Fixing Broken Companies Through Smart Deals with Marc Bell

Today's episode is sponsored by Dealroom, the M& A platform for teams running buyer led M and A. If you've ever spent a Friday chasing five people to complete diligence tasks or watched integration timelines slip while everyone blames someone else, this is for you. Deal Room helps you stop herding cats and start aligning your team. You get project management built into the Deal Room with features like real time tagging, stakeholder alerts, task dependencies, and custom reporting. That means everyone knows what they're responsible for, when it's due and what's holding things up. On top of that Deal Room customers hit their integration timelines 90% of the time. When integration stays on track, cash flows unlock faster, CFO is happier. Learn more@dealroom.net or click the link in the description. Now let's get back to the episode. I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during MA deals. Hello and welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A has done the old school seller led approach. It's dead. Buyer led. M and A is all about strategy, alignment and efficiency, putting value creation at the center of every deal. Let's be real, it's not just about closing the deal, it's about making it successful. We uncover what truly works at M and A by learning directly from the best. I'm your host, Kisam Patel, Founder and CEO at Deal Room and Chief Scientist at M and A Science. I'm joined by Mark Bell, a self described deal junkie whose career spans everything from newspapers and watches to satellites and data centers. He's taken 17 companies public, executed countless acquisitions, and built businesses across the globe. Mark brings a mix of grit, strategy and creativity to M and A. He's not afraid to get his hands dirty in a turnaround. Today we're going to dive into what it really takes to fix broken companies, how to structure deals using leverage and seller financing, and the principles that guide leadership and success. Mark, how you doing?

I'm doing great and thank you for having me today.

Hey, thanks for making a stop to our M and A Science studio hosted by vrc. If you're not familiar with them, valuation research company I won't go anywhere else for evaluation work. Can we kick things off a little bit about your background?

Sure. How far background do you want to go?

The entrepreneurial journey and like When M and A first got introduced to it.

