[00:00:02] Speaker A: Welcome to Intentional growth, a show that teaches you as a business owner and entrepreneur to view and run your company like a financial asset, which will allow you to enjoy work, create wealth, and make an impact. This mindset will help you focus on building a more valuable business and give you the choices to grow, acquire, reinvest, or exit. Live the life you plan for all with intention. And now, here's your host, Ryan Tansom.
[00:00:32] Speaker B: What's going on, everybody? Welcome back. Thanks for tuning in. I am very excited for today's guest. I was stumbling through LinkedIn over the holidays, and I came across an article from a guest that was on the show, Daniel Goldstein, back in 2018. I've stayed in touch with Daniel, and he just retired from the CEO of Folions, and he wrote an article called beyond Rainbows and Unicorns, the case for talking about ESOP companies as a business. And the reason I'm excited to have Daniel back on the show is because he has had a lot of activity since 2018 when he was on the show. He became the CEO of Folions in 2017, and his whole goal was to take this 134 year old business that had been concentrated in the traditional media space to diversify its portfolio as an EsoP holding company. They ended up buying ambulance manufacturers, as well as a horse and trailer livestock manufacturer and some other companies. And so Daniel's been doing all of that since I spoke to him last, and they've had crazy growth and a higher performance than they've had in a long time. In 2020, the ESOP achieved its highest share value since the inception of the ESOP in 1986, and then they were awarded the 2022 National Employee owned Company of the year by the ESoP Association. Daniel also sits on the board of many esoPs, and he previously just retired from the executive board of the ESoP association as well. And so Daniel has been heavily involved in employee ownership after coming from a traditional finance background, working with a lot of high net worth individuals as well as a lot of investors. And Daniel is going to be talking to me today about what is the case for esops, how esops play a role in growing equity value for the founders, for the original people that created the company, as well as the employees. And he's going to be talking about how ESOP holding companies work and how they benefit not just the financial well being, but also the health of the employees who work at the companies, too. And I think this is just a great conversation around why an ESOP can be a potential valuable exit for anybody to monetize their company. Whether you're going to sell to an ESOP and you actually want to take all your chips off the table, but you don't want to do an ESOP. There's just a lot of ground that we cover in this conversation. So thanks, everybody, for tuning in, and I really hope you enjoy this interview with Daniel.
[00:02:50] Speaker A: This episode is brought to you by Arcona's fractional CFO services. Arcona's fractional cfos integrate into your management team and assume the responsibility of the CFO. They become your strategic financial partner to help you run the business, create your value growth plan, and build the financial roadmap to the valuation you want to achieve.
[00:03:13] Speaker B: Good morning, Daniel. How are you?
[00:03:15] Speaker C: Good morning. I'm doing great.
[00:03:17] Speaker B: I am so excited for this conversation. It took all my energy to resist just diving into all the questions right when we were just chatting.
I'll put a container on it. Daniel is our conversation.
I think it was 2017. You're on the podcast, and I don't know if you just started at foliance or.
[00:03:37] Speaker C: It's been just about a year. I just been named co. And actually, I need to start with my disclaimer. So, as we're going to get into, I am no longer associated with Foleyans. I've retired from my role, and I am not representing any other entity which I may be associated with. This is just Daniel Goldstein speaking. As a matter of fact, I have set up my own entity called Go ESOP, LLC. So I will show up today as the CEO of Go ESOp LLC, independent Thinker.
[00:04:08] Speaker B: I love it. Absolutely. I love it. Unfiltered. Well, and I think when I had reached out, you had posted an article on LinkedIn, and I realized it had been six years, so I'll kind of start it with what I had said in the pre call is, like, when I interviewed you, and I named it, like, 134 year old company, the purest form of capitalism. And I had barely understood esops, man. And now I'm, like, down the rabbit hole about how they're structured, why, and all these different things, and I just wanted to get you back on. And then you had just recently said that, well, you're doing other things now, and so I'll let you explain to the audience what you're doing. But I just thought, for my own personal journey, you never step into the same river twice. And I just can go back and I think about all of the things you said and how true they are, but I just didn't know how true they were six years ago. So why don't you just give everybody what foleyance was doing and then what you're doing now and then we can unpack some of the topics.
[00:05:03] Speaker C: So back in 2017, Folence was an aspirational idea of building a holding company of unrelated businesses. And sort of real fast forward, the company acquired an ambulance manufacturing business in 2017, acquired a horse and trailer manufacturing business in 2018. 2019. Everything was just going great for all the businesses, including the media business. And so 2020 was going to be the year, and of course, then March of 2020 hit. And so that changed everybody's plans. And what it also did was it gave from going of the aspirational and sort of the academic case study to now the actual proof that diversification can work. Because throughout the pandemic, the company not only reached its highest share value since inception of being an ESOP in 1986, and then exceeded that year on year, it also was awarded the 2022 National Employee owned company of the year by the ESoP association, which they were very proud of. And basically it works.
[00:06:17] Speaker B: For the listeners. It wasn't it Cedar Rapids Gazette, like over 100 years ago. So you talk about the newspaper business and you're buying manufacturing companies in different industries.
[00:06:26] Speaker C: And that newspaper business, which also includes digital assets and other businesses, celebrated their 140th anniversary almost exactly a year ago. And so they're in their 141st year.
That's crazy. Also, during the pandemic, I got to the point where the company is now sustainable, with a path forward with growth and profitability, with a good culture. And I felt that was at a point where I could be free to move on and transition to a successor, which I did through a two year process. And so I have just formally finished three days ago with foliants. I'm not using the word retire, I'm not getting another full time job, but I am also not going to do nothing. So as people do in this situation, I set up my own LLC to effectively manage my own activities. I'm on the boards of several ESOP companies around the country, primarily in manufacturing, because that's an area which I have a lot of affinity for, which we can talk about. And I continue to serve on the board of the ESOP association Employee ownership foundation. I'm doing more writing, and I'm going to be doing more research. And I guess this will be my.
[00:07:43] Speaker B: Your mantra is Go ESop, right? That's your LLC name. I kind of get it.
[00:07:48] Speaker C: I should have brought my old license plate here, but soon I'm going to have a new one, and then the other you get a scoop because it has not been publicly announced. But also, as of two days ago, I was named an executive fellow at the Rutgers Institute for the study.
[00:08:06] Speaker B: Congratulations.
[00:08:07] Speaker C: I'm really thrilled to be doing this next week.
[00:08:12] Speaker B: We have a lot to unpack with all that. And before we do, Daniel, I want to give the listeners that haven't caught your previous episode, what were you doing before folions? Because that is interesting context. I think for the whole journey, you just didn't pop out of the sky saying like, go Esop. I think there was an interesting journey here.
[00:08:33] Speaker C: Well, so there is a joke that I had both a car and a motorcycle, and my car license plate was go ESOP. My motorcycle license plate was ESOP because it's a smaller license plate. And the joke is that the reason why I did that is because eight years ago, I didn't know how to spell ESoP. And so before that. But what it actually fits with the merging of the past. For over 20 years, I worked in the area of family business, family investment, family foundation, family office. That's what the capital s. Those are the ultra high net worth families taking care of managing businesses, m and a entities setting up foundations, managing yachts, all kinds of things. And it was probably capitalism and tax.
