Episode 276

A Life Of Entrepreneurship: A Wealth Of Best Practices For Founders With Brad Pedersen

ELEV 274 | Entrepreneurship

 

The holidays are fast approaching, and bringing valuable presents for entrepreneurs in this episode is a true values-driven entrepreneur. Brad Pedersen, the author of Startup Santa: A Toymaker’s Tale of 10 Business Lessons Learned from Timeless Toys, joins host Robert Glazer on the Elevate Podcast to share lessons from a life of entrepreneurship and share a wealth of best practices and stories for any founder. He leads the conversation into his transition from healthcare to a toy-making business. Brad also talks about his book, the Startup Santa, to bring your business to reach new heights. Rediscover your inner child and reignite your imagination and curiosity with Brad Pedersen today.

Listen to the podcast here

 

A Life Of Entrepreneurship: A Wealth Of Best Practices For Founders With Brad Pedersen

Brad Pedersen, Serial Entrepreneur And Author Of Startup Santa, Joins Host Robert Glazer On The Elevate Podcast

Our quote is from Tony Hsieh, “Your personal core values define who you are.” My guest, Brad Pedersen, is a good friend and a true values-driven entrepreneur. He’s a founder and a serial entrepreneur who started his first venture during his teen years and eventually created a number of large-scale enterprises. While initially pursuing a career in healthcare, he was inspired to get into the toy business, where he invested over 25 years of his life. Brad’s latest major venture is Pela, a social enterprise committed to creating a waste-free future with his hit product, Lomi. Brad is also the author of a new book, Startup Santa, which is available to buy. Brad, welcome to the show.

It is so great to be here with you. As we were talking ahead of this, we’ve done quite a bit of life together. We’ve been through the mud, the bud, the blood, and the flood talking about our business adventures. I have been looking forward to this conversation, knowing that we’re going to get authentically into it. I’m excited to be here.

We have been through a few different chapters of our books of life, which intersect. Speaking of books of life, I always find it interesting, particularly with entrepreneurs, what the prologue looked like was little Brad hawking lemonade at school. Did those entrepreneurial genes show themselves very early?

Are entrepreneurs born or made? I actually think there’s a bit of both. At an early age, I definitely showed entrepreneurial tendencies. It wasn’t lemonade, but there were things like I would sneak into the golf courses at night with my snorkeling mask and die for golf balls. I take a net with me. It was amazing to get to the bottom of the pond. You see all these little lumps everywhere and you’re scooping them up, and then I’d put them in egg cartons and sell an egg carton of a dozen of them for $5.

It was things like that that always had side hustles. At sixteen, I told people I had the perfect business because we lived on an acreage near a forest that was in conical crown land, so anyone has access to it. I started a woodcutting business. The reason it was a perfect business is I used my dad’s truck, his chainsaw, his gas, his splitting maul, and he had this endless forest.

 

ELEV 274 | Entrepreneurship

 

There are trees for a free supply.

I put my price at $5 less than the competition. I hired friends from school because I got so busy and I think I paid them $5 to $6 an hour. I was in my mid-teens. At that time, it funded most of my endeavors in terms of outdoor pursuits. At a very early age, even though I was destined to be in healthcare, I was definitely showing entrepreneurial tendencies.

You didn’t learn the true lesson of margins early on when most of your costs were not real. Maybe that haunted you in the toy business. That, we’ll get into.

I think I pursued the SaaS model initially. It was a perfect margin business.

What got you into healthcare? That was your first foray into the business world, right?

It was what I was supposed to do. I grew up in the prairies of Canada. What you’re supposed to do in the prairies of Canada is you’re supposed to either be in agriculture or oil. That’s what people do there. That being said, my family were health practitioners. My father was a chiropractor, his father and mother were chiropractors, and my great-grandfather was actually the very first chiropractor in Denmark. Ever since I was a wee boy, all of my dad’s colleagues used to say, “You’re going to grow up and be a chiropractor like your daddy.” I nodded and accepted that that’s what Pedersens do. We grow up and we become chiropractors. This is the lineage.

I started down that path and I went to school and took my science diploma, which is the basically precursor to chiropractic college and I got derailed. It’s the story of my life, a series of happy accidents that come along and open new doors and new possibilities. For me, I met what would then become my wife. She was at school. She was taking her degree. I had finished mine. I was ready to go down to chiropractic school. She let me know that she wasn’t into doing a long-distance relationship, so I decided to hang out for a year. Somebody with entrepreneurial tendencies sitting around waiting for someone tends to get themself into either trouble or business, and I chose business.

A combination?

Exactly. That’s how I got my start in my first venture.

You built this toy company at one point. What is the short version of the toy story? There was also a lot of ups and downs in that journey.

