The oldest trick in the book to make your first million

00:00:00When I Googled this family, the wordscame up weresilent dominance, middlemen at planetaryscale.>> [laughter]>> All right, Sam. I have a I have a billyof the week for you. An MFM classic.This is not just any billy of the week.This is one of the biggest billies inAmerica.One that I wasn't really that aware of.I think you will know more than me aboutthis, but I would say most people don't.>> Okay. Wait, can I guess?>> Let me read you Let me tell you threethings about it then you can take aguess.>> Okay.>> Okay. All right. It is the largestprivate company in Americafor the last 40 years.>> Mhm.>> It is owned 88% by the family and hasproduced more fam more billionaires inone family than any other company ever.They do more revenue than Goldman Sachs,Nike, and Starbucks combined.>> Ooh, is it Mars or Coke?>> You're in the right neighborhood.>> Estee Lauder?>> Okay, you left the neighborhood briefly.Come back [laughter] to the otherneighborhood of likea sort ofrich redneck>> [laughter]>> families of America. It isCargill.>> Oh,

00:01:15yes.>> So, the Cargill family. So, I didn'treally know anything about this family.Can I just tell you a little bit abouttheir story and and what they do becausethis is a dominant business story of alltime.>> Wait, first tell me why did thisinterest you? Why this catch yourattention?>> Remember you when I was at your houseand you were like, "There's this closethere by the way that we found. There'sthis extra storage room this that wedidn't even know till we lived here for2 months." That's how I felt finding outthat one of the most wealthy families inAmerica and I don't know their story.That's how I felt. As the As the host ofMy First Million, I just felt like Ineeded to right a wrong.>> Okay, I understand.>> And And the real By the way, how did Ifind it? There was a Reddit thread thatwas tell me about billion dollarindustries that I probably don't knowabout. And it was like the first one wassand and the second one was this and thethird one is this. Reinsurance. It'slike, well, there's insurance companiesand then they buy insurance. That'scalled reinsurance and then thereinsurance, guess what? They havereinsurance companies behind them. It'sjust insurance all the way down, baby.And so I was reading through this threadand then one was Cargill and I was like,oh, Cargill. So what they did is thatthe story is umback in the day as America was was sortof getting its feet and railroads hadbeen had been uh started to get built.Farmers needed to offload their crops,their grain,um and they needed to sell them. So theycould either

00:02:30sell it individually, sothe farm could try to sell individuallyto a buyer and figure out how totransport it there, or they could workwith a middleman. And so Cargill becamethe biggest middleman on the planet forbasically just initially storing grain.So they would go right next to where therailroad is, they would build what'scalled a grain elevator, which isbasically a giant storage facility forgrain so that it wouldn't spoil veryquickly. And the farmers could come dropit off, they would get like coat check,they'd get an IOU that says, "I will payyou when your grain sells." Or theywould just buy it at a flat rate likewholesale and be able to flip it. So youcould choose as the farmer which one youwanted to do.>> This is what my father my father doesfor a living, by the way.>> Oh, so maybe you should have known.>> [laughter]>> He does it with onions. Onions. But yes,my my father's a a broker. That's whathe does.>> Does he store or he just calls one sideand say, "Hey, I got 75 bushels of>> This Well, it's fresh produce, so thestorage is like a day. But yes, there'sa yeah, there is a place where they sitfor like 24 hours before a truck comesand gets it. Yeah, but yes.>> And what's interesting to me about thisfor me from a from a businessperspective, you always hear this ideaof like you don't want to be themiddleman. Oh, you can always cut outthe middleman. And and in this case, themiddleman became worth more thaneverybody else. And actually, if youlook at many businesses, you know,there's

00:03:45many businesses where themiddleman becomes a quite a valuablebusiness. And so there's an interestingquestion of why. In in case, it'sbecause the middleman was a physical wasphysically in the middle. They literallybuiltthe grain elevators that would store the[ __ ] right next to the railroad. And so,you needed to transport it. You neededto get to the railroad. Who else had it?Like, nobody else was going to buildthat. So, anyways, they started doingthat. They They then go, you know,further and further and further. So, youknow, at one point, they're like,"Hey, these shipping barges are soinefficient where we're shipping thegrainwhen it's not traveling by rail. So,we'll build our own shipyard, our ownships." They end up producing ships forthe US Navy. They bought the biggestlike meatlike poultry company, and now theycontrol like a huge percentage of themeat industry, of the grain industry.And so, they built this like empire, andnobody really knows them. And And theybasically it's just a family that's thatowns this thing. 88% owned by thefamily. There's like 20 or somethingbillionaires in the family now. Theyhave this rule called the 80/20 rule.So, 80% of all profits will getreinvested back in the business. 20 goesout as dividends to the family, and theyhireAnd for the last, you know, 20 years orso, they've They've had professionalCEOs running the company. It's not likefamily run anymore.>> And the profit per year, according toWikipedia, I think it's like five or sixbillion dollars.>> Yeah, that was like during like the kindof peak COVID stuff

00:05:01when you know, whenUkraine was getting attacked and and,you know, Ukraine produces a lot ofgrain. And so, their prices spiked. Ithink it's like three billion in a in anormal year right now.>> Okay.>> So, okay. So, so you're close to abillion dollars a year of profit thatgoes just straight to the family. Andthey've been doing that for like,whatever,50 plus years.And so, I want to I want to tell you alittle bit of something interesting. So,first I was like I was like, "What dothey actually do?" Cuz you know, whenthese corporations get so big, so large,they just have their hand in everything.And you would see these comments like,you know, they just everything on yourplate. Anything you eat in a in apackage, Cargill had a hand in it.They're They're controlling the foodsupply. The people think of likeMonsanto-style like evil companies.Um and so, justI'll read you this paragraph. So,"Imagine you eat a hamburger. Cargillprobably sold the farmer the seed andthe fertilizer to grow the grain. Theybought the grain from the farmer andstored it at their grain elevator. Theyshipped it on their barge that theybuilt in their ships that they built toa processing plant where it's processedinto animal feed. And then they theyfeed that to cattle who they thenslaughter. They they then store the meatat their meat packing plants, sell thebeef to the restaurant. By the way, therestaurant has to buy their salt. Theysell like all of the salt to all of thefast food chains in the country. Andthen the corn

