Auren Hoffman | Why Vendor Management Is A Skill You Need to Master Now | Chairman SafeGraph, Former LiveRamp CEO

Summary

CMO Confidential: Episode Summary Episode: Auren Hoffman | Why Vendor Management Is A Skill You Need to Master Now | Chairman SafeGraph, Former LiveRamp CEO Release Date: August 5, 2025

In this insightful episode of CMO Confidential, host Mike Linton engages in a comprehensive discussion with Auren Hoffman, Chairman of SafeGraph and former CEO of LiveRamp. The conversation delves into the increasingly vital role of vendor management in today’s business landscape, offering strategic perspectives and practical advice for marketing leaders.

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1. The Cruciality of Vendor Management

Vendor management is emerging as a paramount skill for modern business leaders. Auren Hoffman emphasizes that superior vendor management will be a key determinant of business success in the coming decade. He posits that effectively managing external partners and services can significantly enhance a company's operational efficiency and strategic execution.

Notable Quote:

“One of the key ingredients for business success will be superior vendor management in the next decade.” – Auren Hoffman [02:40]

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2. Hiring Executives vs. Renting Talent: The Super Yacht Analogy

A central theme of the discussion is the comparison between hiring full-time executives and renting top-tier talent as needed. Hoffman introduces the analogy that hiring an executive is akin to purchasing a super yacht—expensive, high maintenance, and often more for show than practical use. Instead, he advocates for renting executive talent, allowing companies to leverage high-level expertise without the long-term costs and commitments.

Key Points:

• Executives are often strategic but costly: They bring valuable strategic insight but may not be utilized to their full potential if engaged in tactical tasks.
• Renting talent offers flexibility and access to top-tier expertise: Companies can "rent" executives for specific periods or projects, ensuring they receive high-quality input without the overhead of full-time positions.

Notable Quote:

“Hiring an exec is like buying a super yacht. Expensive, high maintenance and mostly just for show. Just rent the boat when you need it.” – Auren Hoffman [00:35]

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3. Implementing Effective Vendor Management Strategies

Transitioning from the analogy, Hoffman and Linton discuss practical approaches to renting executive talent. They explore various models such as board memberships, advisory roles, consulting, or fractional executive positions. The effectiveness of these models depends on how well the company manages these external resources to maximize value.

Key Points:

• Selecting the right fit: Companies need to carefully choose which external executives align with their strategic goals.
• Managing relationships: Effective communication and clear agendas are essential to ensure that rented executives contribute meaningfully without requiring excessive oversight.
• Value assessment: Regularly evaluate the return on investment from rented executives to determine if continued engagement is beneficial.

Notable Quote:

“If I rented you right now, I may have to pay you two grand an hour. That's a pretty expensive rate, so I really need to start thinking about am I really getting the value out of this?” – Mike Linton [08:36]

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4. The Impact of AI on Vendor Needs

AI's mainstream adoption is poised to increase reliance on external vendors. As businesses integrate more AI-driven tools and services, the complexity and number of vendors will expand, making effective vendor management even more critical.

Key Points:

• Proliferation of vendors: AI technologies require specialized expertise, leading to a surge in the number of vendors.
• Skill adaptation: Marketing leaders must adapt their vendor management skills to handle the intricate landscape of AI partnerships.

Notable Quote:

“In this century, the most important skill is the ability to select and manage vendors.” – Mike Linton [19:58]

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5. Critique of Traditional Procurement Practices and Booz Allen

The conversation takes a critical turn towards traditional procurement practices, specifically targeting consulting firms like Booz Allen. Hoffman criticizes their overreliance by the government and questions the value they provide.

Key Points:

• Government dependency: Booz Allen derives a significant portion of its revenue from government contracts, often for tasks the government could handle internally.
• Cost inefficiency: The high costs associated with such contracts, often without corresponding value, highlight poor vendor management.
• Market Dysfunction: This scenario exemplifies how inadequate vendor management leads to inefficiency and inflated costs.

Notable Quote:

“Just rent the person for two grand an hour and I'm only getting 400 worth of an hour worth of value.” – Mike Linton [08:36]

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6. Private Equity Firms: Evolution from Improvement to Financial Engineering

Hoffman contrasts the historical role of private equity (PE) firms with their modern practices. Initially, PE firms were catalysts for operational improvements in acquired companies. However, today’s PE landscape is dominated by financial engineering rather than genuine business enhancements.

