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- [00:00]
Cody Sanchez
In my definition, good business equals profitable cash flowing. What I call a cash flow versus cash suck business. So you get paid upfront for a service, not after you provide a service. Sustainable it can exist for a long time. Historical it has existed for a long time. Understandable. You can explain it to grandma really easily. And you have what's called the Lindy Effect. The likelihood of the future continuing to cash flow just as it did in the past. Those are my parameters for a good business. A bad business would be a business that is unprofitable, hard to understand, hasn't been around for very long. You get you have to provide the service before you get paid for the service. That is a business that is just much harder. That's a harder game to win.
- [00:58]
Shane Parrish
Welcome to the Knowledge Project. I'm your host, Shane Parish. In a world where knowledge is power, this podcast is your toolkit for mastering the best what other people have already figured out. Today's episode will transform how you think about building wealth and financial freedom. My guest is Cody Sanchez, who is known for her bold advice on helping people buy, grow and sell businesses. Whether you're looking to increase your income, start a side business, or completely transform your financial future, Coty breaks down exactly what separates those who successfully build wealth from those who say stunt. This conversation is packed with immediately actionable insights. We talk about the single most important thing to know about building financial freedom, and it's not what you think it is. The biggest myths around money, the difference between acquiring and keeping money, the rich versus broke mindset, and how it changes everything. Non obvious lessons on negotiating and so much more. If you've ever wondered about the real playbook for financial freedom, this is it. Keep in mind this podcast is not financial advice. Cody's opinions are her own and she's pretty bold about them. It's time to listen and learn. There are too many podcasts and not enough time. What if you could skip the noise and get just the insightful moments, even from shows you didn't know existed? That's what Overlap does. Overlap is an AI driven podcast app that uses large language models to curate the best moments from episodes. Imagine having a smart assistant who reads through every transcript, finds just the best parts, and serves them up based on whatever topic you're interested in. I use Overlap every day to research guests, explore and learn. Give it a try and start discovering the best moments from the best podcasts. Go to joinoverlab.com that's joinoverlap.com you built a business around acquiring other businesses and enhancing Them. Where did this all get started for you and what have been the key moments over that journey?
- [03:02]
Cody Sanchez
I stole it all from private equity. So I, you know, I, I never would have thought about buying businesses and it seemed too big and scary and I didn't grow up a lot of money or cash or understanding of money. And so if you would have told like 20 year old Cody, you would be buying businesses and then buying more businesses and building on top of them, I would have thought I had to win the lottery or something and. But thankfully I got into finance and I, and I kind of hated finance and I didn't want to be anybody in any of the companies, even the people at the top. I finally realized that after like 12 years. But I was like, wow, they really understand this language of money and they know how to buy assets that make money, leave and bring back more friends. And so I was like, I want to learn how to do that and I just don't want to have to do it in a suit. And I want to be able to do it in businesses that I want to be able to do it and I want to be able to hold the businesses forever as opposed to buy them, you know, split them up for parts and then sell them off. And so it got started because I'm a pretty good copycat. You know, I was just like, oh, here's a model that works. Can I do the same thing but a lot smaller because I don't have that much cash? And then if it keeps working, can I scale up to be like the big boys? And so that's where it started. I think sometimes the best way to make money is just to follow other people who are really good at making it. Try to mimic the same thing and then add a little bit of your own sprinkle to it.
- [04:23]
Shane Parrish
Talk to me more about that language of money. What does that mean?
- [04:26]
Cody Sanchez
Yeah, most important language I've ever learned is money. So growing up I didn't understand anything except how to save, maybe how to spend less. Right. And you know, my parents were, my mom was a 30 year special education teacher. My dad came from an immigrant, immigrant family to the US and so they didn't have any money and their biggest concern was like, don't fall into debt. Kind of like Dave Ramsey, right? No debt, save everything you possibly can. Don't use credit cards. The typical things we learned. But when I went into finance, I realized that's not how the rich think. The rich actually know how to use debt intelligently. They understand that money is simply a tool in a toolkit, there's no emotional value to it. And that if you understand what attracts money, then you probably will never have to work again in your life because you will just be able to take money and like a magnet, sit it next to more money and it'll bring it over. And it took me a long time to figure out how to do that. And so I was a journalism major. But once I realized, oh, you know, you can. People say it on the Internet in sort of like a kitschy way now, you know, get other people's money, you know, passive income, I've never earned a dollar passively, you know, that's always been active. But once you have a decent chunk of change, then you can put it into other people spending their active time to make more money for you. And that's what I wish I learned early on. And the algorithm that taught me that the most was, you know, every single way to make money is sort of like a game. And there are some games that are low level games. So think about it, like pickleball, let's say if you want to become a top paid athlete, get all the chicks, you're probably not going to go play pickleball, right? It is a game that people play. It's not a highly paid game and maybe it's not that high of a status game. As opposed to football, you know, soccer internationally. Oh, well, some of the highest paid athletes in the world also, you get lots of checks if that's what you're into. And so if you're going to think about where do you spend your time if you want to be an athlete, you think about what your skills are, but also what's like the best indicator of future success, other people who have future success. And so with money I realized, oh, wow, if I want to make more of it, I probably don't want to be a teacher because that's just not a highly paid job. And probably I want to be in the industry in which more people than anywhere else are on the forbes, let's say 100 list. And that would be finance. So the number one category of people on the Forbes 100 list is some version of finance, whether that's buying and selling companies, whether that's being an active investor in equities, whether that's being in hedge funds, but that's the number one way. And so I realized, okay, well, I'm going to go learn finance because they seem to understand how to attract money.
- [07:08]
Shane Parrish
Is that like, was it a freedom thing to get out of that like you felt like your time was somebody else's.
- [07:14]
Cody Sanchez
It was more a curiosity thing in the beginning. I love the ability to go deep into a subject matter that I think is rare. And so if you look at skill sets, the way we determine if something's rare or valuable these days is typically monetarily. Right. Something always the best way. Maybe spiritually, it doesn't make a lot of sense, but our society seems to say your skill set is ranked on how much money it makes. And so when I thought about it that way, I just wanted to go win the game. I wanted to play the game and I wanted to win. And the highest game I could see was one in which you, you go and get financial freedom. And then with financial freedom, it wasn't that I wanted to work less. It was that I don't want other people to assert their will on me. And so when I was a journalist, I saw a lot of people on the US Mexico border who, they had a last name like Sanchez, just like me, but they were being human trafficked. I mean, I was in Juarez where women were getting mutilated along the border. Yeah, I mean, I saw, I've crossed, crossed the border hundreds of times illegally documenting sort of what happens in conflict zones. And after a while I was like, what's the difference between them and me? It really wasn't that I was American. It was. They just didn't have any money. They had no resources whatsoever. So the world asserted its will on them. And I didn't ever want that to happen to me. I would rather try to architect my own world. And I think the key to that is money.
- [08:44]
Shane Parrish
Yeah, you have to have a little bit of money to create the opportunity. How do you, how do you go about doing that? Like, do you work at a 9 to 5 job and save up money and build these income streams, or is there another approach to this?
- [08:57]
Cody Sanchez
Yeah, well, anytime you hear advice from somebody on the Internet, I always think you should look at their biases. Right. So mine is that I was a. I was risk based. I didn't want to go out and become an entrepreneur and sleep on a couch or a floor and make $0 and have some crazy idea. I didn't have any of that. I was kind of scared and I didn't know what my big move could be. So for me, the best way to do it was I went and worked a 9 to 5 in the industry that paid me more than anywhere else.
- [09:25]
Shane Parrish
Which is finance, which wasn't really nine to five, I'm guessing.
- [09:28]
Cody Sanchez
Oh God, not at all, no, no, it was quite long. But when you're young, you have an incredible ability to withstand pain and it's much easier to do it when you're in your 20s than it is in your 40s or 50s. So I was like, well, I could either have short term pain in the form of long hours and long term gains or I could have short term fun. And in the future I will probably be sacrificing things for that. So I'm like, no, when I'm young and hungry, let's go hard, let's work 10, 11 hour days and let's, let's be voracious in knowledge accumulation. And then once I have some skill set that is valuable enough, then I can assert my will on my hours, et cetera. But to begin with it was just, let's go to finance because they pay really well. I want to understand the game of money. And after you do that, then you can go and build whatever you want. But I think starting with a 9 to 5 is super underrated today.
- [10:20]
Shane Parrish
I think so too. Like you can learn so much somebody else is paying you to learn if you have the right mindset and approach. But not many people seem to have that approach.
- [10:29]
Cody Sanchez
Oh yeah, I mean, I, I totally agree. So when I started at Vanguard, they said that they put about $100,000 a year into their new hires. And so we had, it was called Vanguard University and they trained us on securities and bonds. And I think I have four or five licenses in the securities industry from my days of Vanguard. And, and then I went to Goldman Sachs where I think to get into Goldman as like a little peon analyst, which is what I was. I think I had to do like 13 interviews and like PowerPoint presentations and this. And at the time I was like, this is very annoying, but actually what an incredible gift all that training was. And, and you go to a startup, there's no way they're putting you through a training program. There's no way they're critiquing your PowerPoint skills. You know, everybody's just barely treading water. And so I think if you have a chance to go to a big corporation where you get well paid, they train you a lot, and then you put an exit clock on two years from now. I'm going to leave at the moment in which they won't pay me more or I'm not learning. And because I did that, I accumulated millions before I ever ran my own business. And so a lot of people ask me like, how'd you have all this money to invest. I'm like, well, you know, you're in finance for 11, 12, 13, 15 years. You learn to invest the entire time you're doing it. You're making a lot of money while you're doing it, and you're putting the money back into the stock market and into deals. And so I didn't have to risk a lot of my own capital, except in the beginning, not being paid very much because, you know, I was brand new and I didn't know what I was doing.
- [11:55]
Shane Parrish
Imagine I'm a novice and I've never invested a cent. And I have five minutes with you, like, what's the single biggest lesson that I need to take away?
- [12:06]
Cody Sanchez
Lesson number one is you never get rich investing. You get rich earning. And so the only people who are going to tell you to go invest first to make your first million are people that are trying to sell you something because it's just really hard to make money investing without money. That's rule number one. Your biggest ROI is on you and your time. And then rule number two would be, once you understand that, it's how can you make your time your best investment possible? And so that's why you have to obsess on increasing your earnings potential. And a lot of times people hear this and then they go, well, I negotiated with my boss and, you know, they didn't give me a raise. And I'm like, no, no, that's not the play. The play is you understand how a business actually makes money and how you make money for a business, and how every action you make makes a business more or less money. And then you try to negotiate a percentage of the money you make the business. And like, if you are a employee right now, you would be incredibly rare and incredibly valuable if you went to your boss or the CEO of the company, depending on size, and said something like, hey, I want to make more money at this company, but I would never want to take more money just because I want it. Of course, I understand how business works. Instead, I was thinking, if I hit this goal, which is 25% above the goal that you set for me, I'd love to make 5% of that additional 25% I brought in. You get to keep the extra 20%. You beat your goals. I look good compared to all the rest of everybody else, and I only make money if you make money. Would you be open to something like that? And they might say no, and life will be littered with series of rejections continuously. If you want to have any success Whatsoever. But they might also say, yes or we can't do it that way, but we could do it this way. And then you learn how the business makes money. And most people will never do that because they just say, I want an extra 25k or I want a raise or I'm going to leave. And that just pisses your boss off.
- [14:02]
Shane Parrish
I think most people don't have that mindset. Like you're either directly contributing to revenue or you're helping somebody contribute to revenue or you're a cost 100%. And if you're a cost, then what are you doing there? If you're not contributing in one way or another to revenue?
- [14:15]
Cody Sanchez
Yeah, it's the best way to make more money is to figure out, one, are you a cost center or profit center? And then two, how much of a profit center or cost center are you? And if you can do that, it's not just that you're helping your boss and the company. You are now thinking like an owner for the first time ever. You don't have to own a business outright to think like an owner and get a piece of a business. It's called partial acquisition. And you know, a way that you can get part of a company for your work or sweat equity is simply by saying, I understand what the business's goals are and I understand the next level we want to get to. And if I help us get there, could I get some sort of participation for that? That is how really rich people think. And anybody that goes, no, that's not possible, sadly, you will never be rich if you think that way.
- [15:03]
Shane Parrish
I think, like in a big organization, I could see them saying no to that proposal, but if your small business owner was saying no to that proposal, I'd be starting to look for a new job.
- [15:12]
Cody Sanchez
You'd be shocked. Yeah, I mean, think about it. For you too, if they were like, hey, listen, Shane, what if I brought in these three partnerships and you like them, you sign off on them, they're on brand for you, they bring an extra X dollars for you, would I be able to take a cut of the extra partnerships I brought in? Even though I'm just your producer? You'd be like, yeah, sure, dude, yeah, great, 100%, you know, and if you do work in a big company, then the only question you need to ask is instead of saying, if I do this, could I make more? It's in what part of the company, if I work more and if I hit my goals, can I make more money? What jobs do we have at this Company like that, they're typically sales jobs, right? Maybe a leadership or recruiting job. But you want to get on the side of the profit center and that's how you earn more.
- [16:02]
Shane Parrish
Is, is there different sort of phases to our career? When you think about it like, is it like 20 to 30, we should not be worried about money at all, just learning as much as we can and then switch over. Or how do you, how do you think about that?
- [16:14]
Cody Sanchez
Yeah, I, we talk about it like learn, earn, invest, repeat. So I think when you're in your 20s, you're in your learning phase, you still want to try to increase your earnings. But if I had to choose between earning more or learning in that period, I'd optimize for learning because learning has unlimited upside potential. Like you're never going to go in your 20s from making 30k a year to 300k a year per year because you negotiated a better salary. That's a very unhigh likelihood. What you very well could, if you learn something additional in that one year, compound that over 30 years to multiple millions or more. And so I obsess on learning first. And then as I get into my later 20s and early 30s, I start thinking more about earning. So how can I make more money? Like my first job, I made $37,000 a year. When I was at Vanguard, I thought that was a bajillion dollars. And and then I realized quickly it wasn't, especially after taxes. But that first job in Vanguard set me up for, you know, jobs at 4 the biggest financial institutions out there and an ability to earn more when I didn't want to be in the world of finance anymore.