So my background is a little off the beaten path compared to others. Out of grad school I started a company called Globex, which stood for the Global Internet Exchange. That was in December of 1989. Over the next decade we grew it into the world's largest logical peer, meaning we had 28,000 miles of fiber around the world and we connected to more networks than anybody else. We became the second largest owner of Internet data centers in the world. We had people like Walmart, Microsoft and many others as our initial hosting clients in the mid-90s. And we went from just providing Internet access to eventually web hosting to eventually colocation and then application development. What do you do when you get on the Internet? Everything from video streaming to e commerce. Decided to sell in March of 2000. I was having kids and decided to sell right before my kids were born. And after that I moved to Florida, set up a family home office. We started trading bonds. One of the positions we held was a position company called General Media, which most people have never heard of. This is back in 2004, 2003, 2004. General Media was a company that owned Penthouse magazine and oh my God, named Bob Cuccione. They were in bankruptcy, so we believe there was a lot of value there. We went through the process. Originally we were just trading the bonds. We bought them at pennies on the dollar. Expect to get paid off. A confirmation. Guccione tried. Decided he was going to try to cram down the DIP loan, whether that means debtor in possession financing. But you can't really do that in a bankruptcy court. He found that out the hard way. We ended up foreclosing on the magazine. Next thing you know, we own a magazine with 30 million worth of revenue losing $5 million a year. We tried to flip it. Nobody wanted to buy it. But we did learn a lot. At 9am on day one, we had about 200 employees. By 5pm on day one, we had 50 employees. The business still hummed, we realized because we spent a year diving into the business while we owned the bonds to understand what they were doing right and what they were doing wrong. And this was a classic turnaround. Fast forward a decade later. We had done about 500 plus million dollars of acquisitions. Put it into it, Renamed the company Friend Finder Networks. We started a cable television network Scratch. We were in 330 million homes worldwide. Our websites had 700 million active users worldwide. And we were the fifth largest owner of email addresses in the world besides Yahoo, Microsoft, Facebook and Google. We Took the company to about 350 million of revenue with 150 million of EBITDA, and then we ended up selling it to a hedge fund. So it was a very exciting journey. And while we were doing that, my partner and I did a SPAC called enterprise acquisition. And 2007, we had market. It was a $250 million SPAC. The market collapsed in 2009, where everybody wanted their money back, because that's how SPACs worked back then. So basically, we had a show with $25 million in it. We turned it into what I believe is the world's first externally managed mortgage reit. And with that, we signed up a company which is today called Armour Residential REIT, which has over $15 billion of assets on the New York Stock Exchange. And it's. It owns, basically, Fannie, Freddie, and Jenny mortgages. And that's what we did. We realized there was a massive displacement in the mortgage marketplace when the market collapsed, and loans that were. The principal was guaranteed by the full faith and credit of the US Government were trading way below par. We thought it was an opportune time to pick up, yield, and acquire some assets, and that company still exists today. Then a few years later, a friend of mine asked me if I wanted to go produce a Broadway show. I said, no. And as if I really wanted to produce a Broadway show, I said, really? No. And I go, I'll do it on two conditions. One, I win a Tony Award, and two, I make money. And the joke on Broadway is, how do you make a small fortune on Broadway? You start with a big one. And our first show on Broadway was a show called Jersey Boys, and It was a $12 million investment. We sold $1.6 billion of tickets worldwide. I won a Tony Award. The show won a Grammy Award. We got a gold record, a platinum record. And then my partner asked me if I wanted to do a play. And I'm like. And I wasn't. And I'll be honest, I'm a big fan of Broadway. But okay, so we did a play called August Osage County. It won a Pulitzer Prize. I won my second Tony Award. And then we made a movie with Jersey Boys. Clint Eastwood directed it. We made a movie with August Osage county, and Meryl Streep starred in it. And then we just kept going. We did Rock of Ages, which was awesome because Tom. We made a movie with Tom Cruise, and that was a lot of fun. And I got a chance to be in the movie. That was a real lot of fun. And though nobody could Recognize me? I had long red hair and Arsenal. So I was a groupie. It was fun. And the end of the day, we probably sold over $3 billion of tickets on Broadway. We're worldwide Broadway, the road shows and stuff around the world. And then we started investing in hospitality. We invested in a restaurant in New York called Lavo, called Catch, nightclub called Avenue, Pizza chain called Auto Choke with Sil Pizza. We did bongos in Miami, Floop Chow in Miami, and numerous other restaurants just because we didn't like waiting for tables. So it seemed like a good idea. We got very lucky. We had great partners. So we were very blessed, really good operators who helped work with us. We bought a small company called Tyvac, which I invented, the CubeSat, turned that into Terran Orbital, and recently sold that to Lock and Martin. And now we're looking for what's next. Keep going. Yeah.

No end of sight here.

No end in sight.

Are you the definition of an opportunistic investor?

I like to think of myself as a serial entrepreneur, but I also try to be smart in how we operate our businesses. So a great example was I was building data centers in New York City. We also in New York City and London and California. And I went and I decided you have to own your own real estate because you spend a lot of money putting a data center in. So we were acquiring a building on 415 Granite street in New York. I forgot the gentleman's name, sold it to me. Super nice guy. And we paid $25 million for the building. And we're talking back 25 years ago, but it's a whole city block. And he tells me how super nice guy was probably my early 30s. And he comes up to go, invites me up to his office after the closing, and he goes, mark, I feel bad for you. You overpaid by about $5 million for the building, and it was only worth, like, 20. So I want to take you under my arm, and I want to teach you about real estate in New York and how I can help you do better. And I go, sir, I really appreciate your offer. It was very kind of you. I paid $25 million because there were $18 million of historical tax credits on the building, which I sold to Chevron the next day after closing. So I really only paid $7 million for your building. And he goes, what historical tax credits? The ones that date back 50 years that were just. You didn't. For whatever reason, you didn't take them. He goes, huh? But if you like, I'll take you under my wing. And teach you about real estate in New York City. It was very funny. So that was an opportunity. And we continue to look for opportunities when we buy real estate. We look for real estate that has clauses and stuff that date back long before most people were born that work on the projects. We're very lucky to keep finding real estate around the country that is unique and that we can buy for a significant discount.

