Doug possesses a lifetime of experience as an investment banker, investor and entrepreneur, which makes him an authority on how you can create financial independence and accumulate real wealth.
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Family Inc – Doug’s book
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3 Value Bombs
1) Build a business that will survive and thrive without you.
2) Focus on building a good team, because it’s what will get you to success.
3) The old economy is not outdated in terms of profitability; probability of business success is still high.
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(click the time stamp to jump directly to that point in the episode.)
[01:40] – Doug’s first job out of college was in the army
[01:48] – He went back to school to get a business degree at Harvard and worked in investment banking
[02:01] – He joined a private equity firm and became an entrepreneur by accident
[02:30] – Doug is married and has two young adult children
[02:57] – His area of expertise is in investing
[03:33] – Share something we don’t know about your area of expertise that as Entrepreneurs, we probably should: Many entrepreneurs think that labor is the most important asset they have, and that becomes the mentality that changes the way of a person’s decision making. Entrepreneurship is NOT about the income you create but about building a business that can survive and thrive without you
[05:04] – Worst Entrepreneurial Moment: Doug’s biggest mistake is buying bad management teams for cheap prices. He bought a business where he thought the opportunity was very attractive. Unfortunately the team he got was mediocre after the deal. After several years, his team just became a big pain for him for a lot of reasons
[06:00] – Evaluate good teams
[06:21] – The numbers in business are NOT the game — it’s getting everybody aligned, building and working as a team
[07:00] – Entrepreneurial AH-HA Moment: Doug invests in the old economy – business to business, industrial product companies, etc. One thing that he’s done very successfully is finding old economy businesses that are benefitting from new economy change
[09:35] – The probability of success in old economy businesses is relatively high
[09:55] – What is the one thing you are most FIRED up about today? “I am really fired up about veteran entrepreneurship”
[11:07] – The Lightning Round
- What was holding you back from becoming an entrepreneur? – “Balance sheets”
- What’s the best piece of advice you’ve ever received? – “Time horizon is a competitive advantage”
- What’s a personal habit that contributes to your success? – “I’m a list guy so I make a list every morning”
- Share an internet resource, like Evernote, with Fire Nation – The Investor Podcast
- If you could recommend one book to our listeners, what would it be and why? – Lead Yourself First – “the premise of the book is that they study great leaders in history… and that these leaders use solitude as an important aspect of their leadership”
[15:05] – Entrepreneurship is the surest way to financial security
DM: – prepared to ignite, John, Episode 19-18. Can’t wait.
JLD: Doug possesses a lifetime of experiences as an investment banker, investor and entrepreneur. They make him an authority on how you can create financial independence and accumulate real wealth. Doug, take a minute. Fill in some gaps from that intro and give us a little glimpse of your personal life.
DM: Hey, John. Thanks so much for the intro. As you can tell by all those various jobs, I'm relatively old and a bit of a journeyman. I’ve had a bunch of different careers. I started in the service, in the army, and concluded that with a great experience, but not going to be a career for me. And so, transitioned out into business school at Harvard and did investment bank for a while. Which, again, I concluded was a great experience. I learned a ton, but decided I was more interested in the buy side.
And so, I joined a private equity firm. Worked several year. and then, ultimately became an entrepreneur almost by accident. I started my own investment firm with a couple partners about 12 years ago. And so, I basically been involved in the investment business for the last 20. Absolutely love it. Lots of opportunities to be creative and challenge yourself. You get to meet great entrepreneurs along the way. Having said that, lots of opportunity for failure. So, it can be a humbling experience.
On a personal side, married. Two children that are rapidly approaching adulthood. I’m active in the veteran space, given my army experience. And an avid college wrestling fan, outdoors man and hunter.
JLD: Love all of that. So, I guess my one question would be what would all of what you’ve just shared is your current area of expertise? Like, what do you think really separates you from the best, knowledge-wise?
DM: I’ve got really deep experience in investing. And I think the kind of investing I do, which is private equity, is less about identifying mispricings in the market and more about helping people build quality businesses that are durable and can sustain long-term value. And I'm very passionate about how to apply some of those skills to individuals personal financial decision making.
JLD: So, what would you say is something that we as entrepreneurs typically don't know about that area of expertise that you’ve acquired that would be really helpful for us to know?
DM: Yeah, I think are a couple things that I see entrepreneurs often misprice, if you will. And the first is that many of us, especially young folks, labor is by far and away the most important asset that we have. And if you think about your labor as an asset and the lifetime opportunity to generate income from that asset, it kind of just really changes the way people think about their career decision making and you begin then ask questions like how does this choice impact my lifetime earning or my brand or my skill set, and less about how much am I going to make this year. And so, I think that mindset is very important.
