the man whose life forms the basis of this book was a master of investor psychology the match King had perpetrated the greatest financial fraud in history the world now saw an epic betrayal a villain not a hero a schemer not a planner a destroyer not a builder Evar became the Judas of the financial markets Ivar's company suffered a
similar fate to his body panicked selling reduced them to dust less than two weeks after the public learned of iar's death investigators from Price Waterhouse declared that his companies were insolvent the Swedish committee investigating his construction firm concluded that its 1930 balance sheet grossly misrepresented the true
financial position of the company investigators estimated the loss at 2 billion more than Sweden's national debt the accountant said Evar had treaded his public companies as personal assets he had wired millions of dollars among secret subsidiaries and arranged for dubious inter comp transactions the details were too complex to
unravel at first it was difficult for some people to accept Evar as a fraud he had helped Europe avert a financial crisis he was a friend and advisor to government leaders including the American president Herbert Hoover at the height of the Roaring 20s Evar Kroger was one of the richest men in the world
through an ingenious plan to sell stakes in foreign matchick monopolies to American investors he built up a tremendous Enterprise paying impressive dividends to his investors his company was one of the few to survive the crash of 1929 but shortly after his death in 1932 it became clear that the great Finance
year was not all that he had seemed driven by success to adopt ever more perilous practices Kroger had turned to Shell companies tax Havens off-balance sheet accounting fudged income statements and even forgery and the Kroger crash that followed bankrupted millions that was an exert from the book I'm going to talk to about today which
is the match King Evar Krueger the financial genius behind a century of Wall Street scandals and is written by Frank partnoy so there is a pretty amazing Story how I came to know about this book and read it this week and last week um I actually got to have this incredible almost 4our dinner with Daniel eek the founder of Spotify the
dinner was me Daniel and my friend Patrick from invest like the best I've been a fan of what Daniel's been able to build I think his life story I've heard him on a bunch of other podcasts his life story is absolutely incredible and one of the coolest things that happened to me over the last few years is
Daniel's constantly like tweeting about the fact that he likes this podcast he goes on other podcasts and mentions Founders podcasts and so during the dinner when Daniel ask like can I give you a recommendation for a book to cover on the podcast I was like of course and it is this book that contains one of the
most unique stories I cannot think I went back through list and I cannot think of another example of somebody that had a life like Evar Kroger had this book reads like a thriller it's almost like he's some kind of Evil Genius secret agent so before I jump into it and keep in mind this is not a typical biography we're going to heavily
focus on the last 10 years of his life he shoots himself or at least that's the rumor some people believe he was murdered uh he shoots himself at the age of 52 but before I jump into the book and try to start explaining how he was able to do what he did I need to differentiate because anytime that you
hear his name and a lot of people don't know who he is in his day he was one of the wealthiest and most famous businessman on the entire planet and anytime you read about him or you search about him he's always compared to the inventor of the Ponzi scheme or the person that Ponzi scheme is named after Charles Ponzi I need to read this one
paragraph from ev's Wikipedia page that explains why that comparison is not 100% ACC it says Kroger's Financial Empire has been described by one biographer as a Ponzi scheme however in a Ponzi scheme early investors are paid dividends from their own money or from that of subsequent investors although Kroger did
this to some extent he also controlled many legitimate and often very profitable businesses he owned Banks real estate a gold mine pulp and Industrial companies in addition to as many match companies many of these companies have survived to this day he owned are controlled over 400 companies and so his main company probably his
most profitable company was this Swedish match monopo company it's called Swedish match it was founded in 1915 but it existed up until a few years ago when Philip Morris the gigantic Tobacco Company launched a takeover bid for Swedish match and they actually took it private they took it they delisted it
from the Swedish stock market that just happened a few years ago and so when the book starts Evar is 42 years old and he's going to to America to try to pitch American investors on this European Monopoly something that'll become very apparent is he's got world class Charisma and selling skills I would say a main part of his early success was
based on this Charisma and selling ability that he had but one of the most surprising things about this guy is just how simply how methodical he is his Charisma was not natural he practiced lines he practiced what he was going to say for hours just like great actors do and when I say practice don't mean just
if he's going to do a presentation in front of a bunch of in front of an investment bank or something like that I mean if he's going to a party if he's going to a meeting he is practicing what he's going to say and the end result is a bunch of descriptions of Evar in the book such as he spoke in beautifully constructed paragraphs when Evar began
weaving a story a listener had no choice but to follow him to the end he dominated every conversation those around him wanted him to say more not less whatever the topic he always returned to business there was an air of greatness about him he could get people to do anything they fell for him they couldn't resist his peculiar charm and
magnetism and you're going to see world-class communication skills because we see how his his first pitch to investors is simple easy to understand and this is an important part it is completely legitimate what he's doing at this point and so as I was reading this part of the book it's talking about he's
on a boat he's sailing from Europe going to America and he's like well why is he going to America he says for one simple reason that's where the money was in 1922 America was a wash in cash now this is remarkable it's amazing to me how many times the same principles you and I talk about are applicable to multiple
different fields and this is a theme that you and I are going to talk about a lot today when you analyze the career of Evar Kroger and so Evar is on this boat he's like listen I have a product to sell I need to go to where the money is a few weeks ago I did this episode on this guy named Joseph duven
this is episode 339 Joseph deine was the art dealer to the robber barons and in that episode there's a line that says duine noticed that Europe had plenty of Art and America had plenty of money and his entire astonishing career was the product of that simple observation Evar did the exact same thing instead of
bringing European art to America he's bringing European match monopolies he's giving American investors a chance to invest in European match monopolies and that may sound funny today like when's the last last time you bought some matches but at this point in history matches were a basic and essential product that everyone used and so we
need to go back to this idea that his first pitch these are excellent communicators right it's simple easy to understand and legitimate and so it says he wasn't trying to sell anything complex at least not at first his pitch involved a basic and essential product that everyone used and could understand
the match at the time matches were a staple people use matches to like kerosene lamps gas heaters stoves and tobacco everyone carried matches everyone used them and everyone bought them so his pitch is simple American investors could earn profits from a monopoly abroad and what is fascinating is how he came to build this Swedish
match Monopoly he uses a lot of ideas in fact he studied in in detail Johny Rockefeller Andrew Carnegie and he essentially did what you and I do on this podcast like we study the principles behind right we're not trying to copy the what we're trying to copy the how he copied the how how did Rockefeller build Monopoly in oil how
did Carnegie build Monopoly in steel and he's like okay I can take those exact same principles and I'll apply it right I'm not building the American Oil Monopoly the American Steel Monopoly but I can take those principles export them and actually use them to build a Swedish match Monopoly and it works and so
before he starts building this monopo in the match industry he's actually has a Rel really successful career building this construction firm and construction partnership and as he makes more money he gets more interested in instead of Building Bridges and and buildings he gets more interested in constru constructing companies and so he starts
branching out into other Industries he's trying to build film companies and real estate and Telecommunications he's already a millionaire by this point in his life and then he sees that his family's match business in Sweden was struggling and he identifies be really smart this guy's a likely a legit genius
and so what he notices is there's a lot of characteristics in the Swedish match industry that's very similar similar to the Early American oil industry is essentially if you wanted to oil open an oil refinery in rockefeller's day there was almost no barrier to entry and so in rockefeller's opinion that industry is
only going to survive if it's under the complete control of one formidable individual Evar runs this exact same playbook in the match industry so it says he quietly purchased match factories throughout Sweden he was a pioneer of vertical integration he'd buy Timber tracks and chemical factories to secure the raw materials needed to make
