THE ED MYLETT SHOW - Why Chasing an Exit Could Be Killing Your Business w/ Dave Whorton 

Episode Date: April 29, 2025

What If You Built a Business That Could Outlive You? I sit down today with Dave Whorton, and let me tell you—this conversation is one of the most important ones you’ll hear if you’re serious about building something meaningful. We’re living in a time where entrepreneurship looks more like a sprint to an exit than a commitment to lasting impact. Dave’s new book, Another Way: Building Companies That Last and Last and Last, challenges that broken model and reminds us: success isn't just about cashing out—it's about building something worth keeping. We break down what it really takes to create an "evergreen" company—one that’s not built to flip, but built to matter. Dave shares the 7 P’s that every sustainable business needs: Purpose, Perseverance, People First, Profits, Privately Held, Pace Growth, and Pragmatic Innovation. He hits home the idea that growth doesn’t mean chaos—done right, it compounds over time and actually gets easier, more joyful, and more impactful. You’re not racing to the exit—you’re building a legacy. One of the biggest mind shifts we talk about: you don’t have to sell your business for it to be valuable. You don't need $100M in funding to be "legit." Some of the strongest companies—Amazon, Microsoft, Apple—started with almost no venture capital compared to today’s standards. Real strength comes from a strong foundation, scrappy innovation, and a relentless commitment to people and purpose over hype. I walk away from this conversation fired up because this is real entrepreneurship. It’s the quiet work of building families, communities, and lives that stand the test of time. It’s not just about business. It's about living a life you’re proud of—and leaving something behind that’s bigger than you. Key Takeaways: Why building for the long term beats building for a quick exit every time. The 7 P’s every lasting company needs—and how to use them. How purpose-driven leadership creates stronger, happier teams. Why debt and excessive venture capital can destroy your company’s soul. The hidden financial power of compounding growth over decades. How to attract and retain talent without giving up your equity. You don’t have to follow the crowd. You can build something timeless. Max out.   👉 SUBSCRIBE TO ED'S YOUTUBE CHANNEL NOW 👈   → → → CONNECT WITH ED MYLETT ON SOCIAL MEDIA: ← ← ←  ➡️ INSTAGRAM   ➡️FACEBOOK   ➡️ LINKEDIN   ➡️ X   ➡️ WEBSITE      Get my exclusive Monday Motivation training in GrowthDay, the world’s #1 app for advanced mindset and personal development. Visit https://growthday.com/ed. This show is sponsored by GrowthDay.    Learn more about your ad choices. Visit podcastchoices.com/adchoices

So hey guys, listen, we're all trying to get more productive and the question is, how do you find a way to get an edge? I'm a big believer that if you're getting mentoring or you're in an environment that causes growth, a growth based environment, that you're much more likely to grow and you're going to grow faster. And that's why I love Growth Day. Growth Day is an app that my friend Brendan Burchard has created that I'm a big fan of. Write this down, growthday.com forward slash ed. So if you want to be more productive, by the way the way he's asked me I post videos in there every single Monday that gets your day off to the right start he's got about five thousand ten thousand dollars worth of courses that are in there that come with the app also some of the top influencers in the world are all posting content and they're

on a regular basis like having the Avengers of personal development and business in one app and I'm honored that he asked me to be a part of it as well and contribute on a weekly basis, and I do. So go over there and get signed up. You're gonna get a free tuition free voucher to go to an event with Brendan and myself and a bunch of other influencers as well. So you get a free event out of it also.

So go to growthday.com forward slash Ed. That's growthday.com forward slash Ed. Hey, it's Ed Mylett. Let me share something powerful with you. You know, in uncertain times, the smartest people I know protect what they've built. That's why Advantage Gold is a part of our program now. And what I love about what they're doing is they're giving away a free gold and silver investor kit that walks you through exactly how to get started. Text

WIN to 85545 to get your free kit. That's WIN to 85545. Don't wait for the next crash. Be the one who's ready. Protect, prepare, and prosper. Message and data rates may apply. Performance varies. Always consult your financial and tax professional. John delivered. Sunshine? No. Some wine? Yes. Get almost almost anything delivered with Uber Eats. Order now. Alcohol in select markets. See app for details. This is The Admired Show. Welcome back to the show everybody. So my guest today is a really interesting guy and I'm glad

that he's here. I've told him that off camera because it's finally time somebody writes this book that he's written. I'm a big believer in the premise of the book. He's a very experienced tech investor, he's a founder, founded a bunch of different companies. One of them obviously is drugstore.com, good technology, kind of legendary in the Silicon Valley world, worked directly with John Doerr for a long time, but he's written a book that I think so many of you that run small businesses, medium-sized businesses and someday big ones need to consider this perspective because he is right and the world is going in a very strange direction. So the book is called Another Way Building Companies That Last and Last and Last and last.

And we're going to talk about sort of this flawed model the world has of raising money constantly and trying to exit with Dave Wharton. Dave, welcome to the show. It's good to have you. I think so. Happy to be here. One of my favorite books is Built to Last by Collins and Good to Great. I love his work. And when I saw your work, I thought, this is down the same vein, so to speak. And I just, this Instagram world today where everyone's starting a company to sell it and exit it is such a strange perverted reason to start and create a company, at least to me it is. And it's gotten, it's just, it's the norm

now. It's not why you should be starting a company, in my opinion, just to sell it and exit it. So let's just start with that premise, your experience and why you felt the need to write this book for maybe to shift culture a little bit in the entrepreneur space. Yeah, no, Eddie, hit it. It's, we have so narrowly defined business success today that it appears the only thing you can do is start a company, maybe raise a little bit of money. If you're fortunate, you'll get the venture capital path, raise a lot more money, but

the end game is to sell the company and for a very small percentage to go public. And that's it. That's the, that's the process. Right. And so it's so narrow and the model is such a tough model. The success rate, as you know, is very low if you go in that path. I mean, 50 to 60% of those companies outright fail. Total loss for the investors, for the founders, for the teams.

