Carey Smith

SUMMARY:

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Did selling the business feel like a victory or a sad loss?

Selling the business felt like a victory initially, marking a new chapter in Terry's life. He does not regret the past and has no desire to return to selling fans.

How did you establish a climate that valued cooperation and distributed decision-making?

The leader must actively participate and provide a good example. To provide a variety of answers and better results, problem-solving should involve individuals from all departments and viewpoints.

How did your group assist you in locating blind spots?

The team challenged preconceptions and offered alternate perspectives in order to help discover blind spots. The team leader admitted to having a prejudice towards those who are intellectually combative and understood the need of a varied team in minimizing blind spots.

How crucial is conflict between investors and investment recipients for improved results?

The difference between personal conflict and constructive conflict is that the latter is unproductive. When working with independent, self-assured, and change-resistant people, it can be difficult to create the correct amount of friction.

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TRANSCRIPT:

[00:00:00]

Marcus Cauchi: Hello and welcome back to the Inquisitor Podcast with me, Marcus Cauchi. Today it's a genuine delight to have Carey Smith.

Carey Smith: Mm-hmm. Oh yeah. Okay.

90 seconds on your history and in particular why you can speak both as well as sales, leadership and investor?

Marcus Cauchi: But would you mind giving us, uh, 90 seconds on your history and in particular why you can speak both as well as sales, leadership and investor?

Carey Smith: Well, um, I don't know. I, I got outta school.

I, I left graduate school. I started working actually for a large insurance, uh, organization. It was very disappointing. Um, and I re I realized that I, I probably couldn't, uh, take orders from people that were whose IQs weren't even in the double digits. And, and so in that situation, I, I, I started a business.

[00:01:00] Unfortunately, when I started that business, it, we were doing something that I thought I understood, though I didn't understand either the product or the market.

Marcus Cauchi: That sounds like a bucket load and scar issue.

Carey Smith: Well, oh no, it's not. I don't even want to go there. I honestly don't even like to go there because I started a business.

It's got so many pieces to it. I started a business with my, in partnership with my father, which you should never, ever, ever, ever do because you find all of your father's edges and short cu it's horrible. It's, you should never do that. And I stayed with it because I'm a persistent little bastard. Uh, far too long.

And I didn't, I mean, people talk about sale, uh, failing fast. I failed really slowly, and it took about 12 years to fail completely. I mean, there's a, there's a, I'm very persistent, but, and there's upsides and downsides to being persistent. That's the downside. Fortunately, [00:02:00] during that time, I,

Marcus Cauchi: That sounds more dogged than persistent.

Carey Smith: Well, yes.

Marcus Cauchi: Like a pit bull that won't let go.

Carey Smith: Yeah, like a dumb pit bull. That's right.

Marcus Cauchi: Um, it's still biting,

Carey Smith: But during that time I wrote, uh, in order to, to sell, I was forced to because I never wanted to be, never, ever wanted to be a salesman. I never saw myself like that, though. Uh, when you, when the only thing that's putting money on the or food on the table really is your ability to sell you, you overcome a lot of, uh, preconceived notions.

But one of the things I did during that time was I wrote a lot, I wrote a lot of articles, a lot of educational articles for this particular product, which was a cooling product. And um, I was fortunate enough because I was always looking for something else to write, to put into trade hubs [00:03:00] because at this time this was, I mean, they were paper and so you could, I mean, we knew all the editors.

We knew all the writers. I came across the fans. Some couple of guys in Southern California were making this fan. They had made, oh, I don't know, at least 20 of them. Um, and they were selling them for to cool cows and occasionally, uh, warehouses and by the time I met 'em, they had sold 17 of 'em. And this was years down there, you know, after they'd started it. Anyway, they were more or less failing.

I suggested that I could do a better job. They agreed, made a deal to get to a certain point, uh, to sell a certain number of fans. And at that point I got rights to the IP, the intellectual property, and I took advantage of that and, that was about 2001, 2002. And, uh, from there, [00:04:00] uh, we went from selling 140 fans a year to, uh, tens of thousands of fans a year.

And after 20 years or 19 years, somebody decided they wanted the business a hell of a lot more than I did. So they, they gave me half a billion dollars for it, and that was fine by me.

Marcus Cauchi: Well, first of all, massive congratulations.

Did it feel like a victory or did it feel like a parting, a sad loss?

Marcus Cauchi: And so at that moment, did it feel like a victory or did it feel like a, a parting, a sad loss?