matches this is exactly what rockerfeller did he merged the leading competitors to form Swedish match it was a single dominant business his plan was to limit competition and increase profits by securing a monopoly on Match sales throughout the world mimicking the 19th century oil sugar and steel trusts Swedish match Corporation was just one
part of his Empire he controlled 10 other businesses through his public holding company he controlled the holding company with a tight grip annual meetings were perun at this point that he's coming to America his two largest and most profitable businesses is Swedish match and then his construction firm kruer and
toll he's going to use the track record of these two successful companies in raising a ton of money he raises hundreds of millions of dollars from American investors and the main theme of his life as career is that too much Finance ruined a legit business his two companies are making a profit that wasn't enough for him he wanted to be
richer he wanted to operate on a bigger scale he wanted to have hundreds and hundreds of different companies and so what they would do is he would say hey we pay a 25% dividend and even though his financial statements contained almost no information it didn't matter when investors learned that Krueger and
toll had been paying 25% dividends each year they simply went mad and this is an important point he understood human psychology he was studying the history of Finance now I would say he studied the history of Finance it's not clear to me in fact I would argue I always say that learning is not memorizing information learning is changing
Behavior so he studied this but it never affected his behavior so I to me he never really learned it said that he had studied Financial history and was aware of the infamous periods of mania and later panic such as the south sea bubble of 1720 and the infamous rise and collapse of the Dutch tulip bubble in
1637 in those cases men became rich as they rode the wave of investors speculating he knew that timing was crucial that American optimism would not persist forever when investors were manic they would purchase just about anything but during the Panic that inevitably followed Mania the opposite was true no
one would buy and so even at this point in the book we know how his story ends he loses millions of dollars for a ton of people some are just normal investors then he also loses a ton of money for very wealthy people he kills himself and then he dies in disgrace and so I'm reading this I'm only a few pages into
the book and I immediately think of what Charlie Munger said that I feel is true over and over and over again and he said the problem isn't getting rich the problem is staying sane the problem isn't getting rich the problem is staying sane Evar was not able to stay sane and so when he gets to America Evar starts to
Target several different investment Banks and what he does is really smart he doesn't he knows hey JP Morgan they're not going to give me any money Goldman Sachs is not going to give me any money and so he targets this bank called Lee higginson it was one of the most prestigious and profitable banks in the world but it was a step behind JP
Morgan Goldman Sachs and Layman Brothers before they get involved with Evar it's a s decade old it's a 70-year-old company by the time they're done they are bankrupt and the partners are impoverished and this is the first example that I referenced earlier of this Evar just had this this fundamental understanding of human psychology this
genius level this Evil Genius level way to manipulate people and so there is a partner at Lee higginson this guy named Donald Durant who's going to be his main Banker throughout this entire thing and so as he's on his way to America he's start seeding this they're they're covering what he's doing in newspapers
he's having rumors spread within the finance industry about how profitable Krueger and tol is and how successful Swedish match is he is watering the ground before he meets him so Durant is devouring all the details of his of iar's trip to America all these people around him are telling him hey Krueger
and tol and Swedish match are the two hottest companies outside the United States the colleagues there is a branch of higginson and Company in London his colleagues in London reported that Evar already had made them a fortune on a highly unusual and complex swap transaction and the end of this sentence is really important that even the
sharpest investment bankers could not understand that is another main theme that he got away with that made this this scheme of his successfully he intentionally muddied the waters to make them appear deep turns out in the end he didn't even understand what he had built we're still half a decade at least from
there so in addition to this Evar pays a Swedish stock broker this guy named lagger to set an appointment with Durant to inquire about syndicating some Investments for some of his Swedish clients that was the stated goal this is what I meant this guy's like a like an international Man of Mystery nothing that like appears nothing is as it
appears with Evar Kroger so he sends lerr before he gets there he says hey go I'm going to pay he actually pays him to do this go and have this meeting with Durant under this false pretense and then happen to mention me and what I'm up to and the fascinating thing is this appeared as just you know an aside just something that that casually came up in
conversation Durant never imagined that Evar had arranged it all the entire time and so by this point news about Evar and how great his companies are and the fact that he's coming to New York he's got these great opportunities Durant's heard about it from three or four different sources so he contacts Evar and he's
like let's please have a meeting now this is what I meant that Evar understood human psychology if something is limited and hard to get that increases desire this works for both products like Ferrari and for people like celebrities at this point Evar made himself a business celebrity and so even though he wanted to meet Durant the
whole time when Durant asked to meet him Evo is like no I'll try to fit it in let's see what I can do you know I read three or four books on Enzo Ferrari there's a a great story that I've never forgotten where in the early days of Ferrari you know I think he's making probably 100 cars a year by this point
these all these rich Americans are coming to Italy they Enzo Ferrari gives them a tour of the entire Factory and he's like come you know please Enzo let me buy a car and he's like oh no of course like I'll see what I can do but you have to know like you know it's going to be at least a few months maybe
a year whatever the case is and the the American leaves and Enzo's uh employee walks up to him it's like I don't understand like why did you tell that them behind the factory we have a parking lot full of unsold Ferraris and Enzo said yeah but Ferrari has to be desired it can't be something that you can that's readily available he
understood that at the very beginning in the very early days of uh the history of Ferrari that fundamental understanding of human psychology that like genius level understanding of human psychology that Ferrari had you see that Evar Kroger had as well and so it says when Durant requests a meeting ER responded
that he was busy with other business but he would try to arrange a time he had learned that playing hard to get was a promising strategy with America's Elite he waited a few more days to ensure that the publicity about him has saturated Lee higginson which is the bank that Durant works for the bank that Evar is going to take
down and finally he arranged to have a meeting with Durant and there's a great line in the book a few Pages later this meeting ultimately would lead to the destruction of their firm and so this is the pitch to Durant this is a great description of Ivar's plan listen this plan would and did work it was only the
lying the fals falsifying of his financial statements and being overextended that caused his downfall that that's why I said it's like it's not a clear Ponzi scheme it was working he just took for some reason he risked what he had to pursue what he didn't have and didn't need there's a great line in one of Warren Buffett's
shareholder letter letters is about this and when I was reading this section and what Evar winds up doing to this you know taking a good plan and destroying it reminded me of something that Warren wrote about on the importance of using debt sparingly into making sure that you're putting survival ahead of every
single thing else I'm going to read you this excerpt it comes from the the book The essays of Warren Buffett if you have a subscription to Founders notes highly recommend after this going back I have 65 highlights and notes from this book spend the 10 minutes it takes to to reread those highlights it's excellent and on the Note the note I left myself
on this it says all that matters is to survive the rest is just words that is a quote from Charles theal and this is what Warren Buffett says in his shareholder letters we use debt sparingly we will reject interesting opportunities rather than over leverage our balance sheet as one of the Indianapolis 500 winners said to finish
first you must first finish the financial calculus that Charlie and I employ would never permit our trading a good night's sleep for a shot at a few extra percentage points of return I've never believed this is what Warren is about to tell us what Warren Buffett's about to tell us that he never believed
in is exactly what Evar krer the mistake that he made this is what I mean learning is not just memorizing Behavior learn excuse me learning is not just memorizing information learning is changing your behavior Evar knew this and he could not change his behavior this is like my worst nightmare I'm like
sweaty I have a sweat above my lip right now thinking about this I've never believed back to Warren Buffett I've never believed in risking what my family and friends have and need in order to pursue what they don't have and don't need and so with that in mind this is the plan this is the new idea the prospect of Americans investing in
