← Making It with Jon Davids
Making It with Jon Davids
154 - Codie Sanchez | “The Richest Guy On Your Street Probably Did This” | Business, Money, and More
00:45:18
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- [00:00]
Jon Davids
What's up, everybody? J.D. here. And on today's show, I've got Cody Sanchez. If you're an entrepreneur, a marketer, a businessperson, and you're on social media, you've probably seen Cody Sanchez. She's everywhere. YouTube, TikTok, LinkedIn. She talks about how to buy businesses, she talks about boring businesses. And she is now an author of Main Street Millionaire. You can grab your copy@codysanchez.com book and we talk about so much. Talked about how she got started, what she thinks today about the business environment, the good, the bad, the ugly. Cody does not hold back. And she has got some gems to share. I think you guys are going to love this episode that's coming up in just a sec. If you're a fan of the podcast, make sure to hit subscribe wherever you're listening or watching this. And of course, get my newsletter@john davids.com now let's get to my conversation with Cody Sanchez.
- [00:58]
Cody Sanchez
You're listening to Making it with Jon Davids.
- [01:06]
Jon Davids
So, Cody, you talk a ton about business and money and you're so candid about it all. I'm curious, what was your first big payday?
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Cody Sanchez
Ooh, first. My first big payday was a paycheck. So, you know, unlike a lot of people, I'm sure that come on your podcast. I was a wuss. I couldn't leave corporate life. I felt like I had golden hands, handcuffs. I made a lot of money. I was working in finance at the time and I never had like my bright shining star moment where I thought, ah, I should build this and that's how I'll become a billionaire. And so I like, wasted away in cubicles for many, many years. I mean, I remember the first time I got paid out of College. I made $37,000 a year working for Vanguard. And that felt like a huge payday, actually. And that was really big. And then I remember my first year that I made a million dollars as an employee. And so I think the times that I made like a lot of money by myself came after I had made what seems like a lot of money with or for other people.
- [02:04]
Jon Davids
It sounds like you already said so. You're already a seven figure earner before you even did your first entrepreneurial thing.
- [02:11]
Cody Sanchez
Yeah, that's. Well, let's see. So I did a bunch of failed things while I was an entrepreneurial owner. So I had a couple failed little startups. I bought one business that didn't work very well. I bought my first business while I was an employee. So I Basically, I did. I did the side by side. I did the hustle. These days people talk about having like three jobs. I know that's a thing out there. I had my main job and then I had a bunch of side hustles that I plowed a bunch of money in and realized, oh my gosh, I'm never going to actually make that much from these. I'm just going to spend a lot on them until I found business buying.
- [02:47]
Jon Davids
So you actually had failed startups that were capital intensive that didn't go anywhere?
- [02:53]
Cody Sanchez
Oh, yeah, for sure.
- [02:54]
Jon Davids
Can you talk about maybe one or two of those?
- [02:56]
Cody Sanchez
Yeah, I had one called Threads Refined. At the time, I was super embarrassed that it didn't really work. It was a fashion styling marketplace. I don't actually even like fashion, so I don't know why. I think, you know how you hear that idea. Make money, make profits from your pain. I think that's a terrible idea, actually. And that just means that you're surrounded by a thing you don't really like very much. And so I decided that would be a great idea to have a bunch of fashion influencers be fashion stylists and quickly learned that I do not want to work with fashion influencers very much and so built a marketplace up doing that. They had a couple hundred thousand dollars in revenue, which was a lot, but the profits were basically zero. And it was, you know, it was a, it was a tech startup for all intents and purposes that was really service based. And so I was like chasing fashion stylists and making sure they were actually meeting with customers and yelling at them all the time, and they were yelling at me. And so that was. That was one of the first businesses and it was really painful. And then that one's kind of funny because I was like convinced there was a point where I was going to sell it to somebody. And so I went around, you know, saying like, I'm selling this company. And that transaction ended up not finally going through. And eventually I tried to sell it to one of the stylists and the stylist literally said to me, so how much are you going to pay me to do this job? And I was like, oh, no. I was like, this is not how acquisitions work. And so eventually we ended up, I think we sold part of it, you know, kind of sold a few things off for parts to people, but it definitely didn't make my money back on it.
- [04:21]
Jon Davids
So it's funny, one of my very first failed. So I had a business that worked in college, sold it, made Money. And then I had a bunch of failures and one of them was a website. I still own the domain. It's livedress.com and it was a fashion marketplace. And it was just terrible. And I agree with you, like, the pain of working with fashion stylists. I'm sure they're very nice people, but professionally, we just did not jive. And so it's funny that you had almost the same experience.
- [04:46]
Cody Sanchez
Maybe just this is like, you know, I think there are some things in life where you're like, God, wouldn't it be nice if we could Judy Jetson our clothes and they would just like show up. And those of us who don't like to dress think that should be obvious. I imagine there's a few of us that start something like that and then realize, oh, this is actually a really bad business model, which is why it doesn't exist.