Carey Smith: It didn't feel like a sad loss. It felt, I guess, for a short period of time, like a victory. I don't know. This is, it's like turning, it's like reading a book and turning the, I mean, you know, it's a new chapter and, and it doesn't mean, I mean, you don't regret that you're at that, that point. The only regrets are how, what kept me from getting to this point 20 years earlier.

[00:05:00] Um, but, um, But no, I don't, I not a day. There's never a day that goes by that I wish I was selling fans again. I mean, that's just a, that's just a, that's a part of time, that's a part of life. And I think as you get to, as you go through enough of it, you realize that that's, I did that. That's cool. Of course.

Then you think, well, maybe I could do it again.

Marcus Cauchi: Okay, so te tell me this though. What, when you got your check for half a billion, what was that a life-changing moment or was, cause I, I have no odd way, way of conceiving of what that must be like or, or just look at it and think.

Carey Smith: Yeah, it, it, to some extent, I guess you imagine it's life changing.

It gets very ordinary much quicker than you might imagine. Um, I mean, it doesn't, there's, there's nothing that [00:06:00] I do, and I would imagine this is, well, I'm guessing it's probably true about other people, is it doesn't really change. I mean, you fly first class, I mean, you do silly dumb things like that. You stay at the best hotels, but, but other than that, it's not like you threw out all your clothes and bought new ones.

I guess you could, but, but even if you did, even if you threw everything out and you started anew, there would, you would be right there. And it, that's a discreet amount of money and it really doesn't make that much difference. And so day to day it, it's not a lot. Not a lot.

What were the qualities that allowed you to build a business from essentially pretty much scratch to half the billion because most founders don't make it through that journey?

Marcus Cauchi: What were the qualities that allowed you to build a business from essentially pretty much scratch to half the billion because most founders don't make it through that journey?

Carey Smith: Well, Again, I, I think part of it, uh, was probably, I was a little bit older. [00:07:00] Um, and I, I, I knew a little bit about business because we, I mean, I had a business before, before that happened, even, uh, before I started the, the fan business.

I think that, and I don't know if this is a character trait or if it's an age slash character trait, but um, I tried to be very, very, honest about how the customer felt, how all the people that worked with me felt the way they approached their job, uh, the task at hand. And I, I'm not a touchy feely type of guy, so don't think that's going, that's not what I'm talking about.

I'm just talking about the fact that I was in a very fortunate, I, I saw myself in a very fortunate situation, very early on in that business, and I tried to make sure that I shared it. Not because, [00:08:00] I mean, sometimes people don't even, I'm not even sure they, the people that work with you recognize what you're doing, but that, that shouldn't matter.

But I think that I, I was a stickler for making sure everything was done right, that it was done as fairly as possible, that we didn't take somebody's money. If I sold you a fan and you didn't like it, I took the fan back and gave you your money back. I mean, I didn't, it didn't bother me and, I mean, it bothered me a little bit, but not enough not to do it.

And I think that if we had problems when we did have problems, and we did, I mean there were all sorts of, because this is a big, I mean, these fans weigh 400 pounds and they're, they're 30 feet above a lot of people's heads. And, and I worried every night about that, just in general. But you have to be very, very careful.

And we were, we were, if, if anybody thought we had a problem, we solved that problem regardless of what it cost to solve. And sometimes we spent [00:09:00] an incredible amount of money to do that. But then at the end of the day, I could say to myself, I've done every possible thing, uh, to provide, uh, a safe product and a product that, that the customers are very pleased with, and that the employees, the people that were working with me appreciated and were proud to be a part of.

That was a big deal to me. I didn't, I tell you, I did not worry about the money. I didn't think about the money. I never, ever thought about money. I just figured if we did it right, it would all work out. I know that sounds really, that may sound incredibly naive.

Marcus Cauchi: Not at all. Um, that, that's very in line with my philosophy as well.

If the customer is not at the heart of everything that you do, and if every person within your business doesn't have a window to the customer, then chances are you are going to create needless friction. You're gonna [00:10:00] project that you're more interested in your outcome than their outcome.

Carey Smith: Yes.

Marcus Cauchi: And they're not going to become raving fans.

Carey Smith: No, no.

Marcus Cauchi: If you'll forgive the my pun, um,

Carey Smith: I will.

Marcus Cauchi: And thank you. But there, there's something deeper here because that's built on a set of principles and values, and I'm really curious how you imbue that to the recruitment process and hiring people who share those values and how quickly you can identify whether you've made a mis-hire.

Carey Smith: The hardest thing in business is, is hiring, I mean, is, I mean, it, it just is. It's, it's a crap shoot a lot of times. This sounds terrible, but I think in a lot of cases you can almost tell by somebody's demeanor when you're, when you're talking to them just in the first few minutes of meeting them. Th this is all character.