foreign monopolies you can't monopolize in America this is after you know they they'd broken up trusts like Standard Oil and steel and everything else Anti-Trust laws prohibited a match Monopoly in United States but nothing prevented American investors from buying into monopolies abroad and the smart thing that Evar does again he's a
student of History he's like oh this idea worked I'll just I can adapt it to my circumstances my industry and my environment now so he knew that there was this extraordinary scheme that was orchestrated during the 17 century by this guy named Robert Harley he's the one that formed the south sea company
now the history behind this is f fascinating so he forms the south sea company to assume England's national debt the scheme had become known as a south sea bubble for the sharp increase in the price of south sea company shares but the original idea is the same idea that Evar is going to use in exchange
for the south sea company assuming the debt of England of the British government the British government gave the company a monopoly on trade to the South Seas these government granted monopolies are very very common in Europe that is another important idea nothing that Evar was doing was new he just applied it to a different industry
it was an audacious deal but a simple idea and the idea could be replicated it was not limited to England and the South Seas or to a Time 200 years earlier in theory if a government needed money and a company wanted a monopoly both sides could benefit from from a similar compact anytime anywhere with any
product iar's idea was to do just what Harley had done except with matches instead of south sea trade Evar would lend money to the government of Europe in exchange for a monopoly concession for the production and sale of matches within their territory there was one problem though Evar didn't have enough money to lend millions of dollars to
foreign governments Evar needed the backing of a major Bank you see where he's going here it's very easy to follow what he's trying to do I'm coming to you because I need the money I'm going to take the money raised from American investors I'm going to help out European governments that are in debt in return from lending the money
they have to give me a monop a monopoly in their country on Match production Ma and selling matches and so this is the summary it's very similar to what I just said a single thread runs throughout Americans would lend money through Evar to foreign governments and in return everyone would make unimaginable profits
from match monopolies he hooked Durant with his simple brilliant idea government loans in exchange for match monopolies that's seven words and you understand exactly what you're buying into government loans and exchange for match monopolies and so I want to give a little background because I want to go
back to this just insane idea to me the fact that you risk a successful legitimate business to speculate and he's not alone there's a million examples in the book there's a million examples through history and that's why it's I think so important to spend time talking about most of this book is just about you know the the last decade of
his life but there are a few examples from his early life that I think important to go over because he wasn't just a financier and an entrepreneur he was also a civil engineer and before he made a bunch of Innovations in finance which we'll get to he also made Innovations in building and so this is fascinating this is the self-confidence
of a 28-year-old Evar at the time he's working on the construction of the Archbold Stadium at Syracuse University and I thought this paragraph Was fascinating he regarded his bosses there as inferiors men who lack the intellect and ambition of the Stadium's namesake John deed Archbold the great capitalist
oil refiner and philanthropist Evar wrote to his parents I cannot believe that I am intended to spend my life making money for second rate people I shall bring American methods back home to Sweden I shall bring American methods back home wait and see I shall do great things I am bursting with ideas I'm only wondering where which to carry out first
so as he is working on the construction of the stadium he meets this other guy named Julius Khan Julius Khan is the inventor of this method for making iron called con iron con introduces Evar to another Swedish engineer named Paul tol and that is when Evar leaves America goes back and founds him and Paul Toll
together form this this company this very legitimate and winds up being very profitable construction company called krer and tol and what he does next is rather genius because it's not like construction humans have been building things forever it's like one of the most ancient Industries and yet the way that
Evar young Evar figures out to gain entry and a foothold in an existing industry is fascinating It Is by realigning incentives and in if there is a the main character of this story is Evar Kroger right the supporting character is the P the superpower of incentives I almost started the podcast with this long speech that Charlie
Monger gives on incentives which I'll read to in a little bit it is so obvious in the story The Power of incentives like the role that it plays and so not only do they make innovation in actually the the method of constructing buildings right but maybe even more important than that he's able to take customers from
other existing businesses by realigning their incentives and so it says he he came up with novel contract features this is a really surprising way to get customers really surprising way to increase your distribution so Evar is willing to change the standard terms of construction cont contracts to reallocate the risks to him if I want to
build a building and I hire a construction firm anybody that's built anything knows that you know these timetables most times they're late they're like almost like they just pick dates out of thin air and just completely make it up and so up until this point construction firms had not been willing to take on the risk
associated with delays because that's every day my the construction firm that has not built my build building is late that costs me money and yet I don't have any control over when they complete the the creation of the building and so the ability to speed the project lies with the construction company but the risk of
them failing to do so lies with the client Evar understood this misalignment of a sentence and all he did is just realigned it and he's like I'm going to take on that risk construction firms not clients were in the best position to reduce delays Evar realized that the best way to minimize construction delays
was to shift the risk of loss that arose from such delays to him meaning to his firm then Kroger and toll would have the incentive and the ability to speed up a project and here was the punchline clients would pay more if they knew the job would be done on time this is really really smart Kroger and toll became the
first firm in Europe to commit to finish projects by a fixed date step one I guarantee that your building is done by this date step two if I do not follow through on that commitment I have to pay pay you the client $1,200 for each day I'm late that is step two step three if I finish early you pay me for every day
that I beat that agreed upon fixed date again this guy is a genius at aligning incentives understanding human psychology and then making it very easy to understand what he's trying to explain to you you customer hate construction delays so therefore I will guarantee you that your building will be done by this date any day I go over I
pay you more money any day I save you you pay me more the end result he repeated this formula and earn completion bonuses for every single project Builders were happy to pay extra to know a highquality project would be finished ahead of schedule within a few years Krueger and tol was regarded as the best Building
Company in Sweden a few years later as one of the top firms in Europe that is really smart it also leads us to the next part of the story why is this important because he's going to use use his construction firm as collateral to enter and then consolidate the match industry and so now he goes to banks in Sweden so I to look at this successful
construction firm I'm going to I want to run this Playbook that they use in America on the Swedish match industry and I'm going to use this very successful company they have as collateral uh he saw that the match industry was in the same economic position oil sugar and steel had been a few decades earlier there's too many
owners of too many factories competition was driving prices down this is when he starts doing and he does it unborrowed money just like Rockefeller did at the beginning of his career you and I have gone over Rockefeller in detail I will do probably 15 more episodes on Rockefeller I read every single book on Rockefeller could
find why because Charlie Munger believes that Rockefeller built the greatest company of all time and you see in this book this is fascinating Evar is using Rockefeller s domination tactics I think the the the the last time I talked about this was on uh episode 324 where Rockefeller is writing all those letters
to his son if you really want to go about domination and like his conquering mindset so this is what he's doing the next over the next 8 years Evar parlayed a few family match factories into a conglomerate he modernized factories and expanded overseas sales uh he doubled production and pro and tripled profits
he reduced costs by purchasing the companies that made his machines as well as companies that supplied the chemicals that he needed to make the matches at the beginning everybody said iar's decision to enter the match business seemed foolish they said the exact same thing about Rockefeller Evar would continually to vertically integrate now
he's taking over all the factories cuz you need all like phosphor you need all these other chemicals to make matches so he would take over the suppliers and then he would choke off his competitors so they can no longer buy the supplies they need to manufacture the matches that they're trying to manufacture he
