I downloaded a friend of mine was like, you got to try this out. And I'm like, this is the worst onboarding experience I've ever had. Like, how the hell do you use this? And then Billy Ross, who we know together, he was one of the people who also got me into it, and he's like, there's a moment where it just clicks. And once it clicks, you're cool. But until then, you're gonna be a little frustrated because there is no. It's, like, so open. Like what? Like you're in an empty room. Like, what do I. Yeah, yeah.

Exactly. Exactly. And you know, when you've been around this sort of industry for a while, like, I have, you just see, though, it's like waves.

Yeah.

Every few years, there's a new generation. And it's like, it's a good perspective to have because people get really caught up in the new tool. They think, okay, now it's different. Now this is going to save me. It's going to save and fix me and all my problems. And I warn people away from that, because no thing, no object or tool is going to. Is going to solve all your problems. Problems. Like, eventually it's going to disappoint you in some way. And so I ask people, really, and this is what I teach, is to step away from the tool and to think about the process. And once they see the process that they want, which is really their creative process, then to look at the different tools that they could swap in and out over time to support that process.

I love it. Can you give the folks and myself kind of maybe an example process flow that you go through whenever you're researching something and you can use whatever example or context you'd like.

Yeah. I have a great example. Starting a business so early, I think spring 2020.

I started a business with my brother Lucas. It's called Fort Shelter. Fort or Forte is our last name. And then Shelter. And it was something he'd been in.

Construction home thing. Yeah, I saw you talking about that on Twitter. I was meaning to ask you about that. So this is a perfect example.

We're going to hit both. Both with one stone. So we started this business, which was basically getting shipping containers, the standard ones you see on ships, on trucks, and making homes out of them. So not a small endeavor to start a business, a physical business, construction, building people's homes that they're going to live in, their children are going to live in. It's not a cheap product.

My brother had spent a decade in the construction industry, but I was completely new.

Yeah.

And I'm in charge of like marketing and also like helping him with strategy and some of the finances. Like, I need to play a part and think about how common this need is in our lives. How often in your life, almost on a constant basis, do you have to sort of just like boot up your knowledge about a subject in a very short amount of time?

Oh yeah, right.

Like there's a new project at work, there's a new hire, you know, your kid gets into some hobby. Like life is constantly throwing news right now too.

I'm also launching an E commerce marketplace with a couple other partners. And although I've consulted on the growth of e comm businesses, this was my first real foray into this, into this category. So it's like I'm drawing on all the past knowledge and going like drinking from the fire hose.

There you go, There you go. So I think.

That comes naturally to people. The drinking of the fire hose. Right. There's endless sources of information out there. But what I would add and how I use my second brain is I'm constantly, whatever I'm exposing my myself to. You know, I'm listening to home building podcasts, I'm watching there's a tiny homes, you know, show on YouTube or Netflix, like reading these reports about growth in container shipping. Like really random stuff every single time. I'm not just like downloading the PDF or watching the show. I'm looking, I'm just trying to look for what is the 1 to 10%. Right. It's usually like a tiny minority that is really useful, interesting, insightful or surprising.

And then once I find that I'm extracting it, I'm either like taking a screenshot or copying and pasting or saving a bookmark to my second brain. So that after a few months, and it took just two, three months, I looked in my Evernote notebook for this project, which was starting a business and I had not an overwhelming amount, maybe about 35 notes. But each of those notes is a very succinct takeaway from that source that I had consumed.

Nice. So then.

This business. So screw note taking and all of this other stuff. I'm really interested. Like the container home. So are these typically made out of multiple containers or one? Or is it just a what do you want? I mean it's kind of the. It's like tiny homes, but it's like the shell is pre built and now let's forge it into what you want.

Yeah, that's the thing. The containers are kind of like Legos you can do. There are buildings with hundreds, hundreds of containers.

I've seen some. There was, I was down in Medellin, Colombia not too long ago and I believe there's an entire hotel that looks like it's made out of them. And it was like really, really cool.

Yeah, yeah. We started off, we built a small house that was, you know, like a standard container is 40ft. That's like the standard size. We did a 20 foot container and made a home with a bathroom, kitchen, desk, queen size bed, all of it in a 20 foot container, which was crazy. But then we kind of, we went out into the market and this is where you have to do your research, get feedback. And it was a bit too small for people. So the current house we're building is four 40 foot containers. So it's eight times the size. It's like a typical two to three bedroom house. This one is actually four bedrooms and we're going to finish that in the next month and deliver it to a customer outside of Austin, Texas.

But then as again, we've gotten feedback that's a bit too big for a lot of people. The demand seems to be for like a. Either a home office in the backyard, you know, it's during COVID So people sometimes need a place to work or like a guest room or a cottage.

Or the wife needs a place to send her husband.

Exactly.

Get out of my house.

Exactly.

