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Business Lunch
The Bottlenecks Billionaire Playbook: How the World’s Richest Build, Scale, and Keep Their Fortunes
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- [00:01]
A
Hey, Ryan here. Before we dive into the show, let me ask you something real quick. Are you a seven or eight figure founder who's tired of carrying the whole business on your back? If so, then you're exactly who we built. Get scalable Live for this is the only room where real business owners just like you come together to share what's working. Now, when it comes to strategy, scale and exits, there's no fluff, it's just results. And it's happening November 18th through the 20th in San Diego. And yes, Roland and I will both be there. You can grab your ticket now@getscalablelive.com and don't forget to use code LUNCH to save 25%. Again, getscalablelive.com, code LUNCH. All right, let's get you into today's episode. If what you have is super easy to create, then your only moat is to have a ton of users, right? Because then maybe they would rather buy you for your users than for your technology. Because technology is so easy to create right now. So just remember there's not a giant moat in the technology itself, especially with AI. So just keep that in mind that you're not going to overpay for technology because technology is easily created and integrated. And if all you are is it could be added as a feature in somebody else's dev cycle, then that's a business that goes to zero really fast.
- [01:22]
B
Yeah. Another tool that's in the toolbox of this bottlenecks philosophy that a lot of billionaires use is tax optimization. So you hear a lot of stories and there are reports about billionaires who pay no taxes. And it's kind of done as like, you know, isn't it bad? And aren't they criminals? But the bottom line is that a lot of those people have invested or lost billions and billions of dollars to get to where they are. And fortunately, you do get to write off your losses. So it's, I think it's very often taken out of context, but you have Dustin Moskowitz who showed up with about 13 billion on the list, who primarily leveraged really smart tax strategy using something called qsbs and dafs. And QSBS is qualified small business stock, and dafs are donor advised funds. So the QSBS is a tax rule here in the United States that lets you sell up to $10 million in stock gains per shareholder completely tax free if you've held them in the right way in your name, can't be held in a company and other things like that. And you've held it for five years. So if you structure that properly and you hold it five years, that first 10 million in gain and what if it's you and your spouse or you and your spouse and your two kids or a trust that has you and your spouse and your 2K, it's, that's 40 million. The, the escape of, you know, 40, 50% taxes potentially. If you're at ordinary income in a state that I choose to live in like California, that's got a really high rate, then that can be a game changer. And so that combined with these donor advised funds where you're donating the stock and getting a deduction for donating the stock that you donate and then it's distributed to charities later is kind of a crazy playbook. And so you know, it's not always about how much you make because you can make money on the make money, but you can also on the make money side. But you can also make money on the how much can I keep side here. A playbook would be something like you acquire or restructure companies into C corporations that are eligible for qualified small business stock. Typically that's under 50 million in assets. You hold onto it for five years, you do roll ups and stack multiple exemptions which is the key here. So that like if you had five companies in the roll up and you could get 50 million of exemptions and then you have a spouse and that's 100 million. I mean that's a lot tax free right off the bat. If you add charitable planning to that and you're contributing the appreciated assets to that donor advised fund or the daft, you're using charitable remainder trusts and things like that. So you might buy a SaaS for say 5 million bucks, you grow it to 50 million, two shareholders each exclude 10 million in gains and you end up saving $20 million in taxes. I mean it's, it's a pretty cool tool that is in the belt of the smart investor acquirer type person, I would say.
- [04:28]
A
Yeah, I mean we were able to use a variation of it when we sold a company recently and it was big, big win for sure. Let me ask you a question though. When should somebody, and this is a bit off topic, but I think it's important because you and I have both known business owners and entrepreneurs who like brag about their tax strategies and have all these very complex convoluted kind of things and they're moving off to different countries and blah blah, blah, blah to save all this money and to get one over on Uncle Sam. And you and I both know it's like they don't even have that much money. Yeah, like, like they're, they're basically creating this complexity and they're, they're tripping over dollars to pick up dimes and it's like, what the heck? Like, so at what point does somebody really need to start thinking about this?