would destroy anyone who refused to sell with ruthless tactics he took over Supply contracts interfere with customers and temporarily lowered prices below cost Rockefeller did all of those as a result Swedish match was one of the few European businesses that remain profitable throughout the war that is
World War I that they are referencing and why are they profitable because they are a monopoly and so that is all important backstory because now we're back in America in 1922 he has control of these two companies the Swedish match Monopoly he has Krueger and toll he's got a bunch of these other companies too but those
are the two main ones and so now his Banker the one that he's going to destroy Durant makes this makes Durant's pitch to American investors very easy because investors like all people they like easy to understand stories and his whole point is like this guy's got a great track record he's got a thriving business that is paying very high
dividends and so that same person with a great track record thriving businesses high paying dividends now has a new idea that's easy to understand which is loans to governments for more match monopolies do you want to invest oh by the way one of his companies has been paying 25% dividends every year and so this is when
he starts what he's going to call International match Corporation this is the company that American investors are going to invest in and so he purposely sets up his board he wants people that are distracted and so he's selecting these directors that are supposed to quote unquote oversee International
matches business and one of them is the nephew of John D Rockefeller which Evar thought that was incredibly cool because he idolized Rockefeller since he was a young man but why is he this guy's name is Percy Rockefeller why is he picking Percy Rockefeller Evar saw that Rockefeller was currently serving on more than 60 other
boards he was an ideal director because he was well connected and far too busy to care about any details this guy's an evil genius Evar had idolized Rockefeller since he was a boy and now a member of that family would serve on his board there's a great line describing his corporate structure it was like a corporate family tree from hell and it
extended Into Obscurity and so this is his main mistake this is when he's constantly having to raise more money raise new funds to pay down past debts and past promises there's an excellent line and went and searched all my night notes and highlights because I remember he said something so I just put in the type the
word survive and it comes right up and it says victory in our industry is spelled survival that is Steve Jobs Donald Durant and his Partners had no idea this is the investment bankers that helped Evar raise money from American investors okay they had no idea how desperately Evar needed the money although his businesses seemed to be
thriving he had promised too much to his early investors he had borrowed tens of millions of dollars from Sweden Sweden's leading Banks and both Kroger and tol and Swedish match were pay paying double- digit dividends every year the company's profits alone did not always cover these obligations this is when we
get into this like Ponzi esque scheme that he had going on in order for his businesses to continue to S to succeed they had to continue to grow now that's fine this is 1922 they're going to grow 1929 you cannot tap the markets anymore and that's what causes him to go bankrupt if they stopped growing Evar
would not be able to repay his earlier debts or continue to pay high dividends it wasn't rocket science to pay a 25% dividend every year you either had to earn 25% % from your business or else raise more money this is crazy a large portion of the dividends recently paid by Swedish match and Krueger Kroger and toll came from cash raised by
International match in America in other words the dividends paid to Old investors came from the proceeds raised from new ones that is Ponzi this is crazy that he did this because unlike Charles Ponzi iar's profits were real Swedish match made and sold billions of boxes of matches every year Krueger and
toll build Landmark buildings throughout Europe Evar believed that if he kept raising cash to pay earlier debts his business would grow fast enough to survive what are you doing why are you so smart and talented and why would you put yourself in a position like that victory in our industry and every industry is spelled survival even the
very best ideas fail if a company runs out of money there's a great line about this by the founder of seoa Don Valentine he says all companies that go out of business do so for the the same reason they run out of money the minute iar's businesses stop growing fast enough and the minute he cannot raise more money he goes out of business he
destroys everything that he spent 25 years building for what why and it goes back to what Charlie merer said the problem is not getting rich it's staying sane he was unable to stay sane and so right before he raises money from American investors for the first time there's a public account in Sweden that
had found that Swedish match's finances were so complicated that he could not unravel them and what he said at the time was that the Swedish match Consortium of companies should be called the greatest speculation Venture in Sweden and so you have Swedish Regulators that are coming down and again there's like no laws there's a lot
of stuff that he did now would be illegal but even then The Regulators start talking to Ivar's main Banker in Sweden this guy name is Ry Rybeck is extremely influential and so he's able to calm down The Regulators he says listen it's it's in our it's our interest to survive we don't need like costly new rules we don't need extra
regulation and so this report that's put out about the dangers that's happening with a sweet SMH company it's it's phrased as advice from regulators and not it didn't require any action and so you're like I don't understand like why are why would the bank want to do that if their main customer is potentially
taking risks that could make them lose money and the answer is incentives the banks were not only lending money to Evar they were his biggest shareholders so when the bankers help get The Regulators off of Evar they're in turn getting The Regulators off themselves and why because they like those fat dividends that are coming in
and when you give people fat effortless money they don't question things when Swedish match paid Hefty dividends much of that money went to the bank again straight out of rockefeller's playbook for different reasons Rockefeller went around in the early days he did something very similar in his early days of his career the banks that he was
borrowing money from to build the early days of Standard Oil he also gave them stock and he gave them stock so his competitors right his other oil refining competitors would go to that same bank hey give me a loan I need to be in business and the bank's like why would I do that you're a competitor of mine now
because I'm not just the banker I'm the partner it's incentives it's a misalignment incentives all the way down throughout this entire story it is the supporting character of this story and again there's some banks that two leading two other banks that he raised money from the past they made him settle
their loans and return their money and they said hey you got to raise funds somewhere else and so he did just what duven did he says okay where's the money America okay cool I'll hop on the boat and go over there and so then we go back to Evar being this Evil Genius of course he's he's selling securities in America
Lee higginson is his big Bank they're like hey we need to have an auditor so they hire a young auditor at Ernst and Ernst and this entire story this guy is just completely mismatched against Evar and Evar manipulates him every time but again every single time somebody looks at his books like this doesn't make any
sense this guy name is burning ad burning burning was baffled by this Arrangement he couldn't decipher the financial statements Evar sent were the measures of international matches profits accurate did the company's balance sheet entries include the assets and liabilities of Swedish matches subsidiaries there was no way to tell he
had to rely entirely on iar's numbers which changed more frequently than a careful accountant would hope or expect everything he did was based solely on information provided by Evar and yet he never says anything why doesn't he say anything again it goes back to intens which we'll get to in a minute at the time there's no federal remember there's
no federal Securities regulation so everything at this time in America was handled by the States you know it's hilarious just goes back to this idea that anyone who bothers to look closely confused and suspicious and so there's like he's able to shake or like get away from almost every other regulator except
this one random regulator in Securities regulator in Wisconsin and so they keep sending burning because he's his a he's Ivar's auditor over and over again he like what's going on with this we need more information every time they get more information like this isn't good enough and then this is where burning
should have known burning knows that Evar is a liar and it's not even that sophisticated sloppy and obvious he sends he's like hey Wisconsin needs all this information I need more more about International matches books and so he sends Evar sends burning these financial statements listen to this it was obvious
that the statements had been hastily and not very carefully prepared why Evar sent balance sheets for international match for 1921 and 1922 showing that the company had a 1 million shares outstanding but International match had not even existed during those years and look at the numbers right he's just completely making everything up the the
company doesn't exist okay but he said 1921 we made $1.9 million in profits 1922 $2 million in profits 1923 $2.1 million in profits and it goes on on every year when you know what he does he literally just increases the amount of profits by $100,000 so I made 1.9 then the next year it's two then 2.1 then 2.2
