Bradley Jacobs: The Man Who Started 5, Billion-Dollar Companies

So the guy I'm going to talk about today, his name is Brad Jacobs. Bradley Jacobs, I think he goes by, but, uh, we're going to call him Brad Jacobs. And this person is super interesting because they have started, uh, 5 companies that have either gone public or are worth over a billion dollars. He started at age 23, he's 64 now. Uh, Google him, Brad Jacobs. He's worth somewhere in the range of $3, $4, $5 billion, and he's bought or in both. He doesn't like invest passively like a venture check. They buy companies and he's bought something like 600, 700 companies and he's done it across a variety of industries and he's done the same strategy over and over and over again in different industries. And it's incredibly interesting. And this guy is very fascinating to me for a variety of reasons that I'm going to explain. But Andrew, have you heard of this guy, Brad Jacobs? Do you know anything about this guy?

No, never. I don't know anything.

That's kind of why he's cool. He's kind of on the under the radar. If you Google him, he's got like a bald head and he looks like a finance guy because he wears a tie and he's like pretty well-spoken. And you think that he's just like a private equity person, and I guess maybe he is, but he's really an entrepreneur. He's very entrepreneurial and he's far more interesting than just a lot of the typical New York hedge fundy type of folks. And so I'm going to give you a quick story about his background. So he started 5 things that have been quite meaningfully sized. So the first was, it was called Amerex Oil Associates. He started it when he was 23 and it was an oil biz. It was basically like an oil brokerage firm, which I'm not entirely sure what that entails, but I imagine it just means connecting folks who created the oil to large businesses who are buying the oil. And within a very short amount of time, only about 4 years, Remember, he started this when he was 23. So by the age of 27, Amerex, his oil business, was doing $4.7 billion in gross, gross oil bookings, meaning he would— that's how much oil they're buying and selling. Now, I imagine his company kept a tiny percent of that, like 1 or 2 or 3%, but incredibly impressive for a young guy. And after a few years, he sells that business for a billion dollars. Then only a couple months after that, he starts this thing called Hamilton Resource, uh, Hamilton Resource. He starts it out of, uh, uh, England. He convinces a French bank to give him a billion dollars line of credit, which he was quite successful already, even though he was crazy young. But, uh, he made it happen and he went and secured a line of credit. And here's what he said. He goes, we moved physical cargoes of oil from one place to another. The '80s turned out to be a great time in the oil business, and I built Hamilton up to about $1 billion in revenues and did business in dozens of country, uh, dozens of countries before I moved back to the States in 1989. So between '83 and '89, he started this business and it also was huge. I believe he ended up selling it for a billion dollar, north of a billion dollars. So that's business number 2. Business number 3, a little bit of a, uh, of an odd one was waste management. I don't think there's anyone out there doing waste management stuff now that's brand new, but there's a ton of companies that at the time started in the '70s, '80s, and '90s, like Waste Management, the company Waste Management. And what they did was they would go out and find tons of mom-and-pop waste management companies because back then that's how it was and probably is a little bit to this day. But he started this thing called United Waste Management, which eventually became the 5th largest solid waste business in America. And it had a very, very, very simple business plan, which was buy landfills in small markets, buy many of the local trucking companies that were serving those markets, optimize the truck routes, maximize the pricings, get margins up, achieve size so that they had the capability to scale. And they did that, and the strategy worked really well. And in just 5 years, our earnings compounded annually by 55%. And he took the company public something like 8 months after starting it, and the stock price went up as well, 50% every single year for like 5 years. Eventually that company grew to $3.9 billion in revenue and $1.2 billion in EBITDA with 750 locations and 13,000 employees. Is this freaking crazy? Oh, sorry, that— I just gave you the numbers. I gave you the numbers for, um, his next business, but the waste management grew to $2.5 billion in revenue. Sorry, $2.5 billion in exit to Waste Management. Nuts, right?

That's crazy. So I, one of the most interesting things about this is like, I always think there's like 4 different types of entrepreneurs, right? There's the innovators. So let's just take, let's take Chipotle as an example, right? So there's the innovator, there's the guy who rolled the first burrito and was like, oh shit, this tastes really good. Then there's the remixer. There's the person who creates Chipotle. They take the burrito, they package it up, they create a brand around it. Then there's the scalers, the person who scales Chipotle to 100 locations. And then there's the optimizer, the person who just sits on top, makes sure it doesn't blow up and gets as much as possible, gets as much juice out of the lemon as they can. And this guy's a great example of a scaler, someone who just takes something that already works, that's already proven, and just does a much better job of it and rolls it out, makes it scalable and builds something massive. And it's super interesting. Um, because I'd say I, I kind of fall into this camp. Um, at the same time, I feel like what's sexy about this guy is actually how boring the businesses are, right? They're, they're so basic. These are things that are like undisruptible, and when you build them, it's like a 100-year business or something, which I think is really cool. Whereas what we do is like 5— you got to think in 5-year, uh, chunks.