The cliff-notes version of that story is very simple. I read an article in a magazine about a kid who had invented a flying toy. I was always very playful right from a young age. I was very adventurous and bit mischievous, but always in a good way. I never got myself into real trouble, but mischief was definitely a part of my DNA. I read the story. I called the kid. I bought some products from him. I started playing with them. I’m like, “This thing is so cool.” I got thinking, “Maybe I could sell these.”

That was the beginning of basically becoming a busker because I bought a bunch of products, and then I went to parks, I was throwing this thing around, and I was selling them, but I was as good as my last event and realized that that wasn’t very scalable. I then started setting up kiosks in malls. Kiosk in a mall, also not very scalable. I started getting into retail. Eventually, I built the largest toy distribution company in Canada. It was like a series of events and doors opening and some closing, but it put me on this path of becoming eventually the largest toy distributor in Canada. That got my taste buds whetted for the toy business.

It was awesome because I built this company and the one thing that I was willing to do is work hard. My dad modeled that for me as a young kid and I was the hardest working person I knew. Through the sheer force of will, I built this company to become, as I said, the largest toy distributor in Canada. We were getting accolades and recognized. There was something called the PROFIT100 in Canada. For five years in a row, we were listed in the Top 100 Fastest-Growing Companies. I was nominated for the Ernst & Young Entrepreneur of the Year. I won awards. I was in speaking circuits. I was feeling pretty good. I’m in my twenties.

It went right to your head.

In 2006, I hit a wall. I came to learn that a little bit of ego can lead to a lot of overhead. I found out the hard way that you can actually grow too fast. I don’t think that ever comprehended in my mind that that was possible. The whole idea of building businesses is to grow them. I discovered that if you build your business without the right supporting balance sheet, you can break covenants with your bank. When you break covenants with your bank, they put you in special loans. When you get in special loans, it’s like a timeout for business owners.

You can break covenants with your bank if you build your business without the right supporting balance sheet. Click to Tweet

That’s the equivalent for people who don’t know what it is.

It’s a timeout and it will strangle you and let you breathe very little while you’re in your timeout because you’re only getting a drip of supply of cash while you’re in that timeout. It’s a slow bleed. We wrestled with it for two years, trying to save it. Instead of stopping to see if maybe the business model was broken and maybe the reason we got there was that the margin stack wasn’t properly set up, I said, “I can fix this by growing faster.”

I went out and found some investors who were willing to put more money into the company, but their condition on putting more money in the company was if only they would be able to do a restructuring. Restructuring is a fancy word for bankruptcy, for those of you who don’t know that that’s what that means. It basically allows you to reassess higher your cap table and your balance sheet is set up.

They brought in new capital, and I wrestled to try and fix the business for two years, but I should have taken the time to realize that the business model was broken. The margins were too anemic. I didn’t have the perfect margin business I had when I had the woodcutting business. Two years later, we actually put a bullet in it and it was the final bankruptcy. That was the end of the first chapter of my journey in the toy business of being a toy distributor in Canada.

I know you’re always thoughtful and reflective, so you thought about some things about that business and the model that you wanted to make sure you didn’t repeat again. How did that lead to your second act in the toy business?

It was interesting because my group of investors, business partners, and the chairman of my company did not want to accept the fact that all this money they had put in to try and fix the company was now gone. When I went to them to say, “It’s broken, I can’t fix this.” They said, “Not acceptable. You need to come back with a solution.”

“We want to throw good money after bad.”

We learn from reflecting on what happens. I stepped away from the business and I took the time to reimagine what a future could look like. I don’t know about you, but I find it very hard to figure out what I want. It’s much easier and clearer for me to figure out what I don’t want. I started to list all the things I didn’t want to have anymore in the business of the future. In other words, 1) I didn’t want to be a distributor anymore. I wanted to have control over my products. 2) I didn’t want to be just focused on Canada. I wanted to have the ability to go beyond that. 3) I didn’t want to have a warehouse full of inventory, which ultimately became a MasterCard.

You learned what most entrepreneurs learn the hard way. Cash and profit are very different, but profit can be excellent as you run out of cash because you have all this inventory in the warehouse.

There’s this adage and it seems trite, but it’s so true. The top line is vanity. The bottom line is sanity. Cash flow is your reality. Ultimately, that last piece is what’s mission-critical for you to make sure you never run out of cash. It’s like running out of chips at the poker table. When you run out of cash, you’re out of the game. That became the impetus for starting to build an entirely new business model, which at the time was super painful and super challenging because my identity was around having built that company. It was a part of who I was. I birthed it into the marketplace.

When it died, a piece of me died with it, but it was my in-commune blessing because it forced me to stop, reflect, and imagine a new future. The new business that I launched in 2009 turned out to be infinitely better, more sustainable, and more enjoyable than that initial company ever was. I never would’ve known it if I hadn’t had that sudden stop that was forced on me.

Sometimes failing, choosing it, choosing for you, or running into these things, we think it’s the worst thing in the world when probably dredging on the same path is much worse than someone throwing you onto another path.

As I reflect back on my life and as I was writing my book, I found it very cathartic. There’s something called narrative therapy. It was very therapeutic for me to go through, recite, review, revisit, and then get the learnings out of everything that happened there. I came to understand that there’s a purpose to our pain. It can be. It doesn’t have to be, but you can become a victim too. You can choose that as a path or you can choose to actually apply purpose to it. The difference is time and reflection. If you take the time to reflect on it and learn the lessons, you can then turn your struggles into strength.

If you take the time to reflect and learn the lessons, you can then turn your struggles into strength. Click to Tweet

You’ll make a whole set of new mistakes, but don’t make those mistakes again. I find in companies, it’s like, “Let’s make mistakes, but let’s not make the same ones. There’s no excuse for that. We’re going to make new ones naturally.”

I agree 100%.

Toy company 2.0, which was Tech 4 Kids, and then it had a complicated ending as well.

That’s where you and I got to know each other. Tech 4 Kids was the new venture. You already talked about the fundamentals that would be a toy maker. It was awesome. We launched that, actually. There’s a story about how that almost never happened. We were literally two weeks from the time we funded it to when we launched and the Great Recession. If we’d been two weeks later, it never would’ve happened. Needless to say, it was also terrociting, terrifying and exciting to be building through a period when the entire world was basically putting the speed brakes on. Now, I look back at that. That was our unfair advantage because I had taken out a million-dollar loan from the same group of investors at 24% interest, which is very sobering.

You could do better than that from a loan shark, I think. Maybe not now, but a couple of years ago.

Repay in one year. It was personally guaranteed. I was very motivated to get things moving. Just because the world had paused, we were the only ones working. We found opportunities through the sheer force of will and, of course, having a creative team. That business scaled to be something infinitely bigger. You teased out that it had an interesting ending. I’ve had this group of investors with me since 2006. What most people don’t realize is that when you bring on money, you’ve agreed to sell your company.

They need to get their money back somehow unless you have the ability to pay massive dividends.

There’s some agreement in the future that you’re going to have an event. These guys are starting to say, “We were there in 2006. It’s 2016. We need to see some things happen here.” It was a good news story. We had turned this thing around. Interestingly, we were 1 of 10 companies in the portfolio. We’re the only one left standing. All the other companies were gone. We were the one unicorn, not by the billion-dollar valuation standard, but the one thing that worked out.

We started the process of trying to see if we could find a partner. Ultimately, that led to merging our company with another company in the States. The company was similar in size. The co-founder of that company was ten years my senior. He had a spectacular exit back in the early 2000s. He’s beloved in the toy business. He was excited about the opportunity that we would bring our two companies together. It was going to be a roll-up mergers and acquisition opportunity where we were going to look for other toy cos, buy them, and do something that would eventually allow us to go public.

On paper, it looked awesome. We would take efficiencies of operations, we’d combine our skills in terms of, we were good in certain categories of products. They were good in other categories and they were going to complement each other. We were going to scale something big. Unfortunately, our cultures didn’t blend. We merged the companies together despite the fact that I knew that the cultures were not going to work. Primarily because my motivation was financial, I was looking for an outcome for the investors, but also after being through some scarcity things.

Couple of bankruptcies.

It’s not an awesome day when they come to collect on your house. That’s got some brain damage for your wife when that happens. I was looking for an opportunity to get some abundance in our life. I chose to ignore the cultural differences. Ninety days from the time we signed the documents to merge the companies, which, by the way, led to a financial outcome that was great for everyone, I was fired. I was fired from a company that I had co-founded. Suddenly, again, I’m on the outside looking in and I’m bewildered. I’m like, “What just happened to me?” It was a pretty tumultuous point in my life. You remember those days because we were actually informed together. After almost 30 years in the toy business, I was suddenly on the outside looking in and my life was about to change dramatically.

There are two things. You talked about this in the book and we’ll dive into that, but you could wallow in your sorrow or you could look at that as a period of reflection, what it’s giving you, and what doors it is opening as it closes similar to before, but there’s a story in that that I’ll always remember. I always say entrepreneurship is sexy in the rear-view mirror. People see, particularly when someone has a favorable outcome, “They’re lucky.” They don’t see everything that came before it, all the near disasters and failures. A lot of people never get to a positive outcome moment.

 

ELEV 274 | Entrepreneurship

 

As you said, it was a pretty good moment and I actually remember it’s one of those flashbulb moments for me, where our whole group or our whole forum was getting together with our spouses. I think you ended up closing that day. You and Kelly came down and everyone was like, “Congratulations.” I know you guys were exhausted. Someone said to her, “How does it feel?” She said, “Truthfully, the last time I was in that lawyer’s office, we were declaring bankruptcy. It was like some major PTSD.”

It occurred to me again. There’s a price that the families pay and the spouses pay. I think people on the outside don’t have a sense of that. I think Silicon Valley equity has a little bit distorted the real risk-reward that a lot of people go through. We’re seeing it now. People lose their lives, their houses, and their businesses. That was more of the trade-off, but Silicon Valley equity is different. You get the upside, you’re giving it to you, and there’s no downside. That was a moment that’ll always stand out for me.

I think that entrepreneurism has been Disney-fied and celebrated. It still is something that requires a risk that the average person is usually not willing to make. That’s why to become an entrepreneur is to be the exception. Not that we’re better. It’s just you have a risk tolerance greater than the average person is willing to take because you’re trying to create something in an uncertain future. We call ourselves time travelers. We imagine our future, and then we come back, and we are working to actually come and create it. It doesn’t always work out.

No one tells the stories, though, of the people who bankrupted their families. Those are not told. What’s the principle?

Survivor bias.

Survivor bias, yes. Thank you.

Exactly. The victors get to write history. We look at these story books and we look at these Mark Zuckerbergs. This is the way it is for everybody, but for every one of him, the lane weeds are scattered with the corpses of so many casualties of business that didn’t work out.

I’ve shared this before with people, but people aren’t looking for empathy. I’ve seen a lot of people who have had a positive outcome and who have gone out of their way to be generous with people on their team or give them part of that upside for which they did not have risk. I still have not shared a story, and a lot of times, they’ll still be critic criticized for what they didn’t do or otherwise. I still haven’t heard a story where someone went under and the employees pulled out money to help that person. Not that they should, but I think people see one side of that equation and not the other, which when you go under, there’s no one to help you.

Starting a business takes an incredible amount of courage. I’ve actually spent time thinking about this because a cycle of flywheel is created. Aristotle identified the four original virtues as wisdom, prudence, temperance, and courage. If you unpack those four, he talks about courage being the cardinal virtue because none of those other three can happen if you don’t first step out into the unknown. As I think about it, I think about it that there’s this point of curiosity that we have in our lives. I think most founders and entrepreneurs are curious about something. They use their curiosity to drive some creativity to, “How can I solve that thing? How can I make that better? How can I add value?”

None of that matters until they have the courage to try. It comes down to an idea. Ideas are like noses. Everybody’s got one. Until you actually do something with it, it doesn’t matter. What you should expect on the other side of courage is you’re going to hit challenges. You’re going to hit resistance and it’s going to require additional courage and creativity to overcome that. If you’re willing to go through that cycle, it creates character. Character for you helps build clarity. Clarity gives you confidence, which once again ignites your curiosity. It creates this flywheel of continuing to try and find ways to build value in the marketplace if you choose to. If you hit resistance, surrender, victimize, “I quit,” that is always an option, but it’s not one if you want to live a life of abundance.

It’s looking forward, not backward. We’ll get into the book. You have this new book, Startup Santa, in which this whole story is very cleverly tied into different lessons of different toys. We’d be remiss in not catching up on, so from that being fired and walking out, I remember you coming to the group and talking about it and this is the end of the world to then some reflection. Fast forward a couple of years, you get together with another guy who was in our format and you guys are overseeing one of the fastest-growing businesses in North America, Pela. Tell us about what Pela and Lomi are doing. If you haven’t seen it on Instagram, it’s everywhere at this point.

Let’s step back and revisit this. I’m fired from the company.

That you started.

How do you get fired from something you co-founded? In a way, I felt somewhat okay because Steve Jobs got fired from his company, too. I’m not necessarily saying I’m Steve Jobs. Reflecting back, I’ve gone through a couple of bankruptcies, but in every case, if you take the time to reflect and choose again, it creates a new future.

If you take the time to reflect and choose again, it creates a new future. Click to Tweet

When I got fired, I had an opportunity to think about what I wanted in life and that came from what I didn’t want. I came up with three principles. 1) Life plan over business plan. In my next venture, I wanted to prioritize my life plan over my business plan. I paid all kinds of lip service and my life plan was important to me, my family, my faith, my fitness, and all that were critical elements of my life and values that were there. If you looked at my calendar, it lied. My calendar tells the truth in terms of where I was investing my time. I wasn’t investing my time in a way that was in congruence with that.

2) The no-asshole rule. I was no longer going to spend time working with people who were basically going to pull me down. None of what I didn’t want, less of what I tolerate, and only what I love. That was the filter by whatever opportunity I was going to look at. 3) I only want to focus on things that make an impact.