then 2.3 that's not a joke that is literally what he submitted to these regulators and the first sign that Evar could control burning is he's like oh you obviously made a mistake don't worry I will reconcile he fixes them to the best of his ability on the very limited knowledge that he has and then resubmits
them to the Wisconsin regulator but the message was very clear his auditor would easily change numbers for him and why he does this makes we'll make perfect sense later on again I need to paint this picture here cuz it sounds Absol in the world that you and I live in remember which is heavily formed by by the
financial Swindle that Evar is per perpetuating in the book it sounds ridiculous like who how is this possible and it's but it was par for the course not all I mean he this guy took it to extreme but this lack of information this lack of Regulation it was just part for the course at the time and so it
says few people seemed to care that the information was incomplete indeed International matches cursory financial statements were typical of corporate disclosures at the time even companies with Securities listed on the New York Stock Exchange at the time would give scant detail fewer than onethird of Stock Exchange companies even published
even bothered to publish quarterly reports another third of Stock Exchange companies didn't publish any reports at all and so it's this constant mix of legitimate business outright lies this ex excessively complicated company tree structure but again this idea was not new for centuries European governments
had granted monopolies of all kinds of production and trade the these were not gifts the government's required payment in return in the form of cash interest or a share of the profits these monopolies were an alternative to State Control industry remained in private hands but government received a steady stream of Revenue so past examples
before Evar did this on with matches early monopolies included cigarettes gunpowder liquor petrol playing cards salt and tobacco even the idea of a match Monopoly was not new cuz we're in the 1920s right the first match Monopoly in Europe was created back in France in 1872 he's just taking an old idea and
bringing it back to to his modern day and so the first deal they do which is a legitimate deal this is International's first deal it's with Poland they say okay if you we'll lend you a bunch of money in exchange for this Monopoly this is just after the war so Poland needs you he says it has a bunch of humanitarian fiscal needs and the deal
was structured like this International match would pay a royalty from its match sales in Poland to the Polish state and the proceeds of the royalty would secure the loan to the government as a result all existing match factories were nationalized combined and then leased two International match for the next 20
years that is a legitimate deal that is real and then of course he does something that he he's always combining the the the legal with the illegal when he received a copy of the signed documents he did something rather unusual he thought it might be useful to be able to replicate Dr gak's signature in the future that is the senior finance
ministry of Poland who he's doing this deal with so he gets the documents what does he do he makes a copy of the signature what are you doing so he took a sign copy of the contract to a stamp shop and ordered a rubber stamp that would produce a exact replica he would obtain rubber stamps of official signatures for nearly all of his match
deals I'm telling you if you read this book this guy's going to just blow your mind over and over again on the very next page he has a problem I need more cash from investors but I don't want to give up up control so what could I possibly do this guy literally invented the bhare this dual class share system
that still used to this day he devised An Elegant solution to his problem it was an ingenious piece of financial engineering that would survive the test of time he introduced a new type of security which he called a b share he divided its common shares into two classes each class would have the same claim to dividends and profits but the b
share would only carry one 1,000th of a vote compared to one vote each for an a share B shares could be sold to invest without affecting control and go back to incentives there's so many times where evor is kind of like he's just sloppy with his recordkeeping he's kind of caught in a lie and Durant the main guy
that's going out into the American community and saying hey buy these Securities sometimes it pops up he's like man this is kind of weird so then he goes and talks to burning and earns and erns you're supposed to be the auditor like are you okay with these numbers like what's going on here but then what happened it's incentives it
says he Durant was conflicted because Ivar's financial statements were sloppy and incomplete yet in investors nevertheless clamored to buy Securities of international match so any kind of I feel a little uneasy about this as soon as that money floods in the door Durant's concerns are eliminated and so
when Durant tries to balance his suspicions with what's actually happening he just like oh well the money's coming in he says everything worked just as Evar said it would International match began receiving quarterly interest payments of about a million dollars each quarter just as agreement with Poland said as more cash
flowed in the directors questions went away and I think that sentence so I double underlined that sentence as more cash flowed in the director's questions went away I think that double underline sentence is why these pones deals last a long typ long uh time rather I remember Ed dorf's autobiography one of my
favorite books that I've ever read it's episode 222 it's called a man for all markets I could you should read the book I've read it I think two or three times by now Ed Dorp has just lived a remarkable life listen to episode 222 if you haven't listened it's it's just remarkable like this guy's like the financial history Force Gump started the
first quantitative hedge fund created the world's first wearable computer with Claude Shan in figure out the accounting card system to how to be Blackjack and wrote a book about it sold millions of copies was the first LP at Citadel had dinner with the 38-year-old Warren Buffett goes out in the car tells his
mom or tells his wife hey that guy one day is goingon to be the richest person in America he's just remarkable but in addition to that back in 1991 Ed Dorp was doing research for a friend of his and he discovered he was one of the first people to discover the Bernie made off Ponzi schem and he warned his friend and client I
think at the time hey get your money out of here which he did one of the guys in the reason I bring this up is because it's like okay well why why would Durant Durant knows something's going on but he's not acting on it so one of the guys at this meeting where edor presents he's like no this guy's clearly a fraud this
is clearly the Ponzi scheme you know this is 20 year almost 20 years before Bernie made off actually gets caught and he finds out when after the uh when all the stuff came out that the the client on The Client List is one of these guys that was sitting at the table listening to Ed Thorp in 1991 so he knew and
refused to take his money out and it says in the book one of the reasons he did it because he made hundreds of millions of dollars and so if you're making hundreds of millions of dollars over two or three or four decades with Bernie maid off you don't want to believe that it's a fraud or that there's a Ponzi scheme and there's a
handful of things that clearly point that Evar knew what he was doing so he's setting up all these subsidiaries he's got these secret companies he's got these companies he's got you know it's like a the Russian dolls like one inside of another and so he sets up a new secret company that he doesn't tell
anybody about he needs a new auditor for that company and the auditor that he selects for the new secret company was fired was previously fired from a bank for giving himself a secret loan and Evar knew that because Evar was a director of the bank and so he knowing think about this this is driving me crazy so he knowingly had has you know
bad people around him and then you realize like why is he doing that he wants people that is under complete control and so this new secret company is called garant listen to this the man quickly got to the business of garant's audit uh Evar showed Lang a balance sheet for garant listing millions of dollars of assets and liabilities and
abruptly asked him to sign attesting that the Figures were correct that was it then he could go but then he told Evar he's like well I need to look over the balance sheet as huge sums are involved according to One account Evar stared at him stone-faced in response when Lang mumbled that it would be nice
to know where all the money was going Evar said it was being spent secretly in Poland and he and this should not be mentioned Evar then told Lang if you don't believe me you can go to Poland and see for yourself Lang nodded and then signed and then we get to the part where I've already been exposed to Evar all the the mockin naations that this
guy does and this is the first time that I mentioned something I've mentioned to you over and over again I oh this guy's an evil genius and so it's not like he just Taps the the American investors one he keeps going back and forth uh back and back uh not back and forth back again and again and what he does is like
he'll raise money take the money sign one legitimate deal then go back exaggerate everything else to raise another money it's like almost like using it every little Milestone it's like yeah he has these little Milestones that he then exaggerates or or in some cases lies about completely then he uses that data to keep going back to the
markets and so now this has been going on for a while where his main auditor of international match company that guy burning is asking questions and still not getting the right responses but he's not like drawing this out or refusing to do the audit or sign any the documents and so there was an important fundraise
