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0:00 Billionaire Gautam Adani Loses More Than $60 Billion This Year Following Fraud Allegations
7:22 From Refugee To Sriracha Billionaire: The Man Behind One Of America’s Favorite Condiments
17:07 How South African Billionaire Christo Wiese Sued His Way Back Into The Billionaire Ranks
21:51 Reddit Cofounder Alexis Ohanian Doubles Down After FTX Collapse: 'Crypto Is Here To Stay'
34:34 How Alabama’s Only Billionaire "Yella Fella" Jimmy Rane Saved His Hometown
49:05 How A College Dropout Built A $2.9 Billion Real Estate Empire
58:42 Subway’s Hidden Billions Revealed: How Its Founders Sliced Up A Fortune
1:08:18 Billionaire Mercedes F1 Owner Toto Wolff's Winning Formula
1:14:13 Meet The Iranian-Born Billionaire Helping NASA Get Back To The Moon
Transcript
00:00:00 Gautam Adami is the chairman of the Adani Group.
00:00:03 It's an Indian conglomerate that has interest
00:00:06 in nearly every sector of the Indian economy,
00:00:08 from ports and shipping to media, construction, and energy.
00:00:13 Adani was originally a college dropout.
00:00:16 His dad ran a textile shop,
00:00:18 but he spurned his father's footsteps
00:00:20 and launched his own commodities export firm.
00:00:23 And over the last three and a half decades,
00:00:25 Adani has expanded his business interests
00:00:28 through savvy deal-making,
00:00:30 as well as by cultivating ties with Narendra Modi,
00:00:33 India's prime minister and former chief minister of Gujarat,
00:00:37 an Indian state where Adani made his fortune.
00:00:40 At the peak of Adani's net worth,
00:00:42 which was just in December,
00:00:43 Forbes valued him at around $135 billion,
00:00:48 making him the third richest person
00:00:50 in the world at the time.
00:00:51 In 2022 alone, Adani gained $50 billion to his net worth,
00:00:57 even while other stocks fell,
00:00:59 all the Adani Group companies did well.
00:01:01 Hindenburg Research alleges in a stunning 32,000 word report
00:01:07 that the Adani Group has been engaged
00:01:10 in a decades-long scheme of stock manipulation
00:01:14 and accounting fraud,
00:01:15 designed to enrich themselves, the Adani principals,
00:01:18 at the expense of outside shareholders.
00:01:21 Since Hindenburg's report,
00:01:23 the Adani Group has lost over $100 billion in market value,
00:01:27 a stunning collapse over a period of just eight or nine days.
00:01:31 Some of the key allegations made by Hindenburg are one,
00:01:35 that Adani has enlisted a vast network of allies
00:01:39 and offshore proxies to hold stock
00:01:41 in his publicly listed companies.
00:01:43 The purpose of this maneuver, Hindenburg alleges,
00:01:46 is so that Adani can skirt Indian regulations
00:01:49 that require any publicly traded firm
00:01:51 to have at least 25% of its flow,
00:01:54 meaning 25% of all outstanding stock,
00:01:57 held by non-promoters, people who are not employed by
00:02:00 or affiliated with the Adani Group.
00:02:02 Hindenburg homed in on Vinod Adani, his brother,
00:02:07 who specifically manages a labyrinth
00:02:10 of offshore shell entities,
00:02:12 many of them registered in Mauritius.
00:02:15 Secondly, Hindenburg alleges that the Adani Group
00:02:17 uses offshore entities and proxies to move money around
00:02:21 between the Adani Group's various subsidiaries.
00:02:25 Hindenburg alleges the purpose of this
00:02:26 is to misconstrue the actual state
00:02:29 of the various Adani companies' finances.
00:02:32 Now, Hindenburg presented several examples
00:02:35 of offshore shells sending money
00:02:37 through onshore private Adani companies
00:02:40 onto the listed public companies,
00:02:43 seemingly for the purpose, according to Hindenburg,
00:02:46 of engineering Adani's accounting,
00:02:49 such as bolstering its reported profit and cash flows
00:02:52 and cushioning its capital balances,
00:02:55 and essentially making these entities
00:02:58 seem more creditworthy than they actually are,
00:03:00 which is a key part of how Adani has grown
00:03:04 is by issuing vast amounts of debt.
00:03:07 It has about $20 billion in net debt.
00:03:09 The Adani Group has denied Hindenburg's report,
00:03:13 calling it a malicious combination
00:03:15 of selective misinformation and concealed fact.
00:03:18 Adani has also said that its financial practices
00:03:20 and intercompany dealings are in line
00:03:23 with applicable accounting standards and applicable law.
00:03:26 I think in the US and Europe,
00:03:29 the reaction was by and large one of shock.
00:03:32 Investors and business people have been aware
00:03:34 of the Adani Group and of its meteoric rise
00:03:37 over the last few years,
00:03:38 but most were ignorant to some
00:03:40 of the accounting irregularities, extreme debt loads,
00:03:44 and other questionable corporate governance matters
00:03:47 that were bubbling under the surface.
00:03:49 In India, meanwhile, the Hindenburg allegations
00:03:52 were shocking but less surprising.
00:03:54 That's because India's Securities and Exchange Board,
00:03:57 its main financial regulator,
00:03:59 has investigated companies
00:04:01 under the Adani Group umbrella previously.
00:04:04 Those investigations did not find evidence
00:04:07 of any wrongdoing.
00:04:09 What's been most pronounced in India
00:04:10 is the diverging opinion among the broader public.
00:04:14 On the one hand, there are those who identify
00:04:16 with the Adani Group's embrace
00:04:18 of Prime Minister Narendra Modi and Indian nationalism,
00:04:22 a theme that the Adani Group has turned to
00:04:24 during this difficult period,
00:04:26 but there are plenty of others,
00:04:28 such as members of the media, intellectuals, lawyers,
00:04:32 and the like, who have been criticizing the Adani Group
00:04:35 and its business practices for a while now.
00:04:38 They're using the Hindenburg allegations
00:04:40 and the international attention those allegations have drawn
00:04:43 to press for action from India's financial regulator.
00:04:48 Adani has cultivated allies,
00:04:50 not just at home but also abroad.
00:04:53 We saw this on display just last week
00:04:55 when one of his companies, Adani Enterprises,
00:04:58 was trying to push through a $2.5 billion stock sale.
00:05:02 This sale was thrown into question by Hindenburg's report,
00:05:07 with there being fewer subscribers to the stock.
00:05:11 But we saw Abu Dhabi come to the rescue
00:05:14 with a $400 million injection of capital on January 31st.
00:05:19 This ultimately wasn't enough
00:05:23 to prevent the collapse of the stock sale,
00:05:25 which the Adani Group abruptly
00:05:28 and somewhat mysteriously canceled the following day.
00:05:31 But also last week, we saw Guatemala Adani in Israel,
00:05:35 shaking hands with Prime Minister Benjamin Netanyahu
00:05:38 for the ceremonial signing of the Adani Group's takeover
00:05:41 of the Haifa port, Israel's largest port.
00:05:45 So just due to the sheer size and scale
00:05:48 of the Adani Group's enterprise,
00:05:50 it does have allies abroad whose goodwill
00:05:54 and whose financial clout might prove dire
00:05:57 for the Adani Group in the days ahead.
00:05:59 On the one hand, Hindenburg's allegations haven't done much
00:06:04 to affect Adani Group companies.
00:06:06 The ports are still receiving ships,
00:06:08 energy companies are still producing energy.
00:06:11 On the other hand, the Hindenburg allegations
00:06:14 have really upended the Adani Group's financial picture.
00:06:17 The stocks have crashed,
00:06:19 which means Adani personally is less wealthy.
00:06:21 But more critically for the businesses themselves,
00:06:24 banks such as Citigroup have already said
00:06:26 they're no longer going to be accepting Adani stock
00:06:30 as collateral for loans.
00:06:32 The Adani Group depends on loans
00:06:35 as part of its growth strategy,
00:06:37 and it's a highly leveraged business.
00:06:39 So we could see this affects the company's financial picture.
00:06:44 Similarly, the Adani Group has already faced margin calls
00:06:48 on loans that it has outstanding
00:06:50 for which it's posted Adani company stock as collateral.
00:06:55 Because of the collapse in price of that stock,
00:06:58 it's going to have to post more collateral on those loans.
00:07:01 Going forward, the markets are going to be keeping
00:07:04 a close eye on the Adani Group's existing debt pile,
00:07:08 but also they're going to be keeping an eye
00:07:10 on India's political situation
00:07:14 and whether financial regulators in India
00:07:17 start to investigate the Adani Group.
00:07:19 So the US hot sauce market is estimated to be
00:07:25 around $1.5 billion as of 2021.
00:07:27 The largest in that business is Tabasco,
00:07:30 which is made by McElhenney, a family-owned company.
00:07:32 Second is McCormick, which is publicly traded.
00:07:34 They own Frank's Red Hot, and they also own Cholula,
00:07:38 which they purchased for $800 million in late 2020.
00:07:42 And then after that, we have Huifang,
00:07:44 which is around 9% or 10% of the market.
00:07:46 So they're still much smaller
00:07:48 than the two biggest players in the market,
00:07:50 but they have grown a lot
00:07:52 in the last two decades or so until now.
00:07:55 So Huifang Foods is a company that's best known
00:07:57 for its biggest product, Sriracha.
00:07:59 They're based in Orindale, California.
00:08:01 They were founded by David Tran,
00:08:03 who came to the US as a Vietnamese immigrant in 1979.
00:08:07 And obviously their biggest product is Sriracha.
00:08:10 That's what everyone knows them for,
00:08:12 the iconic rooster logo on the bottle
00:08:15 with the green squeeze cap.
00:08:16 They also have two other products that they make.
00:08:18 One is called Sambal Elek,
00:08:19 which is very similar to the Sriracha hot sauce,
00:08:22 but it's not blended.
00:08:25 And then chili garlic, which is very similar,
00:08:27 but also without the vinegar and the sugar.
00:08:30 So what's really interesting about Huifang is that,
00:08:33 you know, it's never done any direct advertising.
00:08:35 It's only pretty much grown through word of mouth.
00:08:37 Initially, its main customers were Chinese American,
00:08:40 Vietnamese American communities, restaurants, markets
00:08:43 in LA and Southern California.
00:08:45 And it's just spread, you know, organically since then.
00:08:48 You can actually sort of see its growth
00:08:50 based on the factories that it's had.
00:08:52 It started out with a 2,500 square foot facility
00:08:54 in Chinatown in 1987.
00:08:56 They moved to a much larger one.
00:08:58 He eventually expanded that to around, you know,
00:09:00 more than 200,000 square feet.
00:09:02 And then in 2013, they moved to what is now
00:09:04 their main facility in Orindale, East of LA.
00:09:07 That's 650,000 square feet.
00:09:09 They can make up to 18,000 bottles of sriracha an hour.
00:09:13 Sriracha is now everywhere, right?
00:09:14 It's really become a cult product,
00:09:15 and it's a very unique example of a product
00:09:18 that has gone from being, I guess, fairly niche initially
00:09:22 to being so widely used to the point that it's now
00:09:26 the third largest hot sauce in the country,
00:09:29 according to market research from IbisWorld.
00:09:32 And it's only behind Tabasco,
00:09:33 which has been around since 1868.
00:09:36 And then Frank's Red Hot, which is owned by McCormick,
00:09:39 right, a publicly traded spices giant.
00:09:41 So for a company like Huifang that was only founded in 1980
00:09:45 to reach that level, competing with a company
00:09:47 that's got, you know, more than 150 years of history
00:09:50 in Tabasco and then a, you know,
00:09:52 massive publicly traded corporation is really astounding.
00:09:55 So David Tran, he's the founder of Huifang Foods.
00:10:00 He first came to the US in the summer of 1979.