- [17:26]
Shane Parrish
And like you said, they invested $100,000 in your education. Oh yeah, from being there.
- [17:31]
Cody Sanchez
Totally. And then if I think back even further, you know, there was a really interesting study and I wonder if you saw it. It's called economic interconnectedness. And so basically the idea is this. If there's two groups of two neighborhoods with two different groups of people in them, where on average the average salary is the same in both neighborhoods, Right. So I don't know, average person in both neighborhoods makes 50k. It's a lower income neighborhood on both of them. But in neighborhood B, as opposed to neighborhood A, they have a few people who make a million dollars a year. So they just have a few rich people in this neighborhood that interact with some of the poorer people as opposed to this neighborhood, they really don't have any. If you are in this neighborhood and even if your family is in that $50,000 a year bucket. But you interact with some of those rich people, AKA you have more economic interconnectedness. This group of people has a 30% higher earnings over the course of their life for the same skill set and experience. And what I thought was really interesting about that is that it really just goes to show you kind of want two things. You want somewhere you can learn as much as humanly possible, and you want to be somewhere where you are around people who have more money than you do by orders of magnitude, if at all possible. And we don't really know if it's causation or correlation, but we do know that if you are around people who are wealthier, on average, you tend to be wealthier, even if that's not your background or skill set. And that I think is kind of liberating.
- [19:00]
Shane Parrish
Why?
- [19:01]
Cody Sanchez
Why do you think that that is?
- [19:03]
Shane Parrish
I have a guess, but yeah, my guess would be you realize that other things are possible. You're not. You don't have this ceiling of these, like, false rules that we learn. And then all of a sudden it's like, I can do more. I can get out of this situation. I can aspire to more.
- [19:17]
Cody Sanchez
Yeah, I mean, I think. I think there's a couple that. One seems the most likely to me. It's just. It's like the. Where was it? It was like somewhere in the Nordic countries where they had mostly had female heads of state. I don't remember what they call them there, if they're the head of parliament or what, but mostly female heads of state. And so there was a small school program where the boys and girls in the school were asked, you know, how likely are. Are you to be the next, I don't know, head of parliament or whatever. And in the Nordic countries, all the little girls raised their hands because they had seen that example so much. Whereas in the US and this, I think this study was done more than 20 years ago. So in the US it was all the little boys that raised their hand like, I could be president. Right. And it was just, had you seen an example that looked like you previously? So I think that's probably the driving factor. It could also be, you know, you have a conversation with these individuals and you get networking opportunities. You have a conversation with these individuals and you just ask them advice. So you have advice from people who have already done a thing that you want to do, which is an unfair equalizer. And it could also be that, you know, maybe they hire you. I mean, I know for young people like me, when I was Coming up, and we had no money. I got really lucky to. I don't even know what you would call me. I was kind of like a bitch. I just was like a little assistant for one of my brother's friends in high school, his mom. And they had a lot of money and so I would drive their fancy cars to the car wash. I would pick up their dry cleaning, I would take their dog to the vet. All this stuff for basically no money. And just watching them, I learned a ton. How do you organize? What do you guys do for a living? They sold. They sold equipment rentals, like big tractor equipment rentals. I was like, that's so interesting. And that's when I first heard about buying businesses because he sold his equipment, tractor business, and then it went kind of under, went a little sideways, and then he bought it back for pennies on the dollar. And I was like, I didn't know that you could do that. And then that same family was one of my first investors back when I had a fund in the private equity space. And so that was 20 years later. And I think when rich people see hungry, driven, competent humans, by and large they want to help because it's rare. And you are somehow a mirror for them. They're like, oh, I remember when I was like, you Totally.
- [21:37]
Shane Parrish
So if our 20s are about learning, how do we get in front of the people that we are most likely to learn the most from? Be it call them wealthy or high performers, whatever you want. Like, how do we put ourselves in that? Because odds are it's probably not our boss.
- [21:52]
Cody Sanchez
No, no.
- [21:53]
Shane Parrish
And so, like, how do we seek this? If we're going to spend a decade sort of like learning and trying to increase our income, we should be methodical about how we approach this.
- [22:02]
Cody Sanchez
Yeah. Well, a couple things. I was thinking about this today. Like, we have a company here, Contrarian Thinking, which is our media company, and then underneath it we have Contrarian Capital, which is our venture fund, and then Main street holding company, which is where we own a bunch of small businesses inside of it. And we get a lot of applications for jobs. And, you know, I was looking around at our team today. You just met two of two of my employees. And the reason that both of them came was because they wanted to be around other people who were high performing. So one of the nice things about the Internet today is, yeah, maybe you can't get to Shane as much because you're well known on the Internet. You might not have time to mentor people, but how often could you see somebody you liked on the Internet and then go, I want to work for them. You can do that a lot now. And a lot of people who are on the Internet are hiring like crazy. And so you can't go and just slide into somebody's DMs and say, I want to work for you. What can I do? Lazy. But instead you could keep on job applications continuously for people that you think are high performing and companies that you think are high performing. And there was another study that I thought was fascinating about underperformers and high performers. And the study basically showed it was hundreds of employees at many different companies and it was about proximity. So the, if you sat next to a high performer, 15% increase in productivity. If you sat next to a low performer, 30% decrease in productivity. And so I don't think people realize that. If you just look at it like numbers, let's say you make a hundred grand a year. Well, if you sit next to Shane or a high performer, I make 115k. It's a gross generalization, but an easy way to think about it. If I sit next to Cody, who sucks. Wow. What if I only make 70k because my performance has actually dropped? And so I think about that a lot. I think the best way to get mentors today is go work for them. You know, don't, don't ask to do stuff one off. Go to the highest performing companies you think you can get into and if they're not that, switch to another one because you get paid to get mentored. What a crazy idea. And that really didn't exist for like my parents generation.
- [24:07]
Shane Parrish
So taking all the knowledge you have now, how would you go about getting in front. You're 22. How would you go about getting in front of Cody?
- [24:15]
Cody Sanchez
Yeah, a couple things.
- [24:18]
Shane Parrish
One, at the risk of blowing up your inbox.
- [24:22]
Cody Sanchez
No, not at all. I mean every single company that is growing has a careers page on it and you will be sure shocked how often those are not applied to across multiple companies and then how seldom they are chased. I think the number one problem if you can't find a job right now and you want one and you can't find a high performing job right now is are you applying like a shotgun or like a sniper rifle? And you know, I remember for instance, one of my employees that came to work for me, she really wanted the job, so she applied for, I think the job at the time was like maybe my chief of staff, she applied for my chief of staff. Normally, you know, you fill out the resume, you fill it out you wait. That's all most people do. But that wasn't going to be her. She also was like, hey, I imagine you need a lot of newsletter writers. This was in the beginning. So she wrote an entire newsletter for me, kind of in my voice and just sent it to me, like, you know, didn't ask for anything else. And then she said, I also see you're hiring for these other roles. Here's a couple other candidates I thought might be interesting. I kind of pulled some profiles for you. And then she said, you know, I imagine you're really busy. You're hiring this chief of staff role. I just read these two books on. On assistance, and I wish I could remember the name of the one book, because now I give it to some of my employees. But basically on making a top performer, a higher performer. So she was like, you're already great, but here's a couple books I'm reading to figure out how do I make great people even greater. One, she's giving me a compliment, a little ego stroke. And then two, she's saying, I think I understand what you need, which is, like, you don't have enough time, and what if I just solve problems for you? So, of course I hired her. Like, yeah, this is great. And so most people don't even. When I tell a lot of people in my email inbox, they'll ask me for something. Sometimes an email really stands out. And so I'll respond and say, hey, you want to learn about fundraising? Okay, great. Read. I don't know, venture style or something, if you want to learn fundraising. And then come back to me and, you know, tell me what you think.
- [26:23]
Shane Parrish
How many people do that?
- [26:24]
Cody Sanchez
Nobody reads nobody. And so it's like, if you really want a thing, be obstinate in getting it.
- [26:30]
Shane Parrish
Yeah.
- [26:31]
Cody Sanchez
You will be shocked how few people go to that level. And I would say, I've done this multiple times in my life. So when I wanted a job, I wanted to head the Latin America business at Credit Suisse back in the day, which was a big finance company. I was totally. I really was not credentialed enough for that job. It was a private equity job. I was going to be building out the region, and I went ham. I think I traveled to. I went to Europe, I went to la. I went to New York, where the headquarters was to interview in three different places on my own dime. I heckled the head guy there, Ryan, who I'm still friends with to this day, with all these different ideas for the business, with contacts. I gave him leads from people I already knew down there, until finally, you know, I was in the final running with one other woman. She ended up beating me out. I was sad, but Ryan came back to me about six months later and was like, she's not working out. Do you want it? But by that chance time, I had already gotten a position heading another business in Latin America. So it was cool. But that's also how I got my first job at State Street. I think I did like eight interviews and sent custom gifts to a bunch of the corporate heads then because just a little bit of effort shows you're such a decrease of risk as a new hire. I mean, most of the reasons that people don't work out when you hire them is. Is not capability, it's effort. And so if you can decrease the likelihood that you won't work hard for them, you have a much higher likelihood of getting a gig.
- [27:58]
Shane Parrish
I used to test people because I would get these inbounds being like, I want to work for you. I want to. I'm like, no problem. Like, let's grab lunch. And they're like, oh, I'm not in Ottawa. And I'm like, oh, well, if you're ever here, let me know. Do you know how many people ever showed up?
- [28:11]
Cody Sanchez
How many?
- [28:11]
Shane Parrish
None.
- [28:12]
Cody Sanchez
Not one.
- [28:13]
Shane Parrish
Not one person was ever like, I will hop on a plane and I'll grab lunch with you. And I just thought it was like this excellent filter, which is like, well, if you're not willing to do that, why should I invest my time?
- [28:24]
Cody Sanchez
That is a great filter. Yeah, yeah, Ottawa's useful. And that.
- [28:28]
Shane Parrish
Yeah, because it's so hard to get to. Right? It's like so inconvenient. Nobody ever flies there. How do you think? Is it effort? Is it follow up? Is it determination? Is it result? Like, what is it? Because certain people seem to have it and certain people don't. But I also think it's totally learnable.
- [28:45]
Cody Sanchez
Winning is probably one of the most learnable skill sets out there when it comes to business. Because the only thing that really differentiates most businesses from winning and losing is giving up. You know, when we go and invest, I don't know, in 20 or 30 startups a year in our. In our venture fund. The research shows, by and large, the reason why Silicon Valley wants two founders is because the number one risk for investing in a company is that a founder gives up number one. And so if you know that it is really just grit, like Angela Duckworth's study on grit, then that is what you want to test for. You need to have a good idea. You need to have the foundation. But we really want to try to figure out how much pain can you tolerate. And the more pain you can tolerate in business, the higher likelihood you'll succeed over time. It's just shots on goal. And so I think people should be really liberated by that. I was, you know, I'm like, well, you know, I don't really have to be smarter than anybody else. I don't have to be richer than anybody else. I don't have to be better connected. I just have to be a little bit aggressively relentless. And that is something anybody can do. It's not comfortable in the beginning, but you, you can do it. So when we go out and we look at, okay, should I give a couple hundred thousand dollars to this company or this company, the number one thing we screen are the founders.
- [30:00]
Shane Parrish
And so how do you screen them?
- [30:02]
Cody Sanchez
I want to best predict your future behaviors, past behavior, I think so. I want to see a history of winning in some way, shape or form. So also hard to beat a losing streak, as you know, in sports. So a lot of times I want to see, Yeah, I came to this startup, the startup was growing really fast. I outgrew the position, and I was ready for my next adventure as opposed to, I came to this position, the company kind of failed. I was bored, you know, it didn't work out. So I want that. The second thing I want is I really want. We do a specific type of interviewing with founders that basically just takes them through every single company they've ever been at, and you ask them why they went to that company and why they left. And those two questions at least seem to tell us a lot about do they give up, do they chase things, do they allow things to come to them and easy enough system to game. So you'd probably be smarter at coming up with fancy questions.
- [30:56]
Shane Parrish
But I imagine, like, you also people divul. Like, I love questions where you unintentionally get people to divulge things. In this case, one of the things that strikes me people would divulge is like, I didn't like my boss. It was like they hours were too long. They wanted me to work on, like, they'll just passively slip up in some of these things. And you're like, red flag, red flag.
- [31:17]
Cody Sanchez
Well, and the beautiful part is I think with having a brand on the Internet now, kind of people know what they're getting into, you know, And I tell people, listen, if you want to go work 9 to 5, have probably little to no stress whatsoever outside of work, not have to work a ton, be able to take vacation days, have a low likelihood of getting fired. Go work for Vanguard. Like, they're great at that. Like, they love people to stay forever. They pay bottom of the pyramid. But because they do that, people stay there for a long time. And there's not as much exterior stress. Now, I was never more stressed than when I worked at Vanguard because I hate being held back by arbitrary rules like, no, you can't make more money until the three year mark. It's like, what? Why? I don't like that.
- [32:06]
Shane Parrish
But I magically have the skills at, you know, two years and 364 days, I don't have them. But then all of a sudden, then you do.
- [32:14]
Cody Sanchez
Yeah. And they just have a very militaristic way of at least when I worked there, how they hired. And so I didn't like that. I liked to the Gold men, you go eat what you kill, and if you suck, you're fired. And if you're good, you're going to make more money. And I was like, okay, well, at least I kind of can get benefit from working harder. But I think a lot of people these days, in particular, like the hustle culture thing, that'll like it, which I get. But I don't think you have to do it forever, but you should do it when you're young. And if anybody's getting triggered thinking about, well, I wouldn't want to work for Cody because she's super tough and she's going to make me work really hard, I think it's a tragedy, actually. I think. I think there's something sort of spiritual about working hard on something you're obsessed with. With a group of humans all working towards a goal of getting better. Like, where else can you get constant feedback in business, be with a team of high performers and figure out what you're really made of.