[00:09:22] Speaker B: Savings at its finest would be my thought.
[00:09:25] Speaker C: Right? It is.
While that is about private owners getting very wealthy through their own entrepreneurial and hard efforts, it's also about long term patient capital. And over 20 years ago, we started talking about in that industry, the silver tsunami that was coming of the baby boomers retiring, and that there was going to be the largest passage of wealth and transition of ownership, not just of financial assets, but of businesses coming up. And so as I got into the ESOP world, there's that great continuation of those two that a lot of these privately owned businesses are very eligibly going to be transitioning, or could be transitioning to employee ownership, which keeps the companies local, invests in the employees, continues the brand, the legacy, and rewards those employees that help build the wealth for the private owners. But that reward is earned, and that's where it goes back to the purest form of capitalism. I used to say that the stock that employee owners received was free because they don't ever pay for it. But I was admonished by employee owners who said, we work hard for that.
[00:10:39] Speaker B: So I wake up and put my boots on, and that works before we get in, because I think, again, I want to get into what you're going to be exploring. And we have kind of a short list of topics that we're going to unpack. But Dan, I'm curious. So you said that on your motorcycle, you just had ESAP and you didn't know how it was spelled. And it's funny because my partners had said the same thing before they did the ESAP, because they're like, yeah, I didn't know how to spell EspAP. And then six months later, we did an ESP with almost 300 employees.
And I feel like I had a similar situation where all of my background lent insight to. When I heard about it, I was like, what the hell? And then it was just like this expedited drinking through a fire hose. But it wasn't where it was leaking out the side. It all just made sense to me. So what happened to you when you heard about it?
What was your mindset or your thought process at that time where it clicked for you?
[00:11:38] Speaker C: So, great question. And I knew that when I was named president CEO of the company that I needed to get some additional development. And I've owned my own businesses, I've managed businesses. I have an MBA and a second master's degree.
And I knew that that wasn't going to be enough. And so I went out and researched, and there's a great program called leading in an ownership setting, which is held at the University of Pennsylvania. And anyone can go onto the employee ownership foundation website, it's employeeownershipfoundation.org, to find information about this. Dr. Ginny Vanderslic started this program over 20 years ago, and it is specifically and uniquely the only program that is geared towards developing the president CEO of an ESOP. And that's where I started to unpack all this and peel back the layers of the onion, because what you see a lot of information about is that an ESOP is a financial scheme, and there are people out there touting that it's tax free and all this. Yes, and that is a very minimal part of this.
[00:12:54] Speaker B: It's one puzzle piece of the entire picture.
[00:12:56] Speaker C: Yeah. And then there's the other misnomer that once you become employee owned, that does everything. And actually, it doesn't. As a matter of fact, it can create more confusion, entitlement, and problems if you don't educate employees on what it means to be an employee owner, because there's a huge difference between being an owner or the owner and being an employee owner. So an employee owner. Employee ownership is about shared value and helping to educate on how your contributions lead to productivity, safety, profitability, et cetera. But it's not about being an owner. For one thing, you don't have the liability. The other thing is that it's not like a co op structure where it's one vote per employee. It is a very different thing. So going through this program was the start of that. And I learned early on from listening to CEO of another very successful ESOP. He said something interesting, that they offer a financial benefit to their employee owners because of the great employee ownership culture they have. And that's when the light bulb went off, that you can't do it the other way around. And the company that I was in had for many years led with there's a financial benefit and then sort of tried to add on some culture, and that doesn't work because when share prices go up, people say, that's great, and then they don't pay attention. When they go down, they usually say something which is not that great, and they blame management instead. If you turn it around and you lead with culture and then add on the financial benefit, then you get people's attention. And I've often said that I can't think of a single long term employee owner or short term tenured employee owner who comes in in the morning, looks up their ESOP account, and says, okay, I'm motivated for the day. That happens once or twice a year, particularly when you get the new share reveal. And so it's really about leading with the culture.
[00:14:57] Speaker B: I love how you've unpacked that and curious on what you think about. When I describe how I think about this topic is like a couple of different comments that I make, because I'm having these conversations on a daily basis, comparing this to other structures. And people are like, well, an EsOP breeds socialism. And I'm like, or an ESOP, whatever it might be. And they're talking about what people are doing. And I'm like, if you're a C Corp or an LLC, does it impact your culture?
What I'm trying to explain is, just because the financial ownership structure is a certain way, it's not going to change the people's behavior. Management still has to change the people's behavior. And then the way I kind of think about it is I ran a sales team of 24 people where it's like, you could have a great sales team and a shitty comp plan, and at some point that's not going to work. Those salespeople are going to go leave to go somewhere else. Or you can have a great comp plan and a crappy sales team, but if you have both, I'm trying to help because I'm tracking exactly what you're saying, where it's the combination of the people leveraging the culture and then having, I think where you had said in our last conversation, the purest form of capitalism, where the incentive structure is optimized, where everybody gets what they've earned, not what they've given for free, or they're disproportionately not given what other people.
[00:16:24] Speaker C: Me, I'm known for using little stories. Let me give you a little story. One of the things I did when I was working in my prior life, before the ESOP world, is with a private family foundation. I got involved with special summer camp programs for kids with cancer and serious illness. And I'd had a wonderful opportunity to work with Paul Newman before he passed away. And I started an international program, which still continues in different form today.
But while this program is for kids with serious illness, any kid who, if they could have gone through this program, would have benefited from it, because it's all about getting out of your comfort zone zone, not going into your panic zone, giving you better self reliance, giving you better challenges by choice to help you find how to grow. It's the same thing with employee ownership. The stuff that we do in ESops would be great in any company. It's just a little bit more authentic with an ESOP, because that's where then where you do have the financial benefit. You're also going to be able to show how people are benefiting financially from that. But any company, if they treated their employees well and got them engaged and made them safe.
[00:17:35] Speaker B: You know Tom Walter from tasty catering by chance?
[00:17:38] Speaker C: I don't.
[00:17:39] Speaker B: You would really like him, but he's got everything an ESAP culture would have. But he's not an said. And I asked him, do you think you need to be an ESOP? His particular answer with his situation was his employees actually don't want the ownership.
As far as the reliability or the liability. In whatever context he was in his situation, it was in, it made sense, but it still worked. His culture was still great. But if you were to enhance that, I think by people creating financial wealth at the same time, I'm assuming there would be a net positive. That's an assumption that I maybe shouldn't make, but it feels right to me.
[00:18:22] Speaker C: Agreed.
All of this, that's not socialism.
Having good job satisfaction, enjoying working in a safe environment, being able to engage to your fullest level of participation that you want to bring, that's not socialism. That's just a great place to work. And I didn't do the math for today, so I'm not going to be able to do it. But if you assume that most people are going to work 40 years, maybe more during their lifetime, and just assume a 40 hours a week, if you start doing the math of 40 times 52 times 40, that's a long time to be spending in a work environment that is oppressive, demeaning, unsafe. That's why this is not socialism. This is a majority of your life is spent in that environment.
Doesn't everybody want to enjoy that to some extent?
[00:19:21] Speaker B: Well, amen to that.