00:06:16syrup that they processedout of the corn gets put into theketchup, the soybean oil that's used forthe fries, the starch that's used in themilkshake. That's all Cargill. And isn'tit crazy how like one company can have ahand in so much of your day-to-day life?And and when you're when you thinkyou're eating at some farm-to-tablerestaurant, you you're really notescaping them because they control theunderlying ingredients that are used,the fertilizer, the seeds, the grains,like all of it that gets fed to thecows, likeit all come it all goes back to thesource. And isn't that kind ofincredible?>> And the family is so big and soprofitable, they also own a thing calledGarda Capital Partners, which is a $10billion plus size hedge fund. Correct?Cuz they have to hedge com->> commodities, you know, on behalf of thefarmers and for themselves as well atthis point.>> So they own like a little bit ofeverything including mines because theyneed to get their own chemicals andminerals to make all of these things.This is incredible.>> No famous founder.You know, their office was famously thislike chateau looking thing on a lake inthe middle of nowhere. And like that wastheir it was called the lake office ifyou Google it. And it's just quiet. Youknow, like how they say like money talksbut wealth whispers?This is this

00:07:31is wealth whisper [ __ ] Youknow what I mean? Like who's thefounder? What does he look like? Who'sthe CEO? What do they talk about? Howcome they're not on CNBC? Do they dopodcasts? Oh, they don't do podcasts.>> [laughter]>> You know what I mean? Like it is it istrue like quiet dominance. And actuallyit was part of their strategy for a longtime was to be quiet about it just tonot attract competition and to buildthis monopoly position in the logisticsindustry.>> is cool. I've known I've seen their logoand whenever I look at like the largestprivately owned companies in America,it's always been there. I neverunderstood what entirely did they didbecause it's one of those things whereyou say what they do and it sort ofmakes sense, but it's like a B2B thing.So like you don't entirely understandexactly what it does and they say likethey sell chemicals and I'm like, Idon't know what that means, you know,that's so that's so vague. But when youlook at the numbers, they do a hundredand fifty billion dollars a year inrevenue. That's just so massive. And Ibet you that they likeown so many more things that youwouldn't even realize. Like for example,like the Walmart family owns like Haveyou heard of Rapha? It's like a coolbike D2C company.>> They own that? [laughter]>> They own the like they just like they'rejust rich people. They're just like dealmen. They just own [ __ ]>> They just go to the website

00:08:46to buy oneand then they just keep pushing plus onquantity until they own all of them.They're [laughter] like, "We now havethe shop.">> That seems like something that thisfamily would do is like you don'trealize it and then you if you wanted toget like conspiratorial, which I havenot done any research on it. I'm surethat there's like 10 or 20 reallyinteresting conspiracies about how thateither they're at this they're pullingthe strings behind, you know, it's likethethere's something going on with thisfamily, which I'm just making it up.I've no idea.>> A journalist once described the familyas secretive, inbred, and suspicious.>> [laughter]>> I'm in.

00:09:23>> Hey, I want to tell you about somethingpretty cool. We have a database of allof the business ideas that have beendiscussed on this podcast. So hundredsof episodes, the team at HubSpot wentthrough, they pulled out all the simple,relatable, interesting, profitable ideasthat we have brainstormed, and they'reall available for download for free.Just click the link in the descriptionbelow. Thank you to our friends atHubSpot for sponsoring this podcast andputting together this free resource foryou guys. Back to the show.>> In 1980, they did a survey, and by thenit was already a dominant company. Theydid a survey, 94% of farmers had heardof Cargill, but only half of them knewwhat the company actually did. And thenamongst politicians, lawyers, andjournalists, what they call opinionleaders, 50% had heard of them, but only10% understood what the business was.Because they have this sort of sprawlingempire like you described, people don'treally fully understand what they evendo. You just sort of know that they'reimportant.>> Um, I had a friend who, uh, I think itwas Cargill that she went and worked atbecause they obviously make so muchprofit that they were trying to investin like new seed-related,agriculture-related, D2C, like I thinkthey invested, like we had talked aboutthat one D2C milk company. Like theywould look at things like that. Likeanything like interesting. And she saidit was awesome working for them. Shesaid it was a it was a great company.

00:10:38>> Well, definitely there's a sectioncalled the dark side in my notes here.So, let me just tell you some thingsfrom the dark side just to be be fairhere. When you have like global cropproduction, you're going to have this,which is like accusations of child laborlike in Brazil or in, you know, IvoryCoast and things like that. They theyare said to have better intelligencethan the CIA. So, they have basicallythey have a spy network of around crops.So, like they know more about the stateof crops in real time than the USgovernment does around the world becauseit's like life or death for theirbusiness. You know, they've had likedifferent like E. coli break breakoutsand stuff like that. Again, if you'retouching most of the food supply, thenlike anything bad that can happen infood is going to happen to you. Peoplejust generally feel like they'remonopolistic. So, you know, they do theycare about worker safety number one?Probably not. Probably not in the topthree top three things that they careabout.>> But they're Midwesterners. They eventhey're probably really sweet.>> [laughter]

00:11:33>> But it's crazy to go from like a singlegrain shed to now controlling 25% of theentire US export market for grains andmeat. It's like pretty crazy.>> So they were they it started 160 yearsago. You and I did a talk recently andyou were like we were explaining likesome of our preferences. You were likeI like projects. I like startingsomething and then potentially sellingit but like I love the starting phase. Ilove handing it off to someone and thenI love it potentially ending andstarting something new. And I was sayinghow I love things that could potentiallygo for 50 to 100 years. Not that I'veactually done that. I've actually donethe same thing as you. Projects startingand selling. And I'm so fascinated bycompanies that can last this long andthis one in particular is one that seemslike they've kept it togetherpretty amazingly for 160 years. That'scrazy. So they started before the CivilWarand it's still around. Isn't thatincredible? And I just think I I justfind that so fascinating. And like partof me is like wellwhen I die, like why do I care aboutlegacy? Like we talk about legacy a lotandI I was reading something the other dayand like why do the or someone said tome like why do you care about yourlegacy?Like who who gives a [ __ ] You're dead.And I was like okay, yeah. I Iunderstand that perspective. Like we canhave the dichotomy of caring about thatand then