Hide from the kids.

An exile house, man. A man cave. Yeah. Once you start getting into this, you see that there's many uses that people have for just an extra room. It's kind of crazy because like if you need an extra room and you don't have something like this, what do you have to do? You have to move.

Yeah.

Spend who knows how much time and money just to get an extra room. So what we settled on is a 40 foot container, a single 40 foot standard container we can build a complete house in. And that's the next product that we're developing.

That's awesome. I can't wait to follow, follow your progress on that. That seems super cool. I know that earlier on you wanted to flip the interview around and start to ask me some questions for some of your knowledge, especially as it revolves around exiting a knowledge based business.

Before we do that, I want to give you a plug. For some folks, if they're like, I really like this topic, etc. Is the best place to go building a secondbrain. Dot com.

Yep, that's the website.

And you, some of the resources you give are you have a cohort based class. So it's a live class. It's not a self paced online study program, which I saw on Twitter. You're like, I don't want to do those anymore. Like, it's only cohort based. So it's live, right? Obviously, yes. Well, it sounds like you care about getting results for your students.

Imagine that. Right.

Obviously harder work for you because you have to kind of be there live. But let's. Yeah. So guys, go check it out. Buildingasecondbrain.com and see what Thiago's doing. He's one of the best in the world at teaching this stuff, as you've probably gleaned from this podcast. But yeah, I want to flip it around and now see how I can be of service to you. What kind of questions do you have for me around what you're doing? I'm happy to tell you my experience first about what I did and how I did it and then we can relate it towards yours.

So I have this thesis, this belief that courses, which is just a term for educational programs, are complete businesses. Like in the past a course was one product and then you have to have other products, other courses, other services, all this stuff. But building a second brain is now a seven figure business. And instead we're not doing what most other instructors do, which is sort of expanding horizontally. Like new course and then other new course, other new course, we're expanding vertically, we're going into books and then coaching and then eventually we'll have a self paced course and then corporate training and then licensing. It's like we're staying on the same topic in the same brand and just different modalities. Exactly. So part of my thesis that I need to prove it right is it's not a business if there's no X, if there's no possibility of moving on from it. And when I say exit, like anything, acquisition, selling, putting it on autopilot, giving it to someone else, getting a business partner, there's so many ways of exiting and you are someone who has gone through that, that rare experience of I believe it was acquiring, buying a course. Right.

I've done both. Yeah. So I've sold a course and then I. Oh, nice.

Oh, perfect.

So that was my very first one. The very first thing I ever did was.

I started a course and I sold it. And then a few years later, Billy, like I bought his course and media based site and then I ended up Selling it again. So I bought it and sold it. So I've kind of been through amazing various things.

So, okay, let me interview you here.

So let's start with why. Why did you want to sell a course and then buy a course? What were you seeking?

Great question. So let me start off with why I got into it in the first place. So back in 2008, I just gotten laid off a financial services job and I had no idea what to do. But I'd read the Four Hour Workweek and I was like, hey, Tim Ferriss said you can sell information online no matter how specific, like small niche it is, there's a global audience for it. I was like, I'm not an expert in anything. I was like 32 or so at the time and although I had experience in financial advice, I didn't know what else to do. And I.

The other book that I read at the same time just happened to be a New York Times bestselling book by Neil Strauss called the Game, all about the pickup artist movement. I never considered myself a pickup artist. I was never part of the community. I was with my girlfriend at the time, who's now my wife. But when I was single, I liked to run around and impress the ladies. And it just so happened to one of the little things that I knew how to do more to win drinking bets was to do magic tricks at bars without looking like a goofy magician. Like I would make a dollar bill tear up and replace it. And I had about two dozen tricks and my business partner friend who became a business partner said, well, why don't we teach people who are reading about picking up girls? And Neil talked about magic tricks in the book, why don't we teach them how to do magic tricks to pick up girls? And I was like, that would actually be fun. And more importantly, I was like, I don't care about building a career on this, but I want to learn about digital marketing and selling information online. So I always looked at it as a marketing laboratory. And I created this course and it was like a $67 course and then a monthly thing where totally self paced, you get access to all these videos and you learn how to pick up girls with magic tricks without looking like a cheesy magician. So.

I did that for about five years. I want to say, wait, 2008, sold it in 2012, so maybe about four years. And it did pretty well. Like my best year was maybe half a million dollars just off of affiliate traffic, et cetera. But in the meantime I had started, you know, doing Other business based courses and other things that I was actually more interested in because selling magic tricks to nerds who can't get laid on the Internet was not as much fun. But I loved my people so.

