You've heard of The E-Myth, but have you studied it?
In this episode of the Lazy Leverage podcast, host Speaker A and guest Peter S. Lohmann explore Michael Gerber’s classic, The E‑Myth, and translate its principles into modern small‑business practice. They begin by clarifying the book’s focus on entrepreneurship (not e‑commerce) and quickly move into the core framework of the three internal personas – Technician, Manager, and Entrepreneur – and how their conflict drives business failure. The conversation then maps the life‑cycle crises that businesses face (infancy, adolescence, maturity) and the two common but harmful responses (reverting to a “small‑business” mindset or “going for broke” without systems). They contrast organically‑grown, technician‑led firms with acquisition targets, explaining the significance of financial metrics like SDE versus EBITDA and why many MBA‑type buyers miss the technician perspective. A major theme is the need to turn a business into a repeatable, franchisable system of SOPs that ordinary people can execute for ordinary compensation, freeing the owner to work on the business rather than in it. They illustrate this with property‑management case studies (650‑door, $2‑3 M revenue firms) and discuss how the same principles apply to AI workflow design: tiered model usage (free, mid‑tier, premium) mirrors the push‑down of work to lower‑cost talent. The hosts stress the importance of a vivid, compelling vision to sustain the painful transformation, and they outline cultural considerations (pod vs. department structures, leadership vs. line‑level hiring). The episode closes with practical calls‑to‑action: joining the Crane community, upcoming application windows, and a promise to incorporate listener feedback. Key takeaways include: (1) view the business as a machine that produces predictable outputs; (2) identify which of the three internal roles dominates you and rebalance; (3) anticipate lifecycle crises and choose the mature‑business path; (4) document every process to make the business franchisable; (5) design workflows—human or AI—that leverage ordinary talent; and (6) maintain a strong, future‑oriented vision to endure the transformation.
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Lazy Leverage, the internet's number one ops podcast. I'm joined by my pink shirt wearing pickleball playing heterosexual life partner, Peter S. Lohmann, joining us from Ohio. How the hell are you, Peter?
I'm doing well. It's beautiful here this week, 70 right now, I think, and mostly sunny. Quick funny story. The other day someone said to me, they go, oh, I think that, you know, you ever hear how someone will say that like the best programmers are lazy programmers? You ever hear that?
Yeah.
Someone goes, you know, I think the best CEOs are lazy CEOs. I said, funny you should mention that. We have a whole podcast around that theme. I happen to agree.
It's like selectively lazy, right? You and I occasionally will be like fanatical and then occasionally we'll be like, I don't know, whatever. Right. Um, okay. So today I'm going to try to set the hook here for this episode. If I think about if you made me go on a desert island with somebody who wanted to become an entrepreneur and I had, say, 5 books I could recommend, undoubtedly, The E-Myth— you see how old it is because I've had it for so long— is one of those foundational books that I think everyone should read. And I've heard you recommend it a thousand— Below a Million Dollars, E-Myth, Above a Million Dollars. Traction.
Traction.
Yep. EOS stuff. I also think that it's one of those books that everybody hears people talk about, and I would bet 75% of our listeners haven't actually read.
For the longest time, I didn't read this book because I thought it was about e-commerce.
Yeah, it's a horrible title.
It's a— the title is bad. Yeah. So to clarify, in case you were confused like I was, the E does not stand for electronic or anything like that. It stands for entrepreneur. So yeah, unfortunately I missed out on a few years of wisdom because of that.
If you hear the way Peter and I talk about building businesses, I cannot separate my personal opinions from this book's opinions. They are so intermixed in terms of fundamental. It's, it's like saying, like, how are you different than your DNA? I'm like, yo, it's one and the same. There's no, there's no difference between my DNA and me. And if you look at my business approach, I can't, I couldn't tell you. And in revisiting this book, I was like, oh yeah, Right?
Like, it's all become like part of your source code.
Correct. So, um, we're gonna talk about how, you know, I've got some kind of things prepared in terms of, uh, how this applies to buying a business where I think it's different. Um, which is very different. I also have some opinions about how this applies in the age of AI.
Are people still buying businesses? I, I sort of felt, I sort of feel like the, the gig was up with that.
Nah, they're still buying.
We all figured out it's basically stupid.
It's harder, but we're going to talk about that a little bit. But I also just want to take 10 seconds to talk a little bit more about a format that I think we're going to be using a lot going forward, which is Peter and I have looked back on some of our favorite episodes, including the last one about air safety, as well as some of our ones about theory of constraints, and this idea of a book or an article that is kind of the centerpiece of a discussion. And you and I kind of apply it to our businesses and apply it to other businesses, with one of us kind of teaching and one of us kind of commenting and asking questions, whether or not Peter and I have both read the material or not. Peter and I think that this is a great format for this kind of pod because again, the E-Myth is such a rich concept. I mean, you look at the task map that Peter and I first connected in 5 years ago. That's E-Myth stuff, man. It's E-Myth stuff. Right? So how do you, before we jump into kind of some of my takeaways, some summaries, some comments, how do you identify or engage with The E-Myth.