happening and so what he does he's like oh burning why don't you come you and your wife come to Europe on an all expense paid vacation and you should go at this specific time and this is why and this is when I read this paragraph I'm like oh my God this guy is an evil genius the money Evar had spent on the
burnings vacation was well worth it as the details of the new preferred issue were being finalized iar's auditor the one man who might have asked penetrating questions about the accounting details of the deal had been just where iar wanted him strolling the Streets of London and Paris with his wife the size and scale of what this guy
did in the 1920s is incredible from 1923 to 1929 Evar tripled his funds raised from American investors persuaded the New York Stock Exchange to list of Securities pulled even with JP Morgan as a leading lender to Europe by securing match monopolies in several countries built an 125 room match Palace in
Stockholm and in general got really really rich and by 1929 he has 400 companies and so now I want to get into this idea of these this terrible incentives all the way down that kind of produces these predictable human behaviors and so the next time the the last time he tapped American investors he's got his auditor his auditor burning
walking around Paris right the next year he has to sell another 450,000 shares and so burning is in New York when this is happening he's obviously very important on this deal and he's noticing some odd things that he says nothing about let's get into it while berning was updating International matches reports to reflect this new
share issue he discovered a reference to this thing called garant this Dutch hidden company burning was surprised to see that GAR owned that owed International match 17 Mill million he asked Evar for some assurances about granto what was it did this company make any profits or have any assets why
hadn't he told him about this existence Evar reassured burning that garant's income during 1925 was 46 million and that garant made enough money in one year to repay its entire debt there was no reason for concern there's no evidence like I need to be clear there's no evidence of what e is saying he's just saying no this is
I can write it down on a piece of paper but this is what it is it's in my head now you're like this is ridiculous like why isn't burning doing anything and the author asked the same question what was burning supposed to do should he be suspicious of Evar should burning accuse his most important client of hiding crucial information would this
accusation then destroy burnie's relationship with Evar and the destruction of that relationship would that ruin burnie's chances of making partner Evar paid all of his bills on time his fees to Ernst and er were Rising the match Monopoly in Poland was real EV had a reputation that was unassailable every day in the newspaper
there's stories about Evar negotiating potential match monopolies in Ecuador Estonia Greece Hungary Peru Portugal those negotiations were undeniably real Evar met regularly with government leaders given these facts burning told himself garant wasn't important it couldn't be in other words burning is
incentivized to believe Evar because if he's not if he's wrong if he's lying all the overtime all the extra money and I forgot Evar is also paying him for Consulting fees and paying him on the side and everything else paying for trips to his uh for his wife all of that the the trips the extra money The Prestige all of that goes away and so
it's at this point in the book where I think about one of my favorite passages from poor Charlie's Almanac I'm going to pull up my highlights now it really the summary of what Charlie's about to tell us number one we all underestimate the power of incentives number two never ever think about anything else before
the power of incentives and number three the most important rule in management get the incentives right as usual Charlie muger describes it in a beautiful way almost everyone thinks he fully recognizes how important incentives are in changing Behavior but this is not often so I think I've been in the top 5% of my age cohort almost
all my adult life and understanding the power of incentives yet I've always underestimated that power never a year passes that I don't get some surprise that pushes a little further my appreciation of incentive superpower one of my favorite cases about the power of incentives is the federal is from a
federal express so FedEx the Integrity of the FedEx system requires that all packages be shifted rapidly among airplanes in one Central Airport each night the system has no Integrity for the customers if the night work shift cannot accomplish its assignment fast FedEx had one hell of a time getting the
right the night shift to do the right thing they tried everything in the world without luck and finally somebody got the thought that it was foolish to pay the night shift by the hour when what the employer wanted was not not maximize billable hours of employee service but fault-free rapid performance of a particular task if they paid the
employees per shift and let all the night shift employees go home when all the planes were loaded the system would work better and lo and behold they test this and that solution worked and then Charlie muger tells us another story from business history early in the history of Xerox Joe Wilson the founder of Xerox had a similar experience he
couldn't understand why its new machine was selling so poorly in relation to its older and inferior machine he found out that the commission arrangement with the salesman gave a large and perverse incentive to push the inferior machine on customers this maximum is a wise guide to a great and simple precaution
in life never ever think about something else when you when you should be thinking about the power of incentives the most important rule in management is get the incentives right and so if you analyze the incentives in this story The behavior makes perfect sense so there's a many many ways like he's constantly fighting
off remember I think I've said this multiple times over a decade people are like this is weird the books seem funny like there's no detail the numbers change what the hell's going on here and he's got other ways you know he's an evil genius so he's got other ways to get people off of his Trail he has an
auditor ask him for a bunch of paperwork that paperwork is back in Sweden and so he does something here that I remember I was this is probably 20 years ago I was reading a bunch of biographies of very famous like trial attorneys and I think it was the the biography of Roy black if I'm not mistaken and they had a tactic that was
very interesting where let's say they were representing uh their client they knew their client did something wrong and in during Discovery you know the the other side's asking for all the all this information and you're compelled by law to give them that information so they're like okay cool you we need to give this
to you they would essentially bury them in a mountain of paperwork so you get 6 months to go through Discovery they'd give you something that you couldn't read in 10 years now you might happen to find that need on a Hast stag early but their goal was to just bury you delose you in a mountain of paperwork and so he
does this exact same thing he sends the auditor he says he was overwhelmed by the amount of new information that Evar had sent he asked if they could meet to discuss how they might filter what he really needed to see there were so many documents that it was impossible for them to do more than simply scan through the list of what was at the
office more insane Shenanigans you're not going to believe what I'm about to read to you you're just not going to believe it he has this he builds his match path in Stockholm right he sets up at his office so he's got a desk you have a visitor it's like oh this is great I'm meeting one of the the wealthiest and
most famous businessman on the planet and that's what he was at this point right he's in this giant mansion this match Palace right he sitting on the other side of the desk and you notice next to his desk is a little table on the table is three telephones the middle phone was fake it was a non-working phone that Evar could cause to ring by
stepping on a button under the desk he used it for two purposes one if you're visiting him and he wants to get your hell out of there he he'll step on the button it rings like oh sorry like I have another visitor I have to take this call the second thing that he would do is let's say he has a uh he had like
Percy Rockefeller in his office right he's got very famous uh like important people impressive people he wants to impress he pressed the button he's literally taking fake phone calls the phone would ring he'd pick up and he would pretend to receive calls from various European government officials including Bonito mus musolini and Joseph
Stalin that's not it it's not this is not over are you like wait till we get to what's next that evening he threw a lavish party and introduced Rockefeller to numerous ambassadors and I put ambassadors in quotation marks ambassadors from various countries who actually were movie extras that he had hired for the night this guy's got fake
phone calls and hired actors what is that I don't think I've ever read a book like this and so the longer this goes on the more questions happen the more questions happen the higher the bills go this is how and why his auditor winds up becoming an accomplice and he doesn't ever get in trouble for this by the way
and the reason that the auditor at earns and earns that ad burning never said anything is exactly what happened the Ern the Ernst Brothers Who Run The Firm that he works for told burning that they had an important matter to discuss with him after 7 years Evar had become one of the firm's biggest clients and burning
deserved the credit you are now resident partner Mrs burning certainly was proud of her husband now they could afford a new apartment at 40th fth Avenue in Greenwich Village they could afford a new Social Circle as well the burnings joined several of New York's most prestigious societies and so remember