And at the end of the spectrum, 1% or 2% end up becoming the ones you might hear about in a magazine or be read about. But that's of the universal ones that are venture funded and that, you know, thousands of companies, there's very few. And some people will argue that only 10 or 12 year even matter. So what about all those other people who don't have access to Silicon Valley, don't have access to angel investors. It can kind of get them the right introductions. Could be somebody sitting in the inner city of Chicago, Baltimore, could be somebody who's actually a recent immigrant. They have to understand there's

other great ways to build businesses. And frankly, businesses will have stronger foundations and last longer than the ones today that you described that are being popping up on Instagram all the time. They are, by the way, like people know I'm an angel investor, come let you in on a secret. I lose money most of the time and I don't lose a little bit of it, I lose all of it, most of the time and usually one of the big red flags for me is when I feel like the person who's built or is building the company is very anxious to raise money or to exit because a lot of times raising money is just masking a problem. It can expand a problem and an awful lot of the other times the person doesn't really want to create

something of value. They just want to get out of it as soon as they can. I want a company that to quote Collins and yourself, built to last. So let's talk about the antithesis of raising the money and trying to get out. We'll go back and forth here today a little bit. we'll go back and forth here today a little bit. But what are some of the personality traits, characteristics of a leader and of a company that is going to last and last and last, to quote you? Yeah, that's a great question. And it really does start with that founder,

I think you mean when you say the leader. And what is their goal in life? What is their purpose? Is there a purpose to do something to change the world? To have a real impact, to kind of draw from Is their purpose to do something to change the world, to have a real impact, to kind of draw from Steve Jobs, to make a dent in the universe, correct? Or is it kind of a nervousness around generating some wealth

so that they can actually be at a certain social status? The ones that build the great companies are doing it for a deeper purpose. There's something that's moving them to want to either build a really unique organization to the benefit of the employees, or they see something in the world, in the marketplace, that they'd like to see done differently.

And they're like, I can do that. Over time, I can do that. And sometimes it's the combination of those two, but I very often hear from people who are running evergreen companies and founded them, that they did it to build a remarkable organization. I've heard from others saying, I've done it because I want to change the world. And often I just have the intersection of those two.

That's not what you hear from people who are generally raising money in Silicon Valley. What they say is, I'm gonna build something big, I'm gonna make you rich as an investor, I'm gonna get rich, and we're gonna do something really important. But the rich part is really, really important, that whole conversation. The way I think about it is if you're going to build something that's really meaningful to society, treat your employees well, really sure of your customers well, you're going to do really well by product of that. Not the goal.

It's the byproduct of delivering that value. And so what do these companies have? They're scrappy. They're incredibly resourceful. They're creative. These are some of the most creative companies in the world because they don't have the luxury of raising four or $5 million followed by another

20 million and doing what you said, which is just loading up a bunch of people, building some product. You know, if you're going to do this on your own fuel, you're going to have to get really smart about this. You know, a real fun story that brings us to life is the founder of Spikeball.

Yeah. Have you ever heard that story from Chris? How he's. I only threw you, but yes, please tell it. Yes. Chris is fantastic. So Chris had played spike ball as a kid, went to go buy it years later, found out that it was no

longer in production or distribution, bought the IP to it, but kept his job full time. And then what he started doing is he started getting it back into production, low volumes, selling it off hours. He was reaching out to different kind of social groups and others to say, look, you know, you should try this product again. And his wife basically said, you know,

you're working some pretty long hours. Is this all worth it? And he said, I think it's gonna be worth it. Then there was a moment in time where she came to him and said, Chris, you are making more money selling spike ball off hours at night on the weekends. I think this is what you should do. And that is a very successful company that Chris built.

And could he quit his job? No, because he wasn't raising outside capital. The normal model would have been if you're mentoring somebody in the venture capital path would be, okay, quit the job, raise a couple million dollars on some really high profile angels, see if you can get a little bit of momentum, some traction, then go raise a bunch more money.

Didn't do it that way. The gentleman owns the entire firm. He controls his destiny and he's having a great time. I just want everyone listening to this, you're considering starting a business or you own one, that you're a real one if you're doing it this way. I'm not suggesting that guys that take their business and they've got VC folks and that's a real business as well. That is. But so many of you feel like I'm not real because I haven't raised 20 million dollars and we're not shopping this thing to exit at 24 months from now,

eight years from now, I still see myself associated with the company that I'm building right now. That should be the norm, not the exception to the rule. And so the term evergreen is a term most people know. For me, like even when I create content, there's content that I create that'll do really well for a week or a book you write that does well for a week, but I wanted to write an evergreen book, meaning that eight, nine, ten years from now there were still sustainable value to the

content that I was creating that it had meaning and impact. You talk about the characteristics, the seven P's of these evergreen businesses. So right now, a lot of you ought to be pulling over to write, but if you can't, I want you to hear from this man, because these are the things that need to be involved in your business for it to be sustainable and last, which are, you can go through all seven if you like, or a few, whatever you choose. So first is purpose.

You have to have a deep, meaningful purpose, and North Star does more than just making money. And that's what's really going to get people excited about supporting you in the building of this business. Hopefully, they'll be around for generations. Second is perseverance because you're going to go through some tough periods. If you look back 100 years, look at our 100-year-old companies, what they've been through. The Great Depression, two world wars.

They went through the Vietnam War. They've gone through the most recent Great Recession. They've had to navigate all that. Well, that's gonna happen to everybody looking forward to. I can't predict when or what, but that's just the world we live in. So you have to have tremendous perseverance. Things like very low debt levels.

Like investment classes will teach you in business school. There's a way to optimize your capital structure. So much equity, so much debt. You get a tax benefit and all that. You know what evergreen guys say? No debt. Because debt is the way you lose your company. You lose your company.

Thank you, thank you, thank you. Sorry, I didn't mean to interrupt you. Everybody rewind 30, I'm not gonna interrupt you again. You don't have to add a bunch of debt and put a bunch of pressure on yourself to be a real entrepreneur. In fact, if that's on your balance sheet,

I don't believe you probably have an evergreen business more than likely. Didn't mean to interrupt you. Just the reason I get so excited. No one is saying what you're saying right now. It's actually counterculture, which is nuts, because you're right. Anyway, keep going, keep going.