I mean, as you mentioned, it's like a foundational book.
I'm gonna hold it up as you're talking, by the way.
It's on, you know, these two shelves right here directly behind me are sort of like my best of the best of business books.
Bible.
Yeah, it's, it's in there. It's near the middle. And you mentioned, but yeah, I always recommend it. If you're zero to a million in revenue, read E-Myth. If you're over a million, read Traction. That's like, start there. If you haven't done that, drop everything and go do that. Um, and EMA certainly put into words a lot of the intuitions I had around business and codified a lot of the conversations I had been having with other entrepreneurs about what to do and how to do it and how to think about your business and how to think about your role and freedom of time and not being a technician, like. Yep. I remember a lot of it, but I'm glad you've read it more recently here because it has been several years.
Dude, it is such source code in terms of the way you and I talk.
Yeah.
It's going to like, it's going to trip you out, right? Because you and I have moved past it because we've built businesses on top of this. But for many people who've never engaged at the source code level, we just have kind of been like, yeah, you know, email stuff. And it's like, I don't know, like, let's break that apart. So I think the biggest idea, I have like 5 big ideas that I think are worth discussing here. The biggest and most profound idea to me is that your job as an entrepreneur is not to provide property management or to provide recruitment. It's to create a system that provides property management and create a system that provides recruiting and— That's right. That's right. Right? Your business is the machine that produces predictably the outputs, not the outputs. And right there, if just you understand that concept, you can turn off this podcast and be better than 95% of the entrepreneurs out there who start from zero.
Yep.
That is such a core concept. Peter is not providing property management services. He is building a system that provides property management services. So Peter, unpack that a little bit. Why It's tied into crane brakes. It's tied into— it's tied into everything. So unpack that a little bit.
Yeah. So, you know, I think this is really tied up in this kind of Puritan work ethic idea. That's very—
that's the E-Myth, dude. The E-Myth is— yeah, that's actually what the E-Myth is, is it calls it like a, uh, wait, an entrepreneurial seizure.
Yeah.
So in summary, if you love baking bread and you are passionate about baking bread, you should go work at a bakery as a baker.
Go get a job.
If you like owning a bakery business, then you should start a bakery, right? Because the business of a bakery versus baking bread could not be more different.
Yeah.
Right.
And the skills don't translate at all, unfortunately.
Yeah. So this was something that I'd forgotten. That's a really nice distinction. I have it up on my screen over here, which is he talks a little bit, by the way, the author is Michael Gerber, The E-Myth. I have to shout out the author. He talks about the internal war with a business owner, which is 3 different personalities in their mind. And this is where it ties into the entrepreneurship through acquisition stuff, which we're going to talk about. Which is there's 3 personalities: the entrepreneur, the manager, and the technician. So if you start a company, most people start as a technician. You're focused on the present. Your core need is action and tinkering. Your view of the business is a place to do your work. And the fatal flaw is narrow tunnel vision. If I just answer my cell phone more, if I just replace more boilers, I'll be a great property manager. That is the technician one. Okay, so that's identity one. By the way, all three of these identities are at war with each other. Identity two, the manager. The manager is focused on the past. Their core need is order and predictability. Their view of the business is a system to optimize, and their fatal flaw is that they're bureaucratic and rigid. And last but not least, is the entrepreneur. The focus is on the future. Their core need is control and scale. View of the business is a product to scale. And their fatal flaw is their head's in the clouds.
Right?
And by kind of thinking of these three identities as at, you know, this kind of chaotic balance and understand which ones you yourself lean. You know, Peter's probably more of a manager. And sometimes forgets about the entrepreneur role that he has to play. And sometimes, right, and when you first start, it's all technician, and then you slightly become, right? But even just defining those three categories, I think, could be a huge unlock to say, I don't just technician my way to building a viable business.
Yeah.
Right? So I love that distinction of these three identities. Now, one thing, and this is where I wanted to kind of insert the entrepreneurship through acquisition stuff, which is when you start a business out of necessity, you are a technician. Hey, I'm a one-man property management company and I'm a technician.
There's no one else to do the work.
Correct. There's no one else to do it. Right? I'm the one who does SEO. I'm the one who does the hiring. I'm the one who, whatever, makes the widgets. Right? What I would argue is when you buy a business, you are oftentimes much too overloaded on the entrepreneur mindset, which is, okay, we're, we're, this is a system of property management. I want you to talk about that, uh, Crane comment about the guy who said, who was like an investment banker, and you're not enough at the technician level because you didn't come up through the ranks as a technician. You're coming down through acquisition and you don't have a feel for the technician part of being a property manager.