00:12:48also like how cool would it bethat the thing that you can create canemploy 160,000 people 150 years afteryou're gone. Like I don't know. I thinkthat's awesome. I think it's kind ofromantic and exciting.>> It's kind of liketwo people can love runningand one person's trying to run the 100meter dash and the other person'srunning uhyou know, one of these like ultramarathon 100 mile races. And they'reboth like yeah, I love running.>> [laughter]>> But and and that's what I do and that'skind of like in the business sense,there's there's different ways toapproach it. There's the what I call theprojects approach which is you kind ofgo in knowing like hey, I'm going tohave like five great at bats in mycareer.And I I each one is a really fun chapterand I'm going to seek variety in those.>> It's sort of like being an author.You're like, all right, I got 5 years ofresearch and writing, and then a break,and then I do it again.>> Exactly. And then there's other peoplethat are brick by brick laying afoundation for an empire. And you know,I I respect both, but I I know which oneI want to do. And I think you know whichone you want to do, too. I think youwant the You want the like empire.>> Yeah, I don't know if I'm going to havethe grit to pull it off, but I for surelove the idea of the result.>> Do you think the people who do this, isit a temperament difference? Like,they're wired differently, therefore,you know, fast fast twitch, slow twitchmuscle type [ __ ] where it's more ofinherently who you

00:14:04are, or do you feellike you might have the basewiring to do it, but you then need toadopt the systems, right? Like, forexample, it's not like one guy ran thisfor 100 years. No, he passed it to hisson. His son kind of screws it up. Thenthe next son sort of saves it out of outof bankruptcy. And then by by now,professional CEOs run it, but they'veinstilled values and systems and likeownership controls. But, you know, nowthe the heirs are marine biologists, andthey're doing other things. They're notrunning this company that that the butthe company the entity lasts. So, whichone Where do you think you might fail?Is it the wiring or the systems?>> I think the wiring. You start off acertain way, but not always. Forexample, I think there's a lot of themthat would have sold if they could have,but the opportunity just didn't presentitself, and they just said, "Screw it,I'll just keep going." And then I thinkwhat happens a lot of times is there's afew things. Like, if you had to build abusiness and you never thought aboutselling, there's a world where you woulddo some wacky stuff that would make thebusiness incredibly profitable, butincredibly not sellable. Like, you wouldacquire assets or businesses that don'tentirely make sense to one particularbuyer, and then you get big enough tothe point where you're like, "Ugh, thisis a hodgepodge of stuff, and it worksfor us, but no one buyer would everactually take this." So, like, but thenI also think that it comes down a lot tothe family.

00:15:19And I think that there'ssomething special around familymeetings. We've had Rob Dyrdek on here,he talked about that. I actually followsome people on Instagram and they talkabout like family meetings.>> Explain what you mean. What is What's afamily meeting?>> So, the way that I grew up is probablyvery similar to the way potentially yougrew up, but with the way a lot ofAmericans grew up, which is your parentsnever talked to you about money. If youasked them like, "How much do you make?"they would say like, "That's none ofyour business." Um and there was verylittle transparency and there's aprobably very little culture creation interms of like, "Here's explicitly myexpectations of you. Here's our family'sculture. Here's our values." And whatI've been learning about and franklywhat I like is this idea of a familymeeting where you get the children andeveryone in the same room monthly,quarterly, annually, something likethat. And in the same way you run aboard meeting, you run a family meetingwhere you say like, "Here's the valuesthat we stand for. Here's how we didlast quarter, last month according towhat we said we wanted to achieve. Andwhat about the future? What would youguys like to do? Let's Let's talk aboutthis. And here's the money that we haveto spend on whatever dreams and ideasthat you have and let's discuss if itfits within our family credo andmission." And there's actually like away to do that and I aspire to do thatwith my family. My>> do you do you do you do you like takingminutes? Taking meeting minutes?A board observer?

00:16:35>> I just think there's something specialabout being explicit about stuff. Ithink that a lot of times when you'regrowing up, there's these things thatyou say, "Well, we never really talkedabout blank, but my feeling was this."But what I would like to experience islike saying like, "We are actually goingto speak what we intend to do and how wewill do it and what resources we have toget it done and we'll have aconversation." And I think there'ssomething very special about thefamilies who pull that off.>> Yeah, I um I totally agree. I I I thinkit's explicit versus implicit. So, it'snot even like, "Don't talk about that."It's more just it didn't get said,right? And it doesn't get said not formalicious or secretive reasons, it'sjustwe were busy.I don't know myself what you know, it'slikeI'm not sure I really know the answer toall these things and it's easier justnot even think about it, right? It'slike if you ask somebody, "Well,what do you really want?" Watch peoplejust immediately just start to flounderand it's such a simple question. Don'tyou think you should know what youreally want?>> When I'm meeting new people and I wantto make them feel like I care aboutthem, it sounds like I'm beingnefarious, but I mean like I'm trying tolike get to know someone. I'm like,"Hey, in the next 6 months, anythinginteresting you want to get done in lifeor career or family-wise?" And they'llbe half the time people are like, "Idon't know." And it's like the theconversation is them discovering it andit's kind of exciting.>> Yeah, exactly. So, I think I think beingexplicit I'm like you. I'm I'm a

00:17:50over-communicator. I'll take thenegatives that come with that because Ithink the positives are so overwhelming.But how do you do it in a family is kindof interesting.I was at afriend's house and he has this likecrest on the wall and he's like, "Oh,that's our like family crest." And I waslike, "Oh, like my family, we didn'thave one. Like I guess one of myancestors dropped the ball." He's like,"No, like we made this. I painted thatlike, you know,5 years ago and we just decided, whatare we all about?" There's fourquadrants on the crest and we said it'sthis, this, this, and this and this isour sigil. That's our animal.>> I love that.>> And I was like, "You can just do that?You can just be a university? Like Icould be Hogwarts right now? The hell?"Like and I came home and I was like,"Shit, I'm going to start doing stufflike this." So, I actually haven't madethe crest, but I have done a a few otherthings. Like I gave for each of my kids,they have like a way. Like I like it'dbe like Sam's way. So, for example, oneof my kids, it's like one of them is trytry to figure it out. Oh, that's the Samway. And I'll I'll I've said that somany times that now the great fathermoment is when he'll just be like,"Well, I just did it. I just did it theSam way." And he's using it as shorthandfor like, "I didn't give up. I triedtried until I figured it out." And mydaughter has a different one.>> That's really beautiful.>> And then we have one that's like forlike I the idea of gifts.