I completely agree. And if you scroll up to this document that we have open and you click source, um, the source that I'm using for a lot of this, and this is so interesting, So we're on business number 3. I'll get to 4 and 5 in a second. But when he— what this guy does, and then when I wrap up all 5, I'll explain to you what my lessons learned from this guy are. But I'll say one of them right now, which is what this guy does is he raises money like a madman. And it's not like a ridiculous amount. I mean, saying you're raising tens of millions of dollars, I guess for the average Joe, yeah, that is a ridiculous amount, but he's got a track record. And he turns them into multibillion-dollar things. But so kind of tens of millions of dollars is not that much money. But if you click that source thing, what does that take you to?

To the SEC.

Okay. I found this file on the SEC and I don't really know what this is, but I don't even remember how I came across it. But this is what interested me. It's a Q&A session of him having written it out. And he basically lays out the strategy of his fourth and fifth business. And so what this appears to be is a Q&A that he prepared, and they show this to a ton of potential investors, a ton, a ton of potential banks, and they decide to invest in him. And I think this was before the company even started. Is that what that is?

So you're saying this is what he raised on? Like there's no deck, there's nothing. It's just, this is the thing. He goes out and he says, read this document. And you can invest.

I'm not entirely sure, but I think that is part of it. I, I, it's called— this is called a Schedule 14-A, which I, I'm not an expert in the SEC. I believe that is something that you have to answer before a board of directors at a publicly traded company, um, raises money. But I'm not entirely sure. But it's interesting though, because he writes in wonderful, straightforward, simple English and you could read his entire strategy, which I'm going to go through in a second. But skim that while I'll summarize the next two businesses that he did. So he started, I told you he started two oil things, but basically those were oil brokerage businesses. Then he started a waste management business. Now his fourth one is called United Rentals. Now I don't know if you see this in Canada, but if you pay attention to this now, and if you're listening to this and you live in America, go on a drive in downtown, the downtown city wherever you live, and look at the big box trucks and look at the rental equipment. So look at them like the Caterpillars or the Bobcats or the, the, the construction equipment as well as the porta-potties and anything involving construction or trucking. Go and look at those things. And I guarantee you on a lot of them you're going to see United Rentals. Well, that is the fourth company that he started, and he started it with the idea of The same thing of waste management. He wanted to go out and he wanted to find a massive industry that was highly segmented by small businesses that were profitable and great, but they didn't have enough capital to grow and they were kind of bad at sales. And that's what he did. And so he founded it and in just 5 years, 5 years, it grew to $4 billion in revenue and $1.2 billion in EBITDA.

And is he growing via acquisition or is he just rolling this out and crushing competition across the country?

We're going to talk about that, but what he said was, we got there partly through acquisitions, partly through organic growth developed by developing greenfield locations. He goes, we grew by using the same strategy at United Waste. We bought about two-thirds of the branch locations and cold started another third from scratch. I actually prefer cold starts is what he said. The business plan for United Rentals was to become the largest equipment rental company in the world. And leverage our purchasing power, branding, and other advantages of size. Within 13 months, we became number one, leapfrogging Hertz, which had become the equipment rental— which was the number one equipment rental business in 1965. Another thing we did was we went fast. We went public fast. We formed the company on Labor Day weekend, and we were trading on the New York Stock Exchange by December. Labor Day weekend is in May, I think, right?

Mhm.

So they started the company in May, and 5 months— is that 5, 6, uh, 7 months? That's 7 months later they were public. Merrill Lynch said it was the fastest growing, or the fastest IPO they have ever seen. And I stepped down, uh, uh, and so he stepped down of United Rentals in 2007. This is only 5 years after starting, and to start the next company. But when he stepped down, United Rentals, if you look it up now, I believe their market cap is $25 billion. So he spent 5 years on this company and it's worth $25 billion. It's crazy. So listen to what he did after this. Um, after I stepped down, I began looking for my next big thing. I studied tons of industries and I ended up concentrating on transportation and logistics. It's larger and more fragmented than the industries I've previously been involved in. It's a $13 billion— sorry, a $13 trillion industry. And here's what this guy says. This guy at the time is already multi-billionaire, but let me see if I have— he wrote out what he does, which was basically, he basically spends 3 months, he reads tons of reports, and then he calls 100 experts in each industry, and he just goes and he sits down with them and he just asks them questions. It might as well be a podcast. All that's like exactly how he learns. So he's this multibillionaire, he's this big shot, he's done all this amazing stuff, and he calls these people and he just sits down and he listens. That's all he does. It's pretty amazing. And he did this and then he's in this with his new thing. It's called XPO Logistics. Have you heard of this?