So just to set the stage here a little bit, what you're describing is there's a, there's a movement, I guess, of MBA types who go to business school. And there's some schools like Wharton and some others, I think that Stanford's big on it.
And MIT Sloan. Yeah.
There's a couple of ETA entrepreneurship. Yeah. So basically instead of taking a job at a consulting firm or going and trying to do a startup, there's another path, which is you can go buy like a main street business. And historically, Main Street businesses have traded hands. Either like a private equity company will buy them or like a competitor will absorb them in like a roll-up play or something like that. But now here come these MBA types who are trying to buy your business. Maybe you've gotten emails from them. I'm Jeff Smith. I'm a local entrepreneur. I'm looking for a great business to buy, blah, blah, blah. But he has no history in the business. In fact, maybe he's never owned a business and he's not associated with some big private equity firm. So these fine fellows, of which I have friends who have done this—
and women as well.
Yeah.
It's not just men. Yep.
Of course. They, you know, sometimes succeed and buy a business, find a business and buy it. And that's where John was describing how they come in often with too much of a visionary mindset, too much of a, What was the term you used? The manager and the entrepreneur mindset. Yep. Entrepreneur mindset. And not enough of the technician because they weren't there. Like a lot of you listening, when there was no one else to take—
there's 5 doors and you answer all the phone calls.
Yeah. Yep.
And, and I, you know, one of the tells that I always talk about these people is if you call a business an asset, that's a tell, right? It's like, dude, that's not an asset. That's 7 dudes. And a maintenance department in Ohio. That's not an asset. It's like, oh, how do I get this asset? It's like, bro, that's Bob. That's not an asset.
Right. So yeah. And unfortunately at the scale at which these folks buy companies, which is usually like sub $5, sub $10 million in revenue, there may be a, there's probably a few, there's a management team, so to speak. But the outgoing owner was almost certainly running the show. Many of the key relationships are around that person, and the managers who are there, they're great people and they're doing great work, but it's not like you can just be uninvolved as like a passive owner of this.
And that was one of my notes, by the way, one of my notes, and one of the tells, by the way. And this is basic stuff for business acquisition, but for somebody who's not around it, when you see SDE, seller discretionary earnings, that is an owner-operated business. When you see adjusted earnings or EBITDA, that means that there's a management team in place. And when you see SDE, you need to understand that you are buying a business from a technician. Almost—
Well, a technician wouldn't even know what that acronym means.
Correct. But what I'm saying is when you see that, essentially it has to do with whether or not you add back management costs or you include them or not include them, right? That's the biggest distinction. But one of the reasons why you guys need to study E-Myth is a functioning business has a balance between these three roles. And when you come into a role, a business that you just acquired, and it was previously run by a 70-year-old technician for the last 20 years, you need to understand what that business is missing, what, what gaps you're going to need to fill, which is a high-level B2B sales rep to manage the key accounts. Because it was built by somebody who didn't read The E-Myth, in essence, almost across the board. And so you need to understand that the natural inclination of these subscale businesses who do not have professional management in place is a technician-led business. Right? Now, obviously, if you start from zero, that's not the case because you're the one building the websites. Right? And so you have your own maladies, let's say. Is malady— is malady— no, I don't think maladies counts as a big word. Does it?
Uh, it's close.
Close. Okay. We all, I'll get another one in there. Um, you have your own sicknesses, right? Your own illnesses associated with when you start it versus when you buy it. Okay.
Do you want me to tell about the, the searcher?
Yeah, please do that before I go on to the next topic.
So inside of Crain, we have one of these folks who bought an application window, which opens by the way. Yeah. So if you're listening live, the application window opens on Thursday.
Cool.
Um, April 2nd. Cool. For Crane. Okay, so in Crane, um, we had somebody who bought a 650-door management company and joined Crane shortly thereafter.
Now, 650 doors, just to give a sense, is say probably $2 million in revenue.
$2 to $3 million in revenue. Okay. Yep. You know, 20-ish, 20 to 30 team members.
And usually property management companies train at 1 to 2 times revenue. That's kind of across the board.
And lately, lately, more like 1x.
Okay. Interesting.
Yeah.
I would have— I love that. I know property management multiples. Okay. Go ahead.
So he just posted a follow-up 9-month post-close sort of examining his initial assumptions versus how things actually went. So he had some ideas that he came in with and now it's been 9 months and he posted a big long update in Crain. I'm just going to read a tiny little piece. Incredible. More, you know, his longer analysis. Here was something he assumed: the PM role is pretty straightforward. In actuality, I was severely wrong. Coming from a world of highly complex problems, I assumed the simple business model would translate to a simple role. The complications are astounding. The breadth of issues to be solved under pressure or on the spot is unlike anything I expected. And every property manager listening, and probably every small business owner listening, is like Ah, they just like relish in that.