00:19:06So, I toldthem I was like I was like, "Yeah, likeeverybody has like some gifts that youwere given." And my son loves likePokémon and things like that. So, hekind of understands the idea that likesuper you have a superpower and likeevery every character he watches in ashow has like a special power. I'm like,"Yeah, like well, you have one, too."He's like, "Really? What's mine?" AndI'm like, "Well, yours is that you'rethis." And I just get to declare I givethem a reputation to live up to, youknow, one that they're today quiteinconsistent in, but there's moments andall I did is I just highlight thosemoments. I pretend the inconsistenciesdon't exist and I just keep reinforcingthat until it's their identity. And I dothat for each of them individually. Andthen one of the downsides is like I makeone sound so good. I'm like, "Do I Can Ijust say that the other one has thesame?" Cuz then it's it feels lessspecial. I have to give the other oneequally those, but you can also do Youknow, it's a little tricky. It's notperfect, but man, this [ __ ] works. Um itis really a powerful And so, there's a aversion of that that's completelynon-business related, but in creatingthis like family dynasty idea of how doyou instill a culture first in the homebefore you ever try to go do it, youknow, in the office.>> And I think the likelihood that anyone'schildren will ever want to work in theirbusiness is very low. And so, like ifthat even happens, I think and they getalong, that's like a miracle. And so,what I've noticed that is important,also um

00:20:21creating long-term trust. So, Italked about this a little bit with theHearst organizationHearst company, which owns um like GQ islike a famous magazine they own, butthey also own like a hundred businessesthat you never even heard of and theyincluding like they own half of ESPN orwhatever. And one of William RandolphHearst, one of his great inventions washe created this trust within the familythat was pretty ironclad and it was verylong-term thinking.>> Trust like a actual legal trust or youmean trust like the feeling?>> Legal trust. So, for example, for him,it was like you cannot dispute thistrust and if you do dispute it, you'reout of the will. And like the trustbasically just says that like Hearst I Idon't forget the exact number, butHearst hypothetically will have eightboard seats. Family members are alwaystwo. I think it was like you cannotargue with how much money you receive.Money is given out equally. If you wantmore profits, you cannot argue about it.If you do argue about it, you're out.Like things like that. Like he like hedid these things that were quite good interms of like making it last for a longtime. Same with John Rockefeller. He didthat He did that the same way. One ofthe great things about reading aboutJohn Rockefeller, he was this madmanbusinessman. Think of Jeff Bezos. Apolite guy, but like a ruthlessbusinessman. His son, John also John, hewas a great dad. They were both great Hewas a great dad and a great son. Andthey loved

00:21:36each other very much. Theyshowed a lot of mutual respect. And sowhat I'm noticing about a lot of thisstuff, it's built on a mutual respect.It's built on about empowering andhaving these very explicitconversations. And that was a bigtakeaway from reading about him.>> Yeah, it's interesting. You got to findlike these blueprints. It's kind of whatI went back to when I was asking youabout like the long-term thing. Like youyou have to get to know your wiring toknow where you're going to you're goingto naturally havethings come easier to youum that are difficult for others.And other areas that are going to bedifficult for you, and you better figureout how you're going to work around iteither by patching up those weaknessesor getting people around you whocomplement those.And then you got to learn the systems,you know, on top of it. Like what arethe habits? What are the What are theactual systems on top of that to get theresults I want?>> But then there's like a wild card. Likefor example, I have a billionaire friendwhose son is a homeless drug addict.Like they've tried numerous times to getthis kid on the right path to the pointwhere they're like, "We're either Wejust got to let you figure it out." Andunfortunately that that might meandeath, but like it it's a verychallenging tragic situation.>> A family crest didn't help?>> Yeah. Like it's pretty crazy. You canhave I think What's the phrase? You'rethe happiest of your saddest kid?>> Yeah, yeah. You're only as happy as yoursaddest child, yeah.>> I went on this rant about um likephrases and why they're reallyimportant,

00:22:52the phrases we tellourselves. So for example, like usingthe phrase like I might as well. Whereit's like, "Well, I've already eaten badtoday. I might as well eat." It's like,"No, you That's just a convenientphrase. You should not might as well dothat. Or>> It is what it is is my is my my favoriteone. It is what it is is the is thethe the complete surrender of of ofpower, of agency, of anything. It iswhat it is just replace it with just sayit is what I make of this. So then yousay, all right, well, what am I going tomake of this? You know, like it is whatit is is crazy.>> Can I tell you about a phrase thatyou're unfortunately need to know aboutand you're going to see everywhereonline. I also want to rebrand it. Sothis thing is called the Jevons paradox.Have you heard of the Jevons paradox?It's not even a paradox. A paradox meanslike An example of paradox is like canGod heat a burrito so hot that even hecan't eat it? Uh like this is This ismore likelike uh>> Well, what's that paradox called? Theburrito paradox?>> [laughter]>> That's a paradox. This isn't even aparadox. This is just like like a likean economic like principle.>> Okay, okay, here here let me read it letme read the actual definition.An economic principle stating that astechnology makes use of a resource moreefficiently, the total consumption ofthat resource actually increases ratherthan decreases. Okay, so as somethingbecomes more efficient, you would