My interest was waning. So this is, why would I decide to sell it? So I wasn't putting any new content out. I was like, my brain was off to some other stuff and I, I thought the entire time, well, this is, I'm just going to have to let this thing die on the vine. At the time it was probably doing about, I don't remember exactly when I sold it, maybe seven to $10,000 a month in sales and most of that was profit. I was like an 80, 90% profit margin, but it had been going down, trickling down like it was just, I was like, if I don't sell this, I'm just going to let it fold. But I was like, that'd be a shame to just let it fold and just die.

I was talking to another friend who sold his business and he's like, I got a business broker. I mean, I don't know if you can sell a personality based business, but you can talk to him. And I talked to him and he's like, well, let me try it up. So we packaged up a deal together. Luckily for me, I actually had a pen name, it was Brad Jackson. So I was a little bit more packaged. People weren't buying Brad Costanzo for the thing and I didn't have to put any more things into it. But I was like, this is a fully baked out product. I haven't put new content out in two years. I'm just selling what's there. See if you can sell it. He happened to go and do some research and he found a group of investors out of New Zealand who are good at digital marketing and they liked the fact that it was a stable product, that they didn't have to add a bunch of new stuff. But if they did, if they found a new guru or whatever that would be value add.

We ended up doing a deal. I sold that. I didn't sell it for like FU money, but I think I sold it for about a year and a half times my monthly or a year and a half times my profit. So it was just enough to kind of go, hey, here's. It was a six figure deal, all cash. And I was just like, wow, that was actually a lot easier than I thought. They ended up running it into the ground like they, oh really? They weren't that good at digital marketers.

Why what happened?

They just didn't know what to do. They, they, I think that they were more amateurish than they thought. And I thought somebody probably sold them a bill of goods, that it's, it's way easier just to buy a business and run with it. And they didn't realize that, you know, if you didn't build it, you don't really know it. There's a lot of nuances and they were just like, I think, oh crap, what did I, what did I get myself into, into? And they just didn't give it any love. A lot of my traffic came from my affiliates and those were my relationships. And although I told them that up front, I don't think they continued to massage those relationships.

Interesting.

So, yeah, after a couple years, the site was defunct and I felt bad for them, but I felt like, fine for me. I was like, all right, got my face with that off the Internet.

But yeah, that's the beauty of exits, is you exit.

Exactly.

This kind of brings up a question I had, which is what exactly do you sell when you sell an online course? Like, what is included in that bill of sale?

Yeah. So in that case, it was obviously the URL and the brand. It was the customer list, the website, all the content included in it, all of the courses, none of it was cohort or live based. So somebody could just take it, run with it and continue. But yeah, it's basically the content on the website, the URL and the customer list is primarily it. In fact, are you familiar with the Traffic and Conversion Summit convention? They sold that, or at least a majority. I don't remember if they sold the entire thing, but they sold that to a big private equity company called Clarion Events. I know what they sold for, but let's just say it's multiple, eight figures. And they sold a URL.

A trademark and a customer list and that's it.

What?

Yeah, so they had a really interesting way that they did this. Roland Frazier, who is one of the principals there, he calls it thin slicing and he's one of my mentors in the whole area of acquisitions and whatnot and business in general. But they created an event company that put on the event. They have their marketing arm like digitalmarketer.com who markets the events, buys all the ads. They have another company that holds the ip and I believe they only sold. And they probably have multiple things around it, but they only sold the ip. They sold the customer list and the.

Customer list and the URL and trademark. But then when they sold it, they maintained.

The Contracts with their own event planning company and marketing company. So when they sold it, they sold it with those contracts. Now those are optional. They said, by the way, do you want to keep these contracts? We'll just have to redo them, re pencil them in. But we obviously know how to do it. And they thought that was pretty smart because.

They sold it, but they got to maintain the servicing agreements. So that's where if you can thin slice your business into the operational, the ip, the marketing, then you give yourself a lot more capability in order to.

Interesting. And they owned those service companies. So they were basically their acquirer, then became their customer.

Yes, exactly. So they still have. I forget what it's called off the top of my head. Boost. I think it's called Boost Events. And they still put on other events for other people, but their primary client was themselves. Traffic and Conversion Summit. But now Boost Events helps put on tnc.

Fascinating.

Yeah, they sold it, but not all of it. They just sold off the components that the other company wanted. And so whenever you go to sell a business or buy a business, it's really important to understand that you're either typically selling an entity or assets. And when I sold mine, I sold the assets. I didn't even sell my llc. I still maintained the same LLC that I had. I just sold the assets out from under it. And there's different reasons why you may want to do that. Like oftentimes it's cleaner or you can just. Somebody could just buy your customer list or they could buy your IP and you could keep the customer list.

List. So that's what I want to talk about because I see how all the rest of it could work. The customer list, which I imagine is the biggest asset by far, it really.

I mean assuming that it's a well taken care of customer list. Absolutely.