It's still opportunistic.

I guess it's opportunistic. It's not true.

I'm curious to it sound like earlier in your journey you built a business from scratch. Now if you look at things, it sounds like you're more of a theme of finding things that you can be creative and reposition or something unique.

Well, no, no. Now I'm looking for building more businesses from scratch. So we built a broker dealer from scratch at Armor Capital called Buckler, which has done phenomenally well. We're looking now at other things that we could build from scratch. We've been looking at trying to build a smart small modular reactor business. All these data centers around the country are popping up, but they need power. With AI and the massive amount of data processing that's needed, there's just not enough electricity. And small modular reactors could be a very cost effective way to do it. We're looking at how we can produce these in mass production. Not just producing these, as one also produces a match mass production. We're also looking at currently starting our first fund. We've never had a fund. We're 57 years old. It's not too late to do something new in life. So we're starting a national security fund with an AI focus. Really focusing on acquiring, investing in companies that serve the national security of this country. Using AI to achieve that mission. We'll be going on the road with that soon and we're pretty excited about it. This is not a solicitation offer, by the way. We are looking at other companies that we could acquire and do turnarounds as well. We keep finding interesting things and interesting businesses that could use help.

That's what I was curious about. They're sort of like building from scratch. I think you were spot on in terms of there's a significant market opportunity and there's nothing that exists which builds your case to build versus the flip side of buy. What sort of drives you to really get something that catches your eye that makes it worth buying?

It has to be something either. I like, I enjoy. I don't want to do it just for the sake of making Money. That has to be something. So I got my master's degree in real estate development investment from nyu. So I love real estate. I love building things. I've always loved building things as a kid. So building stuff is fun, but it has to be a business that I feel like I could really get my arms around and really not only understand, but something I'd be like, wow, that's fun. So, for example, I purchased a company called Kibu. It was a Dutch watch manufacturer. They had two stores, one in the Hague, one in Saint Tropez. They made a great, huge 55 millimeter watch in a lot of colors. They were going bust, and I loved it. So I decided to acquire the company. And over the next few years, we went from two stores and we were in 6,000 retail stores worldwide. And we sold two and a half million watches. We were on the main Runway at New York Fashion Week. We were having a blast. And then, unfortunately, Covid happened, and the watch company, unfortunately, did not survive. But we learned our lessons. Avoid plagues, Avoid manufacture stuff locally in America. We learned a lot of lessons there, but it was a lot of fun while we were doing it.

Teach me that. How do you even spot these kind of turnaround opportunities? What's your approach to diligence again? And you're avoiding a trap of a. Catching a falling knife. Just keep falling.

A lot of stuff just falls in our laps. General media fell in our laps because Bob Guccioni was one of Globix's first customers. So he called us asking for help in the bankruptcy. So we said we would help, and we said, you know, that way he would get his magazine back. And in the end, he turned against us, and that's. We ended up owning it. We had never had any intentions of owning it. We were just trading bonds. And so that kind of fell in our laps with the watch company. It was more of, I don't want them going out of business. I loved wearing the watches. All my friends were like, wow, that's so cool. It was. They had hundreds of different colors. It was just fun. It cost us very little money to buy it, and it cost us some money to turn it around. It was on a great trajectory until Covid, unfortunately. And then other things. We start from scratch. We just came in ideas, and we build it and we just fall into things.

Opportunities, multipliers are seized. You sort of get this reputation. People like, you should go call Mark. Maybe you can.

You'd be surprised. People call me all the time, and sometimes I'm like, my God, that's so cool. Got a call once from a venture capital firm that was investing in a disappearing tattoo company in Canada. Their fund structure, they realized, would prohibit them from doing a Canadian investment. So they called me up. I'm not a fan of tattoos, I admit it. They asked me if I would be willing to take over their commitment to invest. And I go, hell yeah. Because it solves a problem. Tattoos that disappear, I like that. Went invested in this company and Neil tried to help them grow and we grew it and eventually I sold it, sold out. And it was just a great example. I was a young entrepreneur. I was able to work with him to give him ideas on how to grow and he grew. It's a great product.