00:24:07thinkyou're using less of it cuz you're beingmore efficient, but in total you use waymore of it because the demand explodes.Okay, got it.>> And I'll give you a I'll give you a tonof examples. I want to rebrand it toJevons paradox because uh>> You put a little [laughter] flavor.>> Yeah, well, because it was created bythis guy named James Jevon who was aBritish guy and I think that'd be coolto have a wonderful economic principlebe created by an American brother. So Iwant it to be one of ours, not one oftheirs. So right around the mid-1800s,James Watt creates this new thing. It'sa new variation of the steam engine,which is basically the the steam enginethat like everyone came to love andknow. James Jevon was basically this guyin the 1800s. He wrote a book in 1865called The Coal Question. And hebasically says, I have a feeling thatbecause of how amazing this new steamengine is that Britain potentially isgoing to get rid of all of our cheapcoal and we're going to have a problem.We're going to have a coal shortagebecause everyone else was like, "Whatare you talking about? The steam enginemakes things significantly moreefficient. Therefore, like there's onlya set amount of work needs to get done.Like, we're just going to use lesscoal." And he goes, "No, brother. Thatain't going to happen. We're going touse way more coal because everyone'sgoing to want one of these steamengines." And he was exactly right. Andthis is where things get really freaky.And this is actually what I want to talkabout. It expands

00:25:22in a way that youcannot even com- comprehend. And so, letme give you a really simple example. EliWhitney, he was this guy from Yale andhe was like, "I want to make it rich. Ihave this idea." So, he goes down to thesouth of America. At the time, slaveswould pick cotton. And they would getcotton and it would take them hours toseparate the seed from the cotton to thepoint where they could only produceabout a pound a day of cotton that wasusable, one person. And he comes up withthis little handheld device where youcan kind of like put cotton in there andkind of cranks it and it gets the seedsout to the point where one slave couldproduce 50 pounds of cotton. They madeit 50 times more efficient. And so, somepeople were kind of happy in a weirdway. They thought, "Okay, maybe thismight mean slavery won't continue togrow and thatlike we won't import more slaves. That'skind of That's kind of good." The exactopposite happened. Over the next like30, 40, 50 years,cotton got so cheap that in the south ofAmerica, particularly in Mississippiwhere a lot of like slavery eventuallygot really bad, they actually startedcalling it King Cotton instead of KingGeorge. And so, America's best exportwas cotton and it got so strong that wehad to import like eight to 10 timesmore slaves that we than we currentlyhad at the point

00:26:38at that point pre- EliWhitney in order to keep up with allthis demand for cotton. And one couldargue that the reason why slaves slaveryin America lasted as long as it did wasbecause of cotton and the demand andthat's one of the the why it was likeour economic engine. And so, this thing,this idea of this paradox, it's quitestrong. And so, the reason why it'srelevant right now is because what's oneproduct that AI is making significantlymore efficient?Code. Previously, code was veryexpensive to make. So, you have to raiseall this money from venture capital. Youhave to hire all these engineers. Yougot to mix stuff. And hopefully, 3, 5,10 years, that code is actually workingand makes a profit. Well,Jevons paradox, it comes into play herebecause my opinion is this.A lot of people are saying that AI isgoing to put people out of work.I think it is the exact opposite. Ibelieve that code will get more cheap.Therefore, demand will increase asignificant amount. To the point that wecan't even understand. For example,Gutenberg invented the printing press.When he invented the printing press,people were thinking, you know, maybepeople will read like two times, threetimes, five times more books thanthey're reading now. And Gutenberg, thisguy creates this printing press, Ibelieve in the 1400s. And the

00:27:53offspringof that, like on the extreme end, isthis idea of the Kindle. One could evenargue that like reading text on a pagelike on a computer screen is like aa way further down. But like it didn'tmake five times more books. It made likeit's infinite. Like it doesn't createlike 10 times more. It's like it createsa whole new thing. What I have noticed,I've noticed this with the cotton gin,I've noticed this with the creation ofthe steam engine, which then on went tocreate the railroads, which created amassive boom in America. When whentechnology makes a product that alreadyhas some demanduh more efficient, there is turmoilamongst those who are directly impacted.For example, have you ever heard of theLuddites?>> Yeah, people who don't adopt technology.>> Yeah, so now it's used as an insult.Back then, it wasn't. So, the history ofthe Luddites is basically right aroundwhen uh in the Industrial Revolution,there was a machine invented thatallowed uh people to weave cotton sorrywool into yarn much faster. Previouslythere was like five or 800,000 people inEngland who did this by hand and theywere considered craftsmen. This newmachine comes in they get put out ofbusiness to the point they create a fakecharacter called Ned Ludd. And inEngland this group of people go aroundsmashing these new machines and itstarts ruining the process of creating

00:29:08this new like wool to the point wherelike>> on behalf of Ned Ludd, right? Like thisthis a person that you couldn't attackcuz he wasn't real.>> It was a fake person and it was soserious that it was a capital punishmentin England. So if you got caughtbreaking one of these machines theywould put you to death. And so this ideaof like there was like five or 800,000people who are willing to risk theirlives in order to ruin new technology.That's like the history of Luddites. Butmy point being is when there's a newcreation there is a subset of peoplethat are screwed. For example, whenswitchboards went away in America therewas in the 1970s there was like 800,000telephone operators mostly women thatthose they they didn't exist those jobsdidn't exist. But in generalummore technology that creates a moreefficient processcreates new jobs sometimes because ofincreased demand. Sometimes the otherthing is that because there's newindustries created that we can't evencomprehend. And so my opinion AI isactually going to create a net positivenot a net negative which I previouslythought.>> Mhm.I first of all excellent monologue.Highly informed highly entertained.I I enjoyed that. This you told me youwere reading about the industrialrevolution cuz you were trying to figureout like history doesn't repeat but itrhymes. What happened in the past?

00:30:23Whatdid we say? What did we think then? Doesthat sound like what we say and thinknow and what actually happened?>> Yeah like one that came out like10 or 15 years ago that's now popularagain that I read a while ago is calledAmericana. Um and it goes throughbreakthroughs in American capitalism. Solike different inventions. And you'llnotice that people are have the samefears consistently. So, let me ask you adifferent question.>> One of the most dangerous things inbusiness is to think, "Well, this timeit's different." Those are verydangerous words. This time it'sdifferent. However, it's also dangerousto say,"It'll be just like last time."You have to almost consider bothpossibilities.>> I'm not saying that, by the way. WhatI'm saying is that human nature is humannature, and there's something specialabout the 30- to 60-hour a week workweekthat has happened for centuries. Andalso, time and time again, there's thisidea that I always come back to. I usedto be a beekeeper, and bees are reallyinteresting. With bees, if you get onehive with one set of bees, you juststack that over and over and over again.Bees fill up space. They just fill upspace. In the same way, whenever you'vegotten a new home, anyone hasexperienced this. They get to this newhome, they previously only had athousand square feet. They get to atwo-thousand square feet, they say tothemselves,"I'm never going to fill this place.">> Yeah.