Key Points:

• Historical effectiveness: In the 80s and 90s, PE firms improved operational efficiency and strategic focus through leveraged buyouts.
• Shift in strategies: Modern PE firms prioritize financial maneuvers over substantive business improvements, reducing their positive impact on acquired companies.
• Skepticism towards current PE practices: The reliance on debt and financial structuring undermines the original intent of PE investments.

Notable Quote:

“They could make tons of money without necessarily improving the company.” – Mike Linton [30:05]

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7. Practical Advice: Reassessing the ROI of MBAs and Higher Education

Addressing the value of formal education, Hoffman critiques the return on investment (ROI) of MBA programs, especially those outside top-tier institutions. He argues that many MBA graduates do not see significant career advancements commensurate with the high costs and opportunity losses associated with pursuing the degree.

Key Points:

• Financial burden: The costs of tuition and lost income during studies often outweigh the potential career benefits.
• Career trajectory disruption: Extended time away from the workforce can impede career progression and salary growth.
• Alternative growth strategies: Emphasizing practical experience and continuous learning over formal degrees can offer better ROI.

Notable Quote:

“If you think you're going to like make your career better, I think in most cases it makes it worse.” – Mike Linton [33:15]

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8. Conclusion and Final Thoughts

The episode underscores the shifting dynamics in executive hiring and vendor management. As businesses navigate increasingly complex operational landscapes, mastering vendor management emerges as a critical competency. Hoffman's insights challenge traditional practices, advocating for strategic flexibility and cost-efficient resource utilization.

Final Notable Quote:

“We all have to get better at managing these people who are not 100% in our company.” – Mike Linton [07:01]

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This episode of CMO Confidential provides a thought-provoking examination of modern vendor management, urging marketing leaders to rethink traditional approaches and embrace more strategic, flexible models to drive business success.

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For more insights and discussions on marketing leadership, subscribe to CMO Confidential on Spotify, Apple Podcasts, or YouTube.

Transcript

[Mike Linton]

The CMO Confidential Podcast is a proud member of the I Hear Everything Podcast Network. Looking to launch or scale your podcast, I Hear Everything delivers podcast production, growth and monetization solutions that transform your words into profit. Ready to give your brand a voice? Then visit iheareverything.com welcome to CMO Confidential, the podcast that takes you inside the drama, decisions and choices that go with being the Head of marketing. Hosted by five time CMO Mike Linton.

[Oren Hoffman]

Welcome marketers, advertisers and those who love them to Chief Marketing Officer Confidential. CMO Confidential is a program that takes you inside the drama, the decisions and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Clinton, the former Chief Marketing Officer of Best Buy, ebay, Farmers Insurance and Ancestry.com here today with my guest Oren Hoffman. Today's topic why vendor management is a skill you need to master now. Now, Orin has been the CEO of SafeGraph, a company that collects and curates data about places for eight years. He is a serial entrepreneur and I'm just going to say it out loud, a big data geek having built and sold several companies including Kyber Systems, Bridgepath and Live Ramp. He was a guest on the show about a year ago and now he's back to discuss his belief that one of the key ingredients for business success will be superior vendor management in the next decade. In fact, he wrote, hiring an exec is like buying a super yacht. Expensive, high maintenance and mostly just for show. Just rent the boat when you need it. So we're going to talk about that today. Before we even begin though, I think, Oren, we ought to just take one minute and say what Safegraph does so people know where you're coming from.

[Mike Linton]

Sure. Safegraph is what's called a point of interest data. So if you're searching for Italian restaurants near me and on most of the major platforms outside of Google, you're almost certainly using the Safe Graph data.

[Oren Hoffman]

Excellent. So let's delve into the thinking behind the quote about hiring an exec is like buying a super yacht. Tell us more like what's behind that and what's the marketplace forces that made you y' all post this.