Things that ultimately would build value for people, the planet, and myself in congruence together. Having that filter allowed me to evaluate new opportunities. As you know, Matt and I were in forum with you. We’re in Boston coming to visit you, the forum meeting was. We were delayed for an Air Canada flight, sitting in the lounge in Boston.

I saw that story in the book and I was thinking that must have been a forum meeting.

Matt and I are sitting in the lounge. Matt starts talking about it. Matt, at that time, owned another business in Canada, but he’d invested in a startup called Pela. Pela made these compostable phone cases. He started talking about how he had invested into it and he was applying his marketing genius to it. The thing was taken off. He was frustrated because it kept breaking. They couldn’t scale it. They couldn’t keep up with the manufacturing. There were all kinds of challenges. Literally, every problem that he was describing from somebody who had experienced making consumer products, I’m like, “I know how to fix that. I can help you with that. This would be okay.” It planted the seed for the idea that potentially he and I could work together.

Fast forward to a few months later, I joined as the third co-founder of the company. We scaled Pela Case and we brought outside investments, so venture capital. We had Marcy Venture Partners join us. That’s Jay Brown and Jay-Z’s fund. It was cool to have notable people like them decide that they wanted to lean into our cause. That business could be a force of good that delivered a triple bottom line, profits which are ultimately what’s sustainable, but things that benefit people and the planet. We ran into this problem that we were selling all these compostable cases. We’re scaling the company to a healthy eight figures. The problem was, at the end of life, where do you put those compostable products? There’s no infrastructure.

People ended up sending their phone cases back to us. We said, “We have to solve this problem.” That’s what led us to ultimately create Lomi. Lomi is the first smart waste device that takes organic waste, which is in both food waste as well as compostable products, and turns it into a healthy regenerative soil supplement that grows plants. It is an incredible technology that not only solved the problem of cases, but eliminated all the greenhouse gas emissions that were as a result of food waste going to landfills. It also has this virtuous benefit that the output sequesters carbon. It’s literally the first appliance that generates carbon credits, which is super cool.

For everyone who’s like, “I don’t understand what it is.” It’s this device that looks like a breast pump, surprisingly. It sits on your counter. It has the look of like a Medela thing and you put your food scraps and increasingly more types of other things like Pela and stuff in it. You turn it on and in the morning, it’s dirt. It seems like magic and not true, but there are 10,000 videos you can watch all over the internet of user-generated content of everyone doing this. It is like this little magical dirt device. I think you were one of the most successful kick-starters ever. How many did you sell on that?

Twenty thousand units generating about 7 million US. It was the largest crowdfunding campaign of 2021 and it’s the largest clean tech crowdfunding campaign of all time. I should mention that, Bob, you are on our board of advisors and have been very instrumental in helping guide our strategy as it relates to developing, building out, and scaling the opportunity.

From that experience and watching the notes in the meeting, it is very clear that Brad has taken all of these learnings and things that he is not going to do again or make that mistake again and embed them in the principles. That’s the business story. Let’s talk a little bit about the book Startup Santa. Tell me where the title came from. It’s definitely attention-grabbing.

I wanted people to know that this is for people who start startups. Founders are our target here. Secondly, I’m the real Santa Claus. I don’t have as big a beard or belly, but I’m a toy maker from the north. Most people know that Canada is as close as you can get to the North Pole. I made toys for close to 30 years of my life. I’ve done everything from the distribution side, which you heard about already to ideation, development, manufacturing, and delivery.

I think at the end of the day, as I mentioned in the beginning, I’ve been a playful person my entire life. I subscribe to the idea that we don’t stop playing because we get old. We get old because we stop playing. We should stay youthful. Play is a part of our problem-solving and how we develop. Toys teach us things. There are lessons to be learned from toys.

The impetus for this book was to start off as a memoir. I wanted to go through a cathartic narrative therapy process of unpacking everything that happened because there are a lot of forced gump moments. I’ve been in New York on 9/11, to the volcano in Iceland when it went off and grounded air travel, and a bunch of stuff in between. It was a crazy life. Along the way, I said, “There’s more here that would be of value.” Every chapter identifies an iconic toy you would know, tell a bit of the story of where it came from, its inspiration, and what it teaches. I take stories from my entrepreneurial dream of being the real Santa Claus. Usually, it’s going to be wisdom from my wounds. These are stories of things I did wrong. I affectionately tell people.

Wisdom from wounds. I like that.

I have a PhD in DUMB from the School of Hard Knocks. There are two different ways you can learn in life. There’s knowledge learning from your mistakes. There’s wisdom, learning from the mistakes of others. I’ve garnered a lot of knowledge and you have the opportunity to have the wisdom of that experience so you can avoid the mistakes I’ve made.