I think about. Okay, so there's two comments that I wanted to hear your thoughts on. Is one, is that my wife, the listeners have heard this, our pillow talk. Can you only imagine what it is? But two years ago she was looking for a new job. And I'm like, why would you go work for anywhere that you don't get equity? So if you're going to work and get a w two paycheck and have to after tax, so reduce your annual income to put 18 grand into a 401k, that's going to be worth who knows what in 30 years, given the whole system. Or you could just work and get equity every single year based on your percentage of payroll.
If you're going to spend that time anyways, why wouldn't you want to go get the equity growth? Well, so now, God bless it, she's working at an ESOP and has for two years now.
[00:20:13] Speaker C: Oh great.
[00:20:13] Speaker B: Yeah. You sought out an employer that was an ESOP for that.
So I'd say that's a comment on the equity growth just for the pure time. It's like how you accidentally just end up paying your house off if you live in the same house by working. And the second comment, Daniel, is maybe speak to my listeners. They understand that I'm a big proponent of you have to take off and separate your ownership hat that cares about equity growth and the trade offs between reinvestment and distributions compared to then your leadership hat which is operations and the NisSOp. It's very clearly distinguished of those two. And so when you're commenting out the socialism that people have, and it's just an.org chart, right, with payroll, the forklift driver is not giving you the CEO voting rights about whether you should buy the ambulance company, right.
[00:21:16] Speaker C: That article that you mentioned, the title is beyond rainbows and unicorns, the case for considering esops as businesses. And it's because that is actually what you need to do. It is still a business. And a business needs the right people at every role making decisions because they have the experience, the skills, the training, development, the information, et cetera. So esops do tend to be much more transparent and include more people in that. But it's not rule by committee, and it's not the forklift driver deciding how to allocate capital, but it's not the CFO deciding how to drive a forklift. So it works both ways. That's no way to put it, because I get that sometimes. Do you have a production worker saying on the board, I say no, because if you looked at the board that we had, that is still there. It's very high performing people that have really specific skills, industry experience, networks, training, development, et cetera, to be making those decisions. I've never had anyone say, hey, can we get a board member to tell the welder how to do their job? And that would be the flip of that. So there's that. As far as the ownership distribution, that's really interesting because it's actually getting back to that capital allocation, for example. I remember that at one point, I think it was when we were announcing the acquisition of the horse and trailer company. I got a question of, why are we spending money to buy a company when we could just be distributing that to employees? And.
[00:22:57] Speaker B: Good answer. Yeah, I love it. Show me your intent, Daniel.
[00:23:03] Speaker C: That's all about investing to grow value in the future sustainably and with compounding capital appreciation.
The sort of analogy would be, why don't you just sell your house, take out whatever equity is in it, and just spend it all on tvs, Disney World.
Well, you don't do that because you're building up a store value for your future. And that's the same thing. Whether you're investing to acquire a company, you're investing in capex, automated advanced manufacturing technology, et cetera. There's that trade off between.
You want to be distributing what is enough for competitive wage, benefits, et cetera, to get you through your income side, which is gained at the end of the month and the end of the year. But you want to store up enough with capital appreciation to get you through the wealth side, which is gain you through your retirement.
[00:24:01] Speaker B: That is so beautiful, Daniel. And it's so in line with what I'm out promoting, with intentional growth. And it's really this target equity valuation and understanding the tradeoffs of distributions versus reinvestment. And the only way that I believe that people can have this lens is if they understand valuations. Because isn't that just at the fundamental level, what life is about is like, okay, we need more money today, but how does that impact our future?
And then like, okay, well, if we take more today, what are our expectations for the future? And it's just this balance between the short term and long term. And that's really what you're just highlighting and what I find so fascinating. And maybe we can start going down the rabbit hole of the holding company. And I know there's a couple of other topics we talked about, but can.
[00:24:53] Speaker C: I introduce for 1 second? Absolutely. Besides being the purest form of capitalism, one of the greatest arguments against the socialism, and I'm going to have to ruin your podcast to stand up, to reach for something.
[00:25:07] Speaker B: You got the blurred background. You got it. You nailed it.
[00:25:10] Speaker C: I got the blurred background for a moment to show my bare wall behind me. Because this is not only the purest form of capitalism, it also has to do with american history. And so everyone should read the citizens share written by Joseph Blasey, Richard Freeman and Douglas Cruz. And what this does is it traces employee ownership to the very foundations of our so. And this is not political on either side, no matter what you can about our country. Well, it's about the whole foundations of why this country was founded. And so employee ownership, the ESOP is coming into its 50th anniversary this year of being legislated in 1974 with ERISA. But the concept of employee ownership actually predates that by centuries. And I won't get into the whole thing, but readers should absolutely read that book.
[00:26:08] Speaker B: I'm too curious because I have not read that book. And by the time, hopefully the listeners hear me next, I will have, because I can't get enough of this.
[00:26:15] Speaker C: What?
[00:26:16] Speaker B: It's really funny and I don't want to digress too much, but I'm so sick and tired of the crap going on of the crony capitalism, man. We're like, hey, does Jamie Dimon make any more money? And how about Steve Schwartzman from Blackstone? And I love capitalism too, which is my frustrating part, because it's a nuanced conversation. But I'm sitting here going like, well, if we have democracy, when I think about Daniel. So my wife earns shares based on her percentage of wages of the total payroll. And if she has a higher paycheck, it's because she should be providing more value to the share growth. And it's like, well, no duh. It's just like so freaking ridiculous. Right now we have this mismatch where we tax ordinary income off the charts, which small business owners that have a pass through k one get hurt with that compared to the long term capital gains, where Steve Schwartzman and Blackstone can buy our single family houses and not pay any taxes. And it's just like, if you just look at the landscape, it's so out of whack. But I go like, hey, what if you were just to create a freaking EsOp for the whole country? And then there we got Social Security, we got our pensions, and if everybody just had a full payroll of the whole us and said, okay, and that's not socialism. And I'm just like, it's an incentive issue. And then how out of whack it is, right?
So I'm curious with that book, how does it take that concept and what were the thought processes behind that book and the foundation?
[00:27:48] Speaker C: So, for example, and I'm not going to do justice to this, I wish I had Joseph Blasey here or others back in the 16 hundreds, maybe 1500s, but one, six hundreds, I believe it was the cod fishing boats. The crew on the boat actually owned a share. And so whatever the catch was, they owned a share of the catch. They weren't just paid for their time working on the boat.
That's basically output.
[00:28:19] Speaker B: It's labor and output, right? Like, you're on the boat working with your time, and then you have a certain amount of catch that comes in. Super fascinating.
[00:28:29] Speaker C: Other interesting things that go back over time. The fact that once upon a time, people lived in what was sort of self reliant, agricultural.
You basically produced what was on your land, and you got to own that if you owned your land. Now, the problem is, and again, I'm paraphrasing the book and not doing it justice, land is finite. And as land started to be gobbled up by people that had more wealth, there was even less land to divide between people. And so being self reliant was going to be very difficult. And it was understood that shares are not finite. Shares can be infinite because you can have as many companies with as many shares. And so there's not that finite control of who gets to have land and earn what they produce. With shares, you don't have that constraint. And so you can get shares into the hands of more people, and then they can, like your wife, like I was doing, they can benefit from that by, you know, who's struggling with this right now, earning shares, do a little.