[Mike Linton]

So I mean if you think of like a executive. Really what an executive? An executive is someone who's done it before. They're usually 20 years in, let's say to their career and they're very strategic and in fact that's what they want to do they want to be very, very strategic. Most of the work that's done in a company, even a very, very large company, is very tactical. And so that is you're not getting the highest value out of most executives if you're asking to do these very, very tactical things. Some of which they were very good at 15, 20 years ago. Yeah. And some of which they even like to do 20 years ago, but now they don't necessarily want to do it. They might be a little bit out of date with the new tools they don't want. And, and, and you're, and you know, if you think of just like the hourly cost that you're paying them is, is quite high. And so what you really want for most of these executives is their strategic knowledge. They have to be enough in the business. You can't just like talk to them an hour a month to get enough strategic knowledge. Have to be a little bit more in the business. But you don't need them 24, 7. They could guide, in fact, they could be a great mentor to, you know, your. So the person that might run marketing at your company doesn't necessarily need to be at the executive level. They could have a marketing mentor, maybe even someone like you as a marketing mentor that they could have. And that person could help guide them and help them understand things and help give them the core strategy that they will need. But then you really need an implementer who's running it. And you might call them an executive, but they don't have to be somebody who has 20 plus years of experience.

[Oren Hoffman]

But what you're almost saying here is rent the strategy, you know, buy the execution. Rent.

[Mike Linton]

Yeah, that's right. And I think that's true for almost everything. So I think that's true for almost everything for most companies. And then if you try to think of like, okay, who's the executive that you could hire?

[Oren Hoffman]

Yeah.

[Mike Linton]

Well, for most companies you can't hire the best CMO, the best CFO, the best. You're hiring like the number like 200,000th best. Right.

[Oren Hoffman]

In most cases, like in Star Trek, make it so number 2000.

[Mike Linton]

Yeah, yeah. And so, yeah, like why? But, but a lot of times you can rent the best or you can rent the top like you, you. It's a lot easier to rent someone who's really amazing. And so why not just get the very top talent that could really help you. Really, truly the person that's out there that can help you. And then of course they like it better. Like imagine executive and you're working for 10 companies. And you're just doing the strategy like you're going to be happier as well. So it's the highest value need for both the company and for the executive.

[Oren Hoffman]

Hey, so Oren, when you say rent, there's a lot of ways to rent. You can put somebody on the board, you can have an advisor, you can hire a consultant, you can rent a fractional. When you say rent, do you mean all those things or do you have a specific view of what?

[Mike Linton]

I think it could be any of those things. It is very hard to get the most out of someone who's part time. And so most companies have just not yet built that muscle, whether they have an advisor, whether they have a fractional, whether they're just not very good. And so we all have to get better at managing these people who are not 100% in our company. They have other things that they're doing. There's so many people today who have portfolios of 20 things. Even your board member, right. They've got so many other things that they're doing. And most people don't even manage their board member very well. So how do you get the most out of this person? How do you have the agenda? How do you, how do you. Again, how do you go to that highest value of things? And when you call your lawyer today and that lawyer is charging you 1500 bucks an hour, you have a sense of like, they're charging me 1500 bucks an hour, I better only call them for the right thing. And if, in fact, if I need something a little bit less, I'm going to call the associate and not call the partner, and I'm only going to bring them in when I need. You know, and so you, you have a sense of how to manage that, but for whatever reason, people haven't yet translated that to other people that they work with.

[Oren Hoffman]

So how do you set that up? Because, you know, you also said, look, you can rent almost anybody for one to two days a month. And I don't think you're talking about, look, okay, Procter and Gamble or Pepsi should, should maybe rent a cmo.

[Mike Linton]

But actually I do probably. Yeah, you know, maybe not. Like, you know, you know, if you think of Procter and Gamble, they have, like, they probably have 50 people who are called CMOs at that company. And most of those, you know, are probably not adding the value that they need to.

[Oren Hoffman]

Yeah. So let's go back to the. So if I'm going to rent something for one to two days a month, one, how do I figure out the right fit for this. And then how do I figure out how I'm going to manage this person? Like I manage my lawyer. Because I think the lawyer example is an excellent one, which is, you know, you will send out, you'll prepare everything and then you'll say maybe, maybe the paralegal could do some of this because that's like, you know, 400 bucks an hour. And how, how do you get ready to do this?

[Mike Linton]

I think it's going to be very hard. I think it's hard to retrain people, but most people don't even manage their own employees very well. So it's very hard to manage people. It's very hard to manage vendors. It's very hard to manage anything and get the most out of them. We're all very bad at it. And we, if we can start thinking, and especially if you start thinking about it in an hourly rate, you start to get better. Right. If you starting to think like, if I rented you right now, I may have to pay you two grand an hour. That's a pretty expensive.

[Oren Hoffman]

Super expensive or sorry, I am super expensive.

[Mike Linton]

Yeah, exactly. So like, and, and, and so like, well then I really need to start thinking about am I really getting the value out of this? And by the way, like, at some point you might be like, I'm not getting the value.