- [05:14]
B
I mean, I, I'd say that you, it depends, like to thinking about this. I would say if you're an entrepreneur and you have a business that is likely to be exited, like if that's part of your playbook or you want to have the optionality, which I think is always good to do it. This is a simple thing. Like this is basically just own the stock in your name and hold it for five years. I like, to me this is simple. I don't like the DAF aspect. I think the donor advised fund and charitable remainder trust and all that gets into you giving up control, hoping to game the estate tax thing or whatever and then you might need control back and you can't get it or the people that you gave it to won't give it back. I can definitely tell you charities won't give it back. You know, that I have seen. And so I think also just if it gets to be you have multiple offshore structures and you're paying, you know, hundreds of thousands of dollars a year for your structure, I don't know, I, I've had it both ways and I, I prefer simple now. So I'll give up some of the benefit I could potentially get for the security of knowing that it's a rock solid strategy instead of it's one that's maybe going to be attacked or later might fall out of favor. Yeah. I don't want it to be difficult to unwind and I don't want it to be difficult to manage. And so for me, you know, I'm, I err on the, on that side and like I say, I mean I've done it all, set it all up for people, watched a lot of them, you know, work great. But even something as simple as move to Puerto rico and pay 4% tax. I watch people do that and live there for a couple years and they're like, man, I can't do it, I gotta get out. We, we have a mutual friend that moved down there for like a month and was like, yeah, no, I'm out. You know, so, yeah, nothing against Puerto Rico.
- [07:06]
A
Look, I mean if you, I mean there's, if, if you love Puerto Rico and you're Puerto Rican, like that's totally fine. But if you're used to living, living in Southern California for example.
- [07:13]
B
Yep.
- [07:14]
A
You may not, it may not be worth moving your family to Puerto Rico to save money.
- [07:20]
B
I don't like the weather as much. You know, you never know. But yeah, I, I think it's just, I think it's a balance. I think it's just as what you need. But like generally I'd say 10 million is where you ought to be in actual current net worth before you really get into all that stuff. It's, it's otherwise it's just there's too many easy things that you can do that are not complicated at all to protect 10 million.
- [07:43]
A
Yeah. And if you're simply a high net worth like, or a high income individual, there's really there only so much that you can do. Yes. Talk to your accountant and stuff like that. But it really does come into play when you've got the businesses there and there's a pending exit and that type of stuff.
- [07:58]
B
Yeah, I like that. The Henry's the high earner. Not retiring yet. Right. Not ready yet to retire. The second L is logistics and land. So this is the boring cash machine kind of thing. So Ross Perot Jr. Made billions. Now obviously he started out pretty well funded, but he made billions in logistics, real estate.
- [08:18]
A
So.
- [08:20]
B
I think it was, I don't remember if he was refrigerated warehouses or not. But basically the play here is you acquire these workhorse assets. So maybe it's cold storage near a port or trucking terminals, or self storage in suburbs or student housing near a college or trail yards, trailer yards or rail spurs. Like these are all things to be thinking about and we're just trying to give you guys ideas but they're generally not very tech savvy, the owners of those things that are already existing. And so you get to modernize the operations and add even just something as simple as tech monitoring, which is something that we were talking about with our underground tank guy. It was like, you know what, if you charge a monitoring fee to monitor the state of the tanks and give them a visual representation where they can see the tanks. Roll up four to six sites into a platform, position it as an institutional grade esg. That's the environmental social governance. ESG companies are companies that are sustainable and responsible. So it's ESG compliant. And then you're looking at basically a 2x on your exit. You're buying for 5, 6x and you're probably exiting in the 12 to 15 range. So that would be all things that, that are kind of boring. Like cold storage warehouse. Doesn't sound that great. Railroad spur. Some people don't even know what it is. Right. Self storage units. Would you say that these are really billionaire makers or do you think they're just kind of small plays for risk averse investors?