[00:29:45] Speaker B: Rabbit hole on farmers. And who owns the land compared to who's actually producing the actual food right now? I mean, holy crap, man, you can go into a dark place go down to that rabbit hole, they're paying rent, and it's 15,000, $25,000 an acre, and they can't even afford to buy their own land or afford to rent their own land, but they're the ones sitting with all the machinery.
But I think that analogy of the fishermen and then the catch is just so.
It's beautiful.
Let's talk about how this is actually tied right into the next question. I was going to ask about your holding company, because when I think about it, it's not just the Cedar Rapids gazette. It's like at the end of the day, if I'm waking up next to Daniel, and the reality is I want to have enough income, so does Daniel. And then we also both want to have enough wealth to be fine later.
How do we diversify our risk of making sure that you and I are fine long term?
How does that go into then, like the holding co?
[00:30:51] Speaker C: And again, speaking of hold cos in general, I make the analogy that in your don't just own one stock, and sure, if you bought apple at the right time and you held it, that would be great, but if you get in and out of it at different times, then you're going to be killed by the volatility.
While an ESOP is great, because if you didn't work for an ESOP, you wouldn't have any stock whatsoever. It is just one stock. A Holtco gives you that diversification of a portfolio of companies that lead to the value of that ESOP. And again, during the pandemic, that diversification of unrelated companies within the foliance portfolio proved to be not only successful, but so successful that it reached that highest share price and has grown since then. And there are other hold codes like that. And so now that I'm not associated with Foley's, I can also just talk in general about holding companies. I think that it's a great path to get companies to transition to employee ownership because it eliminates a lot of the costs and risk of becoming a standalone ESOP. And I think there's even going to be a role in the future of consolidation within the ESOP community, that there are going to be esops, probably some smaller ones, that they really haven't provided for the succession of the administration compliance of the ESOP. And so if they got together on a platform, there's the economic scalability of that centralized administration compliance, the evaluation, trustee, et cetera. And then by having a shared services model, they can afford competencies and technologies that they wouldn't be able to afford on their own.
[00:32:35] Speaker B: Pardon the brief interruption. I just want to explain to you why I think the intentional growth academy or starter kit might be something worth looking into. If you're interested in how esops work and how they even potentially compare to private equity in the intentional growth academy, the online academy that you can see in the link below. I have whiteboarded videos out of exactly how the money flows, how the deal structure works, how vesting works for employees, like how esops should be structured, and what that might mean for your cash upfront, your job, your legacy, your financial targets, everything, as well as private equity. So if you're curious on how an ESOP works and how it stacks up to everything else, go check out the starter kit if you're not ready to jump in, or there's a coupon code in the link below for $500 off the one 5000 hundred dollars do it yourself version of the online academy, or if you're interested in a two month coaching program with myself, it's $5,000 for two months. It comes with six calls and it comes with the online academy as well as a financial assessment. And if you're wondering about whether that's a fit or not, all you have to do is schedule discovery. Call in the link below. But no matter what, I'd say the best place to do is to start learning how this stuff works. Because as you can tell, I'm very fascinated about this topic and you don't have to know everything about it. But I think the biggest key component of this is understanding how it works. So you can say, yes, I do want to do that, or no, I don't, and you can explain why. Go check out the starter kit or schedule discovery call below. Thanks everybody, and I hope you enjoy the rest of the conversation with Daniel.
Isn't it that Daniel like the exact same logic that goes mechanically? So it's kind of like, again, if we're separating the two discussions of ownership versus operations, operationally, roll ups make sense mechanically all the time. It's just like it ends up with. That's where it's like the Pacman, where it ends up in the 14 people, Saudi Arabia's private equity fund instead of everybody else.
[00:34:41] Speaker C: And that's the difference, though, that the private equity roll ups, do they make sense? Maybe for the investors, not always for the employees, not always for the communities where the companies are located. What's nice about this, if you do a roll up in the ESOP world into an ESOP holdco, it's still patient, long term capital. And it's still making an investment in the employees, the brand, the community. And so that's the big difference. And one of the things that I specifically did was to, in the terms of today, appropriate a term from private equity and describing fullance as a platform for professional growth and ownership, because I wanted to use that term platform. It's a totally different platform when you're an ESOP holding company than when you're a roll up private equity company. You don't have that need to, within three to five years, go through another sale or transition to compress the IRR to return to your investors.
[00:35:40] Speaker B: I love.
So I want to unpack this a little bit further, but one of my comments is what I see a lot, Daniel, is the first principle of the five intention for the principles, like, what the heck do you want for the owner who's generally got the CEO title? So again, they generally have both hats. Like the privately held company, I have a percentage or a good percentage of this company for my ownership, but I'm also running the business.
Where I came up with, not came up with it, where just it became obvious to me is so many people were calling me up and saying, ryan, I want out. And I would just jump in and try to help them solve it. And I'm like, actually, after years, Dan, I don't know what the hell people want out of. And what happened was people would want out of employee reviews, supply chain issues, and it was more the job, not necessarily their.
So, but when I then layer on to that concept, what are we trying to get out of? And most of the people was like, I'm going to summarize a huge general, like a couple of thousand people that have said this to me is like, it's really, I want to have more strategic ideas and responsibility and less day to day crap. And I want to diversify my wealth where I want to essentially take some of my chips off the table. But I think it's got to be eight out of ten. Daniel, we're like, if they were to have a job where they are making strategic decisions, I'm like, hey, should we buy this company? What product should we launch, essentially on the board or on the CEO level, moving money around? I think this idea of like, hey, if I got onto the point where I could diversify and get my job, the crappy responsibilities out, they could move money around. And people don't need $50 million in cash to put into a Charles Schwab account for then a family office to manage. It's really like, I want my five or $10 million to make my two to $500,000, and just take a deep breath and then essentially go do the job that you did, which is you were. Because you don't have to be in private equity to do the capital allocation roll up strategy like you did that for six years inside of an ESOP structure.
[00:37:58] Speaker C: And let me tell you very specific example of this. I got a great opportunity to go and visit with Michael and Lin Terry this past year. They were the founders of Simaron Trailers and sold it to Foleans. And they wanted out, which meant that they wanted to retire, spend time with their grandkids, just sort of slow down and enjoy life after working really hard for a really long time to build this great company.
And they were really concerned that it went to be owned by the employees with an investment commitment to keep it in the community. And they were concerned that if the employees had to both manage the business and an ESOP, that there would be a distraction, which is why they liked the.
[00:38:51] Speaker B: Do you mind me, given some context, of how many employees did fullance have at this time and how many employees they had?
[00:38:57] Speaker C: You knew where I was going with this, Ryan. So I was just about to say that, because when I first met Michael and Lynn Terry, the company was 125 employees. In March of 2020, the company went down to 90 employees, because when Covid hit, nobody was thinking about buying a trailer. And so immediately, it was kind of like 2008 all over again.
And then there's this. And it's in that article, there's this sort of meteoric rise of Simron as it went through the pandemic. When I sat down with Michael and Lynn, something that I stressed to these business founders sellers is that the legacy that they create with their company is one thing, but the legacy that they create with employee ownership, to me, is much more impressive because that can have multigenerational changes to people's lives.
So I said to them, from 90 people in March of 2020, the company now is over 200 employees and now in two states and two locations, because they opened another location. And Michael looked at me and sort of admonished me and said, it's not 200 employees, Daniel. It's 200 families. I was like, you guys get it? And that was really cool to me because it's about creating a legacy of families. And a lot of those families have multiple generations working for the company, and they will continue having even further multiple generations.
[00:40:34] Speaker B: Just for some context, they're working at the trailer manufacturer, but their wealth is tied into the whole portfolio of homelands. Right.
There's what percent chance that Cedar Rapids Gazette, the newspaper business would be around right now? And so you have all of these people that are diversifying their wealth based on everybody else's shared goals of having a wealth retirement. That makes sense for them.
[00:40:59] Speaker C: The synergies that come across having access to capital, having access to greater talent, competency, technology than any of the individual companies can afford individual resources in the back office. And that's why ESop is already a great structure. And I believe that a holding company, and it's not going to be right for everyone but a holding company, ESop, can give even greater strength and risk mitigation to the businesses and to the employee owners and to their future.
[00:41:35] Speaker B: So cool.
So how many employees does Bollyons have at this point now? And how many different businesses or units, however you guys describe it, against.
[00:41:51] Speaker C: Outsider to publicly available information, just over 500 employee owners and three families of business, media, ambulance manufacturing, horse and trailer manufacturing. And I'm sure that in the future that they will continue with the strategy.
[00:42:11] Speaker B: That's awesome.
Let's talk about, you and I were talking about there's the wealth, and we've spent a lot of time right now on the wealth and the financial incentives and stuff like that. But you've got a couple passions behind safety and manufacturing. We can take whatever one of those you want first, but maybe the safety and how that's different.
[00:42:33] Speaker C: Yeah. So I start to get really focused on safety, because as things were ramping up during the pandemic and work was being done in a different way, because people had to socially distance, because supply chain meant that things couldn't go in a linear configuration through production, because sometimes they had to be moved off to the side to wait for parts that were coming in late or whatever, I noticed an increase in incidents, fortunately, nothing too serious. And I started talking with other ESop ceos, and I heard the same thing, and I knew that we were doing something wrong, but I wasn't sure how to do it right. And fortunately, I got introduced to a whole different world of doing safety differently. And it was through one of our partners. There's a company called make you safe, and it's M-A-K-U-S-A-F-E.
It's a technology startup in Iowa that developed a wearable safety device that would look kind of like a Fitbit. And what it does is it gives you data so you can make data driven safety decisions, which is fantastic. And in learning more about them and participating in safety symposiums that they put on. I was introduced to an author named Todd Conklin, who has a great book, doing safety differently. And the concept behind it is that traditionally what safety is about is management putting in rules and regulations and employees breaking them, because employees just don't follow rules and regulations.
[00:44:24] Speaker B: You know what I thought of, honestly, I have to admit there's two. Like if I was working for, quote unquote, the man without all of the stuff we've talked about, and someone said, hey, Ryan, wear this trackable device so I could tell you what to do. I have all of these thoughts that come right to my head that is probably not appropriate for this.
[00:44:45] Speaker C: There is a whole thing about. There were a lot of people that they thought this was big brother and all that it takes, again, education, transparency, sharing the data, showing how things are being improved, proving to them that you're.
[00:44:57] Speaker B: Not a crazy dictator.
[00:45:00] Speaker C: Yeah, but that's the whole thing.
It's not that employees are bad and are breaking rules and regulations. It's that how we imagine work to be done is not actually how work is done. And so I use a stupid example. Think about as you reach for something to drink. A beer bottle.
[00:45:23] Speaker B: I'm not drinking a beer, by the way. It's a water bottle.
[00:45:26] Speaker C: A beer bottle that has a cap that you need to have a bottle opener to open the cap. So what did we do in college when we didn't have.
[00:45:34] Speaker B: I chipped my tooth on doing that exact same thing.
[00:45:36] Speaker C: Okay, there you go. So you just saved me. What did you do? Work, as management dictates, is you must use a bottle opener.
[00:45:46] Speaker B: Yeah.
[00:45:46] Speaker C: You went and you opened a bottle and you damaged something or you hurt something. Well, it's not that you're a bad person. You didn't have a bottle. I really wanted that beer. You want that beer? Well, that's what a lot of employees do. They really want to get the job done. And so if they don't have the right tools, training, parts, whatever, they're going to still get the work done because they're good people. They actually want to get the work done. And so what you have to do is you have to flip the script. And instead of management giving rules and regulations that says you are doing work this way, and these are the rules, you have to throw that all out and you have to go to the employees and say, how are you doing your work?
How can we make that safer and better? And again, I don't want to take anything away from people should read Tod's book. It's his theories and he eloquently describes it. But the only way that you get to a better safety is instead of employees being the problem, employees have to be the solution and you have to engage.
So Gabe Glenn, the founder of make you safe, had this great thing that he told me. I think it was the first time that I met him, and he said, workplace accidents are the way that many companies find out about the risk in the workplace.
[00:47:04] Speaker B: Interesting.
[00:47:05] Speaker C: So if you engage employees, and what that means is that it actually gets to two things. One is it's about culture and leadership. So it's actually not about safety, because now you're talking about engaging employees to talk about and determine how they do their work in a safe and more productive manner. And that's about leadership. And leadership brings in culture, which has values. I believe it's Tod who says safety can't be a priority, because when things get tough, priorities get set aside. It has to be a value because you don't set aside your.
[00:47:45] Speaker B: Yeah, yeah.
[00:47:46] Speaker C: And so it's all about leadership and culture. And, oh, by the way, once you have that good leadership and culture, you're also going to be.
So there's that. And then the other thing, Gabe asked me, why are you so concerned about this? And I told him, I'll do a very quick version of the story. When I lived in Cedar Rapids, on Sunday mornings, I'd get up really early and I'd sneak out to the pool. And then I went to this little dive for breakfast because my wife didn't like going to it with me.
[00:48:20] Speaker B: What was your breakfast of choice? I got to ask.
[00:48:23] Speaker C: Two poached eggs and two pieces of toast.
[00:48:26] Speaker B: I can tell by how you say that your routine is you got the same thing every single day.
[00:48:29] Speaker C: Absolutely. They knew I didn't even have to order it, but it was in this blue collar neighborhood, and it was mainly retired people, which meant they either had worked in ag or in industry. And the way they moved, you could tell that their bodies were broken.
And it's really sad. Now, at the same time, I was invited to go and speak to the golden tea, that's tee club at the Cedar Rapids country club. So I went there as a very fancy dinner that was offered, and then I got up and entertained people and spoke, and the people that were there were the same age as at my little dive breakfast place, but their bodies aren't broken and they're out playing pickleball. And so it became this joke that safety is about letting people play pickleball when they retire. But really, what it is for me, is we talk about building up the wealth to fund your retirement through an ESOP. Safety is about building up the health and well being that you can enjoy your retirement without having a broken body. And so I agree that safety, usually you hear people say, we want you to return home at the end of the day in the same or better condition than when you came to work. That's great. I love it. That's like income. You want to get through the end of your paycheck, through the end of the month. Safety, to me is I want you to have that at the end of your working life. And that's the wealth part.
[00:49:55] Speaker B: Love it. Are you familiar with Daniel? So he wrote a book. It's right up there.