[Oren Hoffman]

Right.

[Mike Linton]

I rented this person. I'm not getting, I'm, I'm, I'm, I'm renting them for two grand an hour and I'm, I'm only getting 400 worth of, an hour worth of value. So maybe I, and that's, that's a good forcing function to then move on to the next person. And by the way, you don't, doesn't mean you only have to rent one CMO. You can rent three CMOs. I could get a, I could get a mentor if I'm, if I'm like running marketing, I can get a mentor for each different types of marketing. And then the CEO can talk to three slightly different types of people who can help me understand. So it could be a lot of different sizes. There's no one size fit all.

[Oren Hoffman]

Yeah. So how do I start if I've never done this before? How do I even get started? I mean, the most importantly, I probably have the lawyer thing going somewhere or something.

[Mike Linton]

Yeah. So a lot of times you're, you're in a company and you have a great person, let's say running marketing, and they're, they're 30 years old and they're, you know, it's a newer company, they're doing great and like we gotta up level this person. We gotta, we. First of all it would be great if this person had an amazing boss so they could learn because right now they're, they're the top marketing person they can't even learn from. There's no one else who can even teach them so they're not growing as fast. This amazing 30 year old I have running marketing and so you do a whole search, you hire some outside search firm and you, you, you bring in a CMO and you know, and by the way these have like 30, 30 something percent success rate that is even that it works long term. Um, a lot of times you end up losing that 30 year old because that you didn't hire the right CMO.

[Oren Hoffman]

Or the, the path. Suddenly someone else just plucks that person out.

[Mike Linton]

Yeah, exactly. There's, there's a lot of different types of things. So. Okay, well now we already have this great person. A lot of times you already have this good person. Somehow for some random reason. Let's, let's surround this person. I have Mary. She's my amazing up and coming marketing person. She's going to be a super strategic person one day. But today she's just a super doer. She's been in the industry for eight years. She's, she's ready. Let me start surrounding her. Let me get her a mentor. Let me get her some other strategic. So it's a scaffolding around her. Maybe you think you need to replace her now but if you scaffold her all of a sudden you can delay that for X number of years and then maybe you can delay it forever.

[Oren Hoffman]

And you have to get the Mary to buy in completely to this or.

[Mike Linton]

Well he's gonna, Mary's gonna be bought in. It's really getting like your board to buy because your board's gonna be like we need Someone. Mary's only 30 years old. She can't run marketing for this company. We're expecting this company to be a global power. We can't have Mary out there. Like she doesn't, you know. And so it's, it's really getting the other executive, you know the, the board and everyone to be to. She's gonna love it because now she's really going to have a chance to grow. She's going to be accelerating. She's going to be doing things she's never been doing for. So she's going to be. Any great person is always optimizing for their own growth.

[Oren Hoffman]

I think that's, that's right. Particularly if you get the right relationship. You'll also have to go, they'll get the right, if you call a coach, consultant, board member, whatever, so they don't step all over the operations, so they don't become a part time. And that is, are there any tips you have for that? Like for people that are going to be the, you know, the vendor, in this case the rented yacht?

[Mike Linton]

Well, I think people are going to have, they're going to have to learn how to do that as well. And the best person, the best people there are the people who can manage, you know, manage the client rather than having the client manage them. Yeah, right. And so that, that's really the problem today is that it's like, that's true for the best people even that you hire full time is you want someone who manages your company, manages you, you don't want to have to manage them. Whether it's, whether it's an executive assistant all the way to, you know, your cfo, if you have to manage your cfo, that's like, that's a bad. Right. And so, you know, so ideally this, like the, and hopefully, you know, this executive is usually going to be pretty senior. So they, you know, they have to come with the ability to be able to manage the client well. And if they don't, then you're, you know. By the way, the good news is like, okay, well, if you're just paying them an hourly rate or a monthly rate or whatever it is, so you're paying them 10 grand a month or something, right? And they have, they have 20, you know, 15 clients or whatever they have. You know, it's like, well, okay, like three months in, if they're not working out, you can just stop. It's not a big deal. It's easy. We, Whereas if you hired that person, you know, it's like that's like a, you know, over million dollar decision after three months if it didn't work out.

[Oren Hoffman]

And it really, it, it really can slow down the strategy if you hire them.