- [09:57]
A
I think yes. I mean look, anything at scale is a billionaire maker. But my problem with these quote unquote boring businesses is they are now treated, they're touted by so many of the, you know, guru and types on social as like.
- [10:15]
B
But they all tout the same thing. They tout laundromats. I mean like they tout like three vending machines, laundromat.
- [10:23]
A
And they make them seem because they're quote unquote boring, that these businesses are safe and easy. And neither of those things are necessarily true. Right. So yeah, I mean, look, trying to build the next AI unicorn, the chance of that working out, it's a lottery ticket. Okay? It just is. There's big, big, big deltas on that. Going and creating one of these boring businesses, the chance of success is likely higher, the upside is likely lower. Yep. It's not as sexy. And so you don't have all the investor money flowing into it, so the competition isn't as fierce. But make no mistake, this is still business. And so it's still hard.
- [11:06]
B
Right?
- [11:07]
A
You just don't know what hard it is yet. And so just make sure if you're going to go into one of these businesses that you're crystal clear on what, what the hard in this business is. Because if you think that boring equals easy, that just means that you don't know what the hard is in this business. And that should be concerning. So I love boring businesses. But the question that I'm always asking, and I know that we're always asking, is where are we going to be able to add value? Because if you're not able to add value to one of these boring businesses, then yeah, all it is is just an investment. And all you're looking at what's just the internal rate of return on my investment in this and that's not particularly exciting and it's probably not going to turn you into a billionaire. All of these examples are people who went into boring businesses, they added tremendous value and then based on that value and the margin that it created, they scaled it up. So boring business. Yay. Value creation. Double yay. Value creation plus scale, triple, quadruple yay.
- [12:07]
B
Yeah. And if you think about it, what you said is a summary of each of the 11 things we're talking about. We're basically saying identify an opportunity, add value through transformation, get scale by rolling up, arbitrage out at a significantly higher post transformational valuation. Like, that's really. Every One of the 11 playbooks is a version of that. And I think that's a great, like, that is a proven way to make a whole lot of money. So I'm with you.
- [12:43]
A
Yeah, but you have to be able to add that value. I mean, and I think that's the thing that a lot of people do.
- [12:49]
B
In every single one.
- [12:50]
A
Right. But that's the one that a lot of people don't think about. And a lot of people talking about this stuff don't, don't mention. And so asking yourself, you know where the reason that I don't want to have that I don't do much in real estate is because I don't want to swing a hammer, you know, like, I'm not handy like a laundromat or.
- [13:12]
B
An ATM or vending machine route where all you have to do is go into sketchy neighborhoods and collect bags of cash and carry them to your car.
- [13:19]
A
Yeah, that'll be just fine. Yeah, totally fine.
- [13:22]
B
Anyway.
- [13:22]
A
Yeah, I love, I love boring businesses.
- [13:25]
B
Don't.
- [13:25]
A
Don't equate boring to easy.
- [13:27]
B
All right, the next E is energy. Playing both sides in the energy. So Robert Pender and Michael Sable of Venture Capital Venture Global LNG. $4 billion each. They built this LNG export empire. And the playbook here would be find things in those areas that you can acquire, like pipeline inspection firms and these. I like talking about this stuff because I would never think about a pipeline inspection firm, but I kind of like it. Like that's, that's a cool business. LNG logistics, solar or wind developers. I probably wouldn't like them because that sounds like tech that could be obsolete and a lot of money to invest. Micro grid operators, like, that's like, who's put together a micro grid? That, that's kind of cool. And I think you'll find a lot of entrepreneurs there. And like, especially even though they sound kind of like tech, I don't believe. I think you could find baby boomers who had been in the pipeline inspection business or the, a micro grid operator or LNG logistics for years that were just burnout and ready to move on. Part of that 10 trillion in baby boomers that are kind of aging out and moving on to go and acquire their firm. It's been hugely deferred maintenance as far as any Kind of transformational tech adding here we would add interconnect consulting like helping Data centers secure PPAs, power purchase agreements or renewable energy credits or things like that. Those are all like very doable, not hard, not heavy tech. And then you're building this dual energy platforms like hydrocarbons plus green. And then you're finding public company reports or SEC filings or municipal RFPs where they're executing on an ESG mandate, where they've got to go to this sustainable kind of green thing. You're hybrid, you've got two types of energy and you've bought in low and you're, you're, you know, in at 3, 4 or 5 multiples and you're out at 9, 10, 12. So again I think that's a really, you know, and, and you're, you're exiting to PE most likely or strategics in this case. But I like this, I like this. You know, this one in particular is very appealing to me. What, what are your thoughts on this particular one?