So he wrote a book. He's been on. So if people wanted to dive into this, I would highly suggest listening to Peter Atiya on Andrew Huberman's podcast. It's about 3 hours. And Peter's also been on Rogan, as well as all the other Lex Friedman and all these. But why I love it is there's two parts. Oh, man, I got so many comments. I love what you just said, daniel, because your example of seeing people at that stage and the huge contrasting difference is like, so Peter's deal is he's calling it medicine 3.0. He's an MD. And it's like, so ridiculous, daniel, he was on Rogan, and he was like, okay, here's the deal. I'm an MD. And he goes, I learned zero about nutrition, sleep, exercise, and mental health zero. I learned how to prescribe pills and cut people.
I won't go down that rabbit hole because I could do that. But his whole thing is medicine 3.0. And he's got this beautiful graph that I can send you from his book because we're all starting to see it with the baby boomers, like my grandparents or a lot of my. The people that are in the. For a decade, they're sitting in hospice or their memory care, and it's like, no, thank you. My father in law is like, ryan, you're going to kill me, right? And I'm like, paul, you. And I don't know exactly how to approach that topic, but my point is for that extra decade and a half, so Peter's deal is he wants to have the medicine 3.0. Eliminate the marginal decade is what he's calling it. And that's exactly what you're talking about. Daniel, what's the point of having $10 million if you can't wipe your own butt? Or you can't even name your own kids.
And I think the boomers are starting to realize that as how horrible our system is and they're going to be the ones that are going to be stuck there. But to your point, what a great way with an esop where everybody cares about income and equity, but also.
[00:52:06] Speaker C: The.
[00:52:06] Speaker B: Football players we're all seeing that can'tie their shoes.
[00:52:09] Speaker C: Yeah, it's just not worth it. I mean, it's not worth killing yourself or just destroying your body for the economic means. And that's where there has to be the balance.
[00:52:23] Speaker B: How are you doing it then? What are some of the practical ways of, instead of just, hey, you got home today, you got this data. What are different ways? Maybe here would be a better question of like, okay, so I think it's obvious of cutting and giving pills versus, like, hey, exercise, nutrition. How would you take that analogy and put into the workforce?
[00:52:45] Speaker C: Yeah. So using data driven decision making, you can really start to affect the outcome. And so, for example, looking for repetitive motion work, because repetitive motion usually causes a lot of soft tissue damage, which builds up over time. And there are different things that you can do with ergonomics, with power assist to move equipment, to hold equipment, positioning work, building capacity. So it's not just building failsafe systems, because the problem with failsafe systems is that they fail. But one of the big areas is moving away from being punitive to being more in a learning mode. So let me give an example.
If you almost make a mistake and you don't, and you're caught in the old paradigm, you're punished, as opposed to those are called often near misses. And if instead of being punished, you're encouraged to bring forward near misses, what you might find out is that, hey, there's a trend that there is this thing happening a lot. We need to fix that. And so now if you put that into the positive vernacular and you start calling them good catches, now you've changed the whole mindset of, yeah, it's not a bad thing to come forward. As a matter of fact, a lot of companies now, you don't want to necessarily reward a good catch because it can create some other issues of making them up or whatever, but you instead punish not coming forward.
[00:54:31] Speaker B: That's a good way.
[00:54:32] Speaker C: It'll do it.
[00:54:33] Speaker B: I love that because we used to give these awards for, like, we called it 212 degrees, where someone did something good, and then people were like, brokering these fake awards. I'm like, wait a second.
[00:54:46] Speaker C: You can enter into raffles so it's one out of 20. And so it's not guaranteed and all that. But if you flip the script and you're going to be either okay or rewarded for coming forward with an ear miss good catch. But you're going to be punished if you don't, then that makes people understand. And then you go, and instead of doing an investigation, you do learning. And again, this is all the stuff that Tod talks about that he's come up with in his book, because then you build in capacity into the system instead of having those rules and regulations that are imposed to control the work that actually isn't being done.
[00:55:26] Speaker B: You know what I love about it all, Daniel too, is, and this is slippery slope that we don't have to go down, but people are all grown ups and they need to act like grownups and take responsibility over this themselves. The fact that we're just expecting them to have a dictator, whether it's the company or the government or whatever it is saying over do this or don't do this, let people think for themselves within some parameters. And I think that would breed a lot more self responsibility, which is what we all want from our people too. Right? It's just interesting how that mindset, I don't know if it's like the Jack Welch like hey, do what I say kind of stuff, and we're finally starting to see it just didn't work.
[00:56:07] Speaker C: Well, that's the whole keynesian thing of corporations don't have emotions because they're not physical people and instead ESG and other things. And if nothing else, just the whole theory of if you want to be a sustainably profitable company, then you have to take these things into consideration. There's a great Wall Street Journal article, which I have to Google to find again, that talks about when the airline industry started doing this with not punishing pilots for the near misses, but having them come forward. And it took a lot of time to get the unions to buy in and management that that changed the trajectory of air safety. And there is a statistic in there that was really sobering because I travel a lot. And it said if that hadn't happened, then the forecast was that today we probably would be having one fatal plane crash every week around the world. Whoa.
[00:57:04] Speaker B: I don't remember what the article was either. I don't think it was the same article, but it was like how many disasters there were only a handful of decades ago. And I'm like, I traveled like 40 times this year. I would have been like one out of two chances. I would have been in a crash.
[00:57:21] Speaker C: And that's where this whole concept of flipping the script and bringing out the near misses, the good catches, and it's simple stuff like between a pilot and copilot. That pilot says, flaps up, that the copilot has to say, confirm flaps up. As opposed to, did they do it? Did they not? Did they mean flaps down or whatever?
I remember doing reading case studies in business school about wrong amputations. You go in and you get the wrong limb amputated. Well, then they put an x on the one that you're not supposed to amputate. Well, what if they didn't? So then you have to identify which it's working with, the people that are doing the work, what would actually help that work be safer or less error prone?
[00:58:08] Speaker B: And I don't want to move on to the national security stuff that you and I talking about. I think conscious capitalism. I don't know if I think I read that book after you and I talked, and I say to everybody, if you're the greediest person on the planet, you would still do this stuff because you outperform.
[00:58:25] Speaker C: And then that's why there are several esops which aren't 100% esoP, because the owners understand that by giving employees a slice of that pie, the whole pie is going to grow. So they're still going to have more if they're really thinking about it in just very sort of greedy economic terms, that it's actually to their economic benefit to give a slice of the pie to their employees.
[00:58:47] Speaker B: So let's talk about protecting our country, too, because I think I'll tee it up with. I read this book, like, a handful of years ago, Daniel, and they were talking about cybersecurity. This is back when I was coming from my old tech background, and they were talking about, know, no one ever is concerned one's, I'm not important enough for people to steal my information. But I heard this one story where this chinese company, what they did is they had the cyberattack where they went in and they got some guy on some fantasy football click, he clicked it. And this company was a green technology business. And the chinese company went in their ERP system, stopped all their purchase orders, dried them up of cash, and then their PE firm came in and bought the green technology for, like, pennies on the dollar. So it was like a multidimensional strategy, not just like, hey, we're going in to get someone's Social Security number.