[Mike Linton]

Yeah, yeah, exactly. You just had to pay 200 grand or more to the search firm and then you have to give that person 500 grand in severance and you know, and all this other stuff that you would have had to do that like you don't have to do anymore.

[Oren Hoffman]

So when I'm, when, if I'm giving advice to someone out there recruiting somebody into these things or what are the questions you should ask if you're like the CEO or the board or that's you know, whoever is recruiting this, you know, super yacht person for two days or three days a month. Any good questions you should ask?

[Mike Linton]

I mean honestly, like help them understand your business and see if they could.

[Oren Hoffman]

Add value and a little mini case study almost in the, you know, whatever.

[Mike Linton]

Like they're going to want to, they're going to be asking you questions about your business, I'm sure. Right. Like any good person is going to be asking and they're probably already being adding value on the first call. If they're not, they're probably not good. And then like you know what the, again the downside of trying someone is so low. Yeah. So why not like you know, if you think they're, if, if they're adding value already on the first call, you like their personality. It's working. It's like you know, if you have to, if you have to bring on a cmo, the, the process to do that is going to take you, it could take you a year. And you're gonna have to call gazillion references, you're gonna have to interview gazillion candidates. So just the hiring process to bring on a CMO is gonna take hundreds of hours of your company to go do that. Whereas if you're gonna bring on a CMO consultant. Well like again, like, cause again the downside is so low if they don't work out, you could bring someone super fast. And then of course like when you're hiring someone full time, like you have to convince them. It's really hard to convince them that because they only get one shot. It's like they only work at one CMO at once. So why are they going to work for you? You know you're going to have to have all these people you want are not going to want to work with you. They're going to have so many other options. Whereas again if you're, if the fractional it's going to be so much easier to get that person that you want.

[Oren Hoffman]

And your theory is it's not just CMOs, it's almost anything.

[Mike Linton]

Right. Any executive related thing. Yeah, anyone who's strategic. So any like C level thing you, most companies again like outside the very, maybe the very, very biggest companies, most companies shouldn't have. So what the companies that I'm interacting most, you know, startups, that startup may have like a few hundred people but I don't think a few hundred person startup should have a cfo. A cmo. Again you can call that person a CFO or cmo.

[Oren Hoffman]

Yeah.

[Mike Linton]

You call whatever you, if you want to call Mary a CMO to make her feel good, great. Right. You can call her whatever you want. She is running marketing at your company, so call her that. But you don't need to have that like super executive that's been there, done that gazillion times already.

[Oren Hoffman]

I think this is right. We've had a, we had a.

[Mike Linton]

Oh.

[Oren Hoffman]

And a cmo and she said it's really important you understand the position you're hiring for because you're hiring essentially off a football team. So if you need a quarterback that is totally different than if you need a wide receiver or guard or defensive tackle, you have to know what you want. And this would allow you to practice with what you want versus try and hire. Exactly right. Particularly in that early and middle stage.

[Mike Linton]

Company where in that, in your analogy, a lot of companies you don't even know that you're playing football. Right. So yeah, you would think, yeah, if you know you're playing football, you know the rules of football, you need a good kicker. Right? Right, you need that. But like you don't know the game often and like, why do you necessarily need a kick? You, you, you like again, if you, if you have an NFL team, you got to go spend, you know, $5 million a year on a great kicker. Every NFL team goes to do that. If you got a good kicker and you're playing baseball and, and you spend $5 million a year on that person, guaranteed contract for 10 years. Like this is a terrible decision. Right? So you don't know. You just, you just don't know. So having that you want an all around athlete that can do lots of things you don't necessarily want who someone could just kick that ball and kick that field goal for you. That is a very bad use of time unless you know precisely what you need.

[Oren Hoffman]

Well, and I also think if you're in particularly in startup land or early stage companies, you may think you need a super quarterback, but really what you might need is someone that is fantastic at acquisition and maybe social media or something just to get things going versus somebody that's run like a Fortune 500 department.

[Mike Linton]

Yeah, that's right. By the way, like Patrick Mahomes. If you want Patrick Mahomes to play, to play on your team right now you can't. Right? He's, he's committed to, to the Kansas, to the Kansas City Chiefs. But right now if you want Patrick Mahomes to just teach you a little bit how to do it, he is available.

[Oren Hoffman]

Yeah, you can go I bet, I bet he has a camp. I bet he has a camp.