- [15:48]
A
Yeah, I love energy because it's never going to go anywhere. Like we're only always going to want light, heat and cooling like that. Those, those are things that we're never just going to be like, you know what, screw light, dark is fine now. Like I'm fine with it, I'm fine with it being cold in the winter like that. We're never just going to decide that those things are unnecessary. And so everything that goes to supporting those and the stack on energy is massive. It is so, so, so big. And there's always some up and coming industry that needs it. So right now it's data centers and AI. So if you're an electrician, guess what? You're needed. You're absolutely needed because data centers and AI need electricians. But in 10, 15 years it'll be something else. So I think there's a play here to acquiring some of these companies that are in the stack and branding and rebranding them and pivoting them towards whatever the industry is that needs them. Because I don't know how many electricians are out there. Just saying, hey, we specialize in this just for AI data centers. I'm sure that there are some that do it, but are they saying that they do it? My guess is probably some are, most are not. And so there's some opportunity just in branding and pivoting and messaging that a lot of these companies are not doing because it's just not what they're the best in the world at.
- [17:17]
B
Yeah, I agree.
- [17:18]
A
And sometimes That's a logo change, you know, that's tweaking up a website headline.
- [17:23]
B
I like that one. This one I think is harder, but I think the examples we're going to use might make it feel better. So, and that's the N in bottlenecks, which is networks. And you know, those are really compounding flywheel. So the example here would be Adam Faroohi, I think, who founded Applovin and built a network effect ad tech platform. This is where each new user makes the network more valuable for everybody. So our arbitrage tries play here would be buying vertical marketplaces. And you might be thinking apps because Applovin was our example, but that's just because he was the guy on the list. But what about farm equipment rentals? What about construction tools? What about used medical devices? Or even like in the service? It could be niche staffing, like staffing for hospitals. It could be staffing for H vac companies or call centers or something like that. So you buy the vertical marketplace and then the value add, the transformation is you're adding fintech by giving buy now, you know, pay later, the BNPL like Klarna or affirm, adding escrow, adding equipment insurance, which Chubb or Zurich do, adding warranties like Assurant does. And so adding fintech and insurance creates the niche jump, the multiple jump. Right? That's the transformational value. Then you are cross listing your inventory across multiple marketplaces that you've acquired, growing the density of your network, reducing people's wait times because there's more suppliers and more providers. You're increasing your ability to fill orders because you have more buyers and sellers. And then you are boosting repeat usage because you're actually a reliable platform. And then your valuation multiple is going to jump up to 3x once your density is achieved, once you get that actual network effect. So do you think though that like have we kind of. Is this one played out, Ryan? Like you've got Uber and Airbnb and Amazon. Do you think there's still white space for new marketplaces? Like could it be a farm equipment version of that? Could there be a staffing version of that?
- [19:34]
A
Yeah, I mean there's always going to be new marketplaces emerging. I was talking, we had a friend of mine, one of Emily's friends was in town the other day and she, she had a marketplace idea that I thought was great because it was about matching people who have like high, you know, very, very nice, like high end luxury clothing and accessories and they want to resell it, but they don't want to fool with putting it on the, like the realreals and all these other kind of sites. And so, but there are people who will handle all the listing and all the retailing and merchandising of that and basically, you know, take that over. And so these two groups exist. They don't necessarily know that the other ones exist. So creating a matching service for that, I thought it was a great idea. Hopefully she can pull it off. That the thing about marketplaces and what makes them so valuable is precisely because they're so hard to pull off. And what makes them so hard is you have two customers because it's always a two, it's a double sided thing and you're connecting these two things together.