There are two different ways you can learn in life. There's knowledge, learning from real mistakes, and wisdom, learning from the mistakes of others. Click to Tweet

Let’s give people a sample of one of these analogies. There’s a couple I liked. One is the Jenga blocks. We play a lot of Jenga. There’s the pieces that slide out easy and there’s the pieces that’ll knock down the whole tower. Talk about this one.

I love Jenga. It is one of my favorite games to play. What you’ll notice in Jenga is there are foundational blocks and flexible blocks. Just like that in life, there are values in our life that are foundational. Things that you should not touch. Things that are non-negotiable. On the other hand, there are things that are flexible. For me, I’ve identified that there are 8 in my life. 4 that are foundational and 4 that are flexible.

The foundational ones are my faith, family, fitness, and finances. I use finance loosely. It’s nice because it’s an F so the alliteration works, but it’s the economic engine. What is your passion, purpose and how can you generate results as a result of that? Those four things are what you can never not pay attention to. They need daily input and daily investment of your time, energy, and attention to keep them going.

There are the four flexible blocks, which for me are fun, friends, refining, which is continuing to get better and grow yourself, and then finally, freedom. Building more freedom for your life, imagining better things for your future, for those around you, and your community. Those are things that need attention, but they can be intermittent. You could take periods of time and not invest there.

Versus if your health breaks, the whole tower comes down.

A hundred percent. The other thing I would say is this. There are seasons to life. Not all time in life is equal. If you’re starting a startup and you’re saying to me, “I got this startup that requires an incredible amount of energy and I can’t give equal time to my faith, my family, my fitness. It’s the financial pressure on me at this point.”

I would say, “Understood. You’re right. To get one of Elon’s rockets out of the atmosphere, 90% of the fuel is burned up to get it there. It’s going to take extraordinary effort to get you to escape velocity.” It’s a matter of coming up with a negotiation and setting expectations ahead of time with the stakeholders and those others of life to say, “For this period of time or this season of life, I’m going to be overinvesting into the business, but it’s not forever.”

It’s integration, not balance. This notion of this perfect scale in harmony is not realistic. You have fitness days, you have work days, you have family days. They have to come together in a nice, complimentary way.

I’m a big believer in whole-life integration. We should be blurring the lines between work, play, family, and intermixing. I agree with that. That’s the idea behind Jenga.

We should blur the lines between work, play, and family and intermix them. Click to Tweet

Taking it up a level. Probably the biggest pain that most people have grown a business that will resonate with your analogy of the toy box. It’s which toys you decide to bring and which toys you decide to get rid of.

Backing up, if you have a business and you’re a leader in that business, in the beginning, you’re going to be doing everything. We’re generalists. That’s the way it’s going to work out, particularly if you’re a bootstrapper. Maybe if you’re venture-backed, it’s different, but most of us are bootstrappers and that’s where we started from. As you grow that opportunity, you scale it. You realize that you can’t do everything.

Dan Sullivan used to say, “Most people think they can double their business, but think ten times. If you think 10 times, you know that there isn’t 10 times the effort. You may be able to double your effort, but you can’t do ten times the effort. In that case, you need to go find people.” I did this all the wrong way in terms of finding people and why we hire them. Let me ask you a question. Tell me who you think are the 2 or 3 most fascinating people in the world, currently alive.

For better or for worse, Elon Musk is pretty fascinating. I’m so not good at pulling stuff out of thin air. Does that suffice or do you want one from a different discipline?

That’s fair. I’ll add to it. Richard Branson and Oprah Winfrey. We’ve got three. Describe some character attributes of those people. What is it about those people that you think is fascinating?

They’re usually charismatic. They’re free-thinkers. They’re new ideas. They’re pushing some envelope and pushing you to probably think or look at things in a different way.

They’re innovative. They’re charismatic. They have integrity. They have all kinds of virtues that you would say are reflective of their attitude. Yet if you think about how most people hire, they put out these job descriptions and say, “So-and-so individual who’s got to be a good multitasker that needs this much minimum education.”

That is an oxymoron in itself.

We’re hiring for aptitude or at least the way we’re putting out our job request is we’re focused on the aptitude piece when what we should be thinking about is the attitude, which then, in turn, informs the culture. As a CEO of a company, there are three things that you should be focused on. What is the vision and the future of the company? Living out the values.

By the way, the values are represented by the people you hire. You can say what they are, but it comes down to the minimum behavior you’re willing to tolerate within an organization. Finally, hiring and empowering the people to get it done. Those are the three things ultimately you want to get to. When you get past that startup phase to something that’s scaling and expanding, you need to be focused on those three things.

