#335 How To Make A Few Billion Dollars Brad Jacobs



In this episode, Brad Jacobs, a seasoned CEO and serial entrepreneur, shares his journey of building seven billion-dollar companies, including Amarex Oil Associates and United Rentals, through a relentless pursuit of opportunity, strategic acquisitions, and a focus on technology. Despite setbacks and industry challenges, Jacobs' ability to think dialectically, his dedication to hiring top talent, and his embrace of problems as opportunities have led to the creation of tens of billions of dollars in shareholder value. His book, "How to Make a Few Billion Dollars," serves as a guide for those with a burning passion to succeed in business or any endeavor. Jacobs emphasizes the importance of a positive mindset, the transformative power of technology, and the critical role of assembling an exceptional team. His story is a testament to the entrepreneurial spirit and the potential of free markets to generate prosperity.

Summary Notes

Brad Jacobs' Business Experience and Philosophy

  • Brad Jacobs has 44 years of experience as a CEO and entrepreneur, creating significant shareholder value despite making numerous mistakes.
  • He has founded five companies from scratch, including two spinoffs, turning them into billion-dollar or multibillion-dollar enterprises.
  • Jacobs completed approximately 500 acquisitions, created hundreds of thousands of jobs, and raised about $30 billion in outside capital.
  • His career began with Amarex Oil Associates, which achieved $4.7 billion in annual brokerage volume within four years.
  • After selling Amarex, Jacobs started Hamilton Resources in London and then United Waste Systems in the U.S., which sold for $2.5 billion.
  • United Rentals was his next venture, becoming the largest equipment rental company in the world within 13 months.
  • XPO Logistics, another of his ventures, was split into three separate publicly traded companies—GXO, RxO, and the original XPO.
  • Jacobs believes in the power of thinking differently to achieve big goals and shares his insights in his book for those with a passion for making money or achieving success in various fields.

"During my 44 years as a CEO and a Siri entrepreneur, I've made every possible mistake in business... And yet my teams and I have managed to create tens of billions of dollars of value for our shareholders."

This quote underscores Jacobs' experience of learning from mistakes and achieving success despite them, emphasizing the value created for shareholders.

"I'm what's called a moneymaker. I've started five companies from scratch... My teams and I have completed approximately 500 acquisitions in total."

Jacobs highlights his track record of founding successful companies and his extensive experience in mergers and acquisitions.

"United Rental stock is 100 bagger. The share price at inception was $3.50 and it now trades at more than 100 times that price."

This quote exemplifies the massive growth and success of United Rentals under Jacobs' leadership, with a significant increase in stock value.

"This book is a guide if you have a burning passion to make enormous amounts of money in business or want to turbocharge your chances of success in sports, the arts, politics, philanthropy, or any part of your life."

Jacobs' book is presented as a comprehensive guide for those seeking to achieve significant success across various fields.

The Importance of Thinking Differently

  • Successful people think differently than most, rearranging their brains to achieve big goals in turbulent environments where conventional thinking fails.
  • Brad Jacobs emphasizes the importance of thinking from first principles instead of formulas and finding value in unexpected places.
  • Jacobs' approach to problem-solving and decision-making is not bound by conventional wisdom but is driven by original thought and a willingness to challenge the status quo.
  • He believes that thinking differently is essential for making a few billion dollars and that focus and willingness to transform one's mindset are crucial.

"They all have one thing in common. They think differently than most people. All of them to a person have rearranged their brains to prevail at achieving big goals in turbulent environments where conventional thinking often fails."

This quote highlights the common trait among successful people: the ability to think differently and adapt their mindset to overcome challenges and achieve ambitious goals.

"The single most powerful pattern that I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas."

The quote from Peter Thiel, shared by the speaker, aligns with Jacobs' philosophy on the importance of original thinking and finding value where others may not see it.

The Role of Mindset in Entrepreneurship

  • Managing one's mind and attitude is critical for entrepreneurship, which is difficult and stressful and requires sound judgment.
  • Brad Jacobs discusses the importance of expecting positive outcomes and reframing negative thoughts as useful data rather than objective reality.
  • Jacobs advises entrepreneurs to control their mindset and emotions, emphasizing the highs and lows of the entrepreneurial journey.
  • He shares personal experiences of overcoming challenges by controlling his mindset, including reframing problems as opportunities and maintaining mental equilibrium.