I mean, it really is. It's, this is the simplest of interactions. [00:11:00] I mean, we were probably doing this before we walked upright, and you assess people and you assess their, their ability to work with you, to work with others. I think that, and even in those situations, you make a lot of mistakes. I certainly did.

I think where you compound them, and I would suggest that with, uh, starting a, a business, allowing other people to hire people for you is that's the beginning of your, at least if you're lucky, I guess the beginning of your first mistake. Because Alphas hire Alphas. Betas hire Gammas and Deltas and God hell knows what, what Deltas hire.

I won't even I government workers I suppose. I have no idea.

Have you noticed the people hiring their own image only weaker?

Marcus Cauchi: Have you noticed the people hiring their own image only weaker?

Carey Smith: Yes. That's what happens. That's the way it works. And a beta just gets lucky to hire somebody higher.

Marcus Cauchi: Well then, but [00:12:00] then, then from a sales perspective, that has really interesting ramifications because you sell to, you tend to send sell to people that you can understand and you can get on with.

So you'll tend to find that your customers skew as well, and that creates a huge opportunity. But it also, uh, you have to overcome the cultural drag. So when, when you start looking at sales and you look at it as a wicked problem, instead of a series of simple linear problems, it starts to make sense because you've got all these interdependent, concurrent issues going on. And many of them stem from the interaction with other parts. So you have to look backwards. Uh, you've gotta look upstream to try and find where they start to intersect. And then, uh, this flywheel effect starts being created, and then that starts getting embedded into your culture.

So if you don't count it, the recruitment stage, I think, [00:13:00] um, then it's a real problem. And if you then put in external finance and they change your culture, moving away from being customer-centric and looking after and being inclusive in your management style with your employees so they're engaged and then all of a sudden everything's turned into a pin factory, um, and you are worshiping the next valuation.

Carey Smith: Yeah. Yep. No, no, you're right. It, I, I, I will say this though, there's no way you can avoid making those mistakes. I mean, those are mistakes and I think that the part of, of running a company, starting a company, running a company is, is the recognition that everything is less than perfect. It's a lot less than perfect.

And, uh, and much of my time was spent going over and over processes, uh, within the organization to try to make [00:14:00] sure that, that, that when we did make a mistake and we did in the hiring. That we either overcame it by simplifying procedures, by simplifying the task at hand for the individuals. Because if somebody, if a group of people can't get a job done, then, I mean, it's your fault.

I mean, it's your mistake. I mean, you expected these people to do it. No, exactly. Right. And. And so it's, it's, it's incumbent upon you as the, as the manager slash leader to, to take care of that. And that's part of what I think makes, uh, running a business, running your own business exciting. It's, it's, it's intellectually challenging, but it also involves a lot of, you're paying an awful lot of detention to feedback loops and all sorts of things like that.

And sometimes it involves the customer, but, uh, I mean, ultimately they, it all does. But, [00:15:00] um, but you're trying to get, you're trying to optimize the machine and, and ultimately at the end of the day, That's what it becomes, which is, which in some senses is, is, is, uh, a beauty to withhold. But, um, um, but it's, but, but it's also, eh, it can be kind of a grind, I guess, but I don't know.

I kind of like that about it, honestly.

Did you lead with growing your ops team or did you let sales run ahead of itself and then find that you had to play catch up?

Marcus Cauchi: Tell, tell me this, cuz I'm really curious about this as you are scaling. Um, did you lead with growing your ops team or did you let sales run ahead of itself and then find that you had to play catch up?

Carey Smith: Probably the latter. I don't know how you do the, I don't know how you do it otherwise.

Sales is the sharp end of the stick. I mean, and if you can't sell it, then it doesn't, it shouldn't exist. And in marketing [00:16:00] is simply sales wri large. I mean, is, is, is, uh, you, you can't affect people as deeply as you can because you're not talking to the individual. But ultimately you have to be able to sell.

And if you can't sell, you're doing something wrong. And so there's, there's something that needs to be, uh, repaired. Um, and this, this goes, I mean, we sold fans. And we sold him a very rapid clip. I mean, we grew relatively quickly, not, not, uh, at a rate that a software company grows, but, but we grew on average about 30% a top line a year.

And when that, when you could, when you saw that, that started slowing down. Then we started looking for other products, and we were an engineering company underneath all of this. And and so a lot of what we did was, was work on product iterations and derivations and, [00:17:00] but that was all to feed the machine that we had built, which was this relatively arcane sales machine that I was very proud of.