I think the other thing I see frequently is the real juice in entrepreneurship is not about the income you create as an entrepreneur year to year, but it's about building a business that will not only survive, but can thrive without you. And if you do that, you can sell the business at exit or when you decide to leave, and that's where the real juice, that's where the real wealth creation is.
JLD: Doug, let’s talk about what you consider your worst entrepreneurial moment to date. I mean, you’ve had a lot of great moments throughout the years, but what’s the worst? What’s the lowest of the low? Tell us that story.
DM: So, John, the good news/bad news about the investment business is I have many low points. You know, it's a business where if you're batting more than .500, you're doing pretty well. So, I’ll give you maybe a couple. The first is I made the mistake of buying bad management teams for cheap prices.
And so, for example, I’ve got involved with really nice businesses. They have a nice business model. They’re growing in a nice market and I thought I could price that opportunity very attractively. And ultimately, what I concluded is the team was pretty mediocre. We ultimately did the deal. And for the next several years it was absolute pain in terms of working with a team that was not aligned with us. And also, really trying to implement change with a team that wasn’t up to the task.
And so, I think the big take away for me on that one is really hard to price something cheap enough if you don't have a good team. And the numbers that a company produces in terms of it's financial metrics, don't just happen, they happen because there’s a team behind it. And the real important part of the game in my business is evaluating good teams.
JLD: That last point is important to evaluate good teams. Would that be your biggest take away? I mean, what is the one take away that you want to make sure that we get from your worst moment from that story?
DM: Yeah, that I think investing in entrepreneurship and business in general, the numbers are a good way to keep score, but the numbers are not the game. The game is getting everybody aligned. Getting everybody on the same page in terms of your strategic vision. And then getting the organizational capabilities to go execute. And so, it's about building a team and working as a team.
JLD: So, Doug, you’ve had lots of great ideas over the years. I mean, you’ve had some bad ideas? Let’s be honest. But you’ve had some great ones, too. You’ve had those Ah-ha moments. What would you say is one of the greatest Ah-ha moment that would make a really good story for us right now? Take us to that idea. Tell us that story.
DM: Yeah, so, I have an Ah-ha moment that has been a little bit of a recurring theme. And so, I am an old economy investor, so I'm investing in mostly business-to-business, industrial products and services companies. When we purchase a business, we’re buying with a fair amount of leverage or debt. And for the most part, these are relatively slow-growing businesses. Certainly compared to the new economy, the entrepreneurial start-up economy.
And so, one of the things that we’ve done very successfully is find an old economy businesses that are benefiting from new economy change. And I really think this is an interesting approach because it allows you to participate in a very exciting, secular growth opportunity, and the benefit of innovation. And it's often a lot cheaper and a lot more business-risk.
And so, for example, as everybody knows, e-commerce is dramatically changing the way that distribution occurs in every supply chain. From things like imports from Asia, Amazon, you know, even home delivery for food through Uber. And what we’ve done is we try to take advantage of this by investing in all kinds of old economy distribution businesses. Things like industrial containers, aircraft parts, consumable food service supplies, and all these businesses are also changing rapidly because that change in supply chain.
And it's a really an opportunity in our mind to change a sleepy warehouse business into a business that competes on managing a very complex supply chain and the data associated with that, which, to this point, really hasn’t been available. And so, that's, in our mind, a really interesting recurring theme. You know, you find that secular trend and you find a contrarian or secondary way to play it.
JLD: What do we take away from this? Like us as entrepreneurs, what can we take away from that idea that you have from that vision that you saw?
DM: My big take away is I think when people talk about entrepreneurship, a lot of time everybody gets enamored with the big bold opportunities, so the Facebook’s of the world, and those are magnificent in great opportunities. But for many entrepreneurs, it's a much smaller opportunity with a much lower risk profile. And so, it could be a smaller business in your hometown. It could be… You worked for a real estate company and now you're going to start your own real estate company. And, candidly, that's never going to be a Facebook or Google opportunity. But your probability for success, the probability that you can create a good life for yourself and have a business that's a durable and salable at the end of your career is relatively high. And so, on risk adjusted basis, I think that's really compelling.
JLD: Doug, what are you most fired up about today. Like, what gets you excited right now?
DM: You may be able to resonate with this. I am really fired up about veteran entrepreneurship right now. And I serve as the chairman of a non-profit called Bunker Labs. And this is a veteran service organization with a mandate to inspire, educate and connect veteran’s with the right resources so that they can pursue entrepreneurship or at least evaluate it.