Because that's like an annuity, that's an ongoing stream of revenue. Right. But how do you like. I guess I see how my personal email list is by far my biggest business asset, but I just cannot maybe because it's so personal. It's a personal newsletter. I cannot fathom. Like if I sold that and someone else send the emails, it would be the weirdest thing to have the newsletter with my last name in it.

Right. So the way that, that you're 100% right. And that's where it's really challenging to sell a personal brand business. Roland who I just mentioned, he calls it a dancing bear business. Like if you have a dancing bear business where you're the dancing bear, people are Paying to see you. Did I mention Tony Robbins or did you?

I didn't hear that.

So Tony Robbins is a good example. He has a, you know, when he retired, if he retires or dies or tries to sell that business, I mean, who's going to go, Nobody's going to give him as much money to the Tony Robbins Institute to learn what Tony used to teach. Tony is the. He's the draw. Right. But there's other businesses that. And this might be, for instance, for Building a Second Brain. If we use that as an example, it can be the Building a Second Brain IP and it can be the concepts that Tiago Forte teaches and potentially taught.

And the newsletter doesn't have to necessarily go out from you, but it can go out from Building a Second brain. Now.

One of the. There's benefits and drawbacks. The drawback to that is it's less personal. People build relationships with people. But if you start to, let's say, bring in other experts or you start to.

Make it feel more like an institute, like I'm part of the Forte Institute or the Building a Second Brain Institute, or that's what they're really kind of paying attention to, that becomes much more sellable to where like this is built off of the Knowledge IP methodologies of Tiago Forte. Fortunately for what you're doing, at least as I understand it, you've got the ability to do that because you've put the methodology in place. You've been critical to get it well known. But arguably somebody else who really like an apprentice of yours could teach this probably as well as you could. You don't have to be there. Right?

Yeah.

So.

That'S maybe where you want to start to migrate so that people are paying attention to the ip. And here is the. This is the mental switch. Right now, you're kind of a personal brand. You are the one that they are buying. I'm buying Tiago Forte's Second Brain system. You want to switch it to. You're simply a pitch man. Think of yourself as a hired pitch man for the Building a Second Brain ip. And just the same way Billy Mays was the pitch man for OxiClean. Do you remember Oxiclean Infomercial?

Yeah, yeah, yeah. Or George Foreman.

Yeah. Or George Foreman Grill. Now, because those products exploded because of their personality and their impact and their bonding, but people weren't buying George Foreman. George Foreman didn't show up and cooking burgers. They were buying the grill. And then that allowed them to just treat him as a pitch man. Same thing as Billy Mays was the reason it got off the ground. But people still buy OxiClean even though Billy Mays has passed away, because it's a great product now.

Into the brains of everybody else. So if I was in your position, that's what I would be doing, is I would be building up. And you can do this in parallel, building up the Tiago Forte personal brand so that you've always got your list of people by which you can communicate with, but really building up the brand of the. Building a second brain that it's. I'm just a pitch man for the brand.

But do you know of any successful examples of courses, specifically where someone went from, from exclusive personal brand to the pitch man or pitch person that they pulled off that transition? I can't think of it. I can't think of any, you know.

Not offhand, with one exception. And this has been a hard one. So do you know who Brian Tracy is?

Sounds familiar.

Okay, so Brian Tracy is one of the. He's been around since like the, like teaching personal development growth, business growth since like the 80s. And he's one of the leading luminaries of that, like, along with like Tony Robbins and the former Jim Rohn and people like. But he's in his like 70s or 80s now. And there's Brian Tracy International or it's briantracy.com or something like that is his site. But he's, you know, he's older and he'll still show up and do some stuff, but they're still selling courses of his because it's the Brian Tracy like book writing system or it's the Brian Tracy productivity. And he's got an entire company that used to be a client of mine and I used to work with them on this stuff where it's like we just need Brian to kind of like deliver the pitch. But all the content has been created by the team members and everybody else. So they're still kind of buying Brian. But that's one that it's been in the transition because eventually when he's totally retired or when he passes away, the IP is still really valuable. But it'll be a challenge because it's all based around his name. You did a good job with building a second brain the brand because if it was just the Forte method or the Tiago Forte how to Take Better Notes system, you're going to have a harder time.

With the list.

You can also sell the list but retain rights to use it. And then you just tell the. You could just be transparent if you ever decide to sell the business to go. Look, I've sold this business to a company that I really respect and I think they're gonna be. Well, in fact, I'm gonna remain as an advisor to the business. Right. I'm gonna make sure.

Interesting.

Yeah, probably would want to do that because it's your baby.

You could, you could probably get paid as a consultant easily.

You should get paid. So yes, like, and depending on how they buy it. So if I bought your business business today, I might say I'm definitely going to structure an earn out. Or I might only buy 80% of your business to say, would you like to retain 20% and just be kind of the figurehead? And hey, once in a while we need a video or just email the list and we'll pay you.