Send me that quote so I can put that on Twitter.
Yeah, so good. I'll send you the link. We'll put a link to my post on LinkedIn. I'll put in the chat. Yeah. Um, yeah, so that, that's pretty cathartic, honestly.
Yeah. Oh, because we all understand that intuitively, but I think from an outsider you're like, well, how so? You know, how hard could it be? You know, and you're like, it's astounding.
I've solved complex problems.
Yeah, exactly. Okay. So there's another corner that I want to take this to that you and I have both seen, by the way, and in the book, and I don't remember this from the book, but he calls it the life cycle crisis that I think is probably a big thing you see in Crane, which is businesses develop in phases, right? Infancy, adolescence, and then whatever. Okay. What happens is as businesses start to mature, right, they have a couple different options. There's two bad options and then the right one. Okay. One option, I wouldn't call it bad, but is revert to small, which is essentially revert to infancy. So the business starts to mature, it hits 100 doors, which is the beginning of the death zone. And all of a sudden, plates stop falling and they go, eff it, I'm going to get rid of my employees. I'm going to get a smaller office because I can't manage employees. I tried to hire an RTM. I don't know, whatever reason. And it's a return to infancy. And they say, I'll just manage 80 doors from my cell phone.
Dude, that is so real.
Return to infancy.
Multiple people who have done this. And yep, I'll give two more specific examples in the property management space. At conferences, occasionally you run into somebody, oh, how many doors you have? Oh, we, you know, we got up to 1,200 at one point. Uh, we're, we're probably around like 650 right now. And you're like, oh, what do you mean? Like, what? Yeah, you know, we opened up an office in Charlotte, we opened up another office in Denver, and I sent a couple of my people out there and it just, it was, you know, we just couldn't pull it off. So we ended up shutting those offices down and now we're just back to our home base in Memphis, you know, or whatever it is. And so that, you know, that is not uncommon to run into somebody.
Hugely common.
Yep. And then another example is, you know, we have this engineering company that my partner runs and we bought it, we purchased it. It actually was an ETA thing. We purchased it from this older gentleman who had run it for many, many, many, many years. And during the transaction, or I guess it was like shortly post-close, this guy was talking to my partner and he said something like, my partner was asking like, why, why didn't this business ever get any bigger? Why didn't you, you know, hire a manager and have like, you know, turn this into a big, you know, a big business? And the guy said something like, you know, I had a couple employees, uh, steal from me, and another couple employees just quit with no notice. And after that, I pretty much just gave up on employees, and I never did figure out working with employees.
Yep. Yeah, I think that's what I said before.
Yeah, it's like, wow. Like, I, I, at the same time, I get it, and I empathize from the bottom of my heart. There's days I feel like that. On the other hand, I'm like, man, you were so close. Like, you were like one good hire away from being 3 or 4 or 10x your current size. Yeah.
So, uh, you have to talk— he talks about it in the book a little bit, but he says what ends up happening generally— of course there's exceptions, right? But what he says is eventually, he's like, it might take 6 days, 6 months, 6 years, but eventually you start to resent the business.
Yeah.
You wake up one day and you say, I don't want to go back in there, right?
You need to—
because you have not built a business that serves you. It is a master-slave relationship is what he calls it. Right? The business owns you. You have created no difference between your identity and the business's identity. And for some people, that might be it. But that is the trap. Or sorry, not the trap. That is the path you're choosing. The other thing, of course, is that with very rare exception, you are creating absolutely zero exit value.
Did you ever have that? Did you ever have the first one where like your identity was super tied up in the business?
Um, I don't think my identity is tied specifically to a specific business. I would say it's more tied to being an entrepreneur, which is sometimes good and sometimes bad. It's not like I don't know what I'd do if I wasn't running Sagan. I'd be like, dude, I think of a thousand things I'd do. I think it's more— I identify more at the entrepreneurial level.
It's not that you would think of a thousand things. You, you did. You did. I think of 1,000 things. I think I heard most of them.
And you heard one quarter. Costigan heard another quarter. My dad heard another quarter. Exactly. So, okay. So, okay. So I really like that crisis. Okay. The next thing, the other thing you can do, which I also love, which is not the right answer either, which is, okay, your business is maturing, it's in adolescence. You can turn right and you can revert to being an infant. The other thing that he talks about in the book is he calls it go for broke, which I love, which is without systems, without kind of coherence, just like, hey, we just hired like 7 people and we're just going to freaking improvisational jazz.
We're running a national ad campaign, kicks off next week. Correct.
And we're just going for it. We're YOLOing, right? He's also like, the implications to that are obviously also Not very good because chances that you're going to be able to kind of wing it and get there are very low. But he's like, those are the two bad choices at the adolescent stage. Anything about the YOLO strategy?
So like those guys, the survivorship bias thing, like those are the, those are the books we end up reading, right? Yeah. Like we've all read these business books, Home Depot or not Home Depot, FedEx.
I gambled, uh, yeah, payroll, totally.
Yeah, you know, and what's the— what's the shoe— what's the shoe book that everyone's always talking about? Shoe Dog. That's another one. Good book. Everyone— I don't like that book, I gotta be honest. I read it, I was not impressed. I felt like it was this kind of like go-for-broke survivorship bias. Things like, yeah, if like 100 people try this, yeah, it's gonna work once, and that guy's gonna write a book talking about how he's a genius. Yeah, I don't know, maybe that guy was, was a genius. I have no idea, but Anyway. Yeah. Yeah. Go for broke. Yeah.
I write— I wrote something that I really liked the other day. I forgot the exact phrasing, but it was like most, most business advice is autobiography. Hey, so this is—
oh, it absolutely is.
Like, you need to separate the lessons from what you did because oftentimes those are different. Okay. Yeah. So obviously the third thing is that kind of breakthrough to maturity is, is what we're chasing here. When you hit adolescence, you've hit your comfort zone. Okay, my comfort zone is that I do all the sales calls. My comfort zone is that I hand-sign every lease or whatever. You know, I'm the one who— okay. And that is—
that's Kagan. Are you listening? Hand-signing every lease, hand-reviewing every applicant. I have like a long-running debate with him about that.
Okay.
He manually reviews every applicant. This management company is like 5 times the size of ours.
But at this point, right, when you think, by the way, about what is that transformation that you're trying to chase at Crane, or you're trying to chase at Sagan in many instances, is that they've hit their natural boundary. And what Crane is, is looking at a bunch of people on the other side of that boundary saying, wait, you're not Insert thing that exists on the other side of that boundary. You mean you're not doing EOS with quarterly rocks? How are you? How does your team know? You don't have a vivid vision. You're not pod structure versus departmental structure, right?
Like, no, just, we need another ding for every time you have a ridiculously specific property management reference. That's like not only specific, but accurate and like relevant.
But isn't that a good one? Departmental versus pod structure. At this size, you can't wing your way to that. You have to go to school. You have to go to Crane. You know, taking a Crane break is not a naturally occurring phenomenon. You don't just naturally make your way to closing your laptop for a month as a property manager. The natural state of affairs is you're taking calls at 7 PM because a water heater exploded. That is the natural progression. And so you have to put your foot down and say, I'm going to do what feel to me like unnatural things to get to the point where I can take a 1-week crane break.
You're fighting entropy.
Exactly. It is not a natural state of affairs. So E-Myth talks about that and frames it in a way that I think is so exciting, so fundamental because it says your job is to create an organization that creates value separate from your role as a technician.
Does E-Myth talk about like creating your business as if you were going to franchise it?
Correct. So that's a big thing it talks about, which is documenting— really affected me early, which is, which is creating your business in a way that it can become franchisable, which means it's a way of doing business. RL, now anything on this before I go to my next kind of like big holy crap kind of comment here?
Uh, I think like the— my reaction to that is this is really hard the first time you do it. To take your business from infancy to what you call like stable adulthood or something, breakthrough to maturity. Yep. Effing difficult the first time you do it. Yeah. It took me 10 years.
Yeah.
Of like reading and learning and going to conferences and trying things. And hiring and it was the wrong person and reading some weird book about DLR and bumping into some guy at a conference who hooked me up with a mastermind. And the one guy who was there this one time said this thing that like I took home and implemented and changed everything. And like, I just want to give a little encouragement. If you haven't broken through this yet, it is very, very hard, but it's not natural. Doable. Yeah, doable. And once you've done it, I think it's far easier to do the next time for your next business and so on. But, you know, it's, you know, in property management, you know, see that guy's comments who bought one. It's very hard. And I imagine it's every small business is difficult in its own ways.
We've, we've talked about it, but I think if I was to give one piece of advice to somebody listening to this who's struggling with it, I think you have to have this beautiful glowing goal. And it has to be this, it has to be this compelling vision of what your relationship with your business looks like. And you need to define that and you need to get excited about that because that's going to push you through the pain of transformation, which is the first time that a CSR misses a call and they would have, they didn't close a sale that you would have closed if your cell phone rang. You need to revisit that vivid vision or whatever the hell you want to call it and say, it is worth plowing through this and not sucking everything back to me because it is going to be a struggle. And if you're not excited about where that's taking you, the minute you hit resistance, the minute somebody F's up, you're going to revert and you're going to bring everything back in.