And I’ve been involved with the organization for a little more than two years, and I'm just so inspired by what they’re doing. Not only for the veteran’s, but entrepreneurs in general. And it’s a relatively young organization. It's about three years old. They’re in 16 locations across the country and I think doing great things for America’s veteran’s, but also promoting entrepreneurship in America in general, which I think is a huge service to the country.
JLD: Well, I can get fired up about that. So, thank you for your service, Doug. Thank you for what you do. And Fire Nation, if you think…
DM: Yeah, thank you.
JLD: Thank you. If that Doug’s been dropping value bombs so far, you're right. And guess what? More coming in the lightening round when we get back from thanking our sponsors.
Doug, are you ready to rock the lightening rounds?
DM: Let’s do it.
JLD: What was holding you back from becoming an entrepreneur?
DM: Balance sheet. I didn't realize the consequences of some of the decisions I made early in life. As an active duty soldier, got married, young kids, went to business school, incurred a lot of debt. So, my job, number one, was paying off debt before I moved out on the entrepreneurial risk curve.
JLD: What is the best advice you’ve ever received?
DM: Time Horizon is a competitive advantage. I think most people, most investors, think about things, if they’re thinking long-term, it's often a year or less. And I try to force myself into making decisions around five and ten year payoffs. And I think if you do that, you really change the kind of decisions you make.
JLD: What’s a personal habit that contributes to your success?
DM: I’m a list guy. So, I make a list every morning and I work hard to put on the list the things that are important rather than the things that are timely. And I find when I don't make my list, I take care of all the timely stuff and never get to the important stuff.
JLD: Recommend one internet resource.
DM: So, I like a site called the investorpodcast.com, known as the investor podcast. They have a great series called We Study Billionaires. It’s a very highly rated, you know, kind of investment, financial services podcast and they review great books and they get interesting investment kind of gurus or authorities on there. And they really cover all the broad range of topics of the day. So, today it's about Bitcoin, Warren Buffet, fang stocks, hedge fund investing. So, it's a pretty interesting resource for someone like me who is interested in those markets.
JLD: And how often do they publish episodes?
DM: They’re a bi-weekly.
JLD: Recommend one book and share why.
DM: Out of full disclosure. This is written by a friend of mine. His name is Mike Irwin and it's also co-authored by Ray Kethledge. It’s called Lead Yourself First. And Mike is a social entrepreneur, and he started two non-profits. And the premise of the book is that they study great leaders in history. Like, General Eisenhower, Martin Luther King, and they’ve interviewed some current day leaders. And essentially the premise of the book is that these leaders used solitude. You know, quiet time for reflection as an important aspect of their leadership in a source of creativity, clarity, balance and moral courage.
And I’m kind of a history buff, so I really enjoyed the history aspect of it. But it was a fun read and I think, personally, so timely in environment like today where technology continues to rob us all of the quiet time we have. It was helpful for me in terms of being more thoughtful and proactive about controlling the amount of interaction I have and forcing quiet time for myself.
JLD: Fire Nation, when was the last time you’ve taken a step back and just breathed, and just like thought, and just giving yourself space? I mean, we live in this world where it's just announcement everywhere. Notifications, dings, beeps, dongs. You name it. It’s all happening all the time. No wonder why we’re not coming up with original thoughts. Or like really having some deep, deep thinking. And that's where all the magic happens. That’s where all the good ideas have.
So, give yourself that time, every day for the opportunity. Just give yourself some space. Now, Doug, I want to end on fire, brother, with you give us a parting piece of guidance, and then letting us know where we can connect with you and then we’ll say goodbye.
DM: You know, first of all, I guess I’d say from my perspective, watching a number of entrepreneurs sell their business. Entrepreneurship is not only a lot of fun, but in my view, it's the surest way to financial security. You get to pay yourself more. You can generate better returns on your own capital. The tax code is helpful, [inaudible] [00:13:25] advantageous for this. And if you do it well, that’s when you sell your business.
And even if you decide not to start a business, thinking like an entrepreneur as you manage your career and you think about yourself as selling your labor is a really important concept. And that's what I try to bring home. In the book I published of which is called Family, Inc, using business principles to maximize your wealth. And that, you can find more about that, obviously, at Amazon or Family Inc. That’s F-A-M-I-L-Y-I-N-C.com
JLD: Fire Nation, you're the average of the five people you spend the most time with, and you have been hanging out with DM and JLD today. So, keep up the heat. And, of course, head over to eofire.com, and just type Doug in the search bar. His show notes page will pop up with everything that we’ve been talking about today. These are the best show notes in the biz. Timestamps, links galore. And I just want to say, Doug, thank you for sharing your journey with Fire Nation today. For that, we salute you and we’ll catch you on the flip side.
DM: Hey, John. Thanks for having me on. Love the show.
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