If you’re doing it focused on aptitude-type hires, which I did initially, you will hire a bunch of people who potentially could become talented terrorists. We were talking about Lencioni. He talks about the ideal team player who’s hungry, humble, and smart. Warren Buffett says, “Has intelligence, initiative, and integrity.” If you have only 2 of those 3 things, you’re ultimately going to end up becoming a disaster for the organization.

What I love about the toy box is I actually use Toy Story and talk about, “These guys have this mission. They’re going to rescue Buzz.” Each one of them has a superpower. Binoculars can see far. RC can go fast. Slinky can stretch. They use their superpower to achieve the vision and mission, but ultimately, they’re aligned in terms of the culture that they’ve created. I think it’s a perfect metaphor for how we should be thinking about the teams as we build them out. We should seek to build the perfect toy box with people who have skills that complement yours. Don’t compete, but compliment. Most importantly, they are aligned with the culture and values of the company. I’ve done wrong.

It’s not only finding them. I think leaders are responsible for that rugged curation. You share a story of a terrorist in the book, I’ll let people read about that. When you see you have a problem, I think a lot of times we’re like, “Maybe it’ll go away if I ignore it.” It then comes back worse. Most of my regrets in leadership are not acting on those things earlier. I got a window into your leadership early in that forum. We were talking about this story too when we had this incredible group of people and we had homework for each thing. We would do the homework and everybody would be prepared. A couple of times in a row, there was someone in the group who wasn’t prepared. He wasn’t even on the same page.

As we were all going around to do this exercise, they clearly hadn’t done it. They made up a bunch of stuff, and it didn’t even make any sense. This is a whole bunch of CEOs in the room. We’re all thinking it and you were like, “I have to stop us right here. It’s clear that you haven’t done the homework and haven’t been paying attention. We’re wasting everyone’s time here” in a super calm manner and that was the last time that person ever came to the meeting. Again, this was a group of a bunch of A-type people in this room, but only one was willing to say what everyone was thinking and knew, and the calmness. Curation and pruning the weeds so they don’t overgrow everything else is critical.

The adage is to hire slow and fire fast. It’s easier said than done.

There’s no advice that is easier said than done than that.

I’ve identified the fact that founders, in general, are optimists. They can see the potential. That’s why they’re entrepreneurs. When they interview people to bring in the company, they’re looking at these people through the lens of potential. Initially, most of my hires were because I went too quickly and I’m looking at the potential that that person didn’t necessarily see in themselves. Until they see it in themselves, it’ll never show up in your business as a result. We now say that more important than hiring the right person is ensuring that we keep the wrong people out. We’ve created this gauntlet to protect me from myself and Matt from himself so that people have to go through.

 

ELEV 274 | Entrepreneurship

 

We changed the narrative. Instead of the possibility of these people being great fits, it’s like, “Can you qualify?” You are considered not qualifying until you do. We literally look at it as a high-performance team. You need to earn your spot in the team. You have to prove that you can play full out on our team, which means you’re going to go through this gauntlet of 4, maybe even 5 interviews with a number of reference checks along the way. Even with that, we still get it wrong sometimes, but at least our ratio of getting it right is much more improved and we’ve been able to hire some real stars.

By the way, not hiring a star. The best quote I’ve ever heard is from someone. I don’t know her name, but it’s a historical, record-breaking Michigan softball coach. She said, “If I miss on a recruit, they beat me twice a season. If I put the wrong recruit in my team, they destroy my team every day.” People are so focused on the one that got away versus making sure that you get the people who are going to be on your own team.

I belong to a business forum and we have the former founder of Re/Max in that forum, Dave Liniger. He’s a fascinating guy who’s had this storied life. We were on one of our retreats. The question was asked to him, what was his greatest business regret? I’m expecting some juicy story about a deal that he missed out or misplayed. His answer, which shocked me, was, “I didn’t fire people fast enough.” I’m like, “What?” He unpacks it and says, “The first person you’re letting down is yourself because you’re tolerating behavior that’s beneath your minimum acceptable level and you can’t trust that person to do the work they need to do. You’ve given up mind and attention to having to babysit whether their work is going to qualify.”

“The second person is the team around them because the unsaid truth in the room is everyone sees them as an underperformer and you’ve now set a new level of what is acceptable in the organization. The third person you’re letting down is that person because they have a place where they can shine. They have gifts and talents that will actually serve them. It’s just not with you. The sooner you release them back to the marketplace, they can go find out where they can thrive.”

I think that’s hard a lot of times because we think we can help people and fix them, but I think Reed Hastings’ keeper test is actually the right question. If anybody in your organization is to come to you right now and say, “I’m leaving you, “how hard would you fight to keep them? If the answer is you wouldn’t, you should be taking that person and releasing them back.

Also, if you wouldn’t hire them again. If you were looking at your team and say, “That’s okay, but I wouldn’t hire them again.”