You mentioned you haven't done a structured fund. How do you think about capital structure?

You always want to be the senior secured lender at the end of the day and go from there. You want to be at the top of the cap table whenever possible. But that said, you try to layer it. We always do equity, then we do prefers, then we do debt. We always try to layer in all the different parts of a capital that makes sense, but it depends on the business.

Yeah, that's true. I'm just wondering, like, what is your alternative structures? What are your levers that you're pulling on? And I'm trying to get your lessons over time of like, hey, here's what I learned. If it's going to be a new startup from scratch versus buying something that's a turnaround situation. What are sort of the way you would architect the capital structure?

One, we never want to work for the lenders. In other words, you want to make sure you're only borrowing what you can afford. If you're not EBITDA positive, you don't have free cash flow, you better have a plan and how you're going to get there, because then the lenders will own the business. Two, we never like to work for the landlord, so we always want to own the real estate where we are. So we try very hard when we're growing businesses to own the real estate when possible. We believe owning the real estate is key because eventually you pay off your mortgage and your rent becomes cheap. Look at New York City. Your friends are still sky high even though half the city seems to be vacant. But you know, San Francisco is getting, you're seeing now a massive change where buildings are selling for 30 cents on the dollar, 40 cents on the dollar, because nobody wants to be in San Francisco. And people are getting great buys, buying amazing Buildings for very little money. We always joke the second owner of a restaurant always makes money. The first owner spends too much building out the restaurant and then when the landlord re lets it to the second owner, all the kitchen's already built out and everything's already there. And it's turnkey.

You gotta right size the value of it and then optimize the operations. And it's a lot easier to fix something versus build something.

Sometimes depends what you're doing.

You're right. If a business is cash flow, that's always a good thing to leverage, but it's got to be serviceable.

How does an entrepreneur spell happiness? Positive cash flow.

I like that.

I learned that from an undergraduate. I went to Babson College. And they teach you that the first week in school. That's an orientation event.

What about businesses that aren't cash flowing? What is your view on how do you structure those deals?

That's harder, they're not cash flowing. And we try. As I get older, I get more risk adverse. When I was younger, absolutely I would jump on in, we'll try to figure it out. Now at 57 years old, yeah, I'm much, I'm like much more guaranteed, much more secure, much, much more conservative, human. I try to take less risks.

I'm trying to wrap my head around this. Like even so I play in software and I won. I got. I don't think I'm gonna do another thing from scratch again. I'm like done with that. But buying, fixing things, sure. Like those are interesting. When I look at opportunities for us to acquire other businesses, they're adjacent or in the same field in software and they're not making money and they don't have growth, but they still have really high value expectations. Can you teach me how do you bridge the bid ask spread to help the seller rationalize the valuation expectations? And then the other part is even destructuring those deals because it's stuff you really don't want to put debt on.

It's funny, I meet lots of people, lots of entrepreneurs all the time. I used to do a lot of venture investing. I always hear the expression I'm building a company to take it public. That's the one. Probably I've heard the most. Then I remind them that there's a 1 in 3.2 million chance of their company going public and there's a 1 in 770,000 chance of them getting struck by lightning. So I say go home, get struck by lightning, come back. Because that's not how you start a business. They're not starting a business knowing what your exit's going to be on day one. And what is it? 168 companies went public last year. That's it. 200. Some companies are going to go public this year, maybe. But yes, there are millions and millions of companies all over the country. People have very unrealistic expectations. And it's unfortunate because I see a lot of businesses fail. 80% of all new businesses fail within the first year and years two to five, another 80% will fail, and what's left, 50% will fail. So very few succeed. And a lot of it, unfortunately, is because of. I don't know if the word is hubris, I don't know what the right word is, of founders who just believe their thing is the best. It's the most awesome thing in the world and they're worth the most amount of money and they end up getting nothing at the end of the day. And that's unfortunate because they probably could have been good businesses if they were realistic at what they had, realistic in what they. What the value was, and they could have raised capital. Being realistic with yourself is key. We never kid ourselves.