"So much of success in business comes from keeping your head in a good place... Expect positive outcomes. Stop beating yourself up mentally."

This quote conveys Jacobs' belief in the power of a positive mental attitude and the detrimental effect of negative self-talk on decision-making and success.

"The only time that I've ever felt truly lost was when I stepped down from United Rentals in 2007. I started looking for my next big thing and I couldn't find it. I became depressed."

Jacobs shares a personal low point to illustrate the importance of managing one's inner monologue and feelings to make high-quality decisions.

Embracing Problems as Opportunities

  • Brad Jacobs learned from his mentor, Ludwig Jesselson, that problems are an asset and should be embraced as opportunities to succeed.
  • Great companies are effective problem-solving machines, and success in business comes from solving problems effectively and profitably.
  • Jacobs encourages entrepreneurs to run towards problems, not away from them, as each problem solved brings them closer to success.
  • He stresses the importance of reframing problems as opportunities and workflows rather than setbacks.

"Look, Brad, if you want to make money in the business world, you need to get used to problems, because that's what business is."

Jesselson's advice to Jacobs emphasizes that problems are inherent in business and should be approached as opportunities rather than obstacles.

"Problems are an asset. Not something to avoid, but something to run towards."

This quote encapsulates Jacobs' mindset of actively seeking out and solving problems as a pathway to success in business.

Problems as Assets

  • Brad Jacobs views problems as opportunities for improvement and value creation.
  • Jeff Bezos finds waste (muda) exciting because it represents potential for productivity gains and more efficient capital expenditures.
  • Big ambitions lead to big problems, which can be the best opportunities.
  • The correct response to setbacks is to see them as opportunities for creating value.
  • Solving big problems brings you closer to your goals.

"Problems are an asset, not something to avoid, but something to run towards."

This quote emphasizes the idea that problems should be approached proactively as they present opportunities for growth and improvement.

Concept of Radical Acceptance

  • Brad Jacobs practices radical acceptance, which involves seeing the world as it is, not as you wish it to be.
  • This mindset helps avoid compounding mistakes and enables moving forward effectively.
  • Jacobs shares a story of accepting a $500 million loss due to misjudging government funding and market response.
  • Radical acceptance helps quiet the noise from past decisions and wishful thinking.

"Radical acceptance quiets the noise created by yesterday's decisions and today's wishful thinking."

The quote summarizes the concept of radical acceptance, which is about dealing with reality as it is and not dwelling on past mistakes or unrealistic expectations.

Turning Challenges into Opportunities

  • Brad Jacobs turned a short report crisis into an opportunity by buying back $2 billion worth of stocks.
  • He challenges conventional wisdom and acts based on first principles.
  • This approach led to a $4 billion gain when the value of the shares increased.
  • Jacobs emphasizes the importance of thinking from first principles and finding value in unexpected places.

"The short seller crisis had made our stock extremely cheap... We decided to buy back $2 billion worth of stocks."

This quote illustrates how Jacobs capitalized on a crisis by recognizing an undervalued asset and taking decisive action to benefit from it.

  • Brad Jacobs emphasizes the importance of getting the major trend right in business.
  • He conducts extensive research before entering an industry, including reading, attending conferences, and interviewing experts.
  • Jacobs believes that technology is the dominant megatrend and investing in it is crucial for success.
  • He shares examples from his experiences in the oil and waste management industries where understanding trends led to profitable ventures.

"You can mess up a lot of things in business and still do well as long as you get the big trend right."

This quote highlights the significance of identifying and aligning with major industry trends to ensure business success despite other potential mistakes.

Thorough Industry Research

  • Before starting a new company, Brad Jacobs immerses himself in industry research using various sources and methods.
  • He attends conferences, interviews experts, and analyzes data from multiple platforms.
  • Jacobs's research process is about gathering comprehensive information and gaining deep insights into the industry.