And I don't think that, I know I sold a company and they, I think they dismantled that over a period of time because it wasn't standard. I mean, we, we did everything directly. So if you talk to anybody about a fan and you were talking to one of our employees, because we could control that message because we could control as much as you can possibly control somebody, but at least you can control their successes, uh, and failures the individual salespeople.

But we controlled everything. And we were, I mean, when we started, we were obviously a monopoly. We were the only people doing this. When we sold the company 19 years later, McKenzie suggested that we had an 85% [00:18:00] market share after 19 years. And we all, we never, we never, uh, sold and we, our products were always about twice the cost of, of any of our competitors at the time that we sold, cuz we started with zero competitors.

I would imagine we had close to a hundred when we sold a company. The way that we stayed on top and the way that we drove. The fact that we were much more expensive than anybody else, uh, was related to how we, how we ran the company, um, because it was quality and it was quality people. And, and, you know, you have to keep your eyes on everything in my mind.

Marcus Cauchi: About 40 years ago, Milton Friedman came up with the great lie, which is that companies were there to serve the speculators, uh, in the form of, uh, serving shareholder value. And that came first and above everything. And as a result, [00:19:00] companies have taken a, a deep and dark turn, uh, in the wrong direction, which is putting the customer at the end of this long chain of abuse as a forgotten afterthought. And

Carey Smith: I, I, I really don't think that, I really don't think that Friedman thought that way. I mean, I studied at Chicago, right? I, I, that is not what, it's not speculators, it's investors. And when you look at it from a business perspective, I, I know where you're going and I agree with where you're going, but I think that it, besmirches the memory of of, uh, Friedman to say something like that because,

What was Milton Friedman trying to say?

Marcus Cauchi: Okay, so I, I I'm being unfair and deliberately inflammatory, so correct me, um, where, where, where, what was he trying to say?

Carey Smith: What he was trying to say was that you have to have, you have to have a target. You have to have a easily recognizable and easily measured, [00:20:00] trajectory towards the target.

And if you were simply trying to to serve your employees, that's a completely different thing. Uh, you can't do it. And, and because it's a, it's a, uh, it's a, it's a virtous cycle that the best way that I can serve my employees are by serving my customers, I mean by dealing my customers, the absolute best experience I can, the way I serve the community, because my employees and my suppliers, and in our case we made, we made very sure that most of the suppliers were within a 40 mile radius of where we operated, which had nothing to do with, you know, trying to help people.

It had to do with, with quality control. And you help by helping those suppliers, by helping those, those employees, you are benefiting the community [00:21:00] because that's where these people spend that money. And so if you're, if you're generating 300 million dollars top line, a lot of that, obviously the vast majority of it is going to the community.

And you can talk about, you know, hiring this group or that group, but in the end, in benefiting, uh, specific groups. But in the end, you, you do just like you do, just what you suggested as relates benefiting individual salesmen, you, you denigrate everybody else, all the other groups. I, it, the easiest, simplest solution is benefit the customers. Everything will flow from that because you can make that case, you can actually, that's something you can do. You can't really, you can't really benefit the community without, I mean, where's the money gonna come from? Where's the, where's the employment gonna come from? It comes ultimately from being able to [00:22:00] negotiate, uh, with the, with the ultimate customer.

That's who pays for it. That's who funds everything. Okay. You're just a vehicle.

Marcus Cauchi: Uh, I, I couldn't agree more. I, I love the way you think, so let, let, let me bounce some ideas off you and I'd love you to rip them apart and fix them. So, I think compensation, uh, in the traditional sales operation is far too geared towards front loading.

So you get, you pay a lot, at the moment for winning, uh, an account and the salesperson then gets to keep it for three months or a year before it gets taken away from them. And it gets passed on because again, most of the Alphas who implemented predictable revenue models and turned sales into a pin factory, never read the end where Adam Smith says that, um, that kind of structure actually is a bad idea cuz it's dehumanizing.

They never got to the [00:23:00] end. And I suspect it's the same, uh, with me and Friedman. Uh, but, um, I thank, thank you, first of all for schooling me on that. And I think the, the real issue here is that the customer needs to be at the heart of what you do. Your employees need to be engaged. And there was a study of the S and P 500.

Between 2010 and 2016 looking at employee engagement levels and the companies that had high engagement levels had share price growth of 316% compound year on year higher than the rest of the pack.

Carey Smith: It doesn't surprise me at all.

How you created that culture so that they had a flywheel effect in terms of everything that you did, moving decision-making down the chain of command?