- [05:05]
Jon Davids
So you came onto the scene. I think you kind of burst onto the scene around 2020 or 2021. And I just remember, like everybody else seeing you and there was like a picture of a laundromat. And I'm wondering what was the kind of sequence of that? Because I'm imagining. I mean, maybe it was like a beautifully orchestrated PR effort, but most likely it was kind of a bunch of stuff and then something hit. So how did you become the laundromat boring business person in 2021?
- [05:34]
Cody Sanchez
So by accident, for that part, I never say that we built a media company by accident because I always get kind of annoyed with those people that go, oh, I just accumulated millions of followers because I just was authentic. It's like, no, you didn't. You built and stayed up late and bled just like the rest of us. And so that's certainly what's happened now to build content, contrarian thinking, to, you know, 8 million followers and 100 million views a month and to build this really big media company is hard. It's really hard. But when I first started on the Internet, I think I was just messing around. So at the time, I had been in private equity and we had a fund and we were investing in some growth equity companies. And Covid hit and we couldn't roadshow anymore. I couldn't go see the companies. We basically were stalled for a year. So I was bored. And during that time I started writing and I was friends with a guy by the name of Sam Parr who ran a company called the Hustle. And so I was talking to Sam about, like, what about like, newsletters? Like, this is kind of an interesting Business. You did it anyway, so he gave me some really good advice on how to start a newsletter. I started one on one of the startups back then and I started writing and that's kind of how it started. And then I got on Twitter because I think Twitter's interesting now. X and I started turning my long form newsletters into long form tweets or threads, I think at time and I think that's where some of the Laundromat started to come out. And mostly I write because it's the easiest way for me to think. I think if you want to speak clearly, you should write clearly because it is so much easier to be honest with yourself in paper than it is to think you are clear verbally. A lot of people actually think that they speak really eloquently and they don't. And so the way that I narrowed down my focus for speaking was really just through writing. And so it's also a good place to start if you're lost and you don't know what you're doing and you aren't sure what to do next. And so at that time I was very lost. I wasn't sure, you know, what are we going to do another fund after this, I wasn't sure I wanted to stay in private equity anymore. And so I started writing and I just shared my thoughts and then I started writing about the things that I knew, which I think is the best place for most people to start. What do you know? And so I didn't really know much besides how to buy companies, how to raise money, how to build companies. And so I started writing about it and I really did think anybody would find it that interesting. But I loved this idea of, you know, could I turn something really complex, AKA acquisitions into something simple for people. And so it really started as easy as that. And then I became obsessed with this idea of distribution, not in capital and raising money, which is what I've always done, you know, how do I invest, how do I get more money? What if the new form of capital is actually attention, which I think that it is. And I think if you can have attention from individuals, then you can raise the 21st century version of capital, which is how. How we're going to see like the next round of billionaires really be made. It'll be a combination of attention, capital, code and labor. And so I figured early on that I could do that and started. And I think one of the first things that went sort of viral was me talking about my Laundromat and explaining how the deal went. And I thought the laundromat was something to be embarrassed of, to be frank. You know, it was tiny, it was dirty. I didn't know what I was doing back then. It was a fraction of what I made in my finance companies. So I didn't really think it was going to go much, anywhere at all. And then I think the Internet thought the opposite, which often is what happens.
- [09:01]
Jon Davids
So when you were penning that post, did you have any. Did you get any tingles like this might be something, or was it literally just like you put it out, like every other piece of content and it just hit.
- [09:12]
Cody Sanchez
Yeah, no, I had no idea at all at the time. Especially it's, you know, when you are. I was first flexing a muscle of learning how to do content online and I wouldn't have even used the word content. I think I would have said I tweeted something today that I thought was interesting. And so. So, you know, I didn't have a framework or a format or a goal or a lead magnet or a way to convert anything back then. I just had a, hey, I'm doing this thing that I think is interesting. And I had some belief then that more people should not be so dismissive. I think I was on my high horse. I think a lot of times we are told ways to make money that don't actually make us money. And so I was pretty honest about the fact that I think that your bank account is a reflection of the speed that you move and your bank account is also a reflection of the games that you play. And so I think a lot of the games that we play are status games. They're not actually money games. And money games are profitable businesses that have a high percentage likelihood of continuing to be profitable on a go forward basis and do not care whether you think they're sexy or not. And so I had this strong belief that that was the case. And I was slightly annoyed that people were dismissive of blue collar main street trade service businesses because I actually think that they are really important for the country. But also one of the secrets to how America has got so wealthy, you.
- [10:35]
Jon Davids
Have an incredibly high density of like gold information per sentence. So I'm taking like vigorous notes right now. So we're gonna get into all this. By the way, it's so funny. The first breakout post that I ever had that surpassed a million views was about a car wash. And I literally just read an interesting article and put it out there. And in a very similar fashion, I was writing every single day. And you never know when that right piece is going to hit. And so I think it's a lesson to everyone tuning in now. It's really about the repetition because it's not that you're doing it wrong, it's that you're not doing it for long enough. You got to keep going.