[Mike Linton]

Yeah, he's expensive, but you can get him right now. You can get him to come to your house and teach your kid if you really want. If you want to pay for it. Literally, he's available. So it's again, you can't hunger him as a quarterback for your team that, that he's not. But literally the best quarterback, maybe you know, one of the best quarterbacks in the history of the world, you can get. That's how, that's why these things are so powerful.

[Oren Hoffman]

I think that's a super analogy. And I am guessing that as AI becomes more mainstreamed in everything, this will drive the need to use even more vendors. Or at least that would be my theory. Am I right in that theory?

[Mike Linton]

That is my belief. Yes, that's my belief.

[Oren Hoffman]

Tell me how you think it plays out.

[Mike Linton]

Well, I think we're moving into a world where the. If you just think of the most important skill in the last century, that was the ability to identify, hire and manage town.

[Oren Hoffman]

Yeah.

[Mike Linton]

And there are tens of thousands of great books on that. Every single MBA has at least three or four courses on how to do that. Well, we've all talked about it. Everyone has a sense of that. Everyone has been hired and many of which has, has hired and managed people. So we all kind of have a sense of those types of things. That is still an important skill. But in this century, the most important skill is the ability to select and manage vendors. And that vendor could be contractors, that vendor could be software. It could be a lot of different types of things. Almost every company has way more vendors than they have people outside of like Walmart and Amazon, which, you know, they, they employ over a million people each. Almost every company has way, way, way more vendors. Sometimes like we're talking about one or two orders of magnitude more vendors than they have people. So. And there is no book about it that I know of on how to do it. There's no MBA courses on is extremely hard to do. But that is the most important skill that we all have to get better at.

[Oren Hoffman]

Your, your thing would be if business schools are really keeping up with the marketplace, they would. Someone somewhere would create a class on this.

[Mike Linton]

I mean, for sure. I mean, obviously, like, I mean, I think business school is complete waste of time. And I mean it's, I mean it's very good if you want to spot found your spouse or something. So like, and it's just have fun. So, you know, it certainly has some value there. But like, it has bad ROI outside of like, social reasons. And, and so, but, but even putting that aside, like, you would expect that you'll know that the schools are more relevant when they start moving in that direction.

[Oren Hoffman]

I love this comment because I think it's going to generate a lot of discussion from a lot of the business school people we've had on the show. I want to just stay on this provocative note and say, in our first show, you, you said that everyone in procurement should be fired because they weren't very good at vendor management, they were just good at cost management. Do you still feel the same way?

[Mike Linton]

Yeah, I mean, most companies don't even have anyone in procurement. I mean, you got to be, you got to be 500 people plus usually before you have someone in procurement, if you had someone in, if you had a someone called procurement and you're 100 people, well, your company is going to go under anyway. Like, you clearly don't know how to manage your company. Right? So usually you're talking like whenever you don't have a procurement person until you're at least 500, maybe a thousand people.

[Oren Hoffman]

Yeah, you have to get, you have to get pretty big or you always.

[Mike Linton]

Have to be big. And already by that point, you have like so many random bureaucratic people that do bureaucratic things that, you know, you probably have 30% of people you should probably get rid of that, you know, have jobs like, quote, unquote, procurement. But yeah, of course, like, procurement is like, it's a negative, it's not just zero value. It's negative value at almost every company.

[Oren Hoffman]

And it's negative value because it's in the way of the actual project. Or give me a.

[Mike Linton]

Just. It makes. The whole idea of having a procurement person is to make things move slower. Right? That is literally the idea. It's like at some point you want to buy something and you're like, okay, I'm, I'm, I'm, I'm getting to the decision. I want to buy now. I have to bring in the procurement team and they have to go do their thing. Right? So that is, that is literally what you have procurement do is to, is to slow things down. That makes no sense in most companies. Like, why would you want to slow things down? And then they save you like, 3%. It's like, so you just slowed the whole everything down for 3%. Like, and then it's like, and it's a bad experience for the other people in your company. They hate it. It's a bad experience for the vendor. So they're probably going to give you, like, 20% less service because now they have to deal with this. And they just had, like, a bad experience. Imagine you're hiring somebody and some companies do. This is like, right before you're going to hire them, you, like, put them through this whole terrible process. And then you try instead of, like, them, they wanted 100 grand a year, and you, like, beat them down to like, 98 grand a year. Right. Or something. And, you know, by showing them all these things and you know they're going to come in, they're like, I hate this company. Like, you would just like, again, some companies do that to their employees. So they're, they're, they're, they're, they're, they're. Those companies will likely go out of business. Like, they're just not good. And, you know, government does that sometimes to their employees. But they're like the, the only one, their only employer. And it's for certain types of things. If you want to work for, like, the FBI or the CIA, they're going to do that to you. But, like, you have no choice there. But, like, for most things, like, you just don't want to do that. You want people to have a great experience coming in. And that means you have to treat your vendors well. That doesn't mean you have to overpay them or anything. Just like you don't have to overpay your employees, but you've got to treat them well. You have to think of your vendor as, like, part of the team, and that could be even an API. You want to be able to use that in the right way. You want to treat it well, you want to treat the other people well. So they're, they're, they're helping you, they're supporting you, et cetera.