00:10:04 He was born and grew up in Vietnam.
00:10:07 During the Vietnam War, he was in the South Vietnamese Army.
00:10:10 He didn't fight, but he was drafted to it
00:10:13 like everyone of his age was at the time.
00:10:15 He had actually started producing a hot sauce
00:10:18 using the chilies that were grown on his brother's land
00:10:21 in South Vietnam after the war ended.
00:10:23 In 1978, there was a lot of pressure
00:10:25 from the communist Vietnamese government
00:10:26 on citizens of Chinese origin,
00:10:29 like David Tran and his family, to leave the country.
00:10:32 And so he and his son and his wife,
00:10:35 as well as other members of his family,
00:10:37 ended up leaving Vietnam as refugees.
00:10:39 They had to leave on different trawlers.
00:10:41 He left on a freighter called Huifang in December, 1978,
00:10:45 which is actually how he got the name
00:10:47 of the company eventually.
00:10:48 All that he brought with him was a locket
00:10:50 and 100 ounces of gold that he hid
00:10:52 in cans of condensed milk so that they couldn't be taken
00:10:55 by the communist authorities.
00:10:57 He landed up in Hong Kong after a brief journey
00:11:01 on the freighter.
00:11:02 In Hong Kong, he was at a refugee camp for eight months.
00:11:06 And then in the summer of 1979, he was resettled to Boston.
00:11:10 However, Boston was cold.
00:11:12 They didn't really end up liking it that much.
00:11:14 And his brother-in-law had actually resettled to LA.
00:11:17 He mentioned that he would call his brother-in-law
00:11:21 and his brother-in-law had told him
00:11:22 there were chilies available in the markets in LA,
00:11:25 which he was not able to find in Boston.
00:11:29 So they ended up moving to LA in January of 1980.
00:11:32 That's when he started looking for freshly grown chilies,
00:11:36 jalapenos in local markets in LA.
00:11:38 He sold some of the gold he had brought with him
00:11:40 to open up a 2,500 square foot factory in Chinatown,
00:11:45 started producing the hot sauce that we now know as sriracha,
00:11:49 which was similar to the recipe
00:11:50 he had been making back in Vietnam.
00:11:51 In the first two months of business in 1980,
00:11:54 the company brought in $2,300.
00:11:57 And he would actually sell the bottles of hot sauce
00:12:00 out of a blue Chevy van,
00:12:02 driving around LA to different Vietnamese
00:12:05 and Chinese markets to sell it.
00:12:07 So Huifang, I think because it started out as a product
00:12:13 that was mainly used by various types of Asian restaurants
00:12:17 and Asian communities in the US,
00:12:19 it sort of grew out organically from those communities
00:12:21 and those customers.
00:12:23 It wasn't sort of advertised or pitched
00:12:25 to a lot of different places.
00:12:26 You know, it's used by a lot of sushi restaurants
00:12:29 around the US.
00:12:30 There was actually a study made in 2015 by the NPD Group,
00:12:33 which showed that nearly one in 10 households in the US
00:12:37 stock sriracha, and actually higher than that
00:12:39 if you look at households with people under the age of 35.
00:12:44 It's also kind of iconic, right?
00:12:45 Everyone knows the rooster logo, the squeeze cap.
00:12:49 It's sort of dependable as a very spicy hot sauce
00:12:52 you'll find anywhere.
00:12:53 And it's interesting, there was a documentary made in 2013
00:12:56 on sriracha by Griffin Hammond.
00:12:59 You know, he talks to all these people who are big fans
00:13:01 and a lot of people don't even know
00:13:03 that sriracha is made in the US, right?
00:13:05 If you look at the bottle,
00:13:06 it's written in Vietnamese and Chinese.
00:13:08 The people have this idea that it's more authentic
00:13:11 because they might believe that it comes
00:13:12 from outside the US.
00:13:14 It's not, right?
00:13:15 It's a product made by David Tran and his family
00:13:17 who's, he's American.
00:13:19 But obviously he came from Vietnam.
00:13:20 He started making it in Vietnam.
00:13:22 It has that authenticity and that simple recipe
00:13:25 and the ingredients that he's used have never changed.
00:13:28 The recipe has always been the same
00:13:29 and you know what you're getting
00:13:31 when you're getting sriracha, right?
00:13:32 It's very identifiable.
00:13:33 And they focus on that product, right?
00:13:35 They also have Hassan Balalek and chili garlic
00:13:38 but they're a much smaller sort of source of revenue
00:13:41 for them.
00:13:42 It's really mainly sriracha that they sell
00:13:44 and they're so highly identified with that product.
00:13:47 Over the years, we've always had to deal
00:13:49 with some challenges, including some lawsuits,
00:13:51 shortages of chilies, and also counterfeiters
00:13:54 that have tried to sell their product illegally.
00:13:57 One of the first ones that sort of got a lot
00:13:59 of news coverage was when the city of Irwindale,
00:14:01 which is where their facility is located,
00:14:04 sued Huy Fong for basically the odors
00:14:07 that the factory was emitting.
00:14:08 And, you know, this ended up going on for a little while.
00:14:11 Huy Fong actually opened up their factory
00:14:13 to the whole community.
00:14:14 They started doing factory tours.
00:14:16 Eventually the city dropped this lawsuit.
00:14:18 It's interesting, this actually got a lot of coverage
00:14:20 around the US.
00:14:21 You know, Senator Ted Cruz actually asked Huy Fong
00:14:24 if they wanted to move to Texas to get away from Irwindale.
00:14:27 That didn't end up happening.
00:14:28 And then another lawsuit that happened was in 2021.
00:14:32 Huy Fong used to have an exclusive chili producer
00:14:34 up until a few years ago called Underwood Ranches,
00:14:37 based in California, and they would produce
00:14:39 all of the jalapenos that Huy Fong needed.
00:14:41 There was a lawsuit over sort of the agreements
00:14:44 that they'd had with Underwood Ranches.
00:14:46 The lawsuit has since concluded.
00:14:47 And what's interesting about sort of the production process
00:14:49 is that the chili growing season is pretty short.
00:14:52 And so if the harvest goes bad,
00:14:55 that means that they're not gonna have enough chilies
00:14:57 to produce the sauce for the rest of the year.
00:14:59 And so they had all the production with this one producer.
00:15:02 Now they have multiple producers,
00:15:04 I believe in California and in Northern Mexico.
00:15:07 So that's in the past now,
00:15:08 but that was a major challenge for them
00:15:09 in terms of having to deal with that lawsuit
00:15:11 and also on sort of how they were gonna get
00:15:13 their chili production.
00:15:15 More recently in 2022,
00:15:18 there was a severe chili shortage in the spring.
00:15:22 Huy Fong actually sent out a notice
00:15:24 to a lot of their customers saying that
00:15:26 it was going to severely impact their ability
00:15:28 to produce any sriracha.
00:15:30 And so there's a lot of news articles around the US
00:15:32 about the sriracha shortage.
00:15:34 I actually spoke to an analyst
00:15:35 who was looking at Nielsen data
00:15:36 that showed that sales initially spiked
00:15:39 after this announce,
00:15:39 as people were trying to hoard all the sriracha.
00:15:41 That's passed now.
00:15:43 They've been able to sort of get back to regular production.
00:15:47 And also the fact now that they have
00:15:49 sort of a diversified sourcing for their chilies.
00:15:52 But when there's severe weather events like happened in 2022
00:15:55 and there's only one chili growing season,
00:15:57 that can sort of severely impact how much
00:15:59 of you are able to produce for the rest of the year.
00:16:02 David Tran, by all accounts, is a very humble person.
00:16:05 He is fairly press shy.
00:16:07 He has done a few interviews over the years.
00:16:09 But what's really interesting is one of his main phrases
00:16:12 that I've seen a lot of that he said to me also over email
00:16:14 is that he's just focused on making a rich man's hot sauce
00:16:17 at a poor man's price.
00:16:18 He's not changing the ingredients.
00:16:20 He's just trying to keep making the same product
00:16:22 and make more of it as long as more people want it.
00:16:24 He's also said in the past that his American dream
00:16:27 was never to become a billionaire.
00:16:29 You know, he said in the past
00:16:30 that he's received offers over time to buy the company
00:16:33 and he's not interested.
00:16:34 He just wants to pass it on to his family
00:16:36 and to keep growing it as much as possible.
00:16:38 And that's what's happened over, you know,
00:16:40 the last 40 plus years that the company's been in business.
00:16:42 Especially in the last 20 years,
00:16:43 the company's grown so much.
00:16:45 And in some years even, they've grown even by around 20%
00:16:49 each year in some years.
00:16:50 It's this phenomenal growth and a very humble backstory.
00:16:54 An immigrant refugee from Vietnam built this company,
00:16:57 grew it organically, and is not interested in selling it
00:17:00 or bringing out new products or changing the recipe
00:17:05 that has brought the company and the family so much success.
00:17:08 So Christo Visa is a retailing tycoon from South Africa.
00:17:12 And what makes him interesting is
00:17:14 he was on the Forbes billionaire's list
00:17:16 and our list of richest Africans up until 2018.
00:17:20 And then this huge Enron-like accounting scandal happened
00:17:25 at his major asset,
00:17:27 which was called Steinhoff International.
00:17:29 That knocked him off the billionaire's list
00:17:31 starting in March of 2018.
00:17:32 And now he's back on the list.
00:17:34 Visa was worth $5.6 billion in early 2017.
00:17:38 By the time this accounting scandal was revealed
00:17:41 in the end of 2017, in December, 2017,
00:17:44 the shares of Steinhoff fell like 90%.
00:17:47 I mean, he lost almost all the value.
00:17:49 So Visa's fortune fell first down to like $1.1 billion,
00:17:53 and then he fell off the list altogether by March of 2018.
00:17:57 So the Steinhoff was kind of interesting.
00:17:59 It was founded by a German who was building furniture
00:18:03 and he was sourcing from East Germany.
00:18:04 This is when the wall was still up
00:18:06 between East and West Germany,
00:18:07 and was sourcing from East Germany and selling to all over.
00:18:10 And then he heard that a lot of wood
00:18:12 was growing in South Africa.
00:18:13 So he went to South Africa to see if he could get
00:18:15 the supplies for furniture from there.
00:18:17 And then he opened,
00:18:18 he got into doing furniture retail in South Africa.
00:18:21 And so there was a German billionaire, Bruno Steinhoff,
00:18:24 also tied to this company.
00:18:26 But Steinhoff kept its European operations,
00:18:29 and that's where most of the fraud allegedly was happening.
00:18:33 So Visa was the chairman of Steinhoff, not the CEO.
00:18:37 An outside forensic audit by PricewaterhousePwC
00:18:41 found that he was not involved
00:18:43 in the accounting fraud at all.
00:18:46 Since he came in, you know,
00:18:47 after it had been going on for years,
00:18:49 the person who's going to be tried apparently in Germany,
00:18:52 reportedly in Germany in April is the former CEO,
00:18:56 this guy, Markus Usta.
00:18:57 And he apparently organized most of the fraud
00:19:00 according to what I've read.
00:19:02 Most of it happened in the European arm of this company.
00:19:05 So the thing that kind of sticks in my brain is,
00:19:08 I read this really interesting book called "Stein Heist,"
00:19:11 which is about the accounting fraud at Steinhoff.
00:19:14 And it points out that in 2007,
00:19:18 an analyst at the South African arm of JP Morgan
00:19:22 put out a 56-page report
00:19:24 highlighting the accounting issues and questions
00:19:29 and concerns about transactions with Steinhoff.
00:19:33 And then two years later in 2009,
00:19:36 the book recounts a meeting that Visa had
00:19:40 with another analyst at another firm
00:19:42 who had a 40-slide presentation detailing his concerns
00:19:47 about shoddy transactions, suspiciously low tax rates,
00:19:51 all kinds of things that didn't really add up.