- [20:34]
B
Critical mass is the tough thing, right?
- [20:36]
A
Yeah. And it's, it's you have two customers and you're always in this chicken and egg thing because nobody wants to show up unless the other ones are there. And so if you're going to make a marketplace work, you really got to be good at, you got to kind of need to be showing up with at least half of the people already with one side of the marketplace. You got to already have them. And so if you've got half of them, then all you got to do is build a business around getting the other half. And then once you do that, it kind of becomes this beautiful snowball. But it's hard, but if you can do it, boy, there's almost not a more valuable business in the world.
- [21:11]
B
Yeah, I agree. All right, we're down to the last three, the E and bottlenecks. Down at the end here is edge retail. So these are scalable formats. So small replicable retailer service formats that have consistent unit economics. Our example here is Travis Boursima of Dutch brothers who scaled drive thru Coffee Huts. So here it would basically be the play acquire a regional chain that's small, like a 20 store coffee brand. And there's a lot of these, right? Yoga studios, veterinary clinics, car wash networks. There's a lot of those small things that entrepreneurs have built up over the years and just expanded and have, you know, fewer, 20 or fewer, like 10 to 20 locations. Then standardizing across each of the locations, you're unifying menus, you're putting in, you know, point of sale systems, you're getting consolidated supply chain and buying, you know, power there, maybe co op and branding. And then you're expanding beyond franchising with corporate rollouts where you use debt or licensing or the store within a store or things where you buy a Store within, you know, Nordstrom or Harrods or Walmart or something like that, like a big box store. You could also do JVs with landlords. And so you're scaling your ebitda starting around 3 to 5x for the acquisitions and exiting in the 9 12, 15 range. So you have a $10 million business. That's EBITDA, you know, 10 million EBITDA that exits in the $100 million range. That's, that's the thing. And Dutch Brothers did it. They scaled small coffee huts into a $6 billion market cap. Do you like or what do you think of the edge retail concept and do you think E Commerce is eating that or do you think that it will always be. There will always be brick and mortar versions?
- [23:13]
A
Yeah, I mean people are always going to want to be able to just go and grab something. So brick and mortar is going to exist. What Dutch Brothers did, right? I think the opportunity here. So whether you call it edge or not, I would more think about it as inversion retail. So the reason that Dutch Brothers worked is it's effectively an inversion of Starbucks. And this is a play that is almost always going to work. So Starbucks for the longest time was it's classic, it's expensive, it's high end, it's European coffee, it's muted colors, it's all this stuff, it's come in, it's take your time, that was the original brand. And so if you think about what is the inversion of that, it's drive thru, it's get your coffee, it's sugar, it's get the hell out kind of thing. Now Starbucks made the mistake of shifting their brand to that, but because it wasn't their brand, they went down. But you can introduce a new brand, which is what Dutch Brothers did, that is an inversion brand and that can work. And so I do think that there's an opportunity to say what are the big popular brands right now that are out there? And you just simply invert every single aspect of it. I mean, down to their color scheme. You know, what's the opposite of green orange? I mean, just go opposite on the color wheel. And so there, there is definitely a place for that. Dutch Brothers did that also appealing to, to niche markets and starting there, I mean, Dutch Brothers is hugely popular in the west because you have a lot of Mormon Latter Day Saints there. And so it's a coffee shop that actually sells a lot of products that aren't coffee because Mormons don't drink coffee, but they drink dirty sodas. And so you can Drive through and you can get yourself a soda with all the sugar in the world. And so understanding the trends that aren't currently being met, that is always going to work in retail. You just got to know that the very thing that made it, that allowed you to emerge is also what's going to wind up, you know, the two by four that's going to clock you across the head. Somebody's going to invert you, somebody else is going to come out. So that's why I don't love retail, that's why I don't love these trend type businesses. But you can get yourself a good 10, 15 year run.