So business coach of mine, Dan Tocchini, great guy, direct quote from him. Have a vision big enough to carry you through the pain of transformation.
Exactly. Exactly. And so, so that is, that is nebulous, but be specific. A goal big enough that when one of your team or some system you set up costs you money, you've made your peace with Jesus. Yep. We just missed that lead. I need a better SOP. I need a better— I need to upgrade that team member. I need to whatever. Not they cost me a freaking inquiry and oh my God, this isn't gonna work for me. And if you don't have that, if your, if your beautiful goal is not powerful and exciting enough, you're just not gonna get there.
Yeah.
You're just not gonna get there. Right? Okay. Now this is the huge one and it's really kind of like the last big idea cuz I don't wanna crowd this with too, too many things. And this to me, we could do a whole episode about this because I actually think it applies to AI as well. And we we can talk about that, which is the one that I think— I don't want to say it pisses people off, but it's like such a core part of what I do. I almost can't even express it. I don't even know if you have this relationship with this concept as strongly as I do, which is if your business relies on brilliant experts, it cannot be replicated. Experts are expensive, unpredictable, and rare. The goal is to invent an expert system that leverages ordinary people to produce extraordinary results. Feel free to insert the B. Short quote if you'd like. The system runs the business. The people run the system. And that to me is so much a part of how I view business. It— I can't even describe how fundamental that idea is to every decision I make ever.
I'm gonna pull out a quote, one of my favorite— uh, no, I don't think so.
About ordinary people doing ordinary things for ordinary compensation?
I don't think that's Beshore.
Oh, well, is it that quote?
It's that quote. It's that— that book is, I believe, from a book called No Man's Land.
Okay.
Uh, kind of an obscure business book by Doug Tatum. And yeah, the quote is Sustainable profits must be built on ordinary people doing ordinary things for ordinary compensation.
Yeah. So good.
It's so good.
So good.
And, um, I believe that. Yeah.
And when I think this, by the way, you know, we've talked about many times about Matzner's pyramid of how work gets done, right? Ownership, expensive employees, lower cost employees, and technology. This idea is the core of it, which is I'm constantly trying to push things downwards and create a system. It's not hard to run a great restaurant if Gordon Ramsay is in, if you have a $250,000 chef in every seat. The magic is a restaurant that only needs one of those and has a bunch of guys who started yesterday making world-class French cuisine. That's the magic. It's not hard to have expensive, impossible-to-recruit people running a proper— it's— that's not hard. The magic isn't doing it with a drug addict who is flaky and doesn't always show up on time and your business produces value anyway.
Yeah.
That's the magic.
Yep.
Right?
It's a fun puzzle. I mean, I get a lot of enjoyment out of—
Me too.
Figuring out how to do that. How do you set up the systems? What do you document? What's too much? What's not enough? Where do these things get documented? How do you communicate them?
Correct.
The backup systems. What about when you grow by 25%? Like, that's the fun meaty part.
What's the culture that needs to be around in order to create this kind of— all of that is in service of that goal, which is work should be done by ordinary people with ordinary compensation.
Right?
It's not, hey, you know, and this is ballsy for somebody who runs a recruiting company.
Right?
Because in effect, what I'm saying is, well, I mean, the fact is, is that you recruit on other things like attributes, which we could talk about. But ultimately, what I'm saying is, it's not this miracle hire that's going to change your company. Oh, well, we're A-team and A-players. And I'm like, yeah, it's me sick.
So this is the distinction here, though, is leadership team versus line-level workers, to be blunt about it. So, you know, in your small business, your leadership team, it actually does need to be A-players. They need to be exceptional people. And maybe you and I can argue about that. Everybody else should be— you should— your company should be such that ordinary people being paid an ordinary wage can thrive. And drive results and profit for your business. I think that's where I draw the distinction between superstar, super climber. Everyone's got their fancy name, A-player, you know, run them through the 6 interview thing. Great. If you're hiring a COO, if you're hiring a VP of marketing, absolutely. If you're hiring, you know, a receptionist or a showing agent or a property manager, that's not— that is not necessary. And if it is necessary, then the role is not designed correctly. Yeah.
You haven't architected the way the work gets done correctly. Now, I'm going to make, I'm going to make one other comment here that I actually think is going to be important based on maybe how things evolve. And I, I, I was doing some mind expansion and this was one of the things that popped up, which is this is exactly the same with AI agents and models, which is you want to run top-tier opus, which is going to get more expensive, a state-of-the-art model, and it's going to be, call it $4 an API call. And one of your jobs is actually to try to design structures such that a lower-cost model can minimize the amount of work that you're putting on the state-of-the-art technology provider, how do I do this with a free model? So I'll give you a specific example. We built a tool for a permanent lighting business, whatever, and it's evolving as we go. And you could have just raw-dogged it with some crazy expensive nano banana, nano banana, and it would have been $5 per run. And that's like the equivalent of having your CFO do bookkeeping entries.