- [11:09]
Cody Sanchez
Yeah. That consistency compounds in a way that I think only people in finance typically understand that you really are taught and beat into your head that if you invest a dollar now and you continue to allow it to compound at 10% year after year after year, and you continue to reinvest on top of it, you can have a small amount of money somehow magically turn into a huge sum of money. And is this power of compounding, which you can see pretty easily if you look at some of the compound interest calculators online that you can find. And so I think the same thing is true for skills. Your skill is a direct reflection of how long you allow consistency and compounding to take effect. And most people do not think about skills that way. It's, you're going to suck in the beginning and that is going to be normal. But if you continue to execute on it, at some point, you'll go from really bad to kind of bad to okay to good to great to excellent. If you're the 1% that actually continues.
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Jon Davids
So you talked about attention, capital, code and labor, which I think I've heard you say before, the four types of leverage, I think you call it.
- [12:12]
Cody Sanchez
That's right.
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Jon Davids
Can you dig into that and talk about how to use each one? What are you using now? How do you think about them?
- [12:17]
Cody Sanchez
Yeah, well, I heard the three types of labor, originally from naval, which was. He talked about labor, which is basically employees back in the day, serfs, back in the day. Day slaves, really. If you wanted to build something big, you had to have humans. That was the only way you could build something big. It's still true today, by the way. If you want to go fast, go alone. If you want to go far, go together. And if you want to make a lot of money, you need to have other people able to believe in your vision in order to help you achieve it. But then the second type of capital is. Or the second type of leverage is actually capital, which really came into effect. And you can see the impact of it with the banking laws coming into enactment in the early 1900s in the US and when that happened is when we started to get the titans of industry, the Rothschilds of the world, the Rockefellers. Well, they couldn't become Titans and build railroads and change the infrastructure of the country without other people's money, AKA banks, debt, equity loans. And that was the second form of capital. The third is code. So that's how we started to get the Jeff Bezos, the Bill Gates, the Elon Musks of the world. They all built a little army of code or robots or however you want to think about it. And those three are interesting but they are all semi permissioned. So you know labor, you have to get somebody else to say yes in order for them to come work for you. They're going to spend their life for you capital, you got to get a bank to say yes to you code, you have to back when they were doing it, have access to supercomputers early on these days less so. But you have to have a pretty decent skill set to do that, a very technical skill set. And I think I saw first but maybe naval did too. But I started posting like I don't think there's just three levers, I think this last one attention is actually going to be even more powerful in some ways because increasingly we're already seeing it. I mean I saw in the beginning, I remember everybody in tech was saying well go become an engineer, go learn to code. And as I looked at it as an outsider that really didn't understand this, I said maybe. But actually what this seems to me is eventually we will have what we have today which are more and more no code tools and AI backed tools that allow very normal people to in fact code quite quickly. And maybe not incredibly complex thing, but I think the barrier to entry to coding is becoming much, much lower. And so then I thought well if I had to choose, if you, if you had to choose between the ability to code or the ability to market, which one should you choose? And in my opinion it is the ability to market 100% it is. And a lot of my engineers for some of my companies would disagree with me. But you know, marketing is a top of the pyramid skill stack. And so when I think about attention, I really think about 21st century marketing. How can we get more eyeballs on our things? Because that allows us to have more cash, more cash flow, allows us more optionality.
- [15:06]
Jon Davids
I had Kevin O'Leary on the pod a little while ago and he said storytellers, people who are on Instagram, TikTok making content used to be the minimum wage entry level job and now he's hiring them at the top of the stack. Those are the most expensive people because if you can actually break through on TikTok and garner audience. That is a one in a thousand skill set. And, you know, and. Whereas the coders, the ones that used to be getting paid lots of money. Yes, that's very. That takes a lot of talent, too. But it's almost a bit more of a commodity these days when you look at the. At how valuable one is versus the other.
- [15:40]
Cody Sanchez
Yeah. I think there's a formula in engineering which talks about how your top stack engineers can be not 1x, not 10x but 100, 900x more valuable to you than your average engineer. That the skill is completely asymmetric. It has an upside that is potentially unlimited and a limited downside. And I think that is now true in attention and content in a lot of ways, too. If you have somebody who can grab attention continuously, you have asymmetric upside with that person.
- [16:18]
Jon Davids
Probably a lot more than a hundred as well.
- [16:20]
Cody Sanchez
Probably. I mean, it really, you know, it depends. If we're trying to build rockets to go to Mars, it's definitely much more important that we have an asymmetric upside engineer. If we're trying to sell CPG products to the masses. I want Kim Kardashian. And so, you know, I think it does depend slightly on where you want to go.
- [16:41]
Jon Davids
Yeah, you got to pick your game. You mentioned something else as well, the idea of permissioned versus permissionless. So the difference here, and maybe the unlock on the attention side, is that it used to be that it was a permissioned thing, just like capital and code and labor, and now it's permissionless because of social media, podcasts, newsletters. Is that part of the thinking, too?