Marcus Cauchi: So what, what I'm really curious about is how you created that culture so that they took a fly, had a flywheel effect in terms of everything that you did, um, moving decision-making down the chain of command.

Carey Smith: Again, I, I [00:24:00] think, I know this sounds ridiculous, but a lot of this, if you take it all the way back, I mean, you learned this in kindergarten. I mean, this is, I mean, you share, you play together. I mean, I think that if you're not part of. The process, and I mean, as a leader, I don't think you can lead actually without being a part of it.

People are, I mean, people are, they're social and, and I think that the leader has to lead by example. And I think it's funny or it's not funny, I suppose, but, but odd when you hear about a leader saying that, you know, well, I'm not responsible for that, that behavior is, you know, something that the, that the investment guys were into are. The, the production, the engineers, I mean, like, for example, I think, a good, uh, is, uh, Boeing, which was an engineering company, a very, very strong engineering company operating out of California until they [00:25:00] were merged with, uh, McDonald Douglas and St. Louis. I, this, which is the middle of the country here, which has nothing to do with, I mean, aircraft grew, the whole industry grew on the west coast.

And in Seattle, I mean, up and down that that west coast, McDonald Douglas is just a, I mean a failed company, a failed aircraft company, and you start to sense that it's no longer the engineers that are running that company. It's is the, the, um, yeah, I mean it's the finance department. It's those schmucks that don't know, that have never done anything.

I mean, they might have gone and gotten a a, a slew of MBAs, but they don't know anything. They have no feel for the cusp the, um, the, the business, they have no feel for the metal. They have no feel for ultimately the customer. And, and it, it makes you leery [00:26:00] after you recognize that of getting on one of their airplanes.

Um,

Marcus Cauchi: It, it, but it is a byproduct of the economic system that's grown up. Um, you know, you, you look at the unholy rush. For revenue at the end of every quarter.

Carey Smith: But, but this is driven by, but see, this is where you have an opportunity. I think anybody that's related to the media has an opportunity because this isn't true.

This, this is the way it is, this is the way it's become. It doesn't have to be the way it, that, that it stays. It doesn't have to stay this way. I did this in a completely different way, I think, I really did. I did the way I wanted to do it. It didn't bother me at all that I wasn't doing what other people did. And the point being that it was successful. And the point being that, yeah, if you're working for a company that is, that, uh, is laying all people and firing people because they're, [00:27:00] they're ultimately concerned with the bottom line.

I mean, with, and with, you know, maximizing, not optimizing, maximizing profits and ebitda. That's, this is what you get, this is what you get. And when you, when you as a consumer go out and buy something, uh, in your, your major concern is, well, can I find it someplace else cheaper? Well, you want to know who drives this stuff to China's somebody like you.

It's somebody that over everything else is concerned about. The price and you, you can complain about, well, why is every, you know, what is this about everything being made in China and it's poorly done because the Chinese, honest to God, with a lot of these things, they're really, they're very, very nice people.

They're bright people, but ultimately they don't understand in a lot of situations the product that they're making. They don't understand this at all and they make a product that [00:28:00] conforms to what a banker or what a finance guy at a large company who probably owns no or very little equity in that company.

What they think about, what they, what they care about. It's ridiculous. You don't have to do it that way. You can stand up and say, I'm not gonna do this. This is a good reason to start a company and do what you want to do and run it the way you want to run it.

Marcus Cauchi: Couldn't agree more. I mean, I'm not sure whether, um, you, you were briefed.

I'm a a fractional chief revenue officer primarily, and I work in the area of strategic alliances, management enablement and sales optimization. Um, but what I'm doing all the time is trying to work out how we can make sales a force for good. And we, we've established a community trying to discuss the difficult questions, and that's what the, the podcast is really feeding, it's feeding that movement.

Carey Smith: [00:29:00] Yeah, I was, that wasn't directed at you?

Marcus Cauchi: Uh, no, no, no. I, I, I recognize that, but, uh, I'm, I'm curious.

In terms of your, the team that you built around you how diverse and how different were they in terms of perspective?

Marcus Cauchi: In terms of your, the team that you built around you

Carey Smith: Yes.

Marcus Cauchi: How diverse and how different were they in terms of perspective? So when you put their, all of their eyes on a problem, you actually got a, a range of solutions and they ended up with better outcomes rather than a homogenized view, which only gave a

Carey Smith: Yes. Oh yes. No, I, I think that, we're very, very collaborative and this whole bit about people working from home, I mean, that's complete bullshit. It, it, it, it's fine if all you're doing is coding or, or writing an article on spec, but if you're actually, I mean, teams can't work if they're not team together. And when we used to have, it's sort of funny, when we used to have engineering reviews, I would have people come [00:30:00] in from all, all over the company various times just to see what they thought about it, because we had, you would have crazy good ideas from, uh, as relates engineering or design from somebody in the IT department or from somebody on the production line.

