Heath Hunter: How Money, Power and Private Equity Really Work

Heath Hunter [00:00:00] The number one determinant of, of success for, for individuals is, did you have chores when you were growing up? Did you have expectations at home that you were required to help out? That's, that's a crazy statistic that that one variable can have such a dramatic effect on somebody's life. Welcome back to the

Vance Crowe [00:00:24] Podcast.

Heath Hunter [00:00:24] I'm glad you're here. Today

Vance Crowe [00:00:26] We're going to interview a former consultant private equity holder, and really entrepreneurial guy named Heath Hunter Heath and I had a chance to meet when I was delivering the interest based communications course to a company he was working at. And we've since become really good friends and in fact, Heath is such a good communicator that I've invited him on to become a facilitator with the interest-based communications class. I think as you hear him describing things like private equity consulting and all the things we get into about how the general population is perceiving the wealthy, I think you're gonna find this to be a pretty compelling conversation. We're gonna get to that in just a moment, but lately I've been working on a website that describes some of the different services that I offer. If you are a long time listener to the podcast, you know that we record Legacy Interviews here where we capture people telling about their life stories so that future

Heath Hunter [00:01:21] Generations

Vance Crowe [00:01:21] Can know their family history. We also teach the interest based communications course where people get better at communicating and negotiating on their own behalf. And on the Articulate Ventures website, you can find out more about my keynotes. So if you're hosting a workshop, a conference, or some other gathering of people and you wanna have somebody come in and teach some really actionable

Heath Hunter [00:01:43] Skills,

Vance Crowe [00:01:44] You

Heath Hunter [00:01:44] Can

Vance Crowe [00:01:44] Find out about it more there.

Heath Hunter [00:01:46] Alright, without further ado,

Vance Crowe [00:01:47] Let's

Heath Hunter [00:01:48] Head to the interview with my

Vance Crowe [00:01:49] Friend

Heath Hunter [00:01:49] Heath Hunter. So in one of my favorite Steve Jobs clips, there's, he's sitting in a room full of people like students, and

Vance Crowe [00:01:58] He asks, how many of you are consultants? And then he goes, woo, ah,

Heath Hunter [00:02:02] That's not good.

Vance Crowe [00:02:03] And then, and then he talks to him and he basically describes them as

Heath Hunter [00:02:06] Parasites.

Vance Crowe [00:02:07] Ah,

Heath Hunter [00:02:08] You

Vance Crowe [00:02:08] Started your career in consulting. I

Heath Hunter [00:02:10] Did.

Vance Crowe [00:02:11] Why

Heath Hunter [00:02:12] I, coming out of undergrad, I thought it was an interesting field to get in because I didn't know what I wanted to do. And I thought,

Vance Crowe [00:02:21] Wow,

Heath Hunter [00:02:22] Here's an opportunity where I get to go and see lots of different businesses, different industries. I was really young, so the travel was actually attractive at that time, and I thought it would just be the next step in my education. And, and it was, and it was great. And I did get to do all those things. I got to, I was in, I, I got to consult with companies in the oil and gas industry and the publishing industry and the ed tech industry and many others. And, and so it was, it was, it was that experience of getting to see a lot of different things. And I got to see a lot of different business functions too. So it wasn't just finance and accounting. We did strategy and operations. We did, you know, you get into these businesses, you, you find all kinds of problems that people want to talk about and want to buy some. And

Vance Crowe [00:03:14] So like for people that are way outside of the consulting or like the urban environment, yeah. You were a consultant as an accountant, what, what were you

Heath Hunter [00:03:23] There to do? I was what they would call a management consultant.

Vance Crowe [00:03:27] Okay.

Heath Hunter [00:03:27] That's like, yeah. It is just as general and opaque as, as it sounds. I mean, we, we had, again, engagements where we were trying to improve their finance and accounting function, make it more efficient,

Vance Crowe [00:03:43] More

Heath Hunter [00:03:43] Accurate, whatever it may be. We had engagements where we were rebuilding the operations of an oil refinery. We had, towards the end of my consulting career, I got into m and a consulting a lot. So a large company would buy another company and they would hire us to help integrate those two companies. Or a big company would want to sell one of their divisions. And so we were brought in to untangle that piece of the business and sell it off to another company. And, and

Vance Crowe [00:04:15] Why would they hire a consultant? Like what is it about consultants that makes it like, oh, we should have somebody that's never

Heath Hunter [00:04:21] Been a part of our

Vance Crowe [00:04:22] Business before, come in and do this work.

Heath Hunter [00:04:26] Most of it came down to capacity because if you're doing an extra project, like trying to peel a business unit out of your core business, everybody in your business has a day job. And so to do that on top of your day job, if not, if that's not something that the business does on a recurring or a normal basis, you're asking your employees to take on a second job. There's like a

Vance Crowe [00:04:52] Weird thing if you're

Heath Hunter [00:04:53] A young undergrad,

Vance Crowe [00:04:54] Because when you go in as a management consultant, you are like walking into the top

Heath Hunter [00:05:00] Of an

Vance Crowe [00:05:00] Organization where you get to see things like all the way down.

Heath Hunter [00:05:03] How

Vance Crowe [00:05:03] Much are people getting paid? What is the business really doing financially? And there may be people that have been at a company for 25 years that don't have the same level of access.

Heath Hunter [00:05:16] I always found it fascinating that as a 25-year-old who knew just about nothing, that these big corporations would bring us in and, and have us consult with folks that had been there their entire careers 30 years, 40 years. And the way I got comfortable with it was that we had a general level of business knowledge on process or industry or m and a that that was valuable, that we were adding something. And again, a lot of times it was capacity like, these, these, these folks don't wanna do this. They have a normal job, they're bringing you to do something additional. And so that's how I, I got comfortable with it. But I can tell you I was very uncomfortable as a 20 something trying to tell, you know, a 60-year-old something about their business that they didn't know. The only comparison to consulting that I have, 'cause I never really did it, was that when you start off new at a job and everybody's like, oh, we're so glad you're here. You've got all these new and innovative ideas. We want to hear 'em like, don't, don't stop asking questions. We love that. Right? And they, they say this at every job when new people are coming in. And what you don't realize is they don't actually want your new ideas because your new ideas do not fit into the context of anything. And I was just cavalier and naive enough to be like, well, I don't know that guy's dead weight and we should probably clean this thing up.

Heath Hunter [00:06:47] And then you come to find out that guy that's dead weight. He may be dead weight, but he has this wild network that now brings in new business or there's all these complicating factors. And so I have the experience of having multiple times at new jobs after about six months realizing like, you made yourself look like a total idiot and probably made a lot of enemies. And that's kind of the world of a consultant. I I think that's a really interesting analogy and, and close, I I would, I would say there's two paradigms. And the first is, especially as a young person and a young person coming into a new organization for the first time, say as a consultant or a new hire, it's kind of like in life where the less, you know, the more confident you are, right? Yeah. The Dunning Kruger effect, the Dunning Kruger effect is very strong. And it holds in, in a new job as a consultant, you go in and you see all the problems and you obviously know how to fix them. And, and so again, I mean this, this has played out throughout my life, you know, the older I get, the more I realize, I don't know, it's a humbling thing. It's, it also helps with people and, and you know, but as a consultant and as a young person, that the, the, the Dunning Kruger effect is fairly useful because you're confident enough in what you know and what you don't really know that, that you can go in with a level of confidence that you can advise folks that have been doing something in a specific industry for 30 years.

Heath Hunter [00:08:22] Yeah. That's probably, I never really thought about, like, is probably true. You probably, the human nature probably needs this dunning career effect because if you were adequately humble Yeah. You would never start anything. Oh, totally. I I think it's very much you think about the startup scene and entrepreneurs, if they really knew what it takes to get a company off the ground, or if they really knew the chances, the probability of their, their own success, to your point, nobody would ever do any of these wild things that, you know, if you're naive enough, you'll spend two years of your life just slamming your head into the wall and, and, and figuring out if it if it is viable or not. So the other paradigm, so you were saying there's two different ways to approach this. There's the, yeah, I had, I had another thought. The Dunning Kruger effect and then 'cause you, I'm, I'm trying to re replay back. You were talking about going into, oh, the o the other piece is that your new ideas create work. And what I have found, people get really, really comfortable in their job and they know what they know and they know how to do what they do. And even if it's a like slam dunk home run idea for a business, you are always going to come up against resistance. 'cause people don't like change. Change is hard. Even if you give, you know, 10 times the rationale why you should do something, people still don't really wanna do it.

Heath Hunter [00:10:01] Especially if it creates additional work for them. Yeah. And if you feel like, I mean, how many times have you ever finished a project and you're like, ah, this is great. I'm gonna show it to this person and I'm gonna say, Hey, what do you think of this? Not actually wanting them to think very much of it. What I want them to do is tell me it's great and then we'll move on. And then when they start actually giving you their real feedback, you're like, okay, you might be right, but if I accept that you're right now I gotta go undo all this stuff and start again. Yeah. They, feedback is a gift that we all really hate getting. Even if you're logical enough to say like, Hey, I need feedback. I'm not gonna develop, I'm not gonna progress without feedback. It's hard to take because it requires work and it requires you to really take a objective look at yourself and your performance and what you're doing and say, yeah, there might be better ways to do it, but it takes work. And I think that's why people are, you know, resistant. It's hard. It's, you know, it's tough. So how long were you consultant for? Five years. And as you look down the hallway of like consultants, 'cause the people at the top are making a killing. Yeah. I don't know what the entry level people are doing. Is it a good living? It's okay, but you don't, to your point, you don't make the real money until you get to the director partner level. But as a young person, I, I'm, I'm glad I had this, this foresight, but I, I would look at the directors and the guys that have been doing it for 10, 12, 15, 20 years.

Heath Hunter [00:11:37] And I looked at the lifestyle and it was a pretty clear, I didn't wanna be doing that when I was in my forties and I had a family because when I was in consulting and things have changed a little bit, COVID changed a lot. But when I was in consulting, you were on the road Monday

Vance Crowe [00:11:56] Through

Heath Hunter [00:11:57] Thursday every single week. And I did that for five years. And

Vance Crowe [00:12:01] As

Heath Hunter [00:12:01] A guy, as a single

Vance Crowe [00:12:04] Guy,

Heath Hunter [00:12:05] Parts of it were fun, parts of it were great, but it became a grind for me. And so I couldn't imagine having a family and being on the road that much. It just didn't seem like the, the kind of life that I wanted wanted to live.