- [17:04]
Cody Sanchez
Yeah, I mean, the same thing has happened in some ways to attention as has happened to code, which is why increasingly I like small businesses and things that are harder to technologize away from us. So, you know, now when you look at code, you saw engineers continue to build more tools that enabled more people to engineer more easily. And when you look at attention, you see a bunch of tools that have allowed people to become content creators more easily. And one of the things I like about owning Main street businesses is it'll be a lot harder for AI to take over my car wash. That is a real estate asset in tandem with being a service to take over my Laundromat for me, to take over my H Vac or my roofing companies, or even my window cleaning companies. And so I think there's inherent value in having these Main street businesses because they're just not as easy for technology to do for us. You know, there's no limitations on graphic design and AI continuing to own that entire landscape. But I think it would be a lot harder for them, both from certifications and permits and licenses, as well as just actually the difference in piping in one house versus the next. So if you're worried about AI, I like the idea of how can I own some businesses that are not all online?
- [18:21]
Jon Davids
So let's go back to the content piece for a second. So you come out, the laundromat thing blows up. And the thing that I notice about your content is that a lot of content creators are very transactional and they're looking for what's viral, what's trendy. You actually latched onto something that was much more of a movement in that, that you had 10, 20 years of entrepreneurship media, which was you want to go to Silicon Valley, you want to raise from a VC and you want to be in TechCrunch and like that's what entrepreneurship is. And then you come along and it's like, no, it's boring businesses, it's cash flow and it's things that you can do on Main street, everyday blue collar stuff. At what point did you make that conscious shift and say, okay, we have something here. This is what I'm standing for. Or was that literally just like, like that was all you? So it was never a shift, it was just that from the very start.
- [19:13]
Cody Sanchez
I think chasing virality sounds awful to me. You know, I remember I've done one dancing TikTok video and I regret it to this day and I leave it up just to shame myself slightly.
- [19:25]
Jon Davids
And so we'll play it here.
- [19:26]
Cody Sanchez
Yeah, if I ever get on my high horse, just like refer back to that. I remember when I had a young team and I was first doing content and I was also running a finance company, they would come up with some ideas and I kind of would do them and then I would go, oh God, what just happened? And so I think sometimes on the Internet, if you chase virality, well, what's the most viral, profitable visited site online? Fucking porn sites. So like it is all a funnel all the way down to porn. And so I have no interest in that. I'm too old for it. Nobody wants to see it. And so I think unless you have your own pov, you're really uninteresting and you're highly commoditized. And so the part that makes humans interesting is if we take the thing that we have unique insight on and we take the thing that we're slightly weird in and we take Some strong points based on the life experience that we've had. And we put that out into the world. And so I think you can do a lot wrong by chasing what everybody else is doing. And that won't last very long. And it'll make you kind of miserable because it's not you. And so maybe because I was slightly older when I started than a lot of content creators do, I just wasn't that interested in. I sort of had a pov. I had a mission, which was, you know, we want to free 1 million humans financially and we want to create 100,000 small business owners. And I think if I do that, I'll feel pretty good about my tombstone. So my mission was that. And then I said, all right, what will I do? What am I willing to sacrifice to get the thing that I want? I think often people just say, here's the thing that I want, not what am I willing to do to get it. You got to pair the two if you want to achieve anything big in life. And what I was willing to do was get on the Internet a lot, be on camera. It's not actually my favorite thing in the world. I'm actually pretty introverted. I love writing. That's how I started. If it was up to me, I'd just be writing all the time. But I was willing to do it because I think that's how we consume information these days. And so I didn't have a big pivot. I just think if you're going to be interesting online, you need to be interested in the subject matter you're talking about, and you need to know enough about it that you can create a unique pov. And like one of my friends that I think so highly of now, his name is Balaji Srivastava and he was the CTO of Coinbase. And I think he's one of the most interesting people to follow online because he has such a unique point of view. And he is so deep and storied in the cross section of multiple things, from cryptocurrency to centralized currency to the Fed to nation state breakup to network state, that when you read his stuff, you go, oh, there's a human who's really thinking deeply about something and then turning it into something we can consume. And that is how I think you are more lasting in content. Content.
- [22:05]
Jon Davids
Marketing executives, business owners. If you are running a company and looking for a fresh perspective on how to grow that company, take a look at Influicity. That's my marketing agency where we work with brands across influencer marketing, podcasts, social media, AI content, paid ads, and so much more. But don't take my word for it. Go to Influicity. Check out our case study from all the amazing clients we've worked with over the last decade. That's inf l u I c I t y influicity.com and I'll see you there. So let's talk about the business side now. So you've got the content machine. You're getting hundreds. You know, I think you said 100 million views a month, which is amazing. What is Cody Sanchez, Inc. Today.