00:31:38[snorts]>> And then, magically, over the next threeyears, they go, "How do I have so muchjunk?" That is a like, the human need toexpand, to grow, to fill space isinnate. It does not go away. And so,that is what I'm saying is the sameevery single time, not the how. I don'tknow how this is going to happen. That'ssort of the point of my monologue isthat I don't know. But I know it willhappen.>> Yeah, and not to be too abstract here,but the one thing I don't get, or theone thing I haven't figured out withwith that. I I buy everything you said.All this new man will get created. We'llwant We'll want code in places we didn'thave code. So, yeah, it'll be moreefficient to get code, but net-net,you're going to have way more code, waymore people creating code. In this case,if AI is so good at doing the like, AIis a technology that basically is thetechnology of doing work. Like, gen-generic work, human work. It's like,basically a model of the brain.Like, who's to say that AI won't alsofill those jobs? May- meaning like, yes,it creates all this demand, whichcreates new job opportunities, newindustries. But who's to say that AIalso isn't the one who supplies thatdemand also? Because, you know, theprinting press, these were more rigidtechnologies that could do one thing.AI's weird in that it's this likeflexible general thing that can do somany things. So, who's to say it doesn'talso

00:32:53become the supply?>> There's a few ways to look at this. Thefirst is like you could say, well, isthis going to be like hot water? So, forexample, when hot water was invented,this idea that you could like takeshowers every day like a king, like thatwas incredible. And so hot water surged.And water heaters were put in every homein America. But you know what happened?We sort of figured out how much hotwater we need. Like we don't actuallyneed that much hot water today than wedid like 50 years ago. So, it took offand then it kind of got flat, right? Butanother example is electricity. Whenelectricity was invented, it basicallybecame like a base unit of measurementfor life. Where if physics dictate ifphysics if it can exist in physics,there's a way that you can uniquely useelectricity to make it happen.I think potentially code is going to belike that. Where it's going to be a unitof measurement where you can findinfinite ways to get done what you wouldneed to get done. And I do not thinkthat it's going to be like water whereit's going to be like, all right, wefigured out. We don't really need thatmuch more hot water.>> Well, why are you saying code instead oflike intelligence?>> I'm just kind of working through this tobe honest. Like I'm I'm still like but Iwas trying to think of like that's likea unit. Intelligence is I don'tunderstand how to like quantify it. Butnow

00:34:09this is actually interesting to youpotentially.There is always a point of turmoil withthese new technologies. And I've beentrying to actually break down, is therelike a formula that you can figure outwill the economy boom? Well, I I thinkit will. I think that's inevitable. Butlike how long will it take? So, forexample, the railroads came about. Andthat's And like it there's like thisweird chart that if you look at like howmany railroad tracks were laid and howthe average person's protein consumptionwent up because like what the railroadsdid was they made America smaller and itcreated like towns that didn't exactlyhave to be where they were anymore. Andit created this massive like boomingeconomy. However, it took 50 yearsbecause we had to create railroads,which is a very labor intensive thing.We had to create steel, which was likeentirely new invented. And so there'sthis equation where it's like thebreadth of the technology, meaning howmany people does it impact, multipliedby this like the intensity of how itimpacts you, multiplied by like the timeof co-invention and that equals like thelength of turmoil that someone will gothrough. With chat GPT growing as fastas it has, there is a world where thetumultuous period is relatively shortcompared to past breakthroughtechnologies.

00:35:25>> And if you knew the turmoil, eitherwhen, how, or how long, what would youdo with it? Cuz you said there's like anopportunity. What's the opportunity?>> Uh like if you knew that like the thelike it's only going to take us three tofive years to like figure this thing outto where we're humming again, that youcan make bets on that.>> Yeah. Actually, you know, one of thekind of Jevons paradox plays over thelast few years has been Nvidia becausewhat a lot of people thought is, hey,people are buying these GPUs,but each training run, each algorithmicimprovement that the labs are making isgoing to make you need less and less ofthese GPUs in order to train thesemodels.And Jensen went on umon TV saying was he was like,you're right, the training is going tobecome more efficient, but the inferenceis going to go up by 1 millionpercent whatever 1 1 million X. Andpeople are like, 1 million X? And he'slike, 1 million X. And it's kind of whatyou were saying at the beginning, whichis that when these thingsdo diffuse, the demand goes up not bylike somekind of easy to understand percentage ormultiple, but like in a mind-bogglingway.Where you know, when from the time ofthe printing press to now, like

00:36:40if youwere trying to market size how manypeople will create text and how manypeople will read text,you couldn't have thought of Twitter.Like Twitter would have broken yourbrain. It didn't make any sense. Butthat's kind of what happens. And so he'sbeen saying that about inference, whichis like when you when you query AI, whenyou use AI to do something, you useinference. And he's like inference is isgoing People don't understand like howhow much there how big the inferenceneed is going to be for the world. It'slike, you know, mind-boggling.>> I think what's going to happen over thenext 6 monthsis and this is partially for listenerbecause I think you potentially mightknow this is I think the popular smartpeople, which I think we're relativelypopular. I don't think I'm that smart.But I think the popular smart people,the narrative is going to change. It'snot And this is in itselfserving to have this narrativeparticularly if you're a president orwhatever. But the narrative is going tochange that this is going to be amassive net positive and they're goingto cite Jevons paradox and they're goingto excite everything that I've justsaid, which isn't particularly uniqueand nothing I'm saying is unique.>> Dude, I see this all the time. It'slike, yeah, this is going to be greatfor you if you make it great for you. Imean people are just sitting back aslike the recipient of this and it'slike, is this hand going to slap me oris it going to put,