Vance Crowe [00:12:19] So you're living out of a hotel and you're like, are you able to go out and enjoy, meet people and do stuff? Or are you like working late into the night in the hotel? Yeah,

Heath Hunter [00:12:28] You're working, you're, you, the hours are substantial and the way, at least my teams worked, we

Vance Crowe [00:12:34] Wanted to

Heath Hunter [00:12:35] Really, really get after it during the week so that when we

Vance Crowe [00:12:38] Did get home,

Heath Hunter [00:12:39] We could, you know, enjoy our weekend and see our families or significant others or friends and we could have a little bit of a life when we weren't on the road. And so it was great. I got to see a lot of different cities. I even got to go overseas for a period of time, so it was a phenomenal experience, but for me,

Vance Crowe [00:12:59] It

Heath Hunter [00:12:59] Needed to have a light at the end of the tunnel because I didn't wanna do that for the rest of my life. Yeah.

Vance Crowe [00:13:03] There's gotta be some kind of a golden handcuff on that where when you really start making the good money and they're requiring you, like you're being paid to be away from your family and all of the compounding problems that that brings, right?

Heath Hunter [00:13:17] Your

Vance Crowe [00:13:17] Spouse has to take care of the kids. You are out probably working pretty intensely with a really small group

Heath Hunter [00:13:24] Of people.

Vance Crowe [00:13:25] And I imagine that kicks off, you know, things like affairs

Heath Hunter [00:13:29] Oh yeah.

Vance Crowe [00:13:30] And weird relationship situations.

Heath Hunter [00:13:32] Yeah. I never had any, you know, direct experience with that.

Vance Crowe [00:13:36] Right. I didn't, I didn't

Heath Hunter [00:13:37] Actually see that e either. But you hear stories and I would say the, the biggest downside was, was the time away from your family. But the

Vance Crowe [00:13:47] Golden handcuffs

Heath Hunter [00:13:48] Are, are real because you get into the upper tiers of these consulting firms, especially the, the top tier firms like McKenzie, Bain, B, c, G, the golden handcuffs are substantial. It's a very lucrative career and it's hard to get out of, you know, once you get to that level. And so I got to a point, I rose, I was there five years, I rose to the level of manager, and then for me it was time to go to business school so that I could pivot into something else.

Vance Crowe [00:14:17] And at five years when you're managing, so now you have people coming in that are the first

Heath Hunter [00:14:21] Year

Vance Crowe [00:14:22] Outta college and you're, you're watching that person and you're saying, give me reports, and then you're marking up their PowerPoints, what do you, what else is this? Right? It is right.

Heath Hunter [00:14:32] You're, and you start to be responsible for driving business too. So you need to be building relationships with executives at companies so that you could sell work.

Vance Crowe [00:14:46] My experience with consultants was, you know, I saw it a lot at the World Bank and, but the, I really saw it at Monsanto and one of the things that I came to realize is that the consultants were there as a way to mitigate litigation.

Heath Hunter [00:15:04] Hmm. Because

Vance Crowe [00:15:06] You're gonna fire a bunch of people, right? You're gonna have, like, because first you see the consultants, they show up and you're like, oh, hey, the consultants are here. And then they're, hey, they're having meetings with us and talking about our work program. And then the consultants pack up their stuff and they go away. And two weeks later there's that one morning when people come in and there's somebody waiting for 'em in their office and they say, thank you, but today's your last day. We'll take your computer and your phone and your whatever. And then, you know, somebody points out this is a result that the, that is coming from the consultants. And you're like, well, why did they need the consultants to let people go? And it's so, they are not liable for the decisions that they made about who got fired. They're able to say, Hey, we, we fired a, the proper ratio of people over 50 that are making huge salaries and younger people. And we kind of mix it all together. And it wasn't us making this decision, it was the consultants.

Heath Hunter [00:15:59] Yeah.

Vance Crowe [00:16:00] Did you see this?

Heath Hunter [00:16:01] Yeah. I'm getting

Vance Crowe [00:16:02] To like take, take out all my, my frustration.

Heath Hunter [00:16:04] I love it. I I love

Vance Crowe [00:16:05] This just, just whipping the consultant,

Heath Hunter [00:16:08] The

Vance Crowe [00:16:08] Consulting

Heath Hunter [00:16:09] Industry. Cost reduction became a very hot product around 2008. So I entered the workforce in 2006 and I was working on a lot of interesting, like strategic strategy and operations and, and then all of a sudden the great recession hit. And first of all, a ton of consultants got fired. I, you know, luckily wasn't one of them. They took out a, most, a lot of the MBAs, they were the, the expensive ones. You know, I was just an newbie out of undergrad, but a lot of our, our engagements turned into cost reduction projects and it was not fun. And no one liked the fact that we were there. And in some

Vance Crowe [00:16:55] Instances it was hostile.

Heath Hunter [00:16:57] And, you know, by the time, and then I, I left consulting around 2011 and so that was still a big part of the industry at the time. And, and yeah. So your your experience was not unique. It happens and, you know, hopefully we won't see a lot of that

Vance Crowe [00:17:20] Anytime soon.

Heath Hunter [00:17:21] I mean, like, I'm

Vance Crowe [00:17:22] Not above being in that consultant role. Like I think about like when you're new in job, but I once had this job when I was working at the World Bank

Heath Hunter [00:17:28] Yeah.

Vance Crowe [00:17:29] Where they were like, Hey, you know, if we have all these data processors, 'cause there, you know, there was no ai, people are putting a bunch of information into these old ancient HR systems, so it requires like actual people typing into it. And they're like, if we pay a person in Washington, DC even though they're

Heath Hunter [00:17:47] An international hire,

Vance Crowe [00:17:49] 'cause they're from the World Bank, it's gonna cost us X and if we hire a person in Chennai, India, it's going to cost y

Heath Hunter [00:17:57] But we don't know,

Vance Crowe [00:17:58] We can't just like

Heath Hunter [00:17:59] Offload

Vance Crowe [00:17:59] This process that's in somebody's brain over there. It's in five people's brains. So my job was to get them to explain what they do at a high enough degree of fidelity that you could hand that work off to somebody in India. And at first when I start talking to people like, Hey, help me understand how you do this. Let's record every step. You know, I couldn't understand why they were resistant, why they would cancel meetings, why they would like wait too long n and not having it dawned on me like, they're not dumb vans. Yeah. They know that as soon as they hand this, this task off, look as you, you are whipping the consultants. You were, you were basically a consultant. Well, I wa

Heath Hunter [00:18:37] I was a, I was a contractor. So

Vance Crowe [00:18:39] Yeah, there you go in, in a way. Yeah. I love it. Yeah.

Heath Hunter [00:18:42] I

Vance Crowe [00:18:42] Mean, it gets back to

Heath Hunter [00:18:45] People don't like change and, and they also find security in their job. And so if they perceive that you are mining them for what they do and what they know and they're not super, super secure and that, hey, I I am valued, I add value, it can, it can be a scary thing. And so yeah, you get, you get meetings canceled, you get people calling in sick, it

Vance Crowe [00:19:12] Makes total sense. Well, and that's gotta be going on right now, right. With people knowing Yeah. That their work is being tracked through ai. I mean, oh yeah. I, we don't do this. I, you could see a lot of value in it where you can just load a program onto your computer and it tracks every button a person pushes. And AI is good enough to know, oh, they were, you know, using this customer records management system and they were moving this information from here to there. Okay, I can replicate that. And that's gotta be going on with everyone in every major corporation in America right now.

Heath Hunter [00:19:45] Yeah. It feels

Vance Crowe [00:19:46] Like

Heath Hunter [00:19:47] As a population, everybody is fairly nervous about the rise of AI and what that means for them and what that means for their job and their job security. And you

Vance Crowe [00:19:58] Know, there's so

Heath Hunter [00:19:59] Many stories about the tech companies that are laying off tens of thousands of people,

Vance Crowe [00:20:05] So many

Heath Hunter [00:20:06] Stories about what it's

Vance Crowe [00:20:08] Actually going

Heath Hunter [00:20:09] To do to employment. And, and I, I think the basic answers, we, we don't know at this point. I have no idea. I I would, I've got thoughts. I think more than ever, even if you look in into the private equity industry, there's a big, big push into blue collar professions buying HVAC companies, buying plumbing companies, buying into electrical contracting businesses because people are trying to find the safe spaces where AI is not going to take over. And everybody, you know, when we were growing up, the safe bet was to go into a white collar space, you know, be an accountant, be a lawyer now, not so much. So it, it seems, it feels a lot safer to go be an electrician or a plumber or something where you're using, you know, a trade where you're using your hands. But fact is, we, we just, we

Vance Crowe [00:21:08] Don't know.

Heath Hunter [00:21:09] Yeah.

Vance Crowe [00:21:09] I mean, less than two years ago I was telling somebody that was like, I don't want to go get a big education. I don't wanna do anything. I was like, you should go become a bookkeeper. Then they, they, they like, they make $80 an hour.

Heath Hunter [00:21:20] The work is

Vance Crowe [00:21:20] Really straightforward. You're just matching transactions, you're categorizing things and then an accountant is the one that's gonna take the full liability of stuff.

Heath Hunter [00:21:29] Yeah.

Vance Crowe [00:21:30] Now AI can do all of that bookkeeping work.

Heath Hunter [00:21:33] Absolutely.

Vance Crowe [00:21:33] And like I, those jobs, they're, I, they're not gone yet, but they're on their,

Heath Hunter [00:21:38] On their way out

Vance Crowe [00:21:39] Because my AI can do that better than the person that I've, I I I had hired

Heath Hunter [00:21:44] A

Vance Crowe [00:21:44] Bookkeeper

Heath Hunter [00:21:45] Before.

Vance Crowe [00:21:46] AI is better than it.

Heath Hunter [00:21:47] No doubt about it. And, and you're seeing that across the board in white collar spaces, accounting, legal, in finance. I mean, you know, these private equity firms we're already fairly lean. Now the work that a, you know, entering associate would do, building models, putting together research decks, AI can do it better. They can put a, an Excel model together that would've taken me when I was starting out in private equity a week to build it. Can do it in two hours, three hours. It's remarkable. So

Vance Crowe [00:22:22] Let's talk about private equity. Sure. 'cause I think for a lot of people, private equity is like, oh, that's a fancy word for lots of money. And they do something. I don't know what it is.