- [22:50]
Cody Sanchez
So we have a company called Contrarian Thinking. Contrarian Thinking is at the top of our holding company. Contrarian Thinking owns Contrarian Thinking Capital, which is our venture capital fund where we invest in infrastructure for small businesses. We have Main street holding company, where we own a bunch of these small businesses outright, or trade services businesses, boring businesses, Main street businesses. And then we have Contrarian Thinking Media. And Contrarian Thinking Media is all of our social assets, YouTube channels, our newsletter, our education company, our community, and our courses. And I really think, think, you know, in anything in life, I probably think a little bit more like a private equity person, which is, you know, if I, if I have. We used to call this your platform company. So when you go to, if you want to be the next Warren Buffett, right, If you want to own a bunch of things and you want those things to make you money for the next 30 or 40 years and you want to get rich slowly, which I know a lot of people don't want to do, but I think is the way you typically start with a platform company, and that might be something that you think you can build on. And so my platform company for me originally was I own all of these boring businesses, and. And so I can just continue to cash flow on those businesses and build them up with a team and create a little bit of an empire. And then I realized, wow, what if I started talking publicly about some of those? What might happen? Would we attract investors? Would we attract clients? Would we attract more companies? So deal flow. And so then my platform company actually came underneath, and it was the media company. And I was like, oh, I think the media company supports my, you know, Main street holding company. And then I was like, huh, what else would I want to build on top of a media company? And I was like, well, I want to build a venture fund where we invest in companies that are progressing the next evolution of SMB in this country. I want to, I want America to be Dynamic again. And I think it starts with small business. And so I built that on top of it. And then we built our education company which is contrarian thinking education, thinking about, okay, I don't want to just get rich quiet, I want to get rich together. And I think the education system is hyper broken. I think it is ready for somebody to reimagine it. And I think that if I knew the things I knew today, 10 or 20 years ago, I would be a lot wealthier with a lot less scars.
- [25:07]
Jon Davids
Interesting. And so are there certain businesses like I was looking at what you've said about different businesses that you like to invest in or that you think people should get into. So one of them that came up that I thought was interesting was senior services or senior living centers. Can you talk about that? Is that something you're still looking at?
- [25:23]
Cody Sanchez
Yeah. So in the book we have 130 boring businesses that I like to buy or 130 main street businesses I like to buy. And one of them is senior services. And the reason why is really one word, Demographics. And so as you see our country, here in the US we have an aging demographic. We have increasingly the biggest population we've ever had of baby boomers nearing retirement. We have housing shortage overall, we have a healthcare crisis in the US and we increasingly don't live by our families anymore. In fact, more than 60% of young people will move out of the city or state in which they were born. And so what does that mean? Well, that means that we have an alternative care problem for senior citizens. And you know, we know this to be true because we've seen private equity companies gobble these things up. I think on average it's not a great experience when you have a few companies own everything. So the idea was, you know, if I have to put my grandparents in a place, could we own a place that might be lovely for them to do that? Also pretty high margin business people will pay a lot for end of care for their loved ones. Another example similar to that would be drug rehabilitation centers. So where can we actually have small nucleuses where we can have individuals who are going through a drug or an alcohol issue and they come through for a period and then they move on. And, and there's actually government grants for building these types of businesses. They're government grants for buying these types of businesses and there's not enough of them. We have a massive fentanyl and drug issue in this country. And it's not just the sad deaths of despair we have. It's a lack of services for people to get out of it. So not only could you make a lot of money, but you could also do something really good. And in this Internet age where we're selling chocolate bars to kids online because we have a massive amount of attention, I think instead, if you have a humor audience, why not do something good with it? You can make just as much money, if not more, if you're not selling, you know, sugared diabetic goods for the youth as you could doing something that actually mattered and you'd be proud of long term.
- [27:30]
Jon Davids
How much do you think about business model engineering? Because the reason I ask is when I think about a senior care facility or a drug rehabilitation center, it's effectively a real estate play with much better margins and much higher, you know, multiples. Is that like, does your mind go there?
- [27:48]
Cody Sanchez
Oh, yeah. If you want to be really rich, you got to think about the games that you're going to play. So if you pick a bad game, you'll never be rich, no matter how smart you are. I think about it like this. Let's say you're an exceptional athlete and you're going to be top 1%. Well, you could go and play baseball, basketball, soccer, and if you're top 1%, you could absolutely dominate it. And you could make, I don't know, tens of millions a year, hundreds of millions a year. You'd have to be the top 1%, but you could. Well, if you're the top 1% pickleballer, you're probably not going to make that much money. The way that you make a lot of money in pickleball is probably own, you know, the company own the picks and shovels to the industry. Right. And so the game that you go to play really matters. It's sort of the same in a different way with Hollywood. I mean, we did a matrix called the Sexy Boring Matrix. And basically what it shows is you want to look at where do I go? That if I play this game, I have a higher likelihood of making money. Money. And what we found is the sexier appeal the industry has, the lower the average income is. So Hollywood, what was it, 65% of SAG, AFTRA, unionized workers, can't afford or are on Medicare, Medicaid, or have a lower median income than the average American. So what does that tell you? It tells you that some actors make a ton of money. Most don't. And in fact, I think you'd be shocked having me, having met a lot of famous people now, how many of them are broke because they Traded relevancy and fame for cash. And that's a dangerous trade. So I think a lot about the games that you play because that's how you determine if you're going to be wealthy or not. You know, I run a couple companies now. We have a bunch of employees, and I often tell our employees, you know, the difference between a winning and a losing business is how high of an ltv, a lifetime value can you have for your customers? Because if my company can make more money with an individual user than somebody else's, then I'm really hard to compete with because I can, I can plow so much more into my products and services. So we obsess a lot on that game. And I think it comes from having a base level knowledge of the language of business money, which is business models.