Mm-hmm.
You're using Opus top-tier API, right? And the magic that is hard as shit is to say, okay, we're not just gonna raw dog an expensive model. We're gonna take a free, a Gemini Flash, a very low-cost model, and we're gonna use that to scope the work. Then we're gonna use a different little bit more powerful model, a middle manager type model to pick the best picture of the 10 that we created. And then last but not least, we're gonna do one API call to the expensive model. And you're actually designing the way the work gets done because the models are— right? I had this insight about AI agent workflow structuring. It's exactly the shit we've been doing with global talent and with your CFO.
Very interesting.
Right? I had this like, Right. Which is you're actually, as models get differently priced, you're going to be structuring agent work or AI work similarly, which is, is there a way that I can design this workflow? You really need to use Opus to search LeadSimple? Come on, man. What are you doing? Right. So what are you going to do? You're going to use some different metadata structures such that you can use a lower cost model. So every time, 100 times a day, your PMs search your LeadSimple, you're not banging up against frickin' Opus. You're using Haiku, which is essentially free.
Yeah. My guess is that in order to take advantage of those lower cost models, I can think of a couple of things that would have to be true. One, your data needs to be well organized.
Sometimes. Yes. Often.
Yep. Another one would be—
wait, pause, pause, wait, pause, pause. In order to take advantage of global talent, to use a lower skilled person, finish, say what you just said.
Yeah, the data needs to be well organized. Yeah.
You mean like, you mean like good SOPs? You mean like task maps? You mean like good memos?
Direct, directly correlated. Yeah. And my guess is like, as you guys start to build out more agents, your customers who have been the most successful with global talent almost by definition are going to be the most successful.
Why do you think we're ripping? It's because we've been, we have this motion of pushing things downwards and it is, you know, Giving feedback to AI agents. You know, I just tried it and it didn't work. Whether you're talking about a South African account executive or your OpenClaw instance, okay, well, have you integrated your feedback? Oh, I don't know. I'm too busy. I don't have time for that. Okay. Guess it's not gonna work. The similarities are like mind-expanding in terms of how you're gonna be able to capture a value and build leverage as you move down that output pyramid, it is going to be stinking identical. And there's going to be, by the way, flimflam men who do the exact same thing with global talent.
What do you call them?
Flimflam men. You never heard that?
Flimflam men.
Yeah.
Those flimflam men, you know, it's like a con artist, right?
Oh, you know, get, uh, you know, freaking Growth Assistant or Athena, right? They're going to be, the same thing's going to happen with agents. One click and have an outbound CSR for your property management company. Bullshit. Just the same as it is like, you know, get somebody from the Philippines for $2,000 a month who can totally woo up. Bullshit. It is the exact same thing because everybody is chasing this one-click, hormosy, value-based.
Jeff Lerner: That's the tale as old as time, man. Everyone wants an easy, they want a weight loss pill. They want an easy button. They want to One click. Perfection and everything.
One click leasing manager.
Yeah.
Come on. Right? So I'm, that's why Sagan is so well positioned, I think, for this is because we're having these hard conversations about, bro, you haven't defined what success looks like. You gave me a ChatGPT-generated job description. You don't have time to do interviews. You don't even know what success looks like. Whether you're talking about an agent or global talent, you're not gonna have success. Sure. So that's also where I think this EMIS stuff, revisiting this book, my brain started to spin because all of this stuff around designing a system and all that stuff, inject it into my veins for global talent, inject it into my veins for AI agents.
So when was E-Myth written? Let's see here. E-Myth. I can't find a year. Uh, 2004. 2004. So over 20 years ago, 22 years ago. So it sounds like upon a reread, you believe it holds up.
Oh, oh, and just, yes, absolutely.
Love it.
Just incredible. So I think hopefully for those of you that haven't read it, this conversation will at least jog the memory, right? I, by its very structure, this has to be a brief summation of the concepts, but immersing yourself in these concepts as an entrepreneur, I just think is time hilariously well spent. Hilariously well spent. It's kind of like everybody talks about the classics, but doesn't read them.
Oh, sorry.
That's actually the last thing I should say. Everybody talks about working on the business, not in the business. Where is that concept from?
E-Myth.
E-Myth.
It's an 8-hour audiobook, I see. So it's— no excuses. That's pretty short.
Perfect. No excuses. Okay. Final thoughts on E-Myth before we kind of wind things, bring it home. You want to— anything on E-Myth you want to pimp? Your upcoming application window, any stuff like that?