00:19:54 And so in a sense, you know,
00:19:56 I feel like Visa was warned
00:19:58 that there was something amiss with this company.
00:20:01 But yet, six years after he met with his analyst,
00:20:05 he sold his company to Steinhoff anyway.
00:20:09 I don't mean to say he had it coming to him,
00:20:11 but it's sort of interesting
00:20:12 what we choose to pay attention to
00:20:14 and what we choose to ignore.
00:20:15 I think when people have questions,
00:20:17 it's good to kind of follow your instincts
00:20:19 on these questions and pay attention to the doubters.
00:20:22 (gentle music)
00:20:25 So in addition to his settlement with Steinhoff
00:20:32 that gives him cash and shares in the company,
00:20:34 in PEPCOR, in the clothing chain,
00:20:37 he's got about 10% of ShopRite, the supermarket chain
00:20:41 that's like a Walmart of Southern Africa.
00:20:44 And he's also got holdings in a few other companies.
00:20:46 One of them is called Invicta,
00:20:49 which is listed on the Johannesburg Stock Exchange
00:20:52 and has investments in China, Singapore, and the UK.
00:20:55 Another firm, Tradehold, has industrial businesses
00:20:59 in South Africa and also commercial property in the UK.
00:21:02 And then he's got a Luxembourg-listed firm called Brait,
00:21:05 which owns stakes in the Virgin Active health clubs
00:21:09 and in two South African firms,
00:21:11 a fashion label and a consumer goods business.
00:21:14 Most of those investments are not nearly as valuable
00:21:17 right now as his ShopRite stake,
00:21:18 which is the most valuable thing he owns right now.
00:21:21 Avisa is 81 years old.
00:21:23 He basically said that he was shocked
00:21:26 that this fraud made it past all of these gatekeepers,
00:21:31 the internal auditors, the external auditors,
00:21:34 the South African Reserve Bank,
00:21:36 the foreign banks that were lending money to Steinhoff.
00:21:40 For somebody whose fortune got mostly wiped out in 2018,
00:21:45 and he went through four years of a lawsuit
00:21:48 before a settlement, he seems proud
00:21:50 and pretty much at peace with the world.
00:21:53 (upbeat music)
00:21:56 - You may think Bitcoin is silly,
00:21:58 but it's just as silly as gold.
00:22:00 We have a system in place where we know how to mine it.
00:22:03 We pull it out of the earth.
00:22:04 Yes, it's very dangerous.
00:22:05 Yes, it costs human lives,
00:22:06 but we care about this shiny metal.
00:22:09 And we've just agreed as a society
00:22:11 that this is a store of value.
00:22:12 So at a very basic minimum,
00:22:14 when you have a store of value
00:22:16 that you can transport out of a country,
00:22:18 if God forbid you're under duress,
00:22:20 you can carry this out much more easily than the gold.
00:22:24 And so here is, in the most boring way possible,
00:22:29 an argument for why crypto,
00:22:30 and I mean, in particular in this case,
00:22:32 Bitcoin is good, is useful, and is here to stay.
00:22:34 (upbeat music)
00:22:37 I'm Alexis Ohanian,
00:22:38 probably best known for founding Reddit.
00:22:41 I started the company right out of college, 2005.
00:22:45 I returned to the company back in 2014
00:22:47 as the executive chairman for the turnaround.
00:22:49 And then I left for good in 2020.
00:22:52 (upbeat music)
00:22:54 I was gonna be a lawyer,
00:22:57 and then I walked out of that LSAT.
00:22:59 It's a true story.
00:23:00 Walked the hell out of that LSAT, 20 minutes into it,
00:23:03 'cause I was like, this is terrible.
00:23:04 I don't wanna be here.
00:23:06 Went to the Waffle House on 29 in Charlottesville, Virginia,
00:23:09 sat down, got my order, and I'm sitting there,
00:23:11 and I'm just like, I can't be a lawyer.
00:23:13 And that was where I decided.
00:23:14 I was like, I can't do this.
00:23:16 I quit.
00:23:17 I was like, I'm not taking any more LSATs.
00:23:19 Like, I'm done.
00:23:20 And went back to my dorm and started convincing my roommate
00:23:24 to join me in starting a company.
00:23:25 It took like a year to convince him to join me,
00:23:27 but I just knew I had to be an entrepreneur.
00:23:30 (upbeat music)
00:23:32 These days, I'm doing my life's work at 776,
00:23:35 which is a technology company that deploys venture capital.
00:23:38 So I have always been what I'd like to think
00:23:41 is a pragmatic supporter of crypto.
00:23:44 About half of the 776 portfolio is in some way
00:23:48 investing in crypto or blockchain technologies.
00:23:51 When 2005, I'm starting Reddit,
00:23:56 web2 was the jargony phrase.
00:23:58 What did it mean?
00:23:59 It really just meant that we had some new technology.
00:24:02 Back then, it was called Ajax,
00:24:03 just some fancy JavaScript that let me design a website
00:24:06 where you could have these up and down arrows and comments
00:24:10 that you could click on in real time and see them change.
00:24:14 Everyone in web2 was in a way following Zuck's lead.
00:24:19 I think Facebook had launched maybe a year before us,
00:24:21 and then Twitter launched a few years after us,
00:24:23 but we were all following the same model,
00:24:24 which was grow as fast as you can,
00:24:28 and you'll figure it out later,
00:24:30 which meant that eventually you'll have enough users
00:24:33 to run ads.
00:24:34 And I was never happy with that.
00:24:37 It never felt good.
00:24:38 We tried our best to build ads that users didn't hate
00:24:42 'cause they could comment on them
00:24:43 and they could vote on them,
00:24:44 but it always felt like an ugly hack.
00:24:47 What I realized there was we were early and right
00:24:50 in a lot of ways,
00:24:52 but we had a deeply flawed business model, advertising,
00:24:55 and web2 allowed for social media,
00:25:00 allowed for user-generated content,
00:25:01 allowed for anyone to say,
00:25:02 "Hey, I've got a funny story to tell,"
00:25:05 and I think it could be just as funny as anyone else's,
00:25:07 even though I didn't go to a journalism school
00:25:08 or didn't go to a writing school or whatever.
00:25:10 And we just didn't figure out a business model
00:25:14 that worked for it.
00:25:15 I think having a front row seat to building Reddit,
00:25:18 as well as building the communities of Reddit specifically,
00:25:21 has exercised a lot of muscles around intuition
00:25:25 for community.
00:25:26 And as communities grew,
00:25:27 we sort of cobbled together ways
00:25:30 for businesses to go around it.
00:25:32 Let's start with the community first.
00:25:33 Let's build technology around that energy.
00:25:36 Let's build a brand around that energy,
00:25:37 and here we go.
00:25:38 [upbeat music]
00:25:41 So back in 2012, I was working at Y Combinator,
00:25:47 which was the same accelerator that first funded me
00:25:50 back in 2005 when I was a CEO starting Reddit.
00:25:53 And I remembered meeting this young man, Brian Armstrong.
00:25:56 He had just left Airbnb.
00:25:58 He was their head of fraud.
00:26:01 Clearly a very smart guy.
00:26:02 Airbnb was clearly a very successful company,
00:26:05 and he was choosing to leave to start something new,
00:26:10 to be the best and safest way to buy crypto online.
00:26:14 And I thought, okay, someone this smart
00:26:16 at a company this successful who still wants
00:26:19 to just step away and build something
00:26:22 he believed was gonna be his life's work,
00:26:24 that's something I needed to lean in and learn more about.
00:26:26 So I went to the first place you would expect,
00:26:28 which is Reddit, and visited the r/bitcoin community
00:26:32 to start educating myself and to start seeing
00:26:35 the audience there on Reddit has always been
00:26:37 among the earliest adopters of technology.
00:26:40 And so not everything goes viral,
00:26:42 not everything goes mainstream,
00:26:44 but here was a community that was very frustrated
00:26:46 'cause it was very hard to buy this cryptocurrency
00:26:49 that they believed in.
00:26:50 And Brian Armstrong was the first one
00:26:52 to really put his hand up and say,
00:26:54 I wanna do this, I wanna do this above board,
00:26:55 I'm gonna put my name on the website,
00:26:57 and I want people to feel safe buying this asset.
00:27:00 At the time, I thought it'd probably still get shut down
00:27:03 by the government at some point.
00:27:05 I'm sitting here reading that white paper thinking,
00:27:07 really, people are gonna care about this?
00:27:11 But there was just enough, 'cause there were enough Redditors
00:27:13 who already cared about it and thought,
00:27:16 this is powerful, this is a big deal.
00:27:18 I thought, you know what,
00:27:19 the technology's interesting enough,
00:27:21 the white paper is intellectually sound,
00:27:24 and there's a community of very passionate Redditors
00:27:27 who believe in this, and if anyone's gonna do it,
00:27:29 Brian seemed like the right one.
00:27:31 Just very lucky to have invested that early.
00:27:34 (upbeat music)
00:27:37 The technology is a medium, and I compare it to paper
00:27:42 in a way that I think works pretty well for folks.
00:27:44 4,000 years ago, someone is inventing papyrus,
00:27:51 and they're sitting there, and he, or probably more likely,
00:27:54 she is like, yo, I can take a thing and write on this
00:27:58 and give it to you, and now it's yours.
00:28:00 That's pretty cool.
00:28:01 Now, if you were to go back in time right now
00:28:04 and explain that today paper is used for everything from,
00:28:08 I mean, you'd have to explain what a script is,
00:28:10 you'd have to explain what a trading card is,
00:28:12 you'd have to explain what tissue paper is,
00:28:14 you'd have to explain what, you'd have to explain to them
00:28:17 that there is a piece of paper here in the United States
00:28:19 that is so important, we wrote down some words on it
00:28:22 a few hundred years ago, and it's like a sacred document.
00:28:24 And then there's actually literally a sacred document
00:28:26 that's been printed millions of times all over the world,
00:28:29 and it's the basis of an entire religion that people share.
00:28:32 Like, the leaps and bounds of what this simple medium
00:28:36 could do could not have been imagined at that time.
00:28:40 And so now, I think in the next few years,
00:28:43 we'll start to see some really boring applications
00:28:48 for this technology, think of it like paper,
00:28:51 that starts to compound in value and utility for people,
00:28:54 where, again, they shouldn't need to know
00:28:57 the underlying tech, just like they didn't need
00:28:59 to know Ajax, they don't need to know if it's an NFT,
00:29:01 it just needs to work, it needs to deliver
00:29:02 a delightful experience, and that's it.
00:29:05 If we stick to this metaphor of NFT as paper,
00:29:09 then paper can have a cultural value, but also utility.
00:29:13 The Michael Jordan first basketball game, Ticket Stub,
00:29:16 is a perfect example of this, right?
00:29:18 It is a piece of paper.
00:29:20 It had utility a few decades ago, 'cause you knew
00:29:23 which seat your butt went into, and when you got there,
00:29:25 no one else was sitting there, right?
00:29:27 That's clear utility.
00:29:29 Today, it has cultural value,
00:29:30 because it was Michael Jordan's first game,
00:29:32 and it's worth hundreds of thousands of dollars.
00:29:34 And those are the channels where we're gonna see
00:29:37 the value in NFTs over these next years.
00:29:39 (upbeat music)
00:29:42 In tech, broadly, it's gonna be a rocky year.
00:29:54 Wish it weren't the case,
00:29:54 but I think it's gonna be a rocky year.
00:29:56 And CEOs are gonna be looking at a very different scenario
00:30:01 for their next fundraise than ever before,
00:30:06 or at least that I've seen.
00:30:08 '08, '09 was probably the best comp.