- [33:13]
Shane Parrish
Did you see that Tom Brady Baker Mayfield thing? Or Baker came in, he's like, well, you know, he implied that Brady, he was there to, like, lighten up the locker room. And Brady sort of replied, this isn't kindergarten. Winning championships is fine. And I was like, oh, man. Like, that's crazy. Winning is fun.
- [33:32]
Cody Sanchez
It is fun. And, you know, once you figure out the game, you. You want to win, and if you lose, you want to learn a lot. And you don't ever want to not win because you didn't go hard. And you know what's fascinating too is, you know, it's never fun to fire an Employee. I've had to to do that many times over my life. Less fun to get fired for sure. But one of the things I've realized is most often people self select, like they kind of know when they're just not a culture fit and when maybe they don't want to run so hard anymore and when it's not their obsession and when the thing you do is no longer your obsession and you're no longer learning, I think it's perfectly cool to go move on to the next thing. And that's happened to me multiple times when I was working at big corporations and I just, but I did it with hopefully a good amount of grace. I think what goes sideways is when you turn yourself into a victim. You know, they didn't promote me, the company sucked, blah, blah, blah. Instead it's like, listen, you've taught me so much. Thank you for letting me work here for this period of time. I hope I've been high value to you. I'm ready for my next evolution and I want to make sure you have a smooth transition. Like, how can we do that? And if you'll do that. Like, I'm pretty much friends with every single boss I ever had back in the day. Minus, minus two. I did, I did burn a few bridges, but for the most part I'm friends with most of them, even ones where I really disagreed with like what they were doing the business and I thought I should do it my way, but it wasn't my chips, so I had to go get my own.
- [34:59]
Shane Parrish
If you're a boss, manager, owner, how do you determine if somebody's interested or obsessed?
- [35:06]
Cody Sanchez
That's such a good question. I always think about what can you not sleep for the want of doing? You know, again, I, I find business to be sort of spiritual and so I think when you felt that flow state in business before, it could be writing emails. For me, like when I am writing a really good email and I am in the zone and I am focused, it's maybe the most beautiful thing I do. It's my favorite thing in the world and I'd rather do it than go out and drink beers at the bar. And so I like to ask people a couple questions. One of my favorite questions is when was the last time you, you pulled an all nighter, you stayed up all night working on something that you loved. And a lot of times you can tell if somebody is an interested, versed, obsessed person by the fact that they're like, I've never done that, you know. Yeah. Or they might Say the opposite. You know what, I don't, I don't work as well at night. But God, I remember like a couple weeks ago we had this problem and I was just up at 3am Thinking about it. So, like, I got up and I just got the chalkboard out. And what I figured out is this. And so I really like that question. The second one is thinking about, I'll ask something like, when do you. When was the last time that you really believed X was the decision for the business, but one of your colleagues or, or somebody else wanted to do Y? And I just want to see how passionate they are about it. Now, a lot of times the answer for that is something like, you know, I, I wanted to get a raise and I didn't get a raise or something like that. But a good answer sounds like, well, they wanted to launch a new product focused on Argentina. And I told them that was a terrible idea because right now the government in Argentina was xyz and if we focused on an Argentinian bond fund, we were going to get slaughtered. And I put together this PowerPoint that kind of explained why. And I thought through these frameworks and I looked at these historical models and like, that was the reason why. And, you know, and it turned out, you know, I was right. And I either I wish I would have presented it more convincingly or I realized that my opinion, you know, wasn't going to carry weight there. And so I wanted to go somewhere and take my own risk. Like, that's what a great answer looks like.
- [37:15]
Shane Parrish
And whether you're right or wrong, it's a great answer.
- [37:17]
Cody Sanchez
Right.
- [37:17]
Shane Parrish
Like, because if you say I was wrong. Yeah, but I did all the steps that I was supposed to do. I learned from that. Now all of a sudden you get a different sort of tell.
- [37:25]
Cody Sanchez
Yeah, that's true. Because a lot of times it's just. I want to understand how your mind works.
- [37:28]
Shane Parrish
Because what we're always searching for is like, examples where we're the hero, right? Where we're sort of like saving the day. But it's, it's really, I think, interesting when people point out I wasn't a hero. Yeah, I was totally wrong in this situation. But I did make an argument. I did sort of like outline my thinking. And maybe we were lucky or unlucky because nobody corrected my thinking. Or maybe I learned because I missed this huge thing.
- [37:56]
Cody Sanchez
Yeah. And like, what did you do after that? Like, I remember I ran a business where we sold money market funds to big pensions and sovereign wealth funds. And overnight my business was eviscerated. I mean, I'm talking about billions and billions of dollars in assets under management. It was at State street, so it wasn't like all my money. It was their money. But overnight it was totally killed. And it was because of government regulation that did this silly technical thing called they took away stable Navy. I won't get into what that is, but they basically changed the way accounting for this type of product worked. And that meant that the pensions and sovereign wealth funds couldn't use it anymore. So I went from selling billions and billions of dollars of this stuff to, oh, my God, massive redemptions. They were like, give me all my money back. I was like, oh, this isn't great. And in that moment, I realized we had built a business that was technically pretty great. Like, incredible sales team, great customer support, great brand, great product, great team. And we didn't think of, like, our biggest risk, which was the government regulation. And so that business basically became, like, unprofitable overnight. And. And my next decision was I went to Georgetown and I got an international mba and I went to Georgetown in particular because I realized I didn't understand anything about government regulation and oversight. Like, nothing. I was so finance markets investing, and I didn't realize that the government is probably one of your biggest risks often. And so. So I ended up doing that executive MBA for two years while working at the company and opening up a Latin American investment business that was a different type of investment, but, like, that would be a great example of, like, I lost awfully. And so then what do I do about it? You know, do I go curl up and die or do I go learn again so I don't make the same lesson twice?
- [39:46]
Shane Parrish
Hopefully you had another mistake that stands out for me, which was you lost $12 million on a cannabis deal.
- [39:52]
Cody Sanchez
Oh, yeah.
- [39:52]
Shane Parrish
In like, three months. What happened there?
- [39:54]
Cody Sanchez
Yeah, well, that one, we didn't screen the founder very well. I mean, this was a. This one was a scary deal because we didn't have that big of a fund. I think our fund was like 60 or 100 million bucks back then. And cannabis was raging. You know, it was like straight up, like hockey stick, like, growth. And the fund before that, this was our second fund. So the fund before that, we killed it. It was like 3 to 5x return over a pretty short period of time. Investors got their money back. We looked really smart. Well, the second fund was really happening during COVID and Covid almost cratered a bunch of cannabis businesses and. And the market started drying up. So no more capital to Fund fund cannabis businesses and capital is the lifeblood of businesses. And especially for these businesses, they were almost like venture businesses where if they didn't keep getting more cash, they weren't profitable, so they weren't sustainable. So this business we had put in like $12 million into this business and it was like, it was a products business located out of California and basically like, I can't remember, but it felt like two weeks later. And after we put the money into this business, we get a phone call from the founder and the founder's like, we're basically out of money. We don't know what we're going to do next and we need more cash. And we were like, excuse us. Like we just did this huge analysis. You told us these numbers we confirmed in the bank account. Well, it turns out he had all these historical payments that he was paying through, you know, massive fraud, you know, total malfeasance across the company that we just completely missed. And sometimes that happens. And we were like, well, fuck, you know, is this company going to fold? And so thankfully we have on our team a guy by the name of Joe, who's our turnaround guy. And he had to fly out to Oakland and basically over the course of the next four weeks do massive cuts and restructuring and some, some smart turnaround stuff in order to save the company. But I thought we were going to go under and that was one of our murky investments that we had made like two weeks prior. And, and my biggest lesson learning from there is, well, two things really. Remember when I met the guy and now I have learned to really trust my gut on the first interaction with somebody I'm an invest in. I just didn't really trust him. He said a couple things were a little flashy. He drove a flashy car, which is always to me, a red sign, a red red flag when the company's not yet profitable and a little too excitable, a little too laissez faire. But my partners loved him and so I didn't really raise my hand and I didn't put my foot in the sand. So that was my fault. That was the first red flag and that's happened to me multiple times with partnerships. It took me like three times of having sort of bad partnerships like that happen.
- [42:39]
Shane Parrish
Listening to you.
- [42:39]
Cody Sanchez
Yeah, if I don't like it on the first go, then we're waiting a year is our new rule. So if I feel any sort of anything, doesn't mean I'll never do a deal with a person. But I'm going To watch them for a year. It's kind of hard to fool somebody for a full year. So that was one. And then the second thing was we now do forensic audits on most of these businesses, which basically means you get somebody to get in there and you get really deep into the numbers. Because even if they're not committing fraud, a lot of entrepreneurs aren't the cleanest with their books. And so, you know, you can commit fraud on purpose or by accident. Both suck. And so I never wanted that to happen again.
- [43:15]
Shane Parrish
It's almost like people don't realize, like if you're the only shareholder. Yeah, you can sort of like do what you want. That's legal. But if you're not the only shareholder, now all of a sudden you're spending other people's money 100%. And so there's a huge difference between the expense accounts, I would imagine. Yeah, yeah.
- [43:31]
Cody Sanchez
And a lot of times they get, they've never before raised capital, so they get a bunch of money in. And just like I would if, if I had ever raised capital for my independent businesses. You're like, okay, now let's grow. But you don't really know how to look into the future with that kind of money and say, if I do this action, will it make me more money? Because you've never done this game before.
- [43:51]
Shane Parrish
Right.
- [43:51]
Cody Sanchez
And so I think a lot of times that's a danger point in startups. I also joke that anytime you see a startup founder who takes capital from third parties and they start like doing Twitter threads and writing blog posts, it's like a red flag. Unless they're like, unless they're a media company, it's like, no, no, no, stay focused.
- [44:08]
Shane Parrish
You know, how do you think about focus when you, when you see somebody? One of the intuition things I'm imagining is sort of like they're distracted. They got like 20 things going on. When you're investing, I would imagine you want a hundred percent.
- [44:20]
Cody Sanchez
Yeah, well, I, it really depends. First, is this their first rodeo? If it's the first rodeo and the first time you've ever run a business, do one thing really well. Until that thing is profitable, self sustainable and you don't have to focus on it 100% of the time. 100. That's my rule. If it's not your first rodeo and you've already had a successful exit or two, then I think you can get better at layering. And so, you know, one of the things I'd want to see if I was investing in founders, a good example would be Like Brett Adcock who started figure the robotics company. So he had before had a company that was Drones. That company did really well. They exited that company, big exit. Then he started figure he raised a ton of cash. Now the company's worth more than a billion dollars. Well, Brett also started another company after that and that company is focused on like security inside of schools and public areas. And typically if Brett was a first time entrepreneur, I would be like red flag. You know, we should watch why he's starting these two companies since he's a multi time founder, less concerned. And then the third thing to think about is are they accretive or not? Like does one plus one equal three? And so if Kim Kardashian would be a great example. So Kim Kardashian has her big media empire, right? You could say just stay focused on that. Kim, well, she's looking for better ways to monetize that audience. So she has skims, right. Plus she has sky, her her private equity portfolio.
- [45:47]
Shane Parrish
Right.
- [45:47]
Cody Sanchez
You know, plus she has whatever Kim calls her cosmetics company. But they're all sort of accretive because they use her media platform and she gets to sell similar things to her audience and increase her overall basket size. And so that's how I think about our businesses today. I'm like, Cody, you're not allowed to start a beauty company because that's not a creative. It has to be like Bizcout, which is our business buying and selling marketplace, has to be Resi Brands, which is our small business trade franchises. It needs to be like right now we're focused a lot on helping our businesses scale. Not just people buy a business, but okay, you bought it, now let's get it to 10 million instead of 1 million. And so it has to really ladder into the same portfolio. Otherwise you're distracting yourself.
- [46:32]
Shane Parrish
What are some of the biggest lies or misconceptions that you hear about money?
- [46:37]
Cody Sanchez
One, that it's hard to make. I do not actually think money is hard to make. I think it is hard to get a skill set that is valuable. And once you get a skill set that is valuable, money can be very easy to make. And people confuse the two. They say like money's hard and it's like, no, no, you just haven't obsessed yet on having a skill set that people will pay enough money for. But you can do that and then money can become easier. I also think it's a very freeing idea. Like if you keep telling yourself making money is hard, making money is hard. Making money is hard. Well, it's going to be hard, but if you keep telling yourself no, it's actually not hard. I just haven't done what is necessary yet to get what I want. That would be first and then the second is that I think money is a cruel mistress. So I always say money likes attention just like a mistress does. And if you don't pay attention to her, somebody else will. And so, you know, I think there's a lot of benefit early on in your career to sort of obsessing on, race to your first 500k and feel no shame about that. It shows that happiness increases post 500k in income or up to 500k in income. After 500k there's sort of these plateaus and it's not really materially different. And then the second thing on it is really obsessing on money on a daily basis. Like are you looking at your bank account? Are you looking at the bank account of your business? Are you looking at how much you make or sell in products? Are you taking one action every single day to make more money? A money related action? And I think if you do those things, you'll kind of be surprised at how you can compound over time.
- [48:15]
Shane Parrish
Are there different skill sets between acquiring and sort of maintaining or keeping your money?
