How Codie Sanchez Built a $50 Million Portfolio of Boring Businesses, and the #1 Skill to Learn in a Recession

Codie Sanchez: There's a difference and a feeling between when you go into a mega store and when you go into a normal store. And I think in every aspect of our lives, when we were locked up for two years, we basically realized, man, my community matters a lot, especially if I can't travel around. Man, my job matters a lot. If I'm spending all this time at it and I can't be distracted by the foosball tables at the office, and the things that I spend my life doing have a real impact. And so I think boring businesses get people excited because they're like, "Ah, I don't have to start the next Tesla in order to make money and have an incredible life. I could just take over a boring business." It seems reasonable and it seems like noble work and it seems like something they can do.

Alex Lieberman: What's up, everyone? I'm Alex Lieberman.

Sophia Amoruso: And I'm Sophia Amoruso.

Jesse Pujji: Yo, this is Jesse Pujji.

Alex Lieberman: And this is The Crazy Ones. All right, everyone. Welcome back to The Crazy Ones, a show by entrepreneurs for entrepreneurs. As you can tell, the setup is a little bit different today. I am without my amazing co-hosts, Sophia Amoruso, aka The Dean, and Jesse Pujji, aka Baby Buffett. Also, if you didn't listen to the last episode, I've been given a nickname by our listeners called The Mailman. Jesse wants me to be called...I think something Baby Murdoch, something related to media, but I like The Mailman better. We're going to try something different today, though, because Sophia's in Helsinki at a conference. I don't know where Jesse is. I'm going to be having an amazing conversation with a friend, an amazing entrepreneur, an amazing investor, a great media mogul mind. It's crazy, all the things that she does. Codie Sanchez, who has an amazing newsletter called Contrarian Thinking, a whole business called Contrarian Thinking. And she has just an incredible legacy now of making money in so many different ways around a niche that has just taken the internet by storm, which is the niche of boring businesses. My full conversation with Codie Sanchez right after this quick break. Codie, welcome to The Crazy Ones. Pumped to have you.

Codie Sanchez: I'm excited to be here. Thanks for having me.

Alex Lieberman: Before the show, I was trying to think about when we originally met and I couldn't think of...I literally couldn't think of how we met one another. I don't know if it was...I remember I first met you in person at that conference in LA that Romeen Sheth had, the crossover conference. I met you and your husband, but I feel like we had been talking before that.

Codie Sanchez: We definitely had been, I don't know, probably creepy DM sliding by me into yours. Like, "Tell me about your newsletter business because I have one now." That's how I envision it.

Alex Lieberman: And the great irony of all of this is, now I need to be asking you for help on all of the things that you're doing. And one of my greatest regrets in the history of Morning Brew is that we couldn't get you to be a part of the company before you blew up. And now you're probably bigger than us. Our listeners are entrepreneurs and they have so much to learn from you. And I would say so much to learn from the different parts of Codie's empire: the media business, the investing side, the business building side. But for those who haven't heard your story, can you just give me kind of the quick and dirty around what your career trajectory has been, and how you got here?

Codie Sanchez: Yeah, 30 seconds. Longtime financial person, did all the things. PhD, MBA, Goldman Sachs, traditional route, wanted to blow my brains out, like you, when I realized my life would be spent inside of a spreadsheet for the rest of my life if I stayed in finance. And so, realized I was kind of becoming unemployable pretty quickly. So I went to become a partner at a private equity fund and then I realized I didn't even like having partners; I wanted to do the thing all by myself. And so I started building up a media company right behind the back of having bought and invested in what I call "boring businesses" for quite a few years, because I saw people doing it in private equity. And so I didn't think that was cool, actually. I used to never tell anybody that I owned laundromats and car washes and landscaping companies. I thought it was pretty lame. And then I started explaining to a few people once COVID happened, like, "Oh, by the way, I own these things." And they thought it was really interesting. And then we've sort of paralleled that into now this big business where we talk to a lot of people about how to become owners instead of "renters" of both their time, employment, and et cetera.

Alex Lieberman: One thing you failed to mention is that you were a journalist first.

Codie Sanchez: Yeah.

Alex Lieberman: I'm not sure why you failed to mention that, because it's a very important point. How did you decide to go from journalism to finance, and what are a few skills you picked up in journalism that you actually think helped you in a unique way as you entered finance?

Codie Sanchez: One of the smartest things I have heard people talk about from a formula standpoint is Scott Adams's skill stack. And what I didn't realize early on is that I couldn't have better picked a path for me to be a private equity investor, to run a media company, to be on the internet talking about things, than to stack the fact that I was a human trafficking and drug smuggling journalist on the back of investing at one of the largest companies, Vanguard, to then being at Goldman to then doing all the PE stuff, to, the whole time, having that ability to write, ask questions, and really be curious about the world around me. And so most people in finance...there's almost a downside to being curious. People think, well, your intelligence must be lacking because you don't have all the answers. And that's how a lot of financial people think.

And instead what I realized is, oh, man, I don't know the answer to this. And that has nothing to do with my IQ. It just has to do with the fact that I do not have this particular piece of input. And so I think that took me a lot farther than most, because I was never scared about looking stupid. And then now that I run this media business, I've realized, wow, in order to invest, you have to ask the right questions so you don't lose your money. And in order to build a media company, you have to ask the right questions and know the right answers that your audience wants in order to get attention. And so I think they're actually really similar.

Alex Lieberman: I love that. Tell me about the first boring business you bought.

Codie Sanchez: Yeah. The first technically boring business I bought was a laundromat. That was a laundromat that we bought for a hundred thousand bucks, give or take.

Alex Lieberman: Where was it?

Codie Sanchez: Where was it?

Alex Lieberman: Yeah.

Codie Sanchez: Phoenix, Arizona.

Alex Lieberman: Nice.