I have. I have heard of this. I think it's a delivery and logistics company, like a competitor to FedEx. At least that's my understanding.

Well, we'll put this in the show notes, but in that document up top, that is the document from where he was raising money for XPO Logistics. And in plain English—

It looks like it's supply chain. So it's getting people things they need that are critical on time.

Well, in there, in that document that I sent you, I couldn't study the whole thing, but in plain English, he explains what they did, and his reasoning for getting into it. And he just says, well, I just studied loads of industries. This one seemed industry interesting. I went and interviewed 100 people who are experts on it. I hired really good people and we're going to do X, Y, and Z. And that X, Y, and Z is exactly what he's done in his last businesses. And now I want to wrap up by giving you guys incredibly detailed stats or incredibly detailed strategy on what he does. So his first thing that he does, he looks for huge industries with lots of fragmentation that are small and profitable but don't have the capital to scale. So here's what he says. He goes, in a nutshell, this is how you ramp up a business. You buy a brokerage or some type of small business with $30 million in revenue and you add 30 to 40 bodies to it and you double revenue in time. I've looked into companies that have executed this plan, but most of 'em don't have the capital to sustain it. I try to find those businesses and I bring all the capital to do it. The second thing that he does is he hires salespeople. So he says, I like to hire hungry, talented salespeople at a low base, but big upside for incentives. I fund their training for a few months and it's not that hard for the winners to build a million-dollar book after a year or so. It's a business where you have to make 99 calls a day and do 1 or 2 deals. So you have to hire people who are psycho— I actually don't know this word. What's this? We have to hire people who are psychochromatically test high on the need to win scale and low on the need to be liked scale. A salesperson will have a base of $25,000 or $35,000, but can make many times that amount through an incentivize, a really good incentive program. Once you get the right people in the system and integrate them on the right IT, it can be really powerful. And finally, speaking of IT, when someone asked him what was the best acquisition of all time they ever made, he said they made a powerful software acquisition with a politically incorrect name called RentalMan, and we used that to integrate all of our rental businesses. We rolled up into that company. We couldn't have made the hundreds of acquisitions we did without RentalMan. And that was his best acquisition of all time. And that, my friend, Is Brad Jacobs. And I can go on.

I both love and find these guys kind of mysterious. And I kind of wonder, like, what the thing that's missing in all this is, like, what keeps him going? What's his purpose? How does he use his money? And like, why does he do this? Right? What's the driving force?

I researched him and the guy looks like a Wall Street stiff. Did you look up what he looks like?

Yeah. He looks kind of like There's like a character actor that he looks like. I'll try and find a photo of him. He's kind of like a generic nerdy bald, like Steve Ballmer looking kind of guy.

Yeah. He looks like he would be like in Biden or Trump's cabinet. Uh, yeah. Yeah. But I've actually seen interviews with them. He's very endearing. And I think that he's not actually just a stiff, like Wall Street, like just milk all the numbers out. I actually think that he, um, just This is his bill. This is his urge. He just loves to build. And he constantly talks about integrity. He goes, the common denominator of everything we buy is the people who we buy from have to have high integrity. And also one of our moats is we take care of the people of the businesses who work for the businesses that we're inheriting. In fact, the biggest risk of our plan is that the people who we buy companies from, they leave. And so we treat them all really, really well. And so I don't think this is actually bullshit because when I got his energy from interviews, I actually believed that he was a good dude and this was just his art.

What do you think though? What do you think he does with his money? Is that kind of public? Does he do any philanthropy or anything? Because I always find it so interesting. I mean, there's two ways to look at like doing good in the world. It's like, okay, you do capitalism, right? You employ a whole bunch of people, you make an industry more efficient, you added global GDP, you know, Good things happen because he does this, right? But on the flip side, what's driving making more money? And maybe it is just continually maniacally going industry by industry and improving them and optimizing them. That's his gift or whatever. But the guy I'm going to talk about next is really interesting because he basically uses all his money to do crazy good things, which is really fascinating. I'll talk about him in a minute. But do you have any sense of what this guy does? No, with his money, like, no, he's very private.

Like, I don't— I cannot figure it out. But I will— I can wrap this up by saying there's a few things that I've learned from this person. The first is like taking the red pill, which is like, have you heard? I don't know. Someone just used that phrase to me the other day and I'm picking it up.

You should be careful. It's associated with all sorts of not so, not so positive connotations.