00:37:55you know, grapes inmy mouth? And it's like, well, itdepends. Like it depends what you do.Are you learning how to use this [ __ ]Are you paying attention to what's goingon? Are you thinking about how you canuse this in your field? Are you talkingto smart people? Are you moving wherethe puck is going or not? LikeI feel like people are so passive aboutlike what's going to happen as ifeverything is happening to you and thatnone of this is happening potentiallyfor you and that you have no agency tobe generative and democratize thistechnology for yourself.>> The reason I was studying the Ludditesis I think that same movement is alreadyhappening right now and it's going tocontinue to happen. You know, you sawlike at this recent college graduationspeeches like Steve's or Solomon, Iforget his first name, Solomon the CEOof Goldman was like talking about AI andeveryone was booing.>> Yeah, people walked out, right?>> [laughter]>> The reason I'm bringing this up is ifyou go back and study the Gilded Age,which I that's a one of my favorite erasas well as the Industrial Revolution,it's all just repeat itself.Everything's repeating itself. It's It'slike theIt's very very very similar over andover and over and over again. This isall quite predictable. Now, the time andthe how is who knows, but like thegeneral trend, it's all been there, donethat.>> Yeah. Yeah.It's crazy to me that it's become like ahigh-status thing to

00:39:11do tobe anti-data centers and AI and thingslike that. It's like really reallybizarre.>> not fair. I don't think that's fair. I II don't think we should dismiss it. Ithink they're stupid. I understand theirsentiment. Can you imagine being 80 or21 years oldFirst of all, if you're 21 years old,you [ __ ] graduated high school duringCOVID. That sucks. Okay? The worldchanged dramatically over the last 4years to the point where you uh you wereexpecting to get a job at Deloitte andor as a law clerk or whatever like, youknow, and they're like, "Nah, we don'tneed you, dog." Like there is anger,which I understand. But I think that theway that they act>> You need me to put my my mind in themind of a loser and I just can't do it.It's just not possible to do this. Theloser think is just not acceptable in mymind and I uhI'm sorry. I just I just don't have theability. Maybe you can. Maybe you canhave go in the mind of a loser, but Ijust I simply can't.>> they're wrong, but I have empathy forit. I I understand that feeling and Ithink they're stupid.>> [laughter]

00:40:15>> Dude, there was one pointum where like ATMs had just gotteninventedand these people who were like the banktellers was like a huge there it waslike a big deal. That was like a big joband they they revolted. They were like,"F this. You're going to put us out ofbusiness, this or that." And do you knowwhat happened?Way more banks went up. May way morebanks were created or branches, likephysical locations, way more. And so, Ijust think if I'm telling these youngpeople, I would say, "It might suck fora minute.">> Dude, if if you're young, you have noexcuse. Okay, I can get it if you'relike 65 and you're 75 years old orwhatever and you're like, "Oh my god,there's a lot of change. It's going tobe really hard. I've been running mybusiness. It's it's pretty difficult forme to reinvent right now." Like, I havea lot more understanding for that. Ifyou're 18, 19,you didn't know anything anyways. Uh,you know, hop on this train. This trainis exciting. This train has like so muchroom to run. You know, you you sort ofhave to look at the counterfactuals,right? So, you might say, "Well, it'sgoing to be harder than ever to get ajob or this or that." It's also truethat more people than ever are going tocreate new things. More people than everare going to become successful. Morepeople than ever are going to becomemillionaires out of this. And so, it'sentirely possible to to have that resultif you if you choose, if you do theactions that will that will get you tothat result. So, I guess I just have avery little

00:41:30empathy for like the youngerfolks. This should be easier, come morenaturally for them. They have lessinvested and less sunk costs and lessrigidity of the past to even likebe tied down to. So, I don't I don'treally understand that. And the otherside is like, "Is this serving you?Like, is that attitude serving you inany way?" Uh, is that like forgetarguing who's right and who's wrong.Like, at some point you just have toask, "Does this belief serve me or not?"And I don't believe that that beliefserves you. I also don't believe thatyou can control it. Just like Ned Luddand the Luddites found out, it didn'tmatter how many windows you smashed.This shit's happening. It's like gettingmad at the weather. It's like it's goingto rainwhether you shake your fist at the skyor not. Like, you have zero chance ofslowing down AI. The AI freight trainhas left the station. It is happening.And so, all you should really worryabout is what you can control, which isyour reaction and response to the newplaying field. Trying to argue that thenew playing field is bad is sort ofstupid to me. Um it's like again, likeyelling at the weather. You don't get toYou don't get to have a say in in thatside of things. The New York Who is it?The governor, the mayor, who whoever wasthat was like proudly like, "We havebanned data centers in New York state."

00:42:46Um they were like so happy about it. Youknow, politics is already veryperformative, but like man,taking so much smug pride in likebanishing the technology that's going tocreate>> [laughter]>> all the where all the growth is comingfrom in the economy is sort of ayou know,silly.>> And one that's being popularized now isdata centers use electricity and usewater. And I actually have no idea ifthat's true or not true, but whenever Isee these things, I'm like, we shouldactually learn if that's the realitybecauseI have a feeling that like the SuperBowl is significantly more inefficientthan a data center, and yet we celebratethat. Like>> Anybody who's has this feeling andyou're like, "Man, Sean's really notempathizing with my This guy's being ajerk about this. He doesn't understandhow hard it is right now and for forme."Just watch this clip. Just needed towatch this clip of this guy with no legscompleting the last man standing race,which is like this insane 26-hourfitness event, and he's crawling he'susing his pulling his wheelchair throughthe mud using his arms finishing thisrace. And anybody who's got an it iswhat it is attitude,um go watch this on loop. This should beyour commencement speech instead ofyou know, just sitting there