It was, you do much, much better when you mix it up. And in terms of what they refer to as diversity today, typically, I always think about it more in intellectually, but, but we, we hired, we never tried to hire anybody other than the absolute best people. And in the course of doing that, we had people from all over the world.

I mean, we had Ukrainians, we had Africans, we had Australians. Australians. Imagine hiring an Australian that shows how diverse we really were. Seriously, uh, you can't, you can't help but make fun of Australians.

The blind spots that your team helped you to identify

Marcus Cauchi: Yeah. It's only [00:31:00] fair. Unless you're Kiwi who they take the piss outta. So, so this has been a really fascinating conversation and unfortunately we're coming close to the end and I, I'm really curious about the blind spots that you, uh, that your team helped you to identify.

Carey Smith: I think my blind spot is, I have a tendency to defer, not defer. I have a bias towards people that are intellectually aggressive and sometimes that, I mean, it's the, I guess maybe it's the salesman selling the salesman. And I have to be very careful of that. And that's where it's great to have a team because they're not susceptible or not as susceptible to that as I think I am.

And what that means in terms of what we do today, which is invest, we do a lot of investing, is that I'll be taken by [00:32:00] the approach of a specific entrepreneur for whatever reason. But they typically are, you know, they grasp, they grasp the problem, they grasp the, their approach, they grasp the market. They have a feel for it.

It doesn't necessarily mean that they know how to run a company. Running a company and, and, and, and being a business starter or entrepreneur are two totally different things. And when you're investing, you really have to look at who's running the company and how they're running. And if, uh, I will say this, if they're, if they're overly concerned with the bottom line, that doesn't get very far with the way we look at the world.

So, so I guess that all ties it together there in a sense.

Marcus Cauchi: Very interesting. Okay, so do you mind if I ask, ask you a really tough question?

Carey Smith: Sure, sure.

How are you preparing the founders of your investments for what's coming up?

Marcus Cauchi: How are you preparing the founders of your [00:33:00] investments for what's coming up?

Carey Smith: It's very difficult. I mean, the way I look at it is there's lots of money out there and so people, if they in, if they want to have investors, they can surely find somebody to invest and most of that money is pretty dumb money, and we try to be more than that.

I will say that on the one side, what it takes to be an entrepreneur and a business then start a business, is sort of a, as you mentioned earlier, bullheaded approach to things. I mean, you really are people not easily dissuaded, uh, from their own ideas. Consequently, if you invest in a company like that, you're gonna have a hard time, even, even, I mean, I think I know a little bit about starting businesses and running businesses, and even though the people that we invest in will laude me for that, they're not [00:34:00] the natural candidates to take advice. And so it's sort of, it's so weird. It's it people don't listen very well. It takes 'em a long, long time. I think our most, our most successful, uh, investments in terms of shifting the way that the, uh, entrepreneur thinks it takes, it takes, it takes years. I mean, they have to see it happen.

And if they're smart, they can change.

How important is it to have friction between the investors and the investees in order to come up with better outcomes?

Marcus Cauchi: So how important is that I, is it to have friction between the investors and the investees in order to come up with better outcomes?

Carey Smith: I don't know. Without friction you've got nothing. But I mean, nothing happens with, with, with no friction. But I don't, it, it would be, it's ni it would be amazing if you could find somebody that would take your advice [00:35:00] and do what you suggested, but I'm pretty sure I wouldn't take my own advice if I was 30 years younger.

Uh, so I, I can't blame somebody else for, for not taking it. I mean, friction has its, but, I don't, I in, um, I don't, in, in,

Marcus Cauchi: Well, there's constructive conflict. And there's destructive conflict.

Carey Smith: Yeah. But you conflict is on a personal level, is I, I don't think is ever any good. Uh,

Marcus Cauchi: No.

Carey Smith: I mean, if you, if you can, if you can minimize, it's difficult. It's difficult.

Marcus Cauchi: I find that a good, rigorous debate. That where the parameters are that it never becomes personal. And no one hogs the limelight. And you're gonna,

Carey Smith: I, I think that, I think that's true with, with people that work with you, with employees, that has to be true. But you're talking about, when you're talking about another set of people that are [00:36:00] completely auto or basically autonomous, uh, that's very difficult.