So the third is people first. And this is just the basic principle that if you treat your people well, they'll take care of everything else. Your customers, your suppliers, their families, very importantly, and your communities. I mean, if you think about what's this all about. So very important idea of people first. Profit.

Well, in Silicon Valley, profit historically has been looked on very negatively because then you can put a multiple on profit and you're going to be worth a lot less money than a speckle evaluation based on revenue or just the idea. But profits are critical. I mean, if you think about it, it really tells you how much value you're delivering to your customers. How much will they pay you above the cost of delivery? And if they'll pay you a lot, that actually should be seen as a very positive thing, not a negative thing. And by the way, that's what gives you the resources to reinvest in the

business for growth, to pay bonuses to your employees, to give dividends to your owners who deserve those. To do an acquisition. I mean, to pay down debt if you have some, to do an, uh, you know, the it's incredibly important. It's a profit, um, private. And this is one that I think catches most people by surprise. I'm not talking private for four or five years under a private equity mantle or a venture capital

I'm talking about private forever You're never going public. You're never being sold because if we're being sold Ultimately, you won't have longevity by definition if you go public as we know today Shareholders of public companies hold that stock for very short periods of time. CEOs of public companies last in that role less than four years on average. It is a very transactional model today. So private is really important and taking advantage of the fact you can take planning horizons as far out as you want to go in a private company. Ten years, 20 years, 50 years.

I've heard people talk about 100 year planning horizons for other companies, particularly if you look at spaces like Ag. That's how they think about our forestry. Based growth, critically important. Not growing so slow that your team doesn't have opportunities for growth because there's no new jobs being created, but not so fast that you outstrip your cash, your culture, or your management's bandwidth. All three of those are very important. So you have this kind of bounded

growth range. It could be everything from 8% on probably the low end for something like a design firm to maybe 25% on the higher end. Now, if you're a really small company, of course, you could have higher growth rates than that, but I'm talking about larger companies that are more established. And this is the magic. This is what Warren Buffett talks about. This is what Einstein called the eighth great wonder of the world. Compounding growth over long periods of time leads to very big companies. So 15% growth and you know this because you've done these investments. If you're going at 15% and you're a tech startup, you're out of business.

Nobody's interested. You're dead. Call living dead. And if you're profitable, you're really dangerous startup, you're out of business. Nobody's interested. You're dead. Called living dead. And if you're profitable, you're really dangerous because you can't actually naturally die. So they have to find a way to kind of shut you down or sell you on the cheap. 15% growth over 30 years, at least something 67

times bigger. So if you start at 10 million, you're at $670 million. If you started that at a hundred million, you're at 6.7 billion. This is how you build enterprise rental car is pace growth over very long periods of time, you know, as an example, or a Meyer or an Edward Jones or, you know, all these wonderful evergreen companies.

And the last one's pragmatic innovation. And that's simply a recognition that if you're going to be around a hundred years from now, you're just going to have to, you're going to have to adapt. You're going to have to innovate. You're gonna have to innovate. It has to be literally wired in your DNA, everything from Kaizen, the principle of continuous improvement, because you're gonna have to do that to be competitive

over long periods of time, to invention, true invention, an R&D lab or partnering with your suppliers to come up with new ideas. But doing this in a very capital efficient way, because you don't have the luxury of going out and raising $200 million to do a moonshot. You're going to do this from your own capital and not from a lot of debt.

So this is that bullets, you talked about Jim Collins, bullets before cannonballs. Shoot that little bullet, figure out if you hit the target. If you do, then put more energy into it. Or Robert Passinger, Radio Flyer, will talk about planting seeds. Just you got to plant a lot of seeds. You got to get those seeds in front of the market and see which actually germinate.

Or Jim Goodnight at SAS Institute talks about digging a lot of holes. You just got to dig a lot of holes. Not expensive holes, little, inexpensive holes. But when one of those holes gives, just keep digging and make something of it. So that part's really important. And then these seven P's actually act as a system.

You can optimize any one of those, but you have to think of them as a system too, because there are trade-offs between seven P's actually act as a system. You can optimize any one of those, but you have to think of them as a system too, because there are trade-offs between those P's. And sometimes those trade-offs are real, and sometimes they're not real. They're false trade-offs. For example, people say being purpose-driven means that you're probably gonna be lower profits.

What? Uh-oh. Right. Or if you're people first, you going to have to have lower profitability. It's like, wow, I wonder if I have lower turnover and have lower recruiting costs because friends invite friends to apply for jobs. It's like, it doesn't even make sense, but in very short time horizons, you can see that. But over a long time horizons, those trade offs don't exist. It's all win-win.

This is so good. Guys, just so you know, as an entrepreneur of, you know, 30 years, having someone try to move culture back to some version of sanity to me is a really, really exciting proposition. So, hey guys, I want to jump in here for a second and talk about change and growth. And you know, by the way, it's no secret how people get ahead in life or how they grow. And also taking a look at the future. If you want to change your future, you got to change the things you're doing. If you continue to do the same things, you're probably going to produce the same results, but if you get into a new environment where you're

learning new things and you're around other people that are growth-oriented, you're much more likely to do that yourself and that's why I love Growth Day. Write this down for a second, growthday.com forward slash ed. My friend Brendal Bruchard has created the most incredible personal development and business app that I've ever seen in my life. Everything from goal setting software to personal accountability, journaling, horses, thousands of dollars worth of courses in there as well. I create content in there on Mondays where I contribute as do a whole

bunch of other influence, like the Avengers of influencers and business minds in there. It's the Netflix for high achievers or people that want to be high achievers. So go check it out. My friend Brennan's made it very affordable, very easy to get involved. Go to growthday.com forward slash Ed. That's growthday.com forward slash Ed. Hey, it's Ed Milet.

Let me share something powerful with you. You know, in uncertain times, the smartest people I know protect what they've built. That includes my father-in-law, by the way, who've been buying gold for a number of years up until his passing. And it paid off for him every single time that he did it. And I'm licensed, so I can't tell you where to put your money. And I would never do that. But I can tell you this, he bought it because gold is timeless.