Heath Hunter [00:22:30] What is private equity? Private equity industry is essentially comprised of funds. And, and a fund is a committed pool of capital that is going to go and acquire businesses over a period of time and then sell those businesses over a defined period of time. And so the, the typical private equity fund model is 10 years. So if I were raising a private equity fund, I would go out and I would talk to high net worth individuals. I would talk to institutions, pension funds, folks that invest in, you know, what what they call alternative investments. So non-public investments. And I would raise a fund and let's say for the sake of round numbers, it's a hundred million dollars fund. I have that capital committed. And what

Vance Crowe [00:23:26] I'm

Heath Hunter [00:23:26] Gonna go do over the next five years is find good companies to acquire. And then when I, I find one, I'm gonna go call that capital. So I'm gonna go back to my investors who committed that capital and say, Hey, I need $20 million to go do this deal, buy this company that I found, and I'm gonna do that and, and I'm going to deploy that all of that $100 million into companies in five years. And then in the next five years, I'm going to sell those companies and hopefully generate a profit that I will then split between my investors and myself. And what happens in between when you buy those companies and you sell those companies? Is the value of the company going up because of things you're doing to it? Are you now in control of that company? You are in control of that company. And I would say every private equity fund has a slightly different strategy, but the idea is to exit the company at a higher valuation than you bought it. So you make money, and some do this by financial engineering. So they will put 50% of the purchase price will be debt. And over the hold period, they will pay down that debt and, and wait, wait, what does that mean? It'll be debt. They, they said, I have $10 million to invest in this, but I'm gonna go get a bank that'll give us 10 million more. How, how does that work?

Heath Hunter [00:24:58] Yeah, let's say you buy a business for $10 million, it's up to you how you finance that $10 million. And so let's say again, for the sake of round numbers, I'm gonna use 5 million of my investors' money and I'm gonna go partner with a bank to provide 5 million of debt. So that, of that 10 million, 50% is equity and 50% is debt. And just by doing that, if I'm able to over the next, say three or four years, pay down all that debt and just sell it for the exact same price I bought it for, I will have made two times my money. Okay. So there's financial engineering that you could do, it's financial engineering, op operational improvements. So I could have a thesis around, Hey, I like this business. It's a good business. It's growing a little bit. I think I can get in there and with the resource sources of my firm, I can help accelerate their growth or improve their margins. And, and if I do that successfully over the hold period, again, whether it's three or four or five years, I'm gonna have a business that generates more cash than when I bought it. And so people might be willing to pay more for that. And so in a way, I mean there, this is kind of like being a consultant. Only now you have skin in the game, right? The consultant, if the deal doesn't go right or the, you know, something's not right, they just stop getting paid, stop working for that company.

Heath Hunter [00:26:29] Whereas in private equity, you are now like, Hey, I've got my money, or at least my reputation and other people's money on the line here. And if I don't make this work out, then I lose out. Like I don't make any money

Vance Crowe [00:26:43] For the five years I put into this.

Heath Hunter [00:26:44] That's right. Yeah. The operators of private equity firms always have their own capital as part of the equity that they're investing. And that was

Vance Crowe [00:26:53] A big reason

Heath Hunter [00:26:54] Why I wanted to shift from consulting into private equity. You know, part of it was the lifestyle. I didn't wanna be on the road all the time. I still travel. I, even when I got into private equity, I still traveled a fair amount. But

Vance Crowe [00:27:06] It was a,

Heath Hunter [00:27:06] For me it was about building something. I wanted to be involved in the building of something. Because when

Vance Crowe [00:27:11] I would go in as a

Heath Hunter [00:27:12] Consultant, a lot of times we'd

Vance Crowe [00:27:14] Put these awesome

Heath Hunter [00:27:15] PowerPoints and presentations together and, and, and revamped strategies and we'd hand 'em over and then we're off to the next engagement, we're off to the next company. And I would wager at least half the time those fancy presentations got put on a shelf and never thought of again.

Vance Crowe [00:27:33] So on that circle where it's like 1, 2, 3, 4, they only only get to step two on the PowerPoint. And then That's

Heath Hunter [00:27:40] Right. Because that, as you know, I mean, you know, you've run businesses, you run your own business. Execution is hard.

Vance Crowe [00:27:45] Yeah. So hard, particularly like, because if change is so hard for a business, 'cause you're like, just like you said, you're like, I gotta deliver on the business and now I have to change. Like I was running it full capacity before. So to actually implement this is difficult

Heath Hunter [00:27:59] In

Vance Crowe [00:27:59] Private equity. Do you become the CEO?

Heath Hunter [00:28:03] Not typically. I would say the typical fund or private equity firm is backing the current management teams at the companies. Now, a lot of times they will bring a Rolodex of executives where they can plug people in maybe to

Vance Crowe [00:28:20] Compliment

Heath Hunter [00:28:20] The current

Vance Crowe [00:28:21] Team.

Heath Hunter [00:28:22] There are also firms out there whose whole strategy is to, to go and take out an entire management team and, and put their own folks in. That's not, not the game that I played, but it's out there.

Vance Crowe [00:28:33] And so you may come in and say, oh, the guy that they have in their CFO role,

Heath Hunter [00:28:38] He,

Vance Crowe [00:28:38] You know, he was really good to helping the business grow, but now he's in a new world where you've gotta go out and get wild financing or do a big capital raise or something like that. We're gonna pull that guy out, replace him with somebody that has done this before and then, but the rest of the management team stays in place. Yes. And they keep doing the business and we're gonna make smaller tweaks on these other areas.

Heath Hunter [00:28:59] Absolutely. And the, the example you use the CFO is, is is the typically the number one candidate, either a business, especially in, in my experience, which is the lower middle market lot. Lots of companies don't have CFOs. They might have a controller or a bookkeeper, but one of the first hires a private equity firm will make is that, is that CFO hire or a first replacement if that ends up happening to

Vance Crowe [00:29:24] Me, like the general temperament on private equity is that they are the cause of the in acidification of the world, right? Yeah. They're, they're like, I used to have this company that made great shirts, private equity bought it, and now all of a sudden the shirts fray and they're not as good

Heath Hunter [00:29:41] At quality as they used to be. And so I think most people's interpretation of private equity is, if my company gets bought, that's it. There's no more good quality coming from that company. Yeah. Yeah. My wife subscribes to that opinion. Her her favorite makeup brand was bought by private equity about five years ago. It's no longer around. And, and it's unfortunate because I think it's a somewhat undeserved bias, but everybody hates private equity. Yeah. Because there are so many high profile instances of these private equity firms coming into a, a business that was otherwise going fine, maybe growing, but otherwise fine and totally destroying it. And they do a really bad job of publicizing those instances where they actually went into a company and they grew it substantially and they created jobs and they created value and, and it helped everybody involved. Those aren't the instances that get, get a lot of airtime. Yeah. Well if that happens, you don't ever realize that anything happened. It's when you go to buy your new shirt and you realize like, oh, this thing freeze now. That's right. And it didn't used to that you're like, oh, I bet private equity got this one. That's right. And it's, it's always been funny to me that private equity has this really negative bias.

Heath Hunter [00:31:14] Venture capital doesn't. What's the difference? Well, venture capital, you're investing in earlier stage companies. So seed stage series A sometimes before the companies are ever, you know, producing any cash, maybe not even revenue. And and I, I think the, the comparison is so interesting because in, in venture capital land, I, I would say VC firms ruin way more businesses than private equity firms do. But nobody talks about it because if I'm investing out of a VC fund, I assume eight of the 10 companies I invest in are gonna go belly up in private equity That doesn't, that math doesn't work. You need all of your companies to survive. And maybe one or two like really hit it out of the park, but nobody, the, the, the, I don't know how, but venture capital has been able to avoid this negative bias, this really, really bl bad publicity that, that has had some really negative effects on private equity. I think with venture capital, I mean, at first when venture capital comes in from, I know a few people that have started up companies, like all of a sudden that guy goes from I'm eating ramen in my apartment and, you know, barely making it work, doing that grind to now I have

Vance Crowe [00:32:39] Access to a pool of millions of dollars.

Heath Hunter [00:32:42] So now I can pay myself

Vance Crowe [00:32:43] A salary and I can start making

Heath Hunter [00:32:45] Hires.

Vance Crowe [00:32:45] Like, I think at least when Venture Capital first shows up that and they drop a bunch of money on

Heath Hunter [00:32:51] People,

Vance Crowe [00:32:52] They love it. Yeah. Their lives get a lot better. It's

Heath Hunter [00:32:54] True. And they're not, they're not as involved in the day-to-day management and they don't get into operations or, or things like that because usually

Vance Crowe [00:33:01] They're

Heath Hunter [00:33:01] Taking a more of a minority stake to begin with. And private equity is more control investing.

Vance Crowe [00:33:07] Okay, so you brought up series A and blah blah, blah, blah, blah. Like I hear this talked about all the time, I have a vague understanding of it. But what do all these series mean? What is, what is all this about

Heath Hunter [00:33:19] It?

Vance Crowe [00:33:19] It's fairly

Heath Hunter [00:33:20] Undefined. So seed stage would be very early in the company's life. Like, you know, maybe you're a few months or maybe a year into trying to build this company. You may not even be generating revenue at that at that time. Series A and is is really the first institutional round. So se is

Vance Crowe [00:33:43] Seed.

Heath Hunter [00:33:43] Seed rounds are typically comprised of like angel investors, individual, fa, family and friend type money. Now over time now, there are actual funds that are built around seed stage investments, but, but historically that's been the, the characteristics of a seed stage investment series A is really the first institutional money into a venture.

Vance Crowe [00:34:10] And what does that mean series? Why is it called that? You

Heath Hunter [00:34:15] Don't know either. I don't even know. I don't even know. But again, it, it

Vance Crowe [00:34:18] Would,

Heath Hunter [00:34:19] It would be the first time that people like professional investors are coming and putting money into a company.

Vance Crowe [00:34:25] And so there's some level of like, hey, these are our books and this is how you know that we have

Heath Hunter [00:34:32] A real bank account

Vance Crowe [00:34:33] And our structure is set up so that your company, which presumably has rules on how they're allowed to deploy their capital

Heath Hunter [00:34:40] That's right.

Vance Crowe [00:34:40] Can say like, yes, an accountant agrees the amount of money in the bank is what you say it is, the assets that you own or what they say they are. Yeah. Yeah.

Heath Hunter [00:34:49] There there's a different level of diligence for sure. And, and

Vance Crowe [00:34:53] Then it's, it's

Heath Hunter [00:34:54] Measured too. So if you've ever heard somebody say like, oh, we're gonna do an A down round. Yeah, that's, that's not a good sign. If you did a series A at a certain valuation and then your series B, which is again your next funding round, you want it to be up and not down. It's a, it's a good, you know, it's a sign of is this venture working as we planned or not?