- [48:22]
Cody Sanchez
Oh yeah. I mean it's always in my opinion easier in the beginning to save, but easier in the long term to earn. So you can only save your way to zero. You know, there's very, there's limited downside but there's unlimited upside. And so I do think that what do they call that, they call that like spending creep, lifestyle creep. And so there's certainly that the more money you make, the more you spend and then all of a sudden you realize that you've totally outspent your income. That is a big problem for many people. But I, I think on average we've been told that we need to save a lot more. And here's why. One, if we're saving consistently, what does that mean? It means that we're putting money into third party investment products. It means that we have money sitting at banks. Like if we save, we are helping a lot of other individuals make money. If we earn and invest money in our individual businesses, we are actually giving money back to employees. We are giving money back to local economies like this benefits a few really big guys, saving, earning benefits a lot of little guys. And so I, I understand why society has pushed us to save more as opposed to earn more. I also think by and large money equals freedom. So the more Money you can make, the more decisions that you can make by yourself. And most people, they don't want free people. You know, the, the, the people on high really want us to follow rules and to think in terms of safety, not opportunity. And so I think we should obsess on making money and you should obsess on making money because then you get to push back when people tell you things that you don't want to do.
- [50:08]
Shane Parrish
And then you have freedom.
- [50:09]
Cody Sanchez
Yeah.
- [50:09]
Shane Parrish
100 ultimate freedom in terms of you call it you money, call it whatever you want, but it's like no, I don't want to do this thing.
- [50:16]
Cody Sanchez
Yeah.
- [50:17]
Shane Parrish
100 now I can opt in or opt out.
- [50:19]
Cody Sanchez
Yeah. I mean and you know, in society today it's totally doable. I think it is. It's very hard these days to make a profitable business. I think there's never been a harder time to make a profitable business. Never been an easier time to start business. That's kind of why I obsess on buying businesses because you just know it's already making money. It has a history of past performance. So best predictor of future behavior is past behavior. It's not a guarantee, but it is a higher indicator. And so because of that I like buying business businesses because then you can operationalize them, you can increase the growth. And so, you know, I also think people listening, you know, before I made quote unquote a lot of money, if you would have told me that I would have a nine figure holding company or that I would have all of these small businesses, I would have thought you were crazy. And it just wasn't part of my psyche that that was possible for a normal human being. And even though I get about it on the Internet, I like to push upon people that it's, it's actually very possible for you to have a lot of wealth. You know. Now I don't think you most people want a nine figure holding company actually. It's, there's always something going wrong. There's always challenges, there's always mistakes, it's a lot of stress. But I do think everybody can make hundreds of thousands of dollars a year over time if they focus on earning. I do think that's largely possible.
- [51:39]
Shane Parrish
It's almost like people, they want the outcome but they don't want the trade offs to come with the outcome. We look at the gold medal, but we don't see the training days that are like 4am constantly, the injuries, the recovery, the lack of family time. We don't see everything that goes into making that Possible. And if we do see it, we often don't want it.
- [51:57]
Cody Sanchez
Yeah, I think that's true.
- [51:58]
Shane Parrish
Is there a difference between like a rich mindset and then a broke mindset, then many things?
- [52:04]
Cody Sanchez
I think a couple things. Rich people overall, they really don't believe in that word impossible. You know, they're not like if you said to a really rich person, hey, it's just not possible for you to start this next business and execute on it. Kind of doesn't enter their psyche. So they have what I've always thought of as like an armor of no's. So rich people have gotten told no so many times, they've been rejected so so many times that it almost just bounces off of them. They kind of go, yeah, I'm gonna do it anyway. Thanks for the feedback. I'm gonna try it. I think poor people, they have confirmation bias of no. So when stuff has happened to them that's bad, or when stuff hasn't worked out, instead of an armor of no, they're wearing a coat of no. They're like, yep, just let it in. Let's just build some more on this coat. Let's make this cape longer. And I think if you can kind of visualize it like that, a deflection versus an accumulation of no's, that's the difference between rich people and broke people. And in my career for a very long time, I think you want to be around people who often tell you do more, go harder, keep going. As opposed to people who say, that's not possible. It worked for you, but it wouldn't work for me. And I think that's the difference also between allies. Those are people who want you to win and friends who are people that want you to stay with them.
- [53:24]
Shane Parrish
Them, whatever level they're at, go deeper on that.
- [53:28]
Cody Sanchez
So I think most friendships, if you just think about human nature, like I saw this cool thing, I wish I had like a. It's kind of like this. So there's a monk by the name of Don Di. Sorry if I that up, but something like that. And he talks about how as you get rich, you sort of, and I'm going to hold it like this, you sort of rise up like this. And let's say you're friends, your family, you know, your colleagues, your husband or, or girlfriend or boyfriend or something, they're sort of these corners. And as you start rising in wealth or success, what happens? They're like, wait a second, you're leaving me behind. I love you. I don't want you to leave Me. You seem to be superseding me. This is scary. Natural response. But what they don't realize is right now, as you're rising, they're not really rising, you're just getting further away from them. But as you get higher, you pull the rest of them along with you. And so with most friends, all they see is this bottom part of your journey. They don't actually realize, forward looking, you're going to take them with you. Now, the people who do see this are your allies. Those are the people who want you to win no matter what. And those are the people who see, oh, okay. If Shane keeps winning and then he takes us, you know, with him to some of these events and we meet these people too. And I share his podcast and he kind of shares my new newsletter with. We're all going to win. This is. Oh, man, Shane did it. I can do it. That's an ally. Oh, man. Shane's gotten kind of too big for his britches. Oh, man. Shane thinks that he's better than us. I never hear from Shane. I miss you, Shane friend. And, and I think in our life, as we're in our growth journey, obsessing on a few more allies is helpful.
- [55:06]
Shane Parrish
Do you lose friends as you go up? What, like, what's your experience with that?
- [55:11]
Cody Sanchez
Yes, I think, I think that success by and of itself these days is sort of a lonely pursuit and that when you are focused on building something, you know, you're not boring, you're building, but you are in an era where if you don't have focus, you won't win. It is, it is definitely a relentless grind in order to build something completely new for yourself. And so, I mean, I had a, like, I remember I had a series of girlfriends in college that I was quite close with. I think very highly of them still to this day. But I remember, you know, I posted this one picture on Instagram, really sort of like flippantly. I didn't think anything of it. And in the picture we'd all been drinking, so we kind of looked goofy. We were these young college girls, you know, so we're like, I think they look cute. I look a little crazy. And, and I, I posted it like, something like, you know, I, I've been there partying, just like you have to, you know, you can, you can do both, something like that. And, and I remember one of them, you know, texted me and was sort of like, how dare you? You know, you think so little of us. We're just, you're partying, you know, shithead. Drunk friends. And we were never the same again after that. So I apologize profusely. I was like, I don't know how you could have seen that. That is not at all what I meant by it. In fact, never even injured my consciousness. And of course, I'll take it down if it makes you feel uncomfortable. And. And from that moment, we've never been friends again. And this group of girls and I have never been friends again. And at first I really couldn't wrap my head around it. But I do think what happens is when you become really successful, you are a mirror on the things somebody else could have been. And so you are a reflection of every decision that they made that was short term as opposed to long term. And so I've lost many a friend by the mirror. And I think that is, I always openly welcome them back and wish them well. But I. I do think that you won't succeed very far if you stay around the same people that you started with.
- [57:16]
Shane Parrish
I never thought of it like a mirror before. That's a really interesting way to frame it. Yeah. Do men and women think about money differently?
- [57:25]
Cody Sanchez
I want to add one other thing. So one thing I. I don't like, actually, is I have noticed a lot of people on the Internet saying things like, you know, if they're not above you, if they're not in front of you, you've got to leave them behind. And if. If you know they're not moving as fast as you are, then you know they will. You don't need to be friends with them anymore. And I totally disagree with that. And in fact, the research really shows the opposite. Arthur Brooks does an incredible series of studies about having what he calls worthless friends. And worthless friends are the friends that you have no transactional value you want from. You don't want anything from them, they don't want anything from you. They want to hang out with you, they want to go on a walk with you. They don't want your email list, they don't want access to your money. They just want to have a beer on a Friday night. And these friendships end up materially increasing our happiness, these worthless friends. Whereas these transactional friendships actually end up in many ways decreasing our happiness. And so I think when people say, hey, if they're not on your level, ditch them. They don't actually understand the research. And I had a friend here, actually, who I saw get really, really successful on the Internet. And I saw the most fascinating thing, which was I just started meeting people who had done business with this person before. And every one of those people, as this person superseded them, had sort of a negative story to tell about them.
- [58:51]
Shane Parrish
Oh, interesting.
- [58:52]
Cody Sanchez
You know, and it was like, yeah, the second that, you know, they got bigger than I did, I became irrelevant. You know, the second that I was no longer useful, I was after five or six of these stories. I thought, wow. I don't think that people realize the repercussions of not allowing other people to rise with you. And in fact, your reputation is one of your most valuable assets. And people often think about their reputation online as, like, to the masses, am I a good person? It's like, nah. To the guy at the grocery store, are you a good person? To the person that you did a deal with who was your last employee or partner, didn't work out, are you a good person? And if you're not, to those people who are worthless to you, then it will come around. And I truly believe that. And so I just want to say that because I've thought it before, too. Like, hey, if they're not on your level, keep going. I don't actually think that's true, and I think it will catch up to you. And I've seen it firsthand.
- [59:46]
Shane Parrish
One of Buffett's filters, I think, if I remember my reading correctly, is that he was super friendly with people, but if they asked him for a favor, it was an indication that they weren't necessarily friends in the other person's eye. And I thought that was like an interesting sort of. Not like the common favors you would do with your friends. Yeah, oh, my husband needs a job or my wife needs a job. Those kind of favors. Yeah, I thought that was an interesting thing, and I never thought about it again until this moment.
- [60:14]
Cody Sanchez
I think I've had a lot of screens over my. I've only been on the Internet for, like, three years or something like that. You've been playing this game a lot longer, so, you know, you're just. Your spectrum is so much wider and more vivid than mine is.
- [60:26]
Shane Parrish
Oh, you play it better. You have millions of followers.
- [60:29]
Cody Sanchez
Well, do I play? But I like gamifying things, and I think you like deeply understanding things is sort of how I perceive you, at least. And so I find growth to be really fun. That's, like, one of my favorite games. So I obsess on growth and. And sometimes to the detriment of deep understanding. And I think that seems to be one of your skill sets, which is really beautiful. But the. In the time that I've been on the Internet, I think everybody's My buddy. So, like, you know, when I meet people, I truly am like, no, he was so nice. We did a podcast. We're like, best buds. We're texting each other. And I've had to realize, oh, like, they're just really charismatic. We're not that good of friends, and that's okay. And so to your point, I don't know. On the favors thing, I guess I'm always curious how people are going to be when people lose money or things go sideways.
- [61:20]
Shane Parrish
Totally.
- [61:21]
Cody Sanchez
When people are talking shit about you, when it's inconvenient to be your friend, who will be there. And so when those moments happen to me, one of my favorite mentors always said, allow, accept. Thank you. Let it go. And so when something tough is happening, I'll go, okay, this is happening. I accept it's happening. Thank you for this happening. Now kind of let it go. Like, whatever it is, move on, and I'll kind of see who there checks in, who there speaks out. And that, I think, is really valuable feedback. It's not that you're judging them. You're just saying, how much am I going to give you long term? Like, how much of me do I want to invest in you as a fellow human? So I do believe in choosing sides, and I think I want to find people who have at times done a really inconvenient thing for themselves because it was the right thing to do or they thought it was the right thing to do. That's a great indicator to me of. Of a human with more integrity.
- [62:19]
Shane Parrish
Do you have that mindset based on what you just said, it sort of brought this, and correct me if I'm wrong, that you're either with me or against me.
- [62:28]
Cody Sanchez
No. But I have a mindset of, can I trust you? Can I trust you? In my darkest moments, you know, like, I. I joked the other day, I had a little incident with a girlfriend, and I joked with her about it. I was like, man, wait until you meet the real me, you know, like, if this pissed you off, wait until you. Wait until you really get to know me, you know, And. And we joked about it, and then we were fine. But I do have that belief that, like, you know, I want friends who will hide you in the basement, you know, when you need to. And Chris and I, who's my husband, he and I talked about that a lot during COVID because there was so much craziness happening in the world. And. And I remember thinking, if we have an unpopular view, who would hide us? Not because they even believe what we believe. I don't think you need to do that. But because they're like, you're my. You're my people and I love you and I'm going to be there for you. And so, no, I don't believe in moral absolutism. Like, it's actually interesting that our company, right now, for the first time ever, we have something so beautiful I've never seen, which is we have really, really conservative people at my company and really liberal people. And we talk about it. And in fact, we often, often jokingly label each other. Like, we'll be like, you know, blah, blah, blah, you know, the commie and blah, blah, blah, you know, the, the, you know, right of. The right of Rush Limbaugh, you know, and. And what's interesting about that is with these groups of people, they start to respect each other as humans and realize that political views are, like, maybe the most uninteresting thing about most people. And I've never had that at a company before, and I really like it. And so they have this curiosity about one another as opposed to judgment.
- [64:11]
Shane Parrish
I have a theory that part of this whole work from home thing is actually amplifying political divide. Because we go to the office, we have to work with the person who thinks opposite to us. And all of a sudden it takes the power out of that position. It takes the, oh, they're a nice person. They might believe something completely different. But now all of a sudden, like, it just tones down the emotion. But when we don't go to work, we sort of. We're on a laptop and we're commuting. The whole world just looks like us. Like, our friends probably vote the same we do. They make the same amount of money that we do. The world looks. It starts to get insulated.