A hundred percent

In addition to all the business adversity, as you were building this last company in COVID, you talk about the story, this bookend of losing both your parents during COVID. There are so many things. I remember your dad-isms that he shared with you. One of the ones I love from the book that he told you a lot when you were a kid is, “You can either pay the pain of discipline or the pain of regret.” Tell us about that.

COVID, I talk about the tale of two cities as the best time and the worst of time. I appreciate the time in many ways because it forced us to focus on what’s important. I think a lot of people benefited from that. For me, it was pretty tragic losing my father to COVID and then my mother on the other side of it because she missed out in a heart surgery because of the strains on the healthcare system. My father was my hero. Losing him was the greatest loss that I have yet in my life. He, at a very early age, set a real inspiring direction in my life. He used to say that quote and it would bother me, right? In fact, I wrote it out and put it on a plaque next to my bed. I put in a picture frame.

What is the full sentence?

The quote was this, “In life, you’re going to pay 1 of 2 prices, the price of discipline or the price of regret. The price of discipline will cost you something and weigh ounces, but the price of regret weighs tons and will crush you.” It used to irk me and bother me that I never ever wanted to pay that price of regret that that was going to be too much. In fact, in The Top Five Regrets of the Dying.

It’s all things that people didn’t do.

It was things that they didn’t do. It was regrets. Not things that they did but things they didn’t do. My motto is that I want to die young, as late as possible, and to leave it all behind on the field of life. I don’t want anything left. I want to make sure that I wear out, not rust out. I’m lying on my deathbed. I’m not thinking about the things I didn’t do. Jim Rowan used to say, “In life, you may not be able to do all you find out, but make sure you find out all you can do.” I want to know that I found out everything that was possible within me.

Brad, last question for you. Multi-variant, so it could be singular, repeated, personal, or professional, but what’s a mistake you made that you’ve learned the most from?

It’s been so many mistakes. The biggest mistake I made was not understanding how to parent my kids in a way that was relatable. My kids are arrows in my quiver that are firing into a future I’ll never see. I’ve landed at this place where I now have learned that I need to live my life. LIVE stands for, “Love them unconditionally. Inspire them by how I live my life instead of pushing them. V is for vulnerability. Show up and understand that I’m human, I’m on this journey and haven’t figured it all out. This is my first time parenting. As a parent, I’m learning how to parent them while they’re learning how to become parents.

Finally, Experiences. The most important thing that’s ever going to happen in their life are the experiences that you co-create together. The things don’t matter. It’s the memories. It’s a return on experience that is going to matter the most. That’s twofold. Create magic experiences and don’t be a helicopter parent and rob them of the experience of growing and learning through struggling.

Particularly for high-achieving people, I think it puts a disproportionate burden on their kids.

Live your life for your kids. The good news is, I screwed it up for most of it. My kids are now in their twenties. I’ve got adult children. The best time to plant a tree was ten years ago. The next best time is now.

Scott Galilee has a line, I’m going to butcher it, but it’s something about like, “We’re too much hand sanitizer on our kids. They’re not actually developing any of their immunity.” We need to let them build their own immunity and stop dowsing them in hand sanitizer. Helicopter parenting is a decade old at this point. Now, it’s just snowplow. Now, we don’t hover. We just get the stuff out of the way.

If you’re thinking about leadership, I think more of us should think about parenting through the lens of leadership. I wrote an article that was a preface to a potential book or something. The analogy was there’s no 360-review when we’re parenting, but if some of us brought our parenting skills into the workplace, we would be in a performance review so fast. You need to go to special training because no one on your team likes you. It’s probably similar behaviors outside of the workplace.

That’s well said. I agree with the snowplowing. I love the hand sanitizer. Post-COVID, it’s very apropos.

Where can people learn about you, Pela, and the book? Where should they go?

There are a few ways. If you want to learn about Pela Case and Lomi, go to www.PelaCase.com or www.Lomi.com. If you want to learn about me, you can visit my website, which is BradPedersen.com. If you want to check out the book, StartupSantaBook.com. If you go there and sign up, there are some free videos, resources, and tools. It’s going to make it worth your while.

I’ve been listening to Brad’s wisdom for a year. I told him I read the book, it was like Pocket Brad. Everything is right there in a pocket. It’s very clever. It’s very well done. Anyone who enjoyed these toys will enjoy it. Brad, thanks for spending some time with us.

It’s been great to invest time with you. I’m excited to have you visit us so we can make some magic memories together.

It’s on my list. I promised you I’d visit and I will soon. To our audience, thanks for tuning into the show. If you enjoyed this episode, I’d appreciate it if you could leave us a review, as that’s what helps new users discover the show. Thanks again for your support. Until next time, keep elevating.

 

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