Vance Crowe [00:35:16] So you're not in venture capital. I'm

Heath Hunter [00:35:18] I'm not, you're not. You

Vance Crowe [00:35:19] Were in private equity, you kind of are. Now,

Heath Hunter [00:35:21] You

Vance Crowe [00:35:22] Know,

Heath Hunter [00:35:22] That's a good question. I, I, coming outta business school, I got into private equity. I worked for a private equity fund in Chicago in the lower middle market. And then

Vance Crowe [00:35:32] About

Heath Hunter [00:35:33] 2015, I moved from Chicago

Vance Crowe [00:35:36] To

Heath Hunter [00:35:36] St. Louis to help a family build what's called a family office. And, and there are many forms of family office, but this one was specifically focused on acquiring and building businesses. And when I got into it in 2015, it was fairly unique. There weren't many single families that had the resources and the organization to go out and, and do their own deals. Most folks, if they wanted to get into that line of, of investing did so through a private equity fund. And so I, I did that for six and a half years with a family here in town in St. Louis. And then did it for another family here in town for another four years. And now I have my own holding company, it's called River Run Holdings, where we are targeting businesses to acquire and, and help them grow. What is the world of private equity like right now? Because it seems like all the money in the world is going towards AI build out and all of that. And I don't know, people seem to be kind of scared about where the economy is going. What's it like buying and selling companies right now? Yeah, the private equity landscape, the industry today is, it's really tough. There have never been more private equity firms by number. There's almost a trillion dollars of what they call overhang, which means committed capital that hasn't been deployed a trillion dollars.

Heath Hunter [00:37:19] So let me see. I understand that that means like people have said, yes, I'll put in my 20 million or I'll put in my a hundred million and there's a total of trillion dollars worth of people saying at any time you go ahead and use those on the projects that we want. Yeah. And it's not so that money is just hanging out. That's right. Pair that with like, hold times at private equity funds have never been longer. I think, I think right now it's, it's seven years. Because what happened after COVID, there was a huge runup in private equity investments and a huge runup in valuations. And so these private equity firms competition was so fierce. They were, you could argue, overpaying for businesses. Things have come back down to earth now and they are stuck with companies where they don't want to sell for a loss. And, and so they're just hanging onto these companies longer than they normally would. And so there's an excess inventory of these private equity backed businesses that really need to get sold, should have already been sold. You've got a huge over capital overhang of a trillion plus dollars. And so what it creates is a really competitive cutthroat environment within private equity today. And what does that mean cutthroat? Who's cutthroat with who? Well, it, it, it's become a total seller's market, which is great if you, if you wanna sell your business and you wanna get top dollar, but you know, private equity firms are, are stretching on valuations.

Heath Hunter [00:38:54] They're, they're doing everything they can. What, taking a step back, what, what does it mean they, they're getting into these companies at incredibly inflated valuations and then they have to make it work. And so what happens, they either have to dramatically drive growth or dramatically cut costs to show progress on the earnings line. And that can sometimes have some pretty negative implications. When you say that somebody's going to buy that company from private equity who buys a company that's, you know, so expensive that I, I guess I'm putting like who buys these companies? I would, most private equity transactions are private, private equity firm to private equity firm if you look at the statistics. And so a smaller private equity firm is hoping to sell it to a larger private equity firm. And, and private equity firms like to buy from other private equity firms. 'cause they know that a level of diligence has been done prior to them owning it. They know that a level of cleanup has usually occurred as well. And so they are getting a fairly, you know, professionalized business. And so what happens to these private equity firms if they can't sell? They just end up owning companies. I mean, presumably those companies are kicking out a profit. So at some point they have to sell, it's part of their fund structure.

Vance Crowe [00:40:22] So what happens

Heath Hunter [00:40:22] In this world? Well, you, you take a big loss, you take a big markdown on your investment and you lose money. It's interesting because like the valuations are probably at such a height that only private equity can buy some of these companies that, you know, a a family built it up

Vance Crowe [00:40:41] Maybe over a couple of

Heath Hunter [00:40:42] Generations. They're not gonna pass it down to their kids. But the only people that are, the people that are willing

Vance Crowe [00:40:48] To pay the most for that company are gonna be private equity. Then

Heath Hunter [00:40:51] They suck up all these companies. They're trying to hold them 'cause they think, Hey, that's a good business. I can make it more profitable. And then they try and sell the hot potato up to private equity. But eventually where does it go when the larger private equity companies are buying all these, the, the you,

Vance Crowe [00:41:09] You are expecting that

Heath Hunter [00:41:10] There's gonna be a bunch of writedowns, there's

Vance Crowe [00:41:12] Gonna be a bunch of like

Heath Hunter [00:41:13] Sell the company. Well, it's a good, it's a good question. So as a company grows and, and it gets so big there, the bigger the company gets, the, the smaller the pool of potential buyers become. IPOs are always an option. So you can take the company public or you can hope that a big strategic in the industry will come along and wanna buy the company.

Vance Crowe [00:41:39] What does that mean a big strategic,

Heath Hunter [00:41:41] Well you were at Monsanto, did you guys do much m and a while you Oh yeah, yeah, yeah, yeah, yeah. So that, Monsanto would be a great example. Some large Fortune 500 publicly traded company is in your industry or tangential to your industry and might wanna buy your company for, to grow its own earnings or you have some special sauce that that that, that they want as, as a part of their company.

Vance Crowe [00:42:06] So did you, when, when

Heath Hunter [00:42:09] You were around there,

Vance Crowe [00:42:09] What were some like big success stories you had? Like what were companies that were bought that that you ended up being able to do something great with?

Heath Hunter [00:42:19] I'll give you a, give you the story of, there's a couple of companies that we, we acquired when I was in the family office world that we had a huge amount of success with. The first was UHD by the, the name of Omni Cable. And they're a redistributor of wiring cable selling into the electrical distribution market. So think Graybar, Sona Par, Crescent Electric, some of the largest electrical distributors were their customer. We bought that company in clo closed that deal in 2019. It was, you know, roughly 30 million of ebitda. So it generated approximately 30 million in cash every year. And, and that was a great example of using our differentiation to close a deal. The owner, the current owner of the business did not wanna deal with private equity. He had a, he had a very strong negative bias toward the industry. And we met him and hit it off and he, he really, really wanted to partner with us. And so we gave him, you know, what we thought was a very fair deal and, and he took it and we, we, we did the deal. And then shortly thereafter we engaged the board of their largest competitor, which was a company called Houston Wire and Cable. And it happened to be a public company at the time. It was that, that situation where it had been a privately private equity backed company and it got to a certain size where nobody in the industry had the, the, the means to buy it.

Heath Hunter [00:43:59] And they thought that their best exit was to take it public. And so they did. And it was a small cap pri public company for a long time. And after the omni cable deal, we engaged the Houston wiring cable board on potentially merging the companies and they were receptive and we ended up doing that deal. The company at the time was close to break even, but you know, we were able to model out that, you know, they could theoretically be producing about 10 million in cash a year. And so theoretically we could put these two companies together and it would be about a, a company that could generate 40 million of cash every year. And we ended up doing that deal. Take privates are really complicated and, and you've gotta adhere to a lot of regulations and, and anyway, we'll, we'll

Vance Crowe [00:44:52] Go down, take privates. What does that mean?

Heath Hunter [00:44:53] It was a public company that we were buying to to make it private again.

Vance Crowe [00:44:57] Oh

Heath Hunter [00:44:58] Yeah. And so we put these two companies together, Omni and Houston, wire Cable, and less than two years later, those two companies were generating 200 million in cash every year. Wow. Yeah. 200 million in ebitda.

Vance Crowe [00:45:13] So I wanna go back to this to going from public to private.

Heath Hunter [00:45:17] Yeah.

Vance Crowe [00:45:17] How does that occur? Do you

Heath Hunter [00:45:19] Just have to go buy a majority of the shares? What, what goes on? You do. And you, you have to go through a shareholder approval process. So the board has to approve it and then shareholders have to vote on and 'cause you tell the shareholders,

Vance Crowe [00:45:33] Hey, we'll pay you this much for each

Heath Hunter [00:45:35] Share. That's right.

Vance Crowe [00:45:36] Presumably it's more than whatever the market is paying right now.

Heath Hunter [00:45:39] That's right.

Vance Crowe [00:45:39] But it's like they, they're now making the decision, do I want to take the cash payout for what I've, you know, invested in this company? Or do I vote no? 'cause I think no, on our own we're gonna do better than, than this.

Heath Hunter [00:45:52] Exactly. Yeah. Take privates. You know, I think, I think it usually takes typically roughly about a 30% premium over what the, the, the company's trading at at the time. And I think ours was roughly around that. I can't remember the exact statistics, but yeah.

Vance Crowe [00:46:10] All right. We're gonna take a quick break for just a moment because I wanna talk about Legacy Interviews. The other day I was doing an interview and the person walked out of the conversation and they were so excited and we were talking about when we were gonna deliver it and they were like, I don't even care. That was so much fun. Deliver it whenever. And I think that's one of the cool things about a legacy interview. Both that the people that are being interviewed get a chance to talk about important things in their lives. They get to go back and relive some of the great moments and even some of the moments where they had to recover. And just the very act of sitting down and having a conversation about your life is a really uplifting experience. But what they're actually getting even more valuable than the experience is a recording that now future generations are gonna be able to know where their family came from. What is their history, who are they, what is the fabric that you are a part of. If you are interested in having me sit down with one of your loved ones to record a Legacy Interviews, go to Legacy Interviews dot com to find out more. All right, let's head back to this interview with Heath Hunter.

Heath Hunter [00:47:19] You

Vance Crowe [00:47:19] Know, I think the private money that's going on in the world right now has hit the public

Heath Hunter [00:47:24] Consciousness, right?

Vance Crowe [00:47:25] There's the show Billions, there's succession, there's

Heath Hunter [00:47:29] This concept that the things that are really running the world are a few families that have all this money. Are those shows, are they real? Is that really how it works? Friends and neighbors? Have you seen that one? Oh man. We should talk about friends and neighbors. Yeah, for sure. I I I do think that's how the world works. Mo money is influence. I mean, you, you've seen it in our elections. People that have money right now, citizens, United, people that have the money get to write the rules and just human nature. Like why wouldn't you write the rules in your own favor? And so yeah, I would, I would, I would agree. Like, you know, money buys influence and, and, you know, drives policy today. Well, you're just a kid from, you're from Sikeston, Missouri. You're Sikeston Missouri. Some, some little, little hamlet in Missouri, rural town in southeast Missouri, near, near the boot heel. Do you know what the boot heel is? Yes, of course. Yeah. That little piece that dips down into Arkansas. Yeah. That was born and bred. If anybody knows us, they, it's a, there's a famous restaurant there called Lamberts where they throw the rolls at you. So it's called Home of the Throat Rolls. And so you came from that place. And now working in this, you know, private equity and all of this thing, we talked about AI before.