[00:59:46] Speaker C: And there's legislation, which, again, I'd have to Google. I don't know it at hand, which has to do with manufacturing as a national security issue. The reason being that there are foreign countries that are, with the silver tsunami and all these companies that are changing hands, foreign investors are sometimes buying companies just to get ownership of the IP, the technology, and then they could easily just close the business, move that technology offshore. And that is actually a national security concern. And so we've benefited greatly with partnering with the manufacturing extension partnerships. There's one in every country. It's under the National Institute for and Technology. And for three years, I was on the board, and for two of those years chaired the advisory board of Cirrus, the Center for Industrial Research and Services, which is the Iowa manufacturing extension partnership. And as I worked with these groups in different states, I would stress to them that what they do is they help companies, not just manufacturing, but primarily manufacturing companies, to have tools, expertise, access to technology, systems, consulting, to help them remain competitive. And one of the issues is that way it stays in the community, in the state, in the country. And so I would stress with all of them that one of the best tools that you can have is to convert a company to an ESOP, because you're investing in the employees in the company, the technology, the community. And when the employees are the owners, they're not going to all get together one day and say, hey, why don't we just move our company offshore and out of our community? And so it is inherently one of the best ways to ensure continued local presence. And I was able to get quite a few people interested in that. And actually, a couple of years ago, presented to the national board of the Manufacturing Extension partnership and just said, you really should consider this as one of the tools in your toolboxes for not only maintaining manufacturing competitiveness, but addressing that issue of what would happen if these manufacturing companies were sold to foreign investors, foreign countries, and that IP was taken offshore. And I've gotten a number of people that have really responded positively to that, including one person who said that was part of the impetus of why he just last week finished converting his company from family ownership to employee ownership. And so it really would be a great way if instead of selling companies to private equity, which is then going to get it into that resale, if you could get it into an employee ownership structure that's just going to keep the company locally based, it's just like, duh.
[01:02:51] Speaker B: I want to preface it with the listeners before they start crucifying you.
It's not right for everybody. I just want to always say exactly. But Daniel. When I think about, like. And this is one of my missions, it's not to create every company into an ESOP, but it's to give people the choices. And it's like, the mean think about how many people with the rust belt. I mean, how many people the jobs know dislocated. And all this stuff that's going on in the rural America, and it's like. And national security and inequality and employee, like, at the end of the day, we need to create a good freaking company with good cash flow. And I think that that is, like. I want to hear your thoughts on this, because this has been a byproduct of our training program, and it wasn't the intent, which is interesting to me. And that's why I've followed this rabbit hole to this conversation that we're having, is to view and run a company like a financial asset. You got to create sustainable, predictable, transferable future cash flow.
[01:03:53] Speaker C: Yes.
[01:03:54] Speaker B: And you have to manage your risk. So, if you have increased EBITDA and you're derisking it, you're increasing your multiple, and you're managing your debt correctly, then you can essentially have. So, it's that target equity valuation based on the cash flow valuation. If you're reasonable with the timeline, you can do whatever the hell you want. But the problem is that I see Daniel, and this is what has been interesting, is that most of the people that were calling me up over the last decade would come in and say, I want out. And it's like my father, who wanted out of his job, but we didn't understand how valuations worked or how any of this stuff works, so we had to sell the whole company. We gutted the entire business so he could get out of his job and get some money and not talk about copiers every day. But the problem is, what happens is, and I just got done talking to someone yesterday about this. We're like, the moment. And this happened with my father. And I see this happen hundreds of times with the people that come through our program. The moment that someone is in that mindset. Good freaking luck telling.
Like, here's what I always. I mean, it's not a joke, but it's kind of a joke. Hey, Daniel, that's great. You can get out right now, but you got to gut your company. Do all these things. Sell the private. Not even private equity, but a strategic buyer who's all this ramifications if your timeline dictates the price?
So, then, if I were to say to you, hey, by the way, Daniel, all you have to do to get to the valuation that you want is forego all your distributions for five years, put it in a new ERP system, hire a new president. First one's probably not going to work out so well, so you're going to have to go through two of them. Then you're going to have to figure out how to implement AI, and it's going to take you five years. Then you can get to the cash flow valuation of an ESOP and you're going, hey, dude, did you not listen to me? I want out. And it's usually the job and the time, but when I say that the byproduct of our program has been realized, the people that are coming through it have the time and energy. And then they're saying, hey, well, at least I can have the ESAP be the plan b to monetize my company. It might not be their plan a, but this is why going out and just promote, because Steve Storkin is a friend of mine, and going out and just promoting, yeah, love the guy. And just the ESOP becomes myopic. And it's like one puzzle piece of the whole puzzle. So I don't know if you have any comments, because what I see is it's good cash flow, but we have to focus on that for a long time.
[01:06:17] Speaker C: I do. And as always, you have clarified something for me. Talking to you, Ryan, because let's go back to that want out. So it's not that I said I want out, but let's pretend that's what I said when I wanted out. I didn't have to force the company to go through all that stuff because we were in ESOP, because we had worked really hard to have a high performing board, a really good leadership team, employee owners.
[01:06:45] Speaker B: You built a good company.
[01:06:47] Speaker C: And so when I wanted out, I could go out. But there is succession, and so there's a new leader, and it's almost seamless, and that's what an ESOP provides, because it's all about sustainability. And when you build the sustainability, which is not just the financial side, can you touch on?
[01:07:09] Speaker B: When you said succession, I find that so many people, it's just the exit planning, succession consulting, hodgepodge of crap for someone to get an engagement, but define succession from a leadership role and how you handled that and the financial asset, because you handled both of those.
[01:07:27] Speaker C: Right? So the succession was two years ago. I went to the board and I said, at the end of 2023, I would like to be able to step out of the role. President CEO of Foleans. And we came up with a two year plan, which was about shoring up, developing internally to get to the right place, to then go out with a defined set of values, traits, characteristics, to find the right person, to pass the baton, to lead forward. And so the first part is the shoring up, and that's really developing on the financial side, and that can be investments in advanced manufacturing technology, process documentation, et cetera, et cetera. Gained the business into a good place. Gained the capital structure into a good place.
Going through something which is literally called a sustainability study, which esops go through, and being able to see whether or not you have the cash flows, the repurchase obligation forecast, and a plan to pay for it all. So go through all of that part. But then there's a leadership aspect. And so I spent a lot of time with the leadership team, getting them to a place where they were really elevated to have more transparency, more ownership, to be carrying a lot more of the message than just the CEO, because that permeates to a different level of trust. Employees trust the people that are closest to them. They also want to hear from the CEO. But you really need to sort of get that messaging and ownership to that level. And then, of course, working on the culture of every employee owner. And of course, the licensed act is the foundation of what every employee owner has at foliance and really strengthening that. So by the time you get to the passing of the baton, there's sustainability built into the system, the financial, the capital, the repurchase application, forecast, cash flow and all that. There's succession built into leadership that there's going to be as little disruption as possible. There's always going to be uncomfortableness when somebody new comes in, and there should be, it's change, it's new perspective.
And what really holds it all together is that there's that really strong cohesive organizational strength of the employee owners holding it all together, because you've worked hard on that culture to get them to understand that as employee owners, they share the value of the company and their participation. The ownership is what holds it all together.
[01:10:09] Speaker B: I love it. Would you say that? When I hear that? So there's two things that I think of is like that hard work means less drama and chaos.
[01:10:19] Speaker C: Sometimes not.
[01:10:22] Speaker B: Fair enough.
All right, wonderful.
[01:10:27] Speaker C: Because they can react in many different ways.