[Oren Hoffman]

The sound bites coming off the show are going to be fabulous. I'm just saying. And I want to stay on this because you also wrote a note that you are shorting Booz Allen, the consulting firm that gets most of its revenue from the government. Tell us why and what lessons can business leaders take from this whole thing.

[Mike Linton]

We'Ve just been talking about?

[Oren Hoffman]

So start with booze and then go into, like, what's happening?

[Mike Linton]

So BU is a. They make 98% of their revenue from the government, and they're often doing things that the government should do themsel. So this is like a, it's not exactly where it's like, you're having a vendor who's doing something in a, in a. You know, you're hiring Someone for three hours a week to do a specialty thing in, in their case, most of the people you hire through them are full time people doing something. You know, it's like, it's like the Pentagon hires, they have many people at Booz Allen who, who joined the Pentagon to help them buy ammunition. Right. Something that like they should be able to do themselves. And they're often hiring like a 27 year old person who has a political science degree who's just a normal person. It's probably relatively smart person, but they could have hired that person themself and then they pay them, you know, and that person's like commuting to the Pentagon from Minnesota.

[Oren Hoffman]

Yeah.

[Mike Linton]

Every week. And all in cost is $1.1 million. That's like a typical thing. Like no one, there's no one in the world who thinks this is a good bargain. Yes. You need someone to help you buy ammunition. There's no reason why they can't bring that person on. And they can bring that person on like internally to go do that. Now. Now the Pentagon might need better hiring and firing authority, which they don't have today. So there's a whole bunch of things. So this is also a, this short is a bet that this administration is going to be a little bit more sensible. They're going to have the right hiring, hiring, firing authorities. They're going to do a few other sensible things so that like folks like the Pentagon can actually make the right decisions.

[Oren Hoffman]

But the lesson here, if I put all of this together, I think what you're saying is, geez, you know, because they are renting booze to do regular jobs and they're essentially renting booze, Booz Allen to do their, their normal job and they're overpaying for it. So their vendor management in this case is terrible, Correct?

[Mike Linton]

Yeah.

[Oren Hoffman]

And so what you're saying is the lesson here is you have to look at everything and the outputs, including the vendors. Is that, is that right? And do you have any tips for how to do that?

[Mike Linton]

I mean the, a lot of these things you don't need tips. Like they're actually just common sense.

[Oren Hoffman]

Yeah.

[Mike Linton]

Like there isn't anyone who would look at the, what the Pentagon spends on booze and thinks like this is good. Right. I mean there's literally nobody. It's bipartisan. Like it's not like, you know, it's from Elizabeth Warren to Tom Cotton, you know, it's like it's bipartisan. They think this is bad. So it's like I can't even imagine there's like one of 100 senators who would think this is a good thing. So everybody from every walk of life is going to think this is bad. Now, it doesn't mean booze won't continue. You know, I have a short on them. The company stock has gone down pretty significantly since I shorted it. But like I might be wrong about that. And you know, they might, you know, if, if, if you, if you, if you're long on government dysfunction, then you're long gone. Booze. If you think government will actually reform over time, which I'm hopeful, but that may, you know, that historically has not been the case, then maybe, you know, maybe then you're short on booze.

[Oren Hoffman]

CMO Confidential does not give financial advice.

[Mike Linton]

Yes, exactly.

[Oren Hoffman]

Yeah, I know. You also wanted to say one or two words on, on kind of the dichotomy of private equity firms and how.

[Mike Linton]

Private equity firms, and I wasn't really around in the 80s, but my guess in the 80s and 90s is that a company that was bought by a private equity firm was a way better run company than a company that wasn't. So the average company, that private equity firm, you know, back then they called them LBO companies or whatever they were, they were leaner, they move faster, they had less bureaucracy, they were more profitable. They, they had a better strategy, they employed smarter people.