And that's why most of the smart people I know have bought gold. It's real. It doesn't vanish when the market takes a hit. And right now many smart people I know are investing their money in gold and silver as part of their retirement plan and their future planning. That's why Advantage Gold is a part of our program now. And what I love about what they're doing is they're giving away a free gold and silver investor kit that walks you through exactly how to get started. Text WIN to 85545 to get your free kit.

That's WIN to 85545. Don't wait for the next crash. Be the one who's ready. Protect, prepare and prosper. Message and data rates may apply. Performance varies. Always consult your financial and tax professional. So when I coach people on their business, they always ask me, what do I need to have in place? I said, if you're gonna grow and scale anything, you better have great marketing and sales and you had better have somebody great in HR. The problem with HR is it doesn't return on the investment most of the time like sales and marketing does.

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for your business. I can't recommend Bamboo HR enough. Check it out for yourself with a free demo at bamboohr.com slash free demo. That's bamboohr.com slash free demo. bamboohr.com slash free demo. Let me ask you the other side of the coin. Are there any personality traits? We're going to stay in the seven P's. We're actually going to come back to pragmatic growth because that's where the rub happens in a minute. But before we do that, are there personality traits or characteristics of companies that you would avoid immediately?

So personality traits of a founder or, um, characteristics of a company with all of your experience that you go, that's a non-starter for me right there. That stuff. Yeah. Let's talk about the founder first. If you think about two buckets of kind of the introverts versus the extroverts, you experience in Silicon Valley is a lot of extroverts, you know, classics like Mark Benioff and Ray Lane, bigger than life personalities. They're moving mountains by themselves.

You don't even know if they have a team because they, they're moving mountains by themselves. You don't even know if they have a team because they're just doing such amazing things themselves. They need a lot of external validation. They need to go into events and be surrounded by people. They need a lot of reinforcement that they're doing the right thing. Evergreen leaders are more aligned to introverts.

In fact, I did an informal polling of the group a couple of years ago. It said, how many of you guys kind of self identify as introverts? And about 80% of the people in the room raised their hand. So we do have both extroverts and introverts, but it's a more bias towards introverts. And introverts are generally people

who have a very strong internal compass and they're not looking for external validation. They don't need to have people tell them they're doing things well. They know they're doing things well. So I see a general orientation towards introverts. I wouldn't cancel out extroverts because I'm very talented to ever be leaders with that too,

but you see that more commonly. So if you need a lot of positive feedback, you wanna be on the front page of Forbes Magazine, you want people talking about you on Wall Street and stuff like that, this is probably not the path for you. This is a path where you have to be good much more internal Satisfaction from having happy employees having customers send you notes

Just saying I've never had an experience like this before with your company I will always be your customer if that's where you get your validation and as far as businesses You know, there's kind of this concept of winner-take-all And I think it made a lot of sense like during the dot-com boom when I worked closely with John Doar, Kleiner, Perkins. I mean, this was a land grab. And so the idea being is there were obvious sectors, for example, where there were going to be e-commerce players. Let's get there first.

Let's put a stake in the ground, put a lot of money around it, hire a team, build the infrastructure and just be first and we'll win in being first. Well, that's valid in some ways. There's also many examples of where the second mover actually won. MySpace did not. Sure. We've seen this over and over again.

So that kind of undermines it a little bit, but if it's truly a winner take all market and it's going to be a market that is impenetrable after that happens, you might think of eBay would have been an early example of that. Like who's gonna create the exact same thing as eBay? Amazon tried, it sure didn't work. Others tried, it didn't work.

I mean, they grabbed it. So you might argue in those cases that it's really wise to raise a bunch of money until you pull back and you say, well, eBay actually didn't raise that much money. Guess what? Google didn't raise that much money. True, true. And Amazon didn't raise that much money. Guess what? Google didn't raise that much money. True.

And Amazon didn't raise that much equity capital. It raised a lot of debt out of Europe. But in fact, if you kind of sum up how much venture capital went into Apple, Google, Microsoft, and Amazon, I think it totals less than $25 million. Is that right? Really? These are a trillion dollar. I was going to say as a percentage of the market cap of these companies is non-existent.

Well, think about it. Microsoft, Bill Gates wanted Dave Marquardt to join the board of directors. Dave was a venture capitalist. He didn't need the money. He said, well, I'll sell you 10% for a million dollars. That's how Dave got in and built this incredible relationship. Apple, as you know, raised very little money and was in a very scrappy time.

You know, before I went public, I can't remember the total, but it wasn't, I'm not sure it was more than $10 million. Might have been less. Google raised some angel and then $25 million from Kleiner Perkins and Sequoia, and it was well on its way. It was already generating revenues at that point point selling search boxes to the enterprise.

And then a few years later when it figured out the AdSense model bank, you know, this thing took off. And then with Amazon, you know, there was a small angel around, I think it was about a million dollars. And then Kleiner put in, I think, eight and a half million dollars, something like that. I mean, have that slashed off. And that was enough to get into the public offering.

So some of our biggest successes in technology really didn't need that much capital. And then you contrast, this is gonna blow your mind, Ed. So in the first 40 years of the venture capital industry through 1999, $25 billion of capital was deployed. That includes Google, Amazon, Electronic Arts, Starbucks, FedEx, you name it, all those companies. Uber raised $25 billion. One company.

I mean, how out of whack are we? That's out of whack. In any one year, we were getting up to levels of $150, $175 billion of venture capital being deployed. A year. When it was 25 over 40 years, they built these incredible companies that have very strong foundations, they built from strong foundations. And that's one of my biggest concerns.

When you raise all this money and you're moving this fast, how strong is the true foundation of that company? Now, if you can sell it and get out, it doesn't matter, but if you want to build something lasting. Well, it matters to the acquiring company. And I always wondered this too. How can I tell when I'm looking at a company

how it's really doing with all of this artificial cash? It's almost like the economy in general. It's very difficult to know the underlying metrics of a business that's taken on a perverted amount of capital prematurely. It's just hard to evaluate the company. Hard to know how they're really doing. Well, it's hard to know what the culture's like.