Plus you'll have a percentage of the profits and that's a great way to do it. But I would definitely give you an earn out to say, look, I'm going to buy. Let's just say I was going to buy 100% of it. I may give you 80% of the purchase price now, but I may make you earn the final 20% over the next three years. You're not going away. I need to make sure that I got you on call so that, hey, we need this. We need this. What's going on? And that will likely happen if you ever decide to sell. But then you can also just email the list, hey, I sold it. This company is going to be running it now, but I'm still going to be talking to you as well. I've got a new email list. I might be talking about things that don't involve digital note taking, but they involve whatever else I'm interested in. Feel free to opt out at any time. There's a button on the bottom if you don't want to hear from me. But if you do, stay on and we're going to go on this ride together. So there's nothing wrong with bifurcating the list.

And very interesting. So now let's switch to the other side. And I got advance permission from Billy that he's okay with you talking all about this just in case. So now let's flip it where now you're acquiring. First of all, how did that happen?

My friend, our mutual friend Ron. Our mutual friend Ron Reich said, hey, I've got a buddy named Billy who is. He's thinking about selling his business. It's called Homebrew Academy. And it was all about about home beer brewing and everything from an affiliate site with a Lot of media to it, to some online courses, et cetera. And he said he's thinking about selling his business. You've sold a business. Would you mind just letting him pick your brain? Kind of like what we're doing here. Just let's get on the phone and talk. And I just asked him about, okay, well what's it doing, what's the traffic, what's the revenue sources, et cetera, et cetera, what do you want? And he was in the very early stages not knowing. And I had no intention to buy the business. But I asked him a question, I just said, well, look.

If you were to sell the business now, right today, what would you want for it? And he threw out a number. And.

I looked at the valuation compared to what he wanted. It was like, I don't even remember because it's been like three years maybe.

But how do you value this? Do you have a go to metric that you use?

Oftentimes one of the easiest ways is just a multiple of your net profit. Okay, so let me back up a little bit more. There are two ways to look at it. Are you a financial buyer or a strategic buyer?

I was a financial buyer because I was like, okay.

I like beer, but I know nothing about brewing and I don't care about brewing. I would only want to buy this as a financial investment to get a return on my capital. Let's say I had a. Let's say I had my, like I sold. Let's say I had an E commerce business that sold beer related, like kegging equipment. I was like, oh, now I can buy this like 25,000 person email list, 60,000 people a month visiting the site. I'll pay him more for that because I know I can easily monetize that in my own brand business. Right. Like there's a strategic reason I want to buy that. Right. That's why Facebook bought Instagram. Yeah, that was a strategic acquisition.

You said you were primarily financial.

Yeah, and I just said, you know, I think he was. He basically gave me a number that was a one times his.

Annual profits.

Oh really? Yeah, he wanted out. He was over it.

He just wanted out. And you know, and I just said, look, I didn't. And I remember the conversation. I was like, billy, I didn't get on the phone to buy this business today. I'll just help you out. But I was like, I'll buy it from you if you're willing to own or finance it, whatever the number was, like a couple thousand bucks a month for the next 12 months. I was like, I'll buy it. Just let me make installment payments over the next 12 months and if I fail to make an installment payment, you get the site back and I'll just, I'll make sure I'm not going to change much and any big changes I do, I'll let you know. And he said, deal. And now he just got. He got the same amount of money he was going to make anyway that year, but only guaranteed, right? Because he could have had a good month, a bad month, and worst case, if I stop buying, he gets the site back. So that's how I bought it. It was very easy. It was just an easy 12 month owner finance, 100% owner finance deal. I paid him the first month's installment down and then every month I gave him more money.

And then I took over management and I had two other business partners buy in and the three of us ran it.

Do you do this a lot? Are you on the lookout for these kind of businesses?

I'm always on the lookout, but it's not something I do like all the time.

What I do more often than not because my primary business is a consultant. And.

I'll oftentimes start off as just a fee based or performance based consulting and then multiple businesses. Then I'll acquire a. A minority percent of interest. So there's a company called Vitamin Patch Club, which is a really cool way to take vitamins, like a transdermal patch, like a nicotine patch, only it gives you the good stuff instead of the bad stuff.

I just started working with the owner there and I said, look, I think there's a lot of stuff we can do here.

And I'll be willing to work with you. I'll defer some of my fee in lieu of equity. So I've got equity in that business and then some. I'll get more equity if we hit certain performance benchmarks. So.

I've acquired all the businesses, but then sometimes I'll do just a piece of it. I kind of like having a minority interest just so that I don't have to be responsible to be the guy running it.

Yeah. So how did you transition? I'm so fascinated by this. Like, how did it work? Did you like, was it a public thing? Is it like an announcement changing ownership? Or was it completely silent in the.