- [64:47]
Cody Sanchez
Yeah, it's a beautiful view. I mean, some of the research shows one, higher levels of depression and anxiety with work from home. So I actually think that was a great lie. There was a big, beautiful lie. It's sitting in our sweatpants in our house on zoom meetings all day would actually make us happy and give us more freedom. Hard disagree. I do think that sitting in a cubicle, you know, under fluorescent lights is a form of, like, mental insanity over the long term. And I have no interest in doing that again. But, but I do not think that we humans were meant to be isolated. And there's much research that that supports that. And to your point, it's so much easier when you're an anonymous troll on the Internet to hate everybody and to Think that they hate you. And another thing that I learned from Arthur Books, who's become a friend of mine, and he wrote a book called Love youe Enemies. And. And I remember I have this one Twitter troll. And, like, Shane, when I tell you, like, I mean, almost every day, like, tweets about me. Weird stuff, like, she's a dude. You know, she was a secretary at Goldman Sachs. Just, she. She never even worked at Goldman Sachs. She owns no businesses. She. I don't know what else. And all these things. And it was annoying me, to be honest. I was like, like, do I need to be showing my tax return? Like, want to picture me in a bathing suit? And. And at first I remember wanting to clap back, and I thought, nah, don't feed the trolls. That's not very useful. And then second, I was, like, very judgmental of this person. I was like, what? A basement dweller, you know, blah, blah, blah. This person. This person. And then I read Love your Enemies and talked to Arthur, and he was like, just try this thing for me. He's like, just, like, very sincerely, wish this person well. Like, anybody who is in your mind or your mind, okay, in your mind, wish this person well. Like, send them, like, good, good vibes and hope that. That they are wonderful. And he said, because wonderful, happy people don't do things like this. And I was like. And then I did it. And I will kid you not, this is my woo woo. Because we're in Austin, crystal center of the world. They publicly posted, like, two weeks later. A. Hey, sorry. Cody Sanchez, I actually think you're really. You seem like a really good person, like, out of nowhere, and DM to me, like a dissertation sort of apologizing. Oh, wow, I know now I don't think the universe does that every single time, but it taught me a lesson, which is, like, every time, like, I get hate. I just try to send back a little love because I think it's hard to combat, and I think negative emotions are really draining and a lot of work. And so instead I try to not have that.
- [67:29]
Shane Parrish
The temptation, I think, in that situation is to, like, go tit for tat, right? Like, to reply to every post, to, like. And then you get angry, and then you're sort of, like, defending yourself. Why didn't you do that?
- [67:41]
Cody Sanchez
Arthur really helped me. Simultaneously, I think another truth is, like, especially with the Internet, if you mute block these people, ignore. They don't exist in your sphere. They're. They're not in the room with you ever. They're not in your business, they're not in your friend group, you're not shaking hands with them. So the only way they exist is if you allow them, which is actually a fascinating sort of phenomenon to think about. But if you don't look at their stuff, how do you even know it's happening? You could say, well, other people could send it to you, Tell people, don't to not send it to you. Don't look at the comments, ignore the DMs. And the only times that like this really gets to me is when I think there's a kernel of truth. So like if, if, if we made a typo on a post and so somebody was right about that, or if, if we get something wrong or, you know, if we write a story and it wasn't the right one, you know, then I'm like, okay, that bothers me. But for the most part, they don't exist in my sphere because if they're online, it's only if you let them. Like Mark Andreessen, famously, who I'm a fan of and have grown to respect. Like he uses the block button pretty consistently because he just doesn't want to engage with those people. So does Nuval Ravikant. He's like, wish you well. But out of my sphere because it's my energy is like too precious to protect.
- [68:58]
Shane Parrish
Yeah, I think it's an underutilized feature for anybody who has a large social media following.
- [69:05]
Cody Sanchez
Yeah, I think so too.
- [69:06]
Shane Parrish
I want to circle back to reputation. I want you to go deeper on reputation. Like what, what do you see as the advantages, disadvantages? Like how do you think about reputation as a concept?
- [69:16]
Cody Sanchez
First of all, Buffett said the most important thing. Which is. What did he say exactly? It was something like he said, if an employee makes a mistake and loses us money, I will allow that. But if an employee makes a mistake and hurts our reputation, they will immediately be fired. And I think that's quite true because it's very hard to get back your reputation and especially if it's your fault, like you did something that is out of sync with who, who you say you are publicly. When I think about reputation, I try to be as transparent as humanly possible on all the things good, bad and other wise that are true with me. So for instance, we know that a lot of female founders get a hard time and get like, you know, Business Insider pieces written on them for being too harsh and too whatever. And there's sort of this phenomenon of this happening to female founders and, and I think sometimes that's because they Portray themselves as, like, sweet, kind, you know, I'm here for other women, whatever, And. And I'm always nice all the time. And so I don't do that. I'm like, I'm tough. I'm tough sometimes. And, you know, and. And we work really hard, and if you don't want to be a part of that, don't work at my company. And so I try to say the quiet part out loud as often as humanly possible. And then we do what's called inoculations against reputation, which is basically, can you say things a few times that you think are very, very true, but you know, will be very, very unpopular? And if you do that so often, then people don't get that surprised by what you say. And I think Joe Rogan's a great example of this. You know, he often says the quiet part out loud. He says things he knows will be quite unpopular. And because he does that, people, one, think he's telling the truth more often. And two, his audience is inoculated because the people who really hate who he is and the things that he does, they just bail. Like, they leave. And so every so often, I do kind of this culling of our audience because I don't want to have to deal with trying to be a perfect person. I'm very flawed. And with our company, contrarian thinking, we're very flawed. We're all just like a bunch of, you know, sort of two bipedal monkeys running around trying to figure it out. Right.
- [71:31]
Shane Parrish
Like, we all have flaws. We all make mistakes. We all have bad days. We all. But there's no tolerance for that. Yeah, because you're. You're Cody Sanchez. Like, you have millions of followers like you. You can't have a bad day.
- [71:42]
Cody Sanchez
Yeah, it's. It's weird. I also think that. I think your reputation is also. It can be cultivated. And so, you know, it's this series of small decisions you make every single day that becomes the person that people think you are. And so I try to really have congruence between that. I mean, you'll see, you know, if. If. If you worked for my company, I'm not asking anybody to do anything I wouldn't do that would be very hard for somebody to claim. It would be very hard for somebody to claim that they work harder than I do. I. I don't. You know, I work quite hard. I wouldn't really allow that. There's no world in which I say, chris and I, my husband and I have a perfect marriage. You know, we fight all the time we try to figure it out. So I do try to say all of those things. But I also remember that I asked for this. You know, I got on the Internet, I got obsessed with this idea of growth that is on me. And so I think it's one thing if people get famous sort of by accident, maybe, or they're a CEO of a company and they were just trying to grow a company and then they get slaughtered. But if you're going to try to be an influencer, if you're going to try to be a celebrity, like, it comes with the territory, I think. So that's a decision you have to make one way or the other. But one thing I am shocked by, that I don't think people are honest about is people who are very famous and well known on the Internet, they're obsessed with their reputation and brand. It is never by accident. This shit is cultivated. It is created, it is mocked up, it is PowerPointed. Like, I always like to use the Rock, who I think really highly of. But when you look at the Rock's Instagram, for instance, count for me next time. Just for shits and giggles, how many of those pieces of content are an ad for, like, his energy drink, for his face cream, for his next movie, for his, you know, XFL for wwe? Almost every post is like, I would say probably somewhere between 80 and 98% of the posts are, wow, how could he get away with that? Because he has such a strong brand and every single thing that he promotes is so tied into his brand that it feels effortless, but it is absolutely not effortless. And so give yourself some credit. I think anybody who's trying to make a brand online or you're trying to build a business, like, nobody gets famous by accident. For the most part, they all cultivate it. Even like the Hawk TUI girl or whatever that chick's name was, she's got a whole team behind her. She's got agents now. She had people doing her filming for her the second that she went super viral. People creating her, People funding her own content creation process.
- [74:16]
Shane Parrish
Yeah.
- [74:16]
Cody Sanchez
And so I think we all need to be a little bit more honest about that because people are like, oh, I just grew. Because, you know, it just happened one day and you're like, now you didn't. That's not how it works.
- [74:26]
Shane Parrish
So as I was doing research for this, I was watching some YouTube. My kids are totally into YouTube, so we're watching YouTube. We're like, come across some of your stuff. I'm trying to Research this. My kids are interested in business.
- [74:37]
Cody Sanchez
How old are they?
- [74:38]
Shane Parrish
15 and 14.
- [74:39]
Cody Sanchez
Oh, it's amazing.
- [74:40]
Shane Parrish
You look young and so. Thank you. I don't know, I feel old on the inside some days. And one of the shows we used to watch was Undercover Billionaire.
- [74:49]
Cody Sanchez
Yeah.
- [74:50]
Shane Parrish
So my youngest son was like, ask Cody what she would do if she was dropped off like Grant Cardone was. And I forget the other guy's name. And you know, you're in. You get a hundred bucks, you get a phone, you get no contacts. You're the same age you are now. You go to this random rural town. And he wanted to know the answer to this question.
- [75:09]
Cody Sanchez
It's a great question. I'd go find the most expensive thing to sell that I could sell. I think the fastest way to make money when you have no money is find other people who already have something valuable and sell it to other people. And so I remember, I think I watched one episode of the one that Grant was on and he was in like Philadelphia or something and it was sort of like a manufacturing train town. In that instance, I think I would go apply for as. I mean, you go to the library because you don't have a phone, right. And you maybe have a car and.
- [75:40]
Shane Parrish
Gas, I think get a cell phone and you have a car and a full tank of gas, but you have no place to stay. You only have 100 bucks.
- [75:46]
Cody Sanchez
Yeah, I. That would be the very first thing I'd do. So I'd probably go to the library. I'd get on the computer at the public library and I'd start looking up in this geographic area or because remote sales happens now, I would go figure out how could I get something where I could sell. Sell something as fast as possible and with its highest of a price tag as possible. And, and the reason why is that's just a game of. Of that's a numbers game. And so, you know, especially with my skill set already, I know how to sell things. And if somebody already has a market where other people are paying for it, all I'm doing is slotting myself in. And then once I had done that, I would probably find a business where I could get a couple cut of the business for the sales that I brought in. So. Especially because the goal is to like get to a million bucks, right? Is that what you're supposed to do?
- [76:31]
Shane Parrish
3 months, 90 days to build a million dollar business?
- [76:34]
Cody Sanchez
Oh, yeah. I mean, but I wouldn't build it. That's where I'm probably different than Grant. I would go and I would Negotiate a portion of the business. I would basically go and I'd say, all right, you're selling. What would be? What would be? I mean, I probably do something in the online space because I play around in that space so much right now. So I'd go to a bunch of businesses that were online businesses that sold things online. I'd probably try to broker deals between B2B companies and, and I try to close a couple of those deals and then say, can I get a percentage of your company for all the deals that I brought in? And. But if you didn't have that skill set to negotiate deals to start, you just start with selling as much as humanly possible. And even if you did that, if you did that with a boomer based business where that boomer wants more sales, needs somebody young and hungry, you could negotiate part of that business just to apprentice for them and take it over over the long time using seller financing. And that I think is so underutilized today. Because you've run a business before. How many times in your varying businesses have you been like, somebody came to me with the right price and the right terms to sell. Yeah, fucking take this thing, take it. And so business owners have that all the time and people underestimate it. So there'd probably be a lot of door knocking. I'd be going door to door saying, have you ever thought about selling your business? Have you ever thought about selling your business? Have you thought about, thought about selling.
- [77:55]
Shane Parrish
Your business and using seller financing to basically acquire the business with very little risk to you a hundred percent? That's a really interesting approach. Nobody on the show did. The reason we watched this, what I loved about it just being a parent is it's just the mindset of the people going in wasn't the person, wasn't how they went about it. It was the fact they were rejected over and over again. And they just kept trying new things until something stuck. And then they would like, oh, I'm going to go, I'm going to do more of this. This worked. Now, okay, now I can feed myself. Now I can sort of like get a hotel. Now I can start building a business. Now I can get a base, I can build an agency. I can convince other people to be my allies.
- [78:32]
Cody Sanchez
Yeah.
- [78:32]
Shane Parrish
And I just love the mindset that people and I was like, this is the mindset you need as kids.
- [78:38]
Cody Sanchez
So true. I mean, I should play around with that a little bit more in our content because I think one of the things I like to, to try to push upon people is you're way more capable than you think you are.
- [78:48]
Shane Parrish
Totally.
- [78:49]
Cody Sanchez
You just haven't done what is required. You've done what you wanted. And if you were honest with yourself about that, you would realize that if I worked 10% harder than I'm doing right now on a thing that I really do not want to do very first thing in the day, I would build up willpower that would allow me eventually to do the things that most people are not willing to do. And when you're willing to do that, you can win over time. I mean, even small things. Like, I have a friend here. He's a really good guy. He's very quirky, but he, you know, he's. He's one of the guys where. When I wasn't on the Internet at all, I was running a finance company back in the day when I first met him, and I just. I reached out to him randomly. Now, mind you, I had a lot of money at the time. I knew nothing about the Internet. And, like, a lot of money meaning, like, you know, I was doing the. Okay. And I reached out to him because I wanted to understand the Internet. I thought that in the future we might sell investment products and build investment businesses with the Internet and not with my old method, which was like going to pensions and sovereign wealth funds, door knocking, steak dinners, all that stuff. I think I was right, and I've proved that. But back then, I wasn't so sure. I was like, how do newsletters work? Like, what does email look like? Like, finance. We're so. We're dinosaurs with that.
- [79:58]
Shane Parrish
And he was the master with sumo me.
- [80:00]
Cody Sanchez
Right, exactly. And so he had a conference or two. Two that I went to. And. And I was just like, you seem really good at emails. You sell things with emails. Like, how does that work? And. And I reached out to him and I sent him. I did research on him online, and I found out that he was into tacos. Like, weirdly into tacos. And so I bought him a bunch of socks that had his face on it in a taco, and I sent them to him with, like, a note that was like, hey, I'd love to learn from you. You know, love what you're doing. No need to respond if. If you're way too busy. Like, because I think that's important too. You know, the. Hey, you don't have to respond. Anyway, for whatever reason, he did respond, and we became sort of friends. And then he helped teach me a lot of things. And if you don't have money right now and you don't know how to make it. One of the best ways to start is just to learn to negotiate things that you don't want to, which is like, he has a famous thing where he goes into coffee stock shops, even Starbucks, and, like, orders a coffee and then goes, I'd love a discount. And then shuts up. And I'm like, what? There's no discount here. And he's like, well, I just love one. Like, if that was at all humanly possible, is there any way for me to get a discount? And often he is rejected, but sometimes he is not. And just those little lessons of, like, if I was on Undercover Billionaire, I'd be going to hotels and saying, like, hey, how could I negotiate a stay for X Dot? Could I do work around here to do that? What do you need help with? Like, you're on your shift right now. What if I take over a couple hours of your shift? Do you think I could stay in an abandoned room? Like, I would just be trying to negotiate every single thing I could. Because you'll be shocked how seldom Americans in particular do that.