- [29:54]
Jon Davids
Picking the right game versus just trying to be the best at a super hyper competitive game. I think it was. I heard Scott Galloway say that, that to get into SAG AFTRA is really, really hard. But then even when you're in there where you are not living a great professional life, and so it's like you're going to strive to do this incredibly hard thing where even if you win, unless you get like first, second or third, unless you're on the pedestal, you know, getting the gold, you're basically not going to get what you want. And so if you're setting yourself up for failure from the beginning, choosing a different game might be just a much better way to go.
- [30:31]
Cody Sanchez
Absolutely. I mean, we've been one. I think highly of Scott Galloway. I just had him on my podcast this week. There's much I disagree with him on, but he's really come around to our way of thinking on boring businesses, which was not his way before. You know, it was all about public sector, it was all about the big tech companies. And that's been where he's made all of his money. He hasn't made any money in the main street, boring businesses. But now he's starting to see, I think, what a lot of people are opening their eyes to. I mean, we saw for the first time ever, I saw a headline in the Wall Street Journal this past week, that's two weeks maybe, that said the new millionaire class H Vac and plumbers.
- [31:09]
Jon Davids
Yeah.
- [31:10]
Cody Sanchez
And when I tell you that when I started talking about this three years ago, people were like, plumbers don't make that kind of money. Like, this would never happen. And so I think it's really good that people are waking up to this stuff because what it tells Me is that the path to millionaire is not as difficult as we've been told. We were just playing the wrong game.
- [31:30]
Jon Davids
Game.
- [31:30]
Cody Sanchez
You know, in fact, 60% of millionaires in the US own a business. 6, 0. So what do we know? Our likelihood of becoming a millionaire without owning a small business, without owning a business, without owning a part of a business is very low actually. And so if that's the case, then we should try to think about how more people can have ownership. And one way that more people can have ownership is they don't have to come up with a brilliant idea, compete in a blue ocean that nobody else has touched in order to make millions. I actually don't care. That's necessary at all. In fact, most people in this country, the richest guy in your block probably owned a sprinkler head company, not a dating app.
- [32:09]
Jon Davids
Can you talk about the gateway drug business? I love that term, the gateway drugs.
- [32:14]
Cody Sanchez
Yeah. So one of the things I like people to think about in businesses is a simple idea. Your first business is not going to be your last business that you start or you buy. In fact, interestingly enough, on average, they say to start a business you need seven shots. And one of those might work. And so what do a lot of entrepreneurs do and what do a lot of VCs do? They say, well, we've got to take shot, lots of shots on goal. Right? If 1 out of 7 works, we'll make sure 1 out of 10 of ours is 100x. That was the game we were playing in the U.S. we sort of normalized this idea of it's okay, fail fast, fail forward. Well, they don't actually talk about the shakeout from fail fast, fail forward, which is bankruptcy, which is not being able to afford your mortgage, which is going five or 10 years backwards, which is for the first time ever we're earning less than our parents generation. And so instead of that, my thought is why don't we start a little smaller but with something that is already making money. So I think about a gateway drug business as a business that is so simple your grandma can understand it. So simple that you would know how to execute it even if you hadn't been in the industry for a long time and doesn't have a lot of overhead or capital expenditures so that you could get into a business, feel solid with your first step and scale from there. So some examples of those might be a vending machine route, it might be a small laundromat. Important that you're not starting these. I just met with a couple Last week. And like, have you ever looked at an entrepreneur in the eyes and you just go, fuck, you've been through it. Like, you can just tell. Like, you could tell they're either in it or they've been through it. And I've been with enough entrepreneurs that I could tell by now. And so I saw this, this individual and I was like, how you doing? And they had started a laundromat and the person was like, it's been tough, you know, nine months delayed, $2 million in total cost to start a laundromat. When the average laundromat makes about $300,000 a year gross revenue, that's not profit. Profit's probably, you know, 10%, 15% margins on that. So, you know, when I looked at this person, I thought, wow, you don't want to start some of these businesses because they're expensive to start. That's why I like to buy. So you might buy a laundromat, you might buy a rural car wash, you might buy a vending machine, you might buy a production agency, you might buy a small business that's easy to understand that has some sort of recurring revenue where you can get your hands wrapped around running a business, running a P and L and doing an acquisition. And then you can scale up just like you would start maybe with a studio apartment and then go to a one bedroom and then maybe you buy a house.