Codie Sanchez: So did about $67k, $68,000 in profit. And at the time, one, I put up cash for that business. So $100K wasn't nothing to me at that time. And then, two, I was sort of mortified. I don't know anything about laundromats or anything to do with them. And so I did it with an operator. But three, I kind of thought, wow, $67,000 is not that much money to run a laundromat. That's the way I was thinking in my head. And now that I say that deal out loud, people are like, "How could you buy a laundromat that does $67,000 in profit for only a hundred thousand dollars? That's crazy. What's wrong with that idiot laundromat owner?" And what I don't think people realize is that's buying a job. You're buying a job when you buy a company that small, and those types of deals exist all around this country; they're everywhere. If you just want to look for them, you could just go Google it and see if I'm lying or not. And so that first deal, what it made me realize is, one, doing the big deals I did translates just as much of these little deals. And two, these things aren't actually that hard to run. Now they're not easy, they're work, but they're not...but they're pretty simple. And so that was the first deal. And then before that I had bought little websites and sort of these online businesses, but that was the first one where you could touch it.

Alex Lieberman: Where on the spectrum of, call it pure passive investment, of which there basically are none that are truly passive, to pure active investment, where you are operating a business as someone who's put money into your own business. Where did that laundromat sit on the spectrum? How much time did you put into that business?

Codie Sanchez: Oh, god. Basically, none. That business at the time...all the time took up front in the deal. So we basically took a lot of time to find the laundromat, to do the due diligence on it, to figure out how to take over the business, and then to make sure that my operator was set up and running. But that business took a couple hours a week, maybe. And so I really didn't think much of it. And then I did a couple deals where I owned a majority of the business, but somebody else meaningfully found the deal, ran the deal. That was like some of the other laundromats that we've invested in, where I basically know nothing about the business now; I just look at the financials and it comes to me. I think that's irrational for people to think of for their first deal. When you go out and you buy your mini golf course or whatever it is you're going to buy, you're going to be a little bit more hands-on the first go round. This one, I had a really trusted operator that basically ran all of it for me. And I was running a business in Latin America at the time. Yeah, I think I was in Latin America. And so I was on planes nonstop. I had no time to worry about this deal. I just sort of hoped it would work out.

Alex Lieberman: And just to bring that deal to its fruition, do you still own that business? Did you sell it? What's kind of the last chapter?

Codie Sanchez: Yeah, I don't own that business anymore. I own lots of other laundromats and other car washes, but since then...you know, what kind of happens in buying...I should have kept every business I've ever owned, probably, just like real estate. I did an analysis the other day that was horrifying, which is like...don't do this if you're listening, but if you've ever bought real estate and sold it, pretty much a bad idea. You should always try to hold onto your real estate. And businesses are typically like that too. As long as it's a good business, you can continue to have the business actually appreciate as long as the business fundamentals are sound. It's called the Lindy effect. If it's been in existence for a long period of time, it typically stays in business for a long period of time. And so I probably should have kept on, but at some point there becomes this level where you're like, all right, my first house is a studio that I'm going to buy, and then I'm going to buy a little condo, and then I'm going to buy a townhouse, and stair-step your way up. And that's what I've done in businesses too.

Alex Lieberman: Yeah. I think something that you're really passionate about or a skill of yours is around deal structure negotiation. And while you do it in the context of boring businesses, I actually think it's a really important skill for entrepreneurs, because the amount of deals that you'll do kind of over the lifetime of a business as an operator or owner is a lot. So what are some of the biggest lessons you've learned in terms of deal structuring, and even if you can provide an example of interesting deal structures you've done in the past?

Codie Sanchez: That's such a good point. God, there's so many things. One, I think if you can learn one skill, it should be the language of deal-making. A hundred percent. The language of deal-making is actually just the language of money. It's the same exact thing. And what most people don't realize is the language of money we are taught is, this is what a savings account looks like. This is how to budget. This is how to invest in the stock market. Is your asset allocation right? That's a rounding error on the total amount of wealth one can create. And so they teach us stuff like that because quite honestly, it's easy to understand and most people can do it, but if you master budgeting, that does not make a billionaire. If you master deal-making, that makes billionaires. And so I think it's actually a huge disservice that people spend all their time on how to spend to zero, like the FIRE strategy, as opposed to thinking about how to grow. I mean, I'm relatively frugal, but I'm obsessed with the upside, because the upside's unlimited and the downside is not. So that's one. It's just like, you should be interested in this type of stuff because in my opinion, you will never reach the true monetary potential you might have as a human, which is just a fun scoreboard thing at some point, if you don't understand deal-making.

Alex Lieberman: And just in that...

Codie Sanchez: Yeah. Tell me.

Alex Lieberman: On that point, when you say the language of deal-making, what does that mean? Is that actual idioms and phrases you use in deal-making? Do you mean something else by that?

Codie Sanchez: Multiple things. One, terms. Really, really important, and the terms are complex. It's the pref rate of return. It's who has the rights to the IP, who licenses it for certain amount of time, what is the difference between licensing and royalties, what's a liquidation preference? What's a 1x versus a 3x? All of those things are actually pretty intimidating to people. And if you're not in our world, you're probably going to have to Google it unless you subscribe to the Morning Brew, and you're reading their financial terms stuff, right? But for most people, they don't even know the language. So if you don't speak with the right words, then you can't master anything, right? You're not going to be able to give a TED Talk if you can't speak English, in English format. And so I think that's first, but then you have fun with like the 202 level, which is...we even talked about this. I was like, all right, if I was Alex, you wanted to renegotiate a lease or something somewhere, remember? And I was like, "Uhh." You were like, "Oh, I'm just going to pay into them." And I'm like, "Whoa, whoa, whoa. No, we gotta negotiate this and this is how we should play this game, and here's what he cares about and here's what you might say back to him, and here's why I think you could get that." And so that's the 202 level where it's just about human psychology. And Chris Voss has an amazing book called Never Split the Difference about a hostage negotiation, that if you just take away...

Alex Lieberman: Basically, the same as negotiating on a laundromat.

Codie Sanchez: Just like if you want to buy a laundromat or save a life. Same same, really. But I think the one thing I love about him is, amateurs in a deal sound like this. They're like, "Alex, I'd really like a raise at the company because I've been working super hard." And then Alex does this one thing, he just goes "Hm," and he is just quiet, right? Say that's all you do. And then the person goes, "So because I want to do X and Y and Z, maybe it's not the right time for this." And you just go, "Hm," and then you're quiet again. And the pros know the beauty of silence. And I think that's the biggest thing people mess up in the beginning is they talk themselves out of a deal.

Alex Lieberman: Yeah. Because people have a story about what that silence means, and now they feel like they need to concede on things to break the silence.