Oh, well, I didn't know that. What I mean is like, yeah, I guess his perspective, like when you look at what this person's capable of doing, you think, or when you read what he's done, if you didn't know it was true, you would say, well, that's impossible. No one can do that. But the person has done it repeatedly over and over and over again. And he seems pretty nonchalant about that. And so my, what I'm learning from him is that you can create these amazing things and it's hard, but maybe could be kind of simple.

Well, it's so inspiring. You basically go find an industry that has— Let's look at the restaurant industry in general. Restaurants are disorganized. They're very difficult businesses. They're very low margin. People have done this essentially in restaurants by building fast food chains. So you go in, you build systems, you do training, you incentivize people the right way, and you can make a lot of money doing that, but you can't make a lot of money usually in an individual restaurant. So what he's done is he's gone out and he finds these fragmented, disorganized industries like waste management or logistics, and he goes, okay, I'm going to do the fast food chain except for that industry.

Yeah. And it's really, really cool. The second thing that I learned is he actually does the same thing as you. Well, I actually don't know your numbers, but I bet you they're similar. He likes to buy companies between 5 and 10 times earnings. And that's like his number. That's what he looks at.

Yeah, I'd say I love to buy businesses for that, that valuation or whatever. But the problem, the problem with buying a business at that valuation is like you're buying kind of a crappy business often if it's going to be that low.

Well, these are trash companies.

What he's doing. Yeah, exactly. What he's doing is kind of building a platform where he's like, I just need one so I can build the systems and then I can go and acquire a whole bunch more.

And the final thing, and then we can move on, is the guy loves debt. And oftentimes that ends bad. But I personally have zero debt in my life and I've never really had debt. And I actually think though that not having debt or not having some type of leverage is silly. And I've read articles about him and he talks about it very unemotionally. Like he seems like a really charismatic, emotional guy, but he is like, yeah, look, like this makes total sense because I can grow this business at 30%. Therefore, if I look at the cost of capital, I should allocate capital to this and it just makes sense. And I hear that, I'm like, yeah, everything you're saying makes total sense. I'm just so fearful. And it's really cool that you don't seem to have that fear. And I think that's interesting.

Yeah. And I think that that's— it goes back to like not having fatal potential blowups in your life. Right. So I've heard everything from like, you know, I was talking to a guy and he was saying, I, super rich guy, and he goes, I've paid off my house in full. I never have a mortgage or whatever. And it just gives him that sense of security. Maybe this guy has— he's so rich, he's already made a whole bunch of money on other stuff that he can take a little more risk, or he knows how to structure debt or whatever it is. Um, you hear both things. And the problem is you only hear the stories about the guys who levered up and did really well. There may be a whole bunch of other Brad Jacob types who went out, levered up, and it totally fucked them. They hit a speed bump.

Oh yeah.

Lost all their money. So the interesting thing about this though, um, the, and the difference between what we do and this guy is this guy's essentially starting a new business. Um, and what we like to do is find a business that's already working where we can actually just leave it and make it, you know, maybe we'll help plug in a new CEO or something like that, but we're actually not messing with it. We're not changing the DNA. This guy's like modifying the DNA. He's doing like CRISPR on these businesses. He's working, working them and turning that he's working really hard. Right. So, I don't like to work hard. I get really excited when I hear about people like this. I'm so glad they exist, but I'm like, oh my God, this is a big lift. I don't want to do this.

It's a big lift, but it does seem cool. Uh, it's cool. Uh, it's— this is like cornrows or sleeve tattoos. I think they're cool. I just don't want it.

They're cool for certain people and it works great for them. Exactly. Face tattoos, not for me.

Great for some people. It's pretty sick that someone else has it, but I don't know if I want it.

Totally, totally. Um, and I, I, I think again, going back to like, this guy does make the world better because he employs a lot of people in industries where, you know, people aren't getting laid off because of this guy, right? Because he's managed this business better. He can probably pay people better, give them more opportunity. Um, he's not going to lay them off because he's got this global business. So it's very, it's very positive. But what I would want to understand is what's the guy do with the money? What's driving him? Like, is he like a sad, empty hole where he's like, I have to keep doing this all the time? Or is he like, you know, donating it all to charity or views this as super philanthropic in and of itself? I'm super curious about that.

I don't know. I like— the only thing that I saw is that he has a good Glassdoor rating, which I actually— everyone dismisses Glassdoor, but I'm like, yeah, there is like— I got made fun of from the Michael Saylor podcast because I brought that up. I'm like, yeah, it's not like facts, but it's like there's a signal that you can learn a little bit from.

It's the Glassdoor. People only go on Glassdoor when they really hate you. So it's like the voices of the people who hate you most. And if the people who hate you most are saying good things, or at least okay things, that's a really good sign.

Right. Uh-huh. Yeah. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel, never looking back.