I mean, I'm sure anyone listening has probably seen, but yeah, we only open up for new members in Crane twice a year. It's kind of a big deal. The application window is only open for less than 2 weeks. So that's— that kicks off April 2nd for our spring application window. Of course, we've introducing some new member benefits and a whole bunch of announcements as part of our webinar. But yeah, if you're a property management business owner with at least 150 doors under management, We'd love to see you inside Crane, so make sure you get your application in. As far as E-Myth, now I think, I mean, I just remember that book really, the main thing I remember from that book is the technician designation. Yeah, that descriptor. Yeah, differentiating between doing the work of the business, like baking bread versus designing the roles and creating the system to run the business. Yeah. That, that, that you're speaking my language there, right? I'm a systems engineer.
I do— you— this is what you and I bonded about 5 years ago was basically this book in, in its applied form, right? So you could say it is very fundamental to what you and I do.
Yeah.
You know, so great. Okay. Quotes, tech tools, anything fun you've been playing with, whatever. I've got, I've got quote and a small purchase— or not a small purchase, but yeah, a purchase.
Uh, I really like this video I watched recently. So I basically— I've just recently found The Me of Accounting.
Oh yeah, yeah, you sent him to me. Yeah, he's doing like a tour.
Yeah, yeah. So he has a paid community, he has a podcast, he has a newsletter. Yep. Right. And you know, he's— so anyway, he put— he's way ahead of me on, on the YouTube game. He's got a fantastic YouTube channel. He's got multiple camera angles and he has these scripted videos. He's got animations. It's very well done. But he just put out a video called I Put the World's Most Dangerous AI Agent in an Accounting Firm. That's the, that's the title of the video, which is a good title.
Yeah, good title.
Anyway, it's a great little video. We'll link to it, um, because I think it really shows you where it is, you know, accounting firm, whatever, accounting firm, property management firm, any like services, yeah, main street type business, I think could learn a lot from this video in terms of not necessarily what's possible today, but where we're going.
Cool.
And so I, it was very well done. Love it.
Awesome. So that's yours. Uh, we'll put a link in. I'm gonna read a quote for mine, uh, to end with, which ties a little bit into this. And it's from a, a general, I think he's German. Confronted with a task and having less information available than is needed to perform that task, an organization may react in either of two ways. One is to increase its information processing capacity. The other is to design the organization, and indeed the task itself, in such a way as to enable it to operate on the basis of less information. These approaches are exhaustive. No others are conceivable. A failure to adapt one or the other will automatically result in a drop in the level of performance.
Okay. Read the beginning part of that again.
Okay. I'll read it again.
It's dense. Right?
Okay. But this is from like a tank commander. It's like why I love studying these guys, because they have such good— okay. Confronted with a task and having less information available than is needed to perform the task, an organization may react in two ways. One is to increase its information processing capacity. The other is to design the organization, and indeed the task itself, to enable it to operate on the basis of less information. These approaches are exhaustive. No others are conceivable. A failure to adapt one or the other automatically results in a drop in the level of performance.
Got it.
So basically saying, if you need more information, you can either build an organization that collects and processes more information or build an organization that can make decisions with less information, which is what I've done.
Making decisions with incomplete information is the hallmark of a great leader. Yep. And It's something I think a lot about because I have two parts of my— I think of my brain as having two parts. There's the part of me that's the business owner, and there's the part of me that's the investor and asset allocator.
Yep.
The business owner part of my brain needs to make decisions extremely quickly with limited information and iterate, fail fast, learn from failure, on to the next thing, figure it out. I can never be the bottleneck. And I can never waffle or just delay beyond a very short window when it comes to making any type of a decision. The investor asset allocator part of my brain is completely opposite, moves very slowly, complete and total information first. You only need to make 2 or 3 great decisions a year to be successful, and if you start making more than that, you're probably making mistakes. And it's just a completely different approach to tasks and to making decisions. Um, and I often think about developing both of those parts of my brain and understanding the context in which it's appropriate to bring out the one and it's appropriate to bring out the other, switching between the modes, right?
Switching between the modes. So awesome. Good final thought to end on, Peter, as always.
Great job.
Ping us on LinkedIn, ping us on Twitter, join Crane, join Sagan. Thanks.
So I want to get in, I want to get an email address for the show, John.
Cool.
And I want to start—
or something.
Yeah, I want to exactly. I want to start getting, um, comments and feedback from readers, both in terms of like, do they like this format of the show? Did they like this show? Did they not like it? As well as I think it would be fun to start tackling reader questions.
Great idea.
For 10 or 10 or 15 minutes throughout the show. So we'll work on getting like just a basic Gmail address. And, uh, we'll try and get that set up.
Cool. All right.