Codie Sanchez: Exactly. It's super uncomfortable. We're not used to it, especially as Americans. If you want to learn negotiation, read Chris Voss, go to a market in India or somewhere in the Middle East, and you'll learn half the game.

Alex Lieberman: So two more things on deal structure and negotiation, and then we'll push forward. On deal structure, there's an old thread of yours that I was reading and I can't remember what the exact business was, but you basically wrote an exact deal structure that made the deal attractive for you. Also created multiples for the owner that you bought the business from. But if you didn't structure it in that way, would've been really unattractive. Do you remember the thread I'm talking about?

Codie Sanchez: Maybe the one about the gym?

Alex Lieberman: I think so.

Codie Sanchez: Yeah. So the old saying in deal-making: You can have my price and your terms or your terms and my price. The pro knows that you want control of the terms, not the price, always. So the amateur entrepreneur says, "I want a seven-figure exit." And you go, "Awesome, I'll pay you eight figures." And they're like, "What?" You're like, "I'll pay you eight figures, a dollar a day over the rest of your life." Not a good deal. So you really want to focus on what the terms are. And so in this deal, how...I don't really like to buy gyms. Gyms are a hard business. Think about it. The more people that are in your gym, what do you feel? Not happy about it. You're like, I can't use a machine. It's kind of a tough business model. And so I typically wouldn't invest in it except I like this operator and he wanted to do the deal.

And so I can't remember the exact terms, but something to the effect of, I said, "Okay, if we do this deal, I'm going to give you X dollars," because he needed money for it. "I want my money to get paid back to me at an accelerated level." So that typically means, maybe all profits from the business go to me until I get paid back. So I'm accelerating my velocity of money back to me. And then the second thing might be, now post that acceleration of return of capital, you start to take your draw as the operator of the business. Before that, you don't make any money. You've got to figure that out. But after that, even though I only invested 25% in the business, I own 50% of it 'cause I took all the risk up front. So I'm going to change how fast I get my money back and I'm going to change how much of a percentage of the business I own.

And then I might say something else...at the exit, if you want to exit the business, either to not operate it anymore, there's some hold-back so I get some money back, because I don't want to run this business. So what if the operator leaves? And then simultaneously, if the business sells and you want to get out of the business early, but I don't, you have a floor that you have to pay me. So my amount of money is worth at least 3x. And so if you want to sell the business for 1x and be like, "I'm out, I've sold the business," well, you got to come up with the extra for me. And the reason I do that is not to mess with the operator, be unfair, it's because your risk is your money up front and that first dollar is worth so much more than the next dollars. So I just negotiated the deal enough where I was like, well, the only way I want to do this deal is if you can't leave and make this miserable for me and keep the money that you've made, and you can't sell early, and make me have less money than I want for even having my money tied up during this time. And I want my money out fast because I'm not that sure on gyms. And so the cool thing about deal-making is you get to make it up.

Alex Lieberman: Yeah, I feel like at one level of abstraction, basically, you're kind of thinking about what are all of the risks associated with potentially taking on this deal. And then, how are you prioritizing those risks, and based on how you prioritize them, that's where you're going to really write in deal terms that help mitigate the risk as much as possible. To your point, if you feel like a gym business is not the best business because as you grow your customers, the experience gets worse for other customers, or you're going to just want to make sure that you're getting more money in the outset because you don't want to have to wait five years to start seeing return.

Codie Sanchez: That's exactly right. Let's do that. And you just want to protect the house, especially your first deal. You don't want to have your first deal bankrupt you or lose you money, because then you'll think deal-making's bad. Not that you just did a bad deal.

Alex Lieberman: So if I told you, think of the best negotiation you've ever done, can you think of when you feel like it was like, you were on your game and you felt like you gave yourself a pat on the back in the negotiation that you did with an operator or business owner?

Codie Sanchez: When I met my husband. Hopefully he's listening. I'm going to get so many points for that. It's going to be just really good.

Alex Lieberman: That's so good.

Codie Sanchez: You've met him, too. Okay. The best deal I've ever done. Well...

Alex Lieberman: And you don't have to necessarily walk through the whole deal, but I want you to get an image of what the best deal was in your head. Because I want you to talk through, kind of like, as you play it back, what are the things that you did that you think are lessons in negotiation that people should take from that experience you feel really good about?

Codie Sanchez: Yeah. It's a good question. I mean, let's just talk cash. So there's something called seller financing, where the seller will pay you from the future profits of the business to buy their business. So when I think about one of, or some of the best businesses that I've bought, it's because I had $0 at risk and I was able to buy a business based on how much I had shown that I was capable of running and being a steward for their business, and incentive-aligning them on, "Hey, I'm going to run this business really well. We're going to make a bunch of money, and so you're going to make more money by having me take over than you right now. Plus you're miserable and tired, so why don't you give me the business for basically $0. If I mess it up, I'll actually just hand the business right back to you after 12 months." And we decide what "mess it up" means if I don't grow by X or Y or Z, but you're going to give me this business and I'm going to pay you back from the profits of this business over a five-year period.

And so what that allowed me to do is, the business owner got an annuity, right? They got a check in the mail every single month from the business, but so did I. So I started getting a check that was a five-figure check the first month that I closed the deal from taking over this business and running it. That deal was one of the first ones that allowed me to make more money on the side than on my corporate thing. And at the time, I really didn't like my corporate thing. And so it gave me the freedom to say, all right, I'm ready to figure something else out.

Alex Lieberman: Yeah. So it sounds like the thing that worked really well in that deal is you were just great at sizing your risk in a way that felt right for you at the time. And basically, your risk was zero. I mean, it was zero in terms of money. The only place you had risk was, call it like reputational risk or confidence risk of if that deal didn't go well, maybe would've made the second deal harder for you to do.

Codie Sanchez: A hundred percent. A hundred percent. And don't get me wrong, I've lost lots of money, too. I mean, I feel like people who do deals or start businesses always tell you about their wins, and their losses get swept up under the rug, like a gambler. I've written a check for $50,000 and lost that completely. We had multimillion-dollar deals that we had to write off completely when I was at the fund. Thankfully, now I haven't had that happen again. They say in doing deals, it's your first $500k, you either have to super protect and be slow, or expect that you're going to lose. And so I think there's lots of ways for this stuff to go sideways. It's just harder to have happen in these boring businesses if you do it right and you size them right, I think, than if you do a startup.