Heath Hunter [00:49:00] Would you recommend to the n next young Heath Hunter coming out of Sikeston, Missouri, Hey, if you wanna get in, in, with the power centers of the world go to private equity. I would not. It, it was a good path for me. I, I think private equity has gotten so crowded and so competitive that it is not the attractive place. It was 15, 20 years ago. The returns have substantially lowered. If you look over the past three years, public markets have wildly outperformed average private equity over the past 10 years. It's about a wash. And over the past 20 years, private equity still outperforms public markets. But if you think about it, if you invest a dollar into the public markets or private equity, you want your private equity dollar to substantially outperform the public markets because it's illiquid. You can't just take it out. It, it's tied up for maybe 10, maybe four or 5, 6, 7, 8, 10 years. And the fact that it has at best met the public market return is, is concerning in and of itself. And so the game has shifted before the managers of these huge piles of money knew when I started in, in the industry, they knew that if they in invested in private equity, they were gonna outperform the market over the long term.

Heath Hunter [00:50:40] Today, the game has shifted where they have to be good enough at evaluating these fund managers to pick the ones that are in the top quartile or they're gonna lose. I mean, it's just such a, a, a big amount of money sitting in these very small places. And to me, the reason that they're doing these like bets is 'cause they have to outpace inflation, right? People have acquired wealth money and now in order to not have that just eroded away by the government printing money, they've gotta keep taking it to higher and higher risk because the higher the risk, the higher potential reward. Where, where is this theory not, yeah, I don't know. I, they're older. I, I, I've, I know a lot of like wealth managers and there's a lot of psychology that goes into it, into money management, growing your money, et cetera. I can't tell you how many of my friends that are in the wealth management game tell me people just don't wanna lose money. Mm. You know, they're not chasing 10, 15, 20% returns. They're just, they don't wanna lose money. That was shocking to me. That has been shocking to me. 'cause I've always been one, like, I want to grow my wealth. I wanna or grow my, well, I wanna create well, you know, and grow it over time. And, and the mindset of people just not wanting to lose money was a little surprising to me.

Heath Hunter [00:52:12] I I, I get it to an extent. Especially if you're of our generation or, or before you, you've gone through some stuff, financial, great financial crisis, COVID, these big corrections that, that where people have lost a lot of money or gone bankrupt or, or been ruined. It's shocking. And as, as you know, I mean like there's a psychology. Okay, so maybe a better way to put that a an updated model would be to say, I think there are a lot of people that they know their own physical work is unlikely to yield wealth that will outpace whatever inflation is going on. Yeah. And so they're doing higher risk things. I saw that in Korea for example, they just had a huge market wipe out. All these people were, were leveraged trading and just in millions upon millions of dollars wiped out. And it turns out 68% of them were under the age of 30. Yeah. That had their money wiped out. And why is that? Well, it's 'cause they were trying to make money. I think this is why sports betting has gone so ugh, so wildly out of control. And I think it's 'cause people are saying like, Hey, I have the potential to make a lot more money betting on this football game than I

Vance Crowe [00:53:25] Ever did going to work in my regular job.

Heath Hunter [00:53:28] Yeah. I don't wanna go down a rabbit hole, but the whole having a casino in your pocket, I have a huge problem with, I think similar to a lot of things that have come about in our lifetimes. Like this is just preying on the worst of our natural instincts. And to expect a 22-year-old male to, to not, you know, get the dopamine hit that his casino in his pocket is going to create is, is unrealistic. And you've seen it and you've seen what, what it's done. If, if you look at the statistics when states legalize gambling, personal bankruptcies increased by over 30%. That's wild.

Vance Crowe [00:54:19] Do you have the poll to to, to gamble? Are you a gambler?

Heath Hunter [00:54:23] No, I am not. I never got into it. Anytime I have gone to Vegas, I'll play the blackjack table for a little while, but I am keenly aware that my losses hurt a lot more than my wins. And so I've

Vance Crowe [00:54:40] Always,

Heath Hunter [00:54:41] I've always stayed away from gambling and I I know, you know, I I I was a finance major. I know the probabilities and, and that was enough to keep me away from it.

Vance Crowe [00:54:52] Yeah. The, the, I have many, many vices, but I have no pull towards gambling. But the people that I do know have a pull towards it. It is the wildest thing in the world. Like it is, it is like, it's not like with drugs. You can be like, I'm just not

Heath Hunter [00:55:08] Gonna be around drugs. Right.

Vance Crowe [00:55:09] I'm just not gonna be

Heath Hunter [00:55:10] Around alcohol. And

Vance Crowe [00:55:11] I mean, I grew up and one of the, my parents' family friends was a, a psychologist and he worked just with people with gambling addiction. Yeah. And he was like, it's the hardest one to kick because you can gamble on anything. You don't have to have the casino in your pocket. You can, you can be betting, you think the next car past here is gonna be red or green. And the people that get the rush from it, they, they don't stop. Well

Heath Hunter [00:55:32] It's also so dangerous because a lot of times it's invisible.

Vance Crowe [00:55:38] You can see when

Heath Hunter [00:55:39] Somebody's going down a bad path with alcohol or drugs, you can, you know, with gambling

Vance Crowe [00:55:49] You could have like

Heath Hunter [00:55:50] Mortgaged your house and nobody knows about it until it's too late. And, and it's a big, again, if you look at the statistics, it's a big driver behind male suicide. Which, which is was ter it is terrible. And personal anecdote, when I got outta college and I moved to Chicago, a lot of my friends from WashU became traitors. And, and almost all of them got deeply into gambling. 'cause that's kind of what they were doing on a day-to-day basis. And to

Vance Crowe [00:56:20] Your point, you

Heath Hunter [00:56:21] Can gamble on anything. You know, I remember, you know, we'd, we'd be watching the Super Bowl and they were gambling on how long the star spand banner was gonna last. They gamble on, you know, how far the, the first kickoff was going to to fly. I mean, it's crazy. You can gamble to your point, you can gamble on anything. And

Vance Crowe [00:56:38] The sports betting stuff. I I

Heath Hunter [00:56:40] I've never downloaded the app. I, no, I mean I'm, it, it wouldn't

Vance Crowe [00:56:43] Be a danger to me 'cause I would

Heath Hunter [00:56:45] Not open

Vance Crowe [00:56:45] It up. But I have seen them and you're like, you can

Heath Hunter [00:56:49] Bet on

Vance Crowe [00:56:50] Every single second of this game you can bet on is somebody gonna hit a, a free throw in the next five minutes. And like,

Heath Hunter [00:56:58] You know, then you're wired

Vance Crowe [00:57:00] Up to watch some game that's out in Cleveland, Ohio or

Heath Hunter [00:57:04] Albany, New York that you don't

Vance Crowe [00:57:05] Care about at all.

Heath Hunter [00:57:06] Yeah. And all

Vance Crowe [00:57:07] You are is like hitting that button. It's wild.

Heath Hunter [00:57:09] Yeah. And I've heard it's, it's killing Vegas too. 'cause you don't have to travel to Nevada anymore to do real gambling.

Vance Crowe [00:57:18] Oh, that's interesting. Yeah,

Heath Hunter [00:57:20] Yeah, yeah. Ga tour tourism to Las Vegas is way down.

Vance Crowe [00:57:26] I was thinking that was a symptom of just like the larger

Heath Hunter [00:57:29] Economy.

Vance Crowe [00:57:29] But if you're allowed to gamble where you're at, why pay for the plane tickets? Right. And buy, buy the hotel room and do all of that. Wow.

Heath Hunter [00:57:37] Yeah, I think people, they

Vance Crowe [00:57:40] Perceive things like private equity, hedge funds, these kinds of things to be formalized gambling. I think they look at those people like gamblers. Yeah. Are they,

Heath Hunter [00:57:52] I don't think so for a number of different reasons. One, the level of diligence that that goes into doing these deals. Because

Vance Crowe [00:58:05] If, if

Heath Hunter [00:58:05] You took that thread further, you know, investing in the stock market, investing in any company could be considered gambling. And so to an extent, you, you, you are, you are, you are taking on risk. But that's a really interesting philosophical discussion on where's the line, where do you cross the line from investing and taking risk into gambling? And I don't have a good answer for that. Well,

Vance Crowe [00:58:30] 'cause I think you could look at the other side of it and be like, I, I'm sports betting, but I'm not doing it like those other guys. 'cause I ain't done

Heath Hunter [00:58:36] My

Vance Crowe [00:58:37] Research. I know who's playing the game. I know,

Heath Hunter [00:58:40] You

Vance Crowe [00:58:40] Know what the right air speed of the, you know, mile high stadium is this weekend.

Heath Hunter [00:58:46] Yeah. If you have, I mean, I think everybody in the investing and the gambling game, you're trying to get asymmetry of information. You're trying to get some kind of edge and that, that's where private equity has evolved to a lot. Like almost every fund today is gonna have some type of specialization. Like, oh, we only invest in distribution businesses 'cause we know

Vance Crowe [00:59:08] That model

Heath Hunter [00:59:09] Cold and

Vance Crowe [00:59:10] We know

Heath Hunter [00:59:11] The levers to pull to create value. We only invest in healthcare companies because again, we know that industry so well. We've got an asymmetry, we we've got asymmetric information versus a generalist investor that, that might be interested in this company as well.

Vance Crowe [00:59:28] Yeah. That's been my experience. I'm, I'm, I met a guy in, in private equity that all they do is focus on a certain kind of train car. That's it. Yeah.

Heath Hunter [00:59:38] Is

Vance Crowe [00:59:38] Like our, we focus on this train car 'cause it is the industry standard and you, and so there's all these things that you could invest in within that train car, the axles, the steel, the whatever. Yeah. And it's wild. 'cause I mean, you always hear as a, as a, as a stock investor, like you can't pick individual stocks because all of the secret knowledge that people have or in-depth knowledge is being done by other people that, that that's all they do all day. They're not going to their job and then coming home in

Heath Hunter [01:00:09] Their day trading account and

Vance Crowe [01:00:11] Trying to to bet on steel. Do you agree with that?

Heath Hunter [01:00:14] I do agree with that. I've, I've always been a big index fund investor. So I want to, I wanna have my chips diversified across a bunch of industries and companies because I am not arrogant enough to think that I can beat those specialized those, you know, some of the smartest people in the world are working at these hedge funds trying to again, create this asymmetry of information so that they have an edge. I'm not

Vance Crowe [01:00:43] Gonna go up against them

Heath Hunter [01:00:44] And, and bet on individual stuff.