Background or silent with Homebrew Academy? I just started emailing the list as. Cause he was always. Billy B. Was the person. Billy B. Was the. They could have found his name, but he always just signed his name Billy B. And I Just started emailing the list as Brewmaster B. I am B. Right. So that one we didn't tell the the list, but I wasn't changing much, and I could see how Billy wrote. And I was like, okay, I can write in Billy's name, and I'm not gonna. Especially until I owned the thing free and clear.

I didn't want to change it because I didn't actually want to put a lot of work into it. I kind of wanted to just buy it and have it. If it was just stable and I got my money back in one year, that was cool. It wasn't as stable as I thought. Like, Billy did more work than I thought I was gonna have to do. And I was like, okay, so. So it took more than a year to get the money back. But.

The mistake I made, just the personal mistake, like, had I done it again, I would have done a few things differently. Number one is I realized as an acquirer, it's oftentimes more work to buy a small business than it is a bigger one. Because a bigger one is going to turn off enough, ideally, is going to turn off enough earnings or cash flow to pay for somebody to just come in and run the whole thing for you if you don't want to run it. And I didn't want to run it, but it was too small to really pay somebody that had the skills to run it full time.

Interesting.

And I was just like, oh, it's too small to pay for that without me paying for it. But there's too much opportunity cost for me to get too involved in it. So it was kind of a delicate little dance back and forth, but fascinating.

So there's like a threshold. If it doesn't meet the threshold and you can't afford at least one human being to. You know, it's just interesting. I kind of saw this in my own business where, like, there's this big chasm where let's say you're making, you know, 100,000 or 200,000 a year as an online creator. That's a great living. You've made it, you're a success. But then you think, okay, well, let me hire a course manager, and you want to pay them decently, you don't need to just make another, you know, 70, 80, 90, 100,000. It's the cost basis of that person. You have to make, make two or ideally three times more than that. So you have to jump from here, like multiples of your revenue to even afford your first person, potentially.

And that's where it Kind of depends if I'm buying your business. Like I want to see if I'm buying your business. And let's just assume you're not the face of it. You're just, it's just Billy Second brain, you're the operator. Nobody's even seen your face. A. Are you paying yourself a salary and is that salary.

Commensurate with the going market rate? A lot of entrepreneurs like to pay themselves a really small salaries for tax reasons. Right. They'll leave the money that like I don't want to pay a lot of taxes, so I'm going to pay myself 30,000 a year. Well, when I go to buy it, if I know that it's going to cost me 60,000 a year on the market value to replace you, well, I'm going to, I'm personally going to adjust.

Your earnings. I'm going to say you're actually making 30,000 a year less than you are because I have to pay somebody to replace you. So your value is a negotiation tool. Your valuation goes down.

Interesting.

So that's where I'm going to adjust the owner's pay to be like accurate. And you're going to get less. But if you're going, if you're ever. So if you ever go to sell your business and you are responsible for or something that is.

Like operational and they're gonna need to replace you, make sure prior to your exit that you're actually paying yourself a market rate. Otherwise they'll come back. Any shrewd negotiator, not even have to be shrewd. Any shrewd negotiator though is gonna say, well, I'm gonna have to pay X amount. So I'm adjusting the numbers and the valuation is all a dance. Like there's a lot of things you can do to increase valuation and it's because it's just the perception.

What are some of those things that you would look FOR?

Systems and SOPs are going to be huge.

Anything that makes it easy for somebody to pass the baton, right. If I have to get in and go, man, I got to learn all this stuff from ground floor and I got to figure it out on the fly because it's all up in your head. That's going to be. You're probably one of the people I could imagine you got probably pretty good systems and stuff. If not, shame on you. Right. Because you're the guy. But that adds valuation. Recurring revenue adds a lot more valuation.

As opposed to single or like a business that needs big launches.

Oh, launch businesses Suck. So this was one of the things, for instance, Billy's. I dropped Billy's valuation probably in half from what he could have made because.

His main course sales, actually all of his course sales were cohort based live trainings and I was not qualified to teach those. So I was like, if I can't recreate that without you, I can't give you the money for that. We're just going to assume that that doesn't even exist. So I paid him a multiple of.

His.

Basically his revenue that didn't have anything to do with his live stream sales. So that's where you want to be careful. If you're only doing cohort sales, if you're the one doing it now, if you build up a big enough business to where you're not teaching the cohorts and you've got instructors who are on salary who are doing this and you can step away and they can maintain a job, then that gives a buyer the confidence like, okay, cool, I'm not going to buy this and then lose my primary asset.

That was my next question. So how does the team work? Like, let's say, like my business right now there's essentially four employees. Like is it an acqui hire as an acquirer? Do you want to have people on payroll that are dependent on you?

Or like I would love to have somebody like a well run team that is just like, hey, we've got a new ownership and we're cool with that, just treat us well and we're good. That's perfect. I don't want to have to hire new people, unlike.