00:30:10 I was at Y Combinator at the time,
00:30:12 and watching companies like Stripe and Airbnb
00:30:15 get started in that mess was so inspiring,
00:30:20 because those CEOs and those companies were so lean
00:30:23 and so mean and had to earn every user
00:30:26 and every dollar,
00:30:27 and were rejected a hundred times by investors,
00:30:30 but it made them so much stronger
00:30:32 and so much more formidable.
00:30:33 And so the thing we've been impressing upon our founders,
00:30:36 frankly, since the end of last year,
00:30:39 is that this is the time to really, really pursue
00:30:44 this kind of excellence within your org.
00:30:46 It's not about squandering money.
00:30:49 It's not about chasing radical valuations.
00:30:52 It's about delighting your users,
00:30:54 shipping, building a performance culture in your org.
00:30:58 And the good news is, we're still a young firm ourselves,
00:31:02 and we're living a lot of these values ourselves.
00:31:05 The companies in the portfolio are still quite young.
00:31:08 And then the founders we're meeting now,
00:31:10 and I really believe in the next year or two,
00:31:12 are gonna be hardened in a very different way.
00:31:15 And as much pain as this economic uncertainty
00:31:19 is unfortunately gonna create,
00:31:21 that same pain will create some tremendous companies
00:31:24 to get started.
00:31:26 And I'm hopeful for those,
00:31:27 'cause we need those companies.
00:31:28 We need those companies to further push us in space tech
00:31:31 and climate tech and software, and yes, even crypto.
00:31:34 (upbeat music)
00:31:36 Yeah, I've lived through a lot of cycles now,
00:31:38 a lot of crypto winters,
00:31:40 and every single winter, I actually relish the chance,
00:31:43 because you're spending time with real builders
00:31:47 who are sober and focused.
00:31:49 The first time CEO that I meet today,
00:31:52 who's 21, fresh out of college, just like I was,
00:31:55 are so much smarter than I was.
00:31:57 And not just in the obvious way
00:31:59 that every generation you would hope, right?
00:32:01 Two decades later is much smarter.
00:32:03 They are much more wise,
00:32:05 because they're the first generation
00:32:06 to have grown up in this era, in this age,
00:32:10 using it every day, seeing it how affected them in school,
00:32:12 seeing it how it affected them.
00:32:14 I think every generation feels this.
00:32:18 I think they will undo, or at a minimum,
00:32:21 learn from a lot of mistakes that we made,
00:32:23 and I am here to help them as much as possible.
00:32:26 I feel very fortunate to see now in the last two years,
00:32:31 the progress and the success
00:32:32 and all the good fortune we've had,
00:32:33 just makes me think like,
00:32:35 I mean, in a way, it makes me think,
00:32:37 "Gosh, if I didn't do this sooner,"
00:32:38 but I'm happy to be in the place I'm in right now,
00:32:41 and it's been fun, and it's incredibly satisfying.
00:32:44 And I have a kid who I promised two years ago
00:32:49 when I resigned the way I did in protest from Reddit,
00:32:51 that I was gonna do everything I could
00:32:53 to not just keep doing my best professionally,
00:32:57 but do so in a way that was gonna make her proud one day
00:32:59 and make her wanna, you know,
00:33:01 obviously, she's got a mother to be very proud of,
00:33:03 but I'm competitive,
00:33:04 and I want her to be just as proud of me, too.
00:33:07 Folks for years would be like,
00:33:09 "Hey, Reddit, I love Reddit, Reddit, Reddit."
00:33:12 And then for a while, it was, "I love your wife."
00:33:15 They still do that.
00:33:16 Every now and then, it's like, "I love Olympia,"
00:33:17 which is nice, but a little weird.
00:33:20 But it was the first time a few months ago
00:33:21 someone said, "Hey, I love Angel City FC.
00:33:23 "Thank you so much."
00:33:24 And that felt great,
00:33:26 and it would make me so happy if that were my legacy.
00:33:30 The focus right now is 776.
00:33:34 Angel City happens to be a part of that.
00:33:35 But I'm really, I'm in a very fortunate place right now.
00:33:39 The firm's only two years old,
00:33:41 but the success we've had, the tailwinds,
00:33:44 everything has been,
00:33:45 it feels like this energy has been compounding
00:33:49 in such magnificent ways.
00:33:50 And yes, we do early-stage investing.
00:33:53 I get to spend a lot of my time building products
00:33:55 that helps our team work fully remotely,
00:33:57 helps us support our founders
00:33:59 better than anyone in the game.
00:34:01 And I started a foundation.
00:34:03 I didn't call it the Ohanian Family Foundation
00:34:05 'cause that was lame.
00:34:06 I called it the 776 Foundation
00:34:08 'cause it's just, it's a better brand.
00:34:10 And started making,
00:34:12 started building my philanthropic legacy.
00:34:15 The rest of my life is gonna be spent deploying capital,
00:34:18 whether it is for-profit on the venture side,
00:34:22 and we'll do it better than anyone,
00:34:23 or philanthropically on the foundation side.
00:34:26 And I hope we can do that, obviously, also better than anyone.
00:34:29 And that's it.
00:34:30 That's what I want the Google search results to be.
00:34:32 And maybe Olympia's dad.
00:34:33 That'd be cool, too.
00:34:34 (upbeat music)
00:34:37 (upbeat music)
00:34:39 - Jimmy Rain is the founder and CEO
00:34:47 of Great Southern Wood Preserving,
00:34:48 based in Abbeville, Alabama.
00:34:50 Great Southern is one of the country's
00:34:53 largest treaters of lumber.
00:34:55 So basically, they take raw lumber
00:34:58 from other companies' sawmills, primarily,
00:35:01 and apply chemical preservatives
00:35:02 to ensure that it lasts a lifetime.
00:35:05 And based on Great Southern's $2 billion of 2022 sales,
00:35:09 we estimate that the company's worth about $1 billion.
00:35:12 Jimmy actually took over the company
00:35:16 when the father of his first wife
00:35:19 tragically died in a car accident in 1970.
00:35:23 - He was a farmer.
00:35:25 And like most farmers, he was land-rich, but cash-poor.
00:35:29 So the CPA that was advising the family said,
00:35:34 "Sell the tractors, sell the plows,
00:35:36 "sell all the personal property, but don't sell any land."
00:35:41 And this little treating plant
00:35:43 sat on six and a half acres of land next to the farm.
00:35:47 And so they did that.
00:35:49 They sold everything except this one little treating plant.
00:35:52 And they had one offer from Mr. Ralph Reynolds
00:35:55 here in Abbeville.
00:35:56 He was a pulpwood dealer.
00:35:58 He offered them $14,000 for the little treating plant.
00:36:02 And the six and a half acres that it sat on.
00:36:05 The brother wanted to take it.
00:36:08 My wife was trying to do what the CPA told her.
00:36:12 So they kind of got in a disagreement.
00:36:14 And I was in law school trying to mediate my first case.
00:36:19 So I came up with the idea that I would lease the land
00:36:22 and sell the equipment.
00:36:24 So I made an offer to them.
00:36:26 Well, I'll buy the equipment for $10,000
00:36:28 and I'll lease the land.
00:36:30 And everything will go away
00:36:32 and I'll stay in law school and I'll finish.
00:36:34 So my father said, "Jimmy, that's a very good idea.
00:36:37 "But what happens if you can't sell it?
00:36:39 "You're gonna sign a note for $10,000,
00:36:41 "but if you can't."
00:36:42 "Oh, dad, I can sell it.
00:36:43 "I'm sure I can sell it."
00:36:45 "But what if you can't?"
00:36:46 Anyway, he was right.
00:36:47 I couldn't sell it.
00:36:49 So now I've got a treating plant.
00:36:51 So I finished law school and came back here
00:36:54 and opened a one-room law office on the 4th Square.
00:36:58 Two black telephones.
00:36:59 This one ring, that'd say Jimmy Rain Law Office.
00:37:01 This one ring, that'd say Great Southern Wood Preserve.
00:37:04 So that's how it started,
00:37:05 me and one other fellow, Austin Curry.
00:37:08 Back then, the company was doing
00:37:10 less than $100,000 of sales.
00:37:12 So a fraction of what it does today.
00:37:14 It had no cash, no money.
00:37:18 And money is the lifeblood of any business.
00:37:21 And I struggled for a long, long time
00:37:24 trying to run the business.
00:37:26 I would get up 4.30 in the morning
00:37:28 and go out and meet Lawson,
00:37:29 and we would get everything ready and start treating.
00:37:33 Come back and take a shower.
00:37:34 Practice law till 4.30.
00:37:36 Then I'd go back and stay with him until we got finished.
00:37:40 Things really started to take off in the mid-80s
00:37:43 when Jimmy attended a Harvard Business School program
00:37:46 for the owners and managers
00:37:48 of family-owned private companies.
00:37:50 And he was inspired by a case that he studied there
00:37:53 about how Frank Perdue used marketing effectively
00:37:56 to turn commodity chicken into a household name.
00:38:00 Every time I would walk into a building supply store
00:38:04 and try to talk to them about my product,
00:38:06 the only question they asked, "What's your price?"
00:38:10 And I knew we had the best product.
00:38:14 I knew we had the highest quality.
00:38:16 I knew the extent that we were going to
00:38:18 to make a high-quality product and to give service.
00:38:22 But it didn't matter.
00:38:23 So I needed some way to get the attention of that dealer.
00:38:28 I wanted to find some emotional thread
00:38:31 that would weave through my area,
00:38:34 and that was college football.
00:38:36 - Jimmy had this insight based on his love
00:38:38 of college football and the love of college football
00:38:41 across the South, that if he were to bring in
00:38:43 the big college football coaches,
00:38:45 not only at his alma mater, Auburn,
00:38:48 but at rival Alabama and others throughout the South,
00:38:51 if he were to bring them in as spokespeople,
00:38:53 that would really help grow his brand,
00:38:55 and that certainly turned out to be the case.
00:38:57 - I had known Pat for a long time.
00:38:59 We became friends, but when he got the job at Auburn in '81,
00:39:04 and I went to Harvard in '84, '85, and '86,
00:39:09 and the idea came to me when I was at Harvard
00:39:11 to try and use marketing to differentiate my product.
00:39:16 So I came back and I talked to Pat about it first,
00:39:20 and he said, "Well, we'll try it.
00:39:22 "See how it works."
00:39:23 - Like this fence, built with Osmo's pressure-treated pine
00:39:26 from Great Southern Wood,
00:39:28 the lumber with a 40-year guarantee.
00:39:30 Speaking of extra defense, ring and let me keep this.
00:39:34 - So after years of doing commercials with the coaches,
00:39:37 he'd sort of actually created this own character
00:39:39 and brand for himself, and you could argue
00:39:41 maybe at that point, he didn't really need
00:39:43 the coaches as much.
00:39:44 So when he was thinking about, you know,
00:39:47 with his marketing team, what the next phase
00:39:49 of the company's advertising would look like,
00:39:53 he ended up drawing on his love for old westerns
00:39:56 and created this character called the Yellowfella,
00:39:59 who is a cowboy played by Jimmy.
00:40:03 - When we first started, we were using actors,
00:40:06 and nothing was catching on.
00:40:09 Marty Marshall was my marketing professor at Harvard,
00:40:13 and so I talked to Marty, and he said,
00:40:16 "Well," he said, "I think the problem you're having
00:40:18 "is that people are not connecting.
00:40:21 "It's just another commercial."
00:40:23 I really didn't have any plans to be on camera,
00:40:26 but they walked in one day and had this storyboard
00:40:31 for this cartoon cowboy, and I said,
00:40:34 "Do you really want me to do that?"
00:40:37 And it was really, I thought, hokey, cartoonish,
00:40:41 and it sort of evolved into Yellowfella.
00:40:45 - Who are you, Mr.?
00:40:47 - Fella, Yellowfella.
00:40:49 - I thought you were dead.
00:40:54 - Not hardly.
00:40:55 I wanted to replicate the Roy Rogers, Gene Autry,
00:41:02 John Wayne figures of my youth.