Alex Lieberman: I want to talk about two more things with respect to boring businesses, and then I want to kind of talk about your media empire. You did a thread on finding operators for your businesses and what makes great operators great. And I think for entrepreneurs listening to this, even if they're not operators of, say, a laundromat or a car wash, I still think there's probably a lot of through lines they can take. So what similarities do you find in the best operators that you've placed in businesses that you've bought?

Codie Sanchez: Oh, yeah. I mean, a couple of things. First, I really like to hire people that have done it before. I know this sounds obvious, but it's not obviously done, actually. Lots of people hire operators that have never done the thing before. And for the first hire that you make, that's really not what you want to do. You want to do the opposite of that. The second thing, I think, is these people really have to have a pretty high pain tolerance, because you have to assume that if...they need to be able to take the work off your plate you don't want to do. And so that means that there has to be a level of humility and grind and hustle that that human's going to have. And it'll feel weird for you to push the stuff that you really don't want to do for that individual. 

Some of the other stuff I've found with the best operators overall is, the best operators are typically those who are super systems- and processes-oriented, because these aren't starters. You're a starter, Alex. A lot of people listening are probably one of the two: a starter or an operator. And the best starters typically aren't the best operators. We have to morph into that. It's been a struggle for me over the years. I have to hire people to be my operators, because I'm not detail-oriented enough or relationship management of the business enough to see it slowly grow up. I like the big jumps; I like the hard things. And so a good...like one of the fun ways I like to interview operators and CEOs is like, I want them to show me their calendar, and you can tell who's organized or not. So when we're on, I'm like, "Oh, you know what, this is a weird thing. You mind pulling up your calendar? I kind of like to see how people schedule their days," and you'll see who's really organized or not, sort of immediately off the bat. I think one of the most important things with these people is "Show me, don't tell me." So people will tell you a lot of things, but you want to get them to show you the truth.

Alex Lieberman: You've said that you get great pleasure in scaring away bad hires. What do you mean by that, and how do you scare away a bad hire?

Codie Sanchez: Oh, gosh, nobody's listening to this, right? So...

Alex Lieberman: If you are, I hope you're a bad hire and you're scared after this.

Codie Sanchez: I think it's really important that people know what they're getting into with you. One of the first things I do on all the interviews, I listen to them, I get their story first, and then I say, "Here's all the stuff that sucks about this company right now. I'm not incredibly organized. This product set isn't working very well; the revenues are growing, but the profits aren't. And so what's the difference between the two?" And I sort of say...I lay it out all on the table, because they're going to find out and there's nothing worse than getting somebody in the mix and having them not work. So first it's like, tell them the dirty, dirty truth. Then I look for one thing. I look for them to start doing...people either go one of two ways. They go, "Oh, okay, that's interesting." Or "I'm not worried about that," whatever. The good ones go, "Oh, well, you're not organized. Why don't you...do you use Slack in this particular way? And have you thought about Zaps for this?" They solve your problems on the go, and if they start solving your problems, it's a really good indicator that they're a good operator. And then the other thing is, I have a lot of spiky opinions, and you do too. But on the internet, if people don't like cussing or pretty aggressive takes...

Alex Lieberman: Like your view on quiet quitting.

Codie Sanchez: Oh, yeah, like my view on quiet quitting, which I said I'll never hire somebody who believes in quiet quitting or would ever do that. Like, that's going to turn some people off. And that's good, because there's nothing that I would hate more than having somebody who hates working at my company and they're sitting there wasting their life away. It's not just that I'd be pissed. Like, let's get moving. But also, it's sad for you. So put out your spiky opinions. Not to be controversial. I'm not like "I love Nick Huber;" he's a friend of both of ours. I don't go that far, but I put out a few every once in a while so I find the right people.

Alex Lieberman: In case you're someone who says they're married in their Twitter bio, you and Nick are not going to get along.

Codie Sanchez: Exactly.

Alex Lieberman: So what boring businesses are you really interested in buying right now? And which are you trying to stay away from as much as possible? And I ask this question from the perspective that it feels like we're in inning five or six of the boring business journey right now, because I feel like every good deal as it relates to laundromats, car washes, and self storage have been sucked up from the planet. So first of all, do you think we're in inning five or six, or is that a wrong take? And what are you attracted to right now, and what do you want to stay away from as much as possible?

Codie Sanchez: That's a really good question. Well, I think we're in the first part of a recession that'll probably be a double dip recession and we'll actually see inflation come back up again. That's my assertation, which means that I think businesses are still too expensive in the private markets, meaning these small businesses, because they have not had the public market flush that a lot of the publics have just had, they haven't had to go out on their earnings calls and start to tell people that they're gonna miss expectations. And so the private markets typically follow the public markets. So we haven't had our full public markets pull back, which means we definitely haven't had our full private market pullback. There's good deals all around, always. But I am very thoughtful about the valuation I'm buying businesses at. So I think you're right. I think we might be a more like inning seven or eight, and inning eight or nine is coming over this next couple year period, where it's going to be really gnarly out there. I think it'll be really gnarly, and a lot of people will get into a lot of trouble, which is super sad. And then during that period, there'll be a lot of businesses that will come back full circle, basically. So now is the time to learn; I'm not sure now is the time to allocate immediately, so that. Now the ones that I don't like...well, there's a couple that I have seen people talking about lately for some reason that I just can't get on board with. I was talking about three of them this week. ATMs: terrible margin business, not into it, 1% to 3%. These businesses, typically just you cannot collect enough of them to get enough income on them, plus money's going away. I also...

Alex Lieberman: Just as a comparison, what's the margin on, say, a good boring business? I don't know...you've talked a lot about vending machines. Are vending machines a good margin or no?

Codie Sanchez: I was just going to say, vending machines are not my favorite. I think vending machines are much better than ATMs. They have better margins, 15%-ish. So I would say a good boring business is 15% to 50% margins. 50% would be really good. 15% would be like, okay, we've got a healthy business within lots of characteristics. One to three is awful, so that's no go. Vending machines...I only like vending machines as a gateway drug business. So it's like, I've never run my own business. I'm going to know what a P&L is. I am going to know how to hire, I'm going to know how to do logistics, and it's not going to bankrupt me. Awesome, vending machines. Would I tell Alex Lieberman to go buy a vending machine? No, I wouldn't. Like, that's not a big enough game for you to play.