Vance Crowe [01:00:45] And even those guys lose, right. That, that's right. You could be like, we're an extreme expert in this

Heath Hunter [01:00:49] Particular

Vance Crowe [01:00:50] Kind of energy markets and we're competing against other people that have that. And we took a position, we lost, you know, a billion dollars. Yeah. And like, how's the guy at home gonna try and compete

Heath Hunter [01:01:01] With that? Totally. And and that's why I always chuckle when, when people are calling for like a recession or like, this sector is gonna cycle really

Vance Crowe [01:01:09] Hard

Heath Hunter [01:01:10] In the next three months or 10 months or 12 months. 'cause I mean, you think back to the great recession, like nobody had on their radar, mortgage-backed securities.

Vance Crowe [01:01:19] Nobody.

Heath Hunter [01:01:20] And, and so when,

Vance Crowe [01:01:21] When these

Heath Hunter [01:01:22] Corrections happen, when these recessions happen, it's, it's a, it's a, it's you getting t-boned on an idle Tuesday. It's not something that you were planning for.

Vance Crowe [01:01:32] Yeah, that's right. And and on top of mind is Michael Burry did. Right. He got it right. And now people actually think he's got some kind of oracle powers and you watch all the predictions he makes in every other thing. And you're like, that was completely wrong. You bombed that one. You got

Heath Hunter [01:01:48] One thing right one time

Vance Crowe [01:01:50] And then had a movie made about it. That's right. And everybody's like, that's

Heath Hunter [01:01:53] Right.

Vance Crowe [01:01:53] I'm Michael Brewery said this, he's worried about water. I should go buy water.

Heath Hunter [01:01:59] My wife and I joke about this she'll, she, she's a better bit of a pessimist and, and you know, the

Vance Crowe [01:02:07] One in

Heath Hunter [01:02:07] 100 instance where she's right about something going wrong, she'll be like, I told

Vance Crowe [01:02:11] You, see I

Heath Hunter [01:02:13] Told you. And I'm like, well you, you, you're gonna be right. Eventually

Vance Crowe [01:02:17] One thing you said that I I I invest in this theory 'cause it's the easiest way to do it is index funds. I actually have to wonder if index funds have not created an entire zombie economy. Hmm. And I I have I have talked about this for years on the podcast where, you know, if all these people say, Hey, I can't outcompete, I'm not gonna buy private stocks, I'm not gonna buy individual stocks. Yeah.

Heath Hunter [01:02:41] Because

Vance Crowe [01:02:42] I can't beat the market. There's no alpha there, so I'm gonna buy index funds. So those index funds, then those companies that are put into, you know, whether it's an energy index fund or a biotech in the industry fund, and they all know, Hey, if I put these things into a, into my sustainability report, or if I, if I do these special things, then I can go get that index fund money. And that index fund money is like a pulse or like pumping blood in every single Friday when people's payrolls run. Oh yeah. And they get their money taken out for their 401k and then their 401k is going into index funds. That means you're just pumping more money and more money and more money into that system that's essentially blind. Right? Mm. Because the index funds are choosing the collection, you know, David Orkis fund of saying, I'm not gonna try and find a needle in a haystack, I'll just buy the whole haystack. Well these companies all know that. And so they are getting huge amounts of capital, but not because they're particularly good. So there's like zombie money or zombie and certainly an inflation of the system. Where's the hole in this hypothesis? No,

Heath Hunter [01:03:54] I like that. 'cause I, I have been of, of the mind to buy the whole haystack and not the needle inside. Although I will say like, I always have like a set aside amount of money to play, you

Vance Crowe [01:04:06] Know what

Heath Hunter [01:04:06] I mean? So like, I will take like individual positions and like in 2025, I thought Google's price to earnings ratio was really attractive. And it was, it, it had, I I still believe it has the, the biggest,

Vance Crowe [01:04:26] The most potential to

Heath Hunter [01:04:27] Win the AI race. And it's a real company right now and it's got a lot of other services. And so, so I put a put some money behind Alphabet last year this year. Amazon was my pick. 'cause it gave me, you know, some exposure to the space race without a hugely inflated SpaceX evaluation. And it also, I think, you know, it's, it's big into the AI build out as well. So anyway, that aside, I

Vance Crowe [01:05:00] Can't, I can't poke

Heath Hunter [01:05:02] Holes into your theory other than, and this may be, you know, 'cause I'm not, I'm not a, my, my professional experience is not around investing in public securities or public companies.

Vance Crowe [01:05:17] But to be a part of

Heath Hunter [01:05:18] Those index funds you have to perform, right. If you're not performing, or a certain set of analysts believe that your business is in trouble, you will get delisted from those indexes. Right?

Vance Crowe [01:05:36] Yeah, that's right. I don't think they, I mean maybe they do. I, I like, one of the things that I saw when I was at Monsanto was I got to go meet with investor relations. I'm going out talk on behalf of the company. I was the curious like what other parts of the business are, you know, public facing that you could be talking about it. And I go to meet with the investor relations people who are smart, hardworking. This is not a denigration of them. Yeah.

Heath Hunter [01:06:00] But

Vance Crowe [01:06:00] What I'm about to say, kind

Heath Hunter [01:06:02] Of

Vance Crowe [01:06:02] Trashes the, the idea, which is when I would talk to them about what is actually inside the company, what the company actually does, because I was on the ground, I was talking to the biotech scientists Yeah. The database engineers. Like I really had a very strong understanding of what, what was made up of the company.

Heath Hunter [01:06:21] The

Vance Crowe [01:06:22] Investor relations people had no idea. And in fact, I would take that up quite a few levels. Not everyone in the company, but these companies are so

Heath Hunter [01:06:31] Large,

Vance Crowe [01:06:31] They're so massive

Heath Hunter [01:06:33] Sure.

Vance Crowe [01:06:33] That no one can actually know what's inside of the company. Mm.

Heath Hunter [01:06:36] And

Vance Crowe [01:06:37] This idea of valuations, and I've had this fight several times on the podcast

Heath Hunter [01:06:40] Yeah.

Vance Crowe [01:06:41] To me is like farcical. It's like not real. Yeah. That you can value a company that are, that are these large, this large. Well

Heath Hunter [01:06:48] I, I would tell you,

Vance Crowe [01:06:49] And

Heath Hunter [01:06:49] I believe a company's numbers always tell a story if they're

Vance Crowe [01:06:54] Not being manipulated.

Heath Hunter [01:06:55] That can happen. But the numbers tell a story. What are the earnings doing? What, what, what is the trajectory? What's the forecast? You believe in the forecast? What has it

Vance Crowe [01:07:07] Done

Heath Hunter [01:07:07] Historically? So to your point, it is really hard. These behemoth companies that have many different business lines, it's hard to really understand. But the, our society, our markets believe that numbers tell a story. And again, as long as it's not an Enron situation where, where things are being significantly manipulated, you should be able to take substantial comfort and the numbers are telling an accurate story.

Vance Crowe [01:07:38] And you do.

Heath Hunter [01:07:39] I do.

Vance Crowe [01:07:40] I I, I just, to me, I know it, it's like I, I am definitely a, a believer in free market capitalism, but like, I don't know, i i, those numbers, how could anyone know? I, I guess it's really like the, the, what is it? The wisdom of crowds or whatever, like it's wisdom of

Heath Hunter [01:07:55] Crowds. But like that's why, that's why accounting firms exist. That's why people do audits. That's why, and that's why Arthur Anderson is no

Vance Crowe [01:08:05] More. Right. Because they had been auditing Enron and That's right. Cooking the books. Exactly. They had been involved

Heath Hunter [01:08:12] In the manipulation of those numbers. And so when you build your business a around saying, Hey, these numbers are good because I said so and I put my name on the signature line. And that turns out not to be true, you are no more. So one

Vance Crowe [01:08:31] Area that I think is very interesting right now

Heath Hunter [01:08:33] Is the portrayal of wealthy people in the economy. Right. We already mentioned

Vance Crowe [01:08:39] Succession. Billions

Heath Hunter [01:08:41] Friends and

Vance Crowe [01:08:42] Neighbors and friends. Friends.

Heath Hunter [01:08:43] Friends and neighbors. Friends and neighbors. Yeah. And I think

Vance Crowe [01:08:45] There's something really interesting

Heath Hunter [01:08:47] Going on cultural right now that

Vance Crowe [01:08:49] Is

Heath Hunter [01:08:50] Portraying rich people

Vance Crowe [01:08:52] As

Heath Hunter [01:08:55] Idiots, like that don't deserve to be

Vance Crowe [01:08:58] There. And

Heath Hunter [01:08:59] Cold, ruthless people too. Tell me more about idiots because I I would agree with cold and ruthless, but idiots tell me. I mean, when I watch

Vance Crowe [01:09:08] Succession Yeah.

Heath Hunter [01:09:09] Right. Each one of the

Vance Crowe [01:09:10] Characters that's

Heath Hunter [01:09:11] Vying for control of that thing, everyone

Vance Crowe [01:09:14] Watches and says they're

Heath Hunter [01:09:16] Not deserving of that money. If,

Vance Crowe [01:09:18] If I were there I would

Heath Hunter [01:09:19] Make better

Vance Crowe [01:09:20] Decisions

Heath Hunter [01:09:20] And it wouldn't be this

Vance Crowe [01:09:22] Ridiculous or this dumb or

Heath Hunter [01:09:24] Yeah. I, I think that is, I think that perception is reserved for the second and third and fourth generations. Okay.

Vance Crowe [01:09:36] Fair enough. Yeah.

Heath Hunter [01:09:36] Because I think you'd never look at Logan Roy and be like, that guy's an idiot. He's not an idiot.

Vance Crowe [01:09:41] Right. But

Heath Hunter [01:09:41] He's the one that built the business. It's his kids that maybe haven't earned their way into it, that are seen as idiots.

Vance Crowe [01:09:50] That's fair. And

Heath Hunter [01:09:51] There's

Vance Crowe [01:09:51] A special ire in

Heath Hunter [01:09:52] Our culture for the

Vance Crowe [01:09:54] Inheritors of wealth as opposed to the creators of the wealth.

Heath Hunter [01:09:57] For sure. No doubt about it. And I've worked with a ton of family businesses and most do not make it to the third generation. They just don't statistically do not make it. I I worked with a, a phenomenal family here in town and I worked with their second generation and they were of a situation where the first generation, their father built the business, they inherited it, but they took it to heights far beyond what, what their father had ever imagined. And they also had the foresight to put in a lot of structure to make sure that they made it to the third and fourth and fifth generations. And it was, it was, it was a great, it was like a masterclass in family business management. This second generation, they had 12 siblings who all had ownership in the business and salted the other people by the way. Just, just really good people. 48 third generation folks. And so you could look at their business and it almost resembled a closely held public company. But they had the foresight back in the mid nineties when they started to get scale to start putting structure around that so that they maintained, you know, their values, told them that family was most important. Having a family business was their second priority.