I can see that this is the cliche thing, that you raise too much money at a too high of a valuation, you don't make up the metrics that get the return back on that valuation, and then you're underwater and then you're in trouble.

Yeah. As you get older, you get more conservative and you're realistic about how things go, setting your expectations properly. So we go into a business now and we set very low expectations. It's like Scotty from Star Trek. We always wanted to set low expectations and exceed them.

I totally agree. Feels better. Sleep better at night, Sleep much better at night. How do you do that? I feel like we're in this environment where now we got all the AIs trending and you look at the valuation on those companies. You thought we corrected ourselves after 21, but no. It's like swinging back the other way again.

Being first doesn't mean you're the best, doesn't mean you're the winner. If that were the case, MySpace would have been a winner. Lycos would've been a winner. There's a long list of people that had the right idea early but didn't become a winner later. The people who came later on were the winners. AI Quantum computing. There are going to be winners and there are going to be a lot of losers. Nobody knows who's going to be who.

Yeah, that's A fair point in terms of managing risk to keep out of that sort of realm of overvaluation, keeping it like we talked about, just real achievable. How do you discipline yourself to do that? Is it just all the numbers and saying, all right, we have high level confidence we can hit this? Is that what it is or is there more to it?

We look at the numbers, but we also believe you bet on the jockey, not on the horse. So we look at who the operators are. Some people are very smart. And smart doesn't necessarily mean you have your PhD. They could be street smart. They can be other kinds of smart out there. We look at their backgrounds, their track records. Met a young man the other day who I just hired, who's 30 years old and I believe he will do great things. He's got to get comfortable with making decisions and getting comfortable with risk. But you meet someone after you become a good judge of character. So you figure out who's going to be the jockeys of the future and he'll be a great jockey 10 years from now.

Tell me more. What makes a good jockey?

People who are realistic, people who ask great questions. So I love when people ask questions because if they ask smart questions, that means they really thought about it, ask thoughtful questions. People just like to speak and pump up themselves. But you notice that when you meet people and they ask lots of questions, you get to learn about them by the questions they're asking you. So whenever I interview somebody, I like when they ask a lot of questions. And the more sophisticated the questions, the more detailed the questions. I like that. And I'll push back and I'll see how they take it because I want them to feel self confidence and I want for them to argue back what's their point. But it could be on any range of even doesn't have to be issues related to the job. It could be about politics, it could be about. We had a great banter with people the other day over the Trump administration and Harvard and documenting them. $8 billion for Harvard, the way they treated Jews during the anti Semitic things. And you know, it's great that the administration is focusing on, as a Jew focusing on anti Semitism. I think schools like Columbia should be punished, don't get me wrong. But I also think the research, especially the medical research like Harvard does, that shouldn't be punished. They should punish them in appropriate ways. But I do think punishing them makes a statement. But the cutting out medical research that helps the entire nation probably isn't what we all want to See, because that also creates innovation and that creates other things. There's a balance between it all and it's a balance on how you do things.

I like this. So vetting out the best jockey, it's like seeing how the questions are asking, asking some smart questions. The ego part, like making sure they're not too focused on themselves. They got a big ego. And then the banter part, you turn around and challenge it a little bit to see how they respond with some.

Banter, how they react to it. I'm in pa. I don't belong to a political party. Never have, never will. But the banter you get with people, I couldn't care less who's President. I care that the President's doing the right thing. And I care that we have a budget that needs to get balanced. Clinton had a balanced budget. Everybody forgets he's the last president to balance the budget. No Democrat or Republican has done it since. You need a balanced budget, you need to look at the deficit. We went from a $4 trillion deficit to a $30 trillion deficit. Our kids have to pay that off. Why leave our kids and see, it's what, $160,000 per person or something like that? Maybe the math wrong, but I believe it's 100. I know it's over $100,000 per person. So if you want to go write a check to the US government of 100 grand and pay down your deficit, you can have a reduction in your income taxes. And that'd be a great concept, get people to pay off their share. People don't realize that they have all this debt accruing that they own a piece of.