- [81:29]
Shane Parrish
Yeah, we're brought up not to do that. It's like, the price is the price.
- [81:32]
Cody Sanchez
The price.
- [81:33]
Shane Parrish
Whereas a lot of other cultures, it's sort of like the price is the starting point.
- [81:36]
Cody Sanchez
Oh, my God. We have this guy that works for us in our investment team. His name's Karim and he's Egyptian. And I think learning from other cultures on negotiation is such a life hack because they do it like a second life language. If my first language that's most profitable is money, the second one is negotiation. And Kareem will do it with this huge smile the whole time. That's a big key. So every time he asks for something, there's a big smile, and he's like, well, you know, he's very diminutive. He's like, kind of shrugged his shoulders, like, well, we could do this, but, like, we could do that. Like, what do you think about that? And the whole time you're negotiating with him, you like the guy.
- [82:11]
Shane Parrish
Yeah.
- [82:11]
Cody Sanchez
And he kind of weasels his way in to getting you to consider another perspective. And. And he jokes that, like, that's just like Egyptian dinner conversation. That that's. It's nothing. And he's not that special. But having people on your team and learning from friends from other cultures is really powerful. And so any chance you get to. To play with other people who have normalized to this idea of barter, I think is a great way to get better at making money.
- [82:37]
Shane Parrish
The key Is like, the first no is really the final no. Yeah, right. Like, if you stop at the first no, that's a great line. Right? Like, you. You're done. But, like, most people are not going to go past the first no. So you've already differentiated yourself. I do this with the kids. Like, I live in Canada. We get snow. So I make them, like, knock on doors and shovel driveways. And we got to a point where somebody would have a driveway service. So literally, they're paying somebody to come, like, plow their driveway. And the kids, they'd be like, no, I pay a service. And, like, at first, the kids would walk away. And I won't negotiate. I'll just do labor. But I'm like, you go to the door, I want you to get rejected. I want you to learn sales. And then they eventually get to this point where they were like, yeah, but who knows when they're going to get here? And they're probably doing like a hundred driveways a day. We're doing like 10. Who do you think is going to do a better job and take care of your beautiful car out there? And, you know, they would get to a point where they would actually the person be like, yeah, yeah, go do the drive by. Right? It's like, the first no is not the final no.
- [83:37]
Cody Sanchez
That is such a good line, and what a good way to try. So one of our portfolio companies is called Resi Brands, and they have that one painter, which is a painting company, and Pinks, which is a window cleaning company. And so I was going around with the CEO Steven, for that one painter, and they were painting one house. And every time they paint a house, they ask their employees to door knock for an hour. So while somebody's inside painting some of it, they door knock. And so I'm like, let's go do it. Let's go knock on a bunch of doors. In Texas, after about, I can't remember, six or eight doors, one of the people that we knocked on was like, oh, actually, I've been needing this and this and this, and that's a $5,000 purchase. And so in the span of 20 minutes, the company made $5,000 from six or seven door knocks. And so how often is money sitting right in front of you, but you're just not doing what it takes to grab it? And. And I think asking and rejection is one of the biggest reasons why we don't.
- [84:33]
Shane Parrish
I love that. That's awesome. I don't like being in the house when I get these door knocks. No, I get Them all the time.
- [84:39]
Cody Sanchez
100%.
- [84:40]
Shane Parrish
Yeah. What's the difference between a good business and a bad business?
- [84:44]
Cody Sanchez
In my definition, good business equals profitable cash flowing. What I call a cash flow versus cash suck business. So you get paid upfront for a service, not after you provide a service. Sustainable. It can exist for a long time. Historical. It has existed for a long time. Understandable. You can explain it to grandma really easily. And you have what's called the Lindy effect, the likelihood of the future continuing to cash flow just as it did in the past. Those are my parameters for a good business. A bad business would be a business that is unprofitable, hard to understand, hasn't been around for very long. You get, you have to provide the service before you get paid for the service. That is a business that is just much harder. That's a harder game to win. And so as often as possible, I want to have the lifeblood that is money come to me in my businesses. And that way I can make more mistakes as an entrepreneur because I have sort of a. I have a pretty. I have a trampoline that has a lot of give to it as opposed to, I think of cash suck or bad businesses as a concrete floor that has no give. You're going to jump out of the window sometimes and fuck things up. And so it can help if you have cash flow in it because that allows you to jump like a trampoline.
- [85:59]
Shane Parrish
A lot of businesses think they have a marketing problem when they really have a product problem. How do you going in looking at acquiring a business, determine if there's a marketing problem or a product problem because that's going to make a difference for you as an investor. Owner.
- [86:15]
Cody Sanchez
Yeah. Three things, three numbers you need to look at if you want to figure out if you have a company that needs to sell more things or needs to create better things. You need to figure out one, what's your referral rate? How often do your customers tell somebody else that they need to buy something from you? Two, how often do your customers repurchase from you? So your repurchase rate, they come, they buy one water bottle, not enough, you need to buy two or three. And the third is churn. How often do the customers, once they have you on a subscription plan or they're continuing to buy from you, bail out of that plan. And those three numbers can tell you if you have a healthy product business or if you just have a great sales team. You can have both types of businesses, but it is just so much harder when you have to continue to resell your customers again and again and again.
- [86:59]
Shane Parrish
Much easier to keep them find new customers, keep growing 100%.
- [87:04]
Cody Sanchez
I think it's always easier to sell your same customers more things continuously. Then you can sell your customers more expensive things continuously. Then you can get your customers to refer their friends to buy more things from you continuously. And then you can ask your customers to say nice things about you continuously. AKA reviews. And so those, you know, reviews, referrals, retention and reduction of churn are sort of the four main Rs in a good business.
- [87:30]
Shane Parrish
One of the things that a lot of people listening to is hire people. Whether they're hiring within a company or they're hiring as a small business owner or maybe even a large business owner. If you could only have two questions to ask a candidate, what would you ask them?
- [87:44]
Cody Sanchez
Well, first, if you're going to hire somebody, the first question is who are you and what are your strengths and weaknesses? Meaning you yourself, oftentimes your first hire in a business needs to be somebody who can do the opposite of what you can do. So it's actually not about them, it's about can you define the problem first? I think most of the reasons why good hires do not work out is because the person and the problem set has not been clearly defined. We tend to like people that are like us. We shouldn't always hire people that are like us. In fact, we often should not after we've determined, okay, I need this type of person to solve this type of problem. The question is, how can you figure out are they that type of person and can they handle that type of problem? I think a couple things that we our cheat codes. We use something called the Colby test. And so Colby is actually allowed from employment certifications for people to figure out what type of personality they have. And so it's basically like what fills your tank. And so there's like four characteristics to it from fast implementer. So like we do things right away. I'm sorry, fast action to implementer, which is like I like to do things consistently over time. I am high fast action and low implementation. So I need to have an implementation person. Often in my business, I don't need a bunch of ideas person. I'm kind of an idea person. I need the opposite of that. It's also what EOS calls the visionary versus the integrator. I just think the word visionary sounds gross. You know, who's like, no, I want to be the integrator, not the visionary. It's a weird, I don't love that Terminology. So the question that you need to be asking is how can you get to the root of whatever the problem set and Persona you're looking for is defined? And so it's really going to depend. If I know that I need an implementer, I'm going to be asking questions. Like one of my favorite ones that I did the other day was, you know, I'd love to see how you organize your calendar. Can you show it to me? So real time pop up on zoom. What does our calendar look like? If they're an implementer, it's probably highly detailed, it's color coded, it's assigned specific timelines. If there's, if it's kind of all over the place or there's mismatched things on top of it. Not an implementer. That's a very easy one to tell. Another thing I might do if I'm looking for fast action basically is I would, I might say to them something like, well, hey, we're in the business right now. This is our problem. What would you do about it right now, today? And I want to see can they think quickly through what the next steps would be? Well, I would do X and Y and Z and X and Y and Z. And then I might say to them, how, how long would that take you to do something like that? See how quickly they could calculate what the timelines are. If I already know what the job is, I know if those timelines are reasonable or not. And so I know how good they are at calculating their own time and how speedy they are in that regard. And the third thing I do is I probably have some sort of follow up. So I'd be like, all right, you think we should do X and Y and Z? I'd love to pay you a thousand bucks to do a project scope for me. That would be amazing. Like how fast could you turn around a project scope for me? And if they're like oh, a week, I'm like, oh, that's not my guy. It needs to be a 24 hour window. Doesn't need to be hyper detailed, but I want to see sort of like a one page brief and then I can see what they think. I'm not a good enough interviewer to not need like an exterior tell. I really need. Show me what your brief looks like. Show me what your calendar looks like. I think some people just can tell by communications. I can get, I can get persuaded by somebody.
- [91:16]
Shane Parrish
I think it's really rare that actually people have good intuition over hiring. I love what you said because it's hard to fake. Like, show me your calendar right now. I can't, I can't make it look good. I have to do it on the spot. And the same as, like, what would you do? Like, it's harder to fake that. You know, something in those cases where so many people are taking credit for, you know, I worked with Mr. Beast and you know, I know YouTube well, what did you do with. And you can't really verify it. So it's sort of. They have so much and then they get in and you're like, oh, God, like, what? No.
- [91:49]
Cody Sanchez
100%. Yeah. I mean, I think if you want to make a lot of money, you got to figure out hiring, that every problem is a people problem. Every additional profit is determined by people. And so that's been a hard one for me to learn because I do like to go fast. And a lot of times I like to do it by myself, you know, and I, I can execute fast, so I kind of go, but.
- [92:10]
Shane Parrish
And then you want to hand it off to somebody else.
- [92:12]
Cody Sanchez
Right. But once I've really gotten good at leading a team and bringing more people in, I've realized like leadership. I get now why there are so many books on leadership. I didn't used to, you know, when you're young and starting out, you're like, just tell me how to make more money. Just give me the playbook. That's a wrong question. That's the wrong ask. The right ask is, how do I create a vision so big that other people think their vision is bigger with me? And then the second question is, how do I become so good that they want to be with me and work with me because they think that I'm better in some instances. And if you can't do those two things, you'll never attract top talent. And then it's, how do I become so good of a leader that I'm constantly helping somebody become a better version of themselves? Because if I do that, it becomes addictive. And people love to be around other humans who will help them become better if they're high performers. Totally. I actually am not so good at like, I forget my own birthday, I forget my husband in my anniversary. I'm not, I'm not the best at like high empathy, touchy feely stuff. I don't know why. And, and so I think some people think, well, to be a good leader, you got to know their kids names, and that's probably a good one. But like you, you have to go really deep with them. You have to know everything about that employee. And that's just not how I lead. You know, I lead by being like, what do you want to achieve in life? You know, what are your big goals? Because I bet you're an amazing parent. I'm not a parent, so I'm not going to tell you how to be better at that. I'm sure that you have incredible hobbies that you're good at. You can go do that by yourself. I am here to help you make more money, become a better version of yourself, and achieve what you want in your career. And that's interesting to you. You should come work with me, and.
- [93:50]
Shane Parrish
I'm going to do it in a genuine way to you as a person. 100% not going to fake that I'm interested in XYZ when I'm not. Or.
- [93:57]
Cody Sanchez
Yeah, I got murdered on the Internet once because I said, it's one of my dear friends who's been an employee of mine for a long time. But I was like, I did not want to hear about your child's soccer game. And. And I just.
- [94:09]
Shane Parrish
I can see why that would go side.
- [94:11]
Cody Sanchez
Oh, just murdered on the Internet. And I was like, no, I stand by it. I actually do. Not that. And I think that's incredible that you care about that for your kid. But what I'm here to care about for you is, like, your career. And sure, people can pretend one way or another to care about that, but they don't actually care about it.
- [94:30]
Shane Parrish
You get those casuals, like, how is your weekend? And somebody launches into more than a sentence, and you can just see people's eyes. Like, I used to answer, like, oh, I thought people were genuine when they were answering this. I'm like, Like, I did xyz and, like, I can see the gloss in their eyes. Yeah, they don't really want to know.
- [94:46]
Cody Sanchez
No. Well. And, like, how interesting are those stories? You know, it's like, I think as a society, somehow we've lost, like, the ability to be honest, and we think that being nice is the same as being kind. And I don't think that's true.
- [95:03]
Shane Parrish
Talk to me about that.
- [95:04]
Cody Sanchez
Being kind to me is when you see somebody struggling on the side of the road with a. You know, with a flat tire, you get out and you help them with it. You know, being nice is pretending to listen to somebody's story about their kids and thinking that. That, you know, they'll like you more because you pretend to be interesting. Being kind might be like, I'm so excited for that for you. Like, hey, you know I gotta go do this other thing and work right now. But when you need help on that thing so that you can actually leave to go hang out with your kid this weekend, I will help you with it so you can get out faster. Kind as opposed to nice, which is like, I'm going to project this sort of performance on you because I think that it seems like a nicety. In society, niceties are sort of like sprinkles. Kindness to me is like, will you help somebody bake the cake?
- [95:49]
Shane Parrish
In your inner circle, how quickly do you recognize underperformance and how do you deal with it?