Heath Hunter [01:11:29] And then having a family run business was a third priority. So what that meant was if at any point the family being in and running the business was a threat to the family unit, they'd, they'd bring in outside management. It also meant based on their second priority that if just owning the business was a threat to the family unit, they'd sell the business. And they really lived it. It was, it was really something to beholden. The other thing that we see portrayed in, in media or like television is just ruthless people. That the reason that they made it to the top was because they were willing to, you know, but life is a, is a knife fight in the mud and that everybody's, you know, trying to stab everyone else. Yeah. Is that real? I don't think so. I think it, it happens, I think there are very notable instances of that being the case. And those get a lot of press and movies and stories are, are, are created around that. But I think most of the time, and this has certainly been my experience, you need people's help to rise. And if you've gotten to a point where you've got a really, really successful business or you've built an incredible amount of wealth, it's because people like you and people have helped you along the way.

Heath Hunter [01:13:01] And my hope would be that we as a society, like we, we, we pay that forward and we pay that back. But that's been more of the case. 'cause I, I've been exposed to a lot of wealthy people like real, you know, that have real significant wealth. And on the whole, they're pretty good people. And, and I can understand, you know, kind of the, the broader population, having a little bit of ire if, you know, you're having trouble making your car payment or affording housing, having a little bit of resentment for people that have a lot. But it, but it takes help and it takes having good relationships to get there and so on, on average, I think, you know, they're generally good people. Yeah. There's this fascinating YouTube video called Rules for Rulers and it's based off of a book called The Dictator's Handbook. Hmm. And it's talking about how does somebody get to be like the dictator in charge? Hmm. And our impression is because there have been some really terrible people, is that it is like all about force and dominating people. But the truth is, you only get to become king if the

Vance Crowe [01:14:11] Army wants you to be king. If the merchants want you to be king. If all of these groups of people want you to be in that role. And why do they want you to be in that role? Because they know if I support this guy, it cycles back and it's good for me. And to the way this relates I think to the CEO of a company is the same thing, right. People stick with a person that is finding a way to benefit everyone and wider ever widening circles

Heath Hunter [01:14:37] Of

Vance Crowe [01:14:37] People

Heath Hunter [01:14:38] Have

Vance Crowe [01:14:38] To be benefiting in order for the entire organization to be lifted up. But this is not, I think what is being portrayed in the media at all. And I think there is a very driven, it seems to me a motivated movement in the media to point the ire as much as they can at anyone that is wealthy with the assumption that they are not helping other people. They're selfish.

Heath Hunter [01:15:02] Yeah, that's probably right. I mean, it's all clickbait these days. It's entertainment more than it's news and media. And so if you can really get, get people's push, push people's rage button, you're gonna get more clicks, you're gonna get more likes, you're gonna get more eyeballs on your 24 hour news cycle television station. And, and so I think it's just an easy kinda lazy way to to, to drive attention to whatever you're saying is to get people angry.

Vance Crowe [01:15:33] It's also, I think Yeah. In, in in that way a way to band people together. Yeah.

Heath Hunter [01:15:37] Because

Vance Crowe [01:15:38] There are a lot more people that don't have than there are that do have for sure.

Heath Hunter [01:15:41] And

Vance Crowe [01:15:41] Chances are that people that do have, you're not gonna run into them. Right? Yeah. They're, they're, it's easy. It's kind of to create a, a boogeyman.

Heath Hunter [01:15:50] Yeah. And it, it's never been,

Vance Crowe [01:15:54] We've never

Heath Hunter [01:15:54] Been

Vance Crowe [01:15:55] Able to see

Heath Hunter [01:15:56] People's wealth and, and happy circumstances the way we can today with social media.

Vance Crowe [01:16:05] You

Heath Hunter [01:16:05] See the, you

Vance Crowe [01:16:06] See the

Heath Hunter [01:16:06] Upside of everybody's life for the most part, not so much the downside. You know, they show you their great vacations and their stunning houses and, and, and their straight A kids and not, you know, their drug addict nephew or you know, the struggles they're going with with their spouse. All you

Vance Crowe [01:16:33] See is the

Heath Hunter [01:16:34] Good. And so we're stuck in this cycle of, of comparing our entire lives to the best of everybody else's life. And

Vance Crowe [01:16:42] And wealthy

Heath Hunter [01:16:43] People, you know, obviously shine even brighter. And, and so it, it makes sense given what we're exposed to on a day-to-day basis.

Vance Crowe [01:16:50] Yeah. So in doing Legacy Interviews, I've interviewed a lot of people that either they created that wealth or they were raised in it. So I've, I've interviewed people, they were raised with house, you know, maids and butlers and drivers and, and when I first meet them, I have the same kind of like, ugh, what am I gonna have

Heath Hunter [01:17:09] In common with this person? Their life so easy, right? Yeah. Oh gosh. But when we get into that studio and we start talking about their life, there is yet to be a person and I have met some very wealthy people. I would not trade places with any of them. Yeah. Because one, I don't think you would ever trade places with anybody ever, because the only way you can handle the life that you have right now is 'cause you built up all the scar tissue to be able to handle it and doubt about it. But even more than that, like in order to get to wealth, things had to be sacrificed. And a lot of times it was dad was gone all the time. You, you maybe saw him, you know, I've heard the thing said multiple times. I watched my kids grow up from the tops of their heads meaning, you know, I was only kissing their head when I went to bed at night 'cause they were already asleep. You know, then you've got a spouse that's been caring for these kids all by themselves and all the craziness that you mentioned. And like I look at that and I'm like, there's no amount of money in the world that I would trade what I have for that. And like, they were just born into it. They didn't choose this, but there is definitely a push in culture right now to make them the bad guy. Yeah. I think about a number of things. You said a, a lot, one of one of them is struggle. We all struggle. I don't, I don't care, you know, if you're born into wealth or not. But, but I think in our society today, we are able to avoid pain a lot.

Heath Hunter [01:18:43] And, and in, I I'd be really interested in your experience with Legacy Interviews, but if you are brought up with a lot, if you are raised with lot, lots of means and, and access and, and everything else, and you don't have to necessarily work for it, it seems like those folks that don't have that origin story, that struggle story are more prone to things like depression and, and, and a, a sense of meaninglessness. And, and so I think about that a lot because I grew up, I grew up in a shoebox in Sikeston. I was raised by my, my mother who was a single parent and she was a school teacher. We didn't have much. And so I was forced to, if I wanted a new baseball glove, I had to go buy it. I had to go mow some lawns and buy, and my kids aren't gonna necessarily grow up in that same forced grit situation. And so how do I create that level of, of struggle for them so that they know what it is like to work for something, to know what it is like to, to, to go without. Because for me that that's, this created so much of my identity and, and my drive to achieve and, and build.

Vance Crowe [01:20:07] I I think about it a lot. I think about it a lot in, in, in regards to my kids. I think that this is the, this is the hidden reason why people want to be farmers or love being farmers is because the very act of having your work at your house and having tasks that can, that have to get done. And it's not easy to outsource you have for your children. Because in my, you know, suburban lifestyle that I have, there are tasks that I'm like, all right, either I could go do them, I could send my children out to go do those things. Or I could pay somebody. Well I already know my, the the amount of money that I can make working versus the amount of money I'll save by doing it myself. It's not a comparison. Right? Right. I'm gonna pay somebody else to do that. Right. But if I have my children do it now I've gotta go show them how to do it. I've gotta stay on top of them. I have to hear them, you know, complaining about it or whatever that is. And so it becomes a very easy like, ah, I'll just make it easy on myself. I'll just pay to have this done. Whereas when I was growing up, like there, there, we didn't have a weed eater, here's a pair of clippers, now you're gonna walk up and down the, the the fence and you're gonna clip that. Like yeah. But my wife would lose her mind if I was doing that, if I made my children do that all day. And I think herein lies the problem of modern man. How do you, if you are succeeding, put enough obstacles in your children's ways that are real obstacles that, that give them an origin story that makes the struggles they'll have to deal with later easier by, by comparison because they've already dealt with difficult things.

Vance Crowe [01:21:46] I don't think there's an easy answer for this. I agree with you. Chores are a big thing in our house. And you know, my kids, my three older kids, my one and a half year old hasn't, hasn't hit the chore age yet, but they, they know every day they have a set number of things they have to do. They gotta make their bed and their rooms have to be clean. They all clear their own plates and they help mom and dad out with certain things. And, and we, my wife and I did that because those were expectations that I had growing up. But also there's studies out there that show the number one determinant of, of success for, for individuals is did you have chores when you were growing up? Did you have expectations at home that you were required to help out? That's, that's a crazy statistic that that one variable can have such a dramatic effect on somebody's life. Yeah. And it makes, it drives home that as a parent taking the time to set up the situation where your kids have chores. 'cause it's so much easier to do it for 'em. You, it's so much easier. You made that's such a great point that you made. 'cause it would like, it would, it would, it would save

Heath Hunter [01:23:04] Me time and frustration if I just put all the dishes in the Dishwash dishwasher myself. Because there is a right way to do it, by the way.

Vance Crowe [01:23:12] There is,

Heath Hunter [01:23:13] I'm represent with you on this, but, you know, taking the time to make sure that my 6-year-old puts it in to the, you know, cleans it off into the trash can, puts it into the, and I might have to call her back because she actually threw the whole plate into the trash can. You know, it just

Vance Crowe [01:23:29] Takes more

Heath Hunter [01:23:29] Time and effort on my part. So, but hopefully by the time they're, you know, 10 or 11, it does save me some time. But early on that's a, that's definitely a time sink.

Vance Crowe [01:23:38] So speaking of time and work, you've been

Heath Hunter [01:23:42] Putting in

Vance Crowe [01:23:43] Pri time on Blend Labs. Yeah. How do you describe Blend Labs to people?

Heath Hunter [01:23:49] So Blend Labs, we characterize it as a specialized data service platform. And the origin story, I recruited a chief technology officer to my first family office back in 2019. And he was an old friend who was an electrical engineer by training and had spent over a decade in the public space working for a number of three letter agencies in Washington DC but was one of the most well-rounded technologists I've ever been around. And so I brought him onto the family office to help us drive technology into industrial companies with the theory that if we did that we could move those companies toward the technology frontier in their industry and

Vance Crowe [01:24:40] Win in

Heath Hunter [01:24:41] A big way. And he's done that with me now for seven years. And Andrew and I always fancied ourselves as a little bit on the entrepreneurial spectrum. And back in 2019 we started tinkering with a number of ideas. We had a telehealth idea that was a little before its time and kinda got crushed during COVID. But one of the ideas Andrew had was to create a really premium VPN service so that you could log into our service and pop out in a residential location in Seattle or Phoenix, Arizona or wherever it might be that you wanted to pop out because none of the current offerings had that capability. You could use A-V-P-N-I couldn't see anything that you were doing, but I knew you were using A VPN. This one was a super secret one that that was, that was premium. So we built this network and this infrastructure where we co-located servers with rural internet service providers where we had some relationships and we were allocated these pools of residential ips that we could use for our VPN service. And we ended up having a conversation with a friend who was running a company that did large scale data gathering on the web. And what they would do is like scrape information off of Walmart's website and Amazon's website and other websites to do like strategic pricing work for CPG companies.