- [25:25]
B
Would you say that? Well, I think even in a non trend business that like that play works. I understand that the trend can lift it. But I'm curious as to your thoughts on Starbucks because we talked about it in a different episode. They closed 100 of their grab and goes. Do you think they would have made it had they branded it differently? Not Starbucks?
- [25:50]
A
I think it would have been tough. But if the only way to give that a shot would have been if they called it like, you know, Starbucks go. Starbucks go. Yeah, something like that. If they would have given it a fundamentally different brand with a different color and really put some solid messaging behind it, I think that that would have given it a shot. And then if they simultaneously would have taken their, their original stores, their original restaurants and really made them nice like they were before. So if you do the the two to create the real contrast then I think it works. What they did is they kind of wound up somewhere in the middle which nobody ever wants. So yeah, you create a secondary brand, fine. But it's got to be truly distinct. So I would have made it Starbucks go. I would had a different color scheme, the logo would have been different. You're probably safer though to just have a Com to launch a totally different brand. You could even maybe call it Buy Starbucks if you want to. But I would more from a brand architecture go more the the house of brands as opposed to the branded house.
- [26:58]
B
Yeah, I think it like an interesting one for me would be PayPal and Venmo. Yeah. And I still am not other than just let's have a different brand culture that we're trying to develop to capture a different demographic. Don't understand why they needed that. You know but Obviously Venmo grew PayPal still hugely popular but venture Venmo is very much more popular, you know, among younger people. But there wasn't a lot of difference there, right?
- [27:33]
A
Yeah, I mean I think that's just it. Like, you know, when Venmo was a separate product, PayPal acquired it. So I think it was. It got traction among a group, PayPal.
- [27:44]
B
But they didn't absorb it. They just, basically, they just got both of them, which is just kind of interesting to me.
- [27:49]
A
Yeah, I mean, but I think. I think that's it. It's because the brand seemed old. It was targeting a different, you know, a different group. And they probably figure that out. And from that perspective, I think you're going to buy a brand, you leave the brand there.
- [28:00]
B
Yeah, yeah. So the C in bottlenecks is capital cycling, one of our. Somebody we admire for what they've accomplished. Steven Schwarzman from Blackstone, with a whopping $40 billion net worth, built that empire by recycling capital. And this is basically just opm, right? Other people's money. So the arbitrage play here is you buy a $5 million company, EBITDA company, use seller financing, SBA loan, earn out other kinds of things like that. You improve the operations and lift the margin. So this is a straight improvement play, but you've bought it with other people's money because you're using the government's money, SBA guaranteed loan, you're using seller financing, the actual business itself, the assets of the business itself, and the seller. You're refinancing or recapping, depending on how far up the chain you are. If you're in the lower level, it's called refinance. If you're in the higher levels, they call it a recapitalization. And that's taking chips off the table, extracting the equity out, not unlike many of you may have done with your homes, where values of homes went up and you were able to get home equity loans and take the equity out and then invest in other things at better returns, building a $20 million EBITDA platform that you could exit at 8x160 million in your pocket. Not a. Not a bad strategy. Right? Just straight capital cycling, using other people's money. That's basically what we do at epic. If you think about it like, that's the sea in Bottlenecks is our billionaire play for Epic. Right?
- [29:35]
A
Yeah. I mean, and thinking that way, and this is what all businesses become at scale. Like, really all businesses become two things at scale. They become a recruiting agency and they become a bank. Because it's all about how do we get more people in here to do the stuff that we need done, and then how do we allocate the capital and resources that we have and what you have with Blackstone and the reason that they're basically the largest business, one of the largest businesses in the world, that's what they effectively become. It's just a pure capital allocator. Same with Berkshire Hathaway. Right. At some point it just becomes we have all this pesky money. How do we best deploy it? And so that this is, this is what we should all aspire to be is capital allocators.