Unless I see so much value added. Because let's just say you've got an amazing product and you've got an absolute loser running your media campaigns. You're succeeding despite him. And I look and see what he's doing. I'm like, this guy does not know how to run a Facebook ad to save his life. I want to buy this because I've got access to people who can do this and the minute I put somebody in there, there I'm going to double the revenues. In those cases, I'm either looking for somebody who's got a rock star team and we can just continue to go, or that there's low hanging fruit that I can improve upon and I can fire these people who are no longer needed, or.

There'S redundancies like, oh, I've already got an operations manager, I've got a media buyer, I've got these people and I can just put them in and I can Immediately cut my expenses by half. Then in that case I might just want to hire and then fire the people who aren't necessary. But.

Yeah, for somebody who wants like a financial buyer who's not like, oh, I want to get my little marketing hands dirty on this, they want a well run team with rock star talent because they know the probability of their investment being taken care of is going to be a lot of higher. One of my mentors years ago I tried to start another business and it ended up, I ended up closing it, but it was an E commerce business with bad economics. But.

I told him, I was like, we're building this business to sell it. Like that's the reason I think there's an exit value. I'm going to build it with the intention of selling it. And he said, I'm going to challenge you to change your thinking. Don't build a business that you want to sell. Build a business that you would want to buy. And he goes, because the business that you would want to buy is going to have all these great features. It's going to have SOPs and a well run team and it's going to be a tightly run ship because that's what you would want to buy with your money, right? I said yeah. He goes, that's what other people want to buy too. And if you never end up selling your business, at least you're running a business that is a tightly run ship that is profitable with SOPs, etc, etc. Now whenever, like this new E comm business that my partners and I are building, we 100% think that there is a great exit value here. But in my mind I'm not building it to sell it, I'm building it. This is the business that let's say in two years from now I would want to buy this thing because this thing is humming along nicely. And.

That'S one of the little mental shifts that I made that might be useful for you. One thing I want to go back, I want to challenge your thinking on this because I used to think this too. But then you're like, it's not really a business if there's no exit. So that's not totally true because a business is designed to produce cash flow, right? That's really what it's designed to do. It's to provide a living and cash flow, et cetera. Some businesses, I mean even if you never sold it and you just let it fade off into the existence one day you just decide to, to click delete and the billion a Second brain is gone. That doesn't mean it's not a really fantastically successful business. It could be cash cow. But you can achieve those exit like returns by taking that money out and obviously putting it into other investments that may then have a bigger payday down the road. So it's okay to have a business. I had another mentor of mine really explain this to me because I thought the same. He goes, no, use that business to fund the bigger investments that have a really decent payoff. Because for instance.

Let'S say I had a business and it had a very nice exit value or exit potential. And you could see it like the E commerce business I'm building. Well, your business is churning out cash. You take that cash and you invest it in my business and then I sell my business. Well, that cash created an exit. It created an event that you can cash in on. So sometimes a business can just be a great cash cow without needing to sell it. So yeah, just keep that in mind. But I don't think you're going to have that problem because when you decide to sell building a second brain, I think you'll be able to go, look, I've got a great, what do you call it? I got great ip. I've got great people who can teach this. I'm not necessary. I'm just kind of. Kind of like the figurehead.

Yeah, that's great advice. It's funny, I don't plan on ever exiting. I don't want to. There's not a thing on earth I'd rather be doing.

As long as you're having fun. It's also something built around your passion.

Exactly, exactly. I don't know what else I would do if I exited. But let me tell you my interest in this.

I'm interested in.

What does it look like to create an ecosystem of investing investors around co. Like, if my thesis is correct and there is a repeatable pathway for a cohort based course to become a seven figure business.

And it is, it's not capital intensive, but it does take some capital. Like it seems like the difficulty with exits makes investors very wary. Right? Like how are they going to get their money back? Like what's in it for them? Do you see any way that we could, like, and I actually want to help this. I want to stimulate the ecosystem so that there's money coming in, people are getting funded, they're growing faster. Not taking the years and years and years it takes. Otherwise, do you see anything in there that I could do, we could do to stimulate the sector in order to.

Get investors who would invest in your business or just in general.

My interest is I want to see more people creating more, more cohort based courses, making more money so that more people benefit from what I think is a revolutionary way of doing education.

And then making sure that people aren't worried that they're never going to be able to exit out of that business.

Is that yeah, both the owners like oh, I can never escape this thing and investors being wary of having a hand in it.

Well, so I mean I don't know how many people are investing. I don't think there's a big, big market for investors in cohort based courses. Not saying that there couldn't be. Like that might be a whole new avenue. Especially if people know how to create these cohort based courses and can show the cash flow and be like, look, I'm going to get. You're going to be basically buying a cash flowing business where a lot of investors want that. I've got angel investments that I may not see.