Heath Hunter [01:26:14] And we were, we were telling him about our VPN company, our VPN project, and he was like,

Vance Crowe [01:26:19] Well, tell me a little

Heath Hunter [01:26:20] Bit,

Vance Crowe [01:26:21] Wait, what's your network

Heath Hunter [01:26:22] Look like? He said,

Vance Crowe [01:26:24] Can we,

Heath Hunter [01:26:25] Can I just use it to try and do some of this web scraping? And we said, sure. And off he went and he came back, he said, I need to use your service and this is how I'm gonna use it and let's set up an arrangement. And that, that became what is today, blend Labs. And so we, again, we have this network of servers all, all across the country, co-located with rural ISPs that allow companies to go in and gather data off of the internet. That that's one service. We also,

Vance Crowe [01:26:58] Meaning that, that, let me see if I understand it. So you have an a server in, let's say outside of Omaha, Nebraska, and now there's a bunch of IP addresses that are there and instead of this company hitting it from their office in Chicago,

Heath Hunter [01:27:14] Walmarts

Vance Crowe [01:27:14] And Targets and all of these places and gathering their information of which case, Walmart

Heath Hunter [01:27:19] And

Vance Crowe [01:27:19] Target might say, Hey, we don't want one one location's gathering too much information. We're not into this. But instead you spread it out among a lot of, of addresses. Exactly. Omaha and Albany, New York and Seattle, Washington. And it's just gathering little bits of information and then combining them all into one. Exactly.

Heath Hunter [01:27:38] Okay.

Vance Crowe [01:27:38] That's

Heath Hunter [01:27:38] Exactly what it does. So it will cycle you through thousands of residential IP addresses so that it looks like it's thousands of people going to Walmart's website and, and collecting that information instead of just one person or company. So that, that's one thing we do. We also provide compute, which is a big deal right now. So we've had clients that have engaged with us to to to provide them GPU in, in certain locations, whether that's to do their work, you know, running models or to store things depending on what they're into. Yeah.

Vance Crowe [01:28:17] So,

Heath Hunter [01:28:17] So that, that, that's essentially what, what Blend Labs does. And

Vance Crowe [01:28:20] And

Heath Hunter [01:28:22] I know you've had a lot of podcasts on ai, but you

Vance Crowe [01:28:26] Could, you could kind of think

Heath Hunter [01:28:27] Of what we do as the picks and shovels for the AI industry because all of these large language models have had to mine a substantial amount of data out on the web to create their models. And we do have some, some clients in that space too.

Vance Crowe [01:28:45] It's interesting to think about how these, everybody's using AI right now, but it's going to expand and go into all kinds of different information scraping. What, what are, what are the most exciting things you see out ahead for Blend Labs if you've created this diversified server system?

Heath Hunter [01:29:05] Yeah,

Vance Crowe [01:29:05] It, it,

Heath Hunter [01:29:05] It, what I get excited about is giving you the ability as a small company to go out and take advantage of the immense amount of information that is out there. You know, historically you've only had the Googles of the world that can go

Vance Crowe [01:29:23] And do

Heath Hunter [01:29:23] That and take advantage of that information. And now if you partner with a company like us, you can do it too.

Vance Crowe [01:29:31] So the other thing that you're doing is you've been doing Interest-Based Communication stuff, right? Yes. Like you're the first person ever that I've had work with me and come on and, and teach some sessions with that. How, how,

Heath Hunter [01:29:45] Talk about

Vance Crowe [01:29:45] IBC what

Heath Hunter [01:29:46] Yeah, that, that, that's been a lot of fun. If, if folks go to your website, they can see me giving a little bit of a testimonial because I believe so deeply in it. It was, you know, I think back to when we first met, I wanted somebody to come into our firm and help with storytelling. 'cause we, we've talked a lot about private equity today and it was really critical at our firm at Broadview to be able to differentiate against private equity. And it was, it was, it's always been important to me when I, when I've been in the family office space and, and we had a great story and we had a lot of talented individuals on the team, but they weren't great at telling

Vance Crowe [01:30:31] The story.

Heath Hunter [01:30:33] And so I brought you in, we met, kind of hit it off outta the gate and you agreed to, to help us with storytelling, but you also delivered the other sections of IBC, which were Interest-Based Communication, or I'm sorry, interest based negotiation. Storytelling questions and conversations, conflict and alignment and pre presentations. And it was a, it was a game changer for my team. It changed how we interacted with each other. It changed how we interacted with potential acquisition targets. And we got a, we got a lot of great stories about how it changed how people interacted at home. And, and so in essence it really, it kind of changed our lives and I believed so deeply in it when I left Broadview, you and I got together and kind of putting our heads together about like, hey, how could we potentially do this together? How could we bring it to more people? 'cause I thought, man, if, if this, if this had this level and this type of impact for my team, we, we gotta bring

Vance Crowe [01:31:38] This to

Heath Hunter [01:31:38] A larger audience. 'cause frankly, there's nothing else out there like it that I've seen. And, and early signs are, you know, everybody we've talked to and everybody certainly that we've delivered IBC to as just the reviews have been off the charts.

Vance Crowe [01:31:54] Yeah man, it was a dream come true. Meaning you, because when, when, I mean we became good friends, but then when you came and you're like, Hey man, I actually think there are a lot more people out there that wanna do this than what you're reaching right now. 'cause you know, like, you know this, like the only people I ever talk about it to is on the podcast and like, if, if you don't know it through the podcast or somebody else, you know, knows it. And it's been really exciting to, to see this and like scale is not something I know anything at all about. So if people have been feeling hard, bad for you that have been beating you up so much on, on like the consultants and stuff, like, I'm using your, your skillset you like, it's definitely a knowledge in a way of thinking about growth that I just, I just don't have, it's not in my orientation or my whatever. But you've brought a lot of like, and, and as we've met with more groups, you're like, you, I was like, hey, it's right. There are a lot of people that wanna do this. Yeah, it's been fun. I think, I think our backgrounds are really complimentary and, and make for a, a pretty interesting and powerful combination. And so I'm, I'm excited to keep it going. Well man, it has been a lot of fun to have you stop by here and to finally do a podcast. And so if people wanted to know more about Blend Labs or any of the work that you're doing, how would they go about doing that? Absolutely. Regarding Blend Labs, you can go to Blend labs.io, learn more about what we do. What's interesting about BL Blend Labs is I don't know that we have two customers that look alike, so it kind of spans industry.

Vance Crowe [01:33:33] But if anybody has any interest in, in gathering any data that's available out there on the web Blend Labs can help. And especially hard to get data and, and your audience, I know it's a lot of ag folks like we, we provide a lot of data feeds around commodities and, and external data like weather to hedge funds that, that use them, use it to do their work on the investing side, you can find me@riverrunholdings.com. It's, it's really just a landing page right now and you know, we're, we're actively building that out. All right man. Thanks for coming by. Thanks Vance. Appreciate it man. This is awesome. All right, that's gonna do it for this week's show. Thank you so much for tuning in. This has been a great time and as we go out, I wanna play a little bit of a promo on the Interest Space Communications class. If you've been interested in doing this, we do have a class with a few more seats open right at the end of August here in St. Louis, Missouri. So to learn more, go to Articulate Ventures slash IBC.

Ad segment / testimonials (multiple voices) [01:34:41] Good negotiation is one where both parties walk away slightly disappointed. That was probably my default world model BV before Vance. Well, Vance had a lot of these models that he created. I ingrained a lot of these models so deeply from working with Vance for a long time that I started to recommunicate them to my friends and my friends' eyes had the same sort of light up of understanding of like, this is a thing that could help me be more effective in life. Whenever Vance let me know that he was working on sort of putting this into more of a workshop form, I was like, yeah man, I want that for my team. Like now if my first two employees go through this so that we have this shared set of context and a shared set of language that's gonna create value for my team going forward. I wanted to get better at communication myself. I knew I had good ideas in my head that I wanted to be able to communicate to potential investors and I was not super confident in being able to do that before. I thought that negotiation was basically for people in a boardroom, like CEOs, words like shareholder are involved. So I thought that you had to have a lot of resources at your disposal to even care about negotiations. Both people had to lose or both people weren't happy in the end. I found that what you both want is achievable by understanding the needs of the other person more. A negotiation is really a way to solve a problem that you have. You can rearrange the world in such a way where all parties get something that they're happy with. So you don't need to possess great resources to be involved in a negotiation or to really benefit from knowing how to negotiate.

Ad segment / testimonials (multiple voices) [01:36:18] RJ and I initially were two different businesses. It became clear to us over the long term that we would be much more bullish on our shared future if we like found a way to like actually be one entity, one whole working together that required us to have what to many would be very hard conversations because we are both CEOs of our own independently funded businesses. But we were able to have conversations and get to the root of what our actual interests and what our actual skillsets were. Having both people understand this pattern of communication was useful to pull out those tools when we needed them the most in like difficult conversations. It's very helpful to have that quick language to do something more productive than continue to like misunderstand or whatever, whatever else you're doing. Building relationships isn't just you communicating to the other person. It's also figuring out how to let the other person communicate to you so that they trust you. Getting into a real conversation and, and diffusing tensions before you, you know, get to business. A lot of people have a default model where they're like, I wanna raise my own money. I wanna start my own business. I wanna do my own thing. We find that they have specific interests that could help us. We become allies instead of competitors. I guess the course gives you tools to know that you can say the right words to like extract those things out of the ether and put them in your life. Learning interest-based communications from Vance might actually be the single highest leverage skillset that I ever developed before starting this company. I'm by default an introvert. I think that I've developed the ability to interact with people in such a way that it's energizing and it's fun and I look forward to interacting with strangers on a regular basis.

Ad segment / testimonials (multiple voices) [01:37:55] You should just take it, do it already. Yeah. I feel like you should just do it like, no, I don't know. I feel like it's life content. It's like definitely fun life content. I am doing exactly what I want to be doing with my life. Interest based communications did that for me more than anything else that I've learned.