- [30:18]
B
Okay. We're to the K in bottlenecks. And this would be Larry page, Sergey Brin, $100 billion each. Google, obviously, if you're not familiar with that, the IP in Google is worth trillions of dollars.
- [30:29]
A
I've heard it, heard of it.
- [30:32]
B
So here's our play. Start Google. No, here's our play. Step one, acquire IP rich assets like niche SaaS, companies patents for like say AI or semiconductors or biotech. And there's a lot of patents like that that are for sale for not a ton of money that have very specific niche value. And then content libraries would be something else you could, you could acquire, defend and expand. Probably a great example of defending would be Getty with their images who every time anybody uses one of those, they get a $5,000 demand letter. File additional patents, harden your licenses, monitor infringements. That's the play. I don't like this one because I feel like it's more taking than giving. Three license, broadly one patent, multiple industries. So verticalize your patents in autos or call centers or healthcare. Bundle the portfolios, create defensible packages for strategic buyers. You're exiting in the 10 to 15 range and you know as much as 25 if you're in SaaS. What do you think of this one? I'm not crazy.
- [31:37]
A
I think this one becoming increasingly less and less valuable as like when you think about content IP with AI being able to create stuff, there's a window where it's valuable in terms of training. Right. And where people are also going to value AI that has been trained by the right kind of brands. So there is a window there.
- [32:01]
B
Where.
- [32:01]
A
I think that that's valuable, but that window's not going to be open forever in terms of acquiring company brands and product brands. Again, there's a window that's closing where consumers more and more sort of don't care about the fact that this brand was valuable 10, 15, 20 years ago. We are swapping out brands at an alarming rate. There's no loyalty really at all to the brands that we used to.
- [32:28]
B
Wasn't it like originally 20 plus years that a company would sit maybe 30 on the Fortune 500 and now that's down to four or five, something like that. I don't remember reading that long ago. Kind of. Yeah.
- [32:38]
A
So I mean I think if you're going to do this it really does need to be some type of defensible ip, a patent that has a clear. This, this patent is in use. It has these protections and it's going to be protected for this amount of time. But this is not one that I'd be crazy about because yeah, most of people who make money off of this one are also lawyers and so they're basically trolling.
- [33:01]
B
Yeah, yeah.
- [33:02]
A
I don't like that's some bad juju.
- [33:04]
B
The last one is scarce resources. So John Arnold 3 billion plus exploiting natural gas scarcity. The hook here is that the most valuable asset is the one that nobody can make more of. The play would be acquiring scarce rights. So this would be riparian rights which are basically water rights in drought states that the guy from the big short, I think that's his whole play now is water. A lot of the billionaire dudes are investing in buying up water. It'll be interesting to see how that goes because I imagine the government will step in and say if we can't get the people water, the people are going to revolt. So we're taking your water. But anyway we're going to figure out.
- [33:42]
A
How to get them water. Yeah.
- [33:43]
B
Lithium cobalt mineral rights. Metro cell tower permits power interconnects. All of those would be scarce resources. Not meaning that there's not a lot of them but that almost kind of like there isn't a lot of them that are distributed out because it just doesn't make sense. It's like mini monopolies lock in long term contracts with municipalities or EV makers like Tesla or GM. There are tower REITs for phone towers. REITS is a real estate investment trust. And then hold them so that the cash flow can cover the payments. And as scarcity premiums rise you're ultimately start to begin making profits. Repackage them. You could bundle water rights into a water utility company. Sell it to infrastructure pe. You could do mineral rights that you sell to auto. Automakers that are trying to secure supply chain. Supply chain securing is a more top of mind thing these days after all of the challenges with supply chains during the pandemic exit around 12x once the scarcity is obvious. So these are water rights, mineral rights, cell tower rights. How do you feel like? I feel like this is a little predatory what are your thoughts?