That's a good view and a good thing to banter on.

Yeah, but you think about it. We pay off the national debt, all of a sudden, taxes will go down, the economy will soar. Countries like China have no national debt. Russia, I don't think there's any natural debt. The Emiratis, the Saudis have no debt, but they're doing okay for an economy.

You said earlier that these deals tend to find you. And I'm a big proponent of a buyer led approach where you got a profile, you got a strategy, and you're very proactive to find those opportunities as opposed to bankers and third parties just bringing you stuff and you're trying to rationalize your strategy around it. What's your view on that? Of being proactive?

And being proactive is great. I joke. I do the cocktail party circuit all the time for all the conferences. You meet people and you talk to people and you never know what's going to fall into your lap. Or people tell you, I'm trying to raise money for this or that. And then you try to look into it and say, okay, does it make sense? How can we improve it? The trick is, how do you make one plus one equal three? You give people money, that's great, but how do you give them more of the money? How do you give them knowledge? How do you give them advice? How do you get them customers? How do you cut their costs? How do you do something that's going to be transformative for their business? Not just write a check, but truly be transformative the business you're investing in.

How do you do that?

That's just experience.

I'm asking because it's so easy to screw that up. It's so easy to bet on the wrong jockey.

My partner once said to me, I have a.500 batting average and I'm not a baseball fan. I go, what does that mean? He goes, mark, it means one of your two things you touch turns to shit. That's great.

That sounds pretty good.

And I'm like, but he goes, but at.500 batting average still puts you in the Cooperstown hall of Fame. And I'm like, where's Cooperstown? He started laughing. And I'm not a sports guy. As you get older, I try to improve my batting average. My batting average is much better today than it was 30 years ago. I continue to improve my average.

Any other things besides the jockey part? You got a good vibe. This person's the right person that's going to follow through. Any other elements that you look for in a good deal?

We look at the total adjustable market. We look at the tam, we look at who are the customers, what's the value of that customer, what are the chances that customer is going to buy again, if it's a recurring revenue item or if it's a hard, good item. But there are things that can and should be done to really analyze the business.

On the strategy part, it sounds like once you find a direction with this business that you got the jockey lined, and then you're looking at some of the elements, the TAM and things like that. From there, that's when you could be very pragmatic about what are the other businesses that may align or you want to acquire with it. Does that, like, sound right? I'm trying to think of when do you get to that point when you're, like, really proactive on. We have a strategy. This is what we need to do, we need to go acquire these other assets.

When you look at a company, a lot of times we believe if you control your supply chain, you control your destiny. So with any company we acquire, we try to make sure that they have a deep control of their supply chain and whatever that means for that company, we want to be able to control the supply chain.

That's a good lead in is okay. You look at this company and then when you think about how do you make that sort of vision or the strategy from it, that's one good philosophy is like you control supply chain and then that gives you a view of does M and a sort of fit in to be able to achieve that or are there other means to do that?

Controlling the supply chain is key because then if you own your supply chain, you can have better control of the quality of your product, better control the cost of your product. Pretty much all good things come from that. They tell you in business school about just in time, but the reality is it doesn't work. Companies keep having supply chain problems and just in time inventory isn't working. But people own their supply chains back like ford in the 1920s, they own their supply chain. They owned everything and it worked. And I believe that's what's going to happen now. Everybody who's building stuff in China today is going to go ahead and be like, wow, we're screwed. We have all these tariffs. If we would've built it here in the US and owned the factory, it would've been a lot better.

Yeah, those will be the manufacturers get ahead the niche domestic manufacturers because they own their supply chain. Hey, what's a good. Another mark philosophy from Ben. The right jockey on your supply chain.

Buy low, sell high.

Buy low, sell high.

That's a good one.

Try to teach that to my kids. It's not that complicated. Buy low, sell high.