00:41:05 Being in your 60s and out playing cowboys and Indians
00:41:07 was a lot of fun.
00:41:08 I mean, we were shooting these commercials
00:41:11 in the location that John Ford and John Wayne used.
00:41:14 It was like being a kid again,
00:41:16 riding horses and shooting guns,
00:41:18 and you just don't think about the other side effects.
00:41:23 That, okay, now when people see this,
00:41:25 they're gonna recognize you,
00:41:27 but that was kind of different for me.
00:41:30 - I said I came here to rebuild the town with yellowwood.
00:41:33 Best there is for building outdoors.
00:41:35 - Abbeville, Alabama, where Jimmy lives today
00:41:41 and where he started the company
00:41:43 and has kept it ever since,
00:41:45 is probably not exactly where you would expect
00:41:48 to find the richest guy in Alabama.
00:41:51 It's a small town of 2000 people,
00:41:53 about a three hour drive from Atlanta.
00:41:56 Jimmy grew up there.
00:41:57 His family had been there long before he was born,
00:42:01 and he's chosen to keep his company there
00:42:03 and live there today.
00:42:04 And I think a big part of the attachment that he feels
00:42:07 is the critical role that his own dad,
00:42:10 who everyone in Abbeville knows as Mr. Tony, played
00:42:13 in the town's development in the 1950s.
00:42:16 - My dad was a real entrepreneur.
00:42:18 He came back here after World War II.
00:42:21 He wanted to open a nice restaurant,
00:42:23 and he did, it was called the Village Inn.
00:42:25 Well, Mr. Homer Carter was president
00:42:27 of pepper manufacturing in Opelika.
00:42:29 And so he used to come through Abbeville
00:42:34 on his way to his beach house at Panama City,
00:42:36 and he loved to stop at the restaurant
00:42:39 and eat Dad's spaghetti.
00:42:41 So Mr. Homer came in one day,
00:42:43 and he started asking Dad, he said,
00:42:45 "Tony," he said, "what kind of town do y'all have here?
00:42:47 "What kind of water supply?
00:42:49 "What kind of mayor?
00:42:50 "I've got a plant that I want to build
00:42:53 "and open as a textile plant,
00:42:55 "and I'm trying to find a location to put it."
00:42:59 So they started talking and giving him
00:43:00 all this information.
00:43:01 He said, "well, can you get the president
00:43:03 "of the Chamber of Commerce?"
00:43:05 And he said, "we don't have a chairman."
00:43:07 He said, "oh, well, I'm sorry.
00:43:08 "We can't come any place."
00:43:09 They don't have a chairman.
00:43:10 And Dad said, "oh, boy, we'll get you one."
00:43:13 So they organized one, and he became the first president.
00:43:16 And Mr. Carter's decision was between Abbeville
00:43:20 and Cuthbert, Georgia.
00:43:22 And I always say that Dad's spaghetti
00:43:23 is the one that won it, so he chose Abbeville,
00:43:26 and they came to town with 25 employees,
00:43:30 and they started sowing uptown on the square.
00:43:33 And they grew that plant from 25 to 1,400.
00:43:39 (gentle music)
00:43:41 To live here and grow up here was idyllic.
00:43:44 I mean, it was everything that you've ever seen
00:43:47 in old movies, that was what it was like.
00:43:50 And then NAFTA came along and destroyed,
00:43:54 at that time, that building sat on 53 acres
00:43:57 and 550,000 square feet under roof.
00:44:01 Huge plant.
00:44:03 I mean, it was terrible.
00:44:04 And from then through the '90s,
00:44:07 if you rode through Abbeville in 1996,
00:44:10 it'll lock your door and kept going.
00:44:12 There was burned out buildings and boarded up buildings.
00:44:15 It was just a devastated community.
00:44:19 - So within the last few years,
00:44:20 that plant was still sitting empty.
00:44:23 And years ago, to avoid it being sold to a salvager,
00:44:27 Jimmy bought the plant and paid years worth of taxes
00:44:31 and an interest and the like
00:44:33 before he could figure out what to do with it.
00:44:35 And then in 2018, Hurricane Michael happened
00:44:39 and demand for wood basically went through the roof.
00:44:42 And the company went to its suppliers, the sawmills,
00:44:45 and said, "We need X amount of wood."
00:44:47 And they couldn't meet that demand.
00:44:49 So in order to cushion the company
00:44:52 against future situations like that,
00:44:54 Jimmy actually opened one of his company's first sawmills
00:44:58 at the old Pebbrell plant in Abbeville in 2019.
00:45:01 I think that was a moment of pride for him.
00:45:04 - Everything went from being idle for years
00:45:08 to now we got about 110 people out there
00:45:12 making an average of $22 an hour.
00:45:15 So that's been sort of a great inspiration to me
00:45:19 that we were able to bring that back
00:45:21 and bring that kind of prosperity back.
00:45:24 And it's made a big difference in the town.
00:45:25 When you look at our sales tax revenue
00:45:28 and just the whole economy around Abbeville
00:45:31 has really been improved because of that facility.
00:45:34 - Thanks to the success Jimmy's had,
00:45:37 he's been able to really give back to that community.
00:45:40 And he spent millions of his own dollars
00:45:43 to revitalize the town,
00:45:45 to look like it did when he was a kid.
00:45:48 - I wanted to build Hug and Mollies
00:45:50 because it brought back a time for me
00:45:53 that was very special when I was a kid.
00:45:55 I would go uptown on the square to Central Drugstore
00:45:59 and you'd go in there after school
00:46:01 and you'd get a fountain drink.
00:46:03 So we tried to replicate Central Drugstore
00:46:07 with Hug and Mollies with the soda fountain
00:46:09 and the stools and the carbonated water and the drinks.
00:46:13 Most of the buildings downtown have been replicated
00:46:16 back to the way they were originally constructed.
00:46:19 And rather than build one giant big office building,
00:46:23 we would put different offices in some of the buildings.
00:46:26 So it would bring the building back to life
00:46:28 and it would bring the town back to life.
00:46:31 And we tried to go back and restore them
00:46:34 as I remember them in the '50s.
00:46:36 - Jimmy started this foundation
00:46:43 called the Jimmy Rain Foundation,
00:46:45 which is education focused
00:46:47 and funds partial scholarships for college students.
00:46:51 And the way that the foundation funds itself
00:46:54 is primarily through a charity golf tournament
00:46:56 that it runs every year.
00:46:58 - One of my employees, she had a daughter and a son
00:47:03 and I knew both of them very well.
00:47:05 And the little girl was just such a bright shining child.
00:47:10 Her whole life, all she talked about
00:47:13 was I wanna be a doctor.
00:47:15 And she never wavered from kindergarten
00:47:17 through grade school, through high school.
00:47:19 So she went to Auburn, her father ran a tire store here
00:47:23 and her mother worked for us in accounting.
00:47:26 At that time, Auburn didn't have a great scholarship program
00:47:30 but I tried to help her and she got a small one.
00:47:34 I guess I became distracted, I don't know.
00:47:38 But her father had died, passed away.
00:47:42 And before I really knew it,
00:47:44 she had dropped out of college
00:47:47 because she couldn't afford it.
00:47:48 Well, that just broke my heart, it devastated me.
00:47:56 And I said, this is not right, it's not right.
00:47:59 We can't, we gotta do something.
00:48:01 I don't know what, but we're gonna do something.
00:48:03 So we decided right then and there
00:48:06 that we were gonna start this foundation
00:48:08 and we were gonna make sure the best we could.
00:48:11 That wasn't gonna happen again.
00:48:13 Jimmy has been able to draw on the relationships
00:48:16 that he made over so many years
00:48:19 working with the college coaches
00:48:20 to bring in big names like Peyton Manning
00:48:24 whose dad was in a commercial with Jimmy,
00:48:26 Herschel Walker who was a big name,
00:48:28 Georgia running back.
00:48:30 So his ability to bring those big names
00:48:32 is really a big draw for people
00:48:33 who wanna pay to play in the tournament.
00:48:35 And as a result of that, the foundation's been able
00:48:38 to fund more than 500 partial scholarships to date.
00:48:42 In the first year we raised money,
00:48:44 we didn't have enough money to give a scholarship.
00:48:46 The next year we gave one.
00:48:48 And then the next year we gave two.
00:48:50 And now we give over 50 a year
00:48:52 and we've given out over 560.
00:48:56 And I said that first night, I said,
00:48:58 "I hope I'm standing here."
00:48:59 And we give out a thousand.
00:49:01 God willing I will.
00:49:03 I was always intrigued about real estate
00:49:12 and investing in real estate.
00:49:14 I'd read articles.
00:49:15 When I was 13 years old, I bought most of the script
00:49:17 in the Wall Street Journal.
00:49:18 And so it did interest me,
00:49:20 a possible career in real estate.
00:49:22 But I really didn't know which direction I wanted to go
00:49:25 until really I was in high school and first year of college.
00:49:28 My name is Roy Carroll
00:49:30 and I'm the CEO President of the Carroll Companies.
00:49:32 Growing up as a very lower middle class upbringing,
00:49:49 both my parents worked.
00:49:50 My father's a meat cutter, grocery store man.
00:49:53 He did a little bit of remodeling on the side.
00:49:55 So I'd go help him, you know,
00:49:57 after school and on weekends with the remodel jobs.
00:49:59 So that's how I got my hands in construction a little bit.
00:50:03 We actually lived in rental homes.
00:50:05 We didn't even own our own homes.
00:50:07 I was in high school.
00:50:08 After my father bought his first house,
00:50:11 he decided to buy some more rental homes
00:50:12 and get an opportunity to buy two homes
00:50:14 up in Danville, Virginia.
00:50:16 And I'd saved up money,
00:50:17 more in loans doing odd jobs and such.
00:50:19 And so I'd saved $1,000.
00:50:21 And so this is a very modest home.
00:50:24 And so he asked me if I wanted to buy the one home.
00:50:27 And so I put $1,000 down and owner finance,
00:50:30 I think that's $4,000 or so.
00:50:32 So it was a $5,000 home.
00:50:34 And I rented it for a year
00:50:36 and sold it for a profit to buy a car,
00:50:39 which is a bad investment
00:50:40 'cause cars depreciate value, right?
00:50:42 I should have kept that house.
00:50:44 So I was in college and my father got laid off
00:50:48 from his grocery store business after 20 some years.
00:50:51 This early 80s, terrible time to go to real estate.
00:50:54 Interest rates are very high.
00:50:55 We had some friends that wanted a house built.
00:50:57 And so they knew my father had done
00:50:59 some renovations on the side.
00:51:01 So they asked my father if he wanted to build their house.
00:51:05 I was going to school here locally.
00:51:06 And so I would help after school and on weekends.
00:51:09 And he and I did a lot of the work hands-on.
00:51:13 And when I say did the work,
00:51:14 we nailed the nails and swept the floors
00:51:16 and did things like that, built the first house.
00:51:18 And by the time we'd finished that home,
00:51:20 actually had another set of friends that said,
00:51:23 "Hey, you did a good job with that home.
00:51:24 Why don't you,
00:51:25 would you be interested in building us a home?"
00:51:26 And so after building the second house,
00:51:29 he and I kind of sat down and said,
00:51:30 "You know, we may be able to make a career out of this."
00:51:33 And so we formed our little company
00:51:35 and started doing custom homes on scattered lots
00:51:39 around the Greensboro area.
00:51:41 We kind of divvied up the worlds.
00:51:42 He would run the crews on the job site more so.
00:51:45 And I would do more of the estimating
00:51:48 and selections with the customers.
00:51:50 You know, we still both got out there
00:51:51 and drove nails at the end of the day.
00:51:53 So it was very rewarding and everything
00:51:55 that those early years started the business of my father.
00:51:58 Real estate business has a lot of risk associated.