"I start by reading everything I can get my hands on... I look at all the websites and social media of the major players and the up and comers in the industry."

The quote describes Jacobs's meticulous research approach, which involves a thorough examination of all available information sources to gain a comprehensive understanding of an industry.

Reduction in Transportation Cost and Increased Profit Margin

  • Brad Jacobs describes how efficiency improvements led to significant cost reductions and profit margin growth.
  • The company he sold for $2.5 billion achieved the same workload with fewer resources due to process improvements.

"So instead of 50 trucks in five days, he's doing the same work with 20 trucks in three days. Our cost kept coming down as our processes improved and our profit margin grew significantly."

This quote highlights the impact of process optimization on reducing costs and increasing profitability, which contributed to the high sale value of the company.

Inception of United Rentals

  • Brad Jacobs shares the origin of his idea for United Rentals.
  • The idea was suggested during a meeting with analysts at Merrill Lynch.

"One of those analysts asked if I thought about going into the construction equipment rental."

The quote indicates that the concept for United Rentals was sparked by an analyst's question, showcasing the importance of external insights in business ideation.

Technological Advantage in the Rental Industry

  • The larger regional players in the rental industry were quick to adopt technology.
  • Brad Jacobs capitalized on this by purchasing the software company, Win Systems, used by industry leaders.

"By 1997, nearly all of them were running on software developed by a company called Win Systems."

This quote underscores the strategic move of acquiring a technology provider to gain a competitive edge in the industry.

Strategic Acquisition of Win Systems

  • Owning Win Systems provided an industry-best platform and access to valuable industry data.
  • The acquisition allowed proactive adjustments in pricing and asset management.

"Owning win accomplished two things. One we had an industry best platform... And the acquisition gave us access to aggregated, anonymized data on macro trends across the industry."

The quote explains the dual benefits of the acquisition: an improved operational platform and insightful industry data for strategic decision-making.

Importance of Feedback Loops

  • Brad Jacobs emphasizes the value of feedback from frontline employees.
  • Successful entrepreneurs like Les Schwab, Sam Walton, and Jim Casey prioritized frontline data to improve their companies.

"They want data from the people that are actually interacting with the customers."

This quote highlights the practice of gathering insights from employees who directly engage with customers, which can lead to more informed business decisions.

Soliciting Employee Ideas

  • Brad Jacobs advocates for asking employees for their best ideas and identifying company inefficiencies.
  • He suggests using simple questions to gather valuable feedback from all levels within a company.

"What's your single best idea to improve our company? And what's the stupidest thing we're doing as a company?"

The quote illustrates the approach to engage employees in the problem-solving process and to uncover areas for improvement within the company.

Family Feedback

  • Brad Jacobs applies the concept of soliciting feedback to his personal life as well.
  • He stresses the importance of communication and seeking improvement suggestions from family members.

"What's your single best idea to improve our family? What's the stupidest thing that I'm doing as a dad?"

This quote shows how the principle of seeking feedback can be adapted to personal relationships, aiming to improve family dynamics.

Speed of Execution

  • Brad Jacobs' companies are known for their rapid execution and growth.
  • A competitor, Hertz, was outpaced significantly by United Rentals in terms of revenue growth.

"United rentals did that in 13 months."

The quote demonstrates the impressive speed at which United Rentals grew compared to its competitors, emphasizing the company's efficiency and strategic execution.

Hiring Philosophy

  • Brad Jacobs believes in the importance of hiring intelligent, ambitious, and adaptable individuals.
  • He suggests that hiring decisions should be made with a focus on perfection, especially when recruiting top talent.

"The most important thing a CEO does is recruit great people... Make your hiring choices as perfect as they can be because there are few mistakes costlier than hiring the wrong person."

This quote captures the essence of Brad Jacobs' hiring philosophy, stressing the critical impact of recruitment choices on organizational success.

The Value of A-Players

  • A small team of A-players can outperform a large team of B and C players.
  • Brad Jacobs uses a thought experiment to differentiate between A, B, and C players based on the internal reaction to their hypothetical resignation.

"If my reaction is an internal dialogue of panic... That is an A player."