It's hard to know how well they innovate. It's hard to know how close they are to their customers. It's hard to sense like, are they really a people first organization? Are they just flooding their teams with cash? And soon as the stock price goes down, they're out the door. Well, that's my question for you. So I coach, I have a entrepreneurial coaching group

I have with Andy for sale. It's called the Arate Syndicate. And so these are real entrepreneurs in our group. And one of the questions we get asked a lot is this notion of should I take on debt or should I give equity away? And so that's one question of which most of the time our answer is neither, but particularly no on the debt side. At least for me, my tolerance, what I don't like to see on a balance sheet, the pressure it puts on the company. But one real question I do get, I'm now an entrepreneur and I'm gonna go with your philosophy, which is the actual textbook philosophy, which is I'm not building this thing to sell it, at least not anytime soon, it's not why I'm doing it. How do I acquire and hold

on to talent? What are your recommendations for that? Because I may be in a marketplace competing with companies that are getting artificially propped up with cash. How do I get good people? Because in order to grow my company, if we're a people first company, it's also right people, right seats, right bus, all that stuff. Do you recommend equity, a founder giving away equity, but then if they're not ever really going to exit, is that very effective? What are your thoughts about acquiring time? I know it's a hard question, but that's why I have the show and we do interviews a little bit differently here. I try to push the theory to its extreme. It's a great question. And it's interesting

enough, when I was first on my learning journey around this, a guy named Pat O'Day, who was the CEO of Pete's Coffee, you're familiar with Pat. He posed this question to me as we're hiking on Mount Diablo in the East Bay. And he said, look, you know, I'm concerning, because I really like the idea conceptually of evergreen companies,

but I think you're gonna have a talent problem. Because you're not gonna be offering stock options, because stock options effectively are worthless if you're never gonna sell the company or take it public. So can you pay them enough cash, will they be able to buy a house? You know, those were the questions he had asked. And I thought it was a really good question. So I went and spoke to a compensation consultant that works with a lot of very

successful, a hundred year plus family businesses. And they said, you know, we kind of think about that a little bit differently. You want to be competitive on base salary, but you need to have some kind of multi-year paying out profit sharing plan and better if it's economic profit, not profits. The difference between economic profits and profits, economic profit, you take out the cost of capital. So you basically penalize the profitability of the firm by the cost of capital and say, everything above that, we will give you a very generous share of as a team, a very generous share.

And in the way you allocate it can be done in different ways, but that's how you kind of earn what goes into what's called the bonus bank. Then on top of that, you can do equity. I've seen some great firms carve out a little bit of the equity, even when, for example, the family owns the majority of it, they might say, look, I want my employees to own a piece of this thing. And so I'm going to do something probably on a fixed formula to avoid market variation by the public companies and say, look, you can buy in at this price.

And you sell back when you leave at the same ratio, whatever it may be, like six times cashflow, eight times cashflow, two times book value. It'll be something like that. And so you come in and you go out, it's on the same ratio and then you enjoy the appreciation of value between the time in which you joined and you left. So there are ways to kind of bring in equity type things for you, but stepping way back, I think what's really important is to make sure

that people are aligned with your purpose. So you need to be able to clearly articulate from the earliest days, what is the purpose? Why does this company need to exist? And then get behind that and then try to figure out what are those four or five core values in which you want to be measured against and you want your team measured against.

And as you're interviewing people early in the process, say, look, I want you to understand what I'm trying to build here. I'm not building something to flip. I'm not building something to generate wealth just for myself. I'm building something that's going to be lasting. I want you to spend your career with me. I want you to help me invent this company. You're going to grow. I'm going to grow. We're going to add more people to this. Yeah, we're going to be working pretty hard in

the beginning because we don't have a lot of resources, you know, and we're going to be trying to generate our own profits. And so we might, in a venture capital model, we would have hired five senior executives in six months. Well, we're gonna do that over three years. I gotta pick which person will bring the most value with the cash flow I have today to move the business forward to the next level, the next person.

So that if you hear this theme, creativity, creativity, thinking out of the box, approaching things, you have to do this in this model. Even business models to digress a moment, you gotta think differently. There are business models which are highly cash absorptive. There's business models in the exact same industries that are not.

Nvidia's an example of it. How many factories did Nvidia build? Zero. Zero. Zero. Now, great that TSMC did a forum, it's fantastic. That'll get partnered now, but so an Evergreen founder has to be much, much more creative about this

and scrapping it for all, but that's part of the joy. That's part of the journey. This is your hero's journey. Heroic is it being a good salesman and raising a bunch of money from angels and then being a really good salesman and raising a bunch more money from venture capitalists. And then having that thing fail later

because you never really had it right. Right. Yeah. That isn't the hero's journey. That's just a good salesman raising a bunch of capital, making a run at it, trying to get wealthy, the true heroes. You know, you know, these people add the other ones are like, you know what? I'm going to dedicate the rest of my life to this and it may go slow or it may go

fast and maybe small, mid or large, but this is what I'm going to do. And I hope it's large, you know, but if it's not, I'm going to have a one hell of a journey doing this and I'm going to do with people I really enjoy. Yeah. I have to tell you, and then the latter is what I want to talk about next. Those are the people, at least in my own way that I admire most. So once you've done pretty well, you're in these circles as well. You know, you have friends that are entrepreneurs that have had big exits and you have other ones

that have had like these long enduring family businesses that have value and strength and endurance and have made a difference a long time and they're proud of the brand, proud of what they've created. And just my default emotion is I have more admiration, if I were picking, for the person who's done the long haul and built something sustainable. It's almost like someone who had a really good family to me for three or four years and then, you know, that kind of broke apart as opposed to someone who's had a long-term beautiful family with children and grandchildren and a legacy. To me, it's what entrepreneurship is. People ask me all the time about owning a business. What are, it's all you need. Stop struggling to get your job post seen on other job sites. Indeed Sponsored Jobs posts help you stand out and hire fast.

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about green light not on camera with my friends who have children because you think about it at least when I was young nobody taught me about money most parents don't teach that stuff school doesn't teach it even though they should so let's be honest most of us learned about saving and budgeting way later than we should have way later in life and so that's where green light so awesome it takes technology and helps your kids and your family build financially responsible children. Green light's a debit card and money app made for families that lets kids learn how to save, invest their money and they can even get paid for

chores and whatnot and you can track their spending. Parents can send money to their kids and keep an eye on what they're spending. Meanwhile, kids and teens build money confidence. It's just super good. Millions of people are already using Greenlight. Start your risk-free trial at Greenlight today. Go to greenlight.com ed. That's greenlight.com ed to get started. Greenlight.com ed. You know, one little piece of this model that I'd like you to discuss, and it's not so much in my prep for the book, but I want to ask you about it, is that you do have to have separators if you're going to, you know, be in this model.

And for me, I think one of the things that's moving to the forefront in all businesses, even ones who raise money, is the experience that either the customer experience is interacting with you, but also your business partners and employees. In other words, the experience. There's so many things now that are becoming sort of neutral with AI and other information so accessible. One of the separators of coming to work for me, we're going to go long and slow in the right way, is the experience. Whether that be the recognition, maybe it's travel, maybe it's how we treat you, maybe it's the extension of including your family or your spouse is somehow involved in our

culture. But what about that notion of these evergreen companies having a, not just culture, but a culture of an experience of being, I think back to Google when they were innovating and having their fun rooms, they were the first that I remembered, wow, those guys wear t-shirts on Thursdays and they have a great time and they go play, you know, ping pong in between meetings. And it became an experience to work there.

And I think oftentimes that can be a separator if you're gonna build an evergreen company is just the process of working there or interacting as a client. 100%. 100%. One of the things that's interesting is you point to Google and I'd say people can follow a trapper like, I have to do all the things that Google did. The ping pong tables, the free food, the free dry clean, you don't.

Because then what people really want is meaningful work. They want to work with people they enjoy. They want to have a boss that respects them, that sees that they want to be able to contribute more, respects where they are, treats them fairly. That is critically important, more important than the ping pong cables for sure. Now, you can have that fun stuff too, that can be an add-on, but at the end of the day, it's the kind of the commitment the company is making to the individuals, particularly ones that are coming in at the beginning of their careers. The thing that blows me away about Evergreen companies is the commitment they make to training people and developing people.

It is at a completely different level than I've seen Silicon Valley, at least for Silicon County venture back growth companies. They don't have time for it. They're moving too fast. If you get the job, you know what you're doing, you're out, right? They're not doing development. We have a company called McCarthy. It's one of the very large general contractors based out of Dallas and St. Louis. The CEO spends 30% of his work year on training employees of the firm. The CEO does? Wow. So there's nothing more important than developing the next generation of leadership in this firm starting at first line management.

Because if you've ever read Tom Peters work, he says it's made or broken by the first line managers because they are the ones that actually manage all your employees. Because that's the vast majority of employees are working under the first line managers They are very attentive at McCarthy to that first line manager training So they can actually do a great job of bringing people in onboarding and developing them Not being possessive of them, you know seeing that there's better things for each of these employees with the organization So the commitment to training and what happened was at Stanford Business School and lazier talked about this He's an economist and he, the problem we've fallen into is that we no longer invest in training.

And the reason why we don't invest in training is because the relationship between employee and employer is broken. So the worst thing you can do as an employer is invest a lot in training something for two or three years, have them leave to get higher pay at a competitor. And that's what was happening. Evergreens asked for a different relationship.

They're like, we're going to invest in you like we used to invest in people, but we want you to be with us. We want you to commit your careers to us. And it's not signed in a legal document. It's not signed in blood, but it's just kind of, it's an understanding that we're going to invest in you at levels other people won't, but be with us. And we have a responsibility to make sure we create those opportunities for you. We have to pay you well,

but please don't go look for, you know, greener grass elsewhere, because it's pretty green here and it will help you understand that. So I think that's a pretty powerful thing is that people can actually make careers. So we ask the questions, people join membership in tugboat Institute.

You know, how's, how long has your longest tenure employee been with you? Well, they're 45 years, 50 years. What's your average tenure? 15 years. Their average tenure is longer than the life of most Silicon Valley startups. I mean, what?

I mean, isn't that incredible? And then figure out how in the knowledge and the relationships and externally and internally, it's powerful. And that stuff compounds too. People, relationships, trust, doing things together. What about, you know, MySpace, no pun intended, not MySpace, the company, but the space I'm in. MySpace. The idea of personal growth, you write about this in the book

of different topics, but personal growth and how that's sort of connected to longevity. Because what I have watched happen over time is that the results of a company begin to exceed the personal identity level of the founders or the frontline leaders. Meaning a company can actually begin to outgrow the growth capacity of the founder. And then it stunts the growth of the company. The innovation slows down that pragmatic innovation that you talked about earlier. And everything just sort of begins to become repetitive

and slower and it's really founded on the fact that that individual who's leading the company or individuals are not investing in themselves to grow themselves, their identity, their ideas, their ability to communicate, their ability to problem solve in a more modern time? Is there a correlation between these long-term evergreen companies and the growth strategy, the internal growth metrics of the person leading it or the group of people leading the company. Yeah, it's, it's a really good point. And it's a subtle point. This is where pace growth comes in. If you're growing a company at 15 to 20% a year,

let's say it's very headcount intense of which most companies are, you have a hundred employees going to 115, 115 to 131. That's kind of where you're growing year after year. Silicon Valley, it's a hundred to 200, 200 to 400, 400 to 800. That's kind of a winning strategy. That is an extremely demanding leadership talent to be able to manage the scale at that rate.

And that's why you often have to bring in experienced CEOs, experienced managers, and the founders kind of get pushed aside. In the context of an Evergreen company, where you're taking a multi-decade time frame, you actually give yourself breathing room to learn and adapt and go on learning journeys yourself. Now you will still reach a point, and this is very hard for Evergreen founders, where you're going to look around the table and realize the people that got you where you are, aren't going to get you further and you have to start upgrading your

talent and you have to bring in people that have actually seen more and have more experience. Some of the people are going to go there right with you, but if you as the founder cannot upgrade the team at critical junctures, then you will no longer be able to lead that firm effectively. And that's where mentors come in. That's where people can kind of say,

look, I see what you're doing. I think what you're starting to see is you're starting to lose some efficiency. And the reason why is because your team is now in a position where nobody's ever done this before and it's starting to really slow you down and you haven't done it before. So when we look at that head of product, I think that might be your first opportunity. Let's see if we can find a really experienced head of product from a company in a similar industry and bring them in. And the first time a founder does that brings one of those in and it's successful,

they get it forever. Like, oh my God, that was an unbelievable unlock. Now I get it. And they start thinking about who came in, they bring in in other areas of leadership. It doesn't mean you have to fire the person that was there before. You just say, look, you've got a new boss. They're gonna help develop you to the next level

as they help take us to the next level. But that is a very important part of the evolution of Nevergreen company. But it's happening at growth rates that are 15, 20, 25 percent. But again, gives you some breathing room. That's the rub, by the way, is the guy that founded it with his two buddies or they've been there since the beginning and they sacrifice through the, you know, intermittent paycheck stage or whatever. And now that guy, the CFO that started your company may not be the CFO or the woman who should be the CFO going forward. And it's this idea of disloyalty. I'm gonna have to let this person go.

But to your point, maybe not. Maybe they're rewarded for their loyalty because, and they fit your culture and your mission and your values. And so there's a spot for them. It's just not that spot anymore. And that's, it's one of the things that, you know, at least in my them, it's just not that spot anymore. And that's, it's, it's one, it's, it's one of the things that, you know, at least in my mind, it's just an honest conversation, which is, look, I think we're getting to the point now where we're holding back the ability of this

company to achieve its purpose because of where you are, I'm not asking you to leave, but where could we put you, which would get you back on a growth curve, doing something you might really enjoy. I've seen people pivot from product to HR and crush it in that. Or maybe they go from, you know, sales leadership into business development because now they're teamers. So there's, there's a level of respect in an evergreen company, which I really admire. I mean, I like to say that I feel there's a higher level of consciousness about their relationship with their human peers.

You know, it's just not manic. It's not about getting rich quick. It's about building something meaningful and doing it together. And that's incredibly rewarding. I mean, how cool would it be to sit on your front porch in a rocking chair with a bunch of the people that work with you and just reminisce about the incredible company you built that's still going strong. You guys are well beyond it that's still going strong.

You guys are well beyond it. It's going strong. You've transitioned leadership, you've transitioned ownership, you've transitioned control. I think we've left it in a really good place. I think the psychological rewards of that and the relationships that were formed in doing that exceeded anything else. I don't think you could earn enough money through a public company or a large sale

to have what that would feel like later in life. And again, you probably have this, I have friends, I have many friends I really admire, but are starting to really question how they spent their lives. These people were writing, as they say, writing checks their entire life. I wrote checks for a while, but not my entire life,

but they look back and they go, you know, it's interesting. There's been so much capital out there for the last two decades. If I hadn't written that check, somebody else would have written the check. So what did I really do? How did I contribute to the advancement of society, make a meaningful difference?

If I was just the guy that got there first and wrote the check faster, but if I hadn't existed, the sand would have just filled the hole immediately. It wouldn't, it didn't matter. And a friend shared that with me and it just, it was very profound. Yeah, I totally agree with you. I'm just thinking so many different thoughts right now. So, hey guys, you know what separates most businesses from others?

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to the world and is there gonna need to be, you know, guaranteed minimum income at some point and what's it gonna do to the job market. And part of me kind of connects your work to this in the sense that there may be fewer jobs, which may need, in my opinion, to cause people to go into business for themselves and create an expression of themselves as an entrepreneur,

maybe more people are going to move into being responsible for their own incomes. If I may be right about that long term, let's assume someone listening to this right now, maybe they aren't an entrepreneur yet, but they're thinking I have the itch that Michael Gerber called an aim at the entrepreneurial seizure, so to speak. Would there be any overall advice for you, you know, trend wise, something passion wise that you say, hey, if you're going to do this long term business thing and it's going to

endure, there's going to be all these ups and downs, way more downs than you think. Here'd be some of my advice of industries or places, or don't look at all if you don't have that entrepreneurial thing about you. What would you say to them? Well, to your last point, I think you have to really want it. You're gonna be an entrepreneur.

I mean, if you want to be a serious entrepreneur that builds something of significance, you gotta really want it. You can't have, there's no half measures, right? You're all in. There probably are industries you want to be careful of. I mean, if we want to pick on ones that are more obvious looking backwards, you probably did not want to be in a DVD video store when Netflix announced that they were going to start streaming. I mean, that was the beginning and the end, right? And I'm sure their equivalents of

that today, some people say that that'll apply to graphic designers and others like that. Yeah. One thing I do believe is I think if you're the best in any area, you'll have a meaningful life and compensation will be an issue. I don't care where it is anywhere. You know, you've probably heard of Giro. There's a very famous maybe called Giro dreams of sushi.

I have not, I have not heard of it. No.'s a very famous maybe called Giro dreams of sushi. I have not, I have not heard of it. No. Beautiful film. I think it's still available, but maybe I'll watch on Netflix. He is the best sushi man in the world in Japan. In fact, at the fish market in Tokyo, they

actually hold the best fish for him because he's proven he can take that fish and turn into something so magical that is beyond the taste experience of anybody. He's extremely happy. I think he's 90 something now. Been happy his entire life, compensation's never been an issue. He can charge whatever he wants for sushi. I think that exists everywhere and Joseph Campbell talked about this too in a lot of his writings which is if you follow your bliss, everything's gonna be

okay. So even in a world of AI, where all this stuff's gonna be destroyed, if your deep, deep passion is graphic design, go for it. You're gonna still find a way to, you know, do something incredible in that domain. If you're gonna be okay in some of those fields, ugh, I don't think you're gonna be okay, you know? And so I think one thing it does is,

I think it really, fortunate or unfortunate, I think it's gonna cause people to be okay. You know? And so I think one thing it does is that I think it really, uh, fortunate or unfortunate, I think it's going to cause people to be very thoughtful about what they really want to do. And I think to really excel in that, I think that, um, that's going to become very important. I also am not quite sure to your premise that there will be less jobs. You know, Paul Romer, the economist that talks

about this a lot, he's a Nobel prize winner about as ideas are introduced or is discontinuity for sure. But typically, things happen in an unexpected way. They end up absorbing all of the talent that's needed too. So this idea of AI assist, to me, feels more natural than AI replace. And I think, yes, you may have less radiologists, but those radiologists with AI assist

are gonna be really good. And so those that might've been okay or mediocre radiologists, go find something else to take advantage of AI assist on to go do great things with. Yeah, by the way, I know I don't know. And I've interviewed enough people on the show that are experts, I really don't know. It's certainly, I do feel like,

I feel like more and more people, entrepreneurship's just become very sexy through social media and Instagram and Shark Tank and, and I think a more real-world explanation of this is a grind. It's hard every single day. It never leaves your mind. You probably do take it home with you more than you realize and it's a, it's the ultimate for me. I'm not a singer, you know, I'm not a particularly good painter. Entrepreneurship for me has been the greatest form of expression of my lifetime. It's how I express myself and

for a lot of you it may be this part of you that's itching and yearning to express yourself a little bit more deeply and you don't have a desire to exit that form of expression. You'd like to build upon it and see what it can turn into and it can become. So I love the work you're doing. I want to ask you one last question. By the way, this is like flown by, I promised you a certain timeline and we've, we've blown through it because I've enjoyed it so much. But I think of friends of mine, like Sarah Blakely, who built Spanx with no debt, and she did end up eventually exiting that company. And, you know, I know one of the three guys that founded Casa Amigos Tequila, three years later,

they had this exit and it's a billion dollars. And then everyone goes, Oh, I know one of the three guys that founded Casamigos Tequila. Three years later, they had this exit and it's a billion dollars. And then everyone goes, oh, I need to start a tequila company or a vodka company. And you know, that's what everybody thinks. Oh, sure. Every alcohol company starts in three years. It helped having George Clooney as your spokesman, right? That didn't hurt. So I'm just wondering your advice to somebody listening, who's, you know,

they're sitting there going, I want to build an evergreen company. This was a really fruitful discussion. I'm going to certainly grab the book. There's no doubt about that. And we'll, we'll give them a way to get the book here at the very end as well. But something that they, they didn't cover in the interview that I wish they would have covered and I left the floor open to you, one other big takeaway from the book or thought process idea would be what, what would you impart onto somebody who should be building an Evergreen company

that lasts and lasts and lasts? So one idea that came to mind, because you made a reference to this before, building an Evergreen company does not mean going slow and doesn't be going slow forever. And there's a gentleman named Ho Nam who's a dear friend of mine at Altos Ventures. And he argues this very, very succinctly, which is if you go slow in the beginning and build a strong foundation, you know, your culture, your product development processes, your customer service processes, your sales processes, you will actually see accelerating growth over time.

And that'll be very profitable accelerating growth. So what I don't want people to leave with this impression that this leads to small companies over very long, very big companies, not in a decade, but over three decades. So if you're 30 years old and you've got this deep purpose and you're like, I'm going to do this. You're right, Ed.

It's going to be a tough first five or six years. That's just the nature of this. Then you're going to punch through. You're going to get the sustained profitability. You're going to start strengthening your team. You're going to start adding additional products to your partner portfolio, expand your geographies, and it's going to start growing faster. And so you may see an increasing growth rate

over a period of time. And next thing you know, you're doing a billion in revenues. You're doing two billion. Not a period of time. And next thing you know, you're doing a billion in revenues. You're doing two billion. That's right. Not a valuation of a billion, actual revenues of a billion. And so I don't want this to be people who think this is a small company phenomenon. You can build a small company too on the same values.

That's fine. But I don't want people to feel like they can't build something of significance. And you know what? I don't want them to think either, brother, on your behalf that you're not building a massive asset just because you don't intend to liquidate it. Right. So just remember this, you're building an asset, building a business as an asset, just because you don't plan on selling it or liquidating it anytime soon, if ever, does not mean it's

not a tremendous asset. And some, in fact, some of the wealthiest people that I know never sell their homes. They just get other ones and it's an asset. So just because you're not going to let it go, doesn't mean it's not an asset for your net worth that you can leave to your children or grandchildren or to something philanthropic in your life. And so just remember that just because there's no exit doesn't mean it's not an asset.

You don't have to sell something for it to have value. And that's what I don't want people to miss either. Go ahead. Like final thought. And that company, let's say you sold that company at year seven and you took out $20 million. That'd be an incredible outcome. Right. Well, you built that at 15% a year for another 20 years. You'll take out more than 20 million every single year.

So it's still, again, I don't do it for wealth generation, but don't think this is like some philanthropic thing. Now, what you're going to do with all that money is I hope you're going to give some to your community. I hope when somebody calls you up and says the hospital needs $10 million for that new wing. Otherwise we're not going to be able to provide this kind of care in this community, you know, like I'll write that check.

I'll write that check. Cause that this kind of care in this community. You know, like I'll write that check. I'll write that check. Cause that's what I do for this community. I mean, that is a wonderful thing to be able to do with that kind of success. I totally agree with you. What's really interesting about today's conversation is for so many people, this is actually, it's almost like a first introduction to actual entrepreneurship, not this other version that you've heard. And by the way, I have many friends, including myself, who have had liquidation events. They're great.

It's just not the norm, nor should it be. And what we're talking about here are companies that create value, that change culture, that change families, that change communities, that can change lives. And this is a much more real, sustainable, wonderful, medium medium big and huge sized companies at every single scale and scope so guys you heard from Dave Wharton today the book is and I love this book by the way another way building companies that last and last and last the books loaded so go get the book because we just scratched the surface today Dave this was so good it

flew by thank you so much this This was fun I really appreciate it. Enjoy Sun Valley brother. God bless you everyone. Max out. This is the Ed Mylan Show.