- [34:54]
A
Yeah, I mean, you're going in and you're either acquiring this from people who have it and they don't know they have it. And so you're kind of sniping it from some family that's been on this land for a really long time.
- [35:06]
B
That's. I don't like that.
- [35:08]
A
Yeah, I don't want that. Or, you know, you're just coming in with such a big checkbook to go and gobble, gobble it up. It's just not. It's not a game that I'm really in a position to play. So, you know, respect to those who can play it, I don't see an opportunity to add value here. So I probably would not pursue this one.
- [35:32]
B
So of all of these 11, is there one in particular or one or two in particular that really appeal to you? The.
- [35:43]
A
I mean, any. I think identifying the big trends and being a pick and shovel provider to them is always a winning play. And I think if you can combine that with a pick and shovel business, that is an existing boring business repositioned, because then you get the benefit of if this business, if the trend changes, we still got a good business that can work on its own and perhaps be repositioned to another one. So that's what I like. And all these folks who are running.
- [36:24]
B
Energy and I like the bottleneck businesses, I definitely think that all of them, you should apply the tax structuring and capital cycling to. And that is that it's a combination of probably three or four of these things that can really create a giant opportunity for anybody. So hopefully you guys enjoyed that. That bottlenecks acronym, I think, is really cool because it describes a lot of the process. And the four steps, as Ryan pointed out, are pretty much the same. Just identify the opportunity, add the value aggregate to scale, mostly through acquisition or roll up and then. And then exit. That's a. That's a pretty good playbook that. That has gotten most of these people that are on this list to where they are 70% plus of them and we think could benefit you too. So anything you want to say before we sign off today?
- [37:19]
A
I would say that if you're in business, there's a really good chance that you're already doing most of one of these. And so the difference between adding a zero to your net worth is likely just a rethinking and repositioning of the business that you already have towards a higher scale model. You're probably closer to a billion than you think.
- [37:40]
B
Yep, I like that. Well, hopefully you guys enjoyed today's episode. It was wonderful being here. And how's your mouth doing? Are you back to normal now? Almost.
- [37:48]
A
Almost. It definitely got at one point I took a drink of water and you know, you can depending on if we got anything. It definitely dribbled out of the side of my mouth. I'm just gonna own it. I'm just gonna own it. It was there, but I think we're getting better.
- [38:00]
B
I like it. Well, thank you guys for being with us today. If you enjoyed this, please share it with a friend, tell everybody about it, listen and come back. We love hearing from you as well. We're on all the socials. Just let us know what you thought of the episode. We and we'll see you next time on another episode of Business Lunch.
- [38:23]
A
Hey, before you go, if this episode sparks something, a fresh idea, a little clarity, or even just the comfort of knowing that you're not crazy for doing this whole entrepreneur thing, then I want you to imagine what happens when you're in the room with 750 other founders who are right there with you. That's what Get Scalable Live is all about. Three days, San Diego, November 18th through the 20th. And again, this event was built exclusively for seven and eight figure business owners who are looking to scale something real. There's no fluff, there's no ego, there's no washed up celebrities delivering keynotes with zero takeaways. This is just strategies, systems, and the copy and paste tools and tactics that you actually need to scale. There's amazing stuff at the front of the room, of course, but also at dinner, in the hallways and over drinks where the real conversations happen, you're going to get great stuff there as well. So if you've ever thought I can't step away or this whole thing breaks or I build something that works, but it's starting to feel like a trap, then this is your room. Roland and I are going to be there. Our team is going to be there. And if this is your year two level up, you should be there too. Head to getscalablelive.com use the code LUNCH to save 25% off of your ticket. Again, get scalablelive.com and code LUNCH. But you need to do it now. Not only are prices going up, but this event absolutely will sell out. It does every year. So if you're ready to finally step out of the chaos, if you're ready to build a business that scales without you, and if you're ready to surround yourself with people who actually get you go to getscalablelive.com use the code LUNCH, and I will see you in San Diego. Trust me, you're gonna be glad that you did.