Everything else I don't know, I haven't thought about too much. It's just things that come to mind. You know, I always tell my employees, don't be afraid of making mistakes. Not making a decision is worse than making a bad decision. And that process by analysis and people are just afraid to make decisions. And I see this at big companies all the time. People are afraid. They want to make a group decision so nobody can take personal reliability for the decision. Everyone's afraid of making a bad decision. I'm like, you know what? Make a bad decision, it's okay, man. It's not the end of the world. Hopefully everybody learns from their mistakes.

Cliche corporate thing is like you're encouraging an entrepreneurial culture when you hear what you're describing is like, go take some bets. Go make. Go do something people.

But big companies, I've seen over and over again, big companies don't want their employees if they don't want. They don't want to take chances. They know they got a job. So as they keep their head down, no one notices who they are. They get the 35 years and they get their pension and they move on. But there's no efficiency there. There's no moving the ball down the field there.

The strategy part could come up pretty easily. You can sit there in a room, hack out some ideas. Finding the right jockeys to bet on that takes some work. You got to go meet people and hit the conference circuits and so forth. Some of this ways to create value, the actual execution, like once you get the deal done, and this is something you've done really well, is that you make things happen. I get it. The right people always matter. But is there anything else that you're doing to either align incentives or just certain structures that you found have really helped push some tailwind to make sure that things get really good executed? And there's some success that happens.

But we try to tie people's conversation to performance metrics, which will lead us to success. So we want people to have skin in the game. I never met an employee who says, I want to get paid less money. Everybody wants to make more money, fine, let's give them a way to make more money. But they have to be successful. So let's incentivize them to make more money.

Give me some examples.

We have a manufacturing business and we were had to meet a deadline. When we had to meet. It was a tight deadline we had. People had to work double shifts and we said, look, we have a pool of money. We're going to pay out a million dollars to everybody working on it was like 150 people. And we're going to divvy it up. And as long as you keep working your double shifts seven days a week so we make the delivery, you get to share in it. Some people dropped out, others stayed in. But every day that it goes by, the pool decreases by $10,000. Pool dwindled down. So at the end of the day, if you missed all the deadlines, you get nothing. People had a real incentive to go ahead and help each other because it had to be a team effort. It was all or nothing as everybody had to help each other to create a lot of teamwork. And people won their bonus.

That's like a key factor is there's a financial incentive that you.

But it was a financial incentive to both encourage everybody to work together. Because if the person next to you was getting it wrong that means you wouldn't be able to deliver the product. And everybody suffers. So everybody was forced to help everybody else. I was very pleased with how it really worked out. It created a lot of bonding and that was really good.

How important is that to just making sure you got the right person in?

Is it not Gen Xers? Millennials. What are they called today?

Gen Zs.

Gen Zs. Gen Z's have a real problem because Gen Z's they're stuck with their phone in their hands and they don't know how to communicate. They don't know how to work in teams. They very much want to just work from home. Basically tell them all to go work, go back to whatever barista they came from, grow up and come back when you want a job.

They don't. They're not incentivized by money. They're trying to get their snap score up and collect some Robux.

Yeah. So I think social media has not helped us.

That's what I wanted to overcome. But maybe we get to that point you gotta have some real bills to pay.

I don't know. I wish that was the case. I haven't seen it yet.

We talked before and you had this term you used about taking people out of the process. Can you tell me more about that? It was related to automation. I think we were talking around scaling.

Computers don't make mistakes. People make mistakes. The more we can automate things and use AI to help make sure that to teach the robots to be better with their jobs. But we're creating new jobs in terms of programmers for AI People who build the robots physically. Until robots build robots and I guess you have Skynet. At the end of the day we are very much all about robotics Is a huge way to save money and do things fast and quick and get it right.

Any trade offs between over automating. Trying to focus on innovation but still maintaining the human touch?

No. I think you always have to do. Because humans are the ones programming the robots. So humans are the ones designing everything so it has the human touch. But once again you try to solder something. Your hand can't stay steady over and over again a thousand times for solder. A computer can solder things a billion times over with never slowing down.

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