00:52:04 And from the first year that we started the business,
00:52:07 we decided that we would,
00:52:08 my father had a little bit of retirement savings
00:52:11 that he'd lived on.
00:52:11 I was a college student,
00:52:12 so it didn't take much for me to live on.
00:52:14 So we decided we'd pay ourselves once a year
00:52:16 at the end of the year.
00:52:17 So we basically put a third of the profits
00:52:20 back into the business to grow it
00:52:22 and we'll each take a third.
00:52:23 And so as long as he was in the business
00:52:25 up until the early nineties,
00:52:27 that's the way we paid ourselves.
00:52:28 And so I think that was one of the things
00:52:31 that kind of was a catalyst for us
00:52:33 to be as successful as we were.
00:52:35 It's just that very conservative approach,
00:52:37 which I carry on today.
00:52:38 We've got a Hyatt Place Hotel right downtown.
00:52:42 We've have 300 apartments associated with it.
00:52:44 We're getting ready to start up AC Hotel
00:52:46 across the street from it.
00:52:47 Rooftop Restaurant, another 300 apartment associated.
00:52:51 We've got, I don't know how many beef steaks
00:52:53 we have in town here.
00:52:54 And whenever we start a new venture,
00:52:56 new project, new idea,
00:52:57 we always like to try it out in our backyard
00:52:59 where we can kind of tweak it a little bit,
00:53:01 get the formula just right before we take it on the road.
00:53:04 We're always looking for markets that are emerging
00:53:09 and areas where there's new growth and opportunity.
00:53:12 And we're also looking for value.
00:53:14 We're not gonna go out there and be the guys
00:53:17 that bid and pay top dollar for a real estate asset.
00:53:21 We really beat the bushes hard, so to speak,
00:53:24 and try to find value and then try to add to that value
00:53:26 by executing in the vertical construction
00:53:28 or if it's an existing building,
00:53:30 we will go in and renovate and invest dollars
00:53:34 and reposition it to a nice place.
00:53:38 Well, remodeling a building is a lot more brain damage
00:53:42 associated 'cause you don't know what you're gonna get into.
00:53:44 And the building we're sitting in here
00:53:46 is 17 story buildings, old Wachovia Bank building.
00:53:49 It was built between '63 and '64.
00:53:52 And then it was basically abandoned in the early '80s.
00:53:55 And so it had gone through bankruptcy a couple of times
00:53:58 and insurance company next door, Lincoln Financial,
00:54:01 had purchased the building
00:54:02 and they really purchased it to protect their assets
00:54:05 'cause they own several buildings downtown
00:54:07 and several other properties.
00:54:09 And this is kind of sitting in the middle of them.
00:54:11 And so I met with the CEO of the company
00:54:13 and convinced him that we could execute this project,
00:54:16 it turned into something that Greensboro would be proud of.
00:54:19 And so we lined up that we're gonna do condos.
00:54:21 This is mid to 2005, 2006, we're doing the planning.
00:54:26 People lined up to buy condos from us.
00:54:29 And so we started construction.
00:54:31 We had about half the condos pre-sold.
00:54:34 And then 2008 hit.
00:54:36 And 2009, you're hearing just about every day
00:54:38 about a developer who did a condo project
00:54:41 and they got sideways
00:54:43 and they were turning it back over to the bank.
00:54:45 And I told people, I said,
00:54:46 "I will not give this building back to the bank."
00:54:48 I was speaking to the CFO one morning and I said,
00:54:52 "I think it would help us sell more condos
00:54:55 and just take that cloud from over the Carroll Companies
00:54:58 if we just paid off this building."
00:55:00 In hindsight, it was one of the smartest things
00:55:01 we could have done because word got on the street
00:55:03 that that's how we conduct business.
00:55:05 We're not gonna walk away from one of our obligations.
00:55:08 And we never reduced the price of one condo in this building
00:55:12 and we're close to sold out and everything.
00:55:17 And I live here, so all my neighbors are happy with me
00:55:19 because I didn't reduce the price
00:55:20 or give it back to the bank.
00:55:22 So it turned out well for everyone here.
00:55:24 Well, cell storage is kind of like a close cousin
00:55:33 to multifamily anyways, the way I see it.
00:55:35 And a lot of our communities, we already had garages,
00:55:38 we had storage units on site.
00:55:39 So I studied the business and I said,
00:55:41 "Let's come up with something that's a little bit unique."
00:55:44 There's a lot of good cell storage operators
00:55:46 out there today.
00:55:47 And so we came up with the Be Safe brand
00:55:50 and where we tried to position Be Safe
00:55:52 is that it is top end of the market.
00:55:56 Our lighting's a little brighter,
00:55:58 we temper the temperatures inside a little bit more
00:56:01 than most cell storage operators.
00:56:03 And we put a lot of money in the exterior facade,
00:56:05 all of our exteriors in the Be Safe are stone and brick
00:56:09 and they really look like an office building.
00:56:11 So they fit in well in the upscale communities
00:56:13 that we're trying to be in.
00:56:14 So that's been a good business model for us.
00:56:17 And we're spread out pretty much everywhere
00:56:19 where we're already with the multifamily.
00:56:21 We're also looking to put Be Safe cell storage facilities.
00:56:25 Car storage is something that we've studied.
00:56:34 There's a number of different variations
00:56:36 of car storage across the country.
00:56:38 Where we're a little bit different,
00:56:39 we're doing it instead of doing like a condo
00:56:41 or one big open space where we're placing cars
00:56:44 and a big open room.
00:56:46 These are individualized two-story units that we lease.
00:56:50 We give you an upfit allowance where you can personalize it,
00:56:53 whatever theme you want to come up with.
00:56:55 I'm into cars a little bit, so collecting
00:56:59 and thought it would go well
00:57:02 with some of the other car events that I attend
00:57:05 and be able to promote it with some of our Be Safe racing.
00:57:08 I guess about five years ago,
00:57:12 I bought a Ferrari Challenge car and would take it up.
00:57:15 There's a racetrack about an hour north of here in Virginia
00:57:19 and was running it around one day
00:57:20 and a race team was looking to form down in Charlotte
00:57:25 and asked me if I'd be interested in joining them
00:57:28 on a Ferrari Challenge series.
00:57:30 And so I said, "Sure."
00:57:32 And so one thing led to another and joined a team
00:57:35 and met a lot of great people.
00:57:37 Being involved with that,
00:57:39 it's great to be involved with Ferrari.
00:57:41 It's helped us brand.
00:57:42 It's also helped with employee engagement
00:57:44 and Carroll Companies, several employees
00:57:46 like to follow our racing program.
00:57:49 And it's great that it's kind of pulled
00:57:51 a lot of our Carroll Companies employees together
00:57:53 and everything around the racing program.
00:57:56 We had a car in Lamar this year, partnered with Ferrari.
00:57:59 The Ferrari Racing Program built a Ferrari 488 GTE
00:58:04 for us to run in Lamar.
00:58:05 And we had a good experience with that.
00:58:08 Came in fifth in our class.
00:58:09 So we'll be back at some point in the future
00:58:12 and be on the podium one day.
00:58:14 Well, this community Greensboro has been very good
00:58:19 to me and my family over the years, obviously.
00:58:21 And so, you know, we're very blessed
00:58:23 to be able to give back to the community.
00:58:25 And it is rewarding to look out the window of our home here
00:58:29 and see various projects we have ongoing.
00:58:32 Sometimes I'll look out the window and see something though
00:58:34 that, hey, that needs to be changed.
00:58:36 Greensboro is a beautiful place.
00:58:38 It's a great place to live, great place to grow up
00:58:41 and real blessed to be here.
00:58:42 - Subway was founded in 1965 by Fred DeLuca and Peter Buck.
00:58:55 Fred DeLuca was then a 17 year old
00:58:57 aspiring medical student.
00:59:00 And he went to his family friend, Peter Buck
00:59:02 who was a working nuclear physicist
00:59:04 and asked him for advice on how to pay for college.
00:59:07 The two of them opened in 1965,
00:59:09 the first location of Subway
00:59:11 which was then called Pete's Super Submarines.
00:59:14 We've always known that Subway was a cash cow.
00:59:18 Fred and Peter both debuted on Forbes' billionaires rankings
00:59:22 in 2004 with an estimated net worth of $1.5 billion each.
00:59:28 But there's a lot of questions about their wealth.
00:59:31 And we think that potentially there's billions of dollars
00:59:34 that we didn't know about over the years.
00:59:37 One clue to that was a 2017 deposition
00:59:41 by Fred DeLuca's personal banker
00:59:44 which gave some rare insight into their fortunes.
00:59:46 She claimed that Fred DeLuca was pocketing
00:59:49 about $7 million in royalties each week in the early 2000s.
00:59:54 And that wasn't even at the peak of Subway's sales.
00:59:57 Subway switched to a franchise model
01:00:00 about 10 years after the first Subway sandwiches location opened.
01:00:04 And from there, it really experienced very quick growth.
01:00:08 By 1988, they had 2,000 locations across the US.
01:00:13 Subway's revenue peaked in 2012 at $18 billion
01:00:17 but has been on the decline since 2015
01:00:20 which was the first year that Subway closed more locations than it opened.
01:00:24 (upbeat music)
01:00:26 (keyboard clacking)
01:00:29 Number one, they began to reach their point of no return
01:00:33 in the United States
01:00:35 that they had too many Subways on too many street corners
01:00:39 and the number of stores just exceeded the demand.
01:00:42 Number two, Subway had spent the prior 15 years
01:00:47 not developing new products
01:00:50 and just simply discounting their products.
01:00:53 And every marketing professor
01:00:55 and restaurant professional will tell you that
01:00:58 if that's all you got, you're cheapening your brand.
01:01:01 Both of the founding families of Subway are very private.
01:01:06 And for a while after they died,
01:01:09 Fred died in 2015 from leukemia
01:01:11 and then Peter Buck died at the end of 2021.
01:01:14 We didn't know what happened to Subway
01:01:16 but we recently learned what happened to half of the fortune
01:01:20 when the foundation started by Peter Buck
01:01:23 announced that in his will,
01:01:25 he had left instructions to give his half of Subway
01:01:28 to the foundation, which then spends tens of millions of dollars
01:01:32 helping charitable causes like in spending journalism,
01:01:36 land conservation efforts,
01:01:37 and also causes in his local Danbury, Connecticut.
01:01:41 As for the other half owned by Fred DeLuca,
01:01:44 the family has not confirmed with us
01:01:46 what happened to that half of the company.
01:01:49 Although there are a lot of signs pointing to the fact
01:01:52 that it was inherited by his widow, Elizabeth DeLuca.
01:01:56 Since his death, Elizabeth DeLuca has given
01:01:58 hundreds of millions of dollars to charity from herself.
01:02:01 So that signals that the royalties
01:02:04 that were previously earned by Fred
01:02:06 have been redirected to Elizabeth.
01:02:08 The DeLuca family through multiple attempts
01:02:13 did not respond to a request for comment.
01:02:16 (soft music)
01:02:18 So the announcement of the gift comes as Subway confirmed
01:02:24 that it is considering options for sale.
01:02:27 The Wall Street Journal reported that the price
01:02:29 could be as much as $10 billion for Subway.
01:02:32 The timing of this gift means that Peter Buck's heirs
01:02:36 avoid a pretty hefty tax bill.
01:02:39 If he didn't donate his half of the company
01:02:42 to the foundation, then his estate would owe 40%
01:02:45 estate tax on the fair market value of Subway upon his death.
01:02:50 In 2018, Peter Buck was engaged in a legal battle
01:02:58 with the IRS over his gifting of some of his land
01:03:02 that he had accumulated in the North Maine woods
01:03:05 to his two sons.
01:03:07 Peter Buck started buying Timberland in Maine in 2007.