Alex Lieberman: What would you tell me to buy?

Codie Sanchez: I think your unfair skill set is all in media. I think the only businesses that make sense for you IRL are ones that you can do something online with as a component. And so I don't know exactly what that is, but it'd have to be a big swing for it to be worth the squeeze for you. And I think you'd have to have not enough in-person headache for you to hate it. And then you'd have to have some avenue for it to be content-enabled in a big way, otherwise...

Alex Lieberman: Yeah. I remember we had a conversation a few months ago, not to say that this is the business. Remember when we talked about slime, like the business where...

Codie Sanchez: Oh, yeah.

Alex Lieberman: Creating TikTok videos...what is it? ASMR videos around slime and then selling a shit ton of slime. That would be an example of using content to drive physical sales.

Codie Sanchez: I think that would be great. I was actually just on the phone with Reed from Night Media, MrBeast's agency, and I was asking him what he's going to launch, and I obviously won't say what they're going to launch next, but the Feastables, the chocolates or whatever that MrBeast has done, when they originally told me about that, I was like, "Oh, god, that's an awful business. Who eats a whole chocolate bar anyway?" And now it's like a hundred million dollar company, which is funny. But the part that that taught me is, content actually has a much wider sphere for businesses it can impact than I realized. And so he is selling out of Walmart chocolate bars from his YouTube videos, not e-commerce direct. And I used to think that that would not really be a very smart market. And so if he can do it with that...there's probably smarter uses maybe, but I think there's a lot of ways you could play the game. But CPG is an interesting one, which is why they launched that PE fund.

Alex Lieberman: Totally. Well, just on the note for a second, I think this is a good transition to kind of content, your media empire. You just talked about MrBeast and the way that MrBeast has leveraged his massive top of funnel into burgers and into candy bars. Proud investor, very small investor, but proud...

Codie Sanchez: Are you really...

Alex Lieberman: Yeah, yeah. In Feastables.

Codie Sanchez: I think I told you not to do that deal too. I think we talked and I was like...

Alex Lieberman: You're a hundred percent did. It was one of those deals where just to be associated with it was the reason enough to put money into it. But before our conversation started, you were talking about Reese Witherspoon and her business. You were talking about Aerosmith and their businesses. Why are you so fascinated with the way they've monetized themselves?

Codie Sanchez: So there's levels to every game, and the way I think about it is like this. Have you ever had an employee? And with employees, once you have them and you're paying for them out of your pocket, you're like, what are you doing over there? Are you going to work on that? Are they actually working? Like you have this anxiety, right? And I think about my money that same way. It's like, is my money working hard for me? Is it lazy over there? Just lazing around? Is it getting paid at an assistant level when it should be getting paid a CEO salary? What are you doing over there, money? And so I think about that a lot. And then I think about that with...

Alex Lieberman: The only person I know that talks to their money like that.

Codie Sanchez: "Come on buddy, come on, let's go." So I feel like that with my time, too. So now time has become so precious. It's like everybody thinks about scoreboard. How could I make a million bucks? How could I make 10 million bucks? Wrong question. The question I would ask is, what is the fastest, funnest, least time-intensive way to get to a million bucks, or to get to 10 million bucks? Because you would know inherently it will take me longer to walk to the park than it will to drive to the park; we know that. There's like Google Maps, right? What there's not Google Maps for is business levels. So it's like, I want to reach a million dollars, but I'm working as an assistant. Well, it's probably going to take you decades to do it, but we think about that maybe a little bit with salaries, but what if we thought about that with business levels?

So Reese Witherspoon, for instance. Celebrity, yes, I understand that she has a following. Those will be the objections. But Reese Witherspoon just sold a business for $900 million, her Hello Sunshine company. And the way that she did it was brilliant. She took her book club and made the people in the book club buy the books, right? Not from her. She took a dime from none of those book sales. What she did do is took the rights from each of the authors for those books to potentially turn their books into TV or movie. So she basically said, "Author, I'm going to give you a million eyeballs on your books. I'm going to take $0 from it. And guess what? If this turns out well, I'd love to buy the rights, I'd love to give you a little cash or to sign a contract where I will turn it into a movie for you. I'm so nice. I'm Reese Witherspoon." Is it even hard Elle Woods, right?

And so that was her schtick, which was so smart, because then what she knew is her audience would test the books for her. If they liked 'em, she would take that, she would go shop it to a bunch of the big studios and then she would say, "All right. Yeah, you want to buy it for a hundred million dollars? Perfect. You're going to pay a hundred million dollars to my production house, Reese Witherspoon's. I'm going to own the rights to the movie and then we're going to go make a bunch of money on it and then we're going to sell our whole entire studio production house, and also all of those movies that we've made." And so Reese Witherspoon is playing at a level six. Then you have that compared to most celebrities. So let's say like Brad Pitt. Reese Witherspoon is worth more than Brad Pitt at an order of magnitude. Who do you think is more well-known, has more awards? Brad Pitt. But Reese is worth so much more because she is driving and Brad is walking. And the only difference between the two is that Reese understands licensing and royalties. And Brad understands trading his time for money, acting. I mean, first world problems, they're all doing okay, everybody's fine. Brad, we think you're wonderful. But that's fascinating.

Alex Lieberman: Yeah, that's so interesting. I feel like checkers for celebrities or influencers is literally just making money through acting in movies or through getting paid through AdSense on YouTube. Chess is launching a business that you are now an equity holder in. And I would say chess is launching the 17th tequila or vodka brand because it's a commoditized product, which is why everyone is launching their product there, because brand is the only thing that matters. And 3D chess is how do you actually use your uniques to truly arbitrage an opportunity. And so with the example you're using with Reese, it's like she is getting first look on potentially hit movies before anyone else. And she's getting the arbitrage of basically just flipping the value of those movies that she knows there will be appetite to, to studios who never had that first look.

Codie Sanchez: A hundred percent. And then think about it, The Rock will probably make less money on Teremana than Reese Witherspoon did on Hello Sunshine. How many people can say the word Hello Sunshine and know what she's talking about? Nobody. But Reese put no money into this. She got money up front from the studios to produce them, then package them, and resold it at a big multiple with all margin. Whereas The Rock has costs; it costs money to do the agave and travel all around the country doing his schtick, trying to get them into stores. So The Rock is playing at a lesser game than Reese Witherspoon, actually.