- [95:56]
Cody Sanchez
I need to be faster. I mean, the good thing, like, for anybody listening is like, you don't have to be perfect. Oh, man. The more rich people I meet, the more I realize how achievable it is for most of us. And so I am highly flawed in hiring. I am highly flawed in letting go of people or changing things when I need to in a business. I. Even though I sound kind of tough, I almost always defer on the side of, like, I wait too long, I think too much about the person. I want to make sure they're okay. Something I'd like to get better at, I think it is the peak of ego to be like, oh, I shouldn't let this person go because they have it better with me than anybody else. I don't know. I believe in their individual capacity to go and do something great that lights up their soul. And if this isn't it, then let's move them on to the next thing. And maybe the reason why is one time at my, let's see, company, two companies before I started my own, I had a CEO whose name was Jim. And Jim is a badass. I mean, he's like a billionaire many times over. He's very intimidating. And I remember I was running a business in Latin America then. We were crushing it. We were growing like crazy. I was running it for him, and. And he called me to a hotel. We were at the Monarch, and we were walking on the beach after one of our conferences. And he was kind of like, listen, I can tell you want to run the business this way. We do business this way. Like, either row my direction or get out of the boat. And not so many words. And I was devastated. I was so mad at him, and I disagreed with him, and I felt like a victim, and I wanted to yell and scream and. And then I realized, like, it's not my boat. So if I want to go row in a different direction, I got to get My own boat. And Jim, you know, essentially in some ways pushed me out of the company. You know, was like, we're not going to do it that way. So either, like, get out of here if you want to do it that way, or do it my way.
- [97:53]
Shane Parrish
But he did something there that a lot of people won't do. Like, he was just direct with you instead of, like, subtly, like, I'm going to give Cody less opportunity. I'm going to push her ex. I'm going to constructively dismiss her, whatever the term is.
- [98:06]
Cody Sanchez
Nope.
- [98:06]
Shane Parrish
He actually approached you head on and communicated with you that hard thing.
- [98:11]
Cody Sanchez
He was kind, not nice, you know, and. And in that moment, he let me leave in a way that, like, changed my life forever. And then I went and built a giant company and had massive success. And I never would have. I. I would have waited a long time. If he hadn't done that, I would have stayed painfully at the company for a long time. And so I always remember that when I'm thinking about letting go of an employee, I'm like, man, you might go achieve something so much bigger than me if you lean into the thing that you actually should do. So go do it, you know, because I can tell you want to. Your heart's not in it here. And I just had a conversation like that with an employee today, literally today, and I was nervous about having it. And this employee was like, I'm so glad you brought this up, because I've been feeling it, but I wasn't sure how. And I think that is also the mark of a good leader is you. You have a lot of conversations with your people who are not aligning in your company perfectly. And you're like. And so they're never surprised. You know, I don't think I've ever let somebody go or moved in two directions from somebody where they've been like, what? Why? It's always been after a few conversations. And that is, I think, a respectful thing for employees.
- [99:27]
Shane Parrish
Do you rehearse that conversation in your head before you have it with them? Do you just walk in?
- [99:31]
Cody Sanchez
Yes, definitely, I rehearse. Yeah. I try to put myself in their shoes. How would they feel in this situation? What would they want out of this communication? I mean, Sun Tzu has a great line, which is, give them a golden bridge on which to retreat. And he talks about his enemies in this way. And I think, you know, giving your employees a golden bridge on which to retreat is lovely, too. You know, if. If. If you've ever worked at a company and somebody gets fired at that company. And then the boss talks really badly about that person. It doesn't actually make the boss looks better. It makes you think, ooh, so when I eventually leave, they're going to talk about me like that. And so I try to never do that. Now I'm honest, I might say, hey, we have a culture here that mandates X, Y wasn't happening. And so for that reason we've parted ways. I'm not going to sugarcoat it or pretend that something was there that wasn't if that's the case. But in most instances, instances, you know, unless there's fraud or, you know, something reputational. Most times it's just that you two have been together for a period and that period has passed, and that's totally okay.
- [100:36]
Shane Parrish
Do you do performance improvement plans or are you just like, no, like, that's never going to work. I'm not going to invest in that because now, now that's an investment on your part too. Right. It's like, I've already invested months, time, salary, money, and now like to do this, I have to do more. Like, how do you think about that?
- [100:52]
Cody Sanchez
Typically, we do improve performance improvement plans for employees, not at the executive level. You know, if we have executive level people, which is usually the people that I am hiring or firing now, those people, we start with the end in mind. So when people come onto my company, a hack to never have somebody be surprised by being let go is to start with a 30, 60, 90 day plan with every single person that you bring on board, even a new assistant. Right. And those 30, 60, 90 day plans have very specific outcomes. And if those outcomes don't happen at 30 days for your first check in, first red flag, they don't happen at 60 days. Second red flag, third red flag, you're gone from the company. And then we have that on a quarterly basis too. So we have, you know, KPIs key performance indicators. And if you're hitting those, then we're good to go. You keep motoring. If you have a quarter where you're not hitting those, okay, we've got first red flag. Depending on the position, if you have another month or sometimes another quarter of it, that means that you're let go. And so there aren't. I hated when I was at a company and I didn't know where I stood. You know, it's like, am I doing a good job? Am I not doing a good job? Why did this person get promoted? Why did this person get fired? It's so confusing. And so I always Wanted something where it was like, just let me know where I stand and how to make more money and how to be successful and how to not. And I think a lot of companies could do that better. We're by no means perfect, but I'm working on it.
- [102:12]
Shane Parrish
That's such a big unlock, right? Just sort of being clear. Because if you're not clear, you're sort of like, floundering. You're throwing darts at the wall and you're like, hoping something sticks. And if it's inconsistent, you just give up. Eventually you're like, well, yeah, this is too taxing on the mind a hundred percent. Meanwhile, if you could focus my energy, we're going to get somewhere. So one of the key traits you mentioned, I think, of high performers was the kind versus nice and the ability to communicate clearly and. And in a way the message is received, even though it's not always sugarcoated. What are the other traits that you've learned from people that you would say are high performers?
- [102:49]
Cody Sanchez
Yeah, if you want to be a high performer, one, you got to be around other high performers. So try to find a group of people that look like the life that you want in one shape or another. Second, if you want to be a high performer, you want to make sure that you always do the things that you say you're going to do. And I think that is probably one of the most underrated ways to win is simply say you're going to do a thing and follow through on doing the thing. That is very rare. In fact, sometimes it's rare for me. I keep a I. I project, manage the shit out of myself because I'm forgetful. I have too many things on my plate, and I want to be a human of my word. And so I have like a notion task list that has databases and priorities on it. And every single day I look at that task list and I say, did I promise something to somebody? And I check off the things that I don't Or I forward expectation set. Like, even with you, I was like, fuck, Shane. You know, I have this thing I'm gonna do this weekend and I let you know ahead of time. I'm like, I'm a little worried. What if I can't do it? Do you think we could push it back? You know, we like over communicate almost, which sometimes can feel like too much, but lets the person know, like, I'm taking this really seriously. Like, I told you that I was gonna do this thing with you, and I want you to know I'm really, I'M thinking about that and I'm making sure I do everything I can to prioritize it. And if I can't prioritize it, you're going to know why, right? And so if you say you're going to do a thing, do the thing, you'll beat 99% of people. The next thing that I've found in high performers pretty consistently is they are helpers, not Yelpers. And, and I think about this like, you know, those people that go to a small business and there's something wrong with small business and they get on Yelp and they're like, right. As opposed to the people who see something wrong in a small business and the. They go up to the owner or they go up to the person and say, hey, by the way, you know, my food was a little cold. I didn't get this. You know, I know it's hard. I just want to let you know. I wanted to let you know. Personally, I always find that high performers are the helpers and they're never the Yelpers. Because when you're a high performer, you realize things like the average small business needs 20 positive reviews to overshadow one negative review. So every time you do that to a small business, you could be crippling it with the one thing that happened in that small business. So I think about that, and the last thing I'll say with high performers overall, they're usually quite giving. And so I think a good indicator of if somebody is a winner or not is do they over give? Almost because they sit from such a place of abundance and mutual winning that they do not think that if Shane wins, I can't win. You know, if he gets this, that means that I'm less than. And don't get me wrong, like, if you're sitting there ever thinking, man, I'm a little jealous of that, or I wish I could do that. I have that all the time too. You know, there, there are times where there's somebody on the Internet and, you know, they're growing faster than we are or their business is doing better and I'll feel that little twinge, you know, in my stomach, like, shoot, gosh, why aren't we doing that? What am I doing wrong? And, and sometimes that's human nature and I might just mute them for a little bit and just not play the comparison game. I'm like, wish them well, but like, I'm not evolved enough to not feel a little bit of that. But then if I was ever to engage with those people, I would be like, you're killing it. I'm so excited for you and I hope you keep winning.
- [106:15]
Shane Parrish
What do you speak spend money on? That would surprise people. Oh, God.
- [106:20]
Cody Sanchez
I. I'm really into lately matching sets. This is such a girl thing. But I love outfits that match because you don't have to coordinate them. That's such a nerd move. So, like a shirt and pants or a dress and a shirt that. That matches. So then you just get to, like, go off and go. So I probably spend more money on clothes like that than I used to. Um, the second thing I spend a lot of money on is learning overall. So, like, if you were to see where I spend probably, like, I mean, houses, cars, I don't really care that much about that. Trips, those probably cost a lot of money. But something that might surprise people is like, how many books am I buying? How many random courses am I taking? Like, I'm taking one right now on notion automations, for instance, because I want to get better at just prioritization of that. I'm taking another one right now that I'm about done with on AI integration for small business. Like, how could we integrate those a little bit better? So I spend an odd amount of money on learning how to get faster and better, and I love doing that. And then probably the third is hiring, like, every chance I can get. I try to think about, where can I give somebody an opportunity for them to be in their zone of genius, but also help me. And Tanner, who's my creative director, always gives me a hard time because people want me to say something like a private jet or like, something. And like, yeah, sometimes we fly private, but I would rather. I would rather hire a couple more chiefs of staff. I would rather buy another business than spend on a liability. And so I don't do that a ton, but I do really want to farm with goats and many horses and chickens. It's just I can't figure out exactly how to take care of it all without getting stressed out about it.
- [108:10]
Shane Parrish
There's like an expansion surface area right when you.
- [108:13]
Cody Sanchez
Yeah, yeah. It's like, should I just go rent one a couple weekends if I really want to? But I have a dude who's become a friend, Jesse Eitzler, and he's like, I bought a farm and it's the best fucking thing I've ever bought. I was like, God, now I want one. So maybe we'll do that eventually.
- [108:28]
Shane Parrish
I think for you, part of that would be sort of like, your weeks are busy, they're Stressful. And this is like getting away, take myself out of a familiar environment, relaxing so that I can come back on Monday and do it all over.
- [108:40]
Cody Sanchez
Definitely. My husband and I are good at spending on experiences more than things. Like, it's not like. I mean, I have maybe a couple nice watches, but I don't really wear them that much. I don't wear a lot of designer stuff. If, you know, if you see me on Instagram, a lot of times the stuff I'm buying is from small, small businesses and stuff like that. I, I think, I think it's sort of a sign of. Actually, I don't want to judge just for me. Labels and, you know, big logos, I've never really, I've never really gotten off on them. I do think there's a bunch of research now. Like, I saw this thing the other day. I don't know if you saw it, that there's obviously something called the pretty privilege. Right?
- [109:16]
Shane Parrish
What's that?
- [109:17]
Cody Sanchez
Well, basically, women, on average. There was a fascinating study showing that women who wear makeup but have the same attractiveness pole in a group of people. So everybody. So you were all sevens, let's say. But a 7 who wears makeup versus a 7 who doesn't wear makeup will earn 15% more over the course of a year.
- [109:36]
Shane Parrish
Oh, wow.
- [109:37]
Cody Sanchez
Crazy, right? Then for men and women who both. I can't remember how they measured this one, but it was some measure of how they dress. Um, like they're put togetherness, but I can't remember the indicator of, like, how they determine that. Um, women earn on average 30% more not just for their, you know, facial symmetry and whether they're pretty, but how they're put together. And men earn 15% more. And so I do think there is a reason to dress like a pro so you can earn like a pro. And I'm doing.
- [110:08]
Shane Parrish
I'm sitting here in my sweatshirt shorts.
- [110:11]
Cody Sanchez
I think you look great. You got your branding on. I mean, there's definitely the cases where it's not true, but on average it shows you earn more money.
- [110:21]
Shane Parrish
Why do you think it is?
- [110:23]
Cody Sanchez
I mean, I do suppose that we make. You know, they say that you make a first impression in less than blink of an eye. Right. And so historically we were predetermined worth based on, you know, mating capability, probably like protection if you're a man and fertility if you're a woman. Right. And so we're trying to determine is our mate going to protect us or are they going to provide us babies? And so prettiness or whatever. Was an indicator of health which was an indicator of fertility.
- [110:51]
Shane Parrish
Right.
- [110:51]
Cody Sanchez
And so I think for a lot of reasons it's like our Africa savannah brain basically saying is this person going to be a good fit for me or not? And I should have a higher indication of a value for that. That would be what I would assume. And then maybe today it's also due to the fact that you have a historical bias. Like the people who do dress better historically have more money. And so your prior interactions with people who have more money look like this as opposed to this is that you.
- [111:18]
Shane Parrish
Take them more seriously.
- [111:19]
Cody Sanchez
Yeah, could be.
- [111:20]
Shane Parrish
What do you think that would be? My sort of guess, right is you form a snap judgment unconsciously, like not consciously that this person is. And you can probably prove this. Like if you were to walk into a Porsche dealership and you're wearing a fitted suit versus you're wearing sweatpants, how people interact with you just on that. I want to come back to your husband for a second because you guys do this thing I really want to talk about. But before that you mentioned books. What have you learned from business biographies?