01:03:11 And during his lifetime became one of the largest
01:03:14 landowners in the state with over 1.3 million acres
01:03:17 of Timberland.
01:03:18 So he gifted some of that to his sons at a discount
01:03:21 from what he paid for it and then got penalized by the IRS.
01:03:25 And he saved millions of dollars on taxes by doing that.
01:03:29 It seems that the family still owns this land.
01:03:33 His two sons likely own the land,
01:03:36 which is valued anywhere from $300 million to $1 billion.
01:03:40 And that doesn't appear to have been included
01:03:42 in the gift to the foundation from earlier this year.
01:03:45 The Buck family through their representatives
01:03:50 did not respond to a request for comment.
01:03:53 Peter Buck was long charitable.
01:04:07 We calculated that he had given away more than $500 million
01:04:12 before his death to his foundation.
01:04:15 As for Fred DeLuca, there was less charitable giving
01:04:18 before his death in 2015.
01:04:20 But since his death, his widow, Elizabeth,
01:04:23 has been giving away money at a very fast rate.
01:04:27 She's given away more than $400 million
01:04:29 according to an analysis of public documents.
01:04:33 And that doesn't include gifts made in 2021 or 2022
01:04:36 as the filings haven't been made available yet.
01:04:39 She's given more than $400 million
01:04:42 to the Fred DeLuca Foundation
01:04:44 since his death in just a few years.
01:04:46 She also incorporated her own foundation,
01:04:49 the Elizabeth DeLuca Foundation, in 2020.
01:04:53 I spoke with one woman who runs a nonprofit
01:04:56 that received a donation from the DeLuca Foundation in 2021.
01:05:00 And she described them as very purposeful in their giving.
01:05:04 "You actually can't apply for a grant from them
01:05:07 like you can from any other foundations,
01:05:09 and instead they come to you," is what this person said.
01:05:12 And they're known to have a big impact
01:05:14 targeting the people who need help the most
01:05:17 in some local communities in Florida.
01:05:20 As for the Bucks, Peter Buck has a lasting legacy
01:05:24 in Danbury, Connecticut,
01:05:25 where he spent the later years of his life.
01:05:28 According to somebody I spoke with,
01:05:29 he helped transform the city,
01:05:31 which has a population of about 90,000 people.
01:05:35 And he was just very generous.
01:05:37 They're both described to be very generous people.
01:05:40 Since 2015 and 2016, when Subway's revenue
01:05:45 started declining and the location started closing,
01:05:49 it's been tough to run a Subway franchise,
01:05:51 according to the franchisees.
01:05:53 In 2021, a group of over 100 franchisees
01:05:57 wrote a letter to Elizabeth DeLuca
01:06:00 outlining a whole host of issues
01:06:02 with the ownership of Subway
01:06:04 that they alleged was making their jobs a nightmare,
01:06:06 in their own words.
01:06:07 Their average store revenues
01:06:17 went up and down like a ladder,
01:06:19 somewhere in the $400,000 to $500,000 range, OK?
01:06:24 And that's very hard to make any money on.
01:06:28 The other sandwich sector competitors,
01:06:31 Jersey Mike's, Firehouse Subs,
01:06:34 they are all running in the $800,000 to $1 million range.
01:06:39 And that hurts, you know,
01:06:41 because you can make money at $800,000
01:06:43 or $1 million per shop sale.
01:06:46 But at $400,000 to $500,000, it's very difficult.
01:06:50 Mr. Chidsey has noted in interviews
01:06:55 that what they wanna do is they wanna consolidate out
01:06:59 and kind of drive out, force out the smaller franchisees,
01:07:04 the mom and pops, if you will.
01:07:06 This is not a surprise.
01:07:08 They have been trying for the last couple of years
01:07:12 to try to find bigger franchisee operators to come in
01:07:17 and take over whole states of franchisees.
01:07:22 The issue is that the store-level profit has to be higher
01:07:27 for these bigger franchisee groups to be interested
01:07:32 in coming over and taking over blocks of Subway.
01:07:35 And so the charitable donations
01:07:39 have some Subway franchisees kind of annoyed.
01:07:42 I spoke with one who said that, you know,
01:07:45 the owners get to look good on the backs
01:07:47 of the Subway franchisees who have been struggling,
01:07:51 who have lost their businesses in recent years,
01:07:53 and that really those profits should be more
01:07:56 in their pockets than in the owners' pockets.
01:07:58 That's something that has been exacerbated
01:08:00 as the sale nears.
01:08:02 Subway responded to questions from Forbes
01:08:07 and said that it is improving its relationship
01:08:09 with its franchisees, that it has made multiple steps
01:08:12 to do so over the past few years,
01:08:15 and that it needs a good relationship
01:08:18 with its franchisees to thrive
01:08:19 and is doing everything it can to do that.
01:08:22 I think it's obviously important to have ability and talent,
01:08:30 but I give more weight to determination,
01:08:33 ambition, and obsession in what you do.
01:08:36 My name's Toto Wolf, and I'm the CEO and team principal
01:08:41 of the Mercedes-AMG Petronas Formula One team.
01:08:44 Toto Wolf is one of the most successful figures
01:08:49 in auto racing, but before he was in auto racing,
01:08:52 he was an entrepreneur.
01:08:53 When Toto Wolf founded March 15, he had no money,
01:08:56 and ultimately his way of building the business
01:08:59 was he would go to these small burgeoning internet companies
01:09:03 and basically say, "Hey, I'll find you financing,
01:09:06 "and in exchange, give me equity."
01:09:08 He did that with a number of companies
01:09:10 and scored some pretty big wins,
01:09:12 like SMS provider UCP and game publisher JoWood.
01:09:16 After that, he returned to his first love, racing,
01:09:19 and also he started managing junior drivers.
01:09:22 And this got him connected with a company called HWA AG,
01:09:26 which was an engine provider
01:09:27 for Mercedes' lower-level racing teams.
01:09:30 And eventually he got involved, bought 49%,
01:09:33 and helped take them public
01:09:34 in what ended up being a 175 million IPO.
01:09:37 I was born and raised in Vienna, Austria,
01:09:44 and I wanted to be a racing driver.
01:09:46 Formula One race is all about speed and performance,
01:09:49 and what I love in the sport
01:09:51 is that the stopwatch never lies.
01:09:53 You know immediately when I've done a good enough job.
01:09:55 I learned my most important business lessons in racing
01:09:58 when I was competing at the age of 18.
01:10:01 Without having funds, you need to raise sponsorship,
01:10:05 and that was pretty difficult.
01:10:06 So when I progressed into Formula One
01:10:09 as a team owner in Williams,
01:10:11 I understood how important it was as a private team
01:10:14 to raise the necessary funds to be competitive
01:10:17 and eventually win races.
01:10:19 I think being a racing driver
01:10:22 is also about fitting in the car,
01:10:24 and since I've grown very tall
01:10:26 in my early 20s quite late,
01:10:28 it wouldn't have been any way easy to race in Formula One
01:10:31 because the cars are so small.
01:10:41 I became team principal of Mercedes
01:10:43 with a weird coincidence
01:10:45 because I was a co-owner of the Williams Formula One team,
01:10:48 and it was going quite well.
01:10:50 We won a race in 2012.
01:10:52 Top management at Mercedes asked me
01:10:54 to assess why their team wasn't going that well,
01:10:56 and I tried to assess to the best of my ability,
01:11:00 and they offered me the job.
01:11:01 That was a huge honor
01:11:02 to run the Mercedes motorsport activities,
01:11:04 but I said to them that I've always been an entrepreneur,
01:11:07 and I have a stake in Williams.
01:11:10 So they gave him an opportunity to invest in the team
01:11:12 that was originally set to be 40%.
01:11:14 Ultimately, it ended up being 30%,
01:11:16 and Niki Lauda ended up investing 10% as well,
01:11:19 and later on, he raised the stake to 33%.
01:11:22 We've won eight consecutive championships in Formula One,
01:11:27 but probably the proudest moment that I had
01:11:29 was in 2014 when we finished first and second,
01:11:32 and the other team, Williams,
01:11:34 where I was still a shareholder, finished third and fourth,
01:11:37 and that was at the track where I started racing
01:11:39 with no money, and finding myself 25 years later,
01:11:44 winning and placing the cars in the top four position
01:11:47 was a super important moment and made me really happy.
01:11:50 I think if you work in Formula One,
01:11:53 you need to cope with pressure,
01:11:54 and for me personally, it's almost like my comfort zone.
01:11:57 I like the intensity of the race week
01:12:00 and of the whole season.
01:12:01 - Whether it's investment banking or racing,
01:12:04 it's highly competitive,
01:12:06 and therefore, you need to try to understand
01:12:08 as good as you can and then perform to your best levels.
01:12:11 - When you meet Toto Wolff,
01:12:23 one of the first things that stands out
01:12:25 is how magnetic he is.
01:12:26 He seems to command attention when he enters a room,
01:12:29 and also, he's extremely, extremely charismatic.
01:12:33 He's obsessed with perfection,
01:12:34 and he's also really precise,
01:12:36 which even spills over into his daily life.
01:12:38 - I'm traveling to 24 races a year
01:12:42 with more than 500 hours of flying,
01:12:44 so I need to stay disciplined in terms of sleep,
01:12:47 nutrition, and my life pattern.
01:12:50 So I'm always eating the same things,
01:12:52 for breakfast, for lunch, and in the evening,
01:12:54 trying not to upset my system,
01:12:56 and wherever I am, I'm eating the same things,
01:12:58 and for breakfast, it's a pumpernickel bread,
01:13:01 two slices, heavily toasted,
01:13:03 so it's like a cracker, butter,
01:13:05 a slice of ham and a tomato on top,
01:13:07 and all of that with a cappuccino and a sparkling water.
01:13:10 - When he believes something, he says it,
01:13:14 and he's not afraid to own his failures
01:13:17 or take credit for his successes.
01:13:19 - I think what made us successful over,
01:13:23 and sustainably successful over the last 10 years,
01:13:25 was our culture and our values.
01:13:27 We are brutally honest with each other,
01:13:29 but it's having created a safe environment
01:13:31 where you can speak up, where you can point
01:13:33 to inefficiencies and improve.
01:13:35 It is all about integrity and honesty,
01:13:39 and I'd rather give up a championship
01:13:40 than failing to these values.
01:13:42 Formula One has always been the largest global sport
01:13:48 that races every single year.
01:13:50 Real success for me is to have a happy family,
01:13:53 have a great marriage and three wonderful children,
01:13:56 and that is the cornerstone of me being.
01:13:58 So long thereafter comes my professional life,
01:14:01 and that is being successful with the racing team,
01:14:04 winning world championships and creating a structure
01:14:06 and a team that is sustainably successful.
01:14:09 - My personal belief is that as vast as the universe is,
01:14:19 our ultimate destiny is for human race
01:14:22 to become interstellar.
01:14:23 But in order to be able to do that,
01:14:26 we need to take steps to get there.
01:14:30 And eventually, building technologies
01:14:34 that can go beyond our solar system
01:14:37 and traverse into our galaxies.
01:14:39 And then I think to me, when you talk about 10 to 15 years,
01:14:43 20 years from now, my hope is that we have a space city,
01:14:48 you know, a place that people actually can go and live.
01:14:51 - Cam Khaferian is an entrepreneur
01:14:56 who has started several space companies.
01:14:59 His most well-known company is Axiom Space,
01:15:01 which is building what could be
01:15:03 the first commercial space station.
01:15:05 He's also built other companies in the space industry,
01:15:08 including Intuitive Machines,
01:15:09 which is building lunar landers
01:15:11 and pursuing commercial missions to the moon.
01:15:14 Then there's also Quantum Space,
01:15:17 which is trying to build a space superhighway
01:15:20 to move payloads in cislunar orbit,
01:15:22 the space between the Earth and the moon.