[Oren Hoffman]

And because they would do a leverage buyout LBO thing and that would put pressure on the company to cut all the bureaucracy you were doing. Just talking about.

[Mike Linton]

I mean it isn't, it isn't any different today. They still load them up on debt. Still the same thing today. But for whatever reason, I don't, I, I think, I think the alpha back in the day was the reason why these private equity firms existed was to take a company and make it much, much better. Now back then, the, the, the, the lots, the interest rates were pretty high.

[Oren Hoffman]

Yeah.

[Mike Linton]

So it was actually very expensive. You know, they, they often had to do junk bonds. They were, you know, often way, you know, they're in the teens percent that they had it. So the debt was very, very, very expensive. So they really had to make the company much better. Now you start to go to the world in the 2000s where the deck gets cheaper and cheaper, cheaper. At some point it gets close to zero. Yeah. And you don't have to. It becomes a lot more about financial engineering than really making that company better. So the average private equity person who's, who's been in the business for the last 15 years, they could make tons of Money without necessarily improving the company. And so at least for me, when I've interacted with private equity backed companies, I don't think they're run any better than non private equity backed companies today. I don't think, I don't think they're less bureaucratic, I don't think the employees are better, I don't think they're leaner, I don't think they move faster. So. Because I don't think the private equity people have had to make them better. In fact, the, the traditional exit for a private equity company today to get rid of your, you know, when you, when you actually make money to another private equity company. So imagine Blackstone buying it from kkr. It's not like, you know, it's not like, not like they can even improve it that much. KKR is already amazing. Like what can Blackstone do? It's not like, oh yeah, those KKR guys are idiots. They didn't know how to run this company, make this company so much better. They're already buying probably a company that's like relatively so. It's a lot more about financial engineering now than is about improving the company.

[Oren Hoffman]

And we're going to see because you know when you could borrow money at, at very low interest rates, you could dividend yourself like crazy. Yeah. And you could just load on the debt, not higher rates, dividending yourself. It's going to be a little harder.

[Mike Linton]

Correct.

[Oren Hoffman]

See what happens. Which brings us to our traditional last question. It's a two parter. You have to take one or both, but you must take at least one. Okay. Funniest story you can tell on the air or practical advice for our listeners. We haven't discussed yet.

[Mike Linton]

A practical advice.

[Oren Hoffman]

All right, very good.

[Mike Linton]

So that's the question.

[Oren Hoffman]

Sorry, you can do funniest story and or practical advice we haven't talked about about yet.

[Mike Linton]

Well, I mean I think we talked about a little bit but my guess is almost any, anything to do with like an MBA is just extremely bad ROI today. If you got an MBA outside of the top three schools. Yeah. You are going to lose money again. You might, might meet your spouse. So the ROI might be extremely high for your life.

[Oren Hoffman]

Yeah.

[Mike Linton]

And, or you might have just like tons of fun or make lifelo. There's a lot of other good reasons to go there. But if you think you're going to like make your career better, I think most cases it makes it makes it worse. In some cases it might make it marginally better but not enough to justify like the cost. And you have two costs. One is you have the cost of, like, the tuition, housing, all that other stuff that, you know, the tuition there. But the second is you have the, the lost revenue and the last two years of your career where your career didn't progress. And so if you're making 120 grand before NBA, you might have been, you might be making 160 grand if you just kept on that trajectory. Right. And then you leave the NBA and now you're making 140 or something like it often just doesn't. Doesn't play out.

[Oren Hoffman]

It's interesting. I think that's probably true maybe in some college degrees as well.

[Mike Linton]

So I think it's true in most college degrees. Yes.

[Oren Hoffman]

There we go. All right. Another little incendiary thing we will, we will cut up as a short. Thank you, Oren, and thanks to everyone for listening to CMO Confidential. Look for more of our shows on Spotify, Apple, and YouTube, which include from the academics, the Insomnia Cookies Case, How Northwestern Uses the Ghost Model to Teach Marketing the Gumball Machine is broken, rethinking B2B marketing, the top five mistakes CEOs and boards make when hiring CMOs, and of course, Oren's first show, unlocking the potential of Martech. Hey, all you marketers, stay safe out there. This is Mike Linton signing off for CMO Confidential.