Uh, it's very, very difficult. Um, because that, that. You're ta keep in mind that a lot of these people are relatively young. They're, they're, they're, uh, they've got a lot of energy. They're very confident. Um, and they're, they're, they're simply not, they're not the sort of people that, that roll over easily.

And, and so it, what it takes for success, probably success are exactly the things that, that hold him back and it held me back. I mean, it's the same thing. It's always the same thing. So it's a, it's a yin and yang. So I guess the answer is, you know, you have to find the right level of friction because you can get to a point where you just absolutely loathe each other. God no.

Marcus Cauchi: Well that, that, yeah, it's like, it's like in sales. You never take the prospect to the couch.

How long did it take you to find a good COO or the CFO or whoever your number two was?

[00:37:00]

Marcus Cauchi: So help me understand this then. It must be really important as you're starting to build a business that's in the hundreds of millions to have a good, reliable number two, how long did it take you to find a good COO or the CFO or whoever your number two was?

Carey Smith: Actually, I think one of my feelings was I didn't. And I recognize that, I mean, at some point you have to recognize that you need a number two, I mean, you'll always want a co-worker, but I didn't really recognize that fully until, gosh, I mean, 15 years in and because of the way we ran the business. I, I employed, I hired a lot of very young people that I trained because the, this sounds terrible probably, but, but hiring older people that, and when I mean old, I mean, I shouldn't even be talking about this.[00:38:00]

Marcus Cauchi: We can delete that if you like.

Carey Smith: Here's the thing is that, that when people, I mean, when they get to a certain age, I mean they can't change. I mean they, it's hard for

Marcus Cauchi: They habituate.

Carey Smith: Yeah. It's hard for them to accept new ideas and, and younger people you may hire a lot of them and some of them don't work out so well, but the ones that do the really smart ones, and there's a lot of smart ones you can train.

Because they think the way you think because this is their first, this is, they're, they're indoctrinated. I mean, this is their first job outta school. And it turned out that by doing that, I think it kept us very live in, in terms of products and the way we approached things and what we did. But on the other hand, it meant that we really didn't have middle management.

Because we didn't hire for that. We wouldn't have ever hired for that. And so [00:39:00] ultimately for a somebody to, to be a, a partner in the business, I worked with several people, but I wouldn't suggest that they were the right people. Actually, there were people that were working in various departments that I had much, much more respect for in terms of what they thought about the business. And those are the people that I, that I would, uh, that I would work with more closely. Um, that's, so I, I did a terrible job at that. I really did a terrible job. I think.

Marcus Cauchi: It can't been all bad. There are two things that going through my mind at the moment that I wanna finish on.

And the first one is that, um, I, in terms of when you face a problem, it sounds to me like your natural instinct is to lean into it rather than lean out. Um,

Carey Smith: That's business.

Marcus Cauchi: Right. Okay. So again, in terms of the people that you surrounded yourself with, [00:40:00] presumably that's a critical quality that all of them would have to have at the senior leadership level.

Carey Smith: Agreed. Because I mean, what do you need people to, I mean, you don't need yes, men. You just don't need that. It's not doing you any good. If you can't tell me something I'm doing wrong, then I don't need you.

Marcus Cauchi: That takes a leader who is willing to be vulnerable.

Carey Smith: Well, I think that maybe, I think that that if you're honest, uh, with yourself and you're honest with your business endeavor, you recognize that there's, there's no way that you could get it right.

I mean, the times that you thought that you always had the right answer, I mean, that falls away fairly quickly. I That's not viable long term. Uh, you have to recognize that other people have ideas that sometimes are much, much better than yours. And, and, and you have to probe. You have to, you have to make sure that they understand that, that, um, that you want to hear that, and that they understand that if [00:41:00] it's wrong.

So what? I mean, you can make a mistake. And I think that was one of the things that, that was helpful. For us was the recognition by the people, all, all of the people or most of the people in the company that making mistakes was, I mean, it, it didn't, it didn't count against you. What counted against you was, was not collaborating with others.

If you made a mistake and you did it on your own, you were in trouble. If you made a mistake and you, you talked about it with others and everybody was on board with it, then that's, it's not a mistake. I mean, it's just something we know better.

What's the best you've ever seen when it came to sales when you were the buyer? What was the experience like and why were they so stand apart?

Marcus Cauchi: Okay. This has been really fascinating, so I'm gonna end on the crescendo question. And I'm really curious to learn your answer to this one, which is what's the best you've ever seen when it came to sales when you were the buyer? What was the experience like and what, why, why were they [00:42:00] so stand apart?

Carey Smith: When I was the buyer? I don't know. I, I think that, uh, when you, if you feel like on an on a, on an intellectual basis that, that the seller is, is at the same level as you are in terms of understanding the problem.