- [34:50]
Jon Davids
Yeah. And the idea of, like, buying a business, and I know you're, I'm sure you're going to get into it in your book and people can pick up the book and learn about your approach there. Do you think that this is for everyone? Because I get the sense of, like, when it becomes this approachable and when it becomes this, like, oh, yeah, everyone should own a little side business. I wonder if the false narrative there is that people miss the idea that, like, it's still hard. It's just you have to have a reason to want it bad enough. Do you think anybody can do this or what's your checklist for? Like, yes, you're a good candidate to do this kind of thing.
- [35:24]
Cody Sanchez
Well, I've never regretted learning more about deal making and making money. And so if I could give one thing to more people, it would be, don't just learn about budgeting and don't just learn about stock market investing. Instead, learn about the thing that actually makes more money than anything else, which is, which is real ownership. And so I don't think everybody should go and buy a business outright, at least least not at whatever stage they're at in life. I do think everybody should learn how to become a deal maker. And here's why. Because if you learn to buy a business, what are you going to be better at? Well, you're going to be better at when you need to negotiate your salary, thinking about some things that nobody would ever ask, such as understanding how much money you actually make right now in your business, how much money you make, the business that you work for, seeing the delta between the two, and trying to figure out how you can get a percentage of the upside. Right? And so, like, I think every single person in this country should figure out how to get some form of ownership or to become valuable enough to a company to recognize that they should get some form of ownership. And I call these partial acquisitions or a revenue share or a profit share or a sweat equity deal. And it doesn't mean that you even have to change your job. You might love what you do, keep doing it. You might love your business right now and just want to buy one of your vendors. And so I think we don't actually even realize the tools we have at our disposal. Disposal right now. Now, when it comes to going out and buying a business outright, yes, this takes a unique type of human. You know, you have to ask yourself. We have a saying at contrarian thinking, which is choose your heart. And so I think having a 9 to 5 is hard. Buying a business is hard. Choose your heart. Being fit is hard. Being fat is hard. Choose your heart. I think you have to decide what you think is worth it for the life you want to lead. Because, you know, if you're in charge, then nobody else is there to blame. Blame. And so that's a unique thing to take on your shoulders. I do think that most people, once they've done it, they don't want to go back, at least not for a few decades. And so I have a lot of evidence that tells me that most people on average can handle being in charge of something if they've been strong enough to take the jump. But I think a lot of people will never take the full jump. And that's okay. Just go figure out how to get a little piece of the pie so that you have something to build some real wealth.
- [37:41]
Jon Davids
Do you get a lot of pushback? I'm wondering about the. Because obviously a lot of people resonate with your message and, you know, are all in on what you're saying. Do you get a lot of pushback online, A lot of hate from people that have all kinds of different Views.
- [37:56]
Cody Sanchez
Oh, for sure. I mean, you have to. I always go back to Tim Ferriss's. He wrote a piece a long time ago about that. 1% of any given population is crazy. And so, you know, if you think about that, If I have 8 million people that follow me online, if I have 100 million views a month, 1% of the. That population's fucking nuts. So, first of all, they're just. There's a percentage of people that are just going to hate you no matter what. And I just. I don't know why, but I don't think that bothers me that much. I think it bothers me. Hate online bothers me when I feel like we did something wrong. Like if we made an error in an article or if we wrote something that had the wrong date on it, that bothers me. And that can happen online. But for the most part, like, I can sort of categorize the people who would disagree with what we have to say. One, anytime you talk about money and you have a lot of it perceived have a lot of it and somebody else doesn't, and you tell them it is possible for them, how do you feel if you don't have any money? But I'm telling you it's possible if you're like, well, I'm a piece of shit. If you're like, what, it's so easy for you. Well, you don't think I've been trying. That is a totally normal reaction. I am showing you a mirror in front of you and I'm saying, you could have this too, except you haven't tried hard enough yet. And that, that really triggers individuals. Individuals. And the second group of people are what I call the gatekeepers. So the gatekeepers are people that just. I don't know, it's. I don't know if it's hubris or what, but it's sort of like they're like, hey, I did this. But for the rest of people, they're not as smart as we are. They don't want to work as hard as we do. They're not capable, but I am. And so those people, you know, those I care much less about, I think those people, it's like, hey, you know, it's really easy to talk somebody out of taking risk to become better in their life. It's not so easy to talk somebody into belief in themselves and moving forward in life. So I don't really like those people, but I certainly get that. And then the third group of people I think are, like, reasonably skeptic. You know, and this third group is like, hey, is that really possible? Can you break down the numbers here for me? Like, I don't think that I could do that. And those. That doesn't make me mad. Those aren't haters. Those are people that just don't know us well enough yet. And so I think those groups. I'm either a negative mirror for you, you are either a negative mirror for others, or you're checking in the mirror, but you're not exactly sure what you're seeing yet, and you want to do a little bit more due diligence on it. And I think that's totally fair.