The returns for years. Like I've got one in two years. It'll probably be at least another two or three years before anything gets realized. But I love putting my money in cash flowing investments. If I saw a good model that was like, yeah, here's what we're making per year and if you invest this, here's the use of funds and then you're going to be paid back X amount per year. That's a really solid investment thesis on its own.

I think when it comes to encouraging more people to create cohort based courses, I think it's letting them know that even if you don't exit, your goal is to create really a cash cow out of something that you really care about and enjoy doing and then giving them the knowledge of how to take those assets into other investments that will help create the passive income they need so that everything in the business is now just gravy like lifestyle money. In fact, one of my most previous episodes that I did was a guy named Justin Donald and he wrote really an amazing book. I highly recommend it called Lifestyle Investing with Justin Donald. It's really all about using your money and to find and negotiate cash flowing deals in everything from private businesses to real estate to he loves mobile home parks and all this other stuff, but in different ways to negotiate extra kickers and cash flow on top of it. So I think if.

I'm a. And hopefully I'm addressing the question you asked in the right context.

No, I like it. I thought it was fascinating what you said that the cohort model, while successful in terms of marketing, makes it difficult.

As an acquirer because it's like an event, it's like a thing that needs to keep happening. Yeah, but I like what you're saying, like what I'm taking away is like the Silicon Valley, you know.

100X return is not the right model to go for here. It's the lifestyle cash flow sustainability model.

Absolutely. And if they, if you can get them to, you know, I think the most.

We talked about this a minute ago, but like if you can create, let's say, say it's a cohort based class around a certain topic, but it's less focused on the guru or the expert. Right. The expert is the pitch person. But they're not absolutely necessary to it. So there could be, there's different courses and academies on how to study and pass the CPA exam and do all this other stuff. And there can be totally coercion based classes, but it's attracting people based on. Yeah, I want to learn that. And this looks like a credible place to learn it, but it doesn't need to be like, John Smith presents How to pass. Like, I don't care about John Smith. I just want the result. So I think if people want to have the potential for an exit or even investors.

Creating that, like an institute academy, like Homebrew Academy was great. Like the Billy B. Could have been like, I think he even had Billybrews.com, well, that would have been a less viable business for me. I would have been less interested than Homebrew Academy because now I even resold the business and the guy I resold it to was my.

Oh, really?

Oh, yeah. Almost exactly a year ago, in February of last year, I hired a guy to do SEO and he really liked it and he's always wanted to buy a business and he said, wait, would you be willing to sell it to me? Me? I was like, yeah.

Did you, did you profit from the.

Yeah, yeah. It wasn't a home run deal, but it was, you know, I got my money back and I gave him a good deal and I like, I knew I wasn't gonna run with this thing and step on the gas, but he was really hungry and wanted to do it, so I let him buy it and I made him a, like an owner finance deal too.

Wow, what a cool thing. I mean, he. You set up such a great opportunity for him.

Yeah.

Too. Yeah, it's really neat. Gosh, this is just such a foreign world. Because to me, my course is it's literally my child. It's so close to my heart that I speaking as. It's kind of like we're talking about courses as products.

Yeah.

It's like any other product. And I'm not used to thinking of it that way, but one thing I noticed about what you said about getting, like, preparing a company to be bought is I almost think it's a good thing to keep in mind because it kind of. It's like a forcing function to just have your business in order. Right. It's almost like it's good to act as if you could be acquired because you just always have that perspective of how would an outsider understand and make sense of this and run it if I got hit by a bus or something?

Absolutely. Absolutely. Well, hopefully this is, you know, and by all means, like, I actually have a hard stop here in like two minutes, but hopefully this has been as educational back and forth for you as it has been for me. And hopefully our listeners are getting like a double dose of wow, I didn't know we were going to cover that kind of stuff.

But, I mean, I could talk about this for hours and hopefully we stay in contact. And by all means, if there's anything that you want to pick my brain on for that, just you got my information, let me know. Hopefully, hopefully we continue to talk a lot more about this.

Yeah, this has been awesome, Brad. Thank you so much. I learned a tremendous amount.

Yeah, same here. So for all of you guys listening, feel free to go check out buildingasecondbrain.com with Tiago. And for any of Thiago's friends who are followers and fans who are listening to this and have liked the kind of stuff I'm talking about. I mean, this is obviously my podcast, Bacon Wrap business. You can subscribe and learn all about different business and marketing tactics and strategies. The one thing that people who are longtime subscribers know is that this is not about one particular topic. It's not about just marketing or whatnot. It's all the things I'm trying to learn and build my second brain with. I bring on experts like Tiago to download what they know and shortcut the process and invite all my listeners to come do the same. But really appreciate your time here, Tiago.

Thanks so much, Brad. It was a pleasure.

My pleasure, too. Talk soon.

Bye.

Bye.