- [111:49]
Cody Sanchez
Oh yeah, well I think that you learn more from biographies of billionaires than most self help books. I think. You know, I just went through a list of a bunch of business biographies that I thought was really, that I thought were really useful. And the reason I like to learn about billionaires lives and even like in my book I open up with the story of Wayne Husinga which who was the founder of Waste Management, one of the biggest garbage companies in the world. And what's fascinating is he started off owning a. Sorry, not owning. He started off driving a garbage truck. And what I think is interesting about that is he goes from owning a garbage truck to working for a small garbage truck company to saying wait a second, this guy is running this garbage truck company. Couldn't I do it? Why don't I buy a series of garbage trucks and then a series of garbage companies and then compile them into this big huge thing. And so if I can see a model that works then I can reverse engineer how to get there. And so I often find with biographies of billionaires and lessons from billionaires there's a model and how they did things and you can sort of reverse engineer it your own way as opposed to at times if you're following like a, like a self help book, it's a lot of theory or frameworks or ideation which could be useful but maybe don't have the practical application. And so I like to see Like Tom did X plus Y, which got Z. If Cody does X plus Y, likelihood of getting Z. And my brain sort of thinks. And not in numbers exactly like that, but equations like that.
- [113:23]
Shane Parrish
I think that's fascinating. Right. But what I'm hearing is you're filling your brain with this repository of ideas, furniture, if you will, that are the raw material for when you run into a problem. Now, when you're searching this.
- [113:35]
Cody Sanchez
Yeah.
- [113:35]
Shane Parrish
You're sort of like, oh, this reminds me of this situation. Maybe I can handle it this way. Is the environment different? Can I apply it?
- [113:43]
Cody Sanchez
Yeah. Well, I think I don't have the big, huge type of brain that finds completely novel solutions and runs with it. So my brain is in Colby, what they call a fact finder brain. So I first kind of like, probably because I was a journalist, I look at the landscape and say, how have people done this before? What does the data tell us? If I get, you know, 10 instances of this, what happens in nine out of those 10 instances? Okay, now I have, like, some examples. And then I'll go, okay, here's my problem. How do I apply those examples to my problem? Problem? And that just helps me feel a higher degree of confidence that it'll work. So if you work at my companies, you'll often hear me say, like, somebody will say, this is a good video. And they'll say, what does good mean? And they'll say, well, I like it or it feels good or whatever. And I'll say, well, I can't really quantify that. Could you give me some different metrics? And so now we'll have definitions with metrics for almost everything. Because when you use the same words, then you're actually having the same conversation. Often we aren't like, good is too squishy. You can't tell what it means. And so a lot of what we do at our companies is figure out words, mean things, different things to different people. What's our exact definition? And then once we have the exact definition, what's the playbook we can use with those words? I'm also really big on playbooks. I think they help.
- [114:58]
Shane Parrish
What's your problem with rich dad versus poor dad?
- [115:00]
Cody Sanchez
Oh, yeah, I do. First of all, he's a genius, and I think he changed. This is Robert Kiyosaki, the author. I think he changed a generation of Pure W2 employees who had never thought about climbing the investment ladder to be allowed to climb the investment ladder. My problem is man. Sheryl Sandberg became how rich being a W2? Very rich. I mean, the CEO of Google, one of the richest men in the world from being an employee. I think that we have bastardized this idea of being an employee and we've said it's bad and it's less than you should be a founder and entrepreneur. And so in Rich Dad, Poor dad, he has this quadrant where he basically has a W2 employee at the low end of the totem pole. And I don't believe in that. I think W2 is just your tax status. And actually it doesn't matter if you are you not smarter than the average entrepreneur. If you are a W2 employee and you use the wages earned with zero risk because you're working with somebody else to invest in assets that then increase your income stream but allow you to still make money using somebody else's risk, I don't think there's anything wrong with that. So that's my problem with, with that framework, which is called the cash flow quadrant, I believe, because I think that we have made people feel bad about being a W2. And I remember one of my friends came into. We run a community of business buyers, right? And so it's an academy where you go and learn how to do M and A. And one of my friends came into the M and A academy and this person was making like 600, $700,000 a year and they were making 600, 700K. They wanted to buy a couple businesses on the side, but they loved what they did. And somebody said to them, oh, you're just a W2. And I was pissed. I'm like, first of all, how do you expect to be a business owner one day with just W2 employees? You're not going to have any if you treat them like that.
- [116:50]
Shane Parrish
Yes.
- [116:51]
Cody Sanchez
Second, why does that matter? It doesn't. It just means we need to be able to do what we love and have a backup plan in case that doesn't work out, which is some investable assets. So that, that's my problem is I think it creates a series of people who think that they're better than or somebody is worse than because of their tax status, which makes no sense to me.
- [117:10]
Shane Parrish
What are the different types of income streams that are available to somebody who's WTUBE employee, like working for somebody else, getting a paycheck every week so that they can build financial freedom.
- [117:21]
Cody Sanchez
I think one of the, one of the best times to invest in assets that can provide more income is when you're employed because you have an income stream, which means you have less risk if you're going to go and start a new business. You probably shouldn't diversify right off the bat with a bunch of investments. You kind of need to focus and make sure that you're going to grow your business or invest in other companies inside of your business. You could do what's called strategic M and A. But when you're a W2 employee, I mean, gosh, we have probably, I would say like 40% of our community, and there's thousands of business buyers in there are W2s who largely want to keep their W2 salary. They probably are pretty high earners. And they're doing things like they're buying series of hotels or Airbnbs and running those simultaneously. Then they're buying property management companies that run those Airbnbs, So they have 20% that they take back in them. You know, they're buying laundromats and car washes. So what I call people light businesses. So you don't need a ton of employees for those businesses. They might be buying vendors for people that they know and use inside of their W2. So, you know, maybe they buy a studio like this because they work for a podcast company and so they can cash flow on it. So. And then, of course, traditional things like investing in funds and the stock Market and REITs and all of that, which I think the other thing that's a little funny about today is there's a lot of people who don't like the stock market, who don't like bonds, who, you know, think that you shouldn't invest that way. And I think that's bizarre. Like, the best money managers in the world have diversification to some way shape or form for longevity over time. And so I think you're crazy to not want to have multiple ways to protect the downside.
- [119:10]
Shane Parrish
You and your husband do this thing, the team thing. Can you explain this to me and. And how it's helped your marriage?
- [119:16]
Cody Sanchez
Yeah, yeah, we've added on to it. So it's. So I don't know if, you know, you have this, but, you know, when you keep sort of bickering with your spouse, like little things, and they kind of compile and you look back on a fight and you're like, why was that so dramatic? It was about, you know, a book left on the table. It was about a water stain somewhere left out. What a dumb fight. And so we were having some of those. And. And so we have a coach that we use because I believe in coaches in almost every area of your life that you can. I want to steal other people's 10,000 hours, always. And so Brandy was basically like, we do this thing called team, which is at the end of the day, I want to say every day, but we don't do it every day. So often sit down and it goes like this. You touch. So the first thing, maybe you're, like, holding hands. Maybe you're sitting next to each other. The second is educate. So you sit down. You're like, what did I learn today? Oh, I learned this cool thing from my conversation with Shane. I share. He shares then appreciation. So it's like, hey, I really appreciate Honey. If it's a bad day, it might be like, thanks for taking out the trash. You know, that's all I got today. But I appreciate that you did that. The only rule is you can't keep using the same thing every day. You gotta find something new to appreciate. And then finally, metrics. And metrics is like, I wish you did this better today. You know, today you. You didn't take care of the dog. You didn't feed the dog, and I wish you did. And you said this to me, and I wish you would have said it that way instead. And so we keep the small things for a period in which we're not elevated, and that is when we are at our best. And so. And at the end of that, we might also have something like expectations. So that would be like, now we're really busy, and we're both running businesses. He runs our portfolio. And so we realized even if we did team, like, maybe this week, you're traveling here and your wife's home with the kids, and, you know, you're going to be in studio six hours a day, and you're not going to be available. And when you're done, you're going to be so tired, you're not going to want to get on the phone with her. You're going to want a quick call with the kids, but you're going to need to go to sleep afterwards. And when you come home on Friday, even though you're going to want to, like, she's going to want to go to dinner, and you're going to want to. You're going to be so tired, you're not going to be able to. And so we do an expectation meeting now on Sundays where it's like, all right, what's going down this week? I'm traveling here, you're traveling there. We got this. We got this. The kids need this. I need that. Okay, cool. What do you. What's your expectation level of, like, energy? Is this a Brutal week for you. Yeah, this week's awful. No, this week's pretty light. So we go, okay, if it's an awful week, I know you're probably not going to be at your best.
- [121:49]
Shane Parrish
Right?
- [121:49]
Cody Sanchez
You might be a little sure with me. You might need a little bit more love I got you this week. Or we're both kind of. It's a brutal week for both of us, so let's tread easy this week. Let's. Let's try to not nitpick each other so much. And I just think, you know, you do that with your team, you're like, all right, guys, we got a big week this week, so, like, everybody needs to be in the office here, you know, or let's take Friday off half day because we got too much going on the rest of the week. But why not do it with your marriage? Because otherwise, I think life can run you down and you don't realize you're not even fighting because you're mad. You're fighting because you're tired and beat up and you got nothing left and you're just trying to survive. And so it really helped us.
- [122:28]
Shane Parrish
That expectation thing is really fascinating. Often in couples, there's one partner who's maybe working harder than the other, and it could be a female surgeon and a guy who works a 9 to 5, and it could be the other way around or somebody running a business and their partner is more. Their job is more defined.
- [122:46]
Cody Sanchez
Yeah.
- [122:47]
Shane Parrish
How do you handle, like a mismatch between, you know, my day is 12 hours, your day is like six hours, or vice versa. Right. My day is six hours, your day is 12 hours. When you get home, I'm like, full of energy. Energy, and I can't wait to see you. And you're like, oh, I'm drained.
- [123:01]
Cody Sanchez
Yeah, well, we. We compromise. So mine might be like, all right, I'm in my season. I'm in a build season. And it's going to be brutal because I'm in my residency for the next three years.
- [123:12]
Shane Parrish
Right.
- [123:12]
Cody Sanchez
And we know that. And so it's not on a week basis. It's a three year basis. So let's have some expectation setting about what these three years is going to be like. All right, you know that I'm going to be exhausted all these days, but you know what? You're still my top priority. So on Saturdays, I'm going to make it up to you. We're going to have a date night. I'm going to plan it. I'm going to handle it. We're going to do a vacation like three or four times a year. I'll make sure to prioritize that. If we do those things, like, does that fill your cup enough?
- [123:40]
Shane Parrish
Right.
- [123:40]
Cody Sanchez
I think a lot of times these things happen in marriage because we. We aren't honest about the fact that we don't have full time tanks all the time.
- [123:49]
Shane Parrish
Yeah.
- [123:50]
Cody Sanchez
And, you know, you're gonna have a build season, and if you can tell, you know, your partner, hey, I just had a baby, you know, these next. This next year, I'm probably going to be tired and I'm. And I'm not going to go to the gym as much as I want to. And I want to know you're still going to love me and whatever fears you have, then it takes a lot of the edge off because a lot of times we're not even acknowledging what the real problem is. Right. Which is like, I am just really tired and. Because this year, I know, like this quarter, for me, I have a book launch, which is brutal and, like, harder than I thought it was going to be. It's like, oh, my God, all this traveling and I mean, champagne problems. It's like such a hard podcast, but, like, you know, it's. It's a lot of focus.
- [124:34]
Shane Parrish
People who aren't in it don't understand all the stuff that goes into it. If you're trying to excel at it.
- [124:39]
Cody Sanchez
Yeah, it's a. It's a weird process. And so Chris and I sat down and talked about it, and I was like, listen, the compromise is in January, February and March. I'm not going to do any speaking events. Like, I'm just. Nope, zero. And so stick with me for three months. Then, you know, come into the year, we're going to chill out.
- [125:00]
Shane Parrish
There's a light at the end of this tunnel.
- [125:02]
Cody Sanchez
Exactly. And so you got to find whatever your compromise is. Otherwise, I think if you're always like, well, I always work 12 hours, you always work six. Well, that might not a happy marriage make.
- [125:12]
Shane Parrish
And I like how you're sort of setting expectations, which is like, hey, you know, it's going to be busy for the next three months, and then there's like this light at the end of the tunnel.
- [125:20]
Cody Sanchez
Yeah. My husband totally taught me that. I was terrible at it. I'm not a great communicator, actually. Interpersonally. I just go, go, go, go, go. And he was. He's the one that's like, often like, all right, stop. Let's talk about this. Let's be really clear. What do you really want? So I have to give him all the credit in the world for that.
- [125:37]
Shane Parrish
We always end on the same question, which is what is success for you?
- [125:41]
Cody Sanchez
For me, it's two part long term. It's. You know, Emma Bomback has this quote, which is when I stand before God at the end of my days, I want to feel like I used everything you gave me. I have not one drop left. And that's how I want to feel. I want to feel like I've wrung it out, like I just left it all on the field, every piece of ability that I had. And then the second part is I want to feel peace and like I'm enough. Like no matter, even if. If I don't want to ring out those last couple drops, that's okay. And so it's this balance between what am I capable of and no matter what I achieve is enough. Little child of God. No big deal either way.
- [126:29]
Shane Parrish
Thanks for listening and learning with us. For a complete list of episodes, show notes, transcripts and more, go to FS Blog, Podcast or just Google the Knowledge Project. Recently I've started to record my reflections and thoughts about the interview. After the interview, I sit down, highlight the key moments that stood out for me, and I also talk about other connections to episodes and sort of what's got me pondering that I maybe haven't quite figured out. This is available to supporting members of the Knowledge Project. You can go to FS Blog membership, check out the show notes for a link and you can sign up today and my Reflections will just be available in your private podcast feed. You'll also skip all the app ads at the front of the episode. The Faram Street Blog is also where you can learn more about my new book, Clear Thinking Turning Ordinary Moments into Extraordinary Results. It's a transformative guide that hands you the tools to master your fate, sharpen your decision making, and set yourself up for unparalleled success. Learn more at FS Blog Clear until next time.