There is that. It's often a learning opportunity.
[01:10:35] Speaker B: Yeah, fair enough. Fair enough. Because what I like to say is the hard work gets you prepped to have as little mitigates the drama in the cast versus different owner, all of the permeating thoughts, because it's all the narratives that people make up in their head when there's ambiguity and what I was going to say. So you and I chatted a little bit about the spectrum of employee ownership.
I think this is important because, yes, you're a proponent of esops, but you and I talked about the purest form of capitalism, so it's not like a one trick pony. And so maybe explain your mindset in a spectrum of how things work and what your thoughts are on it.
[01:11:24] Speaker C: And again, going back to my disclaimer, I'm not representing the thoughts of anyone except for myself.
I have always believed in spectrums. And so this goes back to the earliest days of when I would be involved in socially responsible investing, which was before impact investing, before ESG. And there's a spectrum, even there, between charities, which had almost no metrics to nonprofits, that had some sort of measurement to then impact philanthropy, which sort of blurred with impact investing, which would get all the way to the other end of sort of the greedy, irresponsible capitalism of just everything for me, without sharing anything with people. And as a believer that there is a spectrum, and you can't just say that there's one point on that spectrum which is right. And so the same thing with employee ownership. Let's start with maybe on one side, and there are co ops, where it's one vote per every employee. Esops, not quite the same. Shared value, not necessarily shared control, employee ownership trusts, where it's more a sharing of current year profits than holding shares with capital appreciation to the end of your retirement, to what Pete Stavros is promoting, which is not really an EOT or an ESOP, but it is getting money into the hands of employees to systems where it's just a single owner, it's PE ownership, and employees really don't get anything.
It is better that there are these points along the spectrum, because not everything is going to be one point. And so it'd be myopic to think that there's either nothing or it's one point on the spectrum. What's important is to discern the differences between the points on the spectrum. So, again, there's been a lot of people that have really lauded Pete Stavros for what he's doing. There's some people that have been criticizing him. I'd rather that the people that are in his deals are gained money than that they're not. It's just important to discern the difference. Eots are very prevalent outside the US, and that has a lot to do with tax regimes and other things. And I would rather that there are eots than there are not. Personally, yes, I really do like the ESOP because I like the fact that it's addressing the income, which is this year, as well as the wealth, which is where you get to at the end of your life.
[01:14:11] Speaker B: Do you think there's a way to wrap a trust around the trust in order to make sure it's not sold? Because I think one of the biggest fears right now with how prevalent PE is, and this is what kind of happened to my partners, where if I'm a PE firm, I could go attack or go seek out esops that are fairly well run companies and offer them enough to trigger the sale with the trustee. That's kind of the big fear that's going on right now. Is there a way to address that within the ESOP structure?
[01:14:37] Speaker C: So there are some esops that have added on layers of protection, like becoming a b corp or putting in sort of a very onerous process that somebody would need to do in order to come in from the outside and have an offer. But again, I'll say something which not everyone believes in. Employee ownership, to me, does not equate to eternal. No change of ownership. If somebody comes to you, if your house, just use a round number, is valued at 100,000 and somebody offers you 2.5 million, are you really going to say no? Because I don't want to have to move, et cetera. There are times where when you own something, it is going to be in your better interest to sell because you're not going to get the same reward, no matter how much time risk you might be in a declining industry, the forecasts aren't good. You're not going to be able to keep up with consolidation in your industry. Something else. And so, yes, there are ways to make that hurdle higher so that you're not going to be selling at a smaller premium, but there are probably going to be times where selling is going to be in the best interest of all concern.
[01:15:57] Speaker B: It seems to be more and more rare where just nuanced thinking is actually a differentiator these days. Because the couple of things that you mentioned, it's a spectrum. And I think about it like this, Daniel. It's like, okay, our body is a system.
I think about how insane the medical system is. A doctor told my sister that they isolated one of her hormones, and I was, what?
Like, it's just hilarious. How do you isolate one of the molecules in her bloodstream or whatever it, like, my point is, it's a system, and so the system needs to work in balance, and so we need all of these. But I think it was Delta's pension fund. Daniel I saw Delta's pension fund, which is $13 billion, 79% of it's allocated to PE and VC and real estate. It's like, okay, well, when that happens in the human body, it's called cancer and it's part of our body, but when it goes out of whack, it's destructive. So it's like, you need the spectrum, I think, and people should pick an option for the right reasons. But then, like you said with the ESOP, just think about it. So don't make it so easy that you can skip around the actual original intent.
[01:17:11] Speaker C: And I'll get back to that article that I wrote. They are businesses, and you have to think about them as businesses. There's volatility, there's cycles, there's ups and downs, whether it's in the industry, the geography, there are times where interest rates can drive, certainly they're businesses. And so, yes, all the wonderful stuff that we've been talking about and needing to get the education, the culture and safety and all that, and just always treat them as businesses.
[01:17:41] Speaker B: Daniel this has been so fun to catch up. I really enjoyed this.
What are your thoughts and hopes with the go ESOP?
[01:17:51] Speaker C: Daniel Goldstein, LLC so it is not a consulting company. It's just a way to effectively manage my own affairs. I'm going to continue serving on boards of esops. I'm going to continue working to advocate for employee ownership both in the US and beyond. I'm going to continue doing research and writing. I have been doing some teaching. I may be increasing that.
We'll see as we go forward and do some other stuff which has nothing to do with employee ownership.
[01:18:23] Speaker B: Ride your motorcycle or do some other things.
[01:18:25] Speaker C: Ride my motorcycle. Be out on my stand up paddle board. I may actually get out on my snowboard for the first time in about eight years.
[01:18:32] Speaker B: Oh, no way.
Last year was the first year that I didn't go out west. And I'm trying to rally some people to go out and get out and strap on my snowboard, make sure I don't kill myself. Daniel this has been so fun. Where can people reach you if they want to reach out and learn more and connect with you?
[01:18:50] Speaker C:
[email protected] awesome.
[01:18:55] Speaker B: And LinkedIn, too. You've got the article and you got a bunch of other stuff out there. And we'll make sure we have links in the show notes Daniel, thanks so much for coming on the show.
[01:19:03] Speaker C: Thank you Ryan. It's great to catch up. Thanks for what you're doing.
[01:19:08] Speaker B: Thanks for listening into that conversation. I hope you found the time valuable. If you enjoyed the conversation, please leave the show a review on your podcast player. We're constantly trying to up those reviews. It helps a lot with the visibility and if you didn't catch the commercial in the middle of that episode, there's two different ways that we can help you. One is if you want that kind of clarity, we have a coaching program that is based on the five intention growth principles and uses the material to help you get that kind of clarity on your target, equity valuation and income that you need on the way towards that valuation. What you want from the business long term and why and then how to get aligned with your leadership and your partners. So that way everybody's working in the right direction to get you what you want. And the second way is if you want to jump right into the data and you want to actually build out your financial roadmap with your three statements and tie your financials and your operational data to that target equity valuation, my my team offers a complimentary financial assessment. Either way, all you have to do is go use the link in the show notes below. Schedule a discovery call with me. We can walk through your situation, figure out if there's a fit or not, and if not, I can point you in the right direction. Thanks everybody for tuning in and I hope you enjoyed this episode and I will see you next week.