00:44:01smug andwalking out of it because some guy saidtwo letters you didn't like.>> I usually think of Sacagawea and Lewisand Clark. That's mine.>> In moments like this.>> I think Look, they walked across anunknown territory for 2 years with a3-month-old baby.They could do that and that baby stilllived. I can do this.>> That's what I need. Actually, thatshould be a service when you're inDisneyland as a dad and it's like hoursevenand it's it's so hot. The kids arecrying, cranky after you spent athousand dollars taking them to thehappiest place on earth and you'repushing the stroller and you've got theturkey leg dripping down youryour your your arm the juice of thatthing and you just hate your life. Youneed you need the Sacagaweaexample.>> Yeah.>> You need you need that's what you need.>> look kids, the story of Moby Dick isreal. These guys floated across Americaon a raft for 90 days before they werediscovered. Okay? If they could do that,we can get to McDonald's without crying.>> [laughter]>> Can I tell you a very inspiringentrepreneurial story just to leave on ahigh note?Have you ever heard about the ice king,Frederick Tudor? Do you know this guy?>> Not personally.>> [laughter]>> All right, so Frederick Tudor. So thisguy is known as the ice king. This guybasically he lives in the nor- northnortheast of

00:45:17of the US. So he lives nearlike Boston or something where it getscold.And you know, Boston gets cold in thewinter. There's tons of ice and herealizes he learns that in SouthAmerica, they never have snowand they never had ice.And so he has this brilliantentrepreneurial idea. He's likeI'm going to sell ice to the SouthAmericans.And this is pre-refrigeration,pre-the freezer being invented, right?Because so he's basically goes outwherever there's like a frozen lake andhe would get blocks of iceand he would figure out how to transportit on boats to South America and go tryto sell this stuff. And he was like, Iwill sell I'm not selling ice, I'mselling winter.And people are like, how are you goingto even trans- melting? He's like so hestarts getting in the lab and he he useswool to wrap that he realizes like, oh,I can cover it with sawdust and sawdustwill preserve this ice for like a littlelonger. And he would start the thingwith like 200 lb of ice and by the endhe would have like, you know, 70 lbleft, but he would still sell that 70lb. And then when he got there, peopledidn't understand what to do with theice. He would sell the ice and thenpeople would come back complaining beinglike, it melted, dude. He's like, whatare you talking about? That's what itdoes. It's it's ice. It's hot outside.Like they didn't get it and he's like,okay, I just got on this boat for like amonth

00:46:32and brought them ice and theydidn't want it. I have to get them towant it. I have to build the desire intheir mind. And so he goes and hefigures out what's the key product.What's my hero hero product here? He'slike, I need to sell cold drinks on ahot day. So he goes to the bartendersand he says, look, I'm going to chip youoff a little ice here. This is free foryou, but you need to start serving rumcold in a chilled chilled drink. And sothey he gets the bartenders free ice.They start giving people ice out of theyou know, cold drinks and guess what?Once you've had cold cold rum, you neverwant to go back to that warm piss again.And so the demand starts to get built.People start to want ice and this guybuilds this amazing trade. He umpioneers new methods of refrigerationand freezing in order to transport theiceand ultimately puts himself out ofbusiness because people realized,oh wait, we can just freeze water andmake ice ourselves and then the icetrade kind of collapsed. But FrederickTudor for a day was the man.>> I'm always I'm also always interestedhow you got interested in this cuzsometimes those stories are equally asgood.>> Uh so me and Diego, who's right overhere 5 ft away from me, one of thethings we do is we we try to read asmany books as we can. So he's beenreading this book called the MediciEffect. So this was one of his storiesand I was like, wow, that's anincredible story.>> I'm happy you're reading books now.>> That's condescending, but I like it. I Iappreciate

00:47:47it.>> I did not say that. I mean, I said whatI just said, but you previously saidthat you normally don't make it past thetable of contents.>> [laughter]>> I don't know. I even open the book. Ibuy the book with great enthusiasm and Ireally don't even open them. They I'veI've actually you'll appreciate this.I'm creating a bookshelf, so you'll seemy office is going to change soon. So,I'm creating a bookshelf that is like atrello board. So, it's basically aprogress bar bookshelf. So, I have allthe books I bought, that's my ice box,my pipeline, and then a book moves intolike the reading phase and then it movesphysically into the completed phase andthen there's the hall of fame of likegreat books, which will be like the few,the rare, the ones I would actuallyrecommend anybody else.>> It's sort of like one time Steph Smithtold me she invented a water bottle thatreminds her to drink more water and Iwas likejust chug the water.Just sit down and read the book.>> [laughter]>> Are you suremy bookshelf not being a progress barhas not been the thing holding me back?>> [laughter]>> That's what I've been telling myself.>> So, my old boss Emmett from from Twitch,he would tell me this cuz I have atendency to do this where I will overarchitect a solution to something and Iwill convince myself that likethis elaborate way will be

00:49:03the solutioninstead of the obvious. And so, he wouldjust listen to me talk and I would tellhim for 15 minutes what I'm this greatidea I haveand then I'd be like, "It's great,right?" And then he would say simplyhe'd go, "Have you tried solving theproblem?">> [laughter]>> He's like and then heHave you tried actually just solving theproblem? And then he would say thingslike, "The only way out is through,Shawn." And I was like, "Oh, wow." I waslike, "Yeah, I'm kind of an idiot." Hegoes, "No, actually." He goes, "I'm apartner at YC and this is the mostcommon advice I give to YC startups.They'll say exactly what they'replanning to do and then I'll ask them,have you tried solving the problem?">> [laughter]>> Then they'll be like, "What?" And it'shis like shock value way of remindingyou that like in many situations theonly way out is through and you'retrying to find a way around. There is noaround, there's only through.>> I waste so much time like charging myAirPods, looking for the holster to holdmy iPhone, making sure that like thisand I'm like dude, just you're justgoing for like a 30-minute run.>> I will buy I will door I door I did thisthe other day. I was going for a run, IDoorDashed, you know the little armplastic like blood pressure monitorwhere you put your phone?>> Yeah.>> And I was like, well, I started Icouldn't run without my phone. So, Iguess I'll just wait 45 minutes for this

00:50:18thing to arrive.>> Dude.>> I go for myrun.>> Four-hour four-minute run. I was goingto run half a mile.>> [laughter]>> I do the same [ __ ] all the time.>> song. I could have just hummed it.>> [laughter]>> Uh what was it like Come My Lady, ComeCome My Lady, You're My Butterfly?>> [laughter]>> Shots so good.Running like Is this guy singingHoobastank to himself?>> [laughter]>> Why do people listen to us? Why do theylisten to us?>> Who listens to that? That's the pod.>> [laughter]