01:15:24 And finally, his other main company is X-Energy,
01:15:28 which is building small modular nuclear reactors,
01:15:31 which are far safer and easier to build
01:15:34 and smaller than conventional large nuclear reactors.
01:15:37 - I was born in Isfahan, Iran,
01:15:42 and I came to the United States when I was 18 years old
01:15:46 with an incredible love of space programs.
01:15:50 Since childhood, I just like looking at the stars.
01:15:53 I'm a stargazer and just sort of mesmerized
01:15:57 about the stars and can we go there?
01:15:59 You know, how far are they?
01:16:01 And really a transformational moment
01:16:04 was when I saw Neil Armstrong landing on the surface
01:16:08 of the moon from my neighbor's black and white television.
01:16:11 And it was like, wow,
01:16:13 you can actually go to another planet.
01:16:16 And that sort of really triggered it for me
01:16:19 that this is what I wanted to do.
01:16:21 I actually landed in Washington, DC
01:16:25 and I got myself registered
01:16:27 at Catholic University of America.
01:16:29 That's where I worked on my first degree,
01:16:32 computer science engineering.
01:16:34 I came with $2,000 that I borrowed from my uncle
01:16:38 to come to the United States.
01:16:39 So when I came, I didn't have a whole lot of money.
01:16:43 Therefore, I had to work every night.
01:16:45 In fact, I worked downtown Washington, DC parking cars
01:16:49 for the three years that I finished a double degree program.
01:16:52 - Kamki Farin founded SGT,
01:16:54 also known as Stinger Gafarian Technologies in 1994.
01:16:58 They co-founded it with Harold Stinger
01:17:00 and it was basically a government contracting business.
01:17:03 They did government contracting primarily for NASA.
01:17:06 And it was the first company he started
01:17:08 after previously working at Lockheed Martin
01:17:10 and Ford Aerospace.
01:17:12 It initially started in his basement,
01:17:14 a mortgage's house to start the company.
01:17:16 And over time, it grew much larger.
01:17:20 It actually started as a Section 8A company,
01:17:23 which is a federal program
01:17:24 for businesses owned by minorities.
01:17:27 And it eventually grew by 2006.
01:17:30 It had become the 20th largest contractor for NASA
01:17:33 with $100 million in contracts.
01:17:35 And by the time Kam sold it in 2018,
01:17:38 it was worth $355 million
01:17:41 when he sold it to publicly traded KBR.
01:17:43 - What you're gonna hear a whole lot from me
01:17:46 is culture, culture, culture.
01:17:49 And when I say culture, it's not just being ethical
01:17:52 or being integrity based,
01:17:53 but a culture of being successful,
01:17:57 culture of winning proposals,
01:18:00 culture of taking care of the people.
01:18:02 One of the thing at SGT that sort of distinguished us
01:18:05 from everybody else was really a culture
01:18:08 and our core values.
01:18:09 Everybody would say, "Oh, it's the ICE principles."
01:18:12 And ICE stood for Integrity, Customers, and Employees.
01:18:17 Integrity at the center of everything that we do,
01:18:20 bend over backward to take care of our customers,
01:18:23 and our employees are at the heart of everything that we do.
01:18:26 That sort of really was the key to our success at SGT.
01:18:31 So people who joined the company wouldn't wanna leave.
01:18:35 In fact, in a period of 23 years,
01:18:37 this is sort of incredible,
01:18:39 I had no executive that joined the company
01:18:42 in 23 years that voluntarily left.
01:18:47 The first company I founded after SGT in 2009 was X Energy.
01:18:52 And it was really because of,
01:18:56 I started a school in Africa in Kinshasa.
01:19:00 And I really knew nothing about nuclear,
01:19:03 nothing about the energy world.
01:19:05 I consider myself a space cadet,
01:19:07 and we sponsored four orphans,
01:19:09 and that school now has grown to close to 800 people.
01:19:14 But I learned that the school didn't have power, right?
01:19:18 And I learned very quickly that there's a direct relationship
01:19:21 between standard of living around the world
01:19:24 and having electricity.
01:19:25 So if you don't have electricity,
01:19:27 you don't have clean water, you don't have education.
01:19:30 And also with all the stuff that was going on
01:19:32 with using the fossil fuel,
01:19:35 and how much carbon we generate,
01:19:37 and we're in this beautiful, precious blue globe,
01:19:43 and if we don't protect it, it's our home.
01:19:45 If we don't protect it,
01:19:46 so far we don't have another place that we can go.
01:19:50 That was really the genesis behind X Energy.
01:19:53 And we've sort of done what I call
01:19:55 is the holy grail in nuclear,
01:19:56 where we design nuclear reactors that are 100% safe.
01:20:00 In the other words, if there's a tsunami,
01:20:02 or there's an earthquake, or any of that,
01:20:05 or plane crashes to it, they can never go supercritical.
01:20:08 And because of that,
01:20:09 you can have them in the middle of cities or anywhere.
01:20:12 And today we are world leader in advanced nuclear.
01:20:15 In fact, we won a $2.5 billion grant from DOE
01:20:20 to build these nuclear reactors.
01:20:22 It's pretty incredible.
01:20:23 - The first company founded after X Energy came in 2013,
01:20:28 when he founded Intuitive Machines,
01:20:29 which eventually became a company
01:20:31 whose goal it was to build lunar landers
01:20:33 and really start to commercialize the moon.
01:20:36 Three years later came Axiom Space,
01:20:38 which he co-founded with Mike Cifradini,
01:20:40 who was the longtime director
01:20:42 of NASA's International Space Station program.
01:20:44 Axiom is the company that's building
01:20:46 what could be the first commercial space station,
01:20:48 also designing the next generation of spacesuits for NASA.
01:20:52 - In 2016, I got together with Michael Cifradini,
01:20:56 who was the previous program manager
01:20:59 for International Space Station for NASA.
01:21:01 And we knew the United States government
01:21:05 was not going to build another space station.
01:21:08 They were going to rely on private industry to do that.
01:21:11 So with this unique experience,
01:21:14 and my experience, we actually run the operation
01:21:17 of International Space Station 24 by 7.
01:21:20 One of my proud things that I like to say
01:21:23 is when the astronauts from space talk and say Houston,
01:21:26 they would be talking to my company employees.
01:21:29 And so it was a very bold vision.
01:21:31 We build the first private commercial space station.
01:21:35 And that's really, that's the vision
01:21:37 that got us started in 2016
01:21:39 to open the doors for Axiom Space.
01:21:41 - After about 30 years at the agency,
01:21:45 I started looking around.
01:21:46 Hadn't really thought a lot about what I was going to do,
01:21:48 but there were a couple of offers out there.
01:21:51 So they got me thinking,
01:21:51 well, maybe there is another life after this.
01:21:54 By the way, I had the best job in the whole agency.
01:21:57 You know, I had a front row seat
01:21:58 to everything that happened on orbit.
01:22:00 And it was really, it was a lot of fun.
01:22:03 So when I started thinking about it,
01:22:05 Cam was one of those people that had a reputation
01:22:08 of being a mover and a shaker in the industry.
01:22:10 And I wanted to seek his advice, just his thoughts
01:22:14 on what I should do in my afterlife.
01:22:17 Well, if you know Cam,
01:22:19 you don't spend a lot of time talking about things like that.
01:22:21 I called him and said,
01:22:23 you know, Cam, the only thing I know how to do
01:22:24 is build an operating space station.
01:22:26 So, you know, I've kind of lived it in my capability.
01:22:29 So I'll wait till somebody,
01:22:31 surely some company was going to come along.
01:22:34 And so I told Cam that, I said, so I'll wait,
01:22:36 somebody will come along and maybe that's what I'll do.
01:22:39 And he said, okay, let's go build a space station.
01:22:42 So he seeded the company and we went from there.
01:22:46 That's how we started together building our space station.
01:22:50 - Axiom Space has a very ambitious goal.
01:22:53 It's to build the world's first commercial space station.
01:22:55 They're actually the only company that's out there
01:22:58 that has the rights to attach their modules.
01:23:02 So the building blocks of their space station,
01:23:04 so to speak, to the International Space Station.
01:23:07 The first one of those modules is set to go up in 2026.
01:23:10 That's their main goal.
01:23:12 And the thing that they're building currently
01:23:13 is the Axiom Space Station.
01:23:15 However, they've already completed two successful missions
01:23:18 to the International Space Station
01:23:20 where they brought commercial astronauts.
01:23:22 So people paying to be an astronaut and go to the ISS,
01:23:26 as well as astronauts from countries
01:23:28 that haven't had the chance to go to space yet.
01:23:30 So Saudi Arabia, for example,
01:23:32 sent two astronauts on the second Axiom mission.
01:23:35 - My belief is that the ultimate destiny for human beings
01:23:40 is to go to stars, to actually do interstellar travel,
01:23:44 to really go to other stars.
01:23:45 'Cause the universe is so enormous and vast.
01:23:49 And in our galaxy alone,
01:23:52 there are 400 billion stars like our sun
01:23:55 with planets around it.
01:23:57 And there are trillion other galaxies.
01:23:59 So we're just such a small part.
01:24:01 So my personal belief is that as vast as the universe is,
01:24:06 our ultimate destiny is for human race
01:24:09 to become interstellar.
01:24:10 But in order to be able to do that,
01:24:13 we need to take steps to get there.
01:24:16 First is LEO, low Earth orbit.
01:24:19 We need to have human presence there.
01:24:22 Then going to the moon and to Mars is further steps.
01:24:26 Having the space infrastructure
01:24:28 where you can go from Earth to the moon and beyond
01:24:31 is another thing.
01:24:32 And so these companies all follow that larger vision.
01:24:37 - So one thing that always came up with the,
01:24:43 I think more than a dozen people I spoke to about Cam
01:24:46 is that he's really ambitious,
01:24:49 which you kind of get just from learning
01:24:50 about the companies he's built,
01:24:52 but also that he's able to convince people
01:24:55 and motivate them to actually get
01:24:57 those very ambitious projects done.
01:24:59 You know, you look at the incredible amount of ex-NASA
01:25:02 sort of rock stars he's brought over,
01:25:04 people who were leading their fields,
01:25:06 and he convinced them to come to the private sector
01:25:08 and build these companies.
01:25:10 He went with Axe Energy from not knowing anything
01:25:12 about energy to now being one of the leading companies
01:25:15 in nuclear energy, right?
01:25:16 And these new reactors that could really make
01:25:19 a huge difference in renewable energy goals.
01:25:21 And obviously the jury's still out.
01:25:23 Anything could happen in the future.
01:25:24 There's a lot of competition out there.
01:25:26 It's still a speculative market, right, for space stations
01:25:29 and for a lot of these things.
01:25:30 But when you look at sort of his initial dreams and visions,
01:25:33 commercial lunar landers, commercial space station,
01:25:36 and the nuclear reactors,
01:25:37 where he's been able to take those ideas
01:25:39 in terms of the funding and the people he's brought with him
01:25:42 and turning them into real businesses,
01:25:44 that's really impressive.
01:25:45 And that really stood out to me when I was talking to him
01:25:46 and the people who've known him for a long time.
01:25:49 - I really hope that my legacy is that I contributed
01:25:52 to advancing state of humanity and human knowledge,
01:25:55 which is really the vision that I've had for many years,
01:25:58 including SGT.
01:26:00 To know that someone may be breathed easier
01:26:02 as a result of you've lived
01:26:04 through my philanthropic activities
01:26:06 and also making a difference for our planet,
01:26:09 like with X Energy,
01:26:10 so that our children can survive the climate change
01:26:14 and everything else.
01:26:15 So making a difference and making this planet
01:26:18 and also going to other places a better place for us.
01:26:22 (upbeat music)
01:26:24 (upbeat music)
01:26:27 (upbeat music)
01:26:29 (upbeat music)
01:26:32 (upbeat music)

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