this only works if the companies keep growing and if he can keep tapping the markets all this is going to fall apart and it is absolutely remarkable the timing is remarkable because he's going to do his biggest deal ever he's like I'm going to loan I'm going to get a German match Monopoly I'm going to loan
the German government $125 million he does not have $15 million to lend this is October 29th while he's doing this this is the crazy one of the craziest things I know he keeps saying that because this is a crazy story while he's signing this deal the stock market is closed due to panic this is going to be
the largest decline in stock in US Stock Market history at the same weekend he's signing the biggest deal of his life and I think this is just great writing I'm going to read this paragraph to you on Saturday Evar met again with the Finance Minister in Berlin to finalize terms as he held the pen about to sign the loan
documents he considered the two paths his life might follow as a result of his decision this audacious deal might be the miracle that would reverse the darkening psychology of investors everywhere think about how grandiose you have to think about yourself if you think that's even possible Evar imagined the buzz spreading about his
extraordinary weekend feat when the New York Stock Exchange opened on Monday his Securities would store in value the r Rising tide of optimism would make it possible for him to raise more cash and shift his personal loan obligations to American investors with any luck by the close of trading Monday the worst would
be over that was one possibility Evar could imagine the alternative that the crisis would continue or even deepen was Unthinkable he couldn't bear to consider what would happen if the market freefall continued what a line This is Evar greatest Triumph was immediately followed by the most spectacular two-day decline in the history of financial
markets this time there would be no recovery Warren Buffett once said that you don't know who's swimming naked until the tide goes out that's a great description of what's taking place here now he's shut off from the capital markets his Bankers are suspicious now nothing's M adding up his auditor uh is
suspicious Durant his main Banker at Lee higginson is constantly requesting meetings he's like looken there's just too many coincidences here and slowly but surely all these financial institutions are cutting them off uh for some banks such as National City these coincidences were too much and they stopped dealing in iar's Securities
entirely another bank credit swis declared Evar a very dangerous person and said it would not lend to any of his companies Evar finally conceded that he could not afford to pay shareholders of Swedish match iar's companies would soon be in default if Evar goes down so does the bank Lee higginson so so two of the
partners go to iar's apartment in New York to try to see what's going on he's in a full collapse and breakdown they're let in says although is midday he was wearing yellow silk pajamas he's babbling he's acting like a madman they call a doctor Dr wiri diagnosed cardiac fatigue he prescribed some sedatives during the next 3 days Evar would cycle
through episodes of mania and depression when the drugs were working he would simply sit and stare into space but when the medication were off he would stand and Shout I'm losing my mind I can't remember I can't can't think he imagined knocks at the door he answered the phone even though it hadn't rung and then he
collapsed you know what I thought of by this time I'm the end of the book I think it's more fakery I think he's completely acting no no doubt he's under stress he's going to wind up shooting himself but this mania this like I can't remember I'm losing my mind being in pajamas I don't trust it for a second
this is the same guy that would sit in a room and practice lines for supposedly casual conversations that has a fake phone that carries on fake phone conversations that hires actors and introduces to him at parties saying this ambassador from Germany the guy that made rubber stamps of every single government official signature that he
ran across the guy that forged documents the guy that made up numbers on the Fly that's the same guy that is babbling like a idiot in the middle of the day sitting in his pajamas now I think that I think he's faking it that would be my guess shortly after he's summoned he's got to go to this meeting with all these
bankers and investors in Paris as soon as he gets back there from America one of his Executives one of the people that works with him is like hey the Swedish government's investigating you they're investigating your personal and business finances they've already got search warrants they collected many of your
important documents Auditors are already scouring our books that was the night before this very important meeting they are supposed to have a meeting at this hotel with all these bankers at 11:00 a.m. the next day that guy leaves Evar at 6:00 that night later that same night the night before he's supposed to meet these Bank investors at 11:00 a.m. he
walks into a gun shop in Paris and buys a gun and a bunch of ammunition the next day in this hotel in Paris a dozen anxious men are pacing the floor while iar's employees are assuring that everyone that Evar would be there soon but Oscar Rybeck and Donald Durant were concerned these are his two main Bankers because it was the first time they could
remember Evar being late after several hours a few of them go to iar's Paris apartment they enter the bedroom and they see a man lying flat on his back there was blood on his left wrist and a red stain on his shirt they shouted he is not sleeping he's dead on the bedside table were three sealed personal notes
one of them said I made such a mess of things that I believe this is the most satisfactory solution for everybody concerned they rushed back to the hotel to tell the bankers that Evar Kroger had committed suicide iar's death confirmed everyone's worst fears about the man and his finances the investment bankers from
Lee higginson which which had sponsored Evar for a decade were dismayed soon Lee Hickson one of the most prestigious investment banks of the era would file bankruptcy and the partners would be ruined George mname the senior partner later told investigators what he thought when he heard the news I suddenly knew that we
had all been idiots and that is where I'll leave it for the full story I highly recommend reading the book I've already given the book as a gift to one friend already I think the story is incredible and very unique and if you buy the book using the link that's in the show notes in your podcast player are available at Founders
podcast.com you'll be supporting the podcast at the same time that is 348 books down 1,000 ago and I'll talk to you again soon okay so I have three things to tell you about real quick stick around if you can I think you'll find this interesting and there's some deals for you that are not available anywhere else and so the first one is
highly going to recommend if you don't if you aren't doing so already to subscribe to Founders notes Founders notes is the personal tool that I have built it's what I use to make the podcast it contains all my every single note highlight and all the transcripts for every single book and episode that I've ever done and the way I would
describe it there's a bunch of different ways to use it but there's two ideas that I think I actually have around this and so one it actually came from something that Charlie merer said the entire reason that Founders knows exists is because he said that learning from history is a formal leverage and I think
Founders notes is a tool that enables you to do so he said I read Baron's magazine for 50 years in 50 years I found one investment opportunity in baren out of which I made about $80 million with almost no risk I took the 80 million and gave it to leeu who turned it into $400 or $500 million so I have made $ 400 or $500 $400 or $500
million reading barrons for 50 years and following one idea and so if you subscribe to Founders notes you can read my notes and highlights on a different book every single day and over the lifetime of your career the idea that you're not going to find one idea in there that's not additive and helpful
and actually improves the odds of your success in business is the probability that it's close to zero possible and when I reread that note about Charlie saying that he made4 or $500 million from one idea of reading this magazine for 50 years I was thinking about a few weeks ago when I did that Tarantino episode if if you listen to that and
even if you didn't I guess I can tell you Tarantino had this like historical database in his head of the entire movie the history of the entire movie industry because he was obsessed with films he says he has this great line in that book he's like I didn't go to film school I went to films and the reason it was
important because it was in his head is one he could call on and use he can call on that information that's in his head and then use it in his work later on and so there's many examples in that episode right where he's talking about hey I saw this movie you know 1970s and I took that exact scene or a principle from
that or an idea from that scene and for this movie I made in the 1990s or in 2000 there's exact scenes in Kill Bill that first appeared in a movie that he saw 30 years ago and so I use this all the time let me give you an example it's from this episode that you just listen to there's multiple times where there
something's happening in a book that I was like wait this is like something else and and so I just um got off the phone I had a zoom with the team at rewise because I'm I built this part product in partnership with rewise I've been using rewise since 2018 I you know mentioned it you can go back and listen
to past episodes to talk about how great this app is had no idea they'd be partnering with them go on other people's podcast talk about it but there was a multiple time so they the reason I bring that up is because there there's a lot of different ways to use uh Founders notes there's a lot of different features in there and so I just want to
highlight one of them uh that I don't think I talk about enough and essentially it's just as giant database that you can search anytime you want for the collective knowledge of History's Grace entrepreneurs and it happened because how many times is the did the the importance of incentives and understanding the superpower that
incentives are come up on the podcast you just listen to so I just talked to the team rewise they just updated the keyword search in Founders notes it is super fast now and so we were talking about that yesterday and I noticed it because this week so I I type in let me give example real world example I would
type in power of incentive so actually I'm going to do this with you lot live okay so what you do is when you're when you subscribe to Founders notes and if you already have subcription try this okay so when once you log into Founders notes you'll see search highlights right and in that box it's the very top page I
put in power of incentives I press enter two seconds later it's showing me it shows you anytime power of incentives has been mentioned either in a note a highlight or on the podcast cuz it searched the transcripts too so within that 2 seconds Founders notes searched and then the left column it'll show you every single book or episode it found
the word power of incentives or incentives from 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 if I'm counting correct 27 different instances inside of those instances it's sometimes multiple times I mentioned it so in this oh my God I haven't done this episode in years John Bogle uh it's mentioned twice in that
book same thing happened when I searched now this is the remarkable thing right this is why I think it's a tool that uh if you're going to invest a lot many many hours in listening to Founders this allows you like there's going to be something you hear in the podcast and you like damn David said that like what
was that months from now well if you have access to Founders notes you just search it you find it like that's that's value that's worth a hundred times the cost right there but I was blown away by just this the horrible position that Evar Kroger put himself in so I just searched debt that is the one key word I
put in debt the first thing that pulls up so again it pulls up I can't even count this is like 30 books I don't even know how many but the first thing it pulls up it's Henry Ford in this book today and tomorrow and he's talking about it's a the note I left myself on the Highlight is what a powerful warning
to be lry of debt from Henry Ford and I'm rereading this highlight and then I'm like wait a minute first of all I didn't remember him saying that when did did I do this it's from the book today and tomorrow you know where this is from it's from episode 80 I published episode 80 on July 14th 2019 that is the superpower right there
I remember reading the book I made the podcast on it I'm sure I've reread the highlights but I didn't remember this exact thing and I wouldn't have if I didn't have access to this tool so if you are interested and if you're already running a successful company I would buy the lifetime version because that means
not only do you get access to every note highlight every feature that I've done everything I've done in the past you get for every future note every future highlight every the ability to search every future transcript any additional features I ever at and this is a living breathing tool for me I'm building the
tool for myself so I'm always going to be constantly updating it it's embedded in my workflow so to do that you go to Founders notes.com that is Founders with an S just like podcast Founders notes.com second thing I want to tell you about is I'm working on so think about it I sit in between uh a bunch of killer entrepreneurs Investors Business
nerds and then a bunch of people listening to the podcast I've become friends with are also building products and services for businesses and so I'm building this out it'll eventually be on my website I will let you know when it's um when it's finished but essentially I'm going around this is this is also is
related to why I'm doing events and this this idea that comes up over and over again that relationships run the world so I am going to friends of mine right that I build relationships with that I talk to on the phone that I text that I have dinner with that I go on walks for all of them listen to the podcast and
I'm going to them and saying Hey I want to build it's it's I don't think it's up there yet but it'll be on my website you it'll be probably under like deals or something like that I'll let you know when the name uh when I do it but essentially I'm saying hey you are building a service like we have a good
relationship you love the podcast uh you're building a service that is valuable to the people that listen to Founders I want you I'm finagling them I'm cering them in a in a as nicely as possible way it's like I want you right I will talk about your product and service in return and I'm going to build this directory of people that are doing
this and it's already been like I already have a ton I haven't talked to you about yet and in return I want you to give them a deal that is a discount that is not available anywhere else it cannot be just your standard you know oh like no no it cannot be standard it has to be special and so there's only there's two I want to talk about real
quick one is in direct relation to a main theme of the podcast you just listened to so my friend Eric jensson is he how I met him uh in addition he in addition to being a fan of Founders he wrote one of my favorite books which is the almanac and noal Ricon I think it's like episode 191 or something like that
when he wrote that book he was a customer of scribe he used scribe media to publish that book he is now CEO of that company and part owner of that company he sold well over a million copies of that book and so the reason it relates to what we just went over it's like I mentioned the fact that Evar did something really smart which is he made
it a point to become wellknown because becoming well-known helped serve his business like his needs in business now obviously we don't want to run Ponzi schemes and all other stuff but the actual concept behind it is really smart in fact when I sat down so that was one of the things when I had lunch with
samel be shortly before he died that's one of the things he said to me because we were talking about some of his business obviously he sold a company you know for $38 billion but he was talking about some of the best investments he ever made came because he was writing op EDS in he was a well before he was a
national and world renowned entrepreneur figure he was uh relatively wellknown and famous inside of uh Chicago and the way he built his audience in Chicago was he would write op-eds in newspapers as a result of that he was invited to make an investment in the Chicago Bulls and so he was making the point to me that the
bigger your podcast gets the more wellknown you're you become like you're going to have opportunities presented to you that wouldn't have come otherwise if you didn't have the platform that you have and so recently went to teach at I was invited to teach at Harvard Business School invited to teach at Columbia
business school and NRE Dame too but at Harvard Business School I was like listen I employ you I implore you rather please like you guys are doing so much research so much learning you have not only your main curriculum at Harvard Business School but all the learning you're doing just organize that it doesn't matter if it's a newsletter I do
it in a podcast write a book you need to be easy to interface with and so what scribe media does and the reason I'm telling you about it is because there's a all think about all the Founders investors Executives Consultants all these other professionals are that are listening to Founders right you have
domain specific knowledge you just haven't found a way to put it to organize it and then put it out there so you're easy to interface with scribe media essentially will do what they'll do is like they have a bunch of different Services anywhere from like if you want to write a book and you want like a like essentially like a co-writer
like a guided author they have three main things that I think are that You' be interested in and you can go to scrib media.com Founders to look at all this guided author scribe professional and then scribe Elite ghost writing scribe has already produced 23 New York Times and Wall Street Journal bestsellers their programs are designed for
entrepreneurs Consultants Executives and other professionals and so when I talked to Eric about this idea this is not like a high margin business but he gave you discounts that are available nowhere else and so I'll list them down below $1,000 off of guided author $1,000 off of scribe professional and $3,000 off of
scribe Elite ghost writing so at scribe media.com Founders the link will be in the show notes as well and then the last thing is vesto I know the founder of vesto it's vest.com vest V is and Victor E is an egg s is in San SRA T is in tom o as an oprah.com Ben is giving Founders listeners $500 off and this product was actually pulled
out of Ben because Ben's main business was helping businesses whether you're bootstrapped or Venture funded get a better return on their Idol cash and then all these listeners of founders were scheduling a demo cuz you actually talk to Ben and a bunch of these people had the same problem which is like hey I
own a ton of different companies these companies have Bank bank accounts at different banks sometimes in different countries can you please make a dashboard so I can actually see all of my company's Financial accounts in one view so if you have that problem go to vest.com schedule a demo tell Ben David from founder sent you and he will give
you $500 off I will have a lot more deals to announce in the future and then I'll put them all in they're already in one organized place it's just not public yet but once that is public I will let you know thank you very much for listening thank you very much for the support and I'll talk to you again soon