If they don't understand your problem, they can't possibly offer you a solution, and then you're, you're just, you know, you're piecing things together on your own, which is not well with a good salesman. That shouldn't be the customer's job, the customer, the salesman should present the analysis of the customer's problem to them and solve it.

I mean, that's what a good salesman does. From a customer's perspective, when I feel like that's happened, I feel good about it. I mean, I think that that's, that's a good investment. I can think several things that I [00:43:00] did, I mean, we bought out a, um, Uh, 3D printer at the company a long, long, long time, but before they were ever popular, I felt very good about that and I felt pretty good about the salesperson.

Um, though, admittedly I did a lot of work on that myself, or we had as a company, uh, We, we bought things, uh, for example, gearboxes that we had. There are a lot of companies that, that make gearboxes, and that's just the, the, the mechanism between the motor and the motor runs at a certain RPM standard motors and the gearbox translates that RPM into, you know, multiple RPMs.

Um, so you can control the speed of the motor, uh, ultimately. And we dealt with a supplier that honest to God charged three times what everybody else charged, which actually was the, in, in the [00:44:00] older fans was the, the major piece of hardware. I mean, it was the most expensive part of the fan and they, the reason that we purchased for them from them was one, I knew the family.

It's a German fam. I got to know the family after doing all of this with them. And they're in Germany, but they built a plant about 30 miles away from us to help us do this, to build. We designed a gearbox with them because we did not know how to design gear boxes, but they had done that for decades. But they put all of their engineering at our disposal and we built and designed and built it a gearbox.

That was fit for what we were doing because no other gearbox is or was. And I always felt that that was, that was the ultimate sale because one, it was tens of millions of dollars to them. Secondly, they were nice people. [00:45:00] And thirdly, that gearbox, honest to God. Never failed, never fail, never ever, ever failed.

And I guess the oldest ones are like 15 years old. It never freaking failed.

Marcus Cauchi: Wow.

Carey Smith: It was the best.

How much did you save in maintenance and engineering costs?

Marcus Cauchi: How much did you save in maintenance and engineering costs?

Carey Smith: What was interesting about this one, but we keep in mind that these fans were 20, 30 feet above your head. So doing maintenance on 'em was ridiculously hard.

Marcus Cauchi: Yeah.

Carey Smith: And so part of the solution to the problem and the gearbox really is what the motors are motors. I mean, motors are, they're a dime a dozen almost. Gearbox is something totally different. And so one of the, one of the specs was that it was a no maintenance gearbox, which meant that it didn't breathe air, it was completely sealed, and we actually had it sealed with nitrogen, which is sort of a fancy way of saying that, that, that it was airtight.[00:46:00]

And because of that, the oil didn't get dirty. The oil was completely clean, and it meant that we had to run different ratios because we had to keep it cooler than we would otherwise keep it if we had one that was vented to the atmosphere. It was a great, great relationship and I think that that's one of the things that's easy to overlook in business is your suppliers.

Your suppliers, I think are a, are a resource and that they shouldn't be in China or they should be within, within a drive. But, uh, the supplier's incredibly important because they know what they know. They know their product better than you're ever gonna know it, and they can improve upon it. And if you're not trying to nickel and dime 'em, if you're not trying to extend their payments, if you're not try, if you treat 'em like real people.

Then they can do wonderful things for you. But again, that just comes back to the whole, my approach to the whole thing, which is if you treat everybody the way you would like to [00:47:00] be treated, honest to God, it just, it's a cr-, it's incredible, it works. Crazy, but it works.

Marcus Cauchi: Carrie Smith, thank you. This has been really eye-opening and very, very informative.

Thank you.

Carey Smith: Well, thank you, Marcus. I appreciate your time.

How can people get hold of you?

Marcus Cauchi: How can people get hold of you?

Carey Smith: The email is the easiest way. And that would be, uh, Carey, C A R E Y, at unorthodox ventures.com.

Marcus Cauchi: Excellent. Carey Smith, thank you very much.

Carey Smith: Thank you.

Marcus Cauchi: So this is Marcus Cauchi signing off once again from the Inquisitor Podcast.

If you've enjoyed this, then please like, comment, share and subscribe, and also tag somebody who would benefit from listening to Carey's story. There's a lot to unpack here, and if you are a leader or a founder, there's a hell of a lot of value here in paying attention to what Carrie values the most. And if you wanna get in touch with either him or me, [00:48:00] then my email is marcus@laughs-lasts.com.

In the meantime, stay safe and happy selling. Bye-bye.

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