Alex Lieberman: Let's talk about your media and content, because I would say that is the most recent component of your empire. I guess other than your fund, which is also recent. But let's talk about content. Why did you decide to go all in on creating content on Twitter, TikTok, Instagram, YouTube, and you have leveled up the production value of your content a ton? I watched your most recent YouTube video and I felt like I was watching a mini-doc at a movie theater. So why are you spending so much time on that when you could be using that time to buy more boring businesses?

Codie Sanchez: Because the level 10 game is content. And I think what I've realized is content is really just a word for audience arbitrage. It's just, can I get people's eyeballs? And we are in a war for our attention. It is becoming the most valuable commodity out there. Not capital, because we're printing it like crazy. It's not historically what it used to be, which is product; it's attention. So I realized this a couple years ago when I started, and I've only doubled down and bet on it more and more because my audience...if I can create an audience of...right now we have 3 million followers and we do 60 or 70 million views a month. If I can create an audience of real humans who are bought into what we're doing, then alongside them we can do just about anything. We can launch funds together, we can launch products together, we can make real money together, we can have fun and experiment without having a ton of overhead together. And so I think it's the most important aspect that there is today, is having a content engine.

Alex Lieberman: So what's the dream, in the sense of, you're building up this battalion of Codie Sanchez's friends, troops, and followers. What do you hope to be able to launch five years, 10 years down the road, that you only have the capability of doing when you have an audience of this size?

Codie Sanchez: This is going to sound like a fucking politician nonsense actor, but I was at dinner last night at this little steakhouse here, and the guy came up to me at the table and was serving us whatever, and he was kind of nervous and went away. Then he came back and he is like, "I'm so sorry, this is so inappropriate. But I just wanted to ask, are you Codie Sanchez?" And I was like, "Oh, yeah, that was really nice." But then he started telling me about the businesses that he's doing on the side and how he got kicked out of school and he couldn't go back and afford it anymore, and what he was going to do now and how he's working on this stuff. And at some point, you make a certain amount of money and then you realize that that's not the only endgame. And then you wonder what your impact could be on this planet, whether it's from ego or altruism, I don't know.

But at some point, I was like, "Huh, what's the point of it all? And wouldn't it be cool if I could actually make some meaningful difference?" So that's one. It's not that I want to launch something else, it's not that I want more work; I got plenty of it. I really like what I'm doing right now. It's really just like, that's so cool. How come I can make a video, this guy can watch it, and then his life can get changed. What? That's wild. And then the second thing is, I just marvel at this idea in my head of...I'm writing a book right now. I don't even think I've said that anywhere yet. So I'm writing a book, and in my mind, when we're doing the research on the book, I'm realizing something really quickly. 25% of construction stores, grocery stores, coffee shops, just about everything you can think of in the US is owned by giant conglomerates. They're taking over slowly our world until strip malls look the same in Albuquerque as they do in New York, as they do in Phoenix. And I've traveled a lot and every time I've seen that, I lose a little piece of my soul, because I think each community should have unique ownership. We should not be a nation of renters, like "You will own nothing and like it." We should be a nation of owners. That's why this country started. And so the part that gets me going is, I want to create small business owners all over this country who actually own businesses in their community; they aren't headquartered somewhere else. And then have some office in your community that takes care of your local citizens. Why? Because they don't care as much. You can only care so much about the stuff that you have skin in the game in. And so that's the thing that I care about. I hope this book and some of the stuff that we're going to launch helps more people become owners, because wouldn't it suck if the only coffee shops around were Starbucks? I don't want that.

Alex Lieberman: Yeah, no, there's something beautiful about the local coffee shop and the feeling of community it creates. You have grown on every platform rapidly and there's just such virality around boring business content, which...by the way, before I get into YouTube, why do you think boring business content is so viral?

Codie Sanchez: People are tired of...actually, two things. Corporate trust has shifted to individual trust. People are tired of working for big corporations, and so they're tired of being consumers of big corporations. And there's a feeling of, man, nobody at the top's kind of looking out for us anymore. There's a difference and a feeling between when you go into a mega store and when you go into a normal store. And I think in every aspect of our lives, when we were locked up for two years, we basically realized, man, my community matters a lot, especially if I can't travel around. Man, my job matters a lot, if I'm spending all this time at it and I can't be distracted by the foosball tables at the office, and the things that I spend my life doing have a real impact. And so I think boring businesses get people excited because, like "Oh, I don't have to start the next Tesla in order to make money and have an incredible life. I could just take over a boring business." It seems reasonable and it seems like noble work and it seems like something they can do.

Alex Lieberman: I agree with that. I also think people love novelty, and every boring business is novel in its own right because there's an unexpected niche, a new unexpected crevice of our economy that's been unexplored until you turned over the stone. But I also think the other piece which you mentioned is, it's aspirational but attainable. I think the reason this probably hits more than a multibillion-dollar company that you profile is the average person that's potentially looking to do something outside of their nine to five. They're like, okay, that's great, but I'm not about to go build Qualcomm. But the guy who makes hundreds of thousands of dollars a month with vending machines, he started with one and has scaled up to dozens. Well, I actually see, I could start with kind of a crawl, walk, run approach. So I think that is huge. Question for you. March of 2022, do you know how many subscribers you had on YouTube? March, meaning eight months ago.

Codie Sanchez: I don't...

Alex Lieberman: Guess.

Codie Sanchez: 20,000 or something?

Alex Lieberman: 3,500.

Codie Sanchez: Not very many.

Alex Lieberman: Today you're right around 409,000 subscribers on YouTube.

Codie Sanchez: That sounds right.

Alex Lieberman: What are the biggest lessons you've learned about YouTube and creating compelling videos that allowed you to scale so quickly?

Codie Sanchez: What's credible to me is if you actually care about something and you're passionate about doing it, and you can bring some real industry expertise in some way, people take note. So I think a lot of people see the growth online and they think, "Ah, I want to stop and go start YouTubing. And that's okay, you could do that. But I think if you want people to be interested, you should try to be interesting. I'm not saying that I'm interesting. I'm saying that I've done a few things in my career, and I have some spiky points of view and I've built a thing or two. And so I think historically, not a lot of people like me are on YouTube. I got a real unfair advantage there in that, how many people that manage hundreds of millions of dollars or have done hundreds of deals are willing to talk about it on the internet? People still think that I live with my parents and have three nickels to rub together on YouTube half the time.