The quote provides a method for assessing the value of employees, with A-players being those whose potential departure would cause significant concern due to their irreplaceable contribution.

Compensation and Talent

  • Brad Jacobs advocates for generously compensating top talent.
  • He argues that it's nearly impossible to overpay for talent due to the disproportionate impact exceptional individuals can have on a company's success.

"The reason you overpay for talent is because it's nearly impossible to overpay for talent."

This quote emphasizes the philosophy that investing in top talent is worth the cost, as their performance can greatly exceed the value of their compensation.

The Importance of Talent and Entrepreneurship

  • Talent in business is invaluable and can be the difference between success and failure.
  • Overpaying for talent is often justified due to the significant impact a talented individual can have on a company.
  • Entrepreneurship is celebrated as a force for creating jobs, wealth, and improving lives.
  • The entrepreneurial spirit is exemplified by individuals who take pride in their work and prioritize customer satisfaction.

"Never, ever forget the dynamic range of human beings and overpay for talent, because it's nearly impossible to overpay for talent." "It's an incredible honor and a good thing for the world to build products and services that make other people's lives better, to create jobs for hundreds of thousands of people, in Brad Jacobs' case, to create wealth for your shareholders."

These quotes highlight the significance of recognizing and compensating talent appropriately, as well as the broader beneficial impact of entrepreneurship, such as job creation and wealth generation.

Personal Anecdotes and the Entrepreneurial Journey

  • Brad Jacobs shares a personal story about Steve, an HVAC technician, to illustrate the entrepreneurial mindset.
  • Steve's dedication to his work and customers' satisfaction reflects the values that Brad Jacobs instills in his companies.
  • The discussion of profit and money is essential, as it is a measure of success and sustainability for businesses like Steve's.
  • Brad Jacobs also shares his experience at the Rhode Island Governor's School for the Gifted in Art and Music, emphasizing the importance of going "all in" and the correlation between effort and outcome.

"Steve is a hard-working, take pride in your work entrepreneur who puts his customers first." "We have it in our own hands to either make life meaningful or just pass time until we die."

These quotes encapsulate the essence of the entrepreneurial spirit, emphasizing hard work, customer focus, and the conscious choice to make life meaningful through one's endeavors.

The Value of Books and Learning

  • Brad Jacobs and the host discuss the value of a book that Brad highly recommends, noting its extensive appendix filled with practical resources.
  • The book is seen as a valuable reference tool, with interview questions for job candidates, recommended books, and advice on conducting meetings.
  • The host encourages listeners to purchase the book using a link provided, supporting the podcast in the process.

"The appendix is like full of you could buy the book just for the appendix, obviously read the whole thing." "Highly, highly, highly recommend buying the book."

These quotes suggest that the book offers extensive and valuable additional materials that make it a worthwhile purchase, and Brad Jacobs endorses the book for its comprehensive content.

Founders Only Conference and Founders Notes Service

  • The host introduces "Founders Only," an in-person conference for founders to build relationships, limited to 150 people.
  • The importance of relationships in business is emphasized, with the potential for life-changing connections.
  • The host also introduces "Founders Notes," a service providing access to his extensive notes on entrepreneurship.

"Founders only is the first ever in person conference that's taking place in Austin, Texas on March twelveth through the 14th." "Relationships run the world. A single relationship can be life changing."

These quotes introduce the "Founders Only" event as an opportunity for founders to network and the belief in the transformative power of business relationships.

The Utility of Founders Notes

  • "Founders Notes" is a platform that provides access to the host's notes from books on entrepreneurship, with a search feature for specific topics.
  • The service is designed for successful entrepreneurs who can apply knowledge from the notes directly to their businesses.
  • The host explains the value of the service, including a feature called "Highlight Feed," which presents random highlights from various books.

"Foundersnotes.com this is another example of how just listening, paying attention to what's going on around you, you're going to find opportunity and ways to serve other people." "You could take knowledge and turn it into a profit."

These quotes describe "Founders Notes" as a tool that captures the host's extensive research and allows entrepreneurs to leverage that knowledge for their own success.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy