#366 Mr. Beast Leaked Memo

**David Senra** (0:00)
A few months ago, I got to spend seven hours over two days with John Mackey, the founder of Whole Foods. And it was during one of our conversations that John Mackey told me one of the craziest things that anyone has ever said about the podcast. By the time we had met, he'd already listened to over 100 episodes. And he said that if Founders had existed when he was younger, Whole Foods would still be an independent company. That since the podcast and all of History's Greatest Entrepreneurs constantly emphasize the importance of controlling expenses, he would have put more of a priority on it, especially during good times. It is natural for a company and for human nature to not watch their costs as closely because everything else is going so well. The importance of that idea was noticed over 150 years ago by Andrew Kearney. He would go around repeating this mantra. He would say, Profits and prices were cyclical, subject to any number of transient forces of the marketplace. Costs, however, could be strictly controlled, and any savings achieved in costs were permanent. This is something I was talking about with my friend Eric, who's the co-founder and CEO of Ramp. Ramp is now a partner of this podcast. I've gotten to know all the co-founders of Ramp and have spent a ton of time with them over the last year or two. They all listened to the podcast and they picked up on the fact that the main theme from the podcast is on the importance of watching your costs and controlling your spend, and how doing so gives you a massive competitive advantage. That is a main theme for Ramp. The reason Ramp exists is to give you everything you need to control your spend. Ramp gives you everything you need to control your costs. Ramp gives you easy to use corporate cards for your entire team, automated expense reporting and cost control. Those two words, cost control. There's a line in Andrew Carnegie's biography that says, cost control became nearly an obsession. Carnegie is not alone with that obsession. In fact, one other thing that John Mackey told me was, which was really surprising, he talked about the role that Walmart played in Whole Foods' success. That potential competitors to Whole Foods tried to compete first with Walmart, and they found that it was impossible to do so. Here's what Sam Walton said in his autobiography, Our money was made by controlling expenses. You can make a lot of different mistakes and still recover if you run an efficient operation, or you can be brilliant and still go out of business if you're too inefficient. Ramp helps you run an efficient organization. Ramp is everything you need to control spend and optimize your financial operations all on a single platform. Ramp's website is incredible. I hope you go check it out. Make history's greatest entrepreneurs proud by going to ramp.com to learn how they can help your business control costs. That is ramp.com.
I'm usually very reluctant to make an episode about a young founder that hopefully has decades left in their career. But I made an exception for this leaked memo, which is called How To Succeed in Mr. Beast Production. And I really there's two primary reasons I wanted to make this episode. One, I know Jimmy, he listens to this podcast. We spent a bunch of time talking about the ideas found on the podcast, found from the life and work of history's greatest entrepreneurs and all these biographies.
I also flew and visited his headquarters, Beast headquarters, with my friend Rick Gerson. So Rick has invested in Jimmy's company and Rick and I spent seven straight hours with Jimmy. We got to see his entire operation, we sat in on meetings with his top team, we talked to his CFO, and I would say we got a very intense download of how Jimmy thinks about YouTube and how he thinks about the business empire that he is building and the business empire that he wants to build.
The second reason I wanted to make this episode is because I devoured the memo. And from the very first page, it's obvious how a lot of the ideas contained in this memo will relate to the biographies that you and I study every week. And so I printed out the memo and I went through it just like I do all the biographies, really the way I read anything. So it starts off, he says, hi, I'm Jimmy. And as the team is growing larger, I no longer get to spend as much time with everyone as I used to. The first dozen employees had unfiltered and unlimited access to me to learn as much as they could about my vision and what I wanted. Sadly, you don't have that luxury. So I thought it would be useful to try to brain dump as much as I can into this silly little book to give new people and to help bring them up to speed on everything we've learned over the past decade with this channel. We've been through a lot and chances are most of the problems you face, we've dealt with. So I genuinely believe that if you intently read and understand the knowledge here, you'll be much better set up for success. So right from the very beginning, when he's like, hey, this stuff may be new to you, but we have a ton of experience and likely the problems that you're encountering are not novel, we can explain what you're likely to run into and how to solve them. So this was my exact experience when I talked to Sam Zell when I had lunch with him, when I had dinner with Charlie Munger. They had entire historical databases of companies and industries and all these examples from 60 to 70 years of experience of building companies, of studying companies. By the time I met them, there's probably not a single novel problem that they have not seen in the past. There was a great line from last week's episode on Nick Sleep's partnership letters that talks about this, you know, him doing all this thinking, spending all this time trying to think through problems. He arrives at a conclusion and realized, wait, I'm buff to figure this out 50 years ago. He says, as a young man, there's something slightly depressing about thinking things through for a while, arriving at a somewhat reason conclusion only to find that others have been there before you and years earlier. In some respects, we are 50 years behind Buffett. And I think these two lines that Jimmy wrote, we've been through a lot and chances are most of the problems you face we've dealt with. So I genuinely believe if you actually read and understand the knowledge here, you'll be much better set up for success. I think that's why you find in people that reach the top of the profession, they have this historical database that can draw from in their head. It's exactly why Sam Zell and Charlie Munger spent so much time reading and studying history. And so back to Jimmy says, this is not a rule book. I need to kick this thing off by saying the purpose of this is not to give you a bunch of rules to follow. What we do is complex and changes based on the situation. I need you to repeat this in your head three times. I will apply everything I read with a grain of salt. This is not an inclusive list of everything. I hope this inspires you with questions and to come to us to learn more. I could make a separate book for creative, a separate book for production, a separate book for editors, et cetera. But I think that's dumb. Everything we do here is interconnected. And the more you understand about what others are doing and trying to accomplish, the better set up for success you will be. I advise everyone to read this in its entirety. A good example of this is James Warren. He understands every single part of this company at a deep level and as a result can make decisions faster than anyone else. The stuff you will be reading about, he knows like the back of his hand. I've seen a team of five people work on a project for a week just to give up and James solve it in 30 minutes. That shows the power that comes when you understand everything in this book deeply. So I'll pause and interrupt myself there so that there's something that happens over and over again. My favorite line on this comes from Sam Zemurray, from the book The Fish That Ate the Whale. He says, if you know your business from A to Z, there's no problem you can't solve. In addition to that line from Sam Zemurray, I had a bunch of notes around just this one section on James Warren, this idea that he understands every single part of the company at a deep level, and as a result can make decisions faster than anyone else. You can have a team of five that can fail to solve a problem over a week and he solves it in 30 minutes. In Sam Zell's autobiography, he talks about one of the most important relationships that he ever made was with this extremely famous and wealthy family that's in Chicago. It's the Pritzker family. And Jay Pritzker, I think is close to 19 or 20 years older than Sam Zell, serves as almost like a friend and a mentor to him for a very long time and teaches them a lot. In fact, in the autobiography, Sam Zell writes that Jay Pritzker was the smartest financial guy he ever met. And so one of the things that Sam Zell said that he learned from Jay Pritzker that I've never forgotten, even though I read the book over two years ago, I think, is he says that Jay taught me to use simplicity as a strategy. He had an uncanny ability to grasp an extremely complex situation and immediately locate the weakness. He always said that if there were 12 steps in a deal, the whole thing depended on just one of them. The others would either work themselves out or were less important. And Sam said that Jay was able to identify the most important part extremely fast. It reminds me what Buffett said about Munger, that he says, Charlie's got the best 30 second mind in the world. If I call him and describe a problem to him, any kind of a situation, he gets to the essence of it immediately. I think that's exactly what Jimmy is describing the talent that James has and the importance of knowing as much as you can and as deep as you can about every single aspect of your business.