Alex Lieberman: You don't live with your parents?

Codie Sanchez: I don't. I love my parents. That'd be great, I'm down. And so I think there's a lot of these fake gurus that were sort of here before. And so when people see somebody who's actually done a few of these things, you're like, "Ah, that's interesting." So one, I think you don't always have to be an expert, but you should try to do a few things before you try to talk about doing things. Just even if you could get a...there's a bunch of guys on YouTube right now that do it in like conspiracy theory land and they grow like crazy, but that's gonna fizzle out. So that's one. Two, I think, is telling people's stories in a way that is you-focused, meaning audience-focused as opposed to me-focused, is also really useful. So how can you make money despite what's going on in this recession right now, even if you don't have more than a thousand dollars? Not how I, Codie, made $3 million yesterday doing X and Y and Z, and here's my Lambo, right? And so I think those two things were big.

Alex Lieberman: Yep. Love that. I want to finish with one last thing about your business, and then a few of your hot takes. Your business, the way that I understand it now is you have the media business, which is your videos on YouTube, TikTok, Instagram, your threads on Twitter. You have your newsletter, I believe there's the free newsletter and then there's paid, like behind the paywall, and you have a community for people interested in boring businesses, right?

Codie Sanchez: Yeah.

Alex Lieberman: And then, so that's the media business. You're also working on your book, and then the other part of it is your portfolio of boring businesses that you own. How many boring businesses do you own at this point?

Codie Sanchez: 24 right now.

Alex Lieberman: And what's the rough value of those businesses?

Codie Sanchez: Well, they do about $50 million in revenue.

Alex Lieberman: Wow. So just to understand all this, how many people do you have employed at the moment? How many people are under you to make this all possible?

Codie Sanchez: Well, inside the boring businesses, a lot. Hundreds. Inside of the media company, very few, less than 10. So from an arbitrage perspective, the media businesses actually are better, from an arbitrage perspective. The boring businesses, I think, are really interesting because they're bonds, they'll be there for a long time; they serve a real point in the community and they don't have the volatility that the media business has.

Alex Lieberman: What will do more in revenue, the media business...or not revenue, but in cash flow to you, the media business or the boring businesses?

Codie Sanchez: Still the boring businesses. But if we keep at this trajectory and I don't buy more boring businesses, the media company will definitely take over at some point.

Alex Lieberman: Well, to the point you said about leverage, something that one of my co-hosts, Jesse Pujji said in one of the first episodes of The Crazy Ones is he basically was like, "Content is the original software business. It's the business that is basically the gift that keeps on giving you the cost of capital. The cost of a person doesn't go up as you create more content, but your audience does, because the internet is working for you." And I think you've proven the value of that. One last question about your business is, what have you learned about yourself as a manager? So are you a good manager? Are you a bad manager? And what are a few of the biggest lessons you've learned to entrepreneurs who are listening to this that want to be better people managers?

Codie Sanchez: Man, if I could go back and learn one skill earlier...I already learned deal-making earlier. I wish I would've learned leadership earlier and really leaned into it. I always thought it was kind of fluffy. So I think I'm a bad manager in many ways, such as I'm a chronic optimist, so I'm late all the time; not a good move. I think I can do more stuff than I can. And so I miss deadlines. Those are two really important things to not do for your team. So if I could change two things, it would be that.

Alex Lieberman: By the way, I'm the same exact way and I've tried to get better over time because...I can't remember who said this, but at the end of the day, your actions set the standard, and if you set the standard of being late and running past deadlines, you can expect nothing more from your employees than what the standard is that you're setting.

Codie Sanchez: Yeah, it's exactly right. I think you have to be...in fact, anybody who says they're a good leader, I'm always like, nope. Because I think a good leader is always really self-critical because it's the hardest job out there that I've ever had, is leading humans. And because there's no...you're balancing two different things, often. The best interests of your employees and people that work for you, and also the management of the entity overall. So you have to make sure at any given point that this entity is going to survive no matter what, while trying to do the best by each individual employee, but you cannot let one part of the entity destroy all of it. And that makes for some really hard times and decisions. 

The other thing I think as a leader that's really, really important is, you have to sell people on a dream that's bigger than their own. So in order for people to join your thing, they have to believe you are going to take them farther than their thing or somebody else's. And so that is one thing that probably you and I are pretty good at and that I think I've delivered over time, which is I put together pretty big visions and plans and then I deliver on those. I may be late in the micro, but I always deliver in the macro, and that really matters.

Alex Lieberman: Love it. We're going to finish this conversation with Codie's hot takes. So I spent way too much time on Twitter earlier today...

Codie Sanchez: Oh, no.

Alex Lieberman: ...going through basically your tweets for the last two years. So I'm going to...I have 10 of them here. I'm going to pick a few of these and I just want you to, I don't know, provide a little bit of context in a sentence or two of what you mean, or just paint a picture of these tweets. So the first one: "Angel investing is dumb." And by the way, I'm going to mention here, you angel invest. So why do you angel invest if you think it's dumb?

Codie Sanchez: I think there was context to this, which is "if you don't have a million bucks or more." So I think angel investing is dumb for your first dollars. You're going to lose 80% of your takes. So I still think angel investing is dumb for 99.9% of people. Don't play a game where you bet on other people's ability before you've bet enough on your own and stacked up enough cash. Still stand by it, even though I do it. But now you understand why.

Alex Lieberman: Other thing I'll add here is, only angel invest if you enjoy doing it, because it is such a, call it like "founderism" that you build a business, at some point, you have to angel invest. Then after angel investing, you have to start a rolling fund. I've learned in the last year that I hate angel investing. So actually, my strategy has changed to, I'm just going to take all the money that I had earmarked to put in angel investing and I'm just going to use it to bet on side projects that I'm building myself.

Codie Sanchez: Smart.

Alex Lieberman: Next one. "Most underrated skill in 2022: Learn to suffer in silence."

Codie Sanchez: I shouldn't laugh so much at my own jokes.