- [40:17]
Jon Davids
That's really funny. The second example, the one I've seen with my audience, and it kind of puzzles me actually, is you have people who are very successful and yes, let's call them gatekeepers. They've worked hard and they've had success, and then they'll see me put out a piece of content or a TikTok or whatever, and it blows up. And I will simplify an otherwise complex thing, a business model, whatever it is. And they'll say, and I've actually had. There's a guy I remember, he commented like last week, he was like, is this. Is this for kids? Like, who are you talking to? Is this for kids? And I'm thinking, no, it's for everybody who didn't go to Wharton, like me. Like, I'm simplifying this for the mass classes, and that's a good thing. But it's almost like you took offense to it.
- [40:58]
Cody Sanchez
Yeah, well, that happens a lot from, I think, gatekeepers too. They're basically saying, in my opinion, they're saying things like, I have a person often that I talk to who's a good friend of mine who went to Harvard. And we joke a lot. You know, I did Georgetown for my mba. I was. I went to Arizona State, so not a fancy school at all. For undergrad, I worked at Goldman Sachs. You know, I've had a bunch of these big private equity companies. So I kind of like, straddle this line of, hey, I partied too, in college. It wasn't that anything that special. And also I went to some pretty good schools and worked at some pretty good firms. And I always joke with my friend who went to Harvard because I remember the last time I was at a group event with him, and we had one of the members come up to me and say, like, oh, you know, what do you do for a living? And so he told me he's doing search through acquisition or Acquisition through search. And I said, that's amazing. You're going to become an entrepreneur. Bye, bye. Find the company. Incredible. And he said, yeah, you know, I'm like 14 months into the search, you know, it's going really well. And I said, that's great. Well, like we know like a little bit about that. If I can ever help you, you know, we, we have a holding company and you know, I'm happy to be a service to you. If you're a friend of Ryan's, you're a friend of mine. Cool. And he looks at me and he goes, I know what you do. I'm like, okay. I'm like, great. Well, here to help if, if I can, you know. And he's like, I don't need a lot of help. The search is good. Great. In my head I'm thinking things and then because my husband's incredible and also likes to feed the trolls sometime, he goes, yeah, 14 months searching. Sounds like you're doing awesome. Have a great time. You know, it walks off. So I think.
- [42:27]
Jon Davids
But that sounds like envy to me. That just sounds like jealousy.
- [42:30]
Cody Sanchez
Well, I think that's what a lot of this is. I think, you know, a lot of times again, it's, I'm so smart. Universities told me that I'm smart. I was self selected into smarthood. I've been in private equity. I have done a hundred million dollar deals as an analyst or associate. What do you, you could just do this as a normal person. What do you mean? This nurse bought a $10 million business with seller financing. And I haven't found a business in 14 years as a Harvard grad. How dare you. And so I think, you know, universities did us a disservice because they told this generation of youth that they were smart and special. And they are in some ways, but in a lot of other ways it's just, are you willing to get really dirty for a longer time than is necessary and drop the vernacular and you know, yeah, I'd rather take, take a military vet who has been through some shit who is willing to get in the weeds and wants to buy a business than I would a lot of the people that even I went to grad school with. And so these days I think like Scott and I disagree, he says that the university wants to, want to close the gap on those who get in and those who don't get in in order to increase their prestige. And I think they're just actually outdated and they can't move fast enough. And the prestige for going to those schools is actually decreasing immensely, that actually we don't have a barrier to entry for, you know, most normal kids going to Wharton and Stanford. And in fact, I would take somebody who had been in the military or who had actually run a business before over one of Scott's kids. And so not his actual students, his NYU Stern students, right off the bat, because I think the best business school is being in business. And I don't think universities realize that these days.
- [44:11]
Jon Davids
What do you hope people get out of the book?
- [44:13]
Cody Sanchez
I hope that I run into people on the street that tell me that they bought something and that that business that they bought is something that changed the trajectory of their lives. And I think that's actually possible. This book is like, it's a big idea, which is that this is a way to change our entire nation and communities around the world. But it's also a very simple idea which is like, listen, supply big. A lot of businesses for sale today. Demand not as big except in Twittersphere. And so what if we could match boomers with millennials and Gen Z and we could actually transition businesses like we used to? And I think that would be pretty special and kind of, kind of where we started in this country with apprenticeships and we got away from. With corporations in Silicon Valley.
- [44:56]
Jon Davids
Cody, I'll be reading it. I know a lot of people will be. And thanks so much for coming on the show today.
- [45:01]
Cody Sanchez
Thank you for having me.
- [45:03]
Jon Davids
Thank you for listening. Listening. If you enjoy episodes like this, make sure you subscribe to us on Apple, Spotify or wherever you listen to podcasts. And of course, follow me on Twitter at realjohndavids. We'll see you next time.