Alex Lieberman: It's unbelievable.

Codie Sanchez: It's terrible. Yeah, I mean, I think that increasingly we all, including myself, think that life's that hard. And sometimes I have to remind myself, for 90% of us, especially if we're on Twitter tweeting about stuff, you're fine, you're breathing, you're fine. For the most part, most people are doing okay, and I think it's wild that we think that somehow it's beneficial for us to be online airing our grievances on little tiny things when there's so much going on in the world that's real, and I think it creates victims. And when you create a victim, you put yourself in a position of disempowerment, and I've never believed in doing that. So I still think you should suffer in silence. Plus my husband and I always joke about, you know you go to the gym and the other guys are like, "Uhhh! Ruhhh!"

Alex Lieberman: Oh, yeah.

Codie Sanchez: They're like lift...and it's like, "Shh, suffer in silence like the rest of us."

Alex Lieberman: The Maria Sharapova of the gym.

Codie Sanchez: Yeah, exactly. 

Alex Lieberman: Yeah. Things are never as good or as bad as they seem. Two more: "Mental masturbation, the single biggest reason most people don't win."

Codie Sanchez: These are great. I need to make these into bumper stickers. I forgot. True. Also, I fall into this camp. Most people...

Alex Lieberman: What is mental masturbation?

Codie Sanchez: Most people spend too much time thinking about the thing instead of doing the thing. And so they go back and forth inside their head and they confuse thinking with doing. And that is the single biggest reason why people feel like they're working all the time, but they're not. They're actually just playing ping pong inside their head.

Alex Lieberman: Love it. Last one of the hot takes. This, I think, is a personal favorite. "Never wrestle with a pig. You both get dirty, but the pig likes it."

Codie Sanchez: That's me coming from Arizona right there. That's actually from my father, who's probably more inappropriate even than I am. 

Alex Lieberman: Well, shout out to Codie's dad, because that is an epic quote.

Codie Sanchez: Stan the man. Yeah, he always said that to me when I was younger. If you ever got into it with somebody, and girls are weird when they're in high school, and there was many a time where of course, I came home crying because something I don't even know to remember, that teenage angst. And he kind of said that to me and it stuck with me, especially in the internet age. And I've really learned it with trolls. At first, I thought it was funny to go back and forth with them, and then I've realized, ah, it's not. And then oftentimes they have something terrible going on in their lives...

Alex Lieberman: Hurt people hurt people.

Codie Sanchez: Yeah, it's exactly right. So just let the pigs roll around in the mud, wish them well and move on. Although, I was at a thing last night with the guy who created Yahoo Games who's like my new favorite hero, and he's this engineer, he's super soft-spoken and he's like...they're like, "What advice would you have for your 25-year-old self?" So, I don't know. I said something like, "Don't believe anything that you hear, including people with microphones." But his was so much better. He's like, "Ah, you know what? If I could go back and talk to my 25-year-old self, I would tell him burn more bridges. I would just make some of them pay." And I was like, this guy. And so all types.

Alex Lieberman: See, maybe he didn't mean it by this, but I actually think that's a pretty profound thing. Burn more bridges in the sense, what it means to me is we are taught to be people-pleasers and taught to be nice, but sometimes being a people-pleaser actually has massive trade-offs, especially in building a business. And so actually if you don't get anyone to dislike you, it probably means that you're accepting trade-offs that probably aren't worth accepting in a business.

Codie Sanchez: Yeah, I think you're probably right.

Alex Lieberman: Two more quick questions for you and then we're done, I promise. You have a million dollars brought to you in a briefcase today by someone in a trench coat. How are you allocating that million dollars? You can put it into anything.

Codie Sanchez: But I have to allocate it right now?

Alex Lieberman: Do both versions. So, say, you don't have to allocate it right now.

Codie Sanchez: I'd probably wait another six or 12 months and see what goes down. I'd like spend a bunch of time learning about the stuff that I think's going to be super impacted. So for me it would be like, I would learn deal-making. I would learn to buy boring businesses, and I'd be like, okay, what's the market at right now? I think it's going to trend down. So let me get a stabilization and then figure out what the bottom-ish or at least the downturn looks like. That would be first.

Alex Lieberman: So you're putting...it sounds like you're saying the asset that would be a boring business.

Codie Sanchez: Oh, yeah.

Alex Lieberman: Ultimately when you do allocate.

Codie Sanchez: A hundred percent, yeah. And the only thing...

Alex Lieberman: So the 12 months from now, what boring business is it?

Codie Sanchez: For me, I think I want to go bigger. So a lot of the deals in that portfolio that I did were smaller deals. So this next go-round, I might buy a portfolio of boring businesses out of a private equity fund. I might do a pretty serious turnaround, potentially inside the software industry that serves small, boring businesses. I would make some sizable checks in those, and I've done it enough where I could do a turnaround. I wouldn't do a turnaround in the beginning.

Alex Lieberman: Got it. So that's the first type of currency. The second and more important type of currency is time. You're given by a genie a hundred extra hours today that you can allocate over the next few weeks. How are you spending that hundred hours?

Codie Sanchez: I'd spend it on locking myself in a closet and probably finishing the book. I think I'm the biggest time thief out there with distraction, and so with a hundred hours I'd do the one thing that I know will have a pivotal impact, but that I keep letting get distracted because I want to get on podcasts with my buddy Alex. So that's I think what I would do; I'd write the book.

Alex Lieberman: Love it. Codie Sanchez, as always, awesome to sit down with you and have great conversations.

Codie Sanchez: You're the man.

Alex Lieberman: Thank you for joining.

Codie Sanchez: Of course.

Alex Lieberman: Another Crazy Ones episode in the books. Thank you all for listening to the show or watching on our YouTube channel. For listeners, definitely check out our YouTube. It's awesome to see the show in video as well. I'd love to hear from you. What did you think of this new format, the interview style with Codie Sanchez? Shoot us an email at thecrazyones@morningbrew.com. And even if you don't have thoughts on this episode, but you just want to introduce yourself, tell us your story as a current entrepreneur or aspiring entrepreneur, shoot us an email at thecrazyones@morningbrew.com, and myself, Sophia, or Jesse, we'll get back to you and we can't wait for you to tune into